International Exploration
First Calgary Petroleums Ltd._2002_Annual Report
First Calgary Petroleums Ltd. is a Calgary based oil and gas company actively
engaged in exploration and development activities internationally.
Exploration activity on well positioned blocks in Algeria and Yemen provides
the basis for near term growth. Common shares of First Calgary Petroleums Ltd.
trade on the Toronto Stock Exchange under the symbol FCP and the London Stock
Exchange (AIM) under the symbol FPL.
Table of Contents
President's Report to 1
Shareholders
Algeria Operations 4
Management's Discussion & 9
Analysis
Financial Statements 14
Corporate Information IBC
Annual Meeting
The Annual Meeting of Shareholders will take place on Wednesday, June 11, 2003
at 3:00 pm in the Devonian Room at the Calgary Petroleum Club, 319 - 5 Avenue
SW, Calgary, Alberta. All shareholders are welcome to attend. If unable to,
shareholders are encouraged to fill out the form of proxy and return it to
Computershare.
President's Report to Shareholders
I am pleased to report on the Company's activities during 2002 and, as
importantly, outline the plans going forward. 2002 was the year both management
and shareholders have been working towards. With energies focused on its two
hydrocarbon licences in Algeria, the Company's major achievements included:
* Listed the common shares on the London Stock Exchange (AIM segment)
* Completed a $25 million equity financing at $1.25 per share in July 2002
* Acquired seismic on both Algeria blocks and identified drill locations
* Drilled MLE-2, a major gas and condensate discovery, on Ledjmet Block 405b
Subsequent to year-end, the Company also:
* Completed a $35 million equity financing at $2.35 per share in February 2003
* Appointed an international figure to the Board of Directors
* Production tested the MLE-2 well at 44,300 barrels of oil equivalent per day
OPERATIONS
Algeria
With hydrocarbon rights over approximately 500,000 acres in the prolific
Berkine Basin, FCP has an outstanding base upon which to grow.
LEDJMET BLOCK 405B
The Ledjmet Block 405b production sharing contract came into effect December
30, 2001. The Company commenced its 2002 activities with the acquisition and
interpretation of 110 km2 of 3D seismic data covering the MLE structure
situated on the eastern side of the Block. During the 4th quarter, FCP drilled
the MLE-2 gas and condensate well. The well production tested 44,300 barrels of
oil equivalent per day (boe/d), comprising 189 million cubic feet of gas per
day (mmcf/d) and 12,874 barrels of condensate per day (bc/d). MLE-2 is the
first appraisal well to the MLE-1 gas and condensate discovery for which FCP
also holds rights pursuant to the production sharing contract. The MLE-1 well
production tested 8,900 boe/d, comprised of 43 mmcf/d and 1,745 bc/d. Combined
production tests for the two MLE wells total 53,200 boe/d.
The MLE-2 well is a milestone in the Company's growth. The MLE pool is emerging
as a giant gas and condensate field far exceeding any of FCP's original
expectations. The Company's interpretation of the 3D seismic over the MLE
structure indicates the field size to be in excess of 100 km2. FCP is moving
quickly to firm up further locations on the MLE structure and will conduct
additional appraisal drilling in 2003. FCP has also commenced preliminary
engineering work to assess optimal MLE field development and timing of
production.
In addition to the MLE appraisal and development planning, the Company is
equally excited about the exploration potential of the remaining Block 405b
lands. A 600 km2 3D seismic program to define drilling locations on two large
structures to the west of the MLE pool will commence during the second quarter
of 2003.
YACOUB BLOCK 406A
Exploration activity progressed on the Yacoub Block 406a during the year with
the acquisition of 239km2 of 3D seismic in the north west corner of the Block.
This was followed by the drilling of the YCB-1 well in the first quarter of
2003. The well was abandoned but did provide valuable information and does not
dissipate management's optimism for a future commercial discovery on the Block.
Yacoub Block 406a is a large land holding covering approximately 251,000 acres
and its geographic proximity to other reserves and geologic trends in the
Berkine Basin make it an ideal area to explore. A number of strong structural
leads have been mapped which are being further defined by a 240 km 2D seismic
program. A second exploration well is planned for 2003.
Yemen
BLOCK 43
Joint venture partner DNO ASA of Norway is undertaking the work program for the
second phase of a five year exploration agreement on Block 43. DNO has carried
out geophysical studies and plans to drill three wells in 2003. FCP has
retained a 10% interest in the Block.
Financial
The Company has been very active during the year managing its capital as it
continues to finance operations with equity and third party joint ventures. FCP
took a major step towards expanding its investor base and access to the world's
capital markets by listing its common shares on the Alternate Investment Market
(AIM) of the London Stock Exchange. A $25 million public offering, priced at
$1.25 (�0.52) per share, was closed in conjunction with the AIM listing during
July 2002. This financing was completed during very adverse market conditions.
In addition, the Company received $8 million from the exercise of share
purchase warrants and options in 2002.
The Company followed its July financing with a $35 million public share
offering in February 2003, priced at $2.35 (�0.95) per share. This financing,
combined with the year end working capital, positions FCP to move ahead with an
active 2003 seismic and drilling program.
Outlook
Management is pleased with the progress of FCP and extremely optimistic about
the Company's future. FCP, a TSE listed `shell' when management assumed control
in 1997, is now firmly established in one of the most prolific on-shore
hydrocarbon basins in the world. The two large concessions held with Sonatrach,
the Algeria national oil company, provide the Company significant growth
opportunities. The common shares are now listed on both the London and Toronto
stock exchanges and, since June 2002, the Company has received approximately
$68 million in new equity. The shareholder base has been strengthened with
institutional investors in the UK and the United States. With the appointment
of Mr. Yuri Shafranik, the Board of Directors welcomes an individual of
international prominence both in the oil industry and politics.
My sincere thanks to the dedicated staff and directors for their contribution
to FCP's success to date. While we welcome the following of new shareholders, I
wish to thank the loyal shareholders who continue to support the Company. It is
with great enthusiasm we look forward to continued growth.
