HOUSTON, TEXAS, Nov 05, 2009 (MARKETWIRE via COMTEX News Network) -- Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX: CAZ)(AIM: CAZA)
is pleased to provide unaudited financial and operational results for
the three month period ended September 30, 2009.
Operational highlights for the quarter include:
- Lucky Penny 10 State #1 and Moore Bailout 11 State #1 wells placed
on production in New Mexico;
- Drilling operations in New Mexico continue at the Bada Bing 23
State #1; scheduled to be followed by drilling of the Moore Cowbell
27 State #1;
- Caza continues to increase its acreage position in the Abo-Wolfcamp
play in New Mexico;
- Caza's production was 116,016 Mcfe for the period, up 27% from
91,463 Mcfe for the comparative period in 2008.
Financial highlights for the quarter include:
- Caza had a positive funds flow from operations for the period of
$157,545 as compared to $117,808 funds flow used in operations in the
2nd quarter 2009 and $841,092 funds flow used for the same period in
2008;
- G&A expenses for the period were $267,295, down from $1,857,337 for
the comparative period in 2008, due to reductions in G&A expenses and
reimbursements from joint venture partners;
- Caza maintained a cash balance of $11.1 million for the period,
relatively unchanged from the previous quarter ($11.2 million)
despite drilling and leasing activity.
W. Michael Ford, Chief Executive Officer commented:
"We have been active during the quarter acquiring acreage and
drilling along with our partners Endeavour International and Wise Oil
& Gas. The Endeavour farmout de-risked and accelerated our drilling
activities, which provides Caza opportunities for growth in both
production and reserves. Additionally, Caza has maintained its strong
cash position and posted positive funds flow from operations for the
quarter."
Copies of the Company's unaudited financial statements for the third
quarter ended September 30, 2009, and the accompanying management's
discussion and analysis are available on SEDAR at www.sedar.com and
the Company's website at www.cazapetro.com.
In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas
Companies, the information contained in this announcement has been
reviewed and approved by Anthony B. Sam, Vice President Operations of
Caza who is a Petroleum Engineer and a member of The Society of
Petroleum Engineers.
ADVISORY REGARDING FORWARD LOOKING STATEMENTS
Information in this news release that is not current or historical
factual information may constitute forward-looking information within
the meaning of securities laws. Such information is often, but not
always, identified by the use of words such as "seek", "anticipate",
"plan", "schedule", "continue", "estimate", "expect", "may", "will",
"project", "predict", "potential", "targeting", "intend", "could",
"might", "should", "believe" and similar expressions. Information
regarding the Endeavour farmout agreement contained in this news
release constitutes forward-looking information within the meaning of
securities laws.
Implicit in this information, particularly in respect of "joint
ventures", "Endeavour farmout", "operations" and "leasing and
drilling activity" are assumptions regarding projected revenue and
expenses. Specifically, the Company has assumed that these agreements
and/or activities will produce positive results. These assumptions,
although considered reasonable by the Company at the time of
preparation, may prove to be incorrect. Readers are cautioned that
actual future operating results and economic performance of the
Company are subject to a number of risks and uncertainties, including
general economic, market and business conditions and could differ
materially from what is currently expected as set out above.
For more exhaustive information on these risks and uncertainties you
should refer to the Company's most recently filed annual information
form which is available at www.sedar.com. You should not place undue
importance on forward-looking information and should not rely upon
this information as of any other date. While we may elect to, we are
under no obligation and do not undertake to update this information
at any particular time.
Mcfe may be misleading, particularly if used in isolation. An Mcfe
conversion ratio of 1 bbl:6 Mcf is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the well head.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following interim Management's Discussion and Analysis ("MD&A")
of the financial results for Caza Oil & Gas, Inc. ("Caza" or the
"Company") should be read in conjunction with the unaudited
consolidated interim financial statements as at and for the three and
nine month periods ended September 30, 2009, the audited consolidated
financial statements and MD&A for the year ended December 31, 2008
and the corresponding Annual Information Form. Additional information
relating to the Company can be found on SEDAR at www.sedar.com. All
figures herein have been prepared in accordance with Canadian
Generally Accepted Accounting Principles ("GAAP") unless otherwise
stated. This MD&A is dated November 5, 2009.
Forward Looking Information
In addition to historical information, the MD&A contains
forward-looking statements that are generally identifiable as any
statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions or future events of
performance (often, but not always, through the use of words or
phrases such as "will", "may", "will likely result", "expected", "is
anticipated", "believes", "estimated", "intends", "plans",
"projection" and "outlook"), are not historical facts and may be
forward-looking and may involve estimates, assumptions and
uncertainties which could cause actual results or outcomes to differ
materially from those expressed in such forward-looking statements.
