Document 2531961

Relief Requested
2.
This Affidavit is made in support of an application by Anterra for an Order (the “Initial Order”)
pursuant to the Companies’ Creditors Arrangement Act, RSC 1985, c. C-36, as amended (the
“CCAA”), among other things, for:
a)
declaring that Anterra is an entity to which the CCAA applies;
b)
staying all proceedings and remedies taken or that might be taken in respect of the
Company or any of its property, except as otherwise set forth in the Initial Order or as
otherwise permitted by law;
c)
authorizing the Company to carry on business in a manner consistent with the
preservation of its property and business;
d)
appointing PricewaterhouseCoopers Inc.
Company in these proceedings;
e)
approving certain charges as set out herein;
f)
approving certain agreements as set out herein;
g)
authorizing the Company to pay the reasonable fees and disbursements of its
professional advisers; and
h)
deeming service of the within Application for the Initial Order to be good and sufficient on
all parties entitled to service thereof.
(the “Monitor” or “PwC”) as Monitor of the
Overview
3.
For the reasons set out herein, I do verily believe that Anterra is insolvent and is a company to
which the CCAA applies.
4.
Anterra is a corporation, duly incorporated pursuant to the laws of Alberta. Anterra was formed
on May 1, 2007, as the result of an amalgamation between Anterra Corporation and Resolve
Energy Inc. Anterra’s issued and outstanding Class A shares trade on the TSX Venture
Exchange (the “TSXV”), under the symbol AE.A. It has approximately 496.8 million shares
issued and outstanding. As at April 26, 2016, Anterra’s Class A common shares were listed on
the TSXV at a price of $0.005.
5.
Anterra has its head office in Calgary Alberta. The Company has approximately 3 full time
employees and 10 full- and part-time contractors, located in Calgary, Alberta, and in Anterra’s
field operations elsewhere in Alberta. Of these, 5 full-time contractors are engaged to operate
Anterra’s midstream oil and gas processing and water disposal facility at Breton, Alberta (the
“Breton Plant”). The remaining 2 contractors are part-time field operators, engaged to manage
Anterra’s field operations on an as-needed basis.
6.
The Company currently has limited financial resources, primarily due to continued weakness in
benchmark crude oil prices, and a resulting reduction in operating revenues, cash flow, and
liquidity. In add Won, events beyond Anterra’s control have had a significant impact on Anterra’s
cash flow, liquidity, and the value of its remaining proved and probable reserves on its developed
and undeveloped properties.
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7.
The Company currently has bank debt in excess of $9.7 million; Anterra’s total liabilities, including
long term debt, trade accounts, and a $4 million secured convertible debenture due March 14,
2018 (the “Convertible Debenture”), are in excess of $21 million. The long-term debt of Anterra
consists primarily of a revolving operating demand loan credit facility, and a non-revolving loan
facility, both with Canadian Western Bank (“CWB” or the “Bank”).
8.
As at December 31, 2015, Anterra has estimated a working capital deficiency of $9.8 million,
excluding bank debt and other long-term debt.
9.
Based on current cash balances, the future capital requirements at its exploration and
development properties, and prevailing oil prices, Anterra does not expect to have sufficient
financial resources to fund its financial commitments in 2016, unless it is able to restructure its
affairs. The Company has significant recent unpaid and upcoming interest payments on the
Convertible Debenture, and is currently in default under its senior secured loan facility with CWB.
In addition, Anterra has significant trade debts that must be resolved if the Company is to
continue as a going concern in 2016.
10.
Accordingly, Anterra believes that it is necessary and in the best interests of its stakeholders to
apply to this Court for relief under the CCAA.
Background and Business Operations
11.
Anterra is an oil and gas production and exploration company; it is engaged in the acquisition,
development, optimization and production of crude oil and natural gas in Western Canada.
Anterra’s oil and gas properties include significant working interests in a number of oil and gas
wells and drilling locations near Breton, Alberta (the “Breton Property”), 17 producing oil wells
near Nipisi, Alberta (the “Nipisi Property”), and a 100% working interest in oil and gas producing
assets near Strathmore, Alberta (the “Strathmore Property”), as well as a 100% working interest
in oil and gas producing assets at Two Creek, Alberta (the “Two Creek Property”).
12.
Anterra is also engaged in midstream oil and gas processing and water disposal services to third
parties, conducted through its operation of a processing plant on its Breton Property (the “Breton
Plant”). Anterra’s product mix consists of approximately 85% light and medium crude oil, with the
balance consisting of heavy oil, natural gas, and natural gas liquids (“NGLs”).
13.
The Company’s two key commercial units are its development properties, and its midstream
processing facility at Breton, Alberta. In addition, Anterra supplements its oil and gas revenue by
way of fee-based and profit-sharing arrangements with third parties at the Breton Plant. Anterra
has an existing profit-sharing contract with Trafigura Canada General Partnership (“Trafigura”) at
the Breton Plant, which is set to expire in on September 30, 2017. Anterra and Trafigura are
currently negotiating the terms of a new agreement, under which Anterra will continue its revenue
sharing arrangement with Trafigura.
14.
In addition, Anterra has significant working interests in minor oil and gas leases located in seven
properties across Alberta; in addition to the Breton, Nipisi, Strathmore and Two Creek Properties,
these include developed reserves in Matziwin, Minnehik-Buck Lake, Sakwatamau, Suffield, and
Soots Lake.
15.
The Nipisi Property was acquired by Anterra in December of 2013, in a transaction with
Pengrowth Energy Corp, partly financed by funds from the Bank. Also in 2013, Anterra acquired
its interests in the Two Creek and Strathmore Properties by way of a business combination with
Terrex Energy Inc. (“Terrex”), through a court-approved plan of arrangement.
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16.
In conjunction with the plan of arrangement with Terrex, Anterra issued the Convertible
Debenture in the principal amount of $4 million to Sandstorm Metals & Energy Ltd. and 0905896
BC Ltd. (collectively, “Sandstorm”). The Convertible Debenture was issued in partial settlement
of a hydrocarbon purchase agreement between Terrex and Sandstorm. The $4 million currently
owing under the Convertible Debenture matures on March 14, 2018. Attached hereto and
marked as Exhibit “A” is a true copy of the Convertible Secured Debenture between Anterra and
Sandstorm.
17.
On April 1st, 2016, in response to Anterra’s current cash flow and liquidity situation, including its
inability to fund necessary work on its producing wells, Anterra shut in its production at all of its
producing oil and gas properties. With all existing commercially producing wells onstream,
Anterra’s production of light and medium crude oil, natural gas and NGLs is estimated to have the
potential to exceed 700 barrels of oil equivalent (“BOEPD”) per day. Much of this production
potential is located on the Nipisi Property, and on the Breton Property close to Anterra’s
midstream processing facility.
18.
The Company has planned short-term capital expenditures and modest personnel costs
associated with reactivating certain producing wells on the Nipisi Property, and on the Breton
Property. Included in these costs is the retention of an additional two to four field operators on a
contract basis, in order for Anterra to recommence its oil and gas production operations. Once
these assets begin generating profitable cash flow for Anterra, the medium-to-long term plan is
for production at Anterra’s other properties to be gradually ramped up over time. If available
capital permits, Anterra plans to re-activate production at its Two Creek property, which has the
potential for up to 160 BOEPD when all producing wells are online. Anterra anticipates that
spending approximately $900,000 on these producing properties will bring them back onto
production at historical levels. It is anticipated that this, combined with a restructuring of Anterra’s
balance sheet, will result in a return to profitability. Longer term, Anterra has planned further
development at the Nipisi Property, including reactivating shut-in wells and infill drilling, which will
generate additional cash flow.
19.
Overall, the Company reported a before tax loss of approximately $16.05 million in the year
ending December 31, 2014. Anterra has prepared, but not yet filed, its year-end financial
statements for 2015. For the year ending December 31, 2015, Anterra incurred a total loss
before income tax of around $13.7 million.
20.
Together, these factors have resulted in uncertainty in terms of the Company’s ability to meet its
current and upcoming debt obligations, given current revenue and the Company’s existing debt
structure. Currently, the Company is unable to meet its debt obligations as they generally
become due.
The Nipisi Pipeline Failures
21.
Anterra experienced two major pipeline failures on the Nipisi Property in the summer of 2014 (the
“Nipisi Pipeline Failures”). The first pipeline failure was a slow leak discovered in the course of
a routine inspection, which resulted in an oil-to-surface event. The second, which occurred
approximately one month later, was a catastrophic failure of a joint between a fiber spar and
metal pipe on the Nipisi Property, and resulted in environmental damage due to the leakage of oil
into a nearby watercourse.
22.
The Nipisi Pipeline Failures resulted in production interruptions at the Nipisi Property, and
significant costs to Anterra (approximately $4.3 million as at December 31, 2015), including
expenses relating to repair, reclamation, and environmental remediation. Repair and remediation
in respect of the second pipeline failure is ongoing.
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23.
After the Nipisi Pipeline Failures, Anterra submitted a claim to its property insurer to recover some
of these costs; eventually, Anterra’s insurer settled Anterra’s claims arising from the Nipisi
Pipeline Failures, and paid a significant portion of Anterra’s repair, reclamation, remediation, and
other costs occasioned by the Nipisi Pipeline Failures.
24.
The insurance proceeds in respect of Anterra’s loss at the Nipisi Property totaled $3.3 million (the
“Insurance Proceeds”). In the end, the Nipisi Pipeline Failures caused Anterra to incur costs of
an additional $1 million, calculated net of the Insurance Proceeds. This number does not include
losses due to the significant production interruption on the Nipisi Property occasioned by the
Nipisi Pipeline Failures.
25.
In March or April of 2015, after the Insurance Proceeds were deposited into Anterra’s accounts,
but before they could be used to settle Anterra’s outstanding trade accounts in respect of the
Nipisi Pipeline Failures, CWB made the decision to apply the majority of the Insurance Proceeds
to its outstanding loan balance, resulting in Anterra not having sufficient cash on hand to meet its
obligations.
26.
The Bank’s sweep of Anterra’s accounts resulted in the Insurance Proceeds, together with the
bulk of Anterra’s existing operating capital, being applied to Anterra’s outstanding facilities with
the Bank. This resulted in a significant reduction in the amounts outstanding under Anterra’s loan
facilities, but left the Company without enough cash to fund its operations, or to pay trade
creditors and contractors retained by Anterra to assist with repair and remediation relating to the
Nipisi Pipeline Failures.
27.
The Bank’s decision to sweep Anterra’s accounts left the Company unable to pay a number of its
trade creditors under its existing contracts, or do work on its producing properties to maintain and
increase production from those properties. Many of these unpaid trade creditors have since
commenced actions against Anterra.
28.
In addition to the Nipisi Pipeline Failures, Anterra has been adversely affected by the prolonged
decrease in benchmark crude oil prices that began in the last quarter of 2014. This price
environment has had a significant impact on Anterra’s cash flows, liquidity, and the fair valuation
of its remaining proved and probable reserves. Although benchmark pricing has stabilized
somewhat in recent months, it remains far below 2014 levels; like many oil production and
development companies, Anterra’s cash flow and liquidity are highly sensitive to fluctuations in
the market prices for oil and natural gas. Nevertheless, but for the current liquidity crisis that
Anterra is experiencing, Anterra would be profitable at current prices if it were able to restructure
its balance sheet and restore its production.
Senior Management of Anterra
29.
The Company’s senior management currently consists of the following individuals:
a)
Gang Fang, Chief Executive Officer and Chairman: Dr. Fang has been the CEO of
Anterra since July 13, 2010. He has Bachelor’s and Master’s degrees in numerical and
applied mathematics from Xi’an Jiaotong University in China, and a Ph.D. in coding
theory from the Eindhoven University of Technology in Holland. Dr. Fang has 20 years of
senior management experience in Asia, Europe and North America, and has held
executive positions with Royal Philips Components, ASML B.V., Tianfa Petroleum Co.
Ltd., Dussman Group, Great United Petroleum Holding Co., Ltd., and Oriental Energy Co.
from 1996 to 2009. He has been with the Company for 5 years.
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b)
Norman G. Knecht, Chief Financial Officer and Vice President Finance: Mr. Knecht is a
Chartered Accountant with over 38 years of experience, 16 of which are in the oil and gas
industry as CEO of publically listed companies. Prior to joining Anterra, Mr. Knecht was
the CFO of Terrex. Prior to that he was the CFO of Compton Petroleum Corporation, a
company listed on the TSX and NYSE. He has been with Anterra for 3 years, and was
with Terrex for 2 years prior to its business combination with Anterra.
c)
Bob McCuaig, Vice President and Chief Operating Officer: Mr. McCuaig is a professional
engineer with 31 years of experience in the petroleum and natural gas industry. Mr.
McCuaig has extensive experience both at the operational and executive level, in the
exploration, production, energy services and transportation sectors of the industry. Prior
to joining Anterra, Mr. McCuaig was VP Engineering & Business Development with
Anadirne Corporation. He has been with the Company for 13 years.
30.
Anterra currently has seven directors on its board (Dr. Fang and six non-executive directors).
The Anterra Board of Directors has been and remains engaged in the initiatives and actions set
out herein. It is contemplated that many of the Anterra directors will continue in their valuable role
during the CCAA proceedings.
31.
To assist in retaining the Anterra directors through its challenging times, Anterra has arranged
and funded appropriate, standard Director and Officer liability insurance.
Assets and Liabilities
Recent Financial Statements
32.
Attached hereto and marked as Exhibit “B” are the audited financial statements of the Company
for the year ending December 31, 2014.
33.
Anterra has prepared its year-end financial statements for 2015, but has been unable to fund the
retention of an auditor to audit this financial statement due to its financial circumstances.
Attached hereto and marked as Exhibit “C” are Anterra’s unaudited financial statements for
2015, issued in draft form pending their review and signature by Anterra’s auditor.
Assets
34.
The Company’s primary assets consist of its working interests in various oil and gas properties,
and the Breton Plant.
35.
Effective December 31, 2014, Anterra’s working interest in oil and gas reserves, was estimated
by Deloitte LLP (“Deloitte”) to amount to net reserves (on a Proved and Probable basis) of 3,677
Mbbls of light and medium crude oil, 988.1 Mbbls of heavy oil, and 2,580.6 MMcf of Natural Gas.
The corresponding before-tax net present value (discounted at 10%) of Anterra’s reserves was
determined to be approximately $57,470,100, based on Deloitte’s forecast pricing as at
December 31, 2014. Attached hereto, and marked as Exhibit “D” is a true copy of the report
prepared for Anterra by Deloitte in accordance with National Instrument 51-101, effective
December 31, 2014.
36.
At the end of 2015, the carrying value of Anterra’s property, plant and equipment (including
capital infrastructure on existing oil and gas properties, and the Breton Plant) was $52,107,506.
In addition, Anterra recorded:
a)
trade and other receivables (net of an allowance for doubtful accounts) of $1,690,088;
and
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b)
deposits and prepaid expenses of $825,627.
Liabilities
37.
38.
The approximate balance owing (both liquidated and contingent) to creditors of the Company as
of December 31, 2015 (rounded) is as follows:
a)
trade and other payables of $1 1,964,475;
b)
bank debt of $9,782,320, including the amounts outstanding under Anterra’s two loan
facilities with CWB, a revolving operating demand loan facility and a non-revolving
demand loan facility; and
c)
the Convertible Debenture, the holders of which are owed a face value of $4,000,000.
In general order of priority, the long-term debt of the Company can be summarized as follows:
a)
$9,920,816 currently owing on senior secured credit facilities with the Bank; and
b)
$4,000,000 currently owing on the Convertible Debenture, with a maturity date of March
14, 2018.
39.
The total of the debt liabilities of the Company, as at December 31, 2015, is approximately $25.8
million dollars; this number includes trade creditors, Anterra’s indebtedness to the Bank, and the
principal amount owing under the Convertible Debenture.
40.
In addition, the Company has reported a decommissioning liability of $24,549,767, estimated as
the net present value of the estimated future cost of dismantling, decommissioning, and site
disturbance remediation activities associated with Anterra’s operations.
Revolving Operating Demand Loan and Non-revolving Demand Loan Facility with CWB
41.
The Company had a $15 million revolving operating demand loan facility with the Bank, with
$12,484,515 outstanding as at December 31, 2014. On or about March 9, 2015, and at the
Bank’s request, the existing loan facility was restructured, and replaced with two separate
facilities: a revolving operating demand loan in the maximum amount of $10,000,000, and a nonrevolving demand facility in the maximum amount of $4.4 million.
42.
The revolving facility bears interest at the Bank’s prime rate plus 1.00%; the non-revolving
demand loan facility bears interest at the Bank’s prime rate plus 3.00%, and is repayable in
minimum monthly principal payments of $200,000. Both facilities are secured by a first floating
charge debenture in the amount of $35 million over all of Anterra’s assets.
43.
Anterra was in default under its loan facilities with the Bank as at the end of 2015, most notably
due to the fact that Anterra was unable to maintain an adjusted working capital ratio of 1:1. This
event of default arose largely as the result of current economic conditions, and of Anterra’s
unplanned expenses and costs arising from the Nipisi Pipeline Failures. As at the time of the
swearing of this Affidavit, Anterra is in default in respect of its indebtedness to the Bank in that the
Bank has demanded payment in full. Attached hereto and marked as Exhibit “E” is a true copy
of the Bank’s demand letter to Anterra, dated April Ii, 2016, together with the Bank’s notice of
intention to enforce its security.
44.
As at December 1, 2014, Anterra owed $12,484,515 under its revolving operating demand loan
facility. At the end of 2015, due in part to the Bank’s decision to sweep Anterra’s accounts in
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March of 2015, Anterra owed just $9,340,661 under its revolving operating demand loan facility,
and $580,155 under the non-revolving demand loan facility.
45.
As at April 27, 2016, Anterra owed $9,782,319 on the revolving operating demand loan, and had
paid the non-revolving demand loan facility in full. As at that same date, Anterra had
approximately $21 1,542 in cash on deposit with the bank.
Alberta Energy Regulator
46.
On March 14, 2016, Anterra received notice of non-compliance from the Alberta Energy
Regulator (the “AER”) in respect of Anterra’s obligation to provide a site-specific security deposit
of $2,218,034.42 on or before April 1, 2016. Attached hereto and marked as Exhibit “F” to this
Affidavit is a true copy of the AER’s Notice of Noncompliance to Anterra.
Convertible Debenture
47.
As is discussed above, the Company owes $4 million under the Convertible Debenture. The
Convertible Debenture bears interest at 6%, payable semi-annually, and matures on March 14,
2018 unless converted to equity prior to that time.
48.
The Convertible Debenture is convertible at the option of the holder at any time into common
shares of Anterra at a price of $0.10 per share; in addition, the Convertible Debenture is
redeemable, in whole or in part at any time, by the Company on 30 days’ notice.
Amounts payable to trade and other creditors
49.
At the end of 2015, Anterra owed approximately $1 1,964,475, to trade creditors and others. This
amount compares to approximately $9.7 million in trade debts at the end of 2014, and $3.5 million
at the end of 2013.
50.
The current balances owing to trade creditors include Anterra’s best estimate of amounts owing
by Anterra to those trade creditors retained in the course of Anterra’s repair and remediation of
the damage resulting from the Nipisi Pipeline Failures. Many of these trade creditors should have
been paid from the Insurance Proceeds; for the reasons set out above, Anterra was unable to
keep its accounts with these trade creditors current.
Legal Proceedings
51.
In the wake of the Nipisi Pipeline Failures, and Anterra’s inability to fund its obligations to trade
creditors thereafter, a number of parties have commenced actions against the Company to
recover alleged trade debts owing. As a result, Anterra faces legal proceedings to recover an
aggregate of approximately $3.5 million in alleged trade debts, relating to obligations arising from
the Nipisi Pipeline Failures, and a provision of $1.8 million to Indian Oil and Gas Canada relating
to royalties, which amount is disputed by Anterra. These amounts are included and accounted for
in Anterra’s estimate of trade accounts payable as recorded in its year-end financial statements
for 2015. In one case, Anterra has been noted in default by Core Drilling Corp. in an action
commenced in Alberta Provincial Court.
Anterra meets the statutory requirements of the CCAA
52.
The Company has debt in excess of $5 million, and is insolvent in that it cannot fund its upcoming
debt obligations, maintain operations and pursue a restructuring for the benefit of its
stakeholders.
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53.
As discussed above, but for the relief being sought herein, Anterra will be unable to meet its
obligations as they become due and owing, including interest and principal payments under its
facilities with the Bank. In addition, unless Anterra is able to restructure its affairs it will be unable
to meet its obligations to the Bank, to its existing trade creditors, and ultimately to the holders of
the Convertible Debenture.
54.
Therefore, a stay of proceedings is essential to maintain the status quo in order to preserve the
value of the Company’s business and to ensure that no creditor of the Company receives
preferred treatment relative to other creditors. Such a stay would provide the Company with the
opportunity to finalize arrangements and agreements necessary to be able to formally present a
CCAA Plan, which is presently being negotiated with significant stakeholders.
Cash Flow Statements
55.
In conjunction with the Monitor, Anterra is preparing cash flow statements (the “Cash Flow
Statements”) setting out the cash position of Anterra through the initial stages of its proposed
restructuring under the CCAA. Anterra believes the Cash Flow Statements are an accurate
reflection of Anterra’s cash flows through this initial period, and fairly account for the revenues
and expenses of Anterra during this period. I am advised, and do believe, that the Cash Flow
Statements, once they have been reviewed and approved by the Monitor, will be attached to the
Monitor’s pre-filing report.
Summary of the Proposed Plan
56.
As is noted above, Anterra’s current cash position has forced it to shut in operations at all of its
producing wells. As a result, Anterra has drastically reduced its operating expenses, but lacks
the cash flow to fund its obligations under both its current and long-term debt. In effect, the
Company has a dilemma: it cannot generate sufficient cash to meet its current obligations to
trade creditors and the Bank without operating its oil and gas facilities, but cannot operate its oil
and gas facilities without an influx of cash.
57.
The Company has a number of oil properties that can be operated at a profit given sufficient cash
to fund operations, and to bring these properties back on production, and further develop the
properties. Anterra has therefore entered into an agreement with Western Union Petro
International Co. Ltd. (“WUP”) for an equity investment of $12 million dollars, to be paid to Anterra
over time. The Cash Flow Statements reflect payment by WUP of the initial tranches of this
to the Applicant in April
investment, the first of which, $1 million, was already received by counsel
th,
27
2016.
May
before
on
or
of 2016. The second tranche of $1.5 million is due
58.
These initial tranches of WUP’s investment into Anterra are contemplated by Anterra and WUP to
be advanced in the form of interest-free interim financing. To that end, WUP has agreed to
advance an interim loan facility of $2.5 million to Anterra in the form of an interim financing facility,
with the principal amount to be convertible into equity at the conclusion of Anterra’s restructuring
of its affairs (the “Interim Loan Facility”).
59.
The proceeds of the Interim Loan Facility will be used to fund Anterra’s operations during the
restructuring of its affairs, and to fund capital and other expenditures required to bring Anterra’s
oil field operations back online as is contemplated in the Plan.
60.
Subject to this Court’s approval, it is contemplated that WUP grant the Interim Loan Facility, and
that this facility rank in priority to the indebtedness of Anterra to the Bank until such time as the
Interim Loan Facility is converted into equity in accordance with its terms.
61.
Attached hereto and marked as Exhibit “G” is a true copy of the Term Sheets entered into by
Anterra and WUP regarding the Interim Loan Facility. It is anticipated that a Definitive Agreement
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in respect of the Interim Loan Facility will be executed by Anterra and WUP once an Initial Order
from this Court is issued pursuant to the CCAA.
62.
The Company intends to use the cash received from WUP to re-activate several of its formerly
producing wells on the Nipisi and Breton Properties. This will require an initial outlay of cash to
fund the re-activation of these wells, and the retention of between two and four contract field
operators to manage production on these sites.
63.
Once the Nipisi and Breton wells are brought back online, Anterra intends to use the resulting
cash flow to gradually ramp up production at its other commercially producing facilities. Given
Anterra’s product mix of 85% light to medium crude, many of Anterra’s existing properties can be
operated at a profit, and Anterra projects that it will ultimately become cash flow positive as a
result of the implementation of a plan under the CCAA.
64.
In the end, the equity investment from WUP (provided Anterra is able to obtain temporary
protection from its creditors under the CCAA) will permit a gradual re-activation of production on
Anterra’s producing properties, and will result in Anterra becoming cash-flow positive, and being
able to fund its obligations to trade creditors and to the Bank while continuing as a going concern
at the conclusion of this CCAA process.
Charges on the Assets, Property and Undertakings of Anterra
65.
It is contemplated that the Monitor, counsel to the Monitor, and counsel to the Applicant will be
granted a first-priority Court-ordered charge on the assets, property and undertakings of the
Applicant in priority to all other charges (the “Administration Charge”).
66.
The Applicant requires the expertise, knowledge and continuing participation of the above
professionals in order to complete a successful restructuring. I believe that the Administration
Charge is necessary to ensure their important continued participation in this process. The
Applicant believes that the Administration Charge is fair and reasonable in the circumstances.
67.
It is further contemplated that WUP be granted a Court-ordered charge on the assets, property
and undertakings of the Applicants in priority to all other charges other than the Administration
Charge (the “Interim Financing Charge”), up to the maximum amount of $2,500,000.
68.
The Applicant requires the interim financing offered by WUP to fund its operations during any
restructuring, and to bring production back online as contemplated in the Plan. The Applicant
believes that the Interim Financing Charge is fair and reasonable in the circumstances, and
necessary in order to effect an orderly restructuring of Anterra’s business and affairs.
Monitor
69.
I believe that PwC is qualified and competent to act as Monitor under the CCAA proceedings.
Relief Reauested
70.
I make this Affidavit in support of an application for an initial CCAA Order which provides, inter
alia, for
(i)
service to be deemed good and sufficient;
(ii)
a declaration that Anterra is a company to which the CCAA applies;
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SWORN
(iii)
a stay of all claims and proceedings of all creditors, including without limitation
the Bank, the holders of the Convertible Debenture, and Anterra’s trade and
other creditors;
(iv)
appointing PwC as Monitor of Anterra;
(v)
creating various priority charges as set out herein;
(vi)
authorizing Anterra to continue to make payments to certain trade creditors and
contract field and plant operators in the ordinary course of business as set out
herein; and
(vii)
such further and other relief as this Court may deem appropriate.
or AFFIRMED BEFORE
2016, at Calgary Alberta.
ME
on
,
A Notary Publicifi and for
the Province of Alberta
Gunnar Benediktsson
Barrister & Solicitor
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)
Norman G. Knecht
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of
Sworn before me this
ANTERRA ENERGY INC, a corporation exist
ing under the (IWS
Province of Alberta (‘Ant.rm”)
of
A I) .o .
-
-and-
ANO
PU LI
FOR THE PROVINCE
SANDSTORM METALS & ENERGY LTD
.,
corp
a
orati
on
exist
ing
unde
r
the laws of the Province of British Columbia
(the “Lend.V)
WHEREAS the Lender has agreed to
secured debenture in the principal amopurchase and Mtarra has agreed to issue and sell, this convertlble
unt of $4,000,000 on the terms herein set forth
NOW ThEREFORE THIS AGREEM
ENT WITNESSES THAT, In consideration
agreements and obligations herein set forth
of the premises,
hereto conclusively acknowledge, the parti and other good wd valuable consideration which the parties
es hereto covenant and agree as follows:
ARTICLE I
WTERPR!TATION
1.1
ne
In this Debenture, the following terms shall
have the meanings set forth below (unless the
mqufres otherwise):
context
(a)
“ApUcahl. Laws” means, in relation to any
(I)
Person, transaction or event
ali applicable provisions of laws, statu
rules and regulations from time to thne
In effect of any GovemmentalIiud1c1aI tes,
Body; and
(Ii)
(b)
(C)
(d)
(,)
II
alt Judgment., orders, awards, decrees, omc
effect of any GovemmentaVJudldi Body Inlal directives, wilts and Injunctions in
an action, proceeding or matter In
which the Person (a a party or by which It or
Its property Is bound or having
application to the transaction or event
‘Business Day” means a day on which
banks are generally open for business In
Calgary, Alberta but does not In any even
Include a Saturday or Sunday or staory
t
holiday in Alberta;
“Cotiatemi” means the property, assets and
the Security Interest, as tiirther described undertaking of Mterra which are suWect to
any pat or parts thereat as the contm mayin Article V, and shall be deemed to refar to
mqrdre;
“Conanoa Shares” means the class A conv
non shares as currently constituted hi the
OtAJBITs,
“Cor*aotuel RIda” has the meaning attrlb
utad ther
to Article V;
2
(f)
“Conversion Price means the price per share at
Gammon Shares wl be Issued
train time to time upon conversion of this Debenturewhich
Into
Comm
on Shares in accordance
with the provisions of Article ill, being, subject to Sectio
n
34
$0.10
per Common Share
,.mtH and including the Maturfty Dats,
(g)
“Dat, of Conversion” has the meaning attilbuted thereto
In Article Ill
(h)
“Dat, of R.d.mpliow’ has the meaning attributed thereto
in Article IV.