On Behalf of the Board of Directors
Richard G. Anderson
President and Chief Executive Officer April 15, 2003
Algeria Operations
ALGERIA
Since the mid-1950's Algeria, a member of OPEC, has become a major supplier of
oil and gas, particularly for the rapidly expanding markets in Europe. Algeria
has the largest reserves of gas in Africa (146.5 TCF) and third largest oil
reserves (15.4 billion bbls). Exploration success rates are among the highest
in the world, particularly within the Berkine Basin. Drilling densities remain
very low, averaging only 15 wells per 10,000 km2 compared with a world average
of 95 and North America's mature basins at 500. Its proximity to Europe
provides Algeria a growing export market for its oil and gas production. Two
gas pipelines connect Algeria to southern Europe under the Mediterranean.
Sonatrach is looking into the expansion of these pipelines and a third export
pipeline to Spain is planned to commence construction in 2003. European gas
markets look to Algeria to provide approximately 29% of the continent's
imported gas needs. European consumption of natural gas is projected to
increase approximately 46% by 2010 while Algeria is looking to increase its
production capacity by 40% by 2005. Algeria's energy sector has become one of
the most sophisticated in the world with the latest production and drilling
technology available.
LEDJMET Block 405b
* 1,108 km2 (255,000 acres)
* MLE-1, MLE-2, MZL-1
* MLE-2 test rates of 189 mmcf/d and 12,874 bc/d
* Multi-zone potential
* Highly strategic block for regional gas development
* Very strong structural leads in west
YACOUB Block 406a
* 1,091 km2 (251,000 acres)
* Multi-zone oil potential
* Giant oil fields to west, north and northwest
* Well situated for oil generation and migration into structural traps
* Excellent seals
* Tight grid of high quality seismic data
* Strong exploration leads across the block
The Berkine Basin has emerged as one of the most prolific onshore hydrocarbon
trends. In the past twelve years more than 5 billion barrels of recoverable oil
have been discovered in the basin, trapped in several giant field
accumulations. Throughout the basin production is from multiple geological
horizons. Flow rates for oil wells average 8,000 barrels per day but can exceed
20,000 barrels per day. The basin becomes more gas prone to the south where a
number of wells, including MLE-2, have tested high rates of gas and condensate.
The geological reasons for this success are clear: a world-class petroleum
system with excellent source rocks, reservoirs, seals and faulted traps. Recent
advances in seismic exploration technology, particularly 3D, allow structures
to be targeted with a higher degree of precision. In the past three years more
than 300,000 bbls per day of oil production have been added from the Berkine
Basin with substantial increments planned over the coming months.
The Ledjmet Block 405b covers 1,108 km2 (255,000 acres). FCP drilled its first
well in Algeria, MLE-2, on Block 405b in the fourth quarter of 2002. MLE-2 is
an appraisal well to the MLE-1 discovery. Production testing was completed in
the first quarter of 2003. Production liner was set to a depth of 4,390 meters
and multi-rate production tests were conducted over 147 meters (480 feet) of
net pay in the Triassic TAGI, Carboniferous, and Upper and Lower Devonian
zones. Six geological horizons were production tested yielding a cumulative
rate of 44,300 barrels of oil equivalent per day (boe/d), comprising 189
million cubic feet of gas per day (mmcf/d) and 12,874 barrels of condensate per
day (bc/d), at 2,000 psi flowing tubing head pressure. Production rates such as
these are extremely rare and indicate MLE-2 to be a world class hydrocarbon
discovery. The MLE-1 well production tested 8,900 boe/d comprised of 43 mmcf/d
and 1,745 bc/d from three zones. Combined production tests for the two MLE
wells total 53,200 boe/d.
The abundance of new geological and geophysical data provided by the 3D seismic
and MLE-2 has allowed FCP's geologists and geophysicists to re-map the field
and derive more accurate assessments of ultimate field size. The geological
picture emerging is that MLE is a hydrocarbon accumulation extending over more
than 100 km2 on FCP's acreage. The MLE structure, which involves multiple
geologic horizons, has substantial complexity which will be further understood
with each well drilled. FCP will conduct additional drilling on the MLE
structure in 2003 and is currently planning the MLE-3 well. Engineering
feasibility studies of the total field development and production have also
been initiated.
Notwithstanding the activity undertaken so far on the eastern side of the
Block, there exists a large land base to the west that remains to be tested
with exploratory drilling. FCP acquired a grid of 2D seismic covering the Block
and in 2003 will be supplementing this data with a 600 km2 3D seismic program.
A number of leads exist on this portion of the Block, providing the potential
for further discoveries.
The Yacoub Block 406a covers 1,091 km2 (251,000 acres). Immediately offsetting
Block 406a are the giant oil fields of Hassi Berkine, Ourhoud and RKF. After
interpretation and reprocessing the 2D seismic data acquired with the Block,
several structural leads were identified covering much of the northern and
eastern portions of the Block. A 239 km2 3D seismic program was acquired in
2002. This survey focused on the northwest corner for two main reasons:
closeness to an oil recovery in the RKFN-1 well and proximity to existing
producing fields. In 2003, FCP drilled YCB-1, its first well on the Block, to a
depth of 3,750 meters. No commercial oil was encountered and the well was
abandoned. Analysis of the YCB-1 data showed that local geological variations
led to the replacement of the sandstone reservoir by non-prospective shales.
FCP's view of the overall prospectiveness of Block 406a remains optimistic.
Towards the east side of the Block reservoir thicknesses are seen to increase
and there is strong support from the 2D seismic data indicating faults and
structures. Additional seismic is being acquired to further define a second
drilling location on Block 406a in 2003.
PERSONNEL
FCP is expanding its core team of professionals to ensure that all the demands
of international exploration and operations are met. The Company uses the
latest computer applications for databases, mapping, seismic interpretation,
log analysis and business systems. In Hassi Messaoud an operations base has
been established for FCP personnel and in Algiers an administrative office
assists with in-country communication and liaises with Sonatrach.
Management's Discussion and Analysis
First Calgary Petroleums Ltd. ("FCP") has established itself as an
international petroleum and natural gas exploration company with the drilling
of the MLE-2 gas and condensate well.
FCP's 2002 operations were centered in the Berkine Basin of Algeria where the
Company partners with Sonatrach, the national oil company of Algeria, in the
Ledjmet Block 405b and the Yacoub Block 406a. On Block 405b, FCP drilled its
first commitment well, MLE-2, during the fourth quarter. MLE-2 was completed
subsequent to year end and production tested 44,300 barrels of oil equivalent
per day consisting of 189 million cubic feet of gas per day and 12,874 barrels
of condensate (light oil) per day. Although additional drilling is required to
delineate and confirm the ultimate recoverable reserves, management is
confident the structure provides FCP a major reserve base to develop.
