Iteration Energy (ITX) announces third quarter 2009 results
CORPORATE SUMMARY
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Financial Three months ended Nine months ended
Highlights Sept 30, Sept 30,
($thousands, except
as noted) 2009 2008 2009 2008
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Production
revenue before
royalties $42,117 $108,444 $145,746 $291,183
Funds from
operations(1) $10,095 $59,338 $30,373 $140,676
Per share ($)
- basic $0.05 $0.36 $0.16 $0.99
- diluted $0.05 $0.35 $0.16 $0.97
Net earnings (loss) ($16,487) $26,696 ($53,740) $29,058
Per share ($)
- basic ($0.08) $0.16 ($0.28) $0.21
- diluted ($0.08) $0.16 ($0.28) $0.20
Capital
expenditures 5,968 32,414 48,239 101,564
Acquisition/
(Dispositions) (38,748) 36,930 (41,126) 41,476
------------ ------------ ------------ ------------
Net capital
expenditures $(32,780) $69,344 $7,113 $143,040
As at Sept 30,
2009 2008
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Total assets $914,266 $1,258,249
Bank debt and working capital surplus or
deficiency(2) $198,515 $232,467
Common shares outstanding 210,985,384 166,020,387
Stock options outstanding 10,706,240 8,635,045
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(1) "Funds from operations" and "funds from operations per share" are
financial measures that are not determined in accordance with GAAP.
See "Non-GAAP Measures" in the Company's Management Discussion and
Analysis.
(2) Working capital deficiency (surplus), which is the difference between
current assets and current liabilities, does not include stock based
compensation payable.
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Operating Three months ended Nine months ended
Highlights Sept 30, Sept 30,
2009 2008 2009 2008
----------------------- ---------------------------
Production
Natural gas (mcf/d) 64,176 75,645 72,634 66,700
Light oil (bbls/d) 3,030 3,956 3,140 3,138
Heavy oil (bbls/d) 136 265 172 217
Natural gas liquids
(bbls/d) 1,357 1,678 1,406 1,385
------------ ------------ ------------ ------------
Total production
(boe/d) 15,219 18,507 16,824 15,857
Prices
Natural gas ($/mcf) $3.02 $8.13 $4.01 $9.05
Light oil ($/bbl) $68.77 $109.59 $59.17 $115.29
Heavy oil ($/bbl) $63.02 $100.38 $42.01 $85.56
Natural gas liquids
($/bbl) $34.47 $74.48 $33.55 $61.79
------------ ------------ ------------ ------------
Average price
($/boe) $30.08 $64.32 $31.73 $67.28
Operating Netback
($/boe) $11.91 $39.22 $10.94 $40.85
Net Undeveloped Land
('000acres as at
Sept 30) 802 878 802 878
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PRESIDENT'S MESSAGE
Since the second quarter of 2009 Iteration has achieved progress on a number of fronts. Highlights include:
- Funds from operations of $10.1 million ($0.05 per basic share) for
the third quarter of 2009 approximately doubled second quarter 2009
results,
- Production expenses of $12.36 per boe for the third quarter of 2009
were approximately 20% lower than the second and first quarters of
2009,
- Third quarter 2009 debt of $199 million was reduced by $43 million
from the end of second quarter 2009 with proceeds from non-core
property dispositions and lower capital expenditures,
- Subsequent to the end of the quarter the borrowing base was set at
$225 million by our banking syndicate,
- Drilling operations commenced at Manyberries in South Alberta with
results to date meeting or exceeding expectations,
- Third quarter of 2009 production averaged 15,219 boed, down about 5%
from the second quarter of 2009 after factoring in property
dispositions (approximately 600 boed on average for the quarter) and
additional shut-in production. Shut in production is up approximately
400 boed on average from the second quarter of 2009 and averaged
1,150 boed for the third quarter of 2009,
- Funds from operations for 2009 is expected to improve $7 million from
our previous forecast to $47 million ($0.24 per basic share) with
higher commodity prices,
- Approved an initial 2010 capital budget of $95 million (after taking
into account drilling credits of $30 million), which includes an
expected drilling program of 77 net wells,
- Production is expected to rise from approximately 13,000 boed in
December 2009 to 16,000 boed in December 2010, and
- Funds from operations in 2010 are expected to double forecast 2009
levels to $95 million ($0.45 per basic share).
2009 Operations and Finances
----------------------------
Average production for the third quarter of 2009 was 15,219 boed, ahead of our budget for the quarter but down from the second quarter of 2009. Non core property dispositions, shut-in production, and natural declines due to lower activity all reduced production. Additional production of 400 boed was shut-in in the third quarter due to low gas prices. If gas prices hold their recent gains we expect to bring the majority of this production back on stream starting in late 2009.
Capital expenditures were approximately
Funds from operations for the quarter were
With second quarter 2009 results we announced a new hedging philosophy that would see us potentially hedging up to 35% of production two years forward in order to reduce the volatility of funds from operations. This program is being implemented over time and will be built up as a portfolio of transactions. During the third quarter we initiated our first transactions under the program, hedging approximately 7% of fourth quarter 2009 and 2010 production and 2% of our 2011 production. Over time we anticipate adding to the 2010 and 2011 positions.
The balance of our non-core property disposition program was completed in
We have updated our guidance for the fourth quarter of 2009 primarily to reflect stronger pricing for both gas and oil, partially offset by a stronger Canadian dollar versus the US dollar. Average production for the year is still expected to be in the range previously forecast of 15,600 to 16,100 boed as we do not anticipate significant new production from our drilling program until 2010. Economic parameters we are using for the last three months of 2009 in this forecast are; AECO gas price of
2010 Operations and Finances
----------------------------
The Board of Directors has approved a preliminary capital budget for 2010 of
With the 2010 capital program 75 net wells are expected to be drilled. The majority of our first quarter 2010 drilling is planned to target western Alberta oil prospects including 3 wells at Rainbow, 4 wells in Gold Creek and 3 wells in the Gordondale area. There is an 8 well gas program expected at Thornbury in our east central Alberta area. We have elected to farm-out a portion of our Montney acreage at Monias in northeast BC. Under the terms of the agreement we will maintain a 50% working interest and the development of the play will be accelerated. The first well is expected to begin drilling shortly, and we will be able to access infrastructure to allow production from successful wells to come on stream. Second half of the year drilling is expected to be a combination of oil and gas targets depending upon commodity prices. We have multi zone targets in our East and West Alberta core areas as well as Northeast BC. Some of the drilling is expected to be down spacing in the Nikanassin and horizontal wells in the Cretaceous and Triassic zones. This should further establish the resource nature of some of our West Alberta and BC acreage. We expect the next round of Manyberries oil drilling in South Alberta to start in
Similar to 2009, our 2010 capital budget will be dependent upon commodity prices and the actual level of funds from operations realized. We anticipate keeping net capital expenditures in line with funds from operations; therefore we will adjust our net capital budget accordingly. As our hedging portfolio is built up over time we expect less variability in our funds from operations and a more predictable capital program. However given that less than 35% of our production is expected to be hedged we will continue to monitor and be prepared to adjust our capital program if circumstances warrant.
Our forecast for the remainder of 2009 and all of 2010 is predicated on there being a swift resolution to the recent moratorium on licensing any wells with H(2)S in Alberta, and that we will be able to proceed with our planned drilling program. We are currently waiting on the ERCB to define potential changes to licensing wells that have the potential for minor amounts of H(2)S.
The third quarter of 2009 represented an improvement in our financial performance and position, and with stronger gas prices we are looking forward to a more active capital program this winter. Forward gas prices have reached a level that makes drilling some of our horizontal opportunities desirable. Our light oil program at Manyberries is progressing as well or better than we expected and we will continue to expand on it in 2010.
We have put forward a preliminary capital budget that would see us double activity levels from 2009 and the resulting funds from operations would place us in solid financial position. To date 2009 has been challenging but we have taken steps to strengthen the Company financially. Having taken these steps, our outlook for 2010 is much improved.
On behalf of the Board of Directors,
(Signed) Brian Illing
President & CEO
November 10, 2009
MANAGEMENT'S DISCUSSION AND ANALYSIS
November 10, 2009
The following is Management's Discussion and Analysis ("MD&A") of Iteration Energy Ltd.'s (the "Company" or "Iteration") operating and financial results as at and for the three and nine months ended
Natural gas is converted to crude oil equivalent at a ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent ("boe"). Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Additional information about Iteration filed with Canadian securities commissions, including periodic quarterly and annual reports and the AIF, is available on-line at www.iterationenergy.com and at www.sedar.com.
The following MD&A contains forward looking information and statements. We refer you to the end of the MD&A for our discussion on forward looking information and statements in the section "ADVISORY - FORWARD LOOKING INFORMATION".
ITERATION OVERVIEW
Iteration is a Canadian oil and gas company with focus areas in Northeast British Columbia/Northwest Alberta, East Central Alberta and Southern Alberta. The most significant currently producing properties are Boundary Lake in Northeast British Columbia and Gold Creek, Knopcik and Manyberries in Alberta.
