Symbol: BEN - TSX Venture Exchange
CALGARY, May 12 /CNW/ -
<<
FINANCIAL AND OPERATING HIGHLIGHTS
For the quarter ended March 31, 2005
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($ Cdn thousands, except as noted) Three months ended
March 31,
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Percent
2005 2004 Change
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Production volume
Natural gas (mmcf/day) 9,155 5,936
Oil (barrels/day) 233 257
BOE/day (6 to 1) 1,759 1,247 41%
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Production revenue net of royalties 4,910 3,360
Net income (loss) (441) 63
Per share (basic and diluted) $(0.01) $0.00
Cash flow from operations $2,707 $1,746 56%
Per share (basic and diluted) $0.06 $0.04 50%
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Capital costs
Exploration & development 4,361 1,844
Land and seismic 5,072 941
Other 29 42
Total 9,462 2,827 235%
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Net working capital (deficit) -
including bank debt (13,216) 329
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Shares outstanding
End of period (000's) 46,427 43,418
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First Quarter 2005 Operating Highlights
- Production - Q1 2005 production averaged 1,759 boe/d, up 41 percent
over Q1 2004 and up 24 percent from the 4th quarter of 2004.
- Cash Flow from Operations - Recorded record quarterly cash flow of
$2.7 million or $0.06 per share in the first quarter of 2005, up from
$0.04 per share in Q1 2004.
- Drilling - We had an active first quarter of drilling delivering 4 gas
wells in Lanfine. In west central Alberta, participated in 5 wells
(1.3 net) resulting in 2 (0.5 net) cased gas wells waiting completion
and tie in and 3 wells (0.8 net) plugged and abandoned. Two successful
gas wells (0.6 net) were also drilled by partners in Huxley, to the
west of Lanfine.
- Land - Berens increased net undeveloped acreage by 11% in the quarter
to 118,000 acres by the end of March 2005. We added significantly to
our west central Alberta position in March with the acquisition of
8 sections at 100 percent working interest through land sales and
another 11 sections through farm-in. These lands are in the highly
prospective, multi-zone areas of Karr and Berland River.
Chairman's Message
The first quarter of 2005 was highlighted by strong production momentum
and significant steps taken to build future growth in west central Alberta.
Production averaged 1,755 boe/d in the first quarter, up strongly over both
the first quarter of 2004 and the final quarter of last year. In an exciting
growth development, we have established a land position in west central
Alberta that enables us to plan significant drilling in this region in the
second half of 2005.
Our core Lanfine area continues to be our operating base as we drilled
with an 80 percent success ratio in the first quarter, delivering four gas
wells. We will continue to invest in this area with the objective of keeping
our Lanfine production stable or growing slightly while using the excess cash
flow that Lanfine delivers to help fund our west central Alberta growth.
Our well costs in Lanfine are as much as 20 percent lower than we were
experiencing early in 2004 due to tight cost control and efficient drilling
program design. We have revised our completion techniques in Lanfine, now
completing most wells for as little as one-half our costs from early 2004
while continuing to deliver excellent productivity. Our undeveloped land
position in Lanfine will continue to deliver drilling locations to support our
plans for the area for the balance of 2005 and most of 2006.
By the end of 2004 we had made significant progress establishing a
position in west central Alberta with 100 boe/d of production coming from
Bigstone and a developing land base. Since the end of 2004, we have tripled
our west central land position giving us a strong base for drilling later in
the year. In particular, we have acquired through land sales and a farm-in, a
17 section position in the Karr area. Our land position in Karr is
concentrated and the area is characterized by multi-zone drilling potential
and strong infrastructure. Berens currently has firm plans to drill at least
five (1.7 net) wells in west central Alberta in the second and third quarter
of 2005 with as many as 10 wells (4.2 net) planned for the full year. We will
also participate in a re-entry of a well (0.5 net) in the second quarter.
We are on track to deliver our forecast average 2005 production volume of
1,800 boe/d and exit the year over 2,000 boe/d. We have set a $20 million
capital program for 2005. The first quarter capital was heavily weighted
toward land acquisition in our key growth area. Now it is time to turn the
drill bit to establish a significant production position in west central
Alberta to complement our well established production base in Lanfine. The
growth plan we have laid out is unfolding and we are well on our way.