On the Yacoub Block 406a, FCP acquired 239 km2 of 3D seismic and prepared the
access road and surface location for the first well, YCB-1. This exploration
well was drilled during the first quarter of 2003. Notwithstanding the well was
abandoned, the Company remains optimistic as to the Block's hydrocarbon
potential and will continue its exploration activities.
To expand its exposure to capital markets beyond Canada and The Toronto Stock
Exchange, FCP was listed on the Alternate Investment Market ("AIM") of the
London Stock Exchange. The Company tapped into these equity markets raising $30
million in new equity and subsequent to year end, raised additional equity
totaling $33 million.
Projects and Capital Commitments
Algerian oil and gas law requires all foreign oil companies to partner with
Sonatrach, which represents the interest of the state in oil and gas projects.
Pursuant to hydrocarbon agreements with Sonatrach, FCP operates and holds 100
percent of the foreign company interest in the Ledjmet Block 405b and the
Yacoub Block 406a. The Ledjmet Block 405b provides the Company both exploration
potential and the right to appraise and develop the MLE reserves. The Yacoub
Block 406a is exploratory in nature but is located adjacent to established oil
production.
FCP also holds a 10 percent working interest in Block 43 in Yemen. Activity on
this exploration block during the year has been funded and operated by an
industry partner pursuant to a joint venture farmout concluded in 2001.
The Algeria and Yemen hydrocarbon contracts require the foreign companies to
conduct certain exploration activities, as a minimum, over periods of time. The
Algeria contracts provide FCP five years, divided into two periods, to explore
the blocks. The first period is for three years. The Company then has the
option to enter a second exploration period of two years. In Yemen, FCP and its
partner are currently in the second exploration period of Block 43.
ALGERIA
Effective December 2001, the Company entered into a production sharing contract
to explore and appraise the Ledjmet Block 405b which covers approximately
255,000 acres.
As at December 31, 2002, FCP's remaining first exploration period minimum work
commitment on the Block includes the acquisition of seismic and the drilling of
two additional wells, including at least one exploration well, prior to
December 2004. If the Company fails to satisfy the minimum 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 US$20 million. The work commitment for the optional two year
second exploration period includes acquiring additional seismic and drilling
one exploration well, the estimated cost of which is currently US$8 million.
As part of the Ledjmet Block 405b production sharing contract, FCP has the
right to appraise and develop the MLE pool discovered with the MLE-1 well
drilled in 1995 by a prior holder of the lands. For the access right to the MLE
discovery, FCP is committed to pay Sonatrach a fee of US$0.25 per barrel oil
equivalent calculated upon the total estimated recoverable MLE reserves. This
access fee will be payable as a deduction from Sonatrach's share of the MLE
development expenditures.
The Company's Ledjmet Block 405b 2003 capital program currently includes the
completion and production testing of the MLE-2 well during the first quarter,
drilling the MLE-3 well on the MLE structure and acquiring 600 km2 of 3D
seismic to further evaluate the lands west of the MLE structure. The projected
cost of the Ledjmet Block 405b 2003 capital program is US$16 million. Following
the 2003 capital program, the Company's outstanding work commitment for the
first exploration period will be the drilling of one exploration well prior to
December 2004.
The Company's rights to explore the Yacoub Block 406a, which also covers
approximately 251,000 acres, commenced in November 2000. As at December 31,
2002, FCP's remaining first exploration period work commitment included
drilling two exploration wells prior to November 2003. If the Company fails to
satisfy the minimum work obligations, 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 US$18.25 million. The work
commitment for the optional two year second exploration period includes
acquiring additional seismic and drilling two exploration wells. The estimated
cost of this work is currently US$11 million.
In the first quarter of 2003, the Company drilled YCB-1, the first commitment
well, on the Yacoub 406a Block. For the balance of 2003, FCP plans to conduct a
2D seismic program and drill the second commitment well on the Block. The
projected cost for the 2003 work program is US$9 million.
The Company incurred capital expenditures of $19.8 million on its Algeria
blocks during 2002 of which $13.4 million was attributed to drilling, $1.6
million to Algeria administrative costs, $4.3 million to seismic and $0.5
million to annual training bonuses. Of this total, $13.8 million was incurred
in the fourth quarter and related principally to the drilling of MLE-2 and the
YCB-1 access road and surface costs. The well location, surface condition and
depth are all factors impacting the drilling costs. Based upon the Company's
experience drilling the MLE and YCB wells, the Company expects ongoing drilling
costs will range between US$4 and US$5 million for the Yacoub 406a wells and
between US$6 and US$7million for the Ledjmet 405b wells.
YEMEN
Effective August 2001, the Company brought an industry partner into Block 43 to
finance the ongoing exploration costs and the companies jointly entered the
production sharing agreement's second exploration period that extends to
February 2004. Pursuant to the joint venture agreement, the partner was
appointed operator of the block and is responsible for funding all exploration
activity until it has incurred US$7.5 million in expenditures or made a
commercial discovery. The partner is also responsible for funding the annual
bonuses and the letter of credit until its earning obligations are satisfied.
Thereafter, FCP will be responsible for 11.8 percent of ongoing costs, if any.
During 2002, the Block 43 minimum work commitment was amended to increase the
number of exploration wells to three from two and reduce the original seismic
commitment. The minimum expenditure commitment for the second exploration
period remains at US$7.5 million.
The Block 43 operator's efforts during 2002 concentrated on interpreting the
existing seismic and well information to develop its prognosis of the Block's
geology and hydrocarbon sources. For 2003, it is planning the acquisition of a
small 2D seismic program and the drilling of three exploration wells, the first
of which is proposed for the second quarter. The operator's current planned
total expenditures for the 2002 and 2003 work programs are approximately US$9.5
million.
Operating Results
The Company sustained a loss for 2002 in the amount of $3.6 million and for
2001, incurred a loss of $1.3 million. FCP's activities over this period have
focused on securing international exploration and development projects and
conducting activities thereon.