(I)
“Debenture” means this Debenture, Issued on the terms
(j)
“Event of Dofeur has the meaning attributed therein In Article
(Ic)
“GOV.rTImmitIUJUdIcIaI Body” means:
described herein;
Vii;
(I)
any government, parliament or legislature or any regulat
ory or administrative
authority, agency, commission, tribunal or board of any govern
ment and any
other law, regulation or rule maldng entity having or
purporting to have
jurisdiction In the relevant circumstances, or any Person acting
or purporting to
act under the authority or any of the foregoing; and
(U)
any judicial, admInIstratIve or arbUral court, authcrtty) tribuna
l or commission
having jurisdiction In the relevant circumstances;
(
“Lands’ means those lands more particularly described in Schedu
(m)
“L.ndW manna the Lender or ils successors or assign
s as the Lender of this Debenture
from time to time;
(n)
“Maturity Date” means March 13, 2018;
(0)
“Outetsndhig Indebtedness” means the remaining
unpaid Principal from time to Urn.
end all ktieiest thereon and Indebteciriess related therebz
(p)
‘Person” means en individual, a parbiership, a corpor
organization, a joint venture, en association, a govern ation, a Irus an unincarpomled
thereof, and the heirs, executors, admkilstmtors or ment or any department or agency
other legal representatives of an
Individual, and words importing persons have a simifar mean
;
‘Principal” means the principal amount payable pursua
nt in Section 2.1 hereof or so
much thereof aa remains from time to time unpaid;
(q)
le “B”;
(r)
“Receiver’ means any receiver or receivers of the Coflate
ral appointed by tire Lender
pursuant to thu Debenture or by a court having Jurisdiction
and audi temi shaft be
deemed Ic, refer to a receiver or recelver-manager
(a)
“Secured Obligations” means all indebtedness, Ilabliti
les and obligations of Antarra
under this Debenture, including, without limitation, payme
nt of the Principal, interest
thereon aid hrest on overdue irdereat, payment of
d other amow recp*’ed to be
by M hereunder, aid aonWbnce by Arderr
a with d rsr covener,
indemaltiss, iremis, conditions, .emeats aid other
m*emer herein ccne
“Secuilty *itt.e’e.r las the mear*ig atbtttied therein hr
MIcleV
“Seater Credit,,” moans any Person who Isa creditor of
the appticabb Senior Debt
—
(0
(u)
3
1.2
Cv)
lealor Debr means any Indebtedness for
ey borrowed Øncluding all Interest and
fees) by Anterra Incurred In connection withmon
the
2012, by and between Anterm, as banower, and loan agreement dated as of July 16.
such agreement may be amended, replaced, restaCanadlan Western Bank as lender, as
ted, or otherwise modified from time to
time;
(w)
‘1armx’ means Terrex Energy Inc.; and
(x)
98W means TSX Venture E*thange.
interoretatlon
(a)
Unless otherwise specified, all dadar reference
s are references to dollars at the Iaw*iI
currency of Canada.
(b)
In this Debenture, words Importk the singular num
ber Include the plural end vice-versa
and words Importing gender Include the masc
uilne, feminine and neuter genders.
The divIsion of this Debenture Into Sect
ions and paragraphs and the Insertion of
headings are for com,enlence of reference
only and shad not affect the construction or
Interpretation hereof.
(a)
(d)
(a)
(f)
1.3
The terms “this Debenture”, “hereof’, “herein”, “hem
unless otherwise stated, to this Debenture taken unde,’ and similar expressions refer,
as a whole and not to any particular
Article, SecUcn paragraph, and include any
agre
emen
t or Instrument In wilting which
amends or Is supplementary to this Debenture.
Unless otherwise specified, aS references to Sect
ion” are references to a Section,
or paragraph of this Debenture.
subsection
References herein to a statute Include, unless
otherwise stated, regulations or rules
passed or In forte pursuant thereto and any amen
dmente to such statute or to such
regulations or rule. from time to lime, and
any
substantially replacing the same or subantlady repla IesIalfon, regulations or rules
cing any specific provision to which
such reference Is made.
Schedules
The following Schedule Is attached hereto and forms a pert
hereof
Schedule “A” Form of Conversion Notice
-
Schedule “8”- Lands
ARTICIJ II
OISE TO PAY P1CIPAL AND 1TE
8T
2.1
Pihicloal
MtaIra SW lua received, hereby acirno
order at the Lander, an the hWndty Dete (oras flse k’sded arid promises to pay to ci
earder Ws as the PrSE,al may become
pay&b in ordence with the terms hated) thesuch
($4,000,000), or the Impeid bic. thereof, at prbici& amount of FOUR ULUOI4 DOU.ARS
sl&eae at the Lender sat forth hi Section LI
oratsudiodplaoeuthebndermeythe
des
mnetothiebynoUceinwng to
Mtene
4
2.2
Intereat
(a)
Antarm shall pay to the Lender Interest on the Piinclpal at a rate otS%
calculated semi
annually. Such Interest Is not compound Interest and Is payable In erieam
on a semi
annual basis on Mardi 15 and September 15 In eadi year. The tiret
such
payme
nt will
fall due on September 15, 2013 (representing payment from
March
16,,
2013
to
September 15, 2013). Such interest shall be calculated after as well
as
default arid judgment with Interest on overdue Interest at the same rate, before demand,
If payment of the
Principal Is demanded and payable hereunder. all accrued and unpaid Interne
t to the data
of payment of the Principal as so demanded and payable shaft also
be payable on such
date.
(b)
In no event shall any interest or fee to be paid hereunder or under this
Debenture exceed
the maánum rate permitted by AppIlcabie Laws. In the event any
such
fee exceeds ouch mmdmum rate, such rate shall be adjusted downw Interest rate or
rate (expressed as a percentage per annum) or lee that the parties ard to the highest
could validly have
agreed to by cantmct on the date hereof under Appitcable Laws. It Is farther
agreed that
any excess actually received by the Lander shall be credited against the
Princip
al (or, If
the Principal shalt have been or would thereby be paid In fiMII the remain
ing amount shall
be credited or paid to Anterm).
(c)
Interest on this Debenture shall be computed on the basis of a 385
day year or a 386 day
year In the case of a leap year. All Interest payable by Anterr
a
hereun
from day to day, computed as descited herein and shall be payabl der shall accrue
e after as well as
before maturity, demand, default and judgment The theory of ‘deeme
d reinvestment’
shall not apply to the computation ci Internet hereunder and no
allowance, reduction or
deduction shall be made for the deemed reinvestment of Interest In
respect of any
payments hereunder. Calculation of interest hereunder shall be
made
using
the nominal
rate method, and not the effective rate method, of calculation.
2.3
Subject to the terms hereof the Principal and all other amounts
secured hereunder and all
interest accrued thereon shaft be due and payable in full an the Maturi
ty Dab.
ARTICLE Ill
3.1
ConversIon PdvIb
3.2
Subject to and upon cornpllance with the provisions of this Article
1 the outstanding Principal may,
attheoptlon of the Lender, atanytime pdorto 4:30 p.m. (Calgarylkne
converted In whole or fri part Into Common Shares at the applicable ) on the Maturity Date, be
Conversion Price.
ConversIon Pries
The Conversion Price for the purposes 01 this DebeWre for each Comm
on Sham to be issued
upon conversion ci
or any pert ci the outendbig Pr*ic4i& sii be $0.10, stded to
aclustEflent in accordanc, with Section 3.4.
3*3
n.r& fssrcb otCowaielon P*,.
(a)
The dØit to convert the oumdng Principal hi whole or hi part into
Common Shares
may be ararroleed by the Lander by surrendering to Mterra at the adrkee
a eat forth hi
Section 8.1, no later than heertly (20) days prior to the
of Conversion, This
5
Debenture, together with a Notice of Conversion, substantially In the
fomi set forth In
Schedule W hereto, duly executed by the Lender or its successors
theh attorney duly appointed_by an Inatniment hi writing In form or assigns or its or
manner reasonably satisfactory to Anterra, exesolsing the ,htand executed hi a
outstanding Principal, hi whole or In part, In accordance with the provis to convert such
ions of this Article.
Thereupon the Lender, lb successors or assigns, or such Person
as
or
It
shaft be entitled to be entered In the books otMterra as at the Date of they may direct,
Conversion as the
holder of the number of Common Shame into which such
ding Principal Is
convertible In accordance with the provisions of this Article andoutstan
Anterra shall deliver to
the Lender or Its successors or assigns, or such Person as it or they
may direct, a
certificate or certificate. for such Common Shares.
(b)
For the purposes of this Article, the right of conversion herein contain
to have been exercised on the date (the “Date of CanvsrnloW’) that ed shall be deemed
Is 20 days after the
date on which this Debenture Is surrendered to, and the Notic.
Conve
of
by, Anterm In accordance with the provisions of Mid. Viii, and the rsion Is received
entitled to receive Corrrnon Shares shall become the holder or holder person or persons
s of record of such
Common Shares on the Date of Conversion.
(c)
From and aflar the Date of Conversion, this Debenture, or portion
thereof converted, shall
not be considered as outstanding, interest shaft cease to accrue albr
such date and the
Lender shaft hive no right except to receive the certificate representing
the Common
Shares end any payments pursuant to Section 3.3(4
(d)
The Lender shall, in respect of any outstanding Principal In respect of which
the Lender
has exercised the right of conversion In accordance with this Article
,
be
entitle
d
to receive
accrued and unpaid interest In respect thereof up to the Date
outstanding Principal, and the Common Shares Issued upon suchof Conversion of such
conversion slial milk
onLy In respect of dMdends declared In tavour of shareholders of record
on and after the
Date of Conversion, from which applicable date such Common Shares will
all
purposes be and be deemed to be Issued and outstanding as
folly
paid
and
non
assessable Common Shares.
(e)
It the outstanding Principal is not converted hi its entirety, Anterra shell
Issue a new
Debenture, on the same tenns and conditions, In respect of the uncorn
ierted
Principal
amount.
()
For certainty, the Lender may exercise its conversion right subsequent
from Mterra that It intends to exercise Its right to redeem the Debenture.to receipt of notice
34
If Mterra bebweeri the date hereof and the Metisity Dale,
(a) consofidates its Common Shares
kilo a lesser number of shams, subdivides Its Common Shares
Into
number of shares or
reclassifies Iti Common Shams, then when the conversion right Isa greater
exercis
ed,
the Lender shall
have the right to receive and the obatlon to take Common Shares
In
such
number and
description as the Lander would otherwise have If he had exercised the
right
of
acquis
ition before
such event or the tnt of such evante If morn than one, and had held the
Common Shares which
he would have received unti the actual exercise of the right of conver
sion, or (b) consl.
anaigan. or merges with
diii corpoidon, thai when tae right to acqc*e pursua
nt
hereto is exercised, the Lander slid have th right to receive and
securities hi lii. ccnsoldatid, am.ni.led or merged corpor the obligation to take such
the Lander woald
disiwise have I he had ersrdaed the rVit at corwersion before ation
such eva mid had held tie
securities he would have received u, the actual ewerul.e of the
benefors at or sdtialiy of lb assets, then when tie right at right of conversion, or (c)
conversion liaJikrg to the
Debenttns Is exercised the Lander did have the right to receive and
the obligation to take the
a
securities In the number and description or other property as if such Lender
had exercised the
right of conversion before such event and had held the securities it would
have
recived until
actual exercise at the ilght of conversion, or (d) redeselfies Comm
on Shares, then when the
conversion right Is exerdeed. the Lender shaH have the right Its
to receive and the obligation to take
such securities as the Lender would otherwise have If he had
axerde
before such event and held the seciaities he would have received untiled the rIght of conversion
the actual exercise of the
right of conversion.
1.
Anterra shall not be reqidred to Issue fractional shams upon the conversion
of this Debentire. If
any fractional Interest hi a Common Share would, exeept for the provis
ions
of
this Section 3.5, be
deilverable upon the conversion of this Debenture, Mterra shell adjust
such
fractio
nal interest by
paying to the Lender an amount In cash equsi (to the nearest carE) to the
approp
riate
fraction of
the value (being the last reported tradIng price of Anterra on the TSXV or,
If
non.,
the mean
between the dosing bid and asked quotations on the TSXV) ate Comm
on Share on the business
day next preceding the Date of Conversion:
3..
In the event that Anterra shell dedem on its Common Shares any dMden payabl
d
e in shams of
Anterra, then, In each such case, Mtsn’a shall give notice, In the manne
specified In Article VIII
r
hereof, to the Lender of Ihe dMdend payswnt proposed and the date
as of which the holders of
Common Shares of record shall participate hi audi dividend. Such vdt.n
shell be given
notissthentwene(25)deyslneachcasepdarlotharecorddateorthenotice
Corporation’s bansfer books are to be closed with respect thereto Such deteonwhlchthe
.
notice is given to the
Lender to permit the Lender to elect to oqrwert the whole or a portion
of
this
Debenture prior to
the shareholder recant date for such dMd
nd payment, In a manner consistent with this Mile.
1
ARTICLE N
PflON
.
4.1
Redemndoii Rlaht
4.2
Subject to and upon compliance with the provisions of this Article, Anterr
a shall have the right to
redeem the outstanding Principal mid accrued and unpaid interest In
whole or to pert at any thne
prior Ia 4:30 p.m. (Calgaiy titne) on the Maturity Dat., for fUll
nt of the outstanding Principal
pius accrued but unpaid interest, and upon such payment topayme
the Lender, Anterra shaH owe the
Lender no fUrther arnourds and shalt be released by the Lender
all obligation, Vabifity and
Indemnity In respect of the Debenture and the Secured Obligationsfrom
without premium or penally.
Manner of rcle. otdemn&n RfoIE
(a)
Th right of Mterra to redeem the outstanding Principal and accrue end unpaid
interest
In whole orin part for frill payment may be exercised by Anterra byd giving
notice
to the
Lender hi writing at the address set forth to Section 8.1, no later than thhty (30)
days
to the Date of Redemption, exercising the rE to redeem such cutatarflng Princip prior
al, hi
whole or is part, is acuorikeice wlh the provisions oldie Arthie.
(b)
For the pwpoes of tide Artkie, the drt o1redentian herein cantabied
etid be demed
to have been exercised on the date (the ‘ at
,W) th is 30 days — die
date an which estlen
is received by the Lender hr accordaice with the provisions
of Article VIII, mid Anlena strati be released by the Lander from
cbIuii, bbltily mid
Indemnity hi respect of the Dsbei*ne mid the Secured Obdorra
without pran*an or
penallyantheDateotRedemption.
---‘
7
From and after the Date of Redemption, this Debenture, or
portion thereof redeemed,
shall not be considered as outstanding, Interest shall cease to accrue
after such date and
the Lender shall have no right except to receive the full
payme
nt
representing the
outstanding Principal and accrued and unpaid Intetest in respec
t
thereof
up to the Date of
Redemption.
(C)
ARTICLE V
sEcuRrrY
5.1
SecurIty
(a)
As general and continuing ollateral security far the due payme
nt of the Secured
ObUgatlons, Mterra hereby grants to and hi favour of the Lender
:
(I)
a security Internet hi and to all of Mterra’s present and after-acquired
personal
property and aft proceeds themof and
(II)
sfloatbigchargetoand infevourofthe Londer,ailthe undertaldnga
property and assets of Antere, both present and Mum, of whatsond allofttie
ever nature
and kind and wheresoever situated (other than the Lends).
(b)
Anterra hereby covenants and agrees that it shall cause
to grant a Iloating charge
to and In favour of the Lenderin all right, the and interesTenex
of
t
Terrex
hi and to tile Lands,
contemporaneously with the issuance of this Debsnftnw
(C)
In INs Debenture, the charges mid security interests hereby
constituted are called the
“Security hibreet.
(d)
Mtena may dispose of or deal with the COISISmI In the ordina
ry course of Re business
and for the purpose of canying on th. same, so that purchasers thereof
or parties dealing
with Anterra take till, thereto free and clear of tue Security Interes
t.
(e)
Anterra confirms that value has been given, that Mte,’m has rights
In the Collateral, and
that Anterra and the Lender have not egreed to postpone the
hole
for
attachment of the
Security Interest to any of the Collateral. In respect of Collateral
which
is acquired after
the data of execution hereof, the time for attachment will be
the time when Anlerra
acqukes such Collateral.
(t)
The Security Interest does not and will not extend to, and the Collate
ral will not Include
(I)
any agreement, right, franchise, licence or permit (the “Contr
which Anterra Is a party or of which Anterra has the benefit, to actual Rights”) to
the extent that the
creation of the Security Interest aculd constitute a breach of
the temis of or
permit any Person to terminate the Conbactual Rights, but Mterra
will hold its
Interest therein In bust r the Lender to the extent permitted by law
and will
assign such Conb’actu& Rights to the Lender forthwith upon
obtaini
ng the
consent of the other party or parties thereto;
(U)
conewnergoodsor
(I)
(g)
tile te dayaf thetenn of any leasecraublease oranyegm
t*rra tease or
sublease noe held or herer acq’ed by Anlerru ha r”.pectemm
of reel property.
Natalthelencag U* proslalons at thIs Debenhrec (I) ftderra sh
at at Re dañes and obeUons hi regard to the Ci.l (hic remain ie to pekwm
lu hout biIhi&fl, of
8
all of its duties and obIatlons arising under any leases,
contracts, agreements, Instruments, contractual rightsDoenses, permits, reservations,
authorizations, licenses and permits now or hereafter pei1and governmental orders,
alnk thereto) to the sane
extent as If this Debenture had not been executed; (II) the exe.vie
e by the Lender of any
of its rights and remedies under or hi regard to this Deben
ture
shall
not r&ease Anterra
from such duties and obligaticms; and (III) the Lander shell
have
no
liabilit
y for such duties
and obligations or be accountable for any reason
to Anterm by reason only of the
execution and delivery of this Debenture.
5.2
Subordhaatlon and Postponement
L3
The Lender agrees that except as permitted by Section 5.3
or as expressly permitted hi any
agreement between the Lender and the Senior Creditor, the payme
nt of the Secured Obligations
Is hereby postponed and subordinated to the payme
nt
In
kill
of
all Senior Debt, whether
outstanding on the date of this Debenture or thereafter incurre
The
d.
Lender
also agrees that the
Security Interest is hereby subordinated and shall rank junior
to
any
han
granted
to any Senior
Creditor. For greater oertakity any lien granted the
Lender hi respect of the Lands shall
constitute a first charge ranking senior to any SeniortoCredit
or’s lien(s) against the Lands.
PemiI.d Payments
Nothing contahied In this Article V shall:
(a)
prevent Anterra from making payment of the Principal and
this Debenture at the specified times to the Lander (nor fromall Internet when due under
payments for its own account) until there has been an event cithe Lender recaMng such
the Senior Debt whIch 1. continuIng end has not been oweddeuft In connection with
within the time periods
specified under the Senior Debt and the Senior Creditor has
given
ttten notice of such
defauft to Anterra or has accelerated or demanded the Senior
Debt or
(b)
prevent the conversion of any or .11 of the outstanding
al kilo Common Shares
together with a payment, In the manner specified In ArticlePrincip
Ill,
of
the internet accrued and
unpaid on the Principal up to the Data of Conversion In accordance
with Article lii at any
time.
Anterra covenants to give notice to the Lender of any written
notice oIddaLit received by Mterra
from a Senior Creditor or of any acceleration or deman
d
of
the Senior Debt forthwith upon the
occurrence of such event
GA
Fwther Aor..m.nIs
The Lender covenants and agrees that It shall, at the
execute and deflver In fawur of any Senior Creditorequest ci Anterra, from time to time,
r, such agreements, postponements,
subordinalloris end other docianents as may be reasonably
Creditor to further evidence or give effect to the subordination required by Mterra or any Senior
provided trw In this Article V.
ARTICLE VI
IBdTATIOI A GOVBLANTS
5.1
4
Re
1
rs
ara
:. and ra’dI
by
Araerr. repseerde and werrente to the Lander fofows
and actmcreledges that the Lender is
relying upon such reprnsentdons and wanendesas
9
(a)
Mterrahasbeenduiylnoororatedandlsvattdlysub&etlngasaoorporationunder
the
laws of AIbeita
(b)
Antsr,a has the corporate power and capacity to enter into and
perform its obligations
under this Debenture, and this Debenture has been duly author
ized, executed and
delivered by Antene and constitutes a legal. valid and bindin
g
obliga
enforceable In accordance with its terms except to the extent that enforc tion & Antana
£nfled by equity or bankniptcy, insolvency, reoranIzatlon, winding-up, eability may be
moratorium or
other laws alfodlng the enforceability of creditors’ rights generatly
(C)
Mrahastherlghttopledge,chaieth.CoilataraltotheLenderascontemplatedby
this Debenture;
(d)
neither the execution and delivery of this Debenture nor perform
ance by Mtena of its
obligations heraundec
(I)
(it)
1
6.2
wilt constitute a defauit under or be hi conbeventlon or breach ot
(A)
any provision of the artk’Aes of Incorporation or any by-law, unanim
shareholdem agreement or other constating or governing corporous
document of Anten’a, or any agreement or Instrument to which Antenaate
Is
apertycrbywhlchltle bound; or
(B)
any Judgment, decree, order, law, statute, rule or regulation appflcable to
MterTa or Its business or assets; or
will adversely affect Anterra, its business or assets In any material respec
ts.
tsral Covenants by Aiderr
Anlene covenants and agrees with the Lender that so long as
this Debenture remains
outstanding It shaI
(a)
pay when due hereunder the Principal and Interest payable thereon;
(b)
cause the Common Shares aulmd by the Lender pursuant to
Debenture to be duly issued and deilvered In accordance with the termsthe temis of this
hereoft
maintain Its corporate erdatence In good standing under the laws ctAthe
rta
(C)
•3
(d)
preserve and protect Its business and Its Income, goodwill and reputat
ion, and retain at
Its servIce the employees necessary to the operation of Its busine
ss, and maintain good
business relationships with its customers auppilers and disitibutom;
(a)
maintain hi good standing all licenses and permits required In order
to carry on Its
bualness and
(f)
carry on Its business with reasonable diligence and In the ordinary course
.
nisw’aa and nsWee be the Lander
The Lai repasants and rw to .zerra as folows end
aolurowIeas that Aritarra is
iron auch rapresencne end eerceate
10
(a)
It Is purchasing this Debenture as principal for its own account
for Investment purposes
only end not with a view to any resale, distribution or other dispos
ition of the Debenture;
(b)
it acknowledges that Mterra has advised the Lender that
a is relying on an
exemption from the requirements to provide the Lender with Antsn’
a prospectus and to sell
securities through a person or company registered to sell
ies under the Sesss
Act (Atherta), aid other applicable securities laws and, assecurit
a consequence of acquiring
securities pursuant to this exemption, certuki protectIone rights
by the Secuiflles Act (Alberta) and other appIkbIe securities aid remedies provided
laws, including statutory
rights of rescission or damages, will not be avalleble to the
Lender;
(c)
It p.*-erdslad lb. offering of the Debenture and has a bone tide
business purpose other
than the Investment in the Debenture and was not created, fanned
or estebitehed solely
or primarily to acquire securities, or to permit purchases
prospectus. In reliance on en exemption from lb. prospectus Of secraities without a
requirements of applicable
securities legislation; and
(d)
ft has the power and capacity .to enter Into and perform Its
obligations under this
Debenture, aid this Debenture has bean duly authorized, execut
ed
and delivered by the
Lender and constitutes a legal, valid and binding obligation of
the
Lander
enforceable In
a000nience with Its terms, except to the extent that .*icesbflfty
may
be limited by
equity or by bankruptcy, Insolvency, reorganization, winding-up, morato
rium
or other laws
affecting th. enforceability of creditors’ rights generally.
ARTICLE VII
EVENTS OFDEFAULT
7.1
Events of Default
Notwithstanding anything herein contalned, the Principal
then
unpaid Interest awing thereon shall, at the option of the Lenderoutstanding and all accrued and
payable upon th. occurrence of any of the following events (“Even, become Immediately due and
ts of Default’):
(a)
If Anlans makes default In payment when due of the Pdnclp
&
(b)
If Anterra makes default hi payment when due of any Interne
other amount payable pursuant to the provisions hereof, andt payable thereon, or any
contintred for a period of thirty (30) days after notice in writing ofsuch default shall have
such default has been
given by the Lender to Mterra;
(0)
II Anterrs shall default In a material respect hi the observance
or performance of any
other covenant or term herein requksd on Its part to be observ
ed or performed and, after
notice In writing has been given by the Lender to Anlarra specify
ing such default and
requiting Anterra to rectify the same, and Anterm shaft fal to remedy
such default within
a period of thirty (30) days or such further period as the
may specify; provided
however, that If such default can not be remedied within Lender
such
period specified by the Lender, an Event of Default shaH not thIrty (30) day or further
occur with respect to such
default it .
mIens correnences to remedy such detaiL wlitde
5
period end thereafter
cos*iues to prosecute the remedying Of such deta* urd such
completion without undue
(d)
it after tire d hereof a decree or order of a corit of competent
)sbdiction is entered
4udglng Antam
bar*rupt or Inscivent under any bartruptcy, insolvency, or
leglacn, or appoit a receiver or reoehthnsuager Of Pii, or
ct any
aixgous
11
substantial pat of the property of Mterre, or ordeiing the windin
g-up or liquidation of
AnterrWe affairs; end
(a)
If after the date hereof any resolution Is passed for the
winding-up or liquidation of
Anlarra, or if Mteri’a institutes proceedings to be adjudi
cated
consents to the institution of bankruptcy or insolvency proceeas bankrupt or insoWent or
bankruptcy, insolvency or analogous iass or consents to the dings agst it under any
It a receiver or recelvedmannger Is appointed over all or lWng of any such petition, or
any substantial part of the
property of Mterra, or Antena makes a general assignment for
the benefit of creditors.
ARTiCLE VIII
E NOE
LI
Notice
Any demand, notice or other communication hereunder
received on the day It is given, or the next Busine shall be In writing, shaH be considered
Day If the day the notice or other
communication is given Is not a Business Day or if thessnotice
or other communication is gIven
after 4:30 p.m. (local lime) on any day, and shall be given
by
d&hie
ry to a representative of the
recipient or by blecopler to the recipient at the following addres
ses:
To Antsn:
Antarm Energy Inc.
SuIte 1420, ll224SfreetSW
Calgary, Alberta
12RIMI
Attention: Gang Fang, President and Chief Executive Officer
Fax No.: (403) 261.8801
To the Lender
Sandstorm Metals & Energy Ltd.
SuIte 1400,400 Burrard Sbwet
Vancouver, BC
VBC 2A6
Attentlon Nolan watson, President and Chief Execofve Officer
Fax No.: 804-889-7317
Anterra or the Lender, as the case may be, may from
to time notify the other in the manner
provided for above of a change of address which, fromtime
the effective date of such notice and until
changed by Hke notice, shall be the address of Anterr
a or the Lander, as the case may be, ford
purposes of this Debenture.
ARTICLE IX
Si
lfoneorrncre cttieprowtalonsotthis Debenbur
ypartotanycf themia, orlsaadgedfo
be, tovald, Ssgat or unei*meebb in any reec ecrw
the vaidtiy
reni*tg provisions hereof shal not hi any yt be oled, isgal and a__ceability of the
hwa#d, Seaal or unenforceable provision or part shati be deeme or bnpsd thereby, aid uch
d to be asvaabls.
12
9.2
No eraer
9.3
Neither the taking of any judgment nor the exercise of
power of setzurs or sale shall operate
to extinguish the Ilebrnty of Antena to m&m payment ofany
or
to
satisfy the Secured Obligations nor
ah the acceptance of any payment or alternate securky constit
II further agreed that the taldng of a judgment or judgments ute or create any novan, aid It
contained ahail not operate as a merger of such covenants. under any ci the oovenaa herehi
WaIver and Amendments
BA
(a)
The Lender may waive any default by Anterra In the observance or
Secured Obligation, hickidlng an Event of DsfauIt hi which case performance of any
the position of the
parties hereto and the status of the Collateral shall be as If such
Event of Default had not
occurred; provided, however, that such waiver of any default or Event
of Default shall not
extend to or be taken In any manner whatsoever In affect
any
sLd*eq
uent breach or
default or to affact the rights of the Lender resulting therefrom
(b)
No failure on the part of the Lender In exercising sty right
Debenture shall operate as a waiver thereof, nor shall arty singleororremedy under this
any such right or remedy preckide any other or further exercise thereofpartial exercise of
or the exercise of
any other right or remedy hi law, by statute, equIty or otherwise conferred.