"signed"
Robert D. Steele
Chief Executive Officer
Berens Energy Ltd.
Management's Discussion and Analysis ("MD&A")
May 12, 2005
OVERVIEW
Berens Energy Ltd. ("Berens") is a full cycle oil and natural gas
exploration and production company with a concentrated production and land
base in Eastern Alberta approximately 300 kilometers east of the City of
Calgary with new opportunities established north west of Edmonton in the
Grande Prairie region.
All calculations converting natural gas to crude oil equivalent have been
made using a ratio of six thousand cubic feet ("mcf") of natural gas to one
barrel of crude equivalent. Barrels of oil equivalent ("boe") may be
misleading, particularly if used in isolation. A boe conversion ratio of
six mcf of natural gas to one barrel of crude oil equivalent is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.
The following discussion of financial position and results of operations
should be read in conjunction with the Company's December 31, 2004 Annual
Report, Audited Financial Statements and Notes thereto and the unaudited
interim financial statements for the current quarter. This MD&A was prepared
using information that is current as of May 6, 2005 unless otherwise noted.
FORWARD LOOKING INFORMATION
This MD&A contains forward looking or outlook information within the
meaning of applicable securities laws. Forward looking statements may include
estimates, plans, expectations, forecasts, guidance or other statements that
are not statements of fact. Berens believes the expectations reflected in such
forward looking statements are reasonable. However no assurance can be given
that such expectations will prove to be correct. These statements are subject
to certain risks and uncertainties and may be based on assumptions that could
cause actual results to differ materially from those anticipated or implied in
the forward looking statements. These risks include, but are not limited to:
crude oil and natural gas price volatility, exchange rate and interest rate
fluctuations, availability of services and supplies, market competition,
uncertainties in the estimates of reserves, the timing of development
expenditures, production levels and the timing of achieving such levels, the
Company's ability to replace and increase oil and gas reserves, the sources
and adequacy of funding for capital investments, future growth prospects and
current and expected financial requirements of the Company, the cost of future
dismantlement and site restoration, the Company's ability to enter into or
renew leases, the Company's ability to secure adequate product transportation,
changes in environmental and other regulations and general economic
conditions. These statements are as of the date of this MD&A and the Company
does not undertake an obligation to update its forward looking statements
except as required by law.
Additional information on the Company can be found on the SEDAR website
at www.sedar.com.
REVIEW OF INTERIM FINANCIAL STATEMENTS
The financial statements in this interim report and the accompanying
notes and MD&A have not been reviewed by the Company's auditor.
QUARTERLY INFORMATION
2005 2004
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($000's except as noted) Q1 Q4 Q3 Q2 Q1
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Sales volumes:
Natural gas
(mcf per day) 9,155 7,089 5,310 6,326 5,936
Oil and natural gas
liquids (bbl per day) 233 240 238 292 257
Barrels of oil
equivalent (boe
per day - 6:1) 1,759 1,422 1,123 1,347 1,247
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Financial:
Net revenue 4,910 3,623 3,188 4,117 3,237
Net income (loss) (441) (1,652) (512) 335 63
per share - basic $(0.01) $(0.04) $(0.01) $0.01 $0.00
per share - diluted $(0.01) $(0.04) $(0.01) $0.01 $0.00
Capital costs 9,462 6,932 5,564 4,732 2,827
Shares outstanding 46,427 46,427 43,427 43,427 43,427
Bank debt 10,480 4,500 4,250 100 -
Working capital
(deficit) including
bank debt (13,216) (6,461) (5,973) (1,851) 329
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Per unit information:
Natural gas price
($ per mcf) $6.91 $6.21 $6.16 $6.76 $6.41
Oil and liquids price
($ per barrel) $30.81 $31.88 $40.02 $32.52 $29.85
Oil equivalent price
($ per boe) $40.05 $36.93 $37.41 $38.03 $36.79
Operating netback
($ per boe) $21.12 $18.96 $19.86 $24.87 $20.71
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Net wells drilled:
Natural gas 8 11 5 3 2
Oil 0 1 1 - -
Dry 4 - 1 - -
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Total 12 12 7 3 2
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RESULTS OF OPERATIONS
Production Volume
Production volume averaged 1,759 boe/d for the first quarter of 2005, up
41 percent compared to 1,247 in the first quarter of 2004. Natural gas
represented 87 percent of production in the first quarter of 2005, up from
79 percent of Q1 2004 production. The remaining 13 percent of production was
conventional heavy oil and natural gas liquids. First quarter 2005 production
was also up 24 percent compared to the final quarter of 2004 volume of
1,422 boe/d. A successful drilling program in the third and fourth quarter of
2004 established momentum going into the end of 2004 and well tie-ins in
January 2005 added production in the first quarter of 2005. Initial production
from west central Alberta also contributed volumes in the first quarter of
2005 as a natural gas well put on production in November 2004 in Bigstone,
contributing over 100 boe/d for the full first quarter of 2005.