The annual losses are primarily attributed to general and administrative and
stock based compensation expenses. The Company holds certain minor Canadian
working and royalty interests carried over from its former activities. Ongoing,
these non-operated properties generate an insignificant amount of cash for the
Company. The 2001 production revenue and expenses related primarily to a
property that was sold during 2001 and reflect adjustments reported by the
operator prior to the sale.
FCP has assembled geological, geophysical, engineering and financial
professionals having international exploration and development experience. The
Company has expanded this team as work progressed on the Algerian blocks and
the associated operational requirements dictated. Further expansion is expected
throughout 2003. The 2002 general and administrative expenses totaled $3.3
million compared with the prior year amount of $1.5 million. Approximately $900
thousand of the increase related to costs associated with the AIM listing. The
remaining increased costs are primarily attributed to travel, investor
relations and personnel costs. The 2002 fourth quarter general and
administrative expenses totaled $841 thousand versus $534 thousand for the
comparative period. The increase is also attributed to travel, investor
relations and personnel costs.
The Company's 2002 operating results include $636 thousand of stock- based
compensation expense resulting from the adoption of accounting standards
requiring the measurement and expensing of the fair value of stock options
granted to non-employees in exchange for services. The Company does not expense
the fair value of stock options granted to employees and directors. If the
Company elected to do so, an additional $634 thousand of stock-based
compensation expense would have been recorded.
Liquidity and Capital Resources
Without an existing revenue base, the Company utilizes equity and third party
joint ventures to fund its operations. In 2002, FCP raised $30 million net of
expenses from private and public equity placements, the exercise of share
purchase warrants and the exercise of employee stock options. In exchange, the
Company issued 32.4 million common shares. Of these totals, the Company
received $2.9 million pursuant to the exercise of 4.7 million share purchase
warrants and employee stock options during the fourth quarter. At December 31,
2002, FCP had working capital of $10.5 million compared with working capital of
$3.2 million at the prior year end. The increase in accounts payable and
accrued liabilities at December 31, 2002 versus the prior year related to
Algerian drilling costs incurred in the fourth quarter.
Subsequent to December 31, 2002, the Company raised additional funding totaling
$33 million net of expenses from a public equity placement, the exercise of
share purchase warrants and the exercise of employee stock options. In
exchange, the Company issued 15.9 million common shares increasing the current
outstanding common shares to 124.5 million. There are also 10.5 million common
share purchase warrants and stock options currently outstanding.
The Algerian blocks encompass a large area to explore. International oil and
gas projects of this magnitude are capital intensive and to thoroughly explore
the land base will require capital in excess of the Company's existing working
capital. In addition to the exploratory activity, the Company will proceed with
the development of the MLE reserves which will also require significant
capital. The recent equity financing provides FCP the funds to proceed with its
2003 capital program. With access to additional capital, the scope and timing
of both exploration and development activities could be increased and
accelerated. Potential sources of additional capital include equity, debt,
farm-outs or a combination thereof. The Company believes that equity and/or
farm-outs are the prudent sources of capital for funding exploratory
expenditures. For development expenditures, the sources of capital are expected
to include debt financing. However, there is no assurance that additional
financing will be available upon terms acceptable to the Company.
Business Risks
The Company's business is subject to risks inherent in oil and gas exploration
and development operations. In addition, there are risks associated with its
development stage of operations and the foreign jurisdictions in which it
operates. The Company has identified certain risks pertinent to its business
including: exploration and reserve risk, drilling and operating risks, costs of
material and services, requirement for additional capital, loss of or changes
to production sharing, joint venture and related agreements, economic and
sovereign risks, possibility of less developed legal systems, reliance on
strategic relationships, market risk, volatility of future oil and gas prices
and foreign currency risk.
FCP attempts to monitor, assess and mitigate certain of these risks by
retaining an experienced team of highly skilled professionals and using
state-of-the-art technology. Further, the Company has focused its activities in
known hydrocarbon basins in jurisdictions that have previously established long
term oil and gas ventures with foreign oil and gas companies, existing
infrastructure and reasonable proximity to markets. The Company also retains
consultants resident in the jurisdictions in which it operates to monitor
economic and political developments and assist with the operating,
administrative and legal matters. There are certain of these risks, however,
over which the Company has little or no control.
Outlook
Algeria is the focus for the Company with its hydrocarbon rights covering in
excess of 500,000 acres in the Berkine Basin. This basin has an established
infrastructure for services and transportation. Based upon the MLE well results
FCP has a potential major gas and condensate field on the Ledjmet Block 405b.
For additional growth, the Company will continue to explore the Ledjmet Block
405b and Yacoub Block 406a.
Similar with any company in an exploration or development stage of operations,
financing the ongoing activity is critical to achieving success and presents a
continuing challenge. Competition for new equity is intense. FCP believes the
MLE reserve base, combined with the potential of its exploration acreage,
allows FCP to compare very favorably with its peer group of companies and that
it can successfully compete in the capital markets. In addition, FCP is
optimistic that if desired, industry joint ventures will also be an available
source of funding for the Company's initiatives.
Pending Accounting Changes
New asset retirement obligation standards require recognition of the fair value
of future restoration and abandonment obligations as a liability on the balance
sheet. The future liability is to be capitalized as part of the cost of the
related capital assets and amortized to expense over the life of the asset.
This new standard is effective for fiscal years beginning after January 1,
2004. Adoption of this standard will result in an increase in property, plant
and equipment and future site restoration on the balance sheet. Although it is
not yet determinable, the change is not expected to have a material impact on
future earnings.
There are also draft standards proposing that the fair value of stock-based
compensation granted to employees be expensed. As the Company uses stock
options as part of its remuneration package for employees and does not
currently recognize compensation expense on the issuance of these options, the
adoption of the proposed change would reduce future reported net earnings.
Management's Report to the Shareholders
Management is responsible for the integrity and objectivity of the information
contained in this annual report and for the consistency between the financial
statements and other financial operating data contained elsewhere in the
report. The accompanying financial statements have been prepared by management
in accordance with accounting principles generally accepted in Canada using
estimates and careful judgement, particularly in those circumstances where
transactions affecting a current period are dependent upon future events. The
accompanying financial statements have been prepared using policies and
procedures established by management and reflect fairly the Company's financial
position, results of operations and changes in financial position, within
reasonable limits of materiality and within the framework of the accounting
policies outlined in the notes to the financial statements.