(C)
No waiver or variation by the Lender of any provision of this Deben
ture shell be effective
unless evidenced by an Instrument hi writing dated subeequent
to
the date hereof and
executed by the Lender.
Dlichms
Once Anterra has satisiled at of the Secured Obligations, the Lander
shaM, at the written request
and expense of Anterra, discharge the Security Interest, return
Debenture and execute and
deliver to Anterra such deeds or other Instruments as shall bethis
required to give effect to such
discharge.
(a)
(b)
(c)
Anterra shall not and cannot assign the Secured Obligations without the
consent of the bnder such consent not to be unreasonably withheld. Subjecprior written
t thereto, all
the Secured Obligations shall bind Mterra and It successors and assign
s.
ThIs Debenture may not be assigned by the Lender hi whole or hi pert
to any other
Person or entity without
(1)
prior written consent &Mterra and
®
compliance by the Lender with all Applicable Laws.
Notwithstanding the furegoing, assignment ct Uw Debenture by
Lander may be
ccnlated wlthor consent of Mhn, alter the occurrence and thethecorWk
xastce of an
Event of Default.
The Deberitwe shall aim to the bandit of aid be binding
upon Mists, the Lender aid their
respective successors and pemimed assign..
14
SCHEDULE A
TO ThE CONVERTiBLE SECURED DEBEI(FURE DATED
RIIARCH 14, 2012 OF ANTEIA ENERGY BIC. IN FAVOUR
OF
SANDSTORM METALS & ENERGY LTD.
NOTiCE OF CONVERSION
TO:
ANTERRA ENERGY INC. Ant.rra
The undersigned Lender of the convertthle secured debenh
ire dd March 14 2013 (the
DebentuW), granted by Anterra In favour of Sendatorm
Metals & Energy L In the prtncaI amount of
$4OO0,00O, hereby elects to exercise the conversion right
contained fri the Debenbire and to receive
Common Shares of Mterra at the Conversion Price
as at the date hereof for the principal amount of
The original Debenture acccmWanles this notice for cancellation.
Captialized terms
used and not otheri4se delined herein have the meetin
g given to such terms in the Debenture.
$_____
____
DATED
SANDSTORM METALS & ENERGY LTD
pe
-
Name:
The:
Mdre.s:
15
SCHEDULE “B”
TO THE COt1VEgflfl1 SECURED DEBENTURE
DATED
MARCH 14 2013 OF ANTERRA ENERGY INC.
IN FAVOUR OF
SANDSTORM METALS ENERGY LTD.
Lends
See attached land schedule
TABB
THIS TS F?,X [HT ““
refçrrec1 to in the Afiidnvit of
Sworn bforc me this LL.
Day
YPU t3LIC
P0k THE I’ROVINCE
/Anterra
Energy inc.
Financial Statements.
For the years ended December 31, 2014 and 2013
KPMG LLP
th
205 5
Avenue SW
-
Suite 3100, Bow Valley Square 2
Calgary AB T2P 4B9
Telephone (403) 691-8000
Fax
Internet
(403) 691-8008
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Anterra Energy Inc.
We have audited the accompanying financial statements of Anterra Energy Inc., which comprise the statements
of financial position as at December 31, 2014 and December 31, 2013, the statements of operations and
comprehensive loss, changes in equity and cash flows for the years then ended, and notes, comprising a
summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditors’ Responsibility
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
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on our judgment, including the assessment of the risks
of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Anterra
Energy Inc. as at December 31, 2014 and December 31, 2013, and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without modifying our opinion, we draw attention to Note 2 in the financial statements which indicates that
Anterra Energy Inc. has a significant working capital deficiency and is in default under its credit facility agreement
as at December 31, 2014. These conditions, along with other matters as set forth in Note 2 in the financial
statements, indicate the existence of a material uncertainty that may cast significant doubt about Anterra Energy
Inc.’s ability to continue as a going concern.
KPME,Lp
Chartered Accountants
April 28, 2015
Calgary, Canada
KPMG Ui’ ia a Canadian limitad liability patinarship and a member firm of the KPMG
network of independent ,nembon-flnna affiliated with KPMG tntemational Cooperative
(‘KPMG International”). a Swino entity.
KPMG Canada provides oervires to KPMG LIP.
ANTERRA ENERGY INC
Statements of Financial Position
AsatDecember3l
2014
2013
Note
Assets
Trade and other receivables
Deposits and prepaid expenses
Fair value of risk management contracts
7
14
Property, plant and equipment
Evaluation and exploration assets
10
11
Liabilities
Bank debt
Trade and other payables
12
Other non-current liabilities
Decommissioning liabilities
Convertible debenture
$
2,968,038
888,909
-
3,856,947
72,625,940
386,667
$
68,892,877
$
76,869,554
$
12,484,515
9,687,480
22,171,995
$
14,014,704
3,528,084
17,542,788
2,808,105
22,669,166
3,610,812
22,152,634
3,489,507
51,260,078
43,184,929
18
46,706,177
46,706,177
16
454,895
2,882,545
(32,410,818)
454,895
2,880,793
(16,357,240)
$
Going concern (Note 2)
Subsequent event (Note 25)
See accompanying notes to financial statements.
Approved on behalf of the Board:
Director
Owen Pinnell
Sianed”
$
64,445,608
386,667
13
15
16
Equity
Share capital
Equity component of convertible
debenture
Contributed surplus
Deficit
2,747,669
1,090,822
222,111
4,060,602
Director
Ross 0. Drysdale
1
68,892,877
-
$
76,869,554
ANTERRA ENERGY INC
Statements of Loss and Comprehensive Loss
For the years ended December 31,
Note
Revenue
Production and processing
Royalties
2014
$
Realized gain on risk management contracts
Unrealized gain on risk management contracts
Expenses
Production and operating
Spill clean-up and site remediation
Transportation
Depletion, depreciation and amortization
General and administrative
Finance expense
Share-based payments
Impairment expense
Exploration and evaluation expense
Transaction expense
Gain on business combination
14
14
10
20
19
10
11
2013
23,779,400
(5,053,519)
$
18,725,881
194,512
222,111
10,772,289
19,142,504
10,772,289
11,522,489
2,865,021
6,266,121
1,022,161
4,235,607
2,598,506
1,397,382
1,752
11,553,164
783,963
2,796,286
2,654,376
895,261
50,066
1,099,100
4,161,131
437,821
(1,192,666)
-
-
-
-
-
8
-
Loss before income tax
Deferred income tax (recovery)
Loss per share
Basic and diluted
21
See accompanying notes to financial statements
2
35,196,082
17,951,459
(16,053,578)
(7,179,170)
-
(76,389)
$ (16,053,578)
$
(7,102,781)
$
$
(002)
17
Loss and comprehensive loss
12,395,142
(1,622,853)
(0.03)
ANTERRA ENERGY INC
Statements of Changes in Equity
Note
Share
Capital
Convertible
Debenture
Equity
Component
Contributed
Surplus
Accumulated
Deficit
Total
Equity
$ 2830727
$ (9,254459)
$24,686,814
Balance,
January 1, 2013
$ 31110546
Share based payments
$
-
Private share placements
18
13,239,418
Shares issued on acquisition
Issuance of convertible
debenture
18
2,356,213
16
-
50,066
-
-
-
-
-
-
-
454,895
-
Loss for the year
-
-
-
$46,706,177
$454,895
$46,706,177
$ 454,895
-
50,066
13,239,418
2,356,213
454,895
(7,102781)
(7,102,781)
$2,880,793
($16,357,240)
$33,684,625
$2,880,793
1,752
$ (16,357,240)
$33,684,625
1,752
Balance,
December31
,
2013
Balance,
January 1, 2014
Share based payments
19
Loss for the year
Balance,
December 31
,
2014
$46,706,177
$ 454,898
See accompanying notes to financial statements
3
$2,882,548
-
(16,053,578)
(16,053,578)
$ (32,410,818)
$17,632,799
ANTERRA ENERGY INC
Statements of Cash Flows
For the years ended December 31
2014
Operating activities:
2013
Note
Loss for the year
$ (16,053,578)
$
(7,102,781)
Adjustments for:
Depletion depreciation and amortization
Accretion
10
4,235,607
2,796,286
20
675,171
505,805
1,752
50,066
Share based payments
(76,389)
Deferred income tax (recovery)
Unrealized gain on risk management contracts
Impairment expense
14
(222,111)
10
11,553,164
Exploration and evaluation
11
Gain on business combination
1,099,100
4,161,131
8
Decommissioning expenditure
Change in non-cash working capital
Cash provided by (used in) operating
activities
(1,192,666)
15
22
(698,533)
6,518,896
6,010,368
(907,003)
$
(666,451)
Investing activities:
Property, plant and equipment expenditures
Additions to intangible exploration assets
Business combinations
Cash used to settle Sandstorm obligation
Change in non-cash working capital
ash usedinqactivWes
10
11
8
(6,947,240)
22
2,467,061
Financing activities:
Net proceeds from issue of shares
Proceeds from (repayment of) bank debt
Cash provided by (used in) financing activities
(3,449,191)
-
(651)
-
(11,771,191)
-
(3,467,502)
(2,150,967)
13,239,418
-
Change in cash and cash equivalents
(1,530,189)
8,266,535
(1,530,189)
21,505,953
$
$
Cash and cash equivalents, beginning of year
$
-
$
Cash and cash equivalents, end of year
$
-
$
See accompanying notes to financial statements
4
-
-
-
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
1. Reporting entity:
Anterra Energy Inc. (“Anterra” or the Company”) is engaged in the acquisition, exploration,
development and production of oil and natural gas in western Canada. The Company’s common
shares are listed and trade on the TSX Venture Exchange under the symbol AE.A. The Company’s
head office is located at 1420, 1122 4th Street SW, Calgary, Alberta T2R IM1 and its registered
office is located at 3700, 400 3rd Avenue SW Calgary, Alberta T2P 4H2.
—
Effective January 1, 2014, the Company and its wholly owned subsidiary, Terrex Energy Inc.
amalgamated pursuant to the laws of the Province of Alberta. The Amalgamated entity continued
as Anterra Energy Inc.
The Company has two reportable operating segments and a corporate segment. The oil and gas
segment explores for, develops and produces oil and gas. The midstream processing segment
provides third party processing and disposal services to the oil and gas industry.
2. Going Concern:
Crude oil prices weakened significantly during the last months of 2014 negatively impacting the
earnings and cash flow for the fourth quarter of 2014. Additionally, during the third quarter of 2014
the Company experienced two major pipeline failures at its Nipisi property. These failures have
resulted in the Company incurring spill clean-up and remediation costs of $2.9 million net of
insurance recoveries of $0.8 million.
The foregoing together with associated production disruptions were major contributors to the loss
reported for the fourth quarter and a working capital deficiency of $5.6 million excluding bank debt of
$12.5 million at December 31, 2014. In addition, at December 31, 2014, the Company is in default
under its Credit Facility Agreement and the default may continue throughout 2015.
Lower year end commodity prices also had a negative impact on the value of the Company’s oil and
natural gas reserves and the borrowing base upon which the Company’s credit facility is
determined. Although proven plus probable reserves at December 31, 2014, as determined by the
Company’s independent reserve evaluators, increased over year end 2013 reserves, lower
commodity prices resulted in a reduction of their Net Present Value as compared to 2013.
Pursuant to a review by the Company’s lender, effective March 9, 2015, the Company’s $15 million
revolving, operating demand loan credit facility was restructured to include a revolving operating
demand loan facility in the maximum amount of $10 million and a non-revolving demand loan facility
in the maximum amount of $4.8 million. The non-revolving loan facility was repayable as to
$200,000 on acceptance of the facilities agreement and thereafter in monthly principal payments of
$200,000.
These conditions create a material uncertainty that may cast significant doubt as to the Company’s
ability to execute on its business strategy and continue as a going concern.
5
ANTERRA ENERGY INC.
For the years ended December 31 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
These financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of obligations in the normal course of business. If this
assumption is not appropriate, adjustments to the carrying amounts of assets and liabilities,
revenues and expenses and the statement of financial position classifications used in the financial
statements may be necessary and such adjustments could be material.
3. Basis of preparation:
These financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (“IASB”).
The financial statements have been prepared on the historical cost basis except as disclosed in
Note 6, and are presented in Canadian dollars, which is the Company’s functional currency.
The financial statements were authorized for issuance by the Board of Directors on April 28, 2015.
Use of estimates and judgments:
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and reported amounts of assets and
liabilities and income and expenses. Actual results may differ materially from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimates are revised and for any future years
affected. Significant estimates and judgments made by management in the preparation of these
financial statements are outlined below.
Criticaljudgments in applying accounting policies:
The Company’s assets are aggregated into cash-generating units (‘CGUs”), for the purpose of
calculating impairment. CGUs are based on an assessment of a unit’s ability to generate largely
independent cash flows. By their nature, these estimates and assumptions are subject to
measurement uncertainty and may impact the carrying value of the Company’s assets in future
periods.
Judgments are required to assess when impairment indicators exist and impairment testing is
required.
The application of the Company’s accounting policy for exploration and evaluation assets requires
management to make certain judgments as to future events and circumstances as to whether
economic quantities of reserves have been found.
Key sources of estimation uncertainty:
The following are the key sources of estimation uncertainties affecting the measurement of
balances and transactions in these financial statements.
(i) Decommissioning obligations
6
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
The Company estimates decommissioning obligations for oil and gas wells and their associated
production facilities and pipelines. In most instances, removal of assets and remediation occurs
many years into the future. This requires assumptions and estimates regarding abandonment date,
future environmental and regulatory legislation, the extent of reclamation activities, the engineering
methodology for estimating cost, and future removal technologies in determining the removal cost
and liability-specific discount rates to determine the present value of these cash flows.
(ii) Income taxes
Tax provisions are based on enacted or substantively enacted legislation. Changes in legislation
could affect amounts recognized in profit or loss both in the period of change, which would include
any impact on cumulative provisions, and in future periods. Deferred tax assets (if any) are
recognized only to the extent it is considered probable that those assets will be recoverable. This
involves an assessment of when those deferred tax assets are likely to reverse and an assessment
as to whether or not there will be sufficient taxable profits available to offset the tax assets when
they do reverse. This requires assumptions regarding future profitability and is therefore inherently
uncertain. To the extent assumptions regarding future profitability change, there can be an increase
or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts
recognized in profit or loss in the period in which the change occurs.
(iii) Reserves
Estimation of reported recoverable quantities of proved and probable reserves include judgmental
assumptions regarding production profiles, future commodity prices, exchange rates, remediation
costs, timing and amount of future development costs, and production, transportation and marketing
costs for future cash flows, as well as the interpretation of complex geological and geophysical
models and data.
The economical geological and technical factors used to estimate reserves may change from period
to period. Changes in reported reserves can impact the carrying values of the Company’s petroleum
and natural gas properties and equipment, the calculation of depletion and depreciation, the
provision for decommissioning obligations, and the recognition of deferred tax assets due to
changes in expected future cash flows. The recoverable quantities of reserves and estimated cash
flows from Anterra’s petroleum and natural gas interests are assessed and evaluated at least
annually by independent reserve evaluators in accordance with National Instrument 51-101.
(iv) Share-based payments
All equity-settled, share-based awards issued by the Company are recorded at fair value using the
Black-Scholes option-pricing model. In assessing the fair value of equity-based compensation,
estimates have to be made regarding the share price, expected volatility, option life, dividend yield,
risk-free rate and estimated forfeitures at the initial grant date.
(v) Business Combinations
In a business combination, management estimates the fair value of assets acquired and liabilities
assumed which includes assessing the value of oil and gas properties based upon an estimation of
the recoverable reserves being acquired.
7
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
4. Significant accounting policies:
The accounting policies set out below have been applied consistently in these financial statements.
(a)
Basis of consolidation:
These financial statements include the financial statements of the Company and its subsidiary
(Terrex Energy Inc.) as at December 31, 2013. A subsidiary is consolidated from the date of
acquisition, being the date on which the Company obtains control, and continues to be consolidated
until the date that control ceases. Control exists when the Company is exposed to, or has rights to
variable returns from its involvement with the entity and has the ability to affect these returns
through its power over the entity. All intercompany balances and transactions, and any unrealized
income and expenses, arising from intercompany transactions are eliminated in full.
Many of the Company’s oil and natural gas activities involve jointly controlled assets. The financial
statements include the Company’s share of these jointly controlled assets and a proportionate share
of the relevant revenue and related costs.
(b)
Financial instruments:
(i)
Non-derivative financial instruments:
Non-derivative financial instruments comprise trade and other receivables, cash and cash
equivalents, bank debt, trade and other payables, convertible debenture and other non-current
liabilities. Financial assets have been classified as loans and receivables, financial liabilities have
been classified as other financial liabilities. These financial instruments are recognized initially at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, these nonderivative financial instruments are measured at amortized cost using the effective interest rate
method, less any impairment losses.
(ii)
Derivative financial instruments:
The Company may enter into certain financial derivative contracts in order to manage the exposure
to market risks from fluctuations in commodity prices. These instruments will not be used for trading
or speculative purposes. The Company will not designate its financial derivative contracts as
effective accounting hedges, and therefore will not apply hedge accounting, even though the
Company considers all commodities contracts to be economic hedges. As a result, all financial
derivative contracts will be classified as fair value through profit or loss and will be recorded on the
statements of financial position at fair value. Transaction costs are recognized in profit or loss when
incurred. Compound financial instruments issued by the Company may comprise convertible
debentures that can be converted to common shares at the option of the holder for a fixed number
of common shares.
The liability component of a compound financial instrument is recognized initially at the fair value of
a similar liability that does not have an equity conversion option. The equity component, if any, is
recognized initially at the difference between the fair value of the compound financial instruments as
a whole and the fair value of the liability component. Any directly attributable transaction costs are
allocated to the liability and equity components in proportion to their initial carrying amounts.
8
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
(iii)
Share capital:
Common shares are classified as equity. Incremental costs directly attributable to the issue of
common shares and share options are recognized as a deduction from equity, net of any tax
effects.
(c)
Exploration and evaluation assets and property, plant and equipment
(i)
Recognition and measurement:
Exploration and evaluation expenditures:
Pre-license costs are recognized in the statement of income (loss) as incurred.
Exploration and evaluation (“E&E”) costs, including the costs of acquiring licenses, geological and
geophysical expenditures and drilling and completion costs are initially capitalized as either tangible
or intangible exploration or evaluation assets according to the nature of the assets acquired. The
costs are accumulated in cost centers by well, field or exploration area pending determination of
technical feasibility and commercial viability.
E&E assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility
and commercial viability; and (ii) facts and circumstances suggest that the carrying amount exceeds
the recoverable amount.
The technical feasibility and commercial viability of extracting a mineral resource is considered to be
determinable when proven and probable reserves are determined to exist. A review of each
exploration license or field is carried out, at least annually, to ascertain whether proven and/or
probable reserves have been discovered. Upon determination of proven and probable reserves,
intangible E&E assets attributable to those reserves are first tested for impairment and then
transferred from E&E assets to a separate category within tangible assets referred to as oil and
natural gas interests.
The cost of undeveloped land that expires or any impairment recognized during a period is charged
against earnings as exploration and evaluation expense.
Development and production costs:
Items of property, plant and equipment (“PP&E”), which include oil and gas development and
production assets, are measured at cost less accumulated depletion and depreciation and
accumulated impairment losses. The initial cost of an asset includes its purchase price or
construction cost, costs attributable to bringing the asset into operation and the initial estimate of
decommissioning obligations. Development and production assets are grouped into CGUs for
impairment testing. When significant parts of an item of PP&E, including oil and natural gas
interests, have different useful lives, they are accounted for as separate items (major components).
Disposition
Gains or losses on disposal of an item of PP&E, including oil and natural gas interests are
recognized within gains (losses) on disposition. The gain or loss is measured as the difference
9
ANTERRA ENERGY INC.
For the years ended December 31 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
between the fair value of proceeds received and the carrying value of the asset disposed, including
capitalized future decommissioning costs.
(ii)
Subsequent costs:
Costs incurred subsequent to the determination of technical feasibility and commercial viability and
the costs of replacing parts of property, plant and equipment are recognized as oil and natural gas
interests only when they increase the future economic benefits embodied in the specific asset to
which they relate. All other expenditures are recognized in earnings as incurred. Such capitalized
oil and natural gas interests generally represent costs incurred in developing proved and/or probable
reserves and bringing in or enhancing production from such reserves and, are accumulated on a
field or geotechnical area basis. The carrying amount of any replaced or sold component is
derecognized. The costs of the day-to-day servicing of property, plant and equipment are
recognized in earnings as incurred.
(iii)
Depletion and depreciation:
The net carrying amount of development or production assets is depleted using the unit of
production method by reference to the ratio of production in the year to the related proven and
probable reserves, taking into account estimated future development costs necessary to bring those
reserves into production. Proven and probable reserves are estimated annually using independent
reserve engineer reports prepared in accordance with Canadian Securities Regulation National
Instrument 51-101, and represent the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a specified degree of
certainty, to be recoverable in future years from known reservoirs and which are considered
commercially producible.
For other assets, depreciation is recognized on a straight-line basis over the estimated useful lives
of each part of an item of property, plant and equipment. Leased assets are depreciated over the
shorter of the lease term and their useful lives unless it is reasonably certain that the Company will
obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for other assets for the current and comparative years are as follows:
20 years
Midstream processing equipment
5 years
Office and other equipment
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(d) Impairment:
(i) Financial assets:
A financial asset is assessed at each reporting date to determine whether there is any objective
evidence of impairment. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.
10
ANTERRA ENERGY INC.
For the years ended December31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the original effective interest rate.
Significant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognized in earnings.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after
the impairment loss was recognized. For financial assets measured at amortized cost the reversal is
recognized in earnings.
(ii) Non-financial assets:
The carrying amounts of the Company’s non-financial assets, other than E&E assets and deferred
tax assets, are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For
goodwill and other intangible assets that have indefinite lives or that are not yet available for use an
impairment test is completed each year. E&E assets are assessed for impairment when they are
reclassified to PP&E and when facts and circumstances suggest the carrying amount exceeds the
recoverable amount.
For the purpose of impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the cash-generating unit” or “CGU”). The recoverable
amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell.
Value in use is generally computed by reference to the present value of the future cash flows
expected to be derived from production of proven and probable reserves. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the
asset.
Fair value less cost to sell is determined as the amount that would be obtained from the sale of a
CGU in an arm’s length transaction. The fair value less cost to sell of oil and natural gas assets is
generally determined as the net present value of the estimated future cash flows expected to arise
from the continued use of the CGU discounted by an appropriate discount rate. Consideration is
given to acquisition metrics of recent transactions completed on similar assets to those contained
within the relevant CGU.
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated
to the CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognized if the carrying amount of an asset, or its CGU, exceeds its
estimated recoverable amount. Impairment losses are recognized in earnings. Impairment losses
recognized in respect of CGU’s are allocated first to reduce the carrying amount of any goodwill
11
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group
of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment
losses recognized in prior years are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
assumptions used to determine the recoverable amount in the period that led to impairment. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depletion and depreciation or
amortization, if no impairment loss had been recognized.
(e) Business combinations
The acquisition method of accounting is used to account for acquisitions that meet the definition of a
business under IFRS. The cost of an acquisition is measured as the fair value of the assets
acquired, equity instruments issued and liabilities incurred or assumed at the exchange date.
Identifiable assets acquired and liabilities assumed are measured initially at their fair values at the
acquisition date. The excess of the cost of acquisition over the fair value of identifiable assets and
liabilities acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets acquired, the difference is recognized as a gain in earnings.
Transaction costs that are incurred in connection with a business combination other than those
associated with the issue of debt or equity securities, are recognized in earnings.
(f) Share based payments:
The Company uses the fair value method for valuing share based compensation. Under this
method, the compensation cost attributed to stock options are measured at the fair value at the
grant date and expensed over the vesting period with a corresponding increase in contributed
surplus. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number
of options that vest. Upon the settlement of the stock options, the previously recognized value in
contributed surplus is recorded as an increase to share capital.
(g) Provisions:
A provision is recognized if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. Provisions are not recognized for future
operating losses.
(h) Decommissioning liabilities
The Company’s activities give rise to dismantling, decommissioning and site disturbance re
mediation activities. Provision is made for the estimated cost of site restoration and capitalized in
the relevant asset category.
12
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
Decommissioning obligations are measured at the present value of management’s best estimate of
expenditures required to settle the present obligation at the measurement date using a risk free
discount rate. Subsequent to the initial measurement, the obligation is adjusted at the end of each
period to reflect the passage of time and changes in the estimated future cash flows underlying the
obligation. The increase in the provision due to the passage of time is recognized as finance costs
whereas increases/decreases due to changes in the estimated future cash flows are capitalized.
Actual costs incurred upon settlement of the decommissioning obligations are charged against the
provision to the extent the provision is established.
(i) Revenue:
Revenue from the sale of oil and natural gas is recorded when the significant risks and rewards of
ownership of the product is transferred to the buyer which is usually when legal title passes to the
external party.
Revenue from midstream activities is recorded when the service is rendered to the customer.
Royalty income is recognized as it accrues in accordance with the terms of the overriding royalty
agreements.
(j) Finance income and expenses:
Finance expense is comprised of interest expense on borrowings, accretion of the discount on
decommissioning liabilities and accretion of the equity component of convertible debentures.
Interest income is recognized in earnings as it accrues, using the effective interest rate method.
(k) Income tax:
Income tax expense comprises current and deferred tax. Income tax expense is recognized in
earnings except to the extent that it relates to items recognized directly in equity, in which case it is
recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred taxes are recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is
not a business combination or on taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be
available against which the temporary difference can be utilized. Deferred tax assets are reviewed
13
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
(I) Per share amounts:
Basic earnings (loss) per share is calculated by dividing the profit or loss attributable to common
shareholders of the Company by the weighted average number of common shares outstanding
during the period. Diluted earnings (loss) per share is determined by adjusting the profit attributable
to common shareholders and the weighted average number of common shares outstanding for the
effects of dilutive instruments such as options and warrants granted. The calculation assumes that
the proceeds on exercise of options or warrants are used to purchase shares at the current market
price.
(m) Flow through shares
Resource expenditure deductions for income tax purposes related to exploration and development
activities funded by flow-through share arrangements are renounced to investors in accordance with
tax legislation. On issuance the premium received on the flow-through shares, being the difference
in price over a common share with no tax attributes is recognized on the statement of financial
position. As expenditures are incurred the deferred tax liability, associated with the renounced tax
deductions is recognized through profit and loss along with a pro-rata portion of the deferred
premium.
5. New Accounting Standards
On January 1, 2014, the Company adopted IFRIC 21 which provides guidance with respect to
recognition of liabilities resulting from government levies. The Company also adopted lAS 32 that
clarifies the requirements for offsetting financial assets and liabilities. The adoption of these
standards has no impact on the amounts recorded in the financial statements as at December 31,
2014 or on the comparative periods.
During the year ended December 31, 2014 the IASB issued the following standard which is
applicable to the Company in future years;
IFRS 9 “Financial Instruments” replaces lAS 39 “Financial Instruments: Recognition and
Measurement” and addressed the classification and measurement of financial instruments with an,
effective date of January 1, 2018. The Company has not completed its evaluation of the effect of
adopting IFRS 9 on its financial statements.
6. Determination of fair values:
A number of the Company’s accounting policies and disclosures require the determination of fair
value, for both financial and non-financial assets and liabilities. Fair values have been determined
for measurement and/or disclosure purposes based on the following methods. When applicable,
14
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
further information about the assumptions made in determining fair values is disclosed in the note
specific to that asset or liability.
(a) Trade and other receivables, bank debt, trade and other payables and other non-current
liabilities
The fair value of trade and other receivables, bank debt, trade and other payabtes is estimated as
the present value of future cash flows, discounted at the market rate of interest at the reporting date.
The fair value of these balances approximated their carrying value due to their short term to
maturity. The carrying value of bank debt approximates fair value due to the floating interest rate.
The carrying value of other non-current liabilities approximates its fair value as the interest rate is a
market interest rate.
(b) Stock options
The fair value of stock options is measured using a Black Scholes option pricing model.
Measurement inputs include share price on measurement date, exercise price of the instrument,
expected volatility (based on weighted average historic volatility adjusted for changes expected due
to publicly available information), weighted average expected life of the instruments (based on
historical experience and general option holder behavior), expected dividends, and the risk-free
interest rate (based on government bonds).
(c)
Property, plant and equipment and exploration and evaluation assets
The fair value of PP&E recognized in a business combination is based on market values. The
market value is the estimated amount for which the assets could be exchanged on the acquisition
date between a willing buyer and a willing seller in an arm’s length transaction wherein the parties
each acted knowledgeably, prudently and without compulsion. The market value of oil and natural
gas interests, included in PP&E, are estimated with reference to the discounted cash flows expected
to be derived from oil and gas production based upon externally prepared reserve reports. The
market values of E & E assets are estimated with reference to market values of current arm’s length
transactions in comparable a locations.