It is expected that second quarter 2005 volumes will be similar to the
first quarter because of spring break-up. Pipelining and drilling operations
commenced again in late April which will contribute volumes late in the second
quarter to offset natural declines. Additional west central Alberta drilling
will commence again late in the second quarter. This new growth is projected
to add significant production volume in the second half of the year.
Production Revenue
Natural gas prices averaged $6.91 per mcf for the first three months of
2005 compared to $6.41 per mcf in the same period in 2004. First quarter 2005
average liquids prices were $30.81 per barrel compared to $29.85 per barrel in
the first quarter of 2004. Higher WTI prices in the first quarter of 2005 were
mostly offset by wider light/heavy differentials compared to the same period
in 2004.
On a per barrel of oil equivalent basis prices in the first quarter of
2005 averaged $40.05 compared to $36.79 in the same period of 2004. Revenue
was up 52 percent in the first quarter of 2005 compared to the first quarter
of 2004. Volume increases contributed 40 percent to the quarter over quarter
increase while higher prices contributed 12 percent to the higher revenues in
the first quarter of 2005.
Royalties
Royalties, net of Alberta Royalty Tax Credit (ARTC), averaged 23 percent
of revenue for the first quarter of 2005 compared to 19 percent of revenue for
the same period in 2004. Excluding ARTC, royalty rates averaged 25 percent in
the first quarter of both 2005 and 2004. The lower royalties after ARTC in
2004 were due to the Company recording ARTC as earned during the year. During
2005 the Company is recording ARTC evenly throughout the year. Overall royalty
costs were up 80 percent in the first quarter of 2005 compared to the first
quarter of 2004. Higher per boe royalty costs contributed 40 percent to the
increase while increased volumes accounted for the remaining 40 percent of the
quarter over quarter royalty expense increase.
Interest Income
Interest income was earned in early 2004 on cash balances which have
since been spent on the 2004 capital program.
Production Expenses
Production expenses averaged $8.61 per boe in the first quarter of 2005
compared to $7.89 in the first quarter of 2004. Operating expenses in early
2004 benefited from a single well that was producing approximately 40 percent
of the Company's total production which lowered the overall per boe costs for
Q1 2004. In addition, first quarter 2005 costs were negatively affected by a
charge of $67,000 or $0.41 per boe for historical gathering and processing
charges pipeline that the operator had not billed for as much as four years'
time. Production expenses were up 52 percent in the first quarter of 2005
compared to the first quarter of 2004. Higher volume contributed 40 percent of
the quarter over quarter increase in production expenses while higher per boe
costs accounted for 12 percent.
General and Administrative Expenses
General and administrative costs, including stock based compensation,
were up only two percent in the first quarter of 2005 compared to the same
period for 2004 notwithstanding a strengthened technical staff contingent in
the 2005 period. Early 2004 costs were higher as the Company was setting up
its initial systems for administration, land, accounting, corporate
governance, regulatory reporting and health and safety. On a per boe basis,
general and administrative costs were $4.02 for the first quarter of 2005,
down 28% compared to $5.55 per boe in the first quarter of 2004. Berens does
not capitalize any general and administrative costs.
Interest Expense
Interest expense is incurred on the Company's bank line of credit. The
Company had no borrowings in the first quarter of 2004.
Operating Netback
Operating netback represents the profit margin realized by the production
and sale of petroleum and natural gas.