Management has established and maintains a system of internal control which is
designed to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and the financial information is reliable and accurate.
The financial statements have been examined by external auditors. Their
examination provides an independent view as to management's discharge of its
responsibilities insofar as they relate to the fairness of reported operating
results and financial condition of the Company.
The Audit Committee of the Board of Directors has reviewed in detail the
financial statements with management and the external auditors. The financial
statements have been approved by the Board of Directors on the recommendation
of the Audit Committee.
Richard G. Anderson Kenneth C. Rutherford
President and Chief Executive Officer Vice President, Finance April 15, 2003
Auditors' Report to the Shareholders
We have audited the consolidated balance sheets of First Calgary Petroleums
Ltd. as at December 31, 2002 and 2001 and the statements of operations and
deficit and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31,
2002 and 2001 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.
Chartered Accountants
Calgary, Canada April 15, 2003
Consolidated Balance Sheets
December 31, 2002 2001
ASSETS
Current assets:
Cash and short-term deposits (note 4) $ 19,587,570 $ 4,444,230
Accounts receivable 91,067 23,340
Deposits and prepaid expenses 143,180 17,284
19,821,817 4,484,854
Property, plant and equipment (note 5) 29,744,160 9,892,628
$ 49,565,977 $ 14,377,482
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities (note $ 9,351,460 $ 1,242,973
6)
Provision for future site restoration costs 35,491 35,491
Shareholders' equity:
Capital stock (note 7) 63,664,285 33,582,732
Contributed surplus (note 7) 636,432 -
Deficit (24,121,691) (20,483,714)
40,179,026 13,099,018
Operations and commitments (note 3)
Subsequent events (note 11)
$ 49,565,977 $ 14,377,482
See accompanying notes to consolidated financial
statements.
Approved by the Board:
Richard G. Anderson Raymond P. Antony
Director Director
Consolidated Statements of
Operations and Deficit
Years ended December 31, 2002 2001
Revenue:
Petroleum and natural gas sales, less royalties $ 32,350 $ 256,070
Interest and other income 233,791 42,230
266,141 298,300
Expenses:
Production 11,809 46,025
General and administrative 3,263,021 1,545,251
Stock-based compensation (note 7) 636,432 -
Foreign exchange losses (gains) (32,785) 15,416
Depreciation 25,641 20,000
3,904,118 1,626,692
Loss for the year (3,637,977) (1,328,392)
Deficit, beginning of year (20,483,714) (19,155,322)
Deficit, end of year $ (24,121,691) $ (20,483,714)
Loss per share, basic and diluted (note 7) $ (0.04) $ (0.02)
See accompanying notes to consolidated financial
statements.
Consolidated Statements of Cash Flows
Years ended December 31, 2002 2001
Cash provided by (used in):
Operations:
Loss for the year $ (3,637,977) $ (1,328,392)
Items not involving cash:
Depreciation 25,641 20,000
Stock-based compensation 636,432 -
(2,975,904) (1,308,392)
Change in non-cash working capital 41,857 (360,888)
(2,934,047) (1,669,280)
Financing:
Proceeds on warrant and share issues 25,676,016 14,051,300
Proceeds on exercise of warrants 6,914,000 -
Proceeds on exercise of stock options 283,472 43,417
Issue costs (2,791,935) (1,067,106)
30,081,553 13,027,611
Investing:
Capital expenditures (19,877,173) (4,926,450)
Proceeds on sale of petroleum and natural - 142,492
gas properties
(19,877,173) (4,783,958)
Change in non-cash working capital 7,873,007 (2,141,627)
(12,004,166) (6,925,585)
Increase in cash 15,143,340 4,432,746
Cash and short-term deposits, beginning of 4,444,230 11,484
year
Cash and short-term deposits, end of year $ 19,587,570 $ 4,444,230
See accompanying notes to consolidated
financial statements.
Notes to Consolidated Financial Statements
1 SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
The consolidated financial statements include the accounts of First Calgary
Petroleums Ltd. (the "Company") and its wholly owned subsidiaries.
(b) Petroleum and natural gas operations
The Company follows the full cost method of accounting for petroleum and
natural gas operations, whereby all costs of exploring for and developing
petroleum and natural gas reserves are capitalized and accumulated in
country-by-country cost centres. Such costs include land acquisition costs,
geological and geophysical costs, carrying charges on non-producing properties,
costs of drilling both productive and non-productive wells, interest costs on
major development projects and overhead charges directly related to
acquisition, exploration and development activities.
The costs (including exploratory dry holes) in cost centres from which there
has been no commercial production are not subject to depletion until commercial
production commences. The capitalized costs are periodically assessed to
determine whether it is likely such costs will be recovered in the future. To
the extent there are costs which are not likely to be recovered in the future,
they are written off.
The costs in cost centres from which there is production, together with the
cost of production equipment, are depleted and depreciated on the
unit-of-production method based on the estimated proved reserves after
royalties. Petroleum and natural gas reserves and production are converted into
equivalent units based upon estimated relative energy content. Costs of
acquiring and evaluating significant unproved properties are excluded from
depletion calculations. These unevaluated properties are assessed periodically
to ascertain whether impairment in value has occurred. When proved reserves are
assigned or the value of the property is considered to be impaired, the cost of
the property or the amount of the impairment is added to costs subject to
depletion.
The capitalized costs less accumulated depletion, depreciation and future site
restoration, in each cost centre from which there is production, are limited to
an amount equal to the estimated future net revenue from proved reserves (based
on prices and costs at the balance sheet dates) plus the cost (net of
impairments) of unproved properties less estimated future site restoration
costs. The total capitalized costs of all cost centres, less accumulated
depletion and depreciation, future site restoration and future income taxes,
are further limited to an amount equal to the estimated future net revenue from
proved reserves of all cost centres, plus the cost (net of impairments) of
unproved properties, less estimated future site restoration costs, general and
administrative expenses, financing costs and taxes.
Estimated future removal and site restoration costs are provided for using the
unit-of-production method and remaining proven reserves. Costs are estimated
based on current regulations, costs, technology and industry standards. The
annual charge is included in the provision for depletion and depreciation and
the related accumulated provision is separately disclosed. Removal and site
restoration expenditures are charged to the accumulated provision account as
incurred.