(d) Derivatives
The fair value of forward contracts is determined by discounting the difference between the
contracted prices and published forward price curves as at the statement of financial position date,
using the remaining contracted amounts and risk-free interest rate (based on published government
rates). The fair value of options and costless collars is based on option models that use published
information with respect to volatility, prices and interest rates.
15
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
7.
Financial risk management:
(a)
Overview:
The Company’s activities expose it to a variety of financial risks that arise as a result of its
exploration, development, production, and financing activities. Financial risks include; credit, risk,
liquidity risk and market risk.
The following addresses the Company’s exposure to each of these risks, its objectives, policies and
processes for measuring and managing risk, and the Company’s management of capital. Further
quantitative disclosures are included throughout these financial statements.
The Board of Directors oversees management’s establishment and execution of the Company’s risk
management framework. Management has implemented and monitors compliance with risk
management policies. The Company’s risk management policies are established to identify and
analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor
risks and adherence to market conditions and the Company’s activities.
(b)
Credit risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Company’s
receivables from joint venture partners and oil and natural gas marketers.
All of the Company’s operations are conducted in Canada. The Company’s exposure to credit risk is
influenced mainly by the individual characteristics of each customer.
Receivables from oil and natural gas marketers are normally collected on the 25th day of the month
following production. The Company’s policy to mitigate credit risk associated with these balances is
to establish marketing relationships with stable, substantial and industry recognized purchasers.
Historically, the Company has not experienced any collection issues with its oil and natural gas
marketers. Receivables from joint interest partners are typically collected within one to three months
of the joint interest bill being issued. The Company attempts to mitigate risk relating to joint interest
receivables by obtaining partner pre-approval of significant capital expenditures and in other
instances may request cash advances in cases of significant capital expenditures. Collection of
outstanding balances, however, is dependent on industry factors such as commodity price
fluctuations, escalating costs and the risk of unsuccessful drilling. Further risk exists with joint
interests as disagreements occasionally arise that increase the potential for non-collection. The
Company does not typically obtain collateral from oil and natural gas marketers or joint interests;
however, the Company does have the ability to withhold production from joint partners in the event
of non-payment.
As at December 31, 2014 and 2013, the Companys trade and other receivables are comprised as
follows:
16
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
2014
2013
Oil and natural gas marketing companies
1,162,758
712142
Joint interest partners
1,740,446
2,688,085
Allowance for doubtful accounts
(155,535)
(432,189)
2,747,669
2,968,038
As at December 31, 2014 and 2013, the Company’s trade and other receivables are aged as
follows:
Current (less than 90 days)
Past due (more than 90 days)
Allowance for doubtful accounts
2014
2013
2,623,232
1,769,533
280,272
1,630,724
(155,535)
(432,189)
2,747,969
2,968,038
(c) Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
come due. The Company’s approach to managing liquidity is to ensure, to the extent possible, that it
will have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company’s financial liabilities consist of bank debt, trade and other payables, other non-current
liabilities and a convertible debenture.
The Company ensures that it has sufficient resources to meet expected operational expenses
including the servicing of financial obligations excluding the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters. To achieve this
objective, the Company prepares annual capital and operational expenditure budgets, which are
regularly monitored and updated as considered necessary. Further, the Company utilizes
authorizations for expenditures on both operated and non-operated projects to further manage
capital expenditure. The Company also attempts to match its payment cycle with collection of oil and
natural gas revenue on the 25th of each month.
Financial liabilities, as at December 31, 2014 total $28,590,912 all of which are current except for $
2,808,105 other non-current liabilities (Note 13) which is due on January 31, 2016 and a $3,610,812
convertible debenture (Note 14) which is due on March 15, 2018. Refer to Note (2) for additional
information.
17
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
(d) Market risk:
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange
rates and interest rates will affect the Company’s income or the value of the financial instruments.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
The Company may use both financial derivatives and physical delivery sales contracts to manage
market risks. All such transactions will be conducted within risk management tolerances as set by
the Board of Directors. Refer to note 14 for details regarding the Company’s risk management
contracts.
Currency risk:
Prices for oil are determined in global markets and generally denominated in United States dollars.
Natural gas prices obtained by the Company are influenced by both US and Canadian demand and
the corresponding North American supply, and recently, by imports of liquefied natural gas. The
exchange rate effect cannot be quantified but generally an increase in the value of the $CDN as
compared to the $US will reduce the prices received by the Company for its petroleum and natural
gas sales.
Interest rate risk:
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market
interest rates. The interest charged on the outstanding bank loan fluctuates with the interest rates
posted by the lenders. The Company is exposed to interest rate risk on its bank debt which bears a
floating interest rate and has not entered into any mitigating interest rate contracts.
For the year ended December 31, 2014, a 1% or 100 basis point increase or decrease in market
interest rates on the Company’s floating rate bank debt would change net earnings by $124,845.
Commodity price risk:
Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of
changes in commodity prices. Commodity prices for oil and natural gas are impacted by not only the
relationship between the Canadian and United States dollar and also world economic events that
dictate the levels of supply and demand.
(f)
Capital management:
The Company’s objective in managing its capital structure is to maintain a flexible structure that
permits the Company to meet its financial obligations, execute on its planned growth strategy
and preserve its access to capital markets. The Company’s capital structure is composed of the
following:
18
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
2014
2013
$ 17,632,799
$ 33,684,625
Convertible debenture
3,610,812
3,489,507
Other non-current liabilities
2,808,105
Shareholders’ equity
Bank indebtedness
Net working capital (surplus) deficiency
-
12,484,515
14,014,704
5,626,878
(328,863)
$ 42,163,109
$ 50,859,973
In a normal economic environment, the Company is able to manage its capital structure and
make adjustments in response to changes in economic conditions and the underlying risk
associated with oil and gas assets. The Company monitors its capital and financing
requirements through an annual budget process and monthly updates to the budget forecast
and working capital projections. The Company, upon approval from its Board of Directors, will
balance its overall capital structure through new share issuances, the use of bank and other
credit arrangements, adjusting capital spending, or by undertaking other strategies as deemed
appropriate under the specific circumstances.
Under the Company’s current Credit Facility, it is required to maintain a working capital ratio,
after adding the unused portion of the revolving demand loan facility and excluding outstanding
debt underthe facility, of not less than 1:1. As at December 31, 2014 the adjusted working capital
ratio was 1 to 0.73 and the Company is in default under the Agreement, and the default may
continue throughout 2015.
Management reviews its capital management approach on an ongoing basis. There were no
material changes to this approach during the year ended December 31, 2014. The Company is
not subject to externally imposed capital requirements.
8. Business Combinations:
(a). Terrex Energy Inc., corporate acquisition
On March 14,2013, the Company purchased 100% of the issued and outstanding shares of Terrex
Energy Inc. (“Terrex”), a public junior oil and gas company, for a total consideration of $2,067,885
comprised 31,813,614 Class A common shares of Anterra and 5,150,000 warrants to purchase
1,581,050 Class A common shares (the “Acquisition”). The warrants to purchase 967,050 Class A
shares expired on August 21, 2013 and warrants to purchase 614,000 Class A shares will expire on
July 15, 2015 and have an exercise price of $1.00 and $0.60 respectively. No value has been
attributed to the warrants.
Concurrently with the Acquisition, 1,866,560 Anterra shares were issued to individuals pursuant to
the settlement of personnel obligations. The purpose of the Acquisition was to increase the
Company’s presence and size in the Western Canadian Sedimentary Basin, and provide the
19
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
Company with additional development opportunities and operating synergies. The value of common
shares issued as consideration was determined in reference to the share price of a material third
party private placement of Class A common shares which closed on April 5, 2013. The purchase
was accounted for as a business combination using the acquisition method of accounting under
IFRS 3.
Estimated fair value of the net assets of Terrex:
Total
Petroleum and natural gas properties
Deferred income tax asset
Net working capital(1)
Inter-company payable
Decommissioning liability
Gah, on business combination
Total net assets acquired
Consideration
Class A common shares (31,813,614 shares at $0065 per share)
$
16,830,283
1,274,413
(493,153)
(7,755,830)
(6,595,162)
$
2,067,885
$
2,067,885
(1) Includes $54,539 of cash and cash equivalents
The fair value assigned to petroleum and natural gas properties is based upon evaluations prepared
by independent reserve evaluators and other market considerations. The value assigned to the
deferred income tax asset is based upon accumulated non-capital losses and is limited to the
deferred income tax liability previously recognized by the Company. The fair value of petroleum
and natural gas properties and the deferred income tax asset gave rise to the gain on purchase.
Immediately prior to and in connection with the Acquisition, Terrex and Anterra entered into a
settlement agreement (the “Agreement”) with Sandstorm Metals and Energy Ltd. and 0905896 BC
Ltd. (collectively, “Sandstorm”). Pursuant to the Agreement, the obligations of Terrex, under a hydro
carbon purchase agreement dated March 18, 2011 were terminated in exchange for $3 million
cash, funded by Anterra, the delivery of certain equipment from Terrex having a value of $3 million,
and the issuance by Anterra of a $4 million principal amount, 6%, 5 year secured convertible
debenture (note 16), the issuance of 3 million Anterra Shares, and the issuance of 20,801,303
Terrex Shares which were exchanged for approximately 6.4 million Anterra shares under the
Acquisition. The inter-company payable amount reflects amounts advanced by Anterra to Terrex to
facilitate the Agreement.
Costs related to acquisitions totaled $ 621,165 of which $402,817 was incurred and charged to
earnings during year ended December 31, 2013. During the period from March 15, 2013 to
December 31, 2013, the acquisition attributed revenues of $3.3 million net of royalties, and a net
loss of $1.2 million for the period, which is included in the statement of loss and comprehensive
loss.
20
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
(b). Nipisi, property acquisition
The Company acquired light oil producing assets, together with associated infrastructure in the
Nipisi area of north central Alberta. The property acquisition was accounted for as a business
combination under IFRS 3. The transaction closed on December 18, 2013.
Estimated net assets acquired
Petroleum and natural gas properties
Decommissioning Nability
Total net assets acquired
$17,088,757
263 027)
-
-
$ 11,825,730
Consideration
$11,825,730
Cash
The estimated fair value of the petroleum and natural gas properties acquired was determined using
discounted cash flows based on an external reserves report and other market considerations.
Decommissioning liabilities assumed were determined using the timing and estimated costs
associated with the abandonment, restoration and reclamation of the wells and facilities acquired.
Cost related to the acquisition totaled $35,004, have been charged to earnings. Revenue and net
income contributed for the post-closing period from December 18 to December 31, 2013 was
$372,913 and $176,749 respectively.
21
ANTERRA ENERGY INC.
For the years ended December 31 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
9. Segmented Financial Information:
For the year ended
December 31, 2014
Revenue
Royalties
Realized gain on risk
Management contracts
Unrealized gain on risk
Management contracts
Production and
operating expenses
Spill clean-up and site
remediation
Transportation
Depletion, depreciation
and amortization
General and
administrative expenses
Share-based payments
Impairment expense
Finance expense
Netincome(Ioss)
$ 20,136,286
(5,053,519)
15,082,767
$
3,696,527
-
-
-
3,696,527
194,512
(53,413)
$
-
(53,413)
-
-
-
-
-
222,111
15,499,390
3,696,527
9,766,827
1,809,075
2,865,021
1,004,306
17,855
4,076,584
159,023
1,655,919
299,593
-
-
11,553,164
530,165
-
-
23,698
843,519
($15,952,596)
$1,387,283
($1,488,265)
$ 6,842,317
$
-
-
23,779,400
(5,053,519)
18,725,881
194,512
(53,413)
222,111
19,142,504
(53,413)
11,522,489
-
-
-
Total
Eliminations
Corporate
Segment
Midstream
Processing
Oil and Gas
ProductIon
-
-
-
-
-
-
642,994
1,752
-
-
-
-
-
2,865,021
1,022,161
4,235,607
2,598,506
1,752
11,553,164
1,397,382
($16,053,578)
Capital expenditures:
Property, plant and
equipment
Total Assets
$61,626,405
92,758
$3,205,870
22
12,165
$
$4,060,602
$
$
-
-
$ 6,947,240
$ 68,892,877
ANTERRA ENERGY INC.
For the years ended December 31 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
9. Segmented Financial Information, continued;
For the year ended
December 31, 2013
Revenue
Royalties
Production and
operating expenses
Transportation
Depletion, depreciation
and amortization
General and
administrative expenses
Transaction cost
Share-based payments
Impairmentexpense
Exploration and
evaluation expense
Gain on business
combination
Finance expense
Deferred income tax
expense (recovery)
Net income (loss)
$ 9,415413
$ 3,079,515
(1,622,853)
7,792,560
$
-
3,079,515
1,298,301
2,623,313
172,973
1,757,273
437,821
556,131
$
(99,786)
$ 12,395,142
(99,786)
(1,622,853)
10,772,289
-
-
5,067,606
783,963
-
-
-
-
-
340,972
(1,192,666)
409,772
2,654,376
437,821
50,066
1,099,100
-
50,066
-
4,161,131
2,796,286
-
-
-
6,266,121
783,963
(99,786)
-
-
1,099,100
Total
ElimInations
Corporate
Segment
Midstream
Processing
Oil and Gas
Production
-
-
-
-
-
-
-
485,489
-
4,161,131
(1,192,666)
895,261
-
-
-
(49,326)
(24,263)
(2,800)
($7,305,427)
$ 1,076,373
($873,727)
(76,389)
-
($7,102,781)
-
Capital expenditures:
Exploration and
evaluation assets
Property, plant and
equipment
Total Assets
$
651
$
-
2,068,234
1,380,957
$ 2,068,885
$1,380,957
$69,916,246
$
3,096,361
23
$
$
-
$
-
$3,856,947
$
$3,449,842
-
-
651
3,449,191
-
-
$
$
-
$
76,869,554
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
10. Property, plant and equipment:
Processing facilities
and
other
$
Petroleum
and natural gas
properties
$
Cost
Balance at January 1 2013
Additions
Nipisi acquisition
Terrex acquisition
Decommissioning provisions
Balance at December 31, 2013
Additions
Decommissioning provisions
Total
$
42,787,582
2,068,234
17,088,757
16,830,283
(891,943)
77,882,913
6,840,487
499,420
3,852,230
1,380,957
102,943
5,336,130
106,753
161,779
46639,812
3,449,191
17,088,757
16,830,283
(789,000)
83,219,043
6,947,240
661,199
85,222,820
5,604,662
90,827,482
Depletion, depreciation and impairment
Balance atJanuaryl, 2013
Depletion and depreciation
Impairment for the year
Balance at December 31, 2013
Depletion and depreciation
Impairment cost
4,630,921
2,623,313
1,099,100
8,353,334
4,076,584
11,553,164
2,066,796
172,973
6,697,717
2,796,286
1,099,100
10,593,103
4,235,607
11,553,164
Balance at December 31, 2014
23,983,082
2,398,792
26,381,874
Net book value
Balance at December 31, 2013
69,529,579
3,096,361
72,625,940
Balance at December 31, 2014
61,239,738
3,205,870
64,445,608
Balance at December 31,
2014
-
-
-
2,239,769
159,023
-
$38,570,000) are included in the
Future development costs totaling $35,708,400 (2013
depletion calculation. Personnel expenses of $225,158 (2013 $270,887) directly attributed to
capital activities were capitalized in property, plant and equipment during the year.
-
-
Impairment charge
At December 31, 2014, due to a decline in the future commodity prices, reserve revisions and
adjustments to future costs, the Company tested its oil and natural gas CGUs for impairment. As
a result, the Company determined that the carrying amount of the cash generating units at
Breton, Strathmore and Other Alberta Properties exceeded their recoverable amount calculated
using fair value less costs to sell. The fair value less costs to sell was determined on a
discounted cash flow basis, based on 2014 year-end reserves and commodity prices, using a
discount rate of 12%. The impairment was attributed to PP&E and an impairment loss of
$11,553,164 was recorded.
24
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
In testing a CGU for impairment, the Company used the commodity price forecast prepared and
used by its independent reserve evaluators in the assessment and evaluation of the Company’s
2014 year-end reserves, the information presented below has been extracted from the
evaluator’s commodity price forecast.
Crude oil
CAD to USD
Edmonton
city Gate
Alberta AECO
Average price
Inflation
Exchange
Year
rate
Rate
($cdn/bbl)
($cdnImcf)
2015
2016
2017
2018
2019
2020
2021
0%
2%
2%
2%
2%
2%
2%
0.86
0.86
0.86
0.86
0.86
0.86
0.86
0.86
70.95
77,10
82.25
87.60
93.15
97.55
102.15
3.85
4.15
4.45
4.80
5.05
5.35
104.20
106.25
108.40
110.55
5.85
6.20
6.40
6.60
2022
2023
2024
2025
2%
2%
2%
2%
0.86
0.86
0.86
5.65
A 3% change in the discount rate would result in a $ 4,337,412 change in the impairment amount
recognized.
II. Evaluation and exploration assets:
$ 4,547,147
651
(4,161,131)
Balance, January 1, 2013
Additions
Exploration and evaluation expense
Balance, December 31, 2014 and December 31 2013
$
386,667
Exploration and evaluation (E&E) assets consist of the Company’s exploration projects which are
pending the determination of proven or probable reserves. Additions represent costs incurred on
E&E assets during the year.
25
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
12. Bank debt:
Authorized
2014
$15,000,000
2013
$15,000,000
Outstanding
$12,484,515
$14,014,704
Bank indebtedness is comprised of a revolving, operating, demand loan credit facility bearing
interest at the bank prime plus 1.00% (2013- prime rate 0.75%), with an effective rate at December
31, 2014 of 4.00% (December 31, 2013— 3.75%), The facility is secured by a first floating charge
debenture in the amount of $35 million over all assets of the Company. Under its Credit Facility
Agreement, the Company is required to maintain an adjusted working capital ratio, after adding the
unused portion of the revolving demand loan facility and excluding outstanding debt under the
facility, of not less than 1:1. As at December 31, 2014 the adjusted working capital ratio was ito
0.73 and the Company is in default under the Agreement, and the default may continue throughout
2015.
Effective March 9, 2015 the Company’s $15 million revolving, operating demand loan credit facility
was restructured to include a revolving operating demand loan facility in the maximum amount of $10
million and a non-revolving demand loan facility in the maximum amount of $4.8 million. The nonrevolving loan facility was repayable as to $200,000 on acceptance of the facilities agreement and
thereafter in monthly principal payments of $200,000. The covenants have remained consistent with
those discussed above.
13. Other non-current liabilities
The non-current liabilities are comprised of amounts payable to a related party, see note 26, due
January 31, 2016 together with interest at 10% per annum.
14. Risk management contracts
The Company’s activities expose it to a variety of financial risks that arise as a result of its
exploration, development, operating and financial activities. The Company’s financial risks are
consistent with those discussed in Note 7.
Effective June 1, 2014, the Company entered into a commodity price contract, as outlined below, to
mitigate a degree of its exposure to commodity price risk and provide a degree of stability to
operating cash flows which enable the Company to fund a portion of its capital program. Additionally
effective July 1, 2014 the Company entered into two fixed price power contacts also outlined below,
Such contracts are not used for trading or speculative purposes. The Company has not designated
the financial derivative contracts as effective accounting hedges although the Company considers
them to be an effective economic hedge. As a result, the contracts are recorded at fair value on the
26
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
statement of financial position, with changes in fair value being recognized as an unrealized gain or
loss on the statement of operations.
Financial assets and liabilities carried at fair value are required to be classified in accordance with a
hierarchy that prioritizes the inputs used to measure fair value. The risk management contracts are
valued using level 2 inputs which are based on quoted forward prices that can be substantially
observed or corroborated in the market place.
Commodity price contract
Remaining term
Contract Type
Quantity Contracted
Price Floor
Price Ceiling
Jan. 1, 2015— June 2015
Crude Oil collar
150 bbls per day
$97.00 / bbl
$11 2,00/bbl
-
Power price contracts
Price
Remaining term
Contract Type
Volume
Jan. 2015—Dec ember 2015
Fixed price
0.2 MW
$52.99/MWh
Jan. 2015 —June 2017
Fixed price
1.5 MW
$55.25IMWh
At December 31, 2014, the foregoing derivative contracts were recorded at fair value on the
statement of financial positon as an asset of $222,111 and the Company recognized an unrealized
gain of $222,111 and realized gain of $194,512.
15.
Decommissioning liabilities:
$
Balance at January 1, 2013
Changes to estimate
Obligation acquired
jop__
10,673,673
(789,000)
11,858,189
$ 22,152,634
661,199
(698,533)
553,866
$ 22,669,166
Balance, December 31, 2013
Changes to estimate
Obligation settled
ccretionepp_
Balance, December 31, 2014
The Company’s decommissioning liability results from its ownership interest in petroleum and
natural gas assets including well sites, gathering systems and processing and production facilities,
all of which will require future expenditures for decommissioning under existing legislation.
The Company has estimated the net present value of the decommissioning obligations to be
$22,669,166 at December 31, 2014 (2013- $22,152,634) based on an undiscounted total future
liability of $24,849,754 (2013 $23,975,656). These expenditures are expected to be incurred over
-
27
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
the next 25 years with the majority of costs to be incurred between 2015 and 2025. A risk free rate
of 2.50% (2013— 2.61%) and an inflation factor of 2% were used to determine the decommissioning
liability at December31, 2014.
16. Convertible debenture:
6% redeemable convertible debenture
December31
2014
2013
Accretion
$4,000,000
(606,526)
217,338
$4,000,000
(606,526)
96,033
Balance
$3,610,812
$3,489,507
6% redeemable convertible debenture, at face value
Equity component, before deferred income taxes
On March 14, 2013, immediately prior to and in connection with the acquisition of Terrex (note 8,
Business Combination), the Company issued a $4 million principal amount convertible debenture as
partial settlement of a hydrocarbon purchase agreement between Terrex and Sandstorm. The
debenture bears interest at 6% payable semi-annually with the principal repayable on March 14,
2018; the debenture is secured, subordinate to the bank credit facility, by a floating charge on the
property and assets of the Company.
At the option of the holder on 20 days’ notice, the debenture is convertible, in whole or in part at any
time, into common shares of the Company at a price of $0.10 per share. The debenture is
redeemable, in whole or in part at any time, by the Company on 30 days’ notice.
The debenture was initially recorded at its principal amount net of an equity component valued at
$606,526 ($454,895 after deferred income tax) attributable to the holder’s option to convert the debt
into common shares.
17. Income tax
The Company has non-capital losses for income tax purposes totaling approximately $37.9 million.
The losses expire between 2023 and 2034. The related tax benefits have only been recognized to the
extent there are taxable temporary differences to offset with.
28
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
Reconciliation of effective tax rate:
Rate Reconciliation
Income (loss) before tax
Expected tax rate
Expected income tax expense (recovery)
Share based compensation
Nontaxable gain on acquisition
Other
Change in unrecognized deferred tax assets
Total income tax expense (recovery)
2014
2013
(16,053,578)
25.0%
(4,013,395)
(7,179,170)
25.0%
(1,794,793)
12,517
438
(298,167)
(30,727)
2,034,781
-
-
4,012,957
(76,389)
-
Deferred tax assets and liabflities are attributable to the foflowh,gj
Deferred tax liabilities:
Property, plant and equipment (including E&E assets)
Convertible debt liability
Risk management contracts
Less deferred tax assets:
Decommissioning Liabilities
Non-capital losses
Share issue costs and other
Net deferred tax liability
—
2014
2013
(5,614,553)
(97,297)
(55,528)
(8,438,340)
(127,623)
5,667,292
100,086
5,538,159
3,027,804
-
-
-
-
-
Deferred tax assets have not been recognized in respect to the following temporary differences:
2013
2014
Property, plant and equipment (including E&E assets)
Non-capital losses
Share issue costs and other
Total temporary differences
29
-
37,507,641
467,051
37,974,692
3,246,618
17,840,782
835,464
21,922,864
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
ContinuJ of the deferrediricopjjiabiliy__
Balance at
Recognized
January 1
in P&L
2014
Property, plant and equipment
(including E&E assets)
Risk management contracts
Convertible debenture
Decommissioning Liabilities
Non-capital losses
(8,438,340)
30,326
-
129,133
-
-
3,027,804
(2,927,718)
-
-
-
-
Balance at
January 1
2013
-
Recognized
inP&L
(6,575,763)
Convertible debenture
Acquired in
business
combina6on
(213,786)
24,008
(1,648,791)
2,668,418
1,220,950
1,648,791
Non-capital losses
2,624,391
(871,000)
1274,413
83,783
(83,783)
(1,199,171)
76,389
1,274,413
(55,528)
(97,297)
5,667,292
100,086
-
Balance at
December
31 2013
Recorded
in Eqjty
-
(151,631)
Decommissioning Liabilities
Share issue costs and other
-
-
(127,623)
5,538,159
-
(5,614,553)
-
-
Share issue costs and other
Property, plant and equipment
(including E&E assets)
-
2,823,787
(55,528)
-
Balance at
December
31, 2014
Acquired in
Recorded
business
combination_iy
-
-
(8,438,340)
(127,623)
5,538,159
3,027,804
(151,631)
18. Share capital:
Authorized
Unlimited Class A voting shares without par value
Unlimited preferred shares, issuable in series, rights and privileges to be determined on issue.
Warrants
$
Issued and Outstanding
Shes
31,110,546
246,438,032
Balance, January 1, 2013
2,356,213
5,150,000
36,680,174
(a)(b)
Acquisition
-
Expired
(b)
Private placement
Private placement
(c)
(3,150,000)
-
107,692,308
1,000,000
6,619,750
106,060,606
1,000,000
6,619,668
496,871,120
4,000,000
46,706,177
-
(d)
Balance, December 31, 2014 and
December 31, 2013
30
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
(a)
On March 14, 2013, a total of 36,680,174 shares were issued on the Terrex Acquisition:
31,813,614 shares were issued to Terrex shareholders in exchange for all Terrex shares;
3,000,000 shares were issued to Sandstorm directly pursuant to the Sandstorm Settlement
Agreement; and 1,866,560 shares were issued to individuals directly pursuant to the
settlement of personnel obligations.
(b)
On March 14, 2013, a total of 5,150,000 warrants for the acquisition of a total of 1,581,050
Anterra Class A shares were issued in relation to the Terrex Acquisition: warrants to purchase
967,050 shares at a price of $1.001 expired on August 21, 2013 and warrants to purchase
614,000 shares at a price of $0603 per share will expire on July 15, 2015. No value has been
attributed to the warrants.
(c)
On April 5, 2013, pursuant to a private placement, the Company issued 107,692,308 Class A
common shares, at a price of $O.065 per share, to LandOcean Resource Investment Canada
Co. Ltd. for gross proceeds of $7 million. The Company paid a cash fee of $350,000 and
issued 1,000,000 common shares purchase warrants relating to the private placement. Each
warrant entitles the holder to acquire one common share at a price of $0.10 per share. The
warrants will expire on April 4, 2015.
(d)
On August 26, 2013, pursuant to a private placement, the Company issued 106,060,606
Class A common shares at a price of $0066 per share, to Huisheng Group Co. Ltd.
(‘Huisheng”) for gross proceeds of $7 million. The Company paid a cash fee of $350,000 and
issued 1,000,000 common shares purchase warrants relating to the private placement. Each
warrant entitles the holder to acquire one common share at a price of $0.10 per share. The
warrants will expire on August 21, 2015.
19. Share based payments:
On March 26, 2011, the Company granted 5,350,000 stock options to directors, officers and
employees to purchase Class A Shares at an exercise price of $0.255. Of the total options granted,
3,500,000 options vested immediately and of the remaining 1,850,000 options, one third vested
immediately, with the balance vesting equally on the first and second anniversary of the grant date.
Included in these options were 750,000 options granted to consultants providing engineering
services to the Company.
A summary of the status of the Company’s stock option plan as December 31, 2014 and 2013, and
changes during the period ending on those dates is presented below.
31
ANTERRA ENERGY INC.
For the years ended December31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
Number of
options
Weighted
average exercise
price $
Outstanding at January 1, 2012
Forfeited
Outstanding at December31, 2012
Forfeited
Forfeited
20,200,000
(350,000)
19,850,000
(1,750,000)
(1,500,000)
010
0.255
0.14
0.10
0.255
Balance, December 31, 2014 and
December 31, 2013
16,600,000
0.13
Options Outstanding
The following table summarizes stock options outstanding and exercisable:
Options Exercisable
$0.10
$0.255
Number
outstanding
at
December
31, 2014
13,100,000
3,500,000
$0.10$0.255
16,600,000
Range of
exercise
prices
$Ô.10
$0255
Number
exercisable
at
December
31, 2014
13,100,000
3,500,000
Weighted
average
remaining
contractual
life
0.5 years
1.2 years
$0.13
16,600,000
0.7 years
Weighted
average
exercise
price
Expiry date
July 13, 2015
March 26, 2016
No options were granted during the years ended December31, 2014 and 2013.