These statements are based on certain factors and assumptions
regarding the results of operations, the performance of projected
activities and business opportunities. Specifically, we have used
historical knowledge and current industry trends to project budgeted
expenditures for 2009 and into 2010. While we consider these
assumptions to be reasonable based on information currently available
to us, they may prove to be incorrect.
Actual results achieved will vary from the information provided
herein as a result of numerous known and unknown risks and
uncertainties and other factors. Such factors include, but are not
limited to: risks associated with the Company's stage of development;
competitive conditions; share price volatility; risks associated with
crude oil and natural gas exploration and development; risks related
to the inherent uncertainty of reserves and resources estimates;
possible imperfections in title to properties; the volatility of
crude oil and natural gas prices and markets; environmental
regulation and associated risks; loss of key personnel; operating and
insurance risks; the inability to add reserves; risks associated with
industry conditions; the ability to obtain additional financing on
acceptable terms if at all; non operator activities; the inability of
investors in certain jurisdictions to bring actions to enforce
judgments; equipment unavailability; potential conflicts of interest;
risks related to operations through subsidiaries; risks related to
foreign operations; currency exchange rate risks and other factors,
many of which are beyond the control of the Company. Accordingly,
there is no representation by Caza that actual results achieved
during the forecast period will be the same in whole or in part as
that forecast. Further, Caza undertakes no obligation to update or
revise any forward-looking statement or statements to reflect events
or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events, except as required by
applicable securities laws.
Financial outlook information contained in this MD&A about
prospective results of operations, financial position or cash flows
is based on assumptions about future events, including economic
conditions and proposed courses of action, based on management's
assessment of the relevant information currently available. Readers
are cautioned that such financial outlook information contained in
this MD&A should not be used for purposes other than for which it is
disclosed herein.
Non-GAAP Measures
The financial data presented herein has been prepared in accordance
with GAAP. The Company has also used certain measures of financial
reporting that are commonly used as benchmarks within the oil and
natural gas production industry in the following MD&A. The measures
are widely accepted measures of performance and value within the
industry, and are used by investors and analysts to compare and
evaluate oil and natural gas exploration and producing entities. Most
notably, these measures include "operating netback" and "funds flow
from (used in) operations". Operating netback is a benchmark used in
the crude oil and natural gas industry to measure the contribution of
oil and natural gas sales and is calculated by deducting royalties
and operating expenses from revenues. Funds flow from (used in)
operations is cash flow from operating activities before changes in
non-cash working capital, and is used to analyze operations,
performance and liquidity. These measures are not defined under GAAP
and should not be considered in isolation or as an alternative to
conventional GAAP measures. These measures and their underlying
calculations are not necessarily comparable or calculated in an
identical manner to a similarly titled measure of another entity.
When these measures are used, they are defined as "non GAAP" and
should be given careful consideration by the reader. Note Regarding
Boe and Mcfe
In this MD&A, barrels of oil equivalent ("Boes") are derived by
converting gas to oil in the ratio of six thousand cubic feet ("Mcf")
of gas to one barrel ("bbl") of oil (6 Mcf:1 bbl) and one thousand
cubic feet of gas equivalent ("Mcfes") are derived by converting oil
to gas in the ratio of one bbl of oil to six Mcf (1 bbl:6 Mcf). Boes
and Mcfes may be misleading, particularly if used in isolation. A Boe
conversion of 6 Mcf of natural gas to 1 bbl of oil, or a Mcfe
conversion ratio of 1 bbl of oil to 6 Mcf of natural gas is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the well
head.
Currency
References to "dollars" and "$" are of U.S. dollars and references to
"CDN$" are to Canadian dollars.
FINANCIAL AND OPERATING RESULTS
Petroleum and Production Revenue
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Natural gas
Production (Mcf) 92,429 83,727 263,034 257,655
Revenue ($) 297,718 772,393 934,274 2,483,020
Price ($/Mcf) 3.22 9.23 3.55 9.64
--------------------------------------------------------------------------
Natural gas liquids
Production (bbls) 248 884 1,011 1,361
Revenue ($/bbl) 16,227 85,583 45,039 136,554
Price ($/bbl) 65.38 96.78 44.53 100.34
--------------------------------------------------------------------------
Oil Production
Production (bbls) 3,682 405 13,655 702
Revenue ($/bbl) 239,848 47,079 689,479 82,129
Price ($/bbl) 65.13 116.22 50.49 116.94
--------------------------------------------------------------------------
Combined
Production (Mcfe) 116,013 91,463 351,032 270,033
Revenue ($) 553,793 905,055 1,668,792 2,701,703
Price ($/Mcfe) 4.77 9.90 4.74 10.01
--------------------------------------------------------------------------
Mcfe/d 1,261 994 1,286 989
--------------------------------------------------------------------------
Boe/d 210 166 214 165
--------------------------------------------------------------------------
Revenues from oil and gas sales decreased 39% to $553,793 for the
three-month period ended September 30, 2009 from $905,055 for the
three-month period ended September 30, 2008 (the "comparative
period") and were 38% lower than the nine-month period ended
September 30, 2008. Caza's production increased 27% to 116,016 Mcfe
for the three-month period ended September 30, 2009, up from 91,463
Mcfe for the comparative period. This represents an average daily
production rate increase of 267 Mcfe/d for the three months ended
September 30, 2009 to 1,261 Mcfe/d, as compared to 994 Mcfe/d for the
comparative period. The average natural gas price received by Caza
decreased 52% to $4.77 per Mcfe during the three-month period ended
September 30, 2009 from $9.90 per Mcfe during the comparative period.