NON-GAAP MEASURES
This MD&A refers to "funds from operations" and "funds from operations per share" which do not have any standardized meaning prescribed by Canadian GAAP and therefore they may not be comparable with the calculation of similar measures for other entities. Management uses "funds from operations" and "funds from operations per share" (before changes in non-cash working capital) to analyze operating performance and leverage. Funds from operations as presented is not intended to represent operating cash flow or income from operations for the period nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP. All references to funds from operations and funds from operations per share throughout this MD&A are based on cash flow from operating activities before changes in non-cash working capital. The table below provides a reconciliation between cash flow from operations and funds from operations.
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($ thousands) Three months ended Sept 30, Nine months ended Sept 30,
--------------------------- ---------------------------
2009 2008 2009 2008
--------------------------- ---------------------------
Funds from
operations $10,095 $59,338 $30,373 $140,676
Changes in non-
cash working
capital 7,240 (13,563) 16,435 (13,664)
--------------------------- ---------------------------
Cash flow from
operations $17,335 $45,775 $46,808 $127,012
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OUTLOOK FOR 2009
Iteration is updating its guidance for 2009 results issued on
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2009 Current 2009 Previous
Forecast August 12 Forecast Change
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Production (boe/d)
Annual average 15,600 - 16,100 15,600 - 16,100 0%
Capital program(1)
Expenditures
($ million) 67 65 3%
Net wells drilled 24 24 0%
Funds from operations
Annual ($ million) 47 40 18%
Annual per basic
share ($) 0.24 0.20 20%
Year end net debt
($ million) 200 205 (2%)
Average Pricing: (Oct - Dec 2009) (July - Dec 2009)
Natural gas - AECO
(Cdn$/mcf) 5.00 3.75 33%
Oil - WTI (US$/bbl) 75.00 65.00 15%
Foreign exchange
rate (US$/Cdn) 0.95 0.90 6%
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Note:
(1) The Alberta drilling credits are included as a reduction to capital
expenditures. The amount of drilling credits is forecast to be $3.1
million ($4.7 million in the previous guidance).
Gas prices began to strengthen in the fourth quarter of 2009 and oil prices have also improved since the second quarter of 2009. A stronger Canadian dollar versus the US dollar since the second quarter has offset some of the price increases. In addition, the Company has approximately 1,150 boed of production currently shut-in, most of which is gas. If gas prices remain at current levels the majority of this production is expected to come back on starting in late 2009.
Capital expenditures have remained essentially the same as our previous forecast, however we have altered the wells drilled due to timing of operations. The 6 (6.0 net) well program at Rainbow in North Alberta will be split between the fourth quarter of 2009 and the first quarter of 2010 due to wet surface conditions delaying the start of the program. Manyberries in South Alberta is proceeding and we have added 5 (4.9 net) additional wells to this program based on early success and lower costs.
Funds from operations are expected to be higher than previously forecast mainly due to higher commodity prices. Royalty rates for the year are forecast to be approximately 18% for the year, slightly below the previous forecast of 19%. Lower than expected rates in the third quarter of 2009 will be partially offset by higher rates due to higher expected commodity prices in the fourth quarter. Production expenses of
General and Administrative ("G&A") expense is expected to average
Year-end debt is expected to be approximately
The impact on the Company's 2009 funds from operations of a
OUTLOOK FOR 2010
Iteration is projecting commodity prices for 2010 to improve over expected 2009 levels resulting in significantly higher funds from operations and capital expenditures in 2010. With increased capital expenditures combined with the fourth quarter drilling program and the return of shut-in production, 2010 production is expected to rise throughout the year to approximately 16,000 boed in
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2010 2009 Forecast
Forecast November 10 Change
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Production (boe/d)
Annual average 14,500 - 15,100 15,600 - 16,100 (7%)
Capital program(1)
Expenditures
($ million) 95 67 42%
Net wells drilled 75 25 200%
Funds from operations
Annual ($ million) 95 47 102%
Annual per basic
share ($) 0.45 0.24 88%
Year end net debt
($ million) 200 200 0%
Average Pricing: (Jan - Dec 2010) (Jan - Dec 2009)
Natural gas - AECO
(Cdn$/mcf) 5.75 4.10 40%
Oil - WTI (US$/bbl) 75.00 61.50 22%
Foreign exchange
rate (US$/Cdn$) 0.95 0.88 8%
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Note:
(1) The Alberta drilling credits are included as a reduction to capital
expenditures. The amount of drilling credits included is forecast to
be $30 million ($3.1 million in the 2009 guidance).
Capital expenditures are expected to increase 42% over 2009 levels after taking into account drilling credits. The program will be split approximately 60% to oil opportunities targeting 50 net wells and approximately 40% to gas opportunities targeting 25 net wells. The majority of the oil drilling will be focused at Manyberries in South Alberta, while the gas drilling will be directed toward East Alberta, West Alberta and North East BC.
Funds from operations are expected to double from 2009 levels mainly due to higher commodity prices and lower operating costs despite lower average production levels. Royalty rates for the year are forecast to be approximately 21% for 2010, slightly higher than 2009 levels due to higher forecast commodity prices. Production expenses are expected to average
G&A expense is expected to average
The Company's capital budget will be responsive to changes in commodity prices. With rising prices there is a significant inventory of drilling opportunities that can be undertaken. However, should commodity prices be lower than forecast, the Company intends to scale back operations to ensure that the projected capital program remains in line with projected funds from operations. As disclosed in the second quarter 2009 report, the Company has instituted a hedging program. Initial hedges have been put in place affecting about 7% of forecast production and as a result are not expected to materially affect projected funds from operations. The Company intends to enter into additional hedges to build up its portfolio with the goal of having potentially 35% of production hedged up to two years forward. Hedge transactions will be taken into account when determining capital expenditures and funds from operations.
The impact on the Company's 2010 funds from operations of a
The Company's forecast for the remainder of 2009 and all of 2010 is predicated on there being a swift resolution to the recent moratorium on licensing any wells with H2S in Alberta, and that Iteration will be able to proceed with its planned drilling program. Iteration is currently waiting on the ERCB to define potential changes to licensing wells that have the potential for minor amounts of H2S.
OPERATING RESULTS
Production
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Daily Three months ended Nine months ended
production Sept 30, Sept 30,
Average for ----------------------------- -----------------------------
the period 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Natural gas
(mcf/d) 64,176 75,645 (15) 72,634 66,700 9
Natural gas
liquids
(bbls/d) 1,357 1,678 (19) 1,406 1,385 2
Light oil
(bbls/d) 3,030 3,956 (23) 3,140 3,138 -
Heavy oil
(bbls/d) 136 265 (49) 172 217 (21)
------------------------------------------- -----------------------------
Total
production
(boed) 15,219 18,507 (18) 16,824 15,857 6
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Average daily production for the three months ended
Average daily production for the nine months ended
Commodity Prices
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Industry Three months ended Nine months ended
benchmarks Sept 30, Sept 30,
Average for ----------------------------- -----------------------------
the period 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Natural gas
(AECO $/mcf) $2.94 $7.73 (62) $3.79 $8.64 (56)
Edmonton Light
crude ($/bbl) $71.50 $121.85 (41) $62.35 $115.14 (46)
Hardisty Lloyd
blend ($/bbl) $63.45 $103.57 (39) $55.33 $94.30 (41)
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Realized
commodity Three months ended Nine months ended
prices Sept 30, Sept 30,
Average for ----------------------------- -----------------------------
the period 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Natural gas
($/mcf) $3.02 $8.13 (63) $4.02 $9.05 (56)
Natural gas
liquids
($/bbl) $34.47 $74.78 (54) $33.55 $61.79 (46)
Light oil
($/bbl) $68.77 $109.59 (37) $59.17 $115.29 (49)
Heavy oil
($/bbl) $63.02 $100.38 (37) $49.66 $85.56 (42)
------------------------------------------- -----------------------------
Total ($/boe) $30.08 $64.32 (53) $31.73 $67.28 (53)
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Commodity prices for 2009 continue to be significantly below those experienced in 2008 and as a result the Company's realized price on a per boe basis is over 50% lower for the three and nine months ended
Price Risk Management
The Company, from time to time, may enter into financial contracts for the purpose of protecting its funds from operations from the volatility of commodity prices. The Company has a general hedging program of potentially having up to 35% of it production hedged up to two years forward. In implementing this program the Company intends to build its hedge position through a portfolio of contracts over time. To that end the Company has hedged approximately 7% of its forecast 2010 production. At
- 1,000 bbl per day fixed price swap for the fourth quarter of 2009 at
$80 Canadian WTI/bbl
- 200 bbl per day collar for 2010 with a floor price of $70 Canadian
WTI/bbl and a ceiling price of $91 Canadian WTI/bbl
- 200 bbl per day collar for 2010 with a floor price of $70 Canadian
WTI/bbl and a ceiling price of $97 Canadian WTI/bbl
- 3,500 GJ per day fixed price swap for November 1, 2009 to October 31,
2010 at $4.98/GJ
- 2,000 GJ per day fixed price swap for November 1, 2010 to October 31,
2011 at $6.00/GJ
Revenue
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Production
revenue
before Three months ended Nine months ended
royalties Sept 30, Sept 30,
----------------------------- -----------------------------
($ thousands) 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Production
revenue $42,117 $108,444 (61) $145,746 $291,183 (50)
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Production revenue for the three months ended
For the three months and nine months ended
Royalties
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Royalties $6,720 $23,115 (71) $25,379 $61,993 (59)
Per boe ($/boe) $4.80 $13.71 (65) $5.53 $14.32 (61)
Percentage of
revenue (%) 15.8 21.3 (26) 17.4 21.3 (18)
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Royalty expenses on an absolute, per boe and percentage of revenue basis all decreased in 2009 compared to the corresponding periods in 2008 primarily due to lower commodity prices, particularly gas prices, and the new
Production Expenses
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Production Three months ended Nine months ended
expenses Sept 30, Sept 30,
----------------------------- -----------------------------
($ thousands) 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Total
production
expenses $17,308 $18,080 (4) $65,941 $47,842 38
Per boe
($/boe) $12.36 $10.62 16 $14.36 $11.01 30
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Note: Production expenses for the three and nine month periods ended
September 30, 2008 have been restated by $455 and $1,180 respectively for
costs previously allocated from general and administrative expenses.