20.
Finance income and expenses:
2013
2014
Finance income:
Interest income on bank deposits
$
Financial expenses:
Interest on bank debt
Interest on debenture
Accretion of debenture
Accretion of decommissioning liabilities
Net finance expense
32
(897)
$
(867)
483,108
240,000
121,305
553,866
200,323
190,000
96,033
409,772
1,398,279
896,128
I ,397,382
$895,261
ANTERRA ENERGY INC.
For the years ended December 31 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
21. Per share amounts:
Basic loss per share was calculated as follows:
2014
Loss for the year
Weighted average number of
$
2013
(16,053,578)
$
496,871,120
common shares (Basic)
(7102,781)
392,643,301
The effect of outstanding options, warrants and convertible instruments is non-dilutive.
22. Supplemental cash flow information:
Changes in non-cash working capital is comprised of
2014
Source of cash:
Trade and other receivable
Deposit and prepaid expenses
Trade and other payable
Related to operating activities
Related to investing activities
2013
220,369
(201,913)
8,967,501
378,422
(324,500)
(3,111,892)
8,985,957
(3,057,970)
6,518,896
2,467,061
(907,003)
(2,150,967)
23. Commitments:
The Company has entered into a lease arrangement for office facilities and expiring December 31,
2017. Annual base lease payments are $221,892.
24. Key management personnel compensation:
Key management personnel include the Board of Directors and Executives that have authority and
responsibility for planning, directing and controlling the activities of the Company.
In addition to their salaries, the Company also provides non-cash benefits to directors and executive
officers. Key management personnel compensation is comprised of the following:
33
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
2013
2014
$ 425,625
Salaries and wages
Short-term employee benefits
Share based payments (i)
28,126
1,752
$ 455,503
(i)
$
$
449,514
6,180
17,022
472,716
Represents the amortization of share based compensation associated with options granted to
executive officers as recorded in the financial statements.
25. Subsequent event
Subsequent to year end the Company entered into a commodity price contract, on a no-cost collar
basis, relating to the sale of 200 bbls of oil per day for the period from June 1, 2015 to December
31, 2015. The contract provides for a floor price of $65.00 per bbl and a ceiling price of $76.00 per
bbl.
26. Related party transactions:
The Company has entered into the following transactions with related parties:
a)
LandOcean Energy Services Co., Ltd. (“LandOcean”) and Western Union Petro (Canada)
Technology Co., Ltd. (“Western Union”), a wholly owned subsidiary of LandOcean.
LandOcean currently holds approximately 21.7% of the issued and outstanding Class A
common shares of Anterra through its subsidiary, LandOcean Resources Investment Canada
Co., Ltd. LandOcean has been tasked with (1) assessing the potential of the Company’s oil and
gas properties and preparing development plans for the properties; and (2) providing assistance
to the Company’s management in executing such plans. Specific projects, as summarized
below, undertaken by LandOcean and Western Union are approved by the independent
directors of the Company prior to the commencement of the project. The Company’s
management monitors and manages the work, and tracks all expenses against a budget
approved by the directors for the project.
I) On April 8, 2013, the Company entered into an agreement (“the Agreement”) with LandOcean
whereby LandOcean will provide Anterra with long-term technical consulting services
including integrated reservoir studies, exploitation evaluations and production planning for
existing properties and acquisition projects through to the end of 2014.
Pursuant to the Agreement, LandOcean will earn total compensation of $1,949,600 for
technical services of which $976,880 has been earned to December 31, 2014. The Company
charges technical costs incurred under the Agreement to petroleum and natural gas
34
ANTERRA ENERGY INC.
For the years ended December 31, 2014 and 2013
(tabular amounts are Canadian dollars except share and per share information)
properties. Additionally, under the terms of the Agreement, $50,000 for travel, communication
and management costs, were paid and expensed during 2013. At December 31, 2014,
$392,000 was payable to LandOcean in relation to the Agreement.
ii) During 2014, the Company engaged Western Union, to complete various field projects
including the initial stage of a water-flood project at Strathmore, Alberta. During the year total
costs of $3,584,962 related to the various projects were incurred of which $2,808,105 which
remains payables at December 31, 2014, see Note 13,
No work additional to that completed during 2014 is ongoing or anticipated with the above related
entities.
(b.) During the year ended December 31, 2014, a consulting company, to which an officer of Anterra
$93,980) for consulting services. At
is related, charged the Company $100,579 (2013
provided
in
relation
to
services
December 31, 2014, $8,378 was payable
-
(c.) During the year ended December 31, 2014, a consulting company, to which a director of Anterra
is related, charged the Company $23,500 (2013 $58,300) for management and advisory
services. This is in addition to those amounts disclosed in note 24.
-
35
C)
w
TI TIS IS !X 1T
refl.rrcd .o II) thc Allidavit of
Sworn beforc me this
A NOTARY PUBLIC
FOR THE PROVINCE
Anterra
Energy inc.
Financial Statements
For the years ended December 31, 2015 and 2014
NOTICE OF NO AUDITOR REVIEW OF
FINANCIAL STATEMENTS
Undor National Instrument 51-102. Part 4, subsection 4.3(3Xa), if an auditor has not parfonned a review of the intarim
financial statements they must be accompanied by a notice indicating that the financial statements hat been reviewed
by an auditor The accompanying unaudited intarim financial statements of Antarra Enugy Inc. ompany”) have
been prepared by and are the responsibility of the management of the Company. The Cotnpan4ent auditor has
not paformed a review of these financial statements In accordance with standards estab4ianadian Institute of
Qiartcsed Accountants for a review of mtaruu financial statements by an entttys auditorJ
Of P a ge
ANTERRA ENERGY INC
Statements of Financial Position
AsatDecember3l
2015
2014
Note
Assets
Trade and other receivables
Deposs and prepald expenses
Fair value of risk management contracts
Property, plant and equIpment
Evaluation and exploration assets
7
$
1,690,088
825,627
13
$
-
9
10
2,747,689
1,090,822
222,111
2,515,715
4,060,602
52,107,806
64,445,608
386,667
-
S 54,623,221
$
68,892,877
9,920,816
11,964,478
$
12,484,515
Liabilities
Bank debt
Trade and other payabies
Fair value of risk management contracts
Other non-current liabilities
Decommissioning ilabllitles
Convertible debenture
11
$
420,463
22,314,774
12
14
15
9,687,480
22,171,995
24,549,767
3,732117
2,808,105
22,869,166
3,610,812
50,596,658
51260,078
17
46,706,177
46,706,177
15
454,895
2,882,545
(46,017,054)
454,895
2,882,545
(32,410,818)
-
Equity
Share capItal
Equity component of convertible
debenture
Contributed surplus
DefIcit
1P age
ANTERRA ENERGY INC
Statements of Loss and Comprehensive Loss
For the years ended December 31,
Note
2015
2014
$ 12,533,965
(1,137,655)
$ 23,779400
11,396,311
986,881
(651,594)
11,731,598
18,725,881
194,512
222,111
8,273,907
718,327
(1,478,102)
3,501,647
2,016,737
1,562,867
11,522,489
1,022,161
2,865,021
4.235,607
Revenue
Production and processing
Royalties
Realized gain on risk management contracts
Unrealized gain on risk management contracts
Expenses
Production and operating
Transportation
Spill clean-up and site remediatlon(Recovery
Depletion, depreciation and amortization
General and administrative
Finance expense
Share-based payments
impairment expense
13
13
9
19
18
9
10,891,572
2,598,506
1,397,382
1,752
11.553,164
25,486,955
35,196,082
(13,755,357)
(16,053,578)
149,121
-
$ (13,806,236)
$ (16.053,578)
*
$
9
Loss and comprehensive loss
19,142,504
-
Loss before income tax
Other Income
(5,053,519)
Loss per share
Basic and dIluted
20
(0.03)
(0.03)
See accompanying notes to financial statements
2f P age
ANTERRA ENERGY INC
Statements of Changes In Equity
Convertible
Debenture
Share
Not
CaplaI
Equity
Component
Contdbuted
Surplus
Accumulated
Total
Deficit
Equity
$2,880,793
1,752
$ (16,357,240)
$33,684,625
Balance,
January 1, 2014
$46,706,177
Share based payments
Loss for the year
Balance,
December31 , 2014
$ 454,895
-
-
-
-
1,752
(16,053,578)
(16,053,578)
$46,706,177
$ 454,695
$2,882,545
$ (32,410,818)
$17,632,799
$46,706,177
$ 454,895
$2,882,545
$ (32,410,818)
(13,606,238)
$17,832,799
(13,606,236)
$ (46,017,054)
$4,026,563
Balance,
January 1, 2018
Loss for the year
Balance,
December31 , 2015
$48,706,177
$ 454,895
$2,882,545
See accompanying notes to financial statements
U—
31P age
ANTERRA ENERGY INC
Statements of Cash flows
For the years ended December 31,
Operating activities:
Loss for the year
Adjustments for:
Depletion, depreciation and amortization
Accretion
Share based payments
Unrealized gain on risk management contracts
Impairment expense
Exploration and evaluation
Decommissioning expenditure
Change in non-cash working capital
Cash provided by operating activities
investing activities:
Property, plant and equipment expenditures
Change in non-cash working capital
Cash used in Investing activIties
2015
2014
$ (13,606,236)
$ (16,053,578)
9
3,501,647
19
553,061
4,235,607
675,171
1,752
13
9
10
14
21
651,594
10,891,572
Note
9
21
Financing activities:
Proceeds (repayment of) bank debt
Cash provided by (used in) financing activities
Change in cash and cash equivalents
(222,111)
11,553,164
(19,270)
843,954
6,518,896
2,$16,332
6,010,368
(200,335)
(52,298)
(252,533)
(6,947,240)
2,467,061
(4,480,179)
(2,583,699)
(2,563,699)
(1,530,189)
$
-
Cash and cash equivalents, beginning of year
$
-
Cash and cash equivalents, end of year
$
-
(098,533)
(1,530,189)
$
$
See accompanying notes to financial statements
4j p age
-
-
ANTERRA ENERGY INC.
For the years ended ace be
, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
1. Reporting entity:
M or the M
Anterra Energy Inc. (Anterra
Compan) is engaged in the acquisition, exploitation,
development and production of oil and natural gas from properties In western Canada. The
Company’s common shares are listed and trade on the TSX Venture Exchange under the symbol
AEA The Company’s head office is located at 1420, 1122 4th Street SW, Calgary, Alberta T2R
I Ml and Its registered office is located at 3700, 400 3rd Avenue SW Calgary, Alberta T2P 4H2.
-
The Company has two reportable operating segments and a corporate segment. The oil and gas
production segment explores for, develops and produces oil and gas. The midstream processing
segment provides oil and gas processing and water disposal services to third parties.
2. Going Concern:
Continuing weak crude oil prices experienced during 2015 have negatively Impacted earnings and
cash flow for the period. Additionally, total net costs of $1.4 million, associated with two major
pipeline failures at the Company’s Nipisi property during 2014, compounded by related production
interruptions, have further strained the Company’s financial resources.
As a result the Company has a working capital deficiency of $9.8 million, excluding bank debt of
$9.9 million, at December 31, 2015. In addition, at December 31 2015, the Company was in
default under Its Credit Facility Agreement.
Pursuant to a review by the Company’s lender, effective March 9, 2015, the Company’s $15 million
revolving, operating demand loan credit facility was restructured to Include a revolving operating
demand loan facility In the maximum amount of $10 million and a non-revolving demand loan facility
in the maximum amount of $4.8 million. The non-revoMng loan facility was repayable as to
$200,000 on acceptance of the facilities agreement and thereafter in minimum monthly princIpal
payments of $200,000.
These conditions create a material uncertainty that may cast significant doubt as to the Company’s
ability to execute on its business plan and continue as a going concern.
These financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the setilement of obligations in the normal course of business. If this
assumption is not appropriate, adjustments to the carrying amounts of assets and liabilities,
revenues and expenses and the statement of financial posthorçiii w the financial
statements may be necessary and such adjustments could be
3. BasIs of prparatlon:
These financial statements have been prepared in accordance with international Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (slASS.
5 P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
The financial statements have been prepared on the historical cost basis except as disclosed in
Note 6, and are presented In Canadian dollars, which is the Company’s functional currency.
The financial statements were authorized for issuance by the Board of Directors on
,
2016.
Use of estimates and Judgments:
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and reported amounts of assets and
liabilities and income and expenses. Actual results may differ materially from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimates are revised and for any future years
affected. Significant estimates and judgments made by management In the preparation of these
financial statements are outlined below.
C,ltIcaIjudgments In applying accounting policies:
The Company’s assets are aggregated into cash-generating units (uCGUs), for the purpose of
calculating impairment. CGUs are based on an assessment of a unft’s ability to generate largely
independent cash flows. By their nature, these estimates and assumptions are subject to
measurement uncertainty and may impact the carrying value of the Company’s assets in future
periods.
Judgments are required to assess when impairment Indicators exist and impairment testing Is
required.
The application of the Company’s accounting policy for exploration and evaluation assets requires
management to make certain Judgments as to future events and circumstances as to whether
economic quantities of reserves have been found.
Key sources of estimation uncertainty:
The following are the key sources of estimation uncertainties affecting the measurement of
balances and transactions in these financial statements.
(I) Decommissioning obligatIons
The Company estimates decommissioning obligations for oil and gas wells and their associated
production facilities and pipelines. In most instances, removel of assets and remedlation occurs
many years into the future. This requires assumptions and estimates r abandonment date,
future environmental and reguiatory Ieslatlon, the extent of reclamatkieering
methodology for estimating cost and future removal technofoes in R.novat cost
and tiabtilty-specffic discount rates to determine the present value of these cash flows.
(H) Income taxes
61 P age
ANTERRA ENERGY INC.
For the years ended December31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Tax provisions are based on enacted or substantively enacted legislation. Changes in legislation
could affect amounts recognized in profit or loss both in the period of change, which would include
any impact on cumulative provisions, and in future periods. Deferred tax assets (if any) are
recognized only to the extent it is considered probable that those assets will be recoverable. This
Involves an assessment of when those deferred tax assets are likely to reverse and an assessment
as to whether or not there will be sufficient taxable profits available to offset the tax assets when
they do reverse. This requires assumptions regarding future profitability and is therefore Inherently
uncertain. To the extent assumptions regarding future profitability change, there can be an increase
or decrease In the amounts recognized in respect of deferred tax assets as well as the amounts
recognized In profit or loss In the period In which the change occurs,
(Ill) Reserves
Estimation of reported recoverable quantities of proved and probable reserves include judgmental
assumptions regarding production profiles, future commodity prices, exchange rates, remediation
costs, timing and amount of future development costs, and production, transportation and marketing
costs for future cash flows, as well as the interpretation of complex geological and geophysical
models and data.
The economical geological and technical factors used to estimate reserves may change from period
to period. Changes in reported reserves can impact the carrying values of the Compans petroleum
and natural gas properties and equipment, the calculation of depletion and depreciation, the
provision for decommissioning obligations, and the recognition of deferred tax assets due to
changes in expected future cash flows. The recoverable quantities of reserves and estimated cash
flows from Anterra’s petroleum and natural gas Interests are assessed and evaluated at least
annually by Independent reserve evaluators in accordance with National Instrument 51-101.
(lv) Share.based payments
All equity-settled, share-based awards issued by the Company are recorded at fair value using the
Black-Scholes option-pricing model. In assessing the fair value of equIty-based compensation,
estimates have to be made regarding the share price, expected volatility, optio , dividend yield,
risk-free rate and estimated forfeitures at the initial grant date.
4. Significant accounting policies:
The accounting policies set out below have been applied conslstenll, In these financial statements.
(a)
East. of consolidation:
These flnancW statements include the financial statements of the Company and It. subsidiary
(Terrex Energy Inc.) as at December 31, 2013. A subsidiary I consolidated from the date of
acquisition, being the date on which the Company obteins control, and continues to be consolidated
until the date that control ceases. Control exists when the Company is exposed to, or has riçits to
variable returns from its involvement with the entity and has the ability to affect these returns
7! Page
ANTERRA ENERGY INC.
For the years ended December 31,2015 and 2014
(tabular amounts are Canadian dollars except share and per share infonnation)
through its power over the entity. All intercompany balances and transactions, and any unrealized
income and expenses, arising from intercompany transactions are eliminated in full.
Many of the Companys oil and natural gas activities involve jointly controlled assets. The financial
statements include the Company’s share of these jointly controlled assets and a proportionate share
of the relevant revenue and related costs.
(b)
Financial instruments:
(i)
Non-derivative financial instruments:
Non-derivative financial instruments comprise trade and other receivables, cash and cash
equivalents, bank debt, trade and other payables, convertible debenture and other non-current
liabilities. Financial assets have been dassified as loans and receivables, financial liabilities have
been dassifled as other financial liabilities. These financial instruments are recognized initially at fair
value plus any directly attributable transaction costs. Subsequent to initial recognition, these nonderivative financial instruments are measured at amortized cost using the effective interest rate
method, less any Impairment losses.
(Ii)
Derivative financial instruments:
The Company may enter into certain financial derivative contracts in order to manage the exposure
to market risks from fluctuations in commodity prices. These instruments will not be used for trading
or speculative purposes. The Company will not designate its financial derivative contracts as
effective accounting hedges, and therefore will not apply hedge accounting, even though the
Company considers all commodities contracts to be economic hedges. As a result, all financial
derivative contracts will be dassifled as fair value through profit or loss and will be recorded on the
statements of financial position at fair value. Transaction costs are recognized in profit or loss when
incurred. Compound financial instruments issued by the Company may comprise convertible
debentures that can be converted to common shares at the option of the holder for a fixed number
of common shares.
The liability component of a compound financial instrument is recognized initially at the faIr value of
a similar liability that does not have an equity conversion option. The equity component, If any, Is
recognized initially at the difference between the fair value of the compound financial instruments as
a whole and the fair value of the liability component. Any directly attributable transaction costs are
allocated to the liability arid equity components in proportion to their initial carrying amounts.
(iii)
Share capital:
Common shares are classified as equity. Incremental costs directly
of
common shares and share options are recognized as a deduction from equity, net of any tax
effects.
(C)
Exploration aid eviduatlon assets and prope?ty, plant arid equipment
(I)
Recognition and measuremeit
8P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Exploration and evaluation expendituras:
Pre-license costs are recognized in the statement of income (loss) as incurred.
Exploration and evaluation (UE&E) costs, Including the costs of acquiring licenses, geological and
geophysical expenditures and drilling and completion costs are initially capitalized as either tangible
or intangible exploration or evaluation assets according to the nature of the assets acquired. The
costs are accumulated in cost centers by well, field or exploration area pending determination of
technical feasibility and commercial viability.
E&E assets are assessed for impairment If (I) sufficient data exists to determine technical feasibility
and commercial viability; and (ii) facts and circumstances suggest that the carrying amount exceeds
the recoverable amount.
The technical feasibility and commercial viability of extracting a mineral resource is consklered to be
determinable when proven and probable reserves are determined to exist. A review of each
exploration license or field is carried out, at least annually, to ascertain whether proven and/or
probable reserves have been discovered. Upon determination of proven and probable reserves,
intangible E&E assets attributable to those reserves are first tested for impairment and then
transferred from E&E assets to a separate category within tangible assets referred to as oil and
natural gas interests.
The cost of undeveloped land that expires or any impairment recognized during a period is charged
against earnings as exploration and evaluation expense.
Development end production costs:
items of property, plant and equIpment (PP&E), which Include ofl and gas development and
1 are measured at cost less accumulated depletion and depreciation and
production assets
accumulated Impairment losses. The initial cost of an asset includes its purchase price or
construction cost, costs attributable to bringing the asset into operation and the initial estimate of
decommissioning obligations. Development and production assets are grouped into CGUs for
impairment testing. When significant parts of an item of PP&E, including oil arid natural gas
interests, have different useful lives, they are accounted for as separate items (major components).
DisposWon
Gains or losses on disposal of an item of PP&E, including oil and natural gas
recognized within gains (losses) on disposition. The gain or loss Is
between the fafr value of proceeds received and the carrying value of the
capitalized future decommissionIng costs.
(ii)
are
Subsequent costs:
Costs mcurred subsequent to the determination of technical feasibility aid commercial viability and
the costs of replacing parts of property, plant and equipment are recogilzed as oil and natural gas
interests only when they increase the future economic benefits embodied in the specific asset to
whkh they relate. Ali other expenditures are recognized in earnings as incurred. Such capitalized
9 Page
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
oil and natural gas interests generally represent costs Incurred in developing proved andlor probable
reserves and bringing in or enhancing production from such reserves and, are accumulated on a
field or geotechnical area basis. The carrying amount of any replaced or sold component is
derecognized. The costs of the day-to-day servicing of property, plant and equipment are
recognized in earnings as Incurred.
(iii) Depletion and depreciation:
The net carrying amount of development or production assets is depleted using the unit of
production method by reference to the ratio of production in the year to the related proven and
probable reserves, taking into account estimated future development costs necessary to bring those
reserves into production. Proven and probable reserves are estimated annually using Independent
reserve engineer reports prepared in accordance with Canadian Securities Regulation National
Instrument 51-101, and represent the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a specified degree of
certainty, to be recoverable in future years from known reservoirs and which are considered
commercially producible.
For other assets, depreciation is recognized on a straight-line basis over the estimated useful lives
of each part of an item of property, plant and equipment. Leased assets are depreciated over the
shorter of the lease term and their useful lives unless it Is reasonably certain that the Company will
obtain ownership by the end of the lease term. Land Is not depreciated.
The estimated useful lives for other assets for the current and comparative years are as follows:
Midstream processing equipment
20 years
Office and other equipment
5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(d) Impairment:
(i) Financial assets:
A financial asset Is assessed at each reporting date to determine whether there Is any objective
evidence of impairment. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows
that asset
An impairment loss In respect of a financial asset measured at amortized cost I
difference between Its carrying amount and the present value of the
discounted at the original effective interest rate.
Sigalficant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in -oups that share simar credit risk characteristics.
1OP age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
All impairment losses are recognized in earnings.
An impairment loss Is reversed If the reversal can be related objectively to an event occurring after
the impairment loss was recognized For financial assets measured at amortized cost the reversal Is
recognized in earnings.
(ii) Non-financial assets:
The carrying amounts of the Company’s non-financial assets, other than E&E assets and deferred
tax assets are reviewed at each reporting date to determine whether there Is any indication of
Impairment. If any such indication exists, then the asset’s recoverable amount Is estimated. For
goodwill and other intangible assets that have indefinite lives or that are not yet available for use an
Impairment test Is completed each year. E&E assets are assessed for impairment when they are
reclassified to PP&E and when facts and circumstances suggest the carrying amount exceeds the
recoverable amount.
For the purpose of impairment testing, assets are grouped together Into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash-generating unit” or “CGU”). The recoverable
amount of an asset or a CGU is the greater of its value In use and its fair value less costs to sell.
Value in use is generally computed by reference to the present value of the future cash flows
expected to be derived from production of proven and probable reserves. In assessing value In use,
the estimated future cash flows are discounted to their present value using a pm-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the
asset.
Fair value less cost to sail is determined as the amount that would be obtained from the sale of a
CGU in an arm’s length transaction. The fair value less cost to sell of oil and natural gas assets is
generally determined as the net present value of the estimated future cash flows expected to arise
from the continued use of the CGIJ discounted by an appropriate discount rate. Consideration is
given to acquisition metrics of recent transactions completed on similar assets to those contained
within the relevant CGU.
The goodwill acquired in a business combination, for the purpose of impairment
to the CGUs that are expected to benefit from the synergies of the combination.
allocated
An Impairment loss is recognized if the carrying amount of an
exceeds Its
estimated recoverable amount. Impairment losses are recognized in
losses
recognized in respect of CGU’s are allocated first to reduce the
of any goodwill
allocated to the units and then to reduce the canying amounts of the other assets in the unit (group
of units) ona pro rata basis.
An impafrment loss ii respect of goodwill Is not reversed. In respect of other assets, impaiment
losses recognized in prior years are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed If there has bean a change in the
assumptions used to determine the recoverable amount in the period that led to impairment. An
11P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depletion and depreciation or
amortization, if no Impairment loss had been recognized.
(e) Business combinations
The acquisition method of accounting is used to account for acquisitions that meet the definition of a
business under 1FRS. The cost of an acquisition is measured as the fair value of the assets
acquired, equity instruments issued and liabilities incurred or assumed at the exchange date.
Identifiable assets acquired and liabilities assumed are measured initially at their fair values at the
acquisition date. The excess of the cost of acquisition over the fair value of identifiable assets and
liabilities acquired Is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets acquired, the difference is recognized as a gain In earnings.
Transaction costs that are incurred in connection with a business combination other than those
associated with the Issue of debt or equity securities, are recognized in earnings.
(f) Share based payments:
The Company uses the fair value method for valuing share based compensation. Under this
method, the compensation cost attributed to stock options are measured at the fair value at the
grant date and expensed over the vesting period with a corresponding Increase in contributed
surplus. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number
of options that vest. Upon the settlement of the stock options, the previously recognized value in
contributed surplus Is recorded as an increase to share capital.
(g) Provisions:
A provision is recognized it, as a result of a past. event, the Company has a present legal or
constructive obligation that can be estimated reliably, and It Is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. Provisions are not recognized for future
operating losses.
(h) DecommIssioning liabilities
The Company’s activities give rise to dismantling, decommissioning and site disturbance re
mediation activities. Provision is made for the estimated cost of site restoration and capitalized in
the relevant asset category.
Decommissioning obligations are measured at the present value of managements best estimate of
expenditures required to setlie the present obligation at the measurementts
ree
discount rate. Subsequent to the initial measurement, the obligation Is adjLf each
period to reflect the passage of lime and changes hi the estimated future cFiMrh)ig the
obligation. The increase hi the provision due to the passage of time is recogeized as finance costs
whereas hicreases!decreases due to changes in the estimated fubxe cash flows are capitalized.
121 P a g e
ANTERRA ENERGY INC.
For the years ended December 31 • 2015 arid 2014
(tabular amounts are Canadian dollars except share and per share Information)
Actual costs incurred upon settlement of the decommissioning obligations are charged against the
provision to the extent the provision is established.
(I) Revenue:
Revenue from the sale of oil and natural gas is recorded when the significant risks and rewards of
ownership of the product is transferred to the buyer which is usually when legal title passes to the
external party.
Revenue from midstream activities is recorded when the service is rendered to the customer.
Royalty Income is recognized as it accrues in accordance with the terms of the overriding royalty
agreements.
(J) Finance Income and expenses:
Finance expense is comprised of interest expense on borrowings, accretion of the discount on
decommissioning liabilities and accretion of the equity component of convertible debentures.
Interest income is recognized in earnings as It accrues, using the effective interest rate method.
(k) Income tax:
Income tax expense comprises current and deferred tax. Income tax expense is recognized in
earnings except to the extent that It relates to Items recognized directly in equity, in which case It Is
recognized in equity.
Current tax Is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred taxes are recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized on the initial recognition of assets or liabilities In a transaction that Is
not a business combination or on taxable temporary differences arising on the Initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they Intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset Is recognized to the extent that It is probable 1
avadalie against which the temporay difference can be utifized.
at each reporting date and are reduced to the extent that it is no
benefit wdi be realized.
wbe
are reviewed
that the related tax
(I) Per share amounts:
131 P a g e
ANTERRA ENERGY INC
For the years ended December 31 • 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Basic earnings (loss) per share is calculated by dividing the profit or loss attributable to common
shareholders of the Company by the weighted average number of common shares outstanding
during the period. Diluted earnings (loss) per share Is determined by adjusting the profit attributable
to common shareholders and the weighted average number of common shares outstanding for the
effects of dilutive instruments such as options and warrants granted. The calculation assumes that
the proceeds on exercise of options or warrants are used to purchase shares at the current market
price.
(m) Flow through shares
Resource expenditure deductions for Income tax purposes related to exploration and development
activities funded by flow-through share arrangements are renounced to Investors In accordance with
tax legislation. On issuance the premium received on the flow-through shares, being the difference
in price over a common share with no tax attributes is recognized on the statement of financial
position. As expenditures are incurred the deferred tax liability, associated with the renounced tax
deductions Is recognized through profit and loss along with a pro-rata portion of the deferred
premium.