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Quarterly Operating Netbacks
($'s per boe) Q1 2005 Q1 2004
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Sales price 40.05 36.79
Less:
Royalties (net of ARTC) 9.15 7.10
Production expenses 8.61 7.89
Transportation charges 1.17 1.09
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Operating netback 21.12 20.71
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Depletion, Amortization and Accretion
Depletion, amortization and accretion totaled $3,065,000 in the first
quarter of 2005 or $19.36 per boe compared to $1,647,000 or $14.68 per boe in
the first quarter of 2004. The higher per boe rate in 2005 is due to revisions
from the 2004 year-end independent petroleum consultants reserve report which
resulted in an increased per boe depletion rate. Depletion rates on a per boe
basis are expected to decline as wells are completed, reserves recognized and
additional wells are drilled with finding and on stream costs below the
current depletion rate.
Income Taxes
Cash income taxes of $15,000 were booked in the first quarter of 2005 to
accrue for capital and resource taxes. The Company does not expect to be cash
taxable for 2005 or 2006 as there are ample loss carry forwards and capital
pools to shelter taxable income.
NET INCOME (LOSS)
Net loss for the first quarter of 2005 was $441,000 ($0.01 per share)
compared to net income of $63,000 ($0.00 per share) in the first quarter of
2005. The first quarter 2005 loss reflects the larger depletion charge and
increased per boe royalty and operating costs compared to the same period of
2004. These higher costs were partially offset by increased production and
higher oil and gas prices in the first quarter of 2005.
CAPITAL COSTS
Capital costs were $9.5 million in the first three months of 2005
compared to $2.8 million in the first quarter of 2004, broken down as follows:
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Q1 Q1
($000's) 2005 2004
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Drilling and completion 4,361 1,844
Land 4,030 366
Geological and geophysical 1,042 575
Office and other 29 42
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Total 9,462 2,827
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Spending on undeveloped land in the first quarter of 2005 was
significantly ahead of plans due to success at land sales. In the first
quarter the Company secured eight key sections in its west central Alberta
growth area. Spending on land is expected to be modest for the balance of the
year with capital focused more on drilling and completion work.
WORKING CAPITAL
Accounts receivable of $3,538,000 at March 31, 2005 are made up primarily
of February and March production revenues. Accounts payable at March 31, 2005
of $6,815,000 was comprised mainly of trade payables for operating and capital
commitments totaling $4.1 million, as well as end of quarter accruals for
in-progress capital programs of $0.7 million. Remaining accounts payable are
primarily for royalties owing.
The draw on the operating line of credit increased by $5,980,000 in the
first quarter to $10,480,000 at March 31, 2005 due to significant capital
spending in the quarter. The high level of capital spending was driven by
success at west central Alberta land sales in the first quarter. Excluding the
bank line, working capital was in a deficit position of $2,736,000 up from
$1,961,000 at the end of 2004. With the exception of land acquisitions,
capital activity was light in the February to April 2005 time frame due to
spring break-up. It is expected that the working capital deficiency will be
reduced by operating revenue in the second quarter.
LIQUIDITY AND CAPITAL RESOURCES
Berens currently plans to fund its operations and capital expenditures
with a mix of cash flow and debt financing through bank operating lines.
Berens has an operating bank line for a total of $11.0 million secured by
Berens' production properties which had $10.5 million drawn as of March 31,
2005. Budgeted cash flows in the second quarter are expected to fund the
capital program in the near term. The bank line is currently under review and
management expects additional capacity will exist for bank financing as a
result of this review.
NON-GAAP MEASUREMENTS
This MD&A contains the term "cash flow from operations". As an indicator
of the Company's performance, this term should not be considered an
alternative to, or more meaningful than "cash flow from operating activities"
or "net income (loss)" as determined in accordance with Canadian generally
accepted accounting principles. The Company's determination of cash flow from
operations may not be comparable to that reported by other companies,
especially those in other industries. Management feels that cash flow from
operations is a useful measure to help investors assess whether the Company is
generating adequate cash amounts from its operations to fund its ongoing
operations and planned capital program.
The reconciliation between net income and cash flow from operations for
the three month periods ended March 31, is as follows.