For the third quarter of 2009 production expenses decreased compared to the same period in 2008 due to lower production partially offset by higher per unit costs. Per unit production costs have increased as fixed costs associated with shut in production in the 2009 period are still incurred by the Company and spread over a lower production base. For the nine months ended
Transportation Expenses
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Transportation
expenses $1,411 $1,290 9 $4,146 $4,741 (13)
Per boe
($/boe) $1.01 $0.77 31 $0.90 $1.10 (18)
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Transportation expenses for the third quarter of 2009 increased compared to the prior year period primarily due to higher charges for interruptible gas transportation. For the nine months ended
Operating Netback
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Three months ended Nine months ended
Sept 30, Sept 30,
----------------------------- -----------------------------
($/boe) 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Production
revenue $30.08 $64.32 (53) $31.73 $67.28 (53)
Royalties (4.80) (13.71) (65) (5.53) (14.32) (61)
Production
expenses (12.36) (10.62) 16 (14.36) (11.01) 30
Transportation
expenses (1.01) (0.77) 31 (0.90) (1.10) (18)
------------------------------------------- -----------------------------
Operating
netback $11.91 $39.22 (70) $10.94 $40.85 (73)
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The operating netback per boe (before general and administrative expenses) realized for the three and nine months ended
General and Administrative Expenses
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
General and
administrative
costs before
the
following: $4,953 $4,282 16 $13,954 $12,397 13
Capitalized
overhead (1,012) (1,045) (3) (3,719) (2,835) 31
Overhead
recoveries (242) (30) 707 (347) (158) 120
------------------------------------------- -----------------------------
General and
administrative
expense $3,699 $3,207 15 $9,888 $9,404 5
------------------------------------------- -----------------------------
Per boe
($/boe) $2.64 $1.88 40 $2.15 $2.16 0
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Note: General and administrative costs prior to any deductions or
recoveries for the three and nine month periods ended September 30, 2008
have been restated by $455 and $1,180 respectively for costs previously
allocated to production expense.
G&A expenses for the three and nine months ended
Stock-Based Compensation Expense
The Company's stock option plan provides option holders the right to request, upon exercise, receipt of a cash payment in exchange for surrendering the option, provided the request is accepted by the Company. The cash payment is equal to the appreciated value of the option, as determined by the difference between the option's exercise price and the Company's closing share price on the
For the three and nine months ended
Future fluctuations in the stock-based compensation expense or recoveries are dependent on the movement of the Company's share price and the number of options vested and outstanding. Based on the
Interest and Financing Expense
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Interest and
financing
expense $2,557 $2,526 1 $7,390 $6,705 10
Per boe
($/boe) $1.83 $1.48 24 $1.61 $1.54 5
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Interest and financing expense primarily represents interest on bank debt but also includes financing charges and expenses related to bank debt. For the third quarter of 2009 interest and financing expense has remained relatively flat compared to 2008 as the impact of lower average debt levels between the periods was offset by a higher interest rate. For the nine months ended
Depletion, Depreciation, and Accretion
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Depletion,
depreciation
and
accretion $32,335 $40,639 (20) $104,835 $101,239 4
Per boe
($/boe) $23.09 $23.87 (3) $22.82 $23.30 (2)
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Depletion, depreciation, and accretion ("DD&A") expense is lower for the third quarter of 2009 compared to the prior year period primarily due to lower production. For the nine months of 2009 higher production increased DD&A expense slightly compared to the prior year period. On a per boe basis DD&A expense is within 3% of each other between the 2009 and 2008 periods.
Funds from Operations and Net Income/(Loss)
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Three months ended Nine months ended
Sept 30, Sept 30,
($ thousands ----------------------------- -----------------------------
except where
noted 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Funds from
operations $10,095 $59,338 (83) $30,373 $140,676 (78)
per share
- basic ($) $0.05 $0.36 (86) $0.16 $0.99 (84)
per share
- diluted
($) $0.05 $0.35 (86) $0.16 $0.97 (84)
per boe
($/boe) $7.21 $34.85 (79) $6.61 $32.38 (80)
Net (Loss)/
income ($16,487) $26,696 (162) ($53,740) $29,058 (285)
per share
- basic ($) ($0.08) $0.16 (150) ($0.28) $0.21 (233)
per share
- diluted
($) ($0.08) $0.16 (150) ($0.28) $0.20 (240)
per boe
($/boe) ($11.78) $15.68 (175) ($11.70) $6.69 (275)
Weighted
average
shares
outstanding
basic ('000) 210,985 166,020 27 190,232 141,607 34
diluted
('000) 210,985 168,046 25 190,232 144,693 31
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The Company's funds from operations for the three and nine months ended
The Company's net loss for the three months ended
Weighted average shares outstanding in the third quarter of 2009 increased approximately 27% over the prior year period primarily due to the 45 million common share equity issue completed in
Capital Expenditures
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Three months ended Nine months ended
Sept 30, Sept 30,
----------------------------- -----------------------------
($ thousands) 2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Land $117 $3,204 (96) $3,915 $24,333 (84)
Seismic 388 2,143 (82) 2,610 6,157 (57)
Drill,
complete &
facilities 4,452 26,082 (83) 37,994 68,299 (45)
Capitalized
G&A 1,011 985 3 3,719 2,775 34
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Capital
Expenditures 5,968 32,414 (82) 48,239 101,564 (53)
Acquisition/
(dispositions)(38,748) 36,930 (205) (41,126) 41,476 (199)
------------------------------------------- -----------------------------
Net Capital
Expenditures ($32,780) $69,344 (147) $7,113 $142,018 (95)
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Wells Drilled Three months ended Nine months ended
(net) Sept 30, Sept 30,
----------------------------- -----------------------------
2009 2008 % Change 2009 2008 % Change
------------------------------------------- -----------------------------
Gas 1.0 13.1 (92) 5.8 34.7 (83)
Oil 1.0 5.9 (83) 2.1 12.8 (84)
Injector 0.8 1.0 (20) 0.8 2.0 (60)
Dry 1.5 2.0 (25) 1.5 3.7 (59)
------------------------------------------- -----------------------------
Total 4.3 22.0 (80) 10.2 53.2 (81)
------------------------------------------- -----------------------------
Success rate
(%) 65.1 90.9 (28) 85.3 93.0 (8)
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The Company completed
Selected Quarterly Data
2009 2008
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Quarter
ended Sept 30 June 30 Mar 31 Dec 31 Sept 30 June 30
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Production
(boe/d) 15,219 17,137 18,165 18,001 18,507 18,146
Revenues
($000) $42,117 $44,936 $58,693 $70,656 $108,444 $127,175
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Average
realized
prices
($/boe) $30.08 $28.82 $35.93 $43.08 $64.32 $77.02
Royalties
($/boe) $4.80 $4.18 $7.43 $7.61 $13.71 $16.47
Production
expense
($/boe) $12.36 $15.23 $15.23 $10.78 $10.62 $12.00
Transportation
expense
($/boe) $1.01 $0.83 $0.88 $0.71 $0.77 $1.20
Operating
netback
($/boe) $11.91 $8.58 $12.39 $23.56 $39.22 $47.35
Net G&A
expense
($/boe) $2.64 $1.96 $1.92 $1.43 $1.88 $2.22
Net interest
expense
($/boe) $1.83 $2.06 $0.99 $1.58 $1.48 $1.86
-------------------------------------------------------------------------
Funds from
operations
($000) $10,095 $5,378 $14,900 $31,152 $59,338 $52,824
per boe
($/boe) $7.21 $3.45 $9.11 $18.81 $34.85 $31.99
per share
- basic
($) $0.05 $0.03 $0.09 $0.19 $0.36 $0.32
per share
- diluted
($) $0.05 $0.03 $0.09 $0.19 $0.35 $0.31
-------------------------------------------------------------------------
Net income
(loss) ($16,487) ($22,978) ($14,275)($244,894) $26,696 $672
per boe
($/boe) ($11.78) ($14.73) ($8.73) ($147.87) $15.68 $0.41
per share
- basic
($) ($0.08) ($0.12) ($0.09) ($1.48) $0.16 $0.00
per share
- diluted
($) ($0.08) ($0.12) ($0.09) ($1.48) $0.16 $0.00
-------------------------------------------------------------------------
Net capital
expenditures
($000) $(32,780) $4,196 $35,360 $74,043 $68,837 $31,408
-------------------------------------------------------------------------
Bank debt
and working
capital
deficiency
($000) as
at $198,515 $241,652 $296,726 $276,130 $232,467 $222,129
-------------------------------------------------------------------------
---------
2007
---------------------------------
Quarter
ended Mar 31 Dec 31
---------------------------------
Production
(boe/d) 10,890 7,989
Revenues
($000) $55,564 $29,265
---------------------------------
Average
realized
prices
($/boe) $56.08 $39.84
Royalties
($/boe) $11.79 $8.12
Production
expense
($/boe) $10.03 $11.71
Transportation
expense
($/boe) $1.48 $1.09
Operating
netback
($/boe) $32.78 $18.92
Net G&A
expense
($/boe) $2.56 $2.64
Net interest
expense
($/boe) $1.12 $1.37
---------------------------------
Funds from
operations
($000) $28,511 $11,103
per boe
($/boe) $28.77 $15.11
per share
- basic
($) $0.31 $0.16
per share
- diluted
($) $0.31 $0.16
---------------------------------
Net income
(loss) $1,689 ($3,149)
per boe
($/boe) $1.70 ($4.28)
per share
- basic
($) $0.02 ($0.05)
per share
- diluted