5. New Accounting Standards
The following pronouncements from the IASB will become effective for financial reporting periods
beginning on or after January 1, 2016 and have not yet been adopted by the Corporation. All of
these new or revised standards permit early adoption lwht transitional arrangements depending
upon the date of initial application:
IFRS 15 “Revenue From Contracts with Customers” replaces lAS 11 “ConstructIon Contracts” and
lAS 18 aRevenue and establishes a single revenue recognition framework that applies to contracts
with customers, effective date of January 1, 2018.
IFRS 9 “Financial Instruments’ replaces lAS 39 “FinancIal Instruments: Recognition and
Measuremenr and addressed the classification and measurement of financial instruments with an,
effective date of January 1, 2018. The Company has not completed its evaluation of the effect of
adopting IFRS 9 on its financial statements.
IFRS 18 “Leases’ replaces lAS 17 “Lease’ and requires entities to recognize lease assets and lease
obligations on the balance sheet, essentially removing the classification of leases as either
operating leases or finance leases and treating all leases as finance leases, effective January 1,
2019.
The corporation has not completed rts evaluation of the effect of adoptwgr4fts
financial statements.
14 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
6. DetermInation of fair values:
A number of the Company’s accounting policies and disclosures require the determination of fair
value, for both financial and non-financial assets and liabilities. Fair values have been determined
for measurement and/or disclosure purposes based on the following methods. When applicable,
further Information about the assumptions made in determining fair values is disclosed in the note
specific to that asset or liability.
(a) Trade and other receivables, bank debt, trade and other payables and other non-current
liabilities
The fair value of trade and other receIvables, bank debt, trade and other payables is estimated as
the present value of future cash flows, discounted at the market rate of interest at the reporting date.
The fair value of these balances approximated their carrying value due to their short term to
maturity. The carrying value of bank debt approximates fair value due to the floating interest rate.
The carrying value of other non-current liabilities approximates its fair value as the interest rate is a
market interest rate.
(b) Stock options
The fair value of stock options is measured using a Black Scholes option pricing model.
Measurement inputs Include share price on measurement date, exercise price of the instrument,
expected volatility (based on weighted average historic volatility adjusted for changes expected due
to publicly available Information), weighted average expected life of the instruments (based on
historical experience and general option holder behavior), expected dividends, and the risk-free
interest rate (based on government bonds).
(c) Property, plant and equipment and exploration and evaluation assets
The fair value of PP&E recognized in a business combination is based on market values. The
market value is the estimated amount for which the assets could be exchanged on the acquisition
date between a wliuing buyer and a willing seller In an arm’s length transaction wherein the parties
each acted knowledgeably, prudently and without compulsion. The market value of oil and natural
gas interests, included in PP&E, are estimated with reference to the discounted cash flows expected
to be derived from oil and gas production based upon externally prepared reserve reports. The
market values of E & E assets are estimated with reference to market values of current arm’s length
transactions in comparable a locations.
(d)Derivatlves
The fair value of forward contracts is determined by thsjt difrence between the
contracted prices and published forward price curves as at U statement of financial position date,
using the remaining contracted anounts and risk-free interest rate (based on published government
rates). The fair value of options and costless collars is based on option models that use published
information with respect to volatity, prices and interest rates.
151 Page
ANTERRA ENERGY INC.
For the years ended December 31 • 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
7. Financial risk management:
(a)
Overview:
The Company’s activities expose it to a variety of financial risks that arise as a result of its
exploration, development, production, and financing activities. Financial risks include; credit, risk,
liquidity risk and market risk.
The following addresses the Company’s exposure to each of these risks, its objectives, policies and
processes for measuring and managing risk, and the Company’s management of capital. Further
quantitative disclosures are Included throughout these financial statements,
The Board of Directors oversees management’s establishment and execution of the Company’s risk
management framework. Management has implemented and monitors compliance with risk
management policies. The Company’s risk management policies are established to identify and
analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor
risks and adherence to market conditions and the Company’s activities.
(b)
Credit risk;
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
Instrument fails to meet Its contractual obligations, and arises principally from the Company’s
receivables from joint venture partners and oil and natural gas marketers.
All of the Company’s operations are conducted in Canada. The Company’s exposure to credit risk is
influenced mainly by the individual characteristics of each customer.
Receivables from od and natural gas marketers are normally collected on the 25th day of the month
following production. The Company’s policy to mitigate credit risk associated with these balances is
to establish marketing relationships with stable, substantial and industry recognized purchasers.
Historically, the Company has not experienced any collection Issues with its oil and natural gas
marketers. Receivables from joint interest partners are typically collected within one to three months
of the joint interest bill being issued. The Company attempts to mitigate risk relating to joint Interest
receivables by obtaining partner pre-approval of significant capital expenditures and In other
instances may request cash advances in cases of significant capital expenditures. Collection of
outstanding balances, however, is dependent on industry factors such as commodity price
fluctuations, escalating costs and the risk of unsuccessful drilling. Further risk exists with joint
interests as disagreements occasionally arise that increase the potential for non-collection. The
Company does not typ4cally obtarn collateral from dll and nati&
jnt interests,
however, the Company does have the ability to withhold poducb in the event
of non-painent.
As at December 31, 2015 and 2014, the Company’s trade and other receivables are comprised as
follows:
16P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Oil and natural gas marketing companies
Joint Interest partners
Allowance for doubtful accounts
2015
2014
1,305,161
1,162,758
638,114
1740,446
(253,187)
(155,535)
1,690,088
2,747,669
As at December 31, 2015 and 2014, the company’s trade and other receivables are aged as
follows:
2015
2014
824,132
2,623,232
Past due (more than 90 days)
1,119,143
280,272
Allowance for doubtful accounts
(253,187)
(155,535)
1,690,088
2,747,969
Current (less than 90 days)
(c) Liquidity risk:
Liquidity risk Is the risk that the Company will not be able to meet its financial obligations as they
come due. The Company’s approach to managing liquidity is to ensure, to the extent possible, that it
will have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company’s financial lIabilitIes consIst of bank debt, trade and other payables, other non-current
liabilities and a convertible debenture.
The Company ensures that it has sufficient resources to meet expected operational expenses
Including the servicing of financial obligations excluding the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters. To achieve this
objective, the Company prepares annual capital and operational expenditure budgets, which are
regularly monitored and updated as considered nscessy. Further, the Company ulzes
authorlztions for expenditures on both operated and non-operated phanage
capital expenditure. The Company also attempts to match its paysient ciJtf o and
natural gas revenue on the 25th of each month.
of which are current except for
Financial liabilities, as at December 31, 2015 total $26,046,891
2018.
15,
March
on
is
whIch
15)
due
$3,732,117 convertible debenture (Note
17P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
(d) Market risk:
Market risk Is the risk that changes in market prices, such as commodity prices, foreign exchange
rates and Interest rates will affect the Company’s income or the value of the financIal instruments.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
The Company may use both financial derivatives and physical delivery sales contracts to manage
market risks. All such transactions will be conducted within risk management tolerances as set by
the Board of Directors. Refer to note 13 for details regarding the Company’s risk management
contracts.
Currency risk:
Prices for oil are determined in global markets and generally denomInated in United States dollars.
Natural gas prices obtained by the Company are Influenced by both US and Canadian demand and
the corresponding North American supply, and recently, by imports of liquefied natural gas. The
exchange rate effect cannot be quantified but generally an increase in the value of the $CDN as
compared to the $US will reduce the prices received by the Company for its petroleum and natural
gas sales.
Interest rate risk:
interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market
Interest rates. The interest charged on the outstanding bank loan fluctuates with the interest rates
posted by the lenders. The Company Is exposed to Interest rate risk on its bank debt which bears a
floating interest rate and has not entered into any mitigating interest rate contracts.
For the year ended December 31, 2015, a 1% or 100 basis point increase or decrease in market
interest rates on the Company’s floating rate bank debt would change net earnings by $99,208.
Commodity price risk:
Commodity price risk is the risk that the fair value or future cash flows win fluctuate as a result of
changes in commodity prices. Commodity prices for o and natural gas are impacted by not only the
relationship between the Canadian and United States dollar and also world economic events that
dictate the levels of supply and demand.
(f)
Capital management:
The Company’s objective in managing its capital structure Is to maintain a flexible structure that
permits the Company to meet its financial obligations, execute on its planned growth strategy
and preserve Its access to capital markets. The Company’s capital structure Is composed of the
following:
1 8( Page
ANTERRA ENERGY INC.
For the years ended December 31 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
2015
2014
4,026,563
$ 17632,799
3,732,117
3,610,812
-
2,808,105
Bank indebtedness
9,920,816
12,484,515
Net working capital (surplus) deficiency
9,878,243
5,626,878
27,557,739
$ 42,163,109
Shareholders’ equity
$
Convertible debenture
Other non-current liabdities
6
In a normal economic environment, the Company is able to manage its capital structure and
make adjustments in response to changes in economic conditions and the underlying risk
associated with oil and gas assets. The Company monitors its capital and financing
requirements through an annual budget process and monthly updates to the budget forecast
and working capital projections. The Company, upon approval from its Board of Directors, win
balance its overall capital structure through new share Issuances, the use of bank and other
credit arrangements, adjusting capital spending, or by undertaking other strategies as deemed
appropriate under the specific circumstances.
Under the Company’s current Credit Facility, it is required to maintain a working capital ratio,
after adding the unused portion of the revolving demand loan facility and excluding outstanding
debt under the facility, of not less than 1:1. As at December 31, 2015 the adjusted working capital
ratio was I to 0.43 and the Company is in default under the Agreement, and the default may
continue throughout 2016.
Management reviews its capital management approach on an ongoing basis. There were no
material changes to this approach during the year ended December 31, 2015. The Company Is
not subject to externally imposed capital requirements.
191P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
8. Segmented Financial Information:
For the year ended
December 31, 2015
Oil and Gas
ProductIon
Midstream
Processing
Revenue
RoyaltIes
$
$ 3,582,828
-
-
-
-
3,582,828
-
(38,629)
986,881
-
-
(651,594)
8,185.399
3,582,828
-
6,961,049
1,349,487
-
(1,478,102)
677,090
-
-
-
41,237
-
*
3,154,166
347,481
-
-
1,126,055
10,891,572
431,756
444,294
446,388
-
-
-
1,109,526
-
Realized gain on risk
Management contracts
Unrealized gain on risk
Management contracts
Production and
operating expenses
Spill clean-up and site
remediation
Transportation
Depletion, depreciation
and amortization
General and
administrative expenses
Impairment expense
Finance expense
Otherlncome
Net Income (loss)
8,987,767
(1,137,655)
7,850,112
Corporate
Segment
Eliminations
$
(36,629)
$ 12,533,966
(1.137,655)
11,396,311
986,881
-
(36,629)
(651594)
11,731,596
(36,629)
8,273,907
-
21,585
Total
-
149,121
$(13,429,066)
-
-
-
$ 1,378,744
$ (1,555,914)
-
Property, plant and
equipment
$
$
Total Assets
$ 49,129,745
(1.478.102)
718,327
3,501,647
2,016,737
10,891,572
1,582,867
149,121
$ 13,606,238
Capital expenditures:
124,401
75,934
$ 2,977,761
-
$ 2,515,715
-
-
$
$
200,33
54,623,221
201 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
8. Segmented Finenclal kiformatlon, continued;
For the year ended
December 31, 2014
Revenue
Royalties
Realized gain on risk
Management contracts
Unrealized gain on risk
Management contracts
Production and
operating expenses
Spill clean-up and site
remedlatlon
Transportation
Depletion, depreciation
and amortization
General and
administrative expenses
Share-based payments
impairment expense
Finance expense
Net income (loss)
Oil and Gas
ProductIon
$ 20,136,286
(5,053519)
15,082,767
Midstream
Processing
Eliminations
Corporate
Segment
$ 3,696,527
-
-
$ (53,413)
-
3,696,527
-
(53,413)
194,512
-
222,111
15,499,390
3,696,527
9,766,827
1,809,075
2,865,021
1,004,306
-
-
17,855
-
-
4,076,584
159,023
-
-
1,655,919
299,593
-
-
11,553,164
530,165
-
-
-
23,698
843,519
-
($18,952,896)
$1,387,283
($1,488,265)
-
$ 6,842,317
$
Total
23,779,400
(5,053,519)
18,725,881
194,512
(53,413)
222,111
19,142,504
(53,413)
11,522,489
-
-
642,994
1,752
-
2,865,021
1,022,161
4,235,807
2,598,506
1,752
11,553,164
1,397,382
($16,053,578)
Capital expenditures:
Property, plant and
equipment
Total Assets
$61,626,405
92,758
$3,205,870
$
12,165
$4,060,602
-
-
$ 6,947,240
$ 68,892,877
DRAFT
21P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
9. Property, plant and equipment:
Cost
Balance at January 1, 2014
Additions
Decommissioning provisions
Balance at December 31, 2014
Petroleum
and natural gas
properties
Processing
and other assets
$
Total
$
$
77,882,913
5,336,130
106,753
161,779
5,604,662
83,219,043
6,947,240
661,199
90,827,482
E&E transfer
Additions, net of disposItions
Decommissioning provisions
6,840,487
499,420
85.222,820
388,667
124,401
1,424.877
Balance at December 31, 2015
Depletion, depreciation and Impairment
Balance at January 1, 2014
Depletion for the year
lmpalmient for the year
Balance at December 31, 2014
Depletion for the year
Impairment for the year
4,076,584
11,553,164
23,983,082
3,154,166
10,891,572
Balance at December 31, 2015
38,028,820
2,746,273
40,775,093
Balance at December 31, 2014
81,239,738
3,205,870
64,446,608
Balance at Deo.nib.r 31, 2015
49,129,745
2,977,761
52,107,506
-
386,667
200,335
75,934
43,438
1,468,115
87,158,565
5,724,034
92,882,599
8,353,334
2,239,769
159,023
10,593,103
4,235,607
11,553,164
26,381,874
3,501,647
10,891,572
2,398,792
347,481
-
Net book vlus
Future development costs totaling $46,903,655 (2014
$47,081,400) are included •m the
depletion calculation. Personnel expenses of $158,080 (2014 $225,158) directly attributed to
capital activities were capitakzed in property, plant and equipment during the year.
-
-
On May 1, 2015, the Company disposed of its certain petroleum and gas properties in Saskatchewan
for cash proceeds of $250,000 before closing adjustments. The petroleum and natural gas properties
had a carrying value of $263,706 at the time of disposition, and an associated decommissioning
liability of $128,075, resulting In a gawi on disposal of $114,369
221 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Impairment charge
At December 31, 2015, due to a decline in the future commodity prices, reserve revisions and
adjustments to future costs, the Company tested Its oil and natural gas CGUs for Impairment. As
a result, the Company determined that the carrying amount of the cash generating units at
Breton, Strathmore, Two Creek and Other Alberta Properties exceeded their recoverable amount
calculated using fair value less costs to sell. The fair value less costs to sell was determined on a
discounted cash flow basis, based on 2015 year-end reserves and commodity prices, using a
discount rate of 12%. The impairment was attributed to PP&E and an impairment loss of
$10,891,572 was recorded.
in testing a CGU for impairment, the Company used the commodity price forecast prepared and
used by Its Independent reserve evaluators in the assessment and evaluation of the Company’s
2015 year-end reserves, the Information presented below has been extracted from the
evaluator’s commodity price forecast
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Inflation
CAD to USD
Exchange
Crude oil
Edmonton city Gate
Alberta AECO
Average price
rate
0%
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
Rate
0.74
0.77
0.80
0.80
0.80
0.80
0.80
0.80
0.80
0.80
0.80
($cdnlbbl)
51.35
57.65
66.35
77.65
89.30
98.00
107.00
109.15
111.30
113.55
115.80
($cdnfmcf)
3.55
4.00
4.25
4.60
4.95
5.35
6.65
5.90
6.25
6.45
6.85
A 3% change in the discount rate would result in a $ 2,419,248 change in the impairment amount
recognized.
.“s?
23P age
ANTERRA ENERGY I NC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
10. EvaluatIon and exploration assets:
Balance, January 1, 2013
Additions
Exploration and evaluation expense
Balance, December 31, 2014 and 2013
Exploration and evaluation transfer
$ 4,547,147
651
(4,181,131)
386,667
$
(386,667)
Balance, December 31, 2015
Exploration and evaluation (E&E) assets consist of the Company’s exploration projects which are
pending the determination of proven or probable reserves. Mditions represent costs incurred on
E&E assets during the year. A $386,687 Evaluation and exploration asset has been transferred to
Property, plant and equipment in 2015.
11. Bank debt
:
Authorized
Revolving demand loan
Non-revolving demand loan
Outstanding
Revolving demand loan
Non-revolving demand loan
December3l,2015
December3l,2014
sio,ooo,ooo
$15,000,000
2,800,000
$12,600,000
$15,000,000
$9,340,661
$12,484,515
-
-
$9,920,816
$12,484,515
As at March 0, 2015 the Company’s authorized $15 million revolving, operating demand loan facility
was restructured to include a revolving operating demand loan in the maximum amount of $10 million
and a non-revolving demand loan facility in the maximum amount of $4.4 million. The revolving
facility bears interest at the bank prime plus 1.25% (December 31, 2014 prime rate plus 1.00%),
with an effective rate at September 30, 2015 of 4.10% (December 31, 2014 3.75%). The nonrevolving facility bears interest at the bank prime rate pius 3% wIth an effective rate as at December
31,2015 of 5.85%, and is repayable In minimum monthly principal payments of $200,000.
The facilities are secured by a first floating charge debenture in
ount of $35 million over all
assets of the Company Under its Credit Facilities Agreement; t1ed to maintain
an adjusted working capital ratio, after adding the unused poffiW,ffng demand loan
facility and excluding outstanding debt under the facility, of not less than 1:1. As at December 31,
-
—
241 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
2015 the adjusted working capital ratio was I to 0.43 and the Company is in default under the
Agreement, and the default may continue throughout 2016.
12. Other non-current liabilities
The non-current liabilities are comprised of amounts payable to a related party, see note 25, due
January 31,2015 together with interest at 10% per annum.
13. Risk management contracts
The Company’s activities expose It to a variety of financial risks that arise as a result of Its exploratIon,
development, operating and financial activities. The Company’s financial risks are consistent with
those discussed In December 31,2014 financIal statements.
The Company has entered into two commodity price contracts, one of which remains outstanding as
outlined below, to mitigate a degree of its exposure to commodity price risk and provide a degree of
stability to operating cash flows which enable the Company to fund a portion of its capital program.
Additionally the Company has entered into two fixed price power contacts also outlined below.
Such contracts are not used for trading or speculative purposes. The Company has not designated
the financial derivative contracts as effective accounting hedges although the Company considers
them to be an effective economic hedge. As a result, the contracts are recorded at fair value on the
statement of financial position, with changes in fair value being recognized as an unrealized gain or
loss on the statement of operations.
Financial assets and liabilities carried at fair value are required to be classIfied in accordance with a
hierarchy that prioritizes the inputs used to measure fair value. The risk management contracts are
valued using level 2 inputs which are based on quoted forward prices that can be substantially
observed or corroborated in the market place.
Power price contracts
Remaining temi
Contract Type
Volume
Jan. 2016—June 2017
Fixed price
1.5 MW
Price
$55.25/MWh
At December 31, 2015, the foregoing derivative contracts were recorded at fair value on the
statement of financial positon as a liability of $429,483 and the Company recognized an unrealized
loss of $651,594 and realized gain of $986,881.
25 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
14. DecommIssioning liabilities:
Balance at January 1, 2014
$ 22,152,634
661,199
(698,533)
553,866
$ 22,669,166
1,468,115
(19.270)
431,756
$ 24,548,767
Changes to estimate
Obligations settled
Accretion expense
Balance, December 31, 2014
Changes to estimate
Obligations seWed
Accretion expense
Balance December 31, 2015
The Company’s deàommissioning liability results from Its ownership Interest in petroleum and
natural gas assets including well sites, gathering systems and processing and production facilIties,
all of which will require future expenditures for decommissioning under existing legislation.
The Company has estimated the net present value of the decommissioning obligations to be
$24,549,767 at December 31, 2015 (2014- $22,669,166) based on an undiscounted total future
liability of $24,708,339 (2014 $24,849,754). These expenditures are expected to be Incurred over
the next 25 years with the majority of costs to be Incurred between 2015 and 2025. A risk free rate
of 1.90% (2014 2.50%) and an Inflation factor of 2% were used to determine the decommissioning
liability at December 31, 2015.
-
—
15. Convertible debenture:
6% redeemable convertible debenture
December31
6% redeemable convertible debenture, at face value
Equity component, before deferred income taxes
AccretIon
Balance
2015
2014
,ooo,ooo
sei,ooo,ooo
(606,526)
338,643
(606,526)
96,033
$3,732,117
$3,489,507
On March 14, 2013, immedIately prior to and in connection with the acquisition of Terrex, the
Company issued a $4 million principal amount convertible debenture as partial settlement of a
hydrocarbon purchase agreement between Terrex and Sandstorm. The debenture bears interest at
6% payable semi-annually with the principal repayable on March 14, 2018; the debenture is secured,
subordinate to the bank credit facility, by a floating charge on the property and assets of the
Company.
At the option of the holder on 20 days’ notice, the debenture is convertible, in whole or in part at any
time, into common shares of the Company at a price of $0.10 per s)Jue is
redeemable in whole or in part at any time, by the Company on 30 days’
261 p a g e
ANTERRA ENERGY INC.
Forthe years ended December31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
The debenture was Initially recorded at its principal amount net of an equity component valued at
$606,526 ($454,895 after deferred Income tax) attributable to the holder’s option to convert the debt
into common shares.
16. income tax
The Company has non-capital losses for income tax purposes totaling approximately $37.9 million.
The losses expire between 2023 and 2034. The related tax benefits have only been recognized to the
extent there are taxable temporaiy differences to offset with.
Reconciliation of effective tax rate:
Rate Reconciliation
2015
Income (loss) before tax
Expected tax rate
Expected income tax expense (recovery)
Share based compensation
Nontaxable gaIn on acquisition
Other
Change in unrecognized deferred tax assets
Total Income tax expense (recovery)
2014
(16,053,578)
25.0%
(4,013,395)
438
-
4,012,957
-
-
Deferred tax assets and liabilities are attributable to the following:
2015
Deferred tax liabilities:
Property, plant and equipment (including E&E assets)
Convertible debt iiabikty
Risk management contracts
Less deferred tax assets:
Decommissioning Liabilities
Non-capital losses
Share issue costs and other
Net deferred tax liability
2014
(5,514553)
(97,297)
(55,528)
5,557,
100,086
-
-
-
271P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Deferred tax assets have not been recognized in respect to the following temporary differences:
2015
2014
Property, plant and equipment (induding E&E assets)
Non-capital losses
Share issue costs and other
Total temporary differences
-
37,507,641
467,051
37,974,692
Continuity of the deferred Income tax liability
Balance at
January 1
Recognized
2014
k P&L
Acquired in
bu&rress
combination
.
Property, plant and equipment
(including E&E assets)
Risk management contracts
Convertible debenture
Decommissioning Liabilities
Non-capItal losses
Share issue costs and other
(8,438,340)
2,623,787
(55,528)
-
(127,623)
-
Balance at
December
31, 2014
Recorded
In EquIty
-
-
3,027,804
30.326
129,133
(2,927,718)
-
-
-
-
5,538,159
(5.614,553)
-
(55,528)
-
(97,297)
-
-
5,667,292
-
-
100,086
-
17. Share capital:
Authorized
UnlImIted Class A voting shares without par value
Unlimited preferred shares, issuable in series, rights and privileges to be determined on Issue,
Issued and Outstanding
Class A
Balance, January 1, 2014
Acquisition
Private placement
Private placement
Expired
246,438,032
36,680,174
107,692,308
108,060,606
(a)(b)
(c)
(d)
(b)
Balance, December 31, 2014
Expired
Balance, December 31 , 2015
(b)(c)(d)
Warrants
$
-
31,110,546
5,150,000
1,000,000
1,000,000
(3,150,000)
2,356,213
8,619,750
6,619,868
496,871,120
4,000,000
46,706,177
-
(4.000,000)
-
-
46,706,177
-
496,871,120
-
281 P a g e
ANTERRA ENERGY INC.
For the years ended December 31,2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
(a)
On March 14, 2013, a total of 36,680,174 shares were issued on the Terrex Acquisition:
31,81 3,614 shares were issued to Terrex shareholders in exchange for all Terrex shares;
3,000,000 shares were issued to Sandstorm directly pursuant to the Sandstorm Settlement
Agreement; and 1,886,580 shares were issued to individuals directly pursuant to the
settlement of personnel obligations.
(b)
On March 14, 2013, a total of 5,150,000 warrants for the acquisition of a total of 1,581,050
Anterra Class A shares were issued In relation to the Terrex Acquisition: warrants to purchase
967,050 shares at a price of $1 .001 expired on August 21, 2013 and warrants to purchase
614,000 shares ata price of $0.603 per share will expire on July 15, 2015. No value has been
attributed to the warrants.
(c)
On April 5, 2013, pursuant to a private placement; the Company issued 107,692,308 Class A
common shares, at a price of $0.065 per share, to LandOcean Resource investment Canada
Co. Ltd. for gross proceeds of $7 million. The Company paid a cash fee of $350,000 and
issued 1,000,000 common shares purchase warrants relating to the private placement. Each
warrant entitles the holder to acquire one common share at a price of $0.10 per share. The
warrants will expire on April 4, 2015.
(d)
On August 26, 2013, pursuant to a private placement, the Company issued 106,060,606
Class A common shares at a price of S0.066 per share, to Huisheng Group Co. Ltd.
(‘Huisheng”) for gross proceeds of $7 million. The Company paid a cash fee of $350,000 and
issued 1,000,000 common shares purchase warrants relating to the private placement. Each
warrant entitles the holder to acquire one common share at a price of $0.10 per share. The
warrants will expire on August 21, 2015.
18. Share based payments:
On March 26, 2011, the Company granted 5,350,000 stock options to directors, officers and
employees to purchase Class A Shares at an exercise price of $0.255. Of the total options granted,
3,500,000 options vested mimediately and of the remaining 1,850,000 options, one third vested
immediately, with the balance vesting equally on the first and second annIversary of the grant date.
Included In these options were 750,000 options granted to consultants providing engineering
services to the Company.
A summary of the status of the Company’s stock option plan as December 31, 2015 and 2014, and
changes during the period ending on those dates is presented below.
291 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
Options Outstanding
Outstanding at December 31, 2013
Forfeited
Forfeited
Balance, December 31, 2014, 2013
Expired
Balance, December 31, 2015
Number
“Ions
“
19,850,000
(1,750,000)
(1,500,000)
16,600,000
(13,100,000)
Weighted
average exercise
price S
0.14
3,500,000
0.255
0.10
0.255
0.13
0.14
The following table summarizes stock options outstanding and exercisable:
Options Exercisable
R
f
Number
outstanding
Wel hted
average
Expiry date
December
p ce
31, 2015
$0255
3,500,000
March 26, 2016
$0255
Number
Weighted
average
December
31, 2015
contractual
life
3,500,000
0. 23years
No options were granted during the years ended December31, 2015 and 2014.
19
FInance Income and expenses
2015
2014
Finance income:
Interest Income on bank deposits
$
(843)
Financial expenses:
Interest on bank debt
interest on other liabilitIes
Interest on debenture
Accretion of debenture
Accretion of decommissioning liabilIties
Net finance expense
534,283
236,366
240,000
121,305
431,756
$
(897)
483,108
-
1,563,710
240,000
121,305
553,866
1,398,279
1562,867
1.397,382
3O P a g
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share Information)
20. Per share amounts:
Basic loss per share was calculated as follows:
2015
Loss for the year
Weighted average number of
$
common shares (Basic)
(13,606,236)
2014
$
496,871,120
(16,053,578j
496,871.120
The effect of outstanding options, warrants and convertible instruments is non-dilutive.
21. Supplemental cash flow Information:
Changes in non-cash working capital Is comprised of
2015
Source of cash:
Trade and other receivable
Deposit and prepaid expenses
Trade and other payable
———--——
Related to operating actIvities
Related to investing activitIes
2014
1,057,581
265,195
(531,1 10)
220,369
(201,913)
8,967,501
791,666
8,985,957
843.964
(52,298)
6,518,896
2,467,081
22. CommItments:
The Company has entered into a lease arrangement for office faces and expiring December 31,
2017. Annual base lease payments are $221,892.
23. Key management personnel compensation:
Key management personnel include the Board of Directors and Executives that have authority and
responsibility for planning, directing and controlling the activities of the Company.
In addition to their salaries, the Company also provides non-cash benefits to directors and executive
officers. Key management personnel compensation is comprised of the following:
311P age
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and
per share information)
Salaries and wages
Short-term employee benefits
Share based payments (i)
2015
498,248
$
28,583
-
S 526,831
(I)
Represents the amortization of share based compensation
executive officers as recorded In the financial statements.