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Three months Three months
ended ended
March 31, March 31,
($000's) 2005 2004
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Net income (loss) (441) 63
Items not requiring cash:
Depletion, amortization and accretion 3,065 1,647
Stock based compensation 83 36
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Cash flow from operations 2,707 1,746
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The Company also presents cash flow from operations per share consistent
with the calculation of earnings per share, whereby per share amounts are
calculated using weighted average shares outstanding. Cash flow from
operations per share for the quarter ended March 31, 2005 was $0.06 (basic and
diluted). First quarter 2004 cash flow from operations was $0.04 per share
(basic and diluted).
RISKS
The Company's primary financial risks relate to variability in commodity
prices. Interest rate and currency exchange rate variability also have an
effect on financial results. The effect of changes in the exchange rate
between US and Canadian currencies on natural gas prices is not direct, as
variations between the regional markets for natural gas is often much greater
than can be explained by currency variability.
Based on the Company's plans for 2005 the following sensitivities are
illustrated for key financial factors:
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Cash Flow
from
Earnings Operations
Sensitivity (000's) Effect Effect
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Natural gas price - Cdn$0.10 per mcf $182 $285
Oil price - Cdn$1.00 per bbl $40 $63
Interest rate - 1 percentage point $54 $85
Exchange rate - Cdn$0.01 $236 $368
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Other risks that the Company is exposed to are related to our operations.
They include exploration risks and risks related to safety and environment.
Exploration risk is managed by a thorough analysis to ensure the Company is
exposed to a balanced risk profile of both low risk and higher risk drilling
prospects. The Company also has complete, documented environmental health and
safety plans as well as a comprehensive emergency response plan to mitigate
operating risks.
The Company has no long-term contractual obligations other than office
rent and vehicle leases.
The Company has no off-balance sheet arrangements.
The company has no commodity price or interest rate hedges or fixed price
contracts in place.
RELATED PARTY TRANSACTIONS
The Company contracts a recruiting consulting firm in which one of its
directors is the chairman. The executive services rendered are in the normal
course of business and are at normal rates charged by the consulting firm.
SHARE DATA
As of the date of this MD&A the Company had 46,427,469 issued and
outstanding common shares. Additionally, the Company has issued options to
purchase 2,769,500 common shares.
OUTLOOK
Berens' strong land position was enhanced in the first quarter of 2005
with the significant land acquisitions made in the Company's west central
Alberta growth area. The Company plans to build on this land value with an
active drilling program for the remainder of 2005. The capital program at
Lanfine is well defined as there is sufficient undeveloped acreage in the area
for planned drilling in the rest of 2005 and well into 2006.
The Company is actively developing drilling prospects and negotiating
with potential partners to expand our position in west central Alberta. At
least four wells planned in the second and third quarters of 2005 with
potential significant additional drilling to take place in the winter of
2005/06.
A $20 million capital program has been set for 2005 that is projected to
yield production growth of approximately 44 percent over 2004, averaging
1,800 boe/day, and exiting 2005 greater than 2,000 boe/day. The capital
program is split 60 percent toward eastern Alberta and 40 percent to new
growth areas in west central and western Alberta. Management believes the
Company has a well defined, balanced growth strategy that delivers low risk
drilling in eastern Alberta combined with higher impact, deeper drilling
opportunities in west central Alberta.
Berens Energy Ltd.
Balance Sheets
(unaudited)
As at,
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(000's) March 31, December 31,
2005 2004
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ASSETS
Current
Cash and cash equivalents $ 35 $ 35
Accounts receivable 3,538 3,365
Prepaid expenses and deposits 573 492
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4,146 3,892
Investments 299 299
Capital assets (notes 3 & 7) 45,264 38,811
Goodwill 14,805 14,805
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$64,514 $57,807
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Bank loan (note 7) $10,480 $ 4,500
Accounts payable and accrued liabilities 6,815 5,795
Taxes payable 67 58
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17,362 10,353
Asset retirement obligation (note 4) 704 648
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18,066 11,001
Shareholders' equity
Capital stock (note 5) 48,331 48,331
Contributed surplus (note 5) 324 241
Deficit (2,207) (1,766)
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46,448 46,806
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$64,514 $57,807
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See accompanying notes to the financial statements
Berens Energy Ltd.