($) $0.02 ($0.05)
---------------------------------
Net capital
expenditures
($000) $41,774 $17,610
---------------------------------
Bank debt
and working
capital
deficiency
($000) as
at $216,959 $61,012
---------------------------------
Compared to the immediately preceding quarter, the Company's third quarter 2009 production declined 11% primarily due to the disposition of non-core properties (approximately 600 boed for the quarter), an increase in shut in gas production (on average an additional 400 boed was shut-in for the third quarter over the second quarter) and natural declines. Revenues decreased 5% as the slight improvement in commodity prices was more than offset by lower production. With slightly higher commodity prices and the shut-in of marginal gas production, royalties increased 15% on a per boe basis and from 14.5% to 15.8% on a percentage of revenue basis compared to the second quarter of 2009. Production expense declined 19% on a per boe basis between the second and third quarter of 2009 due to lower prior period costs recorded in the third quarter. Operating netback improved 39% on a per boe basis in the third quarter of 2009 compared to the second quarter of 2009 primarily due to lower production expense.
Between the second and third quarters of 2009 net G&A expense on a per boe basis increased 35% primarily due to higher office costs and lower production. Comparing the same time periods, net interest expense per boe decreased due to lower debt levels.
Funds from operations for the third quarter of 2009 almost doubled the level achieved in the second quarter of 2009 due to higher operating netback and the absence of the
Net capital expenditures decreased from the second quarter to the third quarter of 2009 due to
Bank debt and working capital deficiency fell
CAPITAL AND LIQUIDITY RESOURCES
The Company's liquidity depends upon cash flow from operations, supplemented as necessary by equity and debt financings, and its new credit facility.
As an oil and gas company, the Company has a declining asset base and therefore relies on ongoing exploration, development and acquisitions to replace production and add additional reserves. Future oil and gas production and reserves are highly dependent on the success of exploiting the Company's existing asset base and in acquiring additional reserves. To the extent the Company is successful or unsuccessful in these activities, funds from operations could be increased or reduced.
The Company currently has budgeted a drilling and exploration program of
The Company's financial position improved during the quarter due to the
Subsequent to the quarter end the Company's lending syndicate re-determined the borrowing base as part of its mid year review to
Operating Leases
The Company has entered into various operating leases with respect to its office space. The leases expire between
-------------------------------------------------------------------------
Gross Commitment Sublet Recovery Net Commitment
($000) ($000) ($000)
-------------------------------------------------------------------------
2009 $885 ($317) $568
2010 $3,537 ($1,268) $2,269
2011 $3,537 ($1,268) $2,269
2012 $3,220 ($951) $2,269
2013 $2,269 - $2,269
2014 $1,135 - $1,135
-------------------------------------------------------------------------
The office space previously occupied by Cyries has been sublet on a full recovery flow-through basis commencing
Related Party Transactions
There were no related party transactions during the three months ended
Outstanding Common Shares and Options
As at
CRITICAL ACCOUNTING ESTIMATES
In the application of accounting policies, management is often required to make judgments based on underlying estimates and assumptions about future events and their effects. Underlying estimates and assumptions are based on historical experience and other factors that management believes to be reasonable under the circumstances. These estimates and assumptions are subject to change as new events occur and additional information is obtained. Reference should be made to the MD&A for the year ended
Impact of New Accounting Pronouncements
Goodwill and Intangible Assets
------------------------------
Effective
New Accounting Standards issued Subsequent to Year End
------------------------------------------------------
In
On
International Financial Reporting Standards ("IFRS")
----------------------------------------------------
The Canadian Accounting Standards Board has now confirmed that the use of IFRS will be required in 2011 for publicly accountable, profit-oriented enterprises. IFRS will replace current Canadian GAAP followed by the Company. The Company will be required to begin reporting under IFRS effective
- determine appropriate changes to accounting policies and required
amendments to financial disclosures;
- identify and implement changes in associated processes and
information systems;
- comply with internal control requirements;
- educate and train internal and external stakeholders.
At
Disclosure Controls and Procedures and Internal Controls over Financial Reporting
The Company has implemented disclosure controls and procedures, as defined in National Instrument 52-109-Certification of Disclosure in Issuer's Annual and Interim Filings ("NI52-109"), to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management, as appropriate, to allow timely decisions regarding required disclosures.
Management is also responsible for establishing and maintaining adequate internal control over the Company's financial reporting. The Company's internal control system was designed to provide reasonable assurance that all transactions are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company's assets are safeguarded. Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedure may deteriorate.
The CEO and CFO are required to certify on the effectiveness of the Company's disclosure controls and procedures concurrent with filing its interim financial statements to the first nine months of 2009 in accordance with NI 52-109. The Company's CEO and CFO, together with management, have concluded, based on their evaluation of the effectiveness of the Company's disclosure controls and procedures as of
The CEO and CFO assessed the effectiveness of the Company's internal control over financial reporting as at
During the three months ended
It should be noted that while the Company's CEO and CFO believe that the Company's disclosure controls and procedures and internal controls over financial reporting provide a reasonable level of assurance that they are effective, they do not expect that the disclosure controls and procedures or internal controls over financial reporting will necessarily prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ADVISORY - FORWARD-LOOKING INFORMATION
This MD&A was prepared on
- the timing and amount of production;
- natural gas, natural gas liquids and crude oil production levels;
- commodity prices for natural gas, natural gas liquids and crude oil;
- royalties payable and future royalty rates under the New Alberta
Royalty Regime;
- royalties payable and future royalty rates under the Transitional
Alberta Royalty program;
- the Alberta royalty incentive program including drilling credits
announced on March 3, 2009;
- production expenses;
- transportation expenses;
- operating netbacks;
- general and administrative expenses;
- interest expenses and interest rates;
- Canadian dollar exchange rates;
- capital expenditures;
- capital and liquidity;
- funds from operations;
- debt levels;
- ratio of debt to funds from operations;
- number of net wells; and
- outlook for 2009 and 2010.
Certain forward-looking statements may constitute "financial outlooks" as contemplated by National Instrument 51-102 - Disclosure Obligations, which are provided for the purpose of forecasting Iteration's results and financial position for 2009 and 2010. Please note that the financial outlook in this MD&A may not be appropriate for purposes other than as stated above.
Forward-looking statements and information are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas, natural gas liquids and crude commodity prices, future natural gas, natural gas liquids and crude oil production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Undue reliance should not be placed on these forward-looking statements, which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed below, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Iteration's actual results could differ materially from those anticipated in our forward-looking statements as a result of the risk factors set forth below and noted elsewhere in this MD&A which include but are not limited to:
- volatility in market prices for oil and natural gas;
- risks inherent in Iteration's operations;
- uncertainties associated with estimating reserves;
- competition for, among other things: capital, acquisitions of
reserves, undeveloped lands and skilled personnel;
- incorrect assessments of the value of acquisitions;
- geological, technical, drilling and process problems;
- general economic conditions including fluctuations in the price of
oil and natural gas;
- royalties payable in respect of Iteration's production;
- governmental regulation of the oil and gas industry, including
environmental regulation;
- fluctuation in foreign exchange or interest rates;
- unanticipated operational events that can reduce production or cause
production to be shut-in or delayed;
- stock market volatility and market valuations;
- counterparty credit risk;
- the need to obtain required approvals from regulatory authorities;
- environmental risks;
- insurance limitations risks;
- risks inherent in replacing reserves;
- reliance on operators and key employees;
- access to funding and issuance of debt;
- aboriginal claims; and
- availability of drilling equipment, access restrictions and cost
inflation.