The decrease in revenues from the third quarter of 2008 is a result
of the decrease in commodity prices. Presently the Company has not
hedged any of its production and does not have any commodity price
management programs in place.
Operating Netback Summary
The following table reconciles the Company's operating netback which
is considered to be a non-GAAP measure:
Three months ended Nine months ended
September 30, September 30,
(on a Mcfe basis) 2009 2008 2009 2008
--------------------------------------------------------------------------
Oil and natural gas
revenue $ 4.77 $ 9.90 $ 4.75 $ 10.01
Production expense (1.36) (0.77) (1.33) (0.74)
Severance expense (0.35) (0.73) (0.34) (0.71)
Transportation expense (0.18) (0.17) (0.13) (0.14)
--------------------------------------------------------------------------
Operating netback
(non-GAAP) 2.88 8.23 2.95 8.42
Production Expenses
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Severance ($) 40,867 67,074 119,433 190,857
Transportation ($) 21,079 15,489 45,863 37,672
Production ($) 157,763 70,766 467,950 199,764
--------------------------------------------------------------------------
Severance, transportation
and production ($) 219,709 153,329 633,246 428,293
Severance, transportation
and production ($/Mcfe) 1.89 1.68 1.80 1.59
--------------------------------------------------------------------------
Severance taxes and transportation expenses totaled $61,946
($0.53/Mcfe) for the three-month period ended September 30, 2009,
representing a decrease of 25% from $82,563 ($0.90/Mcfe) incurred
during the comparative period. Severance tax is a tax imposed by
states on natural resources such as crude oil, natural gas and
condensate extracted from the ground. The tax is calculated by
applying a rate to the dollar amount of production from the property
or a set dollar amount applied to the volumes produced from the
property. The decrease in severance taxes and transportation costs
are a result of a 52% decrease in the average commodity price
received by Caza during the third quarter of 2009.
Production expenses for the three-month period ended September 30,
2009 was $157,763 compared to $70,766 for the comparative period.
Caza's average lifting cost for the three-month period ended
September 30, 2009 was $1.36 per Mcfe versus $0.77 per Mcfe for the
comparative period. This increase in lifting costs occurred as a
result of the natural decline in production of certain wells and the
bringing on of new wells which currently have higher lifting costs
than our historical average.
Depletion, Depreciation and Accretion
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Depletion and
depreciation ($) 614,251 320,042 2,006,738 991,152
Accretion ($) 6,154 3,566 18,461 10,698
--------------------------------------------------------------------------
Depletion, depletion
and accretion ($) 620,405 323,608 2,025,199 1,001,850
Depletion, depletion
and accretion ($/Mcfe) 5.35 3.54 5.77 3.71
--------------------------------------------------------------------------
Depletion, depreciation, amortization and accretion expense for the
three months ended September 30, 2009 increased to $620,405
($5.35/Mcfe) from $323,608 ($3.54/Mcfe) in the comparative period.
The increase resulted from drilling costs associated with, and
production from, the wells drilled by Caza during 2008.
Costs of acquiring unproved properties of $11,364,481 were excluded
from depletable costs in accordance with Canadian Institute of
Chartered Accountants Accounting Guideline 16. A proportionate amount
of the carrying value will be transferred to the depletable pool as
reserves are proven up through the execution of Caza's exploration
programs.
General and Administrative Expenses
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
General and
administrative ($) 938,483 1,889,194 3,179,031 4,606,074
Joint venture partner
reimbursements ($) (608,854) - (1,184,676) -
General and
administrative
recovery ($) (62,334) (31,857) (109,384) (148,921)
--------------------------------------------------------------------------
Net general and
administrative ($) 267,295 1,857,337 1,884,971 4,457,153
General and
administrative ($/Mcfe) 8.09 20.66 9.05 17.08
Net general and
administrative ($/Mcfe) 2.30 20.31 5.37 16.52
--------------------------------------------------------------------------
Net general and administrative expenses were $267,291 for the
three-month period ended September 30, 2009 and $1,857,337 for the
comparative period. Stock-based compensation expense in the amount of
$114,229 is included in general and administrative expenses for the
three-month period ended September 30, 2009 ($149,215 in 2008).