Statements of Operations and Deficit
(unaudited)
For the quarters ended March 31,
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Three months ended
(000's) March 31,
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2005 2004
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Revenue
Oil and natural gas revenue $ 6,358 $ 4,165
Royalties, net of ARTC (1,448) (805)
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4,910 3,360
Interest - 15
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4,910 3,375
Expenses
Production 1,363 896
Transportation 184 123
Depletion and amortization 3,065 1,647
General and administrative 553 591
Stock based compensation 84 36
Interest expense 87 -
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5,336 3,293
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Income (loss) before income taxes (426) 82
Income tax expense 15 19
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Net income (loss) for the period (441) 63
Deficit, beginning of period (1,766) (12,944)
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Deficit, end of period $ (2,207) $(12,881)
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Net income (loss) per share (note 8)
Basic and diluted $ (0.01) $ 0.00
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See accompanying notes to the financial statements
Berens Energy Ltd.
Statements of Cash Flows
(unaudited)
For the quarters ended March 31,
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Three months ended
(000's) March 31,
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2005 2004
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OPERATING ACTIVITIES
Net income (loss) for the period $ (441) $ 63
Add items not involving cash
Depletion and amortization 3,065 1,647
Stock-based compensation 83 36
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2,707 1,746
Change in non-cash working capital items (note 6) (67) (1,079)
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2,640 667
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FINANCING ACTIVITIES
Change in bank loan 5,980 -
Proceeds from the exercise of stock options - 22
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5,980 22
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INVESTING ACTIVITIES
Purchase of property and equipment (9,462) (2,827)
Change in non-cash working capital items (note 6) 842 (10)
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(8,620) (2,837)
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Decrease in cash and cash equivalents - (2,148)
Cash and cash equivalents, beginning of period 35 4,022
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Cash and cash equivalents, end of period $ 35 $ 1,874
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See accompanying notes to the financial statements
BERENS ENERGY LTD.
Notes to Financial Statements
(unaudited)
Three months ended December 31, 2005 and 2004
1. NATURE OF OPERATIONS
The Company is a full cycle oil and natural gas exploration and
production company with activities encompassing land acquisition,
geological and geophysical assessment, drilling and completion, and
production. The Company's primary areas of operation are in eastern and
west central Alberta.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements of the Company have been prepared by
management following the same accounting policies as the most recent
annual audited financial statements except as discussed below.
Certain disclosures, which are normally required to be included in notes
to the annual financial statements, are condensed or omitted for interim
reporting. Accordingly, the interim financial statements should be read
in conjunction with the Company's audited annual financial statements for
the year ended December 31, 2004.
3. CAPITAL ASSETS
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($000's) March 31, 2005 December 31, 2004
Accumulated Accumulated
depletion and depletion and
Cost amortization Cost amortization
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Petroleum and natural
gas properties 57,863 12,794 48,394 9,757
Office and computer
equipment 261 66 232 58
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58,124 12,860 48,626 9,815
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Net book value 45,264 38,811
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At March 31, 2005, costs of $13,024,000 related to undeveloped land have
been excluded from the depletion calculation (2004 - $6,965,000).
4. ASSET RETIREMENT OBLIGATIONS
The total future asset retirement obligation was estimated by management
based on the Company's net ownership interest in all wells and
facilities, estimated costs to reclaim and abandon the wells and
facilities and the estimated timing of the costs to be incurred in future
periods.
The following table reconciles the Company's asset retirement obligation
as follows:
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($000's)
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Obligation, December 31, 2004 648
Increase in obligation during the period 37
Accretion expense 19
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Obligation, March 31, 2004 704
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The total undiscounted obligation for asset retirement is $2,760,000 as
at March 31, 2005. The Company uses a credit adjusted risk free rate of
12 percent and an inflation rate of 1 1/2 percent to calculate the
present value of the asset retirement obligations. These payments are
expected to be made over the next 5 to 15 years.
5. CAPITAL STOCK
(a) Authorized Capital
The authorized capital of the Company consists of an unlimited number of
preferred shares issuable in series and an unlimited number of common
shares without nominal or par value.