Further information regarding these factors may be found under the heading "Risk Factors" in the AIF. Readers are cautioned that this list of risk factors is not exhaustive.
The Company undertakes no obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward looking statements, which are made as of
Iteration Energy Ltd.
Consolidated Balance Sheets
(unaudited)
As at September 30, December 31,
(in thousands of dollars) 2009 2008
-------------------------------------------------------------------------
Assets
Current
Cash $ 1,422 $ 6,832
Accounts receivable (Note 9(f)) 27,849 43,996
Prepaids and other current assets 8,876 10,846
-------------------------------------------------------------------------
38,147 61,674
Property, plant and equipment (Note 4) 876,119 973,529
-------------------------------------------------------------------------
$ 914,266 $ 1,035,203
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (Note 5) $ 200,000 $ 266,800
Accounts payable and accrued liabilities
(Note 6) 36,662 71,004
Stock-based compensation payable (Note 8(c)) 71 -
-------------------------------------------------------------------------
236,733 337,804
Future income taxes 72,003 92,539
Unrealized loss on derivative contracts
(Note 9(b)) 399
Leasehold inducements - 193
Asset retirement obligation (Note 7) 42,324 43,323
-------------------------------------------------------------------------
351,459 473,859
-------------------------------------------------------------------------
Commitments and contingencies (Note 10)
Shareholders' equity
Share capital (Note 8 (b)) 860,504 805,301
Deficit (297,697) (243,957)
-------------------------------------------------------------------------
562,807 561,344
-------------------------------------------------------------------------
$ 914,266 $ 1,035,203
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited interim consolidated financial
statements.
Iteration Energy Ltd.
Consolidated Statements of Earnings (Loss), Comprehensive Earnings (Loss)
and Deficit
(unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, Sept 30,
-------------------------------------------------------------------------
(in thousands of
dollars, except per
share amounts) 2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue
Production
revenue $ 42,117 $ 108,444 $ 145,746 $ 291,183
Unrealized
loss on
derivatives
(Note 9(b)) (399) - (399) -
Royalties (6,720) (23,115) (25,379) (61,993)
Other production
revenue 548 950 765 1,908
-------------------------------------------------------------------------
35,546 86,279 120,733 231,098
-------------------------------------------------------------------------
Expenses
Production 17,308 18,080 65,941 47,842
Transportation 1,411 1,290 4,146 4,741
General and admin-
istrative 3,699 3,207 9,888 9,404
Stock-based
compensation
(Note 8(c)) 36 (16,496) 71 4,412
Interest on debt 2,557 2,526 7,390 6,705
Depletion, de-
preciation and
accretion 32,335 40,639 104,835 101,239
-------------------------------------------------------------------------
57,346 49,246 192,271 174,343
-------------------------------------------------------------------------
Income (loss)
before the
following (21,800) 37,033 (71,538) 56,755
Non-cash charge
related to
warrants - - - (3,547)
Provision for
bankruptcy:
SemGroup LP
(Note 9 (f)) (1,650) (1,812) (10,998)
Recovery of
investment tax
credits - - - 1,820
-------------------------------------------------------------------------
Earnings (loss)
before income
taxes (21,800) 35,383 (73,350) 44,030
-------------------------------------------------------------------------
Income taxes
Current income
tax expense 66 - 79 671
Future income
tax expense
(recovery) (5,379) 8,687 (19,689) 14,301
-------------------------------------------------------------------------
(5,313) 8,687 (19,610) 14,972
-------------------------------------------------------------------------
Net earnings (loss)
and comprehensive
earnings (loss) $ (16,487) $ 26,696 $ (53,740) $ 29,058
Deficit, beginning
of period $ (281,210) $ (26,072) $ (243,957) $ (18,405)
Charge on mod-
ification of
warrant terms - 310 - (9,719)
-------------------------------------------------------------------------
Deficit, end of
period $ (297,697) $ 934 $ (297,697) $ 934
-------------------------------------------------------------------------
Basic earnings
(loss) per common
share (Note 8(d)) $ (0.08) $ 0.16 $ (0.28) $ 0.21
---------------------------------------------------
Diluted earnings
(loss) per common
share (Note 8(d)) $ (0.08) $ 0.16 $ (0.28) $ 0.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the unaudited interim consolidated financial
statements
Iteration Energy Ltd.
Consolidated Statements of Cash Flows
(unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, Sept 30,
-------------------------------------------------------------------------
(in thousands
of dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings
(loss) $ (16,487) $ 26,696 $ (53,740) $ 29,058
Add (deduct) non-
cash items:
Depletion, de-
preciation and
accretion 32,335 40,639 104,835 101,239
Unrealized
derivative loss
(Note 9(b)) 399 - 399 -
Recovery of
investment tax
credits - - - (1,820)
Future income
tax expense
(recovery) (5,379) 8,687 (19,689) 14,301
Amortization of
leasehold
inducements (127) (41) (193) (136)
Stock-based
compensation
expense
(Note 8 (c)) 36 (16,496) 71 (5,256)
Non-cash charge
related to
warrants - - - 3,547
Asset retirement
expenditures (682) (147) (1,310) (257)
-------------------------------------------------------------------------
10,095 59,338 30,373 140,676
Net change in non-
cash operating
working capital
(Note 11) 7,254 (13,563) 16,449 (13,664)
-------------------------------------------------------------------------
17,349 45,775 46,822 127,012
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on sale of
property plant and
equipment 38,748 - 41,126 646
Acquisition of
subsidiary - - - (778)
Acquisition of oil
and gas properties (163) (36,930) (163) (41,344)
Additions to oil
and gas properties (5,619) (31,907) (47,555) (100,542)
Additions to other
capital assets (186) (507) (521) (1,022)
Net change in non-
cash investing
working capital
(Note 11) (2,682) 14,918 (32,427) (16,733)
-------------------------------------------------------------------------
30,098 (54,426) (39,540) (159,773)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from
(repayment of) bank
indebtedness (46,000) (9,000) (66,800) 71,630
Common shares issued - - 57,555 2,900
Exercise of warrants - (261) - (21,112)
Share issue costs (55) - (3,200) (30)
Net change in non-
cash financing
working capital
(Note 11) (110) - (247) -
-------------------------------------------------------------------------
(46,165) (9,261) (12,692) 53,388
-------------------------------------------------------------------------
Increase (decrease)
in cash 1,282 (17,912) (5,410) 20,627
Cash, beginning of
period 140 39,769 6,832 1,230
-------------------------------------------------------------------------
Cash, end of period 1,422 21,857 1,422 21,857
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See Note 11 for supplemental disclosure
See accompanying notes to the unaudited interim consolidated financial
statements
Iteration Energy Ltd.
Notes to the Unaudited Interim Consolidated Financial Statements
As at and for the Three and Nine Months Ended September 30, 2009 and 2008
(Tabular amounts in thousands of dollars, unless otherwise noted)
1. NATURE OF OPERATIONS
Iteration Energy Ltd. ("Iteration" or the "Company") is a public company
that trades on the Toronto Stock Exchange and is incorporated under the
Business Corporations Act (Alberta). Iteration is engaged in the
exploration, development and production of petroleum and natural gas in
Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements of Iteration
Energy Ltd. have been prepared in accordance with Canadian generally
accepted accounting principles and are consistent with those policies set
out in the audited consolidated financial statements for the year ended
December 31, 2008, except as disclosed below. These interim consolidated
financial statements do not include all disclosures provided in the
December 31, 2008 financial statements and should be read in conjunction
with those financial statements. The timely preparation of financial
statements requires that management make estimates and assumptions, and
use judgment regarding assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the
date of the financial statements. Accordingly, actual results may differ
from estimated amounts. In the nine months ended September 30, 2009 the
Company recorded additional production expenses for 2008 as costs accrued
at year-end 2008 did not reflect late invoices from vendors and higher
than expected charges from partners relating to 2008. In the opinion of
management, these unaudited interim consolidated financial statements
have been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies summarized
below.
Basis of Consolidation
-----------------------
These unaudited interim consolidated financial statements include the
accounts of Iteration Energy Ltd., its wholly owned subsidiaries
(CyriesEnergy Inc, Iteration Energy Inc. and Cyries Wyoming Inc.) and its
wholly owned partnerships (Iteration Energy and Iteration Energy
Partnership 2007). All inter-company transactions are eliminated on
consolidation.
Changes in Accounting Policies
------------------------------
Effective January 1, 2009, the Company adopted the new CICA Handbook
Section 3064, Goodwill and Intangible Assets, which converges Canadian
GAAP for goodwill and intangible assets with International Financial
Reporting Standards ("IFRS"). The new standard provides more
comprehensive guidance on intangible assets, particularly for internally
developed intangible assets. This new standard has no impact on the
Company's current financial reporting.