Proceeds from the sale of petroleum and natural gas properties are applied
against capitalized costs, with no gain or loss recognized, unless such a sale
would significantly alter the rate of depletion and depreciation.
Substantially all of the Company's exploration, development and production
activities are conducted jointly with others and accordingly these financial
statements reflect only the Company's proportionate interest in such
activities.
(c) Foreign currency translation
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 and amortization which are
translated at the rate of exchange applicable to the related assets. Monetary
items denominated in foreign currencies are translated to Canadian dollars at
exchange rates in effect at the balance sheet date and non-monetary items are
translated at rates in effect when the assets were acquired or obligations
incurred. Foreign exchange gains and losses are included in the determination
of income.
(d) Stock-based compensation
The Company accounts for stock options granted to non-employees after January
1, 2002 using the fair value method. Under this method, compensation expense is
measured at fair value at the grant date using the Black-Scholes option pricing
method and recognized over the vesting period with a corresponding credit to
contributed surplus. No compensation expense is recognized for stock options
granted to employees; the Company discloses the pro forma effect of accounting
for these awards using the fair value method.
(e) Income taxes
The Company provides for income taxes using the asset and liability method.
Under this method current income taxes are recognized for the estimated income
taxes payable for the current year. Future income taxes are recognized for
temporary differences between the tax and accounting bases of assets and
liabilities and for the benefit of losses available to be carried forward for
tax purposes that are likely to be realized. Future income tax liabilities and
assets are measured using tax rates expected to apply in the years in which
temporary differences are expected to be recovered or settled. Any change to
the net future income tax assets and liabilities is included in operations in
the year it occurs.
(f) Derivative financial instruments
Realized and unrealized gains and losses on derivative financial instruments
acquired to manage financial risks such as interest rates, commodity prices and
foreign exchange rates are included in income in the same period as when the
underlying asset, liability or anticipated transaction affects income. The
Company links all derivatives to specific firm commitments of forecasted
transactions and does not enter into derivative financial instruments for
trading or speculative purposes.
(g) Measurement uncertainty and use of estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses including depletion and depreciation, future site
restoration and abandonment costs of properties. The cost recovery ceiling test
is also based upon estimates of the market value of unproved properties, proved
reserves, petroleum and natural gas prices, future costs and other assumptions.
These estimates are subject to measurement uncertainty and the effect on the
financial statements of changes in such estimates could be significant.
(h) Earnings per share
Basic earnings per share are computed by dividing net earnings by the weighted
average shares outstanding during the reporting period. Diluted amounts are
computed using the "treasury stock" method of accounting. The treasury stock
method assumes that proceeds received from the exercise of options and warrants
where market price exceeds the exercise price are used to repurchase shares at
the average market rate for the period.
(i) Comparative figures
Certain prior year balances have been reclassified to conform to the current
year's presentation.
2 CHANGE IN ACCOUNTING POLICY
Effective January 1, 2002 the Company adopted a new Canadian accounting
standard for stock-based compensation and other stock-based payments to
recognize as an expense the value of stock-based grants to non-employees. As a
result of this change in accounting policy, the Company recorded $636,432 ($
(0.01) per share) in stock-based compensation expense in 2002.
3 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 Minister of
Mineral Resources 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. The Company does not have a sustainable revenue base
and therefore will require additional funding in the form of equity, debt,
joint ventures or some combination thereof to complete the work obligations.
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.
(a) Algeria
In 2000 the Company entered into a joint venture agreement with Sonatrach to
explore Yacoub Block 406a in the Berkine Basin. The remaining minimum work
obligation at year-end is to drill two exploration wells prior to November
2003, the end of the first exploration period. The estimated cost of this work
is U.S.$9,000,000. 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.$18,250,000. The joint venture agreement also
provides the Company with the option to enter a second exploration period that
would extend 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 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. The remaining
minimum work obligation at year-end is to conduct a seismic program and drill
two wells at an estimated cost of U.S. $18,000,000. 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 $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 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 extends to February 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. 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.
(c) Other
The Company is committed to office and equipment leases over the next three
years as follows:
2003 $ 248,907
2004 252,239
2005 238,016
4 CASH AND SHORT-TERM DEPOSITS
Deposits in banks, certificates of deposit and short-term investments with
original maturities of three months or less are classified as cash and cash
equivalents. The major components of cash and cash equivalents are as follows:
2002 2001
Cash on deposit
Canadian dollars $ 156,709 $ 4,377,533
British pounds 259,992 -
U.S. dollars 27,955 66,697
Algerian dinars 368,064 -
Bank term deposits at rates of interest varying
between 0.375% and 3.75%
Canadian dollars 4,710,500 -
British pounds 6,550,545 -
U.S. dollars 7,513,805 -
$ 19,587,570 $ 4,444,230
5 PROPERTY, PLANT AND EQUIPMENT
Accumulated
depletion and Net book
2002 Cost depreciation value
Petroleum and natural gas $ 29,617,798 $ - $ 29,617,798
properties
Office furniture and equipment 256,624 130,262 126,362
$ 29,874,422 $ 130,262 $ 29,744,160
2001
Petroleum and natural gas $ 9,801,707 $ - $ 9,801,707
properties
Office furniture and equipment 195,542 104,621 90,921
$ 9,997,249 $ 104,621 $ 9,892,628
At December 31, 2002 petroleum and natural gas properties include costs of
proven and unproven properties of $28,560,423 in Algeria (2001 - $8,746,950)
and unproven properties of $1,057,375 in Yemen (2001 - $1,054,757).
In 2002, the Company capitalized $1,640,000 (2001 - $294,000) of overhead
charges relating directly to the exploration and development activities in
Algeria and Yemen.
At December 31, 2002, the Company had estimated future site restoration costs
of $100,000 (2001 - $nil) that will be accrued over the remaining proven
reserves.
6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2002 2001
Trade payables:
Canadian dollars $ 359,880 $ 504,443
British pounds 100,903 -
U.S. dollars 6,489,579 -
Algerian dinars 101,320 -
Capital accrual:
U.S. dollars 2,069,350 478,530
Algerian dinars 230,428 -
Due to a shareholder
U.S. dollars (note 7 (b) (i)) - 260,000
$ 9,351,460 $ 1,242,973
At December 31, 2002 a bank has issued letters of credit totaling US$800,000 to
guarantee payment for services. The Company pledged cash as security for the
letters of credit.