(b) Common shares issued
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Balance December 31, 2003 43,405,802 $56,793
Stock options exercised during the year 21,667 21
Reduction of contributed surplus for options
exercised - 1
Private placement for cash 3,000,000 4,564
Reduction of stated capital - (12,944)
Share issue costs - (104)
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Balance December 31, 2004 46,427,469 $48,331
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Balance March 31, 2005 46,427,469 $48,331
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Private Placements
The Company issued 3,000,000 flow-through common shares on December 9,
2004 in a private placement at $1.61 per share for cash proceeds of
$4,830,000 before agent's commission of $266,000 to finance certain oil
and gas expenditures to be incurred in 2005. The renouncement of these
expenditures will be made to the purchasers of these shares in 2005.
(c) Stock Option Plan
The Company has a stock option plan under which 4,000,000 common shares
have been reserved for options to be distributed to directors, officers,
employees and consultants to the Company with terms established by the
board of directors.
Options granted under the plan generally have a five year term to expiry
and vest equally over a three year period commencing on the first
anniversary date of the grant. The exercise price of each option equals
the closing market price of the Company's common shares on the day prior
to the date of the grant.
The following table sets forth a reconciliation of the plan activity
through March 31, 2005.
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Weighted
average
Number of exercise price
Options ($ per share)
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Outstanding, beginning of year 2,784,500 1.22
Granted 75,000 1.20
Cancelled (90,000) 1.70
Exercised - -
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Outstanding, end of year 2,769,500 1.21
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Exercisable 662,494 1.17
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The following table sets forth additional information relating to the
stock options outstanding at March 31, 2005.
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Options Outstanding Exercisable Options
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Weighted Weighted
average average
exercise Weighted exercise Weighted
price average price average
Exercise price Number of ($ per years to Number of ($ per years to
range Options share) expiry Options share) expiry
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$1.00 to $1.10 1,220,000 1.00 3.07 481,662 1.00 2.93
$1.11 to $1.20 577,500 1.17 4.72 - - -
$1.21 to $1.30 152,000 1.27 4.59 - - -
$1.31 to $1.40 307,500 1.39 4.27 - - -
$1.41 to $1.50 197,500 1.47 3.96 65,833 1.47 3.96
$1.51 to $1.60 - - - - - -
$1.61 to $1.70 315,000 1.70 3.76 114,999 1.70 3.75
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$1.00 to $1.70 2,769,500 1.21 3.77 662,494 1.17 3.18
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The Company has adopted the fair value method for measuring option
awards. For 2004 and 2005 calculations the key assumptions used for the
Black Scholes-based valuation of issued options were: Risk free rate -
4.00 percent; average expected life - 4.5 years; no expected dividend
yield; 42 percent volatility. The Company has not incorporated an
estimated future forfeiture assumption in its calculations, and will
recognize forfeitures as they occur. Based on the fair value method,
$83,000 was recorded as compensation expense in the first quarter of 2005
for options issued (2004 - $36,000) with a corresponding increase
recorded to contributed surplus.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in Non-cash Working Capital
For the quarters ended March 31,
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($000's) 2005 2004
Accounts receivable (173) (239)
Prepaid expenses and deposits (81) 13
Accounts payable and accrued liabilities 1,020 (863)
Income taxes payable 9 -
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775 (1,089)
Less:
Change in non-cash working capital related to
investing activities 842 (10)
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Change in non-cash working capital related to
operating activities (67) (1,079)
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Cash taxes and interest paid during the quarters March 31,
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($000's) 2005 2004
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Cash income and other taxes 6 19
Cash interest paid 87 -
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7. BANK OPERATING LINE
Berens has an agreement with a Canadian bank for a revolving operating
line for $11.0 million. Collateral for the operating line of credit
includes a general assignment of book debts and a $35 million debenture
with a floating charge over all assets of the Company. The bank line is a
demand line and carries an interest rate of the bank's prime rate plus
3/8th of one percent or 4.625 percent at March 31, 2005. On March 31,
2005 $10,480,000 was drawn on the bank line.
8. PER SHARE INFORMATION
The weighted average number of common shares outstanding during the
quarter ended March 31, 2005 of 46,427,469 (2004 - 43,417,597) was used
to calculate basic income and loss per share. On a diluted basis the
weighted average number of common shares outstanding during the quarter
ended March 31, 2005 was 46,604,492 (2004 - 43,770,447).
>>
%SEDAR: 00020114E
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