2014
$ 425,625
28,126
1,752
$ 455,503
associated with options granted to
24. Subsequent event
25. Related party transactions:
The Company has entered into the following transactions with related parties:
a) LandOcean Energy Services Co., Ltd. (“LandOcean”) currently holds approximately 21.7% of
the Issued and outstanding Class A common shares of Anterra through Its subsidiary,
LandOcean Resources investment Canada Co., Ltd. On April 8, 2013, the Company entered
into an agreement (“the Agreement”) with LandOcean whereby LandOcean was to provide
Anterra with long-term technical consulting services including integrated reservoir studies,
exploitation evaluations and production planning for existing properties and acquisition projects
through to the end of 201 4.
the Agreement, LandOcean was to earn total compensation of $1,949,600 for
technical services of which $976,880 was earned to December 31, 2014. The Company
charged technical costs incurred under the Agreement to petroleum and natural gas properties.
Additionally, under the temis of the Agreement, $50,000 for travel, communication and
management costs, were paid and expensed durIng 2013. At December 31, 2015, $392,000
was payable to LandOcean in relation to the Agreement.
During 2014, the Company engaged Western Union Petro (Canada) Technology Co., Ltd.
(“Western Union”), to complete various field projects including the Initial star
project at Strathmore, Alberta During the year total costs of $3,834,642 reljf
projects were incurred of which $3,009,998 remains payable at December 31, 2015, (Noti9).
No work, further to that completed to the end of 2014, Is ongoing or anticipated with the above
related entities.
Pursuant to
b) During the twelve months ended December 31, 2015, a consulting company, to which an officer
of Anterra is related, charged the Company $101,256 (2014- $100,579) for consulting services.
321 P a g e
ANTERRA ENERGY INC.
For the years ended December 31, 2015 and 2014
(tabular amounts are Canadian dollars except share and per share information)
c) During twelve months ended December 31, 2015, a consulting company, to which a director of
Anterra Is related, charged the Company $4,200 (2014 $23500) for management and advisory
-
services.
DRAFT
33P age
TABD
THTS IS FX! 11TtT
ref ed to i the A{Tidnvit of
Sworn be Fore mc this
Dayof
.1).
Kx
‘I
10k mi: PkO\ iNi
NI 51401 Form Fl
Anterra Energy Inc.
Statement of reserves data
and other oil and gas information
as of December 31, 2014
Prepared by Deloitte
March 23, 2015
Table of contents
Page
Part 1: Date of statement
1
Part 2: Disclosure of reserves data
2
Part 3: Pricing assumptions
2
Part 4: Reconciliations of changes in reserves
3
Part 5: Additional information relating to reserves data
3
Part 6: Other oil and gas information
7
Reserve definitions
13
Appendix
15
Part 1:
Date of statement
Date of statement:
Effective date:
Preparation date:
March 23, 2015
December 31, 2014
March 23, 2015
Anterra Energy Inc.’s (the Company”) oil and gas reserves were evaluated by Deloitte LLP (Deloitte),
effective December 31, 2014. Deloitte was engaged by the Company to evaluate proved and proved plus
probable reserves: no valuation of possible reserves or resources was undertaken. The Deloitte
evaluation was prepared in accordance with National Instrument 51-1 01 Standards of Disclosure for Oil
and Gas Activities and the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”).
—
All of the Company’s oil and gas reserves are located on-shore, in Canada.
The reserves on the properties described herein are estimates only. By nature, such forecasting of
reserves and related economic parameters and analyses are forward-looking statements based on
predictions of future events. Actual events or results may differ materially. Furthermore, the estimated
future net revenue contained in the following tables does not necessarily represent the fair market value
of the reserves.
In certain instances, numbers may not total due to computer-generated rounding.
2
Part 2:
Disclosure of reserves data
Item 2.1
Reserves data (forecast prices and costs)
Breakdown of proved reserves (forecast case)
Item 2.11
Please refer to NI 51-101 Forecast Case Summary of Oil and Gas Reserves in the Appendix.
—
Net present value of future net revenue (forecast case)
Item 2.1.2
Please refer to NI 51-101 Forecast Case Summary of Net Present Values of Future Net
Revenue in the Appendix.
—
Additional information concerning future net revenue (forecast case)
Item 2.1.3
Please refer to NI 51-101 Forecast Case Total Future Net Revenue (Undiscounted), and NI 51101 Forecast Case Unit Value of Net Reserves by Production Group in the Appendix.
—
—
Item 2.2
Supplemental disclosure of reserves data (constant prices and costs)
Supplemental constant price estimates are not reported.
Item 2.3
Reserves disclosure varies with accounting
The Company has no subsidiaries and is not a subsidiary of another company.
Item 2.4
Future net revenue disclosure varies with accounting
The Company has no subsidiaries and is not a subsidiary of another company.
Part 3: Pricing assumptions
Item 3.1
Constant prices used in estimates
Supplemental constant price estimates are not reported.
Item 3.2
Forecast prices used in estimates
Forecast oil and gas prices are laid out in the Deloitte Price Forecast December31, 2014
Table (see Appendix). All prices are stated in Canadian dollars unless otherwise indicated.
Adjustments for oil differential and gas heating values are applied to these prices, as
appropriate for each entity. Capital and operating costs are inflated.
3
Part 4:
Reconciliation of changes in reserves
Item 4.1
Reserves reconciliation
Please refer to NI 51-101 Forecast Case
-
Reserves Reconciliation Summary in the
Appendix.
Part 5:
Additional information relating to reserves data
Item 5.1
Undeveloped reserves
oil
First
attrIbuted
WI MbbI
Proved undovelooed
*pnorto 2012
2012
2013
2014
1,070
-
200
65
Cumulative
WI MbbI
448
197
845
601
Natural Gas
First
attributed
Cumulative
WI MMc’f
WI MMcf
1,337
-
166
24
Probable undeveloped
**priorto 2012
697
1133
1,217
2012
523
716
1,973
2013
93
2014
309
2,165
116
Cumulattve volumes were not reported prrorto 2010.
**
Probable undeveloped reserves were not reported prior to 2010.
-
First
NGLS
attributed
WI MbbI
Cumulative
WI Mbbi
968
247
754
462
29
61
20
15
21
1,406
343
1,150
776
73
-
8
6
-
4
21
73
13
15
31
Undeveloped reserves were assigned within seven properties: Breton, Matziwin, Minnehik
Buck Lake, Nipisi, Sakwatamau, Strathmore, Two Creek Jurassic A, and Two Creek
Jurassic B.
—
—
Breton
Two new undeveloped locations were assigned reserves this year.
Reserves were assigned to four horizontal Belly River wells that are to be drilled into the
Norbuck Basal Belly River B Pool Unit and one horizontal Belly River well located in the
southwest just outside of the Unit boundary. Each of the locations were assigned 90 Mbbl of
probable reserves based on the successful 02/10-25-048-05W5/0 well drilled in the Basal
Belly River H pool. The 02/10-25 well is located immediately beside the 00/10-25-04805W5!0 oil well which has produced over 313 MbbI of oil to date and is the largest well in the
pool. Given that seven wells in the Norbuck Basal Belly River B Pool Unit have produced
greater than 313 Mbbl it would be reasonable to assume that a horizontal location drilled in
the Unit could perform as well or better than one drilled in the Belly River H pool. Proved
reserves were not assigned at this time due to the fact that there has not yet been a
horizontal well drilled by the Company into this pool. The Company has confirmed the
estimated on-stream dates forecast.
Reserves that were previously assigned to the two vertical well locations, LC/15-23-04704W5/A and LCI I -24-047-04W5/A, have been removed. Based on the current pricing
situation and with the knowledge of the Company’s plans to exploit this property using short
horizontal locations and not vertical wells, the locations are no longer forecast to be drilled.
4
A review of the location, 02/16-35-047-04W4W5/0, indicates that the well could be drained by
the offsetting producers 00/1 6-35-047-04W5/0 and 00/1 0-35-047-04W5/0. The two
suspended oil wells have produced a combined oil production of approximately 1,500 Mbbl
from the northeast quarter of section 35. With the high water cuts from the wells at the time
of their suspension, up to 99 percent, and the assigned probable horizontal location to the
northeast, Deloitte advises that no reserves be assigned until this location is drilled and
proved productive.
Matziwin
No new locations were assigned reserves this year.
The Company plans to drill a short leg horizontal well at HZIO1-16-023-14W4/A to increase
Pekisko recovery in section sixteen. The Company has also planned to drill an offsetting
location at HZ/03-15-023-14W4/A. Proved undeveloped and proved plus probable reserves
were assigned primarily by analogy to the 02/04-15-023-14W410 well. Deloitte confirmed
estimated on-stream dates with the Company.
Minnehik-Buck Lake
No new locations were assigned reserves this year.
There are three horizontal Cardium locations accounted for in this property, with proved
locations assigned in section 17-045-05W5. A type well generated from existing vertical and
horizontal Cardium oil producers was used as the basis of assigning reserves. These new
locations are considered as infills, based on the estimated areal extent of the existing wells.
Currently, spacing for the Cardium is limited to four wells per section; however operators in
the area, such as Sinopec Daylight Energy to the north, have started downspacing to six or
eight wells per section. Deloitte has assigned reserves assuming the Company would get the
same approval for downspacing. Sinopec Daylight has also been experimenting with
increasing the length of the wellbores of their Cardium horizontal wells. The Company has
completed the 01-17 and the 08-17 wells with oil fractures, and the 09-17 was completed with
a slick-water fracture.
These infill locations were assigned reserves after a review of the original oil-in-place for
section 1 7-045-05W5. The production to date and the assigned reserves were used to
estimate the remaining oil-in-place. The remaining reserves were assigned to the two
horizontal infill locations after confirming the recovery factor from the gross production and
reserves assigned and compared to the pool ticket. One additional location to the north of
the 00/09-17 well has been forecast with the knowledge of higher GOR’s in the north of the
section as reflected in the 09-17 well. The profile for this northern location in the section
reflects the lower production rates and higher gas volumes, as seen in the 09-17 well,
therefore resulting in assigned reserves being closer to the 09-17 well. The Company no
longer plans to drill the previously assigned Cardium locations in section 08-045-05W5.
Nipisi
Seven new undeveloped locations were assigned reserves this year.
Over the next several years the Company also plans to drill several wells in this property in
order to access volumes not fully swept by the waterflood. Based on an analysis of the
waterflood in this area, Deloitte expects that there are some oil volumes remaining in the pool
that have not been accounted for within the reserves assigned to existing wells. A total of
seven locations have been assigned reserves based on a review of the geology and the
performance of offsetting wells. Two locations, LC/02-29-078-08W5/0 and LC!1 5-29-07808W5/0, has been assigned proved undeveloped reserves due to the lower water-cuts (less
5
than 95 percent) of the surrounding wells and the lack of offsetting water injection. The
remaining five locations have only been assigned probable reserves due to the uncertainty in
where the injected water has migrated and where the oil-water contact now lies and a
concern that initial water-cuts will possibly be too high for the wells to be economic.
Sakwatamau
No new locations were assigned reserves this year.
The Company has identified two horizontal drilling locations in the Belloy Formation in the
north part of the pool. These locations are proposed to the north of the existing defined pool
boundary. Probable undeveloped reserves have been assigned to both locations based on
volumetric analysis and a review of the previously produced wells in the pool. Proved
reserves were not assigned due to the lack of certainty regarding the oil water contact and
the effect of areal extent of these locations. Additionally, there has not been a horizontal well
drilled in this area targeting the Belloy Formation to date.
Strathmore
No new locations were assigned reserves this year.
Assigned probable undeveloped reserves for the drilling of the LC/1 4-07-022-25W5/A and
LC107-i 8-22-25W5/A locations as part of the Lower Mannville B Pool are estimated by
Deloitte to be drilled, completed, and producing in 2017. The estimated reserves, initial rate,
and segment profiles were assigned based on a review of the immediate offsetting wells and
the expected production from a revitalized waterflood in place. Deloitte also consulted
document provided by the Company, submitted to them by LandOcean Energy Services Co.
Ltd., dated March 2014. The document took an in depth analysis of the potential development
plans for the pool, and was titled “Improved Water Flooding Plan for Lower Mannville B of
Strathmore”. The Company has indicated that they plan to implement the development plans
outlined in the report and will continue to do so in the future. The direction from the report, is
to make full use of existing wells through perfecting injection patterns to achieve bidirectional
flooding for more oil wells, by adjusting the injections, attaining water cut control, and
increasing reservoir pressure. Proved undeveloped reserves were not assigned because of
the uncertainty that the Company will drill these locations in the near future.
Two Creek
—
Jurassic A
No new locations were assigned reserves this year.
An assignment of probable undeveloped reserves to this group includes the re-alignment of
the waterflood, including the reactivation of two non-producing wells and a water injection
well drilled at 00105-17-065-15W5/0. The forecast producing rates and incremental reserves
were based on simulation data provided by Terrex and the performance of the pool to date.
Based on confirmation from the Company, Deloitte has forecast water injection to commence
in mid-2016.
The Company has identified two horizontal drilling locations, the Hi/I 0-08-065-15W5/A and
the H2/12-08-065-15W5/A wells. Proved undeveloped reserves were assigned to the HI/b
08-065-15W51A oil location and probable undeveloped reserves were assigned to the H2/1208-065-15W51A oil location. Reserves are based on volumetric analysis from geological
parameters estimated from offset well logs by Deloitte. A drainage area of 80 acres and a
recovery factor of 20 percent was based on the expected recovery of a waterflood in this pool
and the offset production of the horizontal wells in the pool. The initial producing rate and
forecast production trend were based on the 00/14-08-065-15W5/00, 102/02-17-06515W5/00, and 100/06-17-065-15W5/00 wells producing from the pool. Based on
6
confirmation from the Company, Deloitte has forecast the two locations to come on-stream in
2017.
Two Creek
—
Jurassic B
No new locations were assigned reserves this year.
Probable undeveloped reserves have been assigned based on a waterflood development
plan proposed by the Company. As identified by the Company at last year’s evaluation, the
pressure in the Jurassic B Pool has been significantly depleted to approximately 13 percent
of the original pressure, through the production of oil and water, but predominantly from the
large volumes of gas produced. The Company identified both a gas cap and downdip water
leg, each largely influencing the pool production. According to the plan proposed previously
by Terrex, a reservoir re-pressurization to 40 percent of the original would be required in
order to successfully develop the waterflood. Deloitte has estimated that this would require
suspending production for approximately one year during injection, through three injector
entities as identified by the Company. Injection would occur in the southern portion of the
pool, near the migrated water-oil contact estimate. Two additional producers are also
expected to be reactivated after this year of injection is complete.
Terrex previously identified the Killam North Upper Mannville F2F pool as an analogous
waterflood scenario. It should be noted that while both pools have seen pressure depletion,
the Killam pool is not a direct analog. The Killam pool contains: a heavier oil (24 API) with
less expected solution gas, a higher porosity, lower initial water saturation, and is
approximately five times the size by volume of oil initially-in-place. The Killam pool pressure
was depleted from an original six MPa to under one MPa before the waterflood was
implemented, and according to public data, the pool has an estimated five percent
incremental recovery factor due to the enhanced oil recovery from the waterflood. That
incremental recovery factor is considered reasonable, and has been applied in the Two
Creek B pool. This represents a total estimated ultimate recovery of 1.0 MMbbl on the total
proved plus probable case.
—
Item 5.2
Significant factors or uncertainties
Reserve estimates are subject to change with such factors as updated production data, well
performance and operational issues, ongoing development activities, price forecasts, and
other economic conditions.
Item 5.3
Future development costs
Undiscounted utwe
coStS net (M$)
øIscount (iO%)
futtire costs net M$)
rov
2015
2016
2017
2018
2019
2020+
Total
7,964.7
5,129.6
4,993.9
9,489.7
22,349.8
15,241.9
7,523.0
4523.8
4,012.0
8,992.7
19,461.2
12,069.0
18,088.2
47,081.4
16,058.8
40,522.9
Forecast capital expenditures will be funded by forecast cash flow, development lines of
credit and additional equity.
7
Part 6: Other oil and gas information
Item &1
Oil and gas properties and wells
Item 6.1.1
Major properties
Breton, Alberta
The Breton property is located near the town of Breton, Alberta approximately 50 miles southwest
of Edmonton, Alberta in Townships 47 and 48, Ranges 3 and 4 W5M. The property contains two
producing oil wells, one producing oil Unit containing six wells, and seven drilling locations. The
Company holds a working interest of 100 percent in the majority of their wells, as well as two
royalty interest only wells. Production is from the Belly River Formation.
The Breton property consists of six producing oil wells which are in the Norbuck Basal Belly River
B Pool Unit, two producing Non-Unit oil wells, and six oil well locations, five of which are
horizontal wells. There are also three producing oil wells and two producing gas wells to which
no reserves were assigned as they are producing below the economic limit. In addition, there are
several service wells which are used to dispose of water and other produced fluids. The two
Non-Unit producing wells in the property have been assigned proved developed producing
reserves, based on decline analysis with consideration towards well performance.
All other wells in the property were either uneconomic or have not produced for a reasonable
amount of time in which it was assumed they would not come back on-stream. No reserves have
been assigned to these entities.
Nipisi, Alberta
The Nipisi property is located approximately 40 miles northwest of Slave Lake, Alberta in
Townships 78 and 79, Ranges 8 and 9 W5M. The Company acquired the property from
Pengrowth Energy Corp. effective December 18, 2013 and holds working interests ranging from
22.5 to 100 percent in 17 oil wells producing from the Gilwood Formation. The Company is the
main operator in the property.
Proved developed producing reserves have been assigned to 17 producing entities based on
decline analysis with consideration towards performance history of the wells and the area. Based
on received operating statements, gas has been conserved on all of the wells in the property.
Gas-oil ratios have been estimated based on the performance of the wells. The wells included in
this property are located primarily to the west of the Nipisi Gilwood Unit 1. The Gilwood A pool
was first produced from in 1965, and water injection was implemented in 1969. The western flank
of the pool, where these wells produce from, was first brought on-stream in the early 1980s.
The Company has indicated that they plan to reactivate and install new pumps in five wells which
are currently not producing. These reactivations coincide with plans to resume water injection on
two wells: 00/10-08-079-08W5/0 and 00/12-17-079-08W5/0. Proved developed non-producing
reserves have been assigned to these wells assuming production will return to the rates seen
prior to shut-in, It is expected that the reactivation of the water injectors will provide pressure
support and result in similar decline rates in these wells. Based on the capital required to
reactivate these wells and their expected remaining volumes, two of these planned reactivation
wells were found to be uneconomic and therefore have not had any reserves assigned.
The Company also plans to install new pumps on four wells that are currently producing. A
review of wells in the pool which have undergone pump changes in the past show that these
pumps generally result in a doubling of the prior oil production rate. Proved developed non
producing reserves have been assigned to these four wells based on this increase in rate and a
slightly steeper decline rate than seen prior to the pump installation.
8
All other entities in the property are either suspended, abandoned, or water injection wells and
are not producing oil volumes. No reserves have been assigned to these entities.
Strathmore, Alberta
The Strathmore property is located 40 miles southeast of Calgary, Alberta in Townships 21 to 23,
Ranges 25 to 26 W4M. The Company has 100 percent working interest in the Strathmore
property which contains 29 non-producing wells and the oil producing Lower Mannville B Pool
group. The Lower Manville B Pool group consists of six producing oil wells and 35 non-producing
oil wells. The wells in this property are producing from the Ellerslie Formation. The Company is
the operator of this property.
The producing wells in the Lower Mannville B Pool have been evaluated as a group. There have
been six to nine producing wells in the group over the past two years, and more than 30 nonproducing oil wells. Proved developed producing and proved plus probable developed producing
reserves have not been assigned due to the high operating costs, lower recent production
volumes, and low oil prices.
Proved developed reserves have been forecast based on the reactivations of the following wells:
00/12-31-021 -25W4, 00/13-31-021 -25W4, 00/03-06-022-25W4, 00/05-06-022-25W4, 00/14-06022-25W4, 00/04-07-022-25W4, 00/02-1 8-022-25W4, 02/10-1 8-022-25W4, 00/11-1 8-022-25W4,
and 00/05-1 9-022-25W4. The timing and capital for the reactivations have been scheduled for
the first and third quarter of 2015. As part of the reactivation, the Company will be installing
electric submersible pumps to increase fluid output from the wells. It is assumed that the
workovers will increase overall productivity in the pool. The Company has also undertaken a
program to convert wells to injectors and increase injection rates in the pool, expecting overall
fluid production to increase, maintaining the watercuts exhibited over the past several years.
Item LI 2
Gross and net oil and gas wells
Canada
Alberta
Saskatchewan
Total
50.0
1.0
51.0
46.1
0.5
46.6
-
-
-
-
-
-
175.0
7.0
182.0
164.6
3.3
167.9
225.0
8.0
233
210.7
3.8
214.5
The Company does not have any additional wells that were not evaluated by Deloitte.
Item 62
Properties with no attributed reserves
The Company has 4,547 total hectares (3,410 ha net) of land in Abbott, Saskatchewan where
no reserves have been assigned. The Company farmed-out a 25% interest in the lands, the
proceeds from which were used to drill a second exploration test well. The well was drilled,
logged, and abandoned.
Item 6.3
Forward contracts
The Company has an oil volume hedge with Nexen for 150 bbls of crude per day from June
1, 2014 through May 31, 2015 on a zero cost collar basis with a floor of $97.00 Canadian per
bbl and a ceiling of $112 Canadian per bbl.
9
Item 6.4
Additional information concerning abandonment and reclamation costs
No. of net wells
Included in evaluaton
Not included in evaluation
214.5
0.0
$90,000/well
$50,000/well
$65,000/well
$70,000/well
$75,000/well
$50,000/well
$90,000IwelI
$70,000/well
$80,000/well
$80,000/well
Judy Creek
Matziwin
Minnehik-Buck Lake
Nipisi
Sakwatamau
Scots Lake
Shadow
Strathmore
Two Creek Jurassic A
Two Creek Jurassic B
—
—
The abandonment costs are based on area averages taken from the Alberta Energy
Regulator (AER) Directive 011 called the “Alberta Regional Well Abandonment Cost Tables”.
Reclamation costs are taken from the AER Directive 011 section called “Alberta Regional
Well Reclamation Cost Table”.
Next 3 fiscal years
Following years
Total
Item 6.5
2,295.4
15,709.9
18,005.3
M$
2,295.4
17,897.5
20,192.9
1,874.6
7,055.3
8,929.9
M$
1,874.6
6,947.2
8,821.9
Tax Horizon
The Company is expected to begin paying income tax in 2022 based on proved plus probable
cash flow economics.
Item 6.6
Costs incurred
$
Proved property acquisition
206,579
Land acquisition (unproved)
Exploration
Development
6,740,661
Total
6,947,240
10
Item 6.7
Exploration and development activities
The Company did no exploration and development drilling in 2014.
Item 6.8
Production estimates
Foreast production working interest
Januanf 1,2015- December31, 201S
Proved
Proved
+
probabte
Breton
Oil (Mbbl)
Gas (MMcf)
NGL (Mbbl)
19.2
10.9
0.1
26.5
13.7
0.1
Oil (Mbbl)
Gas (MMcf)
NGL (Mbbl)
122.6
37.2
9.2
124.1
36.8
9.1
Oil (Mbbl)
Gas (MMcf)
NGL (Mbbl)
24.4
133.3
0.8
24.4
133.3
0.8
50.3
36.3
1.6
50.8
37.5
1.6
216.6
217.7
11.6
225.9
221.4
11.6
Nipisi
Strathmore
Remaining properties
Oil (Mbbl)
Gas (MMcf)
NGL (Mbbl)
Total
Oil (Mbbl)
Gas (MMcf)
NGL(Mbbl)
11
Item 69
Production history
Total Company
Q12014
Q22014
Q32014
Q42014
54,903
43,728
2,171
64,362
53,256
36,161
2,492
61,775
47,391
31,341
2,328
54,943
53,430
39,904
3,474
63,555
Production
oil, bopd
gas, Mcf/d
natural gas liquids, bopd
Boe/d
610
486
24
715
585
397
27
679
515
341
25
597
581
434
38
691
Price
oil, $Ibbl
gas, $/Mcf
natural gas liquids, $Ibbl
Total, $IBoe
96.28
6.32
70.66
88.80
100.13
5.06
56.01
91.55
94.07
4.27
47.42
85.58
70.43
3.50
46.18
63.94
Operating expenses, royalties, and netback
averages, $IBoe
royalties paid
operating cost
netback
19.71
40.78
21.92
23.59
44.49
15.60
20.91
54.95
2.43
18.55
37.53
1.30
Volumes
oil, bbl
gas, Mcf
natural gas liquids, bbl
Boe
12
Reserve definitions
Reserves are classified in accordance with the following definitions which meet the standards established by
National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and found in Appendix I to
Companion Policy 51-101 CP, Part 2 Definition of Reserves.
Reserve categories
Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be
recoverable from known accumulations, from a given date forward, based on
•
•
•
analysis of drilling, geological, geophysical and engineering data;
the use of established technology; and
specified economic conditions, which are generally accepted as being reasonable and are
disclosed.
Reserves are classified according to the degree of certainty associated with the estimates:
Proved Reserves are those reserves that can be estimated with a high degree of certainty to be
recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated
proved reserves.
Probable Reserves are those additional reserves that are less certain to be recovered than proved
reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than
the sum of the estimated proved plus probable reserves.
Possible Reserves are those additional reserves that are less certain to be recovered than probable
reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the
estimated proved plus probable plus possible reserves.
Development and production status
Each of the reserves categories (proved, probable and possible) may be dMded into developed and
undeveloped categories:
Developed Reserves are those reserves that are expected to be recovered from existing wells and
installed facilities or, if facilities have not been installed, that would involve a low expenditure (for
example, when compared to the cost of drilling a well) to put the reserves on production. The
developed category may be subdivided into producing and non-producing.
Developed Producing Reserves are those reserves that are expected to be recovered from
completion intervals open at the time of the estimate. These reserves may be currently
producing, or if shut-in, they must have previously been on production, and the date of
resumption of production must be known with reasonable certainty.
Developed Non-Producing Reserves are those reserves that either have not been on
production, or have previously been on production, but are shut-in, and the date of
resumption of production is unknown.
Undeveloped Reserves are those reserves expected to be recovered from known accumulations
where a significant expenditure (for example, when compared to the cost of drilling a well) is required
to render them capable of production. They must fully meet the requirements of the reserves
classification (proved, probable, possible) to which they are assigned.
13
Use of Barrels of Oil Equivalent (Boe)
Disclosure provided herein in respect of Boe units may be misleading, particularly if used in isolation. A Boe
conversion ratio of 6 Mcf of natural gas to I bbl of cwde oil is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Abbreviations
Certain terms and abbreviations used in this document are defined below:
“bbl”
“bcf’
“bpd”
“Boe”
“Boe/d”
“Mbbl”
“MBoe”
“McI”
“Mcfe”
“Mcf/d”
“MMcV’
“MMcf/d”
“NGLs”
barrel of oil or NGL;
billion cubic feet of natural gas;
barrel of oil or NGL per day;
barrel of oil equivalent determined by converting a volume of natural gas to barrels using
the ratio of 6 Mcf to one barrel;
barrel of oil equivalent per day;
thousand barrels;
thousand barrels of oil equivalent;
thousand cubic feet of natural gas;
Mcf of gas equivalent determined by converting a volume of oil or NGL to Mcf using the
ratio of 0.1667 barrels to 1 Mcf;
thousand cubic feet of natural gas per day;
million cubic feet of natural gas;
million cubic feet of natural gas per day;
natural gas liquids;
United States dollar;
Canadian dollar.
Conversion
In this document measurements are given in standard Imperial or metric units only. The following table sets
forth certain standard conversions.
To convert from:
Mcf
Cubic metres
bbls
cubic metres
feet
metres
miles
kilometres
acres
hectares
To:
cubic metres
cubic feet
cubic metres
bbls
metres
feet
kilometres
miles
hectares
acres
Multiply by:
28.174
35.494
0.159
6.290
0.305
3.281
1.609
0.621
0.405
2.471
14
Appendix
NI 51-1 01 Forecast— Oil and Gas Reserves Summary
NI 51-101 Forecast— Summary of Net Present Values of Future Net Revenue
NI 51-101 Forecast—Total Future Net Revenue
NI 51-101 Forecast— Unit Value of Net Reserves by Production Group
NI 51-101 Forecast— Reconciliation of Company Gross Reserves
Deloitte Price Forecast December 31, 2014
-
WI
2,072.1
2,309.2
4,381.4
TP
PB
P÷P
303.1
329.3
367.0
696.2
TP
PB
P+P
584.4
65.4
281.3
79.0
PUD
82.0
E3m3
133.9
Net
Share
92.8
WI
Gross
E3m3
157.4
Co.