On January 20, 2009 the CICA issued EIC-173 "Credit Risk and the Fair
value of Financial Assets and Financial Liabilities". Under the
requirements of EIC-173, an entity's own credit risk and the credit risk
of the counterparty should be taken into account in determining the fair
value of financial assets and liabilities, including derivative
instruments. Iteration adopted the requirements of EIC-173 effective
January 1, 2009. This has had no material impact on Iteration's financial
statements or additional disclosure.
Future Accounting Policies
Consolidated Financial Statements
In January 2009, the CICA issued section 1601, "Consolidated Financial
Statements," which will replace CICA section 1600 of the same name. This
guidance requires uniform accounting policies to be consistent throughout
all consolidated entities, which is not explicitly required under the
current standard. Section 1601 is effective for Iteration on January 1,
2011 with early adoption permitted. This standard will have no impact to
the Company.
Financial Instruments - Disclosures
In May 2009, the CICA amended Section 3862, "Financial Instruments -
Disclosures," to include additional disclosure requirements about fair
value measurement for financial instruments and liquidity risk
disclosures. These amendments require a three level hierarchy that
reflects the significance of the inputs used in making the fair value
measurements. Fair values of assets and liabilities included in Level 1
are determined by reference to quoted prices in active markets for
identical assets and liabilities. Assets and liabilities in Level 2
include valuations using inputs other than quoted prices for which all
significant outputs are observable, either directly or indirectly. Level
3 valuations are based on inputs that are unobservable and significant to
the overall fair value measurement. These amendments are effective for
Iteration on December 31, 2009.
Business Combinations
In January 2009, the CICA issued section 1582 which establishes
principles for the measurement of assets, liabilities and contingencies
acquired at fair value, as well as recognizing acquisition-related and
reorganization costs separately from the business combination within the
consolidated statement of income. These recommendations are effective for
business combinations occurring after January 1, 2011, although early
adoption is permitted.
International Financial Reporting Standards
The Canadian Accounting Standards Board ("AcSB") has now confirmed that
the use of IFRS will be required in 2011 for publicly accountable,
profit-oriented enterprises. IFRS will replace current Canadian GAAP
followed by the Company. The Company will be required to begin reporting
under IFRS effective January 1, 2011 and will be required to provide
information following IFRS for the comparative period. The Company is
currently developing a changeover plan to complete the transition to IFRS
by January 1, 2011, including the preparation of required comparative
information. The key elements of the plan include:
- determine appropriate changes to accounting policies and required
amendments to financial disclosures;
- identify and implement changes in associated processes and
information systems;
- comply with internal control requirements;
- educate and train internal and external stakeholders.
At September 30, 2009, the Company had completed a diagnostic study of
the anticipated impact of the transition to IFRS. The Company is
currently analyzing the accounting policy alternatives and identifying
implementation options for the corresponding process changes. Until this
analysis is complete and as IFRS is expected to change prior to 2011, the
impact of IFRS on the Company's consolidated financial statements is not
reasonably determinable at this time. The Company will continue to
monitor standards development as issued by the International Accounting
Standards Board ("IASB") and AcSB as well as regulatory developments as
issued by the Canadian Security Administrators, which may affect the
timing, nature or disclosure of its adoption of IFRS.
3. ACQUISITIONS AND DISPOSITIONS
Cyries Acquisition
On March 7, 2008, Iteration acquired Cyries Energy Inc. ("Cyries"), by
Plan of Arrangement (the "Arrangement"). Under the Arrangement, Iteration
issued 93,990,604 Iteration common shares to acquire the issued and
outstanding common shares, warrants and performance shares of Cyries. The
value attributed to each Iteration common share was $5.99 per share,
representing the volume weighted average trading price on the Toronto
Stock Exchange for an Iteration common share for the period from February
27, 2008 to March 6, 2008. This period includes the three trading days
before and after Iteration's announcement on March 3, 2008 of an increase
in the exchange ratio.
Upon completion of the Arrangement, Cyries became a wholly owned
subsidiary of Iteration with the existing Iteration shareholders, option
holders and warrant holders holding approximately 47% of the combined
entity. Although Cyries shareholders held 53% of the Iteration Common
Shares on a diluted basis following the arrangement, the transaction was
accounted for as an acquisition of Cyries by Iteration, recognizing that
Iteration is the surviving legal entity, Iteration paid a premium to
acquire Cyries and Iteration's existing management and Board of Directors
retained their positions. The financial statements for the nine month
period ended September 30, 2008 incorporate the operations of Iteration
Energy Ltd., Iteration Energy Inc., Iteration Energy and Iteration Energy
2007 Partnership for the period from January 1, 2008 to September 30,
2008 and the operations of Cyries Energy Inc. for the period from March
8, 2008 to September 30, 2008.
The acquisition is being accounted for using the purchase method and, the
purchase price was allocated as follows:
-------------------------------------------------------------------------
($000's)
-------------------------------------------------------------------------
Furniture and equipment $969
Property, plant and equipment 599,448
Goodwill 205,208
Bank Debt (111,223)
Working capital deficiency (29,827)
Future income tax liability (75,950)
Asset retirement obligation (14,275)
-------------------------------------------------------------------------
Total purchase price $574,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consideration was comprised of :
Common shares $563,004
Transaction costs 11,346
-------------------------------------------------------------------------
Total consideration $574,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note: Goodwill was written off at December 31, 2008.
4. PROPERTY PLANT AND EQUIPMENT
-------------------------------------------------------------------------
September 30, December 31,
2009 2008
($000's) ($000's)
-------------------------------------------------------------------------
Oil and gas properties $ 1,294,966 $ 1,290,246
Other 3,447 2,925
-------------------------------------------------------------------------
1,298,413 1,293,171
Less accumulated depletion and depreciation 422,294 319,642
-------------------------------------------------------------------------
$ 876,119 $ 973,529
-------------------------------------------------------------------------
-------------------------------------------------------------------------
At September 30, 2009, unproved properties and seismic expenditures
amounting to $124,901,000 (September 30, 2008: $147,788,000) have been
excluded from the depletion calculation. Future development costs on
proven undeveloped reserves of $89,000,000 (September 30, 2008:
$33,025,000) are included in the depletion calculation.
For the three and nine months ended September 30, 2009, the Company
capitalized $1,012,000 and $3,720,000 (three and nine months ended
September 30, 2008: $1,045,000 and $2,895,000) of overhead directly
related to exploration and development activities.
5. BANK INDEBTEDNESS
Bank Indebtedness represents the drawn portion of a syndicated facility,
net of any actual cash balances on hand. The credit facility is with a
syndicate of lenders, consisting of Canadian Imperial Bank of Commerce,
Bank of Nova Scotia, Bank of Montreal and Alberta Treasury Branch. The
borrowing base on this facility is $252.5 million and consists of a $12.5
million operating facility and a $240.0 million extendible revolving term
facility. Subsequent to the end of the quarter the borrowing base was re-
determined at $225 million in conjunction with the semi-annual review.
This facility is secured by a $500 million floating charge demand
debenture. This facility will mature April 30, 2010, and, at the
Company's request, such Credit Facilities may be renewed for a period of
not more than 364 days on agreement of the lenders. The pricing on this
facility is as follows:
a) For Canadian prime based loans or US base rate loans, at
applicable prime plus a margin ranging from 175 to 325 basis
points, depending on the ratio of consolidated debt to earnings
before interest, taxes and depletion/depreciation/accretion for
the preceding four quarters;
b) For borrowings by way of Bankers' Acceptances or LIBOR loans, at
the Bankers' Acceptance or LIBOR rate plus a stamping fee ranging
from 275 to 425 basis points, depending on the ratio of
consolidated debt to earnings before interest, taxes and
depletion/depreciation/accretion for the preceding four quarters,
and
c) A standby fee on the unutilized portion of the facility of between
82.5 and 127.5 basis points depending on the ratio of consolidated
debt to earnings before interest, taxes and
depletion/depreciation/accretion for the preceding four quarters.
As at September 30, 2009, bank indebtedness was $200.0 million. The
effective interest rate for the nine month period ended September 30,
2009 is 3.9%.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The accounts payable and accrued liabilities consist of the following:
September 30, December 31,
2009 2008
($000's) ($000's)
-------------------------------------------------------------------------
Trade accounts payable $ 26,748 $ 57,474
Joint venture accounts payable 4,468 3,790
Royalties payable 5,446 9,740
-------------------------------------------------------------------------
Total $ 36,662 $ 71,004
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. ASSET RETIREMENT OBLIGATION
The total future asset retirement obligations were estimated by
management based on the Company's net working interest in all wells and
facilities, estimated costs to reclaim and abandon wells and facilities
and the estimated timing of the costs to be incurred in future periods.
The Company estimates the undiscounted cash flows related to asset
retirement obligations, adjusted for inflation, to be incurred over the
estimated reserve life of the underlying assets (which is estimated to be
from 2009 through 2036) will total approximately $94,812,000 (December
31, 2008: $98,079,000). The book value of the obligation at September 30,
2009 is $42,324,000 (December 31, 2008: $43,323,000) using a discount
rate of eight and one half percent for obligations incurred subsequent to
September 30, 2008 (six and one half percent prior thereto) and an
inflation rate of two percent. As at September 30, 2009, no funds have
been set aside to settle this obligation.