7 CAPITAL STOCK
(a) Authorized share capital
Unlimited number of common shares without nominal or par value Unlimited number
of preferred shares without nominal or par value
(b) Issued share capital
Number of
shares Amount
Common shares:
Balance, December 31, 2000 48,764,602 $ 20,555,121
Issued on exercise of share purchase 170,000 110,500
warrants
Issued units (i) 400,000 200,000
Issued on exercise of special warrants (ii) 6,000,000 3,000,000
Issued units (iii) 14,000,000 7,000,000
Issued on exercise of share purchase 6,680,000 3,740,800
warrants (iv)
Issued on exercise of stock options 195,307 43,417
Issue costs - (1,067,106)
Balance, December 31, 2001 76,209,909 33,582,732
Issued on exercise of share purchase 3,400,000 2,210,000
warrants (i)(ii)
Issued on exercise of share purchase 8,400,000 4,704,000
warrants (v)
Issued on public offering (vi) 20,014,850 25,676,016
Issued on exercise of stock options 604,967 283,472
Issue costs - (2,791,935)
Balance, December 31, 2002 108,629,726 $63,664,285
(i) In March 2001 a shareholder acquired 400,000 units at $0.50 per unit. Each
unit consisted of one fully paid common share and one common share purchase
warrant exercisable into one common share at a price of $0.65 per share until
March 23, 2002. A director of the Company was a director of the purchaser of
the units.
In January 2002 the 400,000 common share purchase warrants were exercised and
the Company paid $260,000 for settlement of an outstanding claim of the
shareholder in the amount of US$185,000.
(ii) In May 2001, 6,000,000 special warrants were issued at $0.50 per special
warrant. Each special warrant consisted of one fully paid common share and one
half common share purchase warrant exercisable into one common share at a
purchase price of $0.65 per share until November 8, 2002.
In November 2002, 3,000,000 common shares were issued pursuant to the exercise
of the common share purchase warrants.
(iii) In June 2001, 7,000,000 units were issued at $0.50 per unit. Each unit
consisted of one fully paid common share and one common share purchase warrant
exercisable at a purchase price of $0.56 per share until December 29, 2001. In
conjunction with the sale, the Company issued to the agent 700,000 common share
purchase warrants exercisable at a purchase price of $0.56 per share until
December 29, 2002.
In September 2001, 7,000,000 units were issued at $0.50 per unit. Each unit
consisted of one fully paid common share and one common share purchase warrant
exercisable at a purchase price of $0.56 per share until June 13, 2002. In
conjunction with the sale, the Company issued to the agent 700,000 common share
purchase warrants exercisable at a purchase price of $0.56 per share until
March 13, 2003.
(iv) In December 2001, 6,680,000 common shares were issued on the exercise of
6,680,000 common share purchase warrants at $0.56 per share. In conjunction
with this issuance, the Company issued to the agent 668,000 common share
purchase warrants exercisable at a purchase price of $0.56 per share until June
29, 2003.
(v) In June 2002, 7,000,000 common shares were issued pursuant to the exercise
of 7,000,000 common share purchase warrants at $0.56 per share having an expiry
date of June 13, 2002. In connection with this issuance, the Company issued to
the agent 700,000 common share purchase warrants exercisable at a purchase
price of $0.56 per share until December 13, 2003.
In October 2002, 700,000 common shares were issued pursuant to the exercise of
700,000 common share purchase warrants at $0.56 per share having an expiry date
of December 29, 2002.
In October and November 2002, 700,000 common shares were issued pursuant to the
exercise of 700,000 common share purchase warrants at $0.56 per share having an
expiry date of March 13, 2003.
(vi) In July 2002 the Company issued 20,014,850 common shares for gross
proceeds of $25,676,016 (5,132,250 common shares at $1.25 per share and
14,882,600 common shares at �0.52 per share).
(c) Employee stock options
Pursuant to the stock option plan, the Company can reserve for issuance and
grant stock options to a maximum of 8,796,727 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 December 31, 2002 employees held stock options to purchase 7,110,033 common
shares at prices ranging from $0.25 to $1.90 per share. The options expire at
various times from November 2003 to December 2007.
Number of Weighted
average
options exercise price
Outstanding, December 31, 2000 3,415,307 $ 0.86
Granted 3,065,000 0.59
Exercised (195,307) 0.22
Cancelled (100,000) 0.70
Outstanding, December 31, 2001 6,185,000 0.76
Granted 1,530,000 1.18
Exercised (604,967) 0.47
Outstanding, December 31, 2002 7,110,033 $ 0.88
Exercisable, December 31, 2002 5,101,700 $ 0.87
The following table summarizes information about the options outstanding and
exercisable at December 31, 2002:
Options outstanding Options exercisable
Weighted Weighted Weighted
average average average
Range of Common remaining exercise Common exercise
exercise prices shares contractual price shares price
life
$0.25 - 0.50 1,736,999 3.6 years $0.47 1,167,000 $0.46
$0.60 - 0.85 2,231,334 3.3 years $0.74 1,659,667 $0.73
$0.95 - 1.06 1,191,700 2.4 years $1.04 1,025,033 $1.04
$1.23 - 1.90 1,950,000 3.4 years $1.28 1,250,000 $1.29
7,110,033 3.2 years $0.88 5,101,700 $0.87
(d) Common share purchase warrants
At December 31, 2002, 1,718,000 common share purchase warrants were
outstanding:
Outstanding Exercise Price Expire
668,000 $ 0.56 June 29, 2003
700,000 $ 0.56 December 13, 2003
350,000 $ 1.11 June 9, 2007
1,718,000
(e) Stock-based compensation and payments
In January 2002 the Company entered into agreements with two consultants to
provide services relating to the financing of its operations. Pursuant to the
agreements, the Company granted the two consultants options to acquire 900,000
common shares at a price of $0.70 per share. The options have a five-year term
and vest as to one third in each of the next three years.
In addition, as partial compensation for the Company's nominating and broker
advisors respecting services rendered to list the common shares on AIM of the
London Stock Exchange, the Company issued warrants to purchase 350,000 common
shares at $1.11 per share exercisable until June 2007.
The Company recognized $636,432 of stock-based compensation expense in the year
ended December 31, 2002 with a corresponding increase in contributed surplus.