Light, medium
and shale
3,677.3
1,907.3
1,770.0
PONP
POP
Category
497.3
PUD
157.0
84.9
72.1
16.4
1.6
54.0
E3m3
WI
Gross
Heavy
Oil
988.1
534.5
453.5
103.3
10.2
515.8
411.7
340.1
842.5
584.3
Mbbl
Gross
990.6
Net
MbbI
WI
Gross
Mbbl
Heavy
Oil
PDP
PDNP
Co.
Share
Light, medium
and shale
Effective: December31, 2014
Category
_
130.4
68.9
61.6
13.7
1.4
46.4
Co.
Share
Net
E3m3
820.9
433.5
387.4
86.5
Mbbl
292.0
8.9
Net
Co.
Share
WI
0.0
0.0
0.0
0.0
0.0
0.0
E3m3
Gross
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Co.
Share
Net
E3m3
Bitumen
0.0
0.0
0.0
0.0
WI
Gross
MbbI
0.0
0.0
Co.
Share
Net
Mbbl
0.0
0.0
0.0
Bitumen
—
2,580.6
1,048.3
1,532.4
357.3
0.0
0.0
0.0
0.0
0.0
0.0
MMcf
Gross
WI
0.0
0.0
84.2
34.1
50.1
13.0
22.0
15.1
E6m3
Gross
WI
72.7
29.5
432
10.1
21.1
12.1
Co.
Share
Net
E6m3
Solution
0.0
0.0
0.0
0.0
MMcf
Net
Co.
Share
a4cI
0.0
0.0
0.0
0.0
0,0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
aod
Co.
WI Share
Gross
Net
E6m3
E6m3
Natural gas
Associated
VOLUMES IN METRIC UNITS
2,989.4
1,211.6
1,777.9
461.9
MMcf
536.8
779.2
Gross
WI
Co.
Share
Net
MMcf
427.9
747.2
Solution
Natural gas
Associated
VOLUMES IN IMPERIAL UNITS
Canada
0.0
0.0
0.0
0.0
0.0
0.0
WI
Gross
E6m3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Co.
Share
Net
E6m3
Coalbed
methane
0.0
0.0
0.0
0.0
0.0
0.0
WI
Gross
MMcf
Co.
Share
Net
MMcf
Coalbed
methane
Anterra Energy Inc.
NI 51 -101 FORECAST CASE
OIL AND GAS RESERVES SUMMARY
Deloitte December 31, 2014 Forecast Pricing
—
Net
107.5
42.5
65.0
13.6
12.3
39.2
Mbbl
25.9
10.0
15.9
3.4
2.7
WI
Gross
E3m3
9.8
17.1
6.7
10.3
2.2
2.0
6.2
Co.
Share
Net
E3m3
Natural gas
liquids
163.0
63.1
99.9
21.3
16.9
61.7
WI
Gross
Mbbl
Co.
Share
Natural gas
liquids
0.0
0.0
0.0
0.0
0.0
WI
Gross
E3t
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Co.
Share
Gross
E3t
0.0
0.0
0.0
0.0
0.0
0.0
Gross
MIt
Sulphur
0.0
0.0
0.0
0.0
0.0
0.0
WI
Gross
MIt
Co.
Share
Sulphur
958.3
494.0
464.3
111.0
117.8
235.5
E3m3e
Gross
WI
Co.
5,035.8
2,558.0
2,477.8
571.3
661.4
1245.1
Share
Net
MBoe
800.2
406.5
393.7
90.8
105.1
197.9
Co.
Share
Net
E3m3e
Total Boe
6,030.7
3,108.8
2,921.9
698.8
741.2
1,481.9
Gross
MBoe
WI
Total Boe
_
-
_
MS
27083.3
8,059.3
43,910.9
36115.1
14,411.0
19,098.2
69,624.2
86,544.3
156,168.5
PDP
PDNP
PUD
TP
PB
Ri-P
MS
10%
57,470.1
26,397.8
31,072.3
3,178.8
5,529.0
22,364.6
Values may not add due to rounding
Unit Value calculation based on Net Boe reserves.
88,433.9
44,523.1
8,768.3
5%
MS
Before Income Taxes
0%
Reserves
category
—
—
—
—
—
39,946.1
16,387.8
23,558.3
725.0
3,482.9
19,350.4
MS
15%
28,811.2
10,138.1
18,673.2
(632.1)
2,096.4
17,208.9
MS
20%
64,891,9
64,720.3
14,306.2
14,299.1
36,115.1
MS
0%
129,612.2
Canada
75,251.6
33,211.7
42,040.0
6,199.8
8,756.9
27,083.3
MS
5%
49,692.1
19416.3
30,275.8
2,383.5
5,527.7
22,364.6
MS
10%
After Income Taxes
34,908.4
11,717.6
23,190.8
57.6
3,482.7
19,350.4
MS
15%
—
Anterra Energy Inc.
NI 51-101 FORECAST CASE
SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE WITH CORPORATE TAX POOLS
Deloitte December 31, 2014 Forecast Pricing
Effective: December 31, 2014
—
25,357.0
6,864.2
18,492.8
(812.5)
2,096.3
17,208.9
20%
MS
11.41
10.32
12.54
5.56
8.36
17.96
Income Tax
Discounted
at 10%
$IBoe
Before
Unit Value
—
—
—
—
58,034.7
67,064.3
261,602.1
301,708.0
563,310.0
PDNP
PUD
TP
PB
P÷P
91,717.4
53,913.3
37,804.1
11,573.0
7,044.4
19,186.7
MS
Royalties
—
—
—
—
—
—
MS
248,149.8
130,069.6
118,080.2
24,338.4
29,799.3
63,942.4
47,081.4
28,993.2
18,088.2
11,308.2
6,780.0
0.0
MS
Development Costs
20,192.9
2,187.5
18,005.3
746.5
0.0
17,258.8
MS
Costs
Well Abandonment
Canada
—
156,168.5
86,544.3
69,624.2
19,098.2
14,411.0
36,115.1
MS
Before Income Taxes
—
26,556.3
21,652.4
4,903.9
4,792.0
111.9
0.0
MS
Expenses
Income Tax
—
Future Net Revenue
Anterra Energy Inc.
NI 51-101 FORECAST CASE
TOTAL FUTURE NET REVENUE WITH CORPORATE TAX POOLS
Deloitte December 31, 2014 Forecast Pricing
—
Operating Costs
_
*Revenue includes product revenue and other income from facilities, wells and corporate if specified.
136,503.0
MS
PDP
Category
Revenue*
Effective: December31, 2014
-
129,612.2
64,891.9
64,720.3
14,306.2
14299.1
36,115.1
MS
Future Net Revenue
After Income Taxes
Anterra Energy Inc.
NI 51-1 01 FORECAST CASE
UNIT VALUE OF NET RESERVES BY PRODUCTION GROUP
Deloitte December 31, 2014 Forecast Pricing
Effective: December 31, 2014
Canada
Reserves
Oil
Gas
NGL
Boe
NPV
Unit Value
Net
Net
Mbbl
Net
10%
$/Primary
Mbbl
Net
MMcf
MBoe
9j,MedIum Crude Oil
Proved developed producing
Proved developed non-producing
Proved undeveloped
Proved
Probable
Proved plus probable
842.5
515.8
411.7
1,770.0
1,907.3
3,677.3
427.9
747.2
357.3
1,532.4
1,048.3
2,580.6
39.2
12.3
13.6
65.0
42.5
107.5
953.0
652.6
484.8
2,090.4
2,124.5
4,214.9
19,394.1
5,463.6
3,019.4
27,877.2
23,536.1
51,413.2
M$IMbbl
23.02
10.59
7.33
15.75
12.34
13.98
Heavy Oil
Proved developed producing
Proved developed non-producing
Proved undeveloped
Proved
Probable
Proved plus probable
292.0
8.9
86.5
387.4
433.5
820.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
292.0
8.9
86,5
387.4
433.5
820.9
2,970.5
65.3
159.4
3,195.2
2,861.7
6,056.9
M$IMbbl
10.17
7.38
1.84
8.25
6.60
7.38
1,134.6
524.6
498.2
2,157.3
2,340.8
4,498.2
427.9
747.2
357.3
1,532.4
1,048.3
2,580.6
39.2
12.3
13.6
65.0
42.5
107.5
1,245.1
661.4
571,3
2,477.8
2,558.0
5,035.8
22,364.6
5,529.0
3178.8
31,072.3
26,397.8
57,470.1
M$/MBoe
17.96
8.36
5.56
12.54
10.32
11.41
Product
Total
Proved developed producing
Proved developed non-producing
Proved undeveloped
Proved
Probable
Proved plus probable
—
-
—
_
61.9
348.8
0.0
0.0
43.7
0.0
2,309.2
25.8
260.7
0.0
0.0
0.0
54.7
0.0
2,072.1
Technicalrevisions
Extensions & improved recovery
Discoveries
Acquisitions
DisposItions
EconomicFactors
Infihl Drilling
Closing balance
0.0
-182.7
Opening balance
Production
4,381.4
0.0
128.5
0.0
0.0
609,5
87.6
-162.7
3,975.4
Mbbl
Mbbl
1,972.3
Probable
Mbbl
Proved
Medium Oil
Proved
+probable
Light &
2,003.1
Effective: December 31, 2014
—
—
453.5
0.0
1.7
0.0
0.0
0.0
4.4
-36.7
493.0
Mbbl
Proved
534.5
0.0
1.6
0.0
0.0
0.0
2.5
0.0
533.6
Mbbl
Probable
Heavy Oil
988.1
0.0
0.1
0.0
0.0
0.0
-1.9
-36.7
1,026.6
Mbbl
Proved
+probable
Canada
1,777.9
0.0
25.6
0.0
0.0
72.1
47.7
102.9
1,786.6
Mbbl
Proved
1,211.6
0.0
43.6
0.0
0.0
127.3
-518.2
0.0
1,648.0
Mbbl
Probable
Gas
2,989.4
0.0
23.0
0.0
0.0
199.4
516.7
-102.9
3,432.6
Mbbl
Proved
+probable
Associated & Non-Associated
Anterra Energy Inc.
NI 51-101 FORECAST CASE
RECONCILIATION OF COMPANY GROSS RESERVES BY PRINCIPAL PRODUCT
—
Opening Case: Deloitte December 31, 2013 Forecast Pricing
Closing Case: Deloltte December 31, 2014 Forecast Pricing
—
99.9
0.0
1.1
0.0
0.0
17.5
13.5
-9.6
79.6
Mbbl
Proved
63.1
0.0
0.2
0.0
0.0
22.7
-1.7
0.0
42.2
Mbbl
Probable
163.0
0.0
0.9
0.0
00
40.2
11.5
-9.6
121.8
Mbbl
Proved
+probable
Natural Gas Liquids
I
U
II
tc
I
h
h
I
i
Ii
p
gg8
I,
<I
•0 — SOIl S
—
—
—
—
—
—
—
—
—
—
—
—
Deloitte
NI 51-101 Form F2
Report on reserves data
by
independent qualified reserves
evaluator or auditor
To the Board of Directors of Anterra Energy Inc. (the “Company”):
2.
We have evaluated the Company’s reserves data as at December 31, 2014. The reserves data are
estimates of proved reserves and probable reserves and related future net revenue as at December 31,
2014, estimated using forecast prices and costs.
The reserves data are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the reserves data based on our evaluation.
We carried out our evaluation in accordance with standards set out in the Canadian Oil and Gas
Evaluation Handbook (the “COGE Handbook”) prepared jointly by the Society of Petroleum Evaluation
Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum
Society).
Those standards require that we plan and perform an evaluation to obtain reasonable assurance as to
whether the reserves data are free of material misstatement. An evaluation also includes assessing
whether the reserves data are in accordance with principles and definitions presented in the COGE
Handbook.
The following table sets forth the estimated future net revenue (before deduction of income taxes)
attributed to proved plus probable reserves, estimated using forecast prices and costs and calculated
using a discount rate of 10 percent, included in the reserves data of the Company evaluated by us for the
year end December 31, 2014 and identifies the respective portions thereof that we have evaluated and
reported on to the Company’s management/Board of Directors:
Independent
Qualified
Reserves
Evaluator or
Abditor
Deloitte LLP
Location of
Reserves (Cou1tr.
or Fo eigrr
Geograpn’c Area)
Description and
Preparation Date of
Eualuatior Report
Anterra Energy Inc.
Rem:ion
:
1
nd
Net Present Value o
5 Fuire Net Rejer’ue
QCI
before ncorne taxes 1
d scount rate\
Audited
Evatua”ed
Rev ewec,
SM
SM
$M
Canada
-
$57,470.1
-
Total
SM
$57,470.1
December31, 2014
5.
6.
7.
In our opinion, the reserves data respectively evaluated by us have, in all material respects, been
determined and are in accordance with the COGE Handbook, consistently applied. We express no
opinion on the reserves data that we reviewed but did not audit or evaluate.
We have no responsibility to update our reports referred to in paragraph 4 for events and circumstances
occurring after their respective preparation dates.
Because the reserves data are based on judgments regarding future events, actual events will vary and
the variations may be material.
Executed as to our report referred to above:
Deloitte LLP
nd
700, 850 2
Street S.W.
Calgary, Alberta
T2POR8
—
Original signed by: “Douglas S. Ashton”
Douglas S. Ashton, P. Eng.
Partner
Execution date: February 27, 2015
TABE
TillS [S !XlIEBlT
referred to in the Affidavit of
‘-
Sworn bcfore me this
Day of
I
M C LENNAN lOSSar
LEGAL COUNSEL
A NO
JBLIC
FOR THE PROVINCU
Our File Rererence:
151789
Charles P. Russell, Q.C.
Direct Line: (780)482-9115
e-mail: [email protected]
Lynn Matthews, Assistant
Direct Line: (780) 482-9262
Fax: (780) 733-9757
April ii, 2016
PLEASE REPLY TO EDMONTON OFFICE
VIA EMAIL
randa1.vandemosselaernortonroseflilbright.com
Anterra Energy Inc.
do Norton Rose Fulbright Canada LLP
#3700, 400 3rd Avenue SW
Calgary, AB T2P 4H2
-
Attention: Randall Van de Mosselaer
Dear Sir:
Re:
Canadian Western Bank (“CWB”) / Anterra Energy Inc. (“Anterra”)
We are counsel for CWB.
The Borrower is indebted to CWB in the amount of $10,211,782.26 as at April 11, 2016.
Interest continues to accrue due on this indebtedness from April 8, 2016. Costs incurred by
CWB in registering, reviewing and enforcing the Borrower’s obligations are also
recoverable by CWB on a solicitor and his own client basis.
As security for the foregoing obligations, the Borrower has granted to CWB the following:
(a)
$35,000,000.00 Debenture dated October 20, 2010;
(b)
General Assignment of Book Debts;
(the “Borrower’s Security”).
The Borrower has defaulted in performance of obligations owed to CWB as referenced in
the Borrower’s Security and various collateral agreements entered into by CWB and the
Borrower. CWB hereby declares all indebtedness to now be due and owing. CWB hereby
Edmonton Office
600 McLennan Ross Building
12220 Stony Plain Road
Edmonton. AS T5N3Y4
p. 780.482.9200
f. 780.482.9100
f. 1,800.567.9200
Calgary Office
1000 FIrst Canadian Centre
350— 7” Avenue SW
Calgary, AS T2P3N9
p. 403.543.9120
f 403.543,9150
tf 1.888.543.9120
Visit our website at www.mross.com
Yellowknife Office
301 Nunasi Building
5109—48” Street
Yellowknlfe, NT XIA 1N5
p. 867.766.7677
1. 867.766.7678
tL 1.888.836.6684
-2-
demands that the Borrower make payment to CWB of the foregoing obligations, by April 21,
2016.
In default of payment of the foregoing, CWB will take such steps as it considers necessary to
enforce the Borrower’s Security, and all such other security as CWB may hold, and take
such other steps as CWB may deem appropriate.
Enclosed is a Notice of Intention to Enforce Security.
Please govern yourselves accordingly.
Yours trul)
CHARLES P. RUSSELL, Q.C.
CPRJjjfYana
End.
cc:
All vri Email:
Canadian Western
Canadian Western
Canadian Western
Canadian Western
Bank Attention:
Bank Attention:
Bank Attention:
Bank— Attention:
—
Jessie Taha
Arden Buskell
Kuno Ryckborst
Jefl’Bowllng
C:\Users\lrnatthews\AppData\LocaI\MicrosaftWindows\Temporary
Letter to Anterra (0131 7323x7ACI F)docx
Internet
FiIesContent.OutIook\JL3STVQU’Demand
NOTICE OF INTENTION TO ENFORCE SECURITY
(subsection 244(1), of the Bankruptcy & Insolvency Act)
TO:
ANTERRA ENERGY INC.
an insolvent person
TAKE NOTICE THAT:
1.
CANADIAN WESTERN BANK, a secured creditor, intends to enforce its
security on the personal and real property charged by the insolvent person pursuant to:
(a)
$35,000,000.00 Debenture dated October 20, 2010;
(b)
General Assignment of Book Debts;
(the “Security”).
2.
The total amount of indebtedness secured by the Security is $10,211,782.26 as at
April 11,2016 plus costs.
3.
The secured creditor will not have the right to enforce the security until after the
expiry of the 10 day period following the sending of this notice, unless the insolvent person
consents to an earlier enforcement.
th
1
day of
DATED at the City of Edmonton, in the Province of Alberta, this 1
April, 2016.
CANADIAN WESTERN BANK
BY ITS
ZICORSANMCENNANSS
CHARLES P. RUSSELL, Q.C.
H:WDocs’I 51 789OI 31733 I .DOC
TABF
mis is ,xmnur
rc1rrcd U)
ill tji
Au1d1Wit
Of
Sworn bforc me this 3Lc1.
March 14 2016
A
1?OR THE PROVINCE
President
Anterra Energy Inc.(A2LN)
1420- 1122 4 St SW
Calgaiy, AB T2R 1M1
Alberta
Energy
Re g ulator
Calgary Head Office
Suite 1000, 250—5 Street SW
Calgary, Alberta T2P 0R4
Canada
Notice of Noncompliance
Noncompliance with the Liability Management Program Requirements
Monthly Liability Management Rating (LMR) Assessment
Assessment Number: 17266
Dear Sir/Madam:
The AER, in a letter dated February 11, 2016 directed Anterra Energy Inc. to provide a security deposit
for the difference between its Deemed Assets and Deemed Liabilities and/or to fulfill a site-specific
security deposit requirement by March 04, 2016. As the AER has not received the required security
deposit by March 04, 2016, Anterra Energy Inc. is in noncompliance with the LMR requirements. As
such, the AER is issuing Notice of Noncompliance.
The required security deposit of $2,218,034.42 calculated from the March/2016 LMR assessment, must
be received by the AER on or before April 01,2016 and must not be combined with any other payment.
The AER will accept only payment methods meeting the requirements of Directive 068. Please send
payment to the AER, Attention: Manager, Liability Management.
Failure to comply with the noted remedial actions will result in a regulatory response from the AER
consisting of additional remedial and/or enforcement consequences which may include the issuance of an
AER Order.
As an alternative to paying the required security deposit in full immediately, the AER has developed the
Licensee Liability Rating (LLR) Program Management Plan (plan), as detailed in Bulletin 20 14-06,
which allows payment of security in installments, Bulletins and the plan are available on the AER’s
website (www.aer.cu). Note, until a submitted plan has been approved by the AER, standard timelines and
escalation practices will continue.
Questions regarding this assessment should be directed to the Liability Management helpline at 403-2973113 or [email protected].
Sincerely,
Liability Management
TABG
!Xl
Tl{13
referred to iii the
1dir’it ot
Sworn before inc this ...3c_..
Day of
-
FOR ThE PROV IN CE
TERM SHEET
Whereas Western Union Petro International Co. Ltd, (“VUP”) a Chinese Corporation
resident in I-long Kong; wishes to invest in Anterra Energy Inc. (“Anterra” or “the
Corporation”), a Canadian listed company (TSX Venture Exchange AIiA) and thereby acquire
a major interest in the Corporation through the subscription for Anterra common share for cash
and whereas Anterra is in agreement with such an investment (“the Transaction”); the following
outincs the principal terms and conditions relating to the Transaction.
-
I. Cash Investment
WU1 shall subscribe for, and Anterra shall issue from treasury, 2,400,000,000 common
shares of Anterra at a price of CAD $0.005 per share for total consideration of CAD S 12
million.
2. Creditors Arrangement
The Transaction shall occur in conjunction with an arrangement whereby Anterra will
settle approximately CAD $11.8 million of unsecured debt and CAD $4 million of
convertible debentures pursuant to a Plan made under the provisions of the Companies’
Creditors Arrangement Act of Canada or by way of a comparable arrangement.
3. Investment Agreement
The terms and conditions of the Transaction shall be set out in a definitive agreement
(“the Agreement”) to be prepared by AntelTa on execution of this Term Sheet.
4. Board Position
On execution of the Agreemeffi. WUP and its nominee acting together, shall have the
right to nominate individuals to Anterra’s Board of Directors according to its share
position in Anterra.
5. Closing
Closing of the Transaction shall occur concurrently with closing of the Creditors
Arrangement referred to in 2 above.
6. Deposit
On execution of this Term Sheet, WUP shall deposit, by means of wire transfer, the sum
of CAD $1 million in trust with the Corporation’s legal counsel, Norton Rose Fuibright
Canada LLP. Such deposit will be availab]e to the Company to commence the CCAA
process and other corporate purposes necessaiy to the CCAA process. The balance of the
1P,’g’
4W
Cash investment (CAD $1 I ,000,000) is to be released to the Corporation on Closing or
on such earlier date as agreed to by WUP.
Should the Transaction not close as anticipated, through no fault of Anterra, the deposit
amount shall be returned to WUP, net of CAD 5500,000 being an estimate of related
costs incurred by Anterra. in such an instance, Anterra shall issue to WUP 100,000,000
shares of Anterra at a price of CAD $0.005 per share in exchange for the amount
withhcld.
Wire transfer instructions
are attached hereto.
7. Anterra Share Consolidation
Concurrent with the execution of the Agreement, or as soon as practicable thereafter,
Anterra shall effect a share consolidation on the basis of one new Anterra share in
exchange for 20 old Anterra shares, or such other ratio as agreed to by the Board of
Directors.
8. Approvals
The issuance of common shares as contemplated herein is subject to various approvals
including approval by the Corporation’s Board of Directors, regulatory approvals
including approval by the TSX Venture Exchange, and approval of the Share
Consolidation by the shareholders of Anterra.
9. Confidentiality
No News Release or other disclosure shall be made by Anterra or WUP prior to the
execution of the Agreement without prior consultation and consent between Anterra and
WUP, provided that no party shall be prevented from making any disclosure required to
be made by law or regulatory bodies.
The terms and condition as set out above shall remain open for acceptance until 4:00 pm
Mountain Standard Time April 20, 2016.
Executed this 19th day of April 2016.
F
2j Page
ANTERRA ENERGY INC.
Dr. Gang FANG,
and CEO
Western Union Petro International Co. Ltd.
or
t
Uetmrec
31
P
— —
TERM SHEET
Whereas Western Union Petro International Co. Ltd. (“WUP” or the “Investor”) a Chinese
Corporation resident in Hongkong; wishes to invest in Anterra Energy Inc. (“Anterra” or “the
Corporation”). a Canadian listed company (TSX Venture Exchange AE.A) and thereby acquire
a major interest in the Corporation through the subscription for Anterra common share lbr cash;
and whereas Anterra is in agreement with such an investment (“the Transaction”) the lbllowing
outlines the principal temis and conditions relating to the Transaction.
-
1. The Investor
The investor is WUP or an entity designated and authorized by WIJP (still called as
“WUP”).
2. Cash Investment
WUP shall subscribe for, and Anterra shall issue from treasuiy, 2,400,000,000 common
shares of Anterra at a price of CAD $0.005 per share for total consideration of CAD $12
million.
3. Creditors Arrangement
The Transaction shall occur in conjunction with an arrangement whereby Anterra will settle
approximately (‘AD $1 l.R million of unsecured debt and CAD $4 million of convertible
debentures pursuant to a Plan made under the provisions of the Conipanies Creditors
Arrangement Act of Canada or by way of a comparable arrangement.
4. Board Position
On issuance of the shares referred to in 2 above. WUP and its nominee acting together, shall
have the right to nominate two individuals to Antcrras Board of Directors.
5. Closing
(Josinr of the iransict ion sha
\rrt1trt relerred to in $ iho c.
6.
occur concurrently wih closing of the (rediinr
11w First Deposit (“the initial Deposit”)
1,
Within 2 days of execution of this Term Sheet, WUP shall deposit, by means of wire
transfer, the sum of CAD $1 million in trust with the Corporation’s legal counsel, Norton
Rose Fulbright Canada LLP. Such deposit will be available to the Company to commence
the CCAA process and othcr corporate purposes necessary to the CCAA process.
7. Second Deposit
Upon Anlerra receiving CCAA approval from the court and accepted by CWB, on or about
May 6, 2016, WUP shall make an additionaj deposit of$l .5 million (the “Second Deposit”)
by means of wire transfer, in trust with the Corporation’s legal counsel. Notion Rose
Fulbright Canada LLP.
The Second Deposit shall be received by Norton Rose Fuibright Canada LLP on or before
May 27, 2016.
The Second Deposit will be available to the Company to continue the CCAA process and
other corporate purposes necessary to successful completion of the CCAA process.
Wire transfer instructions are attached hereto.
8. The Deposit Management
For whatever reason, Parties do not proceed with the CCAA process, Anterra will return the
amount received of all the Deposits totaling of $2.5 million, less costs relating to the
applicaion and process and the banks’ transfer fee, to WUP.
Prior to making any expenditires from the amounts deposited by WUP with Norton Rosc
Fulbrigl:t LLP. being $2.5 million in total, Anterra shall providc WUP a schedule Slating the
amount of the expcnditurc. the purpose of the expenditure and the name of the payc:.
together with supporting ciuc.aunentation. lhr written approval by W[!P. Appreval of
cxpenditures by WUP will be made in a timely manner and WLT will coopertivJy support
Anierra during (‘(‘A A proes.
In iddition to the fc:egoir. Anterra shah also provide WLP with all hudgLts ard
Anft’rr.i in nation to the CC’AA process.
prolechons prepiWCc
.
nvestincnt Agreerncnt
l’he lcj-rns ad :it of the 1 raisiin shah be set out ir
n’i’ c are’meL: dc
.\:Lmen(”t to e pr..rd lr \‘iP on ecu::n of his i’erm Shec!.
10. Representations and Warranties
The parties hereto make the following representations and warranties as of the date of this
addendum and the Term Sheet executed on April 19, 2016.
1) The Parties have obtained all consents, approvals, and taken all such actions
necessary to execute the Term Sheet including this Addendum and fi.ilfill their rights
and obligations under the Term Sheet.
2) The signing of the addendum by the Parties Legal representative or authorized
signing authorities constitutes a valid and legitimate obligation and is legally
binding;
3) The signing of this addendum by the Parties and the resulting obligations hereunder
(i) does not violate any business license, articles of incorporation or any provision of
similar organizational documents of the Parties; (ii) does not violate any laws or any
government regulations, authorizations or approvals; (iii) does not violate or cause
violations of any other contract or agreement, it will not result in any breach under
the contract, or breach of any unilateral commitment constraint or guarantee,; and
(iv) does not violate any judgment or arbitration body to make its arbitral award, or
any of its decisions or governmental authority having jurisdiction or regulations;
4) The Parties are not aware of any pending or threatened litigation, arbitration or other
judicial or administrative procedures that that may affect the full implementation of
its obligations under this addendum.
11.
Approvals
Anterra shall cnsure that the necessary approval systems and processes are in place and
provide to Wt..P.
Prior to making any expenditures from the deposits, Anterra shall provide WUP a copy of
all written submissions to the Court and CWB and a copy of all documents related to the
Court’s fiml dccisions. During the transaction, a copy of all correspondence among
Anierra’s I3wyers. the Court and CWI3 shall be provided to WUP’s designated officer.
Eecutcd and ffeetivc as of the 19th day of/tpril 2016.
3
ANTERRA ENERGY INC.
Dr. Gang Fang, Chairmfnd CEO
Witness:
Name: orman. G. Knecht
WESTERN UNION PETRO 1NTERNATIONAL CO. LTD
Bin Huang,
‘Witness:
Name:
hutive Director
NORTON ROSE FULBRJGHT LLP
Wfre Transfer Information
Trust account (CADS) for the transfer of trust funds:
TDBank
340
—
5
t
h
Avenue SW, Calgary, Alberta T2P 0L3
Transit:
80609
Bank Code (Institution #):
Account:
0637591
Account name:
Swift Code:
004
Norton Rose Fuibright Canada LLP Trust Account
TDOMCATTTOR
5/