September 30, December 31,
2009 2008
($000's) ($000's)
-------------------------------------------------------------------------
Balance, beginning of period $ 43,323 $ 18,897
Liabilities incurred on acquisition of
properties (note 3) - 19,854
Change in estimate (712) -
Increase in liabilities from drilling activity 100 2,848
Accretion expense 2,183 2,271
Liabilities reduced on disposition of
properties (1,260) -
Settlement of liabilities (1,310) (547)
-------------------------------------------------------------------------
Balance, end of period $ 42,324 $ 43,323
-------------------------------------------------------------------------
8. SHARE CAPITAL
(a) Authorized
Unlimited number of voting common shares without par value.
Unlimited number of preferred shares issuable in series
(b) Common Shares Issued
-------------------------------------------------------------------------
Nine months ended Year ended
30-Sep-09 31-Dec-08
----------------------------------------------------
Number of Amount Number of Amount
Shares ($000's) Shares ($000's)
-------------------------------------------------------------------------
Balance, beginning of
period 166,020,384 $ 805,301 71,029,780 $ 238,586
Shares issued on
public offerings 44,965,000 57,555 - -
Shares issued on
corporate acquisition
(note 3) - - 93,990,604 563,004
Shares issued on
exercise of warrants - - 1,000,000 3,733
Share issue costs,
net of tax effect of
$848 (2008: $9) - (2,352) - (22)
-------------------------------------------------------------------------
Balance, end of
period 210,985,384 $ 860,504 166,020,384 $ 805,301
-------------------------------------------------------------------------
(c) Stock Options
The Company has a stock option plan which provides for the issuance of
options to its officers, employees and consultants allowing for the
acquisition of up to a fixed maximum of 16,000,000 common shares. The
dates on which options vest are set by the Compensation Committee of the
Board of Directors at the time of grant. The exercise price of an option
granted is the closing price of the Company's stock on the last trading
date prior to the grant date. The dates on which options expire are also
set by the Compensation Committee of the Board of Directors at the time
of grant and cannot exceed ten years. Outstanding stock options to
acquire common shares through the stock option plan are as follows:
September 30, 2009 December 31 ,2008
-------------------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
Options price Options price
$ $
-------------------------------------------------------------------------
Outstanding, beginning
of period 9,782,445 $4.55 6,568,789 $3.49
Granted 4,119,287 1.20 5,343,065 5.47
Granted in conjunction
with surrender 1,306,707 1.40 - -
Exercised for cash - - (1,642,409) (2.94)
Forfeited or cancelled (4,502,199) (5.06) (487,000) (5.70)
-------------------------------------------------------------------------
Outstanding, end of
period 10,706,240 $2.65 9,782,445 $4.55
-------------------------------------------------------------------------
Options exercisable,
end of period 3,455,749 $3.54 3,759,285 $3.36
-------------------------------------------------------------------------
In June of 2009 the Company provided employees (excluding officers and
directors) the option to surrender options they held with a strike price
above $3.50 per share and in turn receive 40% of their surrendered number
of options with a strike price at the then prevailing share price of
$1.40. As a result, 3.4 million options were surrendered and 1.3 million
options were issued
The following table summarizes information about stock options
outstanding at September 30, 2009:
-------------------------------------------------------------------------
Weighted
average
Number remaining Weighted Number Weighted
Range of outstanding contractual average exercisable average
exercise September 30, life exercise September 30, exercise
prices 2009 (years) price $ 2009 price $
-------------------------------------------------------------------------
$0.70 to
$2.89 5,599,269 3.62 1.27 - -
$2.90 to
$4.00 2,977,638 0.77 2.99 2,728,638 2.96
$4.01 to
$5.00 410,000 1.62 4.67 154,000 4.54
$5.01 to
$9.00 1,719,333 2.52 6.05 573,111 6.05
-------------------------------------------------------------------------
10,706,240 2.57 2.65 3,455,749 3.54
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company's stock option plan provides stock option holders the right
to request, upon exercise, to receive a cash payment in exchange for
surrendering the option provided the request is accepted by the Company.
The cash payment is equal to the appreciated value of the stock option as
determined based on the difference between the option's exercise price
and the Company's share price at the time of exercise. For the three and
nine month periods ended September 30, 2009, stock-based compensation
expense of $36,000 and $71,000 respectively (2008: recovery of
$16,496,000 and expense of $4,412,000 respectively), was recognized based
on the change in the intrinsic value of outstanding stock options
prorated over the vesting period. Future fluctuations in stock-based
compensation expense or recoveries are dependent on the movement of the
Company's share price and the number of options vested and outstanding.
Based on the September 30, 2009 share price of $1.20, had all of the
10,706,240 stock options outstanding been vested, aggregate stock-based
compensation expense and a corresponding liability of $481,000 (December
31, 2008: $nil) would have been recognized. Of this amount, $71,000 has
been recognized as stock-based compensation payable at September 30, 2009
(December 31, 2008: $nil).
(d) Per Share Amounts
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
-------------------------------------------------------------------------
Weighted average
common shares
outstanding 210,985,384 166,020,287 190,232,310 141,606,728
-------------------------------------------------------------------------
Weighted average
diluted common
shares outstanding 210,985,384 168,045,908 190,232,310 144,693,253
-------------------------------------------------------------------------
Options outstanding for the quarter and nine months ended September 30,
2009 are not included in the computation of diluted common shares
outstanding as the Company realized a net loss during these periods.
9. FINANCIAL INSTRUMENTS
The Company is exposed to a number of different financial risks arising
from normal course business exposures, as well as the Company's use of
financial instruments. These risk factors include market risks relating
to commodity prices and interest rate risk, as well as liquidity risk and
credit risk.
a) Market Risk
Market risk is the risk or uncertainty arising from possible market price
movements and their impact on the future performance of the business. The
market price movements that could adversely affect the value of the
Company's financial assets, liabilities and expected future cash flows
include commodity price risk and interest rate risk.
b) Commodity Price Risk
The Company's financial performance is closely linked to oil and natural
gas prices. A change of $1.00 Cdn/mcf in natural gas prices at the
wellhead would have changed the net loss for the nine months ended
September 30, 2009 by approximately $11.9 million. A $5.00/bbl change in
WTI for oil would have the effect of changing the net loss for the nine
months ended September 30, 2009 by approximately $3.5 million.
From time to time, the Company employs the use of various financial
instruments to manage these commodity price exposures. At September 30,
2009 the Company had financial instruments outstanding as follows:
-------------------------------------------------------------------------
Daily Contract Mark to
Transaction Type Volume Units Price Term Market
-------------------------------------------------------------------------
($000's)
Oct 1/09 to
AECO Gas Swap 1,000 Bbl/day CDN $80.00 Dec 31/09 358
CDN $70.00- Jan 1/10 to
WTI Oil Collar 200 Bbl/day CDN $91.00 Dec 31/10 26
CDN $70.00- Jan 1/10 to
WTI Oil Collar 200 Bbl/day CDN $97.00 Dec 31/10 134
Nov 1/09 to
AECO Gas Swap 3,500 GJ/day CDN $4.98 Oct 31/10 (705)
Nov 1/10 to
AECO Gas Swap 2,000 GJ/day CDN $6.00 Oct 31/11 (212)
------
(399)
-------------------------------------------------------------------------
c) Interest Rate Risk
The Company is exposed to interest rate risk as changes in interest rates
may affect future cash flows and the fair value of its financial
instruments. The Company's primary debt facility has a floating interest
rate that will fluctuate based on prevailing market conditions and the
Company's ratio of funded debt to trailing earnings before interest,
taxes, and depletion/depreciation/accretion. Cash flows are sensitive
to changes in interest rates on this instrument. Given the amount of debt
employed, the Company's strategy is to manage interest rate risk within
the current economic environment framework. If interest rates on the
floating instrument were to change by 1.0%, it is estimated that net loss
for the nine months ended September 30, 2009 would change by
approximately $1.4 million.
d) Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in
meeting obligations associated with financial liabilities. The Company
believes that it has access to sufficient capital through internally
generated cashflows and external equity sources, as well as undrawn
committed borrowing facilities to meet current spending forecasts. All of
the trade liabilities mature in 2009 and the Company's bank loan is due
on April 30, 2010.