The expense represents the estimated fair value of the above-noted options and
warrants being accrued over the vesting period.
The Company continued 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 reported 2002 loss and loss per
share would have been the pro forma amounts below:
Loss for the year As reported $(3,637,977)
Pro forma (4,271,684)
Loss per share (basic and As reported (0.04)
diluted)
Pro forma (0.05)
The fair value of options and warrants granted, estimated on the date of the
grant using the Black-Scholes option pricing model (expected volatility of 95%,
risk-free interest rate of 5% and expected lives of 5 years) ranged from $0.52
to $1.41.
(f) Per share amounts
The loss per share is based on the weighted average shares outstanding for the
year. The weighted average shares outstanding for 2002 were 90,007,229 (2001 -
57,284,269).
In computing the dilutive effect of the warrants and options, 7,965,153 shares
(2001 - 983,592) were added to the weighted average number of shares
outstanding. Outstanding warrants and options had no dilutive effect for 2002
or 2001.
8 INCOME TAXES
The income tax provision differs from the amount which would be obtained by
applying the Canadian basic federal and provincial income tax rate to the loss
for the year as follows:
2002 2001
Loss for the year $ (3,637,977) $ (1,328,392)
Statutory tax rate 42.1% 42.6%
Expected income tax recovery at statutory $ (1,531,588) $ (565,895)
tax rate
Non-deductible stock-based compensation 267,938 -
expenses
Losses, the benefit of which have not been 1,262,600 552,433
recognized
Other 1,050 13,462
$ - $ -
The components of the net future income tax asset at December 31, 2002, no
portion of which has been recorded in these financial statements, are
summarized as follows:
Canada
Operating losses $ 2,316,098
Property, plant and equipment 4,147,316
Other tax pools 3,228,539
Less: Valuation allowance (9,691,953)
$ -
The operating loss carryforwards expire as
follows:
2004 $ 715,000
2005 417,000
2006 564,000
2007 450,000
2008 327,000
2009 2,999,000
9 FINANCIAL INSTRUMENTS
The Company is exposed to foreign currency fluctuations on its exploration
activities as these obligations are generally denominated in U.S. dollars.
There are no contracts in place to fix the exchange rate.
The fair value of other financial instruments, including cash and short-term
deposits, accounts receivable and accounts payable and accrued liabilities
approximate their carrying values.
10 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.
2002 Canada Algeria Yemen Total
Revenue $ 266,141 $ - $ - $ 266,141
Expenses (3,879,118) (25,000) - (3,904,118)
Loss for the year $ (3,612,977) $ (25,000) $ - $ (3,637,977)
Capital $ 61,082 $ 19,813,473 $ 2,618 $ 19,877,173
expenditures
Assets $ 19,580,115 $ 28,928,487 $ 1,057,375 $ 49,565,977
2001 Canada Algeria Yemen Total
Revenue $ 298,300 $ - $ - $ 298,300
Expenses (1,601,692) (25,000) - (1,626,692)
Loss for the year $ (1,303,392) $ (25,000) $ - $ (1,328,692)
Capital $ 26,447 $ 5,743,542 $ (986,031) $ 4,783,958
expenditures
Assets $ 4,575,775 $ 8,746,950 $ 1,054,757 $ 14,377,482
11 SUBSEQUENT EVENTS
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 �0.95 per share). The share issue costs are estimated to be
$2,600,000, including the agent's 6% commission. In conjunction with the sale,
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.
In addition, the Company issued 1,023,805 common shares for a total cash
consideration of $645,680 pursuant to the exercise of 668,000 common share
purchase warrants at $0.56 per share, 81,472 common share purchase warrants at
$1.11 per share and 274,333 employee stock options at prices ranging from $0.25
to $1.06 per share.
Corporate Information
SENIOR MANAGEMENT CORPORATE HEADQUARTERS
First Calgary Petroleums Ltd.
Richard G. Anderson
Suite 900, 520 - 5 Avenue SW
President & CEO
Calgary, Alberta T2P 3R7
Martin G.J. Layzell tel: (403) 264-6697
Vice President, Exploration fax: (403) 264-3955
Kenneth C. Rutherford email: info@fcpl.ca
Vice President, Finance web site: www.fcpl.ca
Roger D. Whittaker AUDITORS
Manager of Geosciences KPMG LLP
Ken M. Topolinsky Calgary, Alberta
Operations Manager BANK
David J. Murphy Royal Bank of Canada
Senior Exploration Advisor Calgary, Alberta
Mike J. Brusset LEGAL COUNSEL
Engineering Manager
Burnet, Duckworth & Palmer LLP
Gary R. Bugeaud Calgary, Alberta
Corporate Secretary
REGISTRAR AND TRANSFER AGENT
DIRECTORS Inquiries regarding change of address,
registered shareholdings,
stock transfers or lost certificates should be
directed to:
Richard G. Anderson
Computershare Trust Company of Canada
President & CEO
Suite 600, 530 - 8 Avenue SW
Raymond P. Antony Calgary, Alberta T2P 3S8
Chartered Accountant Attn: Stock Transfer Department
Alastair J. Beardsall tel: (403) 267-6800
Oil and Gas Consultant
STOCK EXCHANGE LISTINGS
Darryl J. Raymaker, Q.C. Toronto Stock Exchange - Symbol: FCP
Solicitor London Stock Exchange - Symbol: FPL
Yuri K. Shafranik
OIL AND GAS ABBREVIATIONS
Independent Businessman
bbls barrels of oil
bbls/d barrels of oil per day
ACTIVE SUBSIDIARY
bc/d barrels of condensate per day
EURL FCP Algerie OPCO BCFe billion cubic feet of gas equivalent
(6 mcf/bbl conversion)
boe/d barrels of oil equivalent per day
mcf thousand cubic feet of gas
mcf/d thousand cubic feet of gas per day
mmcf million cubic feet of gas
mmcf/d million cubic feet of gas per day
psi per square inch
TCFe trillion cubic feet equivalent
First Calgary Petroleums Ltd
Suite 900 520 - 5 Avenue SW Calgary, AB T2P 3R7 tel: (403) 264-6697 fax: (403)
264-3955 email: info@fcpl.ca web site: www.fcpl.ca
Further Exploration
END