Scheduled reviews of the credit facility focus on the borrowing base
supporting lending limits and are influenced by the lenders' willingness
to lend in general, commodity price forecasts used to determine the
lending base, lenders interest in particular business sectors, such as
energy and the relative strength of the borrower. Given these
constraints, there is no assurance that Iteration will be able to sustain
its current borrowing base and may be required to reduce its outstanding
loans. Should there be a requirement of the Company to reduce its
outstanding loans, there are a number of options available including, but
not limited to:
1) Issuance of additional equity;
2) Negotiation of incremental borrowings with subordinated lenders;
3) Divestiture of assets; and
4) Dedication of funds from operations.
e) Foreign Exchange Risk
Foreign exchange risk is the risk that the fair value of the future cash
flows will fluctuate because of changes in foreign exchange rates. The
benchmark pricing for most natural gas and crude oil is based on US
Dollars. Changes in the exchange rate of the Canadian dollar relative to
the US dollar will indirectly impact the Canadian dollar commodity price
realized by the Company and, as a result, cash flow. If foreign exchange
rates were to change by 1% over the course of the quarter, it is
estimated that net loss for the quarter would change by approximately
$0.9 million.
f) Counterparty Credit Risk
Counterparty credit risk is the risk that a customer or counterparty will
fail to perform an obligation or fail to pay amounts due causing a
financial loss. The Company's accounts receivable are with customers and
joint venture partners in the oil and gas industry and are subject to
normal credit risks. A small portion of the Company's production is
currently sold through a joint venture partner to purchasers under normal
industry sale and payment terms; the balance is sold to twenty five
marketers also under normal industry terms. Of these twenty five
marketers, sales to four account for approximately 80% of the Company's
production revenue.
As at September 30, 2009, the Company had an allowance for doubtful
accounts of $17.0 million (December 31, 2008 $15.4 million) including a
provision of $15.8 million relating to the filing for CCAA protection by
SemCanada and SemCAMS, on trade accounts receivable that in the
estimation of the Company may be impaired.
As at September 30, 2009, the aging analysis of trade receivables, net of
the allowance for doubtful accounts, is as follows:
-------------------------------------------------------------------------
($000's)
------------
Current $ 16,929
30 - 60 days 2,846
60 - 90 days 1,175
Greater than 90 days 23,932
------------
Total 44,882
Less allowance for doubtful accounts (17,033)
------------
Total $ 27,849
-------------------------------------------------------------------------
Note: Greater than 90 days includes amounts receivable from for SemCanada
and SemCAMS.
g) Fair Value of Financial Instruments
Section 3855 of the CICA Handbook requires the initial measurement of all
financial instruments at fair value with classification into one of five
categories: loans and receivables, assets held to maturity, assets
available for sale, other financial liabilities, and held for trading.
Derivative instruments are classified as held-for trading and are
recorded on the balance sheet at fair value with actual amounts received,
or paid, on the settlement of the derivative financial instrument
recorded in revenue. There were no financial assets on the balance sheet
which were designated as available-for-sale.
The fair value of a financial instrument is the amount of consideration
that would be agreed upon in an arm's length transaction between
knowledgeable, willing parties who are under no compulsion to act. Fair
values for commodity price derivatives are provided by the financial
intermediary with whom the transactions were completed and tested by the
Company for reasonableness based on comparative market prices and the
fixed prices of the contracts. In determining fair values, the Company
uses quoted prices for identically traded commodities obtained from
active exchanges such as the New York Mercantile Exchange and the Natural
Gas Exchange, or obtained directly from brokers, or other publicly
available market data providers.
The Company has elected to classify its financial instruments as follows:
-------------------------------------------------------------------------
September 30, 2009 December 31, 2008
Carrying Estimated Carrying Estimated
($000's) Value Fair Value Value Fair Value
-------------------------------------------------------------------------
Loans and receivables
Accounts receivable 27,849 27,849 43,996 43,996
Other financial
liabilities
Bank indebtedness 200,000 200,000 266,800 266,800
Accounts payable and
accrued liabilities 36,662 36,662 71,004 71,004
Stock-based compensation
payable 71 71 - -
Unrealized loss on
derivative contracts 399 399 - -
-------------------------------------------------------------------------
The carrying value of financial instruments included in current assets
and current liabilities approximate their fair value, reflecting the
short term maturity, normal trade credit terms, and/or the nature of
these instruments.
10. CONTINGENCIES
Pursuant to a purchase and sale agreement, the Company has indemnified
the purchaser of a former subsidiary company for up to $1,000,000 of
income tax and legal expenses incurred with respect to specifically
identified income tax returns. The Company accrued this obligation in the
first quarter of 2008 and correspondingly increased the purchase price of
related property, plant and equipment acquired as part of a series of
transactions which occurred in conjunction with the disposition of the
former subsidiary.
11. SUPPLEMENTAL DISCLOSURE ON CONSOLIDATED STATEMENTS OF CASH FLOWS
Changes in non-cash working capital were comprised of the following:
Three months ended Nine months ended
September 30, September 30,
(000's) 2009 2008 2009 2008
-------------------------------------------------------------------------
Accounts receivable $ 4,573 $ (4,456) $ 16,147 $ 5,795
Prepaids and other
current assets 3,224 (492) 1,970 (1,253)
Accounts payable and
accrued liabilities (3,335) 6,303 (34,342) (34,939)
----------------------------------------------------
Net change $ 4,462 $ 1,355 $ (16,225) $ (30,397)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(000's) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net change by activity:
Operating $ 7,254 $ (13,563) $ 16,449 $ (13,664)
Investing (2,682) 14,918 (32,427) (16,733)
Financing (110) - (247) -
-------------------------------------------------------------------------
Net change $ 4,462 $ 1,355 $ (16,225) $ (30,397)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additional information:
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(000's) 2009 2008 2009 2008
-------------------------------------------------------------------------
Cash interest paid $ 2,401 $ 2,503 $ 7,425 $ 6,784
----------------------------------------------------
Cash taxes paid $ 66 - $ 79 $ 671
----------------------------------------------------
Included in cash interest paid during the three and nine month period
ended September 30, 2009 are initial commitment fees of $752,000 related
to the syndicated facility.
12. CAPITAL MANAGEMENT
The Company's principal business of the exploration, exploitation and
development of oil and gas requires ongoing access to capital in order to
allow the Company to successfully implement its growth strategy; and to
provide adequate returns for shareholders and benefits for other
stakeholders.
The Company defines capital as share capital and bank indebtedness, net
of cash and cash equivalents. The consolidated capital structure of the
Company is as follows:
-------------------------------------------------------------------------
As at September 30, 2009 As At December 31, 2008
($000's) % ($000's) %
----------------------------------------------- -------------------------
Bank indebtedness $ 198,578 18.8 259,968 24.4
Share capital 860,504 81.2 805,301 75.6
-------------------------- -------------------------
Total $ 1,059,082 100.0 $ 1,065,269 100.0
-------------------------------------------------------------------------
As at September 30, 2009, the Company had a bank credit facility that
contained covenants which limit the amount of debt that can be incurred
by the Company. Throughout the periods presented, the Company has met
those covenants.
The Company actively manages its capital structure with the objective of
maintaining sufficient flexibility to allow it to execute on its capital
investment program, including investing in oil and gas acquisitions,
exploration and development, which may or may not be successful. For this
objective to be achieved, the Company continually strives to balance the
proportion of debt to equity in its capital structure to take into
account the level of risk being incurred through capital expenditures.
In order to maintain or adjust the capital structure, the Company
considers various factors including, but not limited to:
a) projected debt to projected funds from operations ratio while
attempting to finance an acceptable investment program, including
incremental investment and acquisition opportunities;
b) the current level of bank credit available from the banking
syndicate;
c) the level of bank credit that may be available from the banking
syndicate as a result of anticipated changes in reserves;
d) the availability of other sources of debt with different
characteristics from the existing bank debt;
e) the sale of assets;
f) limiting the size of the investment or capital program; and
g) issuing new common equity, if available, on favorable terms.
13. COMPARATIVE AMOUNTS
Certain amounts in 2008 have been reclassified to conform with the
presentation for 2009.
Directors, Officers and Auditors
Current Officers and Directors of the Company are as follows;
Officers
--------
Brian Illing President and CEO
Mark Ariss VP Exploration East
Jane Mactaggart VP Exploitation
Carmen McKay-Illing VP Corporate Affairs
Myron Rak VP Production
Peter Scott VP Finance and CFO
Kevin Stromquist VP Exploration West
Directors
---------
Don Archibald (Chairman) Independent Businessman (former Chairman &
CEO - Cyries)
Pat Breen P. Eng. President - Foremost Income Fund
Dallas Droppo Q.C. Partner - Blake, Cassels and Graydon LLP
Jim Grenon President - TOM Capital Associates
Michael Hibberd President - MJH Services Inc.
Brian Illing P. Geol President and CEO - Iteration Energy Ltd.
Garry Peddle Independent Businessman (former VP
Corporate - Cyries)
Robert Waters, CA Senior VP and CFO - Enerplus Resources
Fund
Corporate Secretary
-------------------
Tony Grenon Managing Director - TOM Capital Associates
Auditors
--------
Ernst & Young LLP
Corporate Counsel
-----------------
Bennett Jones LLP
Additional Information on the Company
The TSX has not reviewed this press release and does not accept responsibility for the accuracy of any of the data presented here-in.
Other information about the Company, including the AIF, is available through the internet on the Company's website at www.iterationenergy.com and on the Company's SEDAR profile at www.sedar.com.
%SEDAR: 00002576E
For further information: Mr. Brian Illing, President and CEO, or Mr. Peter Scott, VP Finance and CFO, at (403) 261-6883
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