During the three-month period ended September 30, 2009, Caza
capitalized general and administrative expenses relating to
exploration and development activities of $58,887, of which $39,422
related to capitalized stock-based compensation. Under certain joint
venture agreements Caza receives reimbursements of general and
administrative expenses. Net loss
Caza incurred a net loss of $553,423 for the three-month period ended
September 30, 2009 compared to a net loss of $2,164,475 during the
comparative period. The decrease in net loss from the comparative
period occurred as a result of significant reductions in general and
administrative expenses, reimbursements from joint venture partners
and the de-recognition of future income tax assets in the second
quarter of 2008.
Investments
Interest income for the three-month period ended September 30, 2009
was $193 down from $132,295 during the same period in 2008. Caza
invested its cash in short-term money market funds. The Company does
not hold any asset backed commercial paper.
Funds flow from (used in) operations (Non-GAAP)
The following is a reconciliation of funds flow used in operations to
net loss:
The Company had a funds flow from operations for the three month
period ended September 30, 2009 of $157,545 as compared to a funds
flow used in operations for the three month period ended September
30, 2008 of $841,092.
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Net loss (553,423) (2,164,475) (2,871,550) (3,336,861)
Depletion, depreciation,
amortization and
accretion 620,405 323,608 2,025,199 1,001,850
Stock-based compensation 90,563 149,215 363,212 401,441
Asset retirement
obligations settled - - - (9,767)
Future income tax
expense (recovery) - 850,560 - 426,082
--------------------------------------------------------------------------
Funds flow from (used in)
operations 157,545 (841,092) (483,139) (1,517,255)
--------------------------------------------------------------------------
Funds loss per share
- basic and diluted 0.00 (0.01) (0.00) (0.01)
--------------------------------------------------------------------------
Capital Expenditures
Three months ended Nine months ended
September 30, September 30,
By Type ($) 2009 2008 2009 2008
--------------------------------------------------------------------------
Drilling and completions (79,393) 4,283,732 150,765 9,840,167
Seismic - - 19,427 166,314
Facilities and lease
equipment 28,616 175,690 230,765 1,438,223
Office furnishings and
equipment 7,464 47,761 7,464 121,969
Leasehold/geological
/geophysical 286,301 1,664,782 922,950 1,955,737
Other costs (recovery) 118,323 519,147 142,907 559,009
--------------------------------------------------------------------------
Total 361,311 6,691,112 1,474,278 14,081,419
During the nine month period ended September 30, 2009 Caza initiated
the 2009 drilling schedule with the Lucky Penny 10 State #1 and the
Moore Bailout 11 State #1 wells located in Lea County, New Mexico.
Caza plans to drill sequentially 4 Abo-Wolfcamp wells in 2009. During
the nine month period ended September 30, 2009, as a result of joint
venture agreements the Company received payments for prior period
costs of $556,589 of lease acquisition costs and seismic reprocessing
costs of $435,500. In addition, the Company increased its working
interests in certain oil and gas properties in consideration for the
settlement of certain joint venture accounts receivable due to the
Company.
Outstanding Share Data
Caza is authorized to issue an unlimited number of common shares
without par value, of which 119,319,000 common shares are currently
issued and outstanding. An additional 26,502,000 common shares are
issuable pursuant to certain exchange rights attached to certain
outstanding common shares of Caza Petroleum.
The following table sets forth the classes and number of outstanding
securities of the Company and the number of issued and issuable
Common Shares on a fully diluted basis. See note 5 to the
corresponding interim financial statements.
Issued and
Issuable
Securities
Common Shares
Issued and outstanding 119,319,000
Issuable from exchangeable shares 26,502,000
Issuable from exercise of warrants 19,800,000
Issuable from exercise of broker warrants 700,000
Issuable from exercise of stock options 6,118,334
-----------
Total Common Shares issued and issuable 172,439,334
-----------
-----------
Warrants Issued
Warrants to purchase common shares 19,800,000
Broker warrants 700,000
-----------
Total warrants 20,500,000
-----------
Stock Options Issued
Total stock options outstanding 6,118,334
-----------
Commitments
The following is a summary of the estimated amounts
required to fulfill Caza's remaining contractual commitments as at
September 30, 2009:
less
Type of than 1-3 4-5
Obligation ($) Total 1 Year Years Years Thereafter
----------------------------------------------------------------------------
Operating leases 48,674 48,674 - - -
Asset obligations retirement 767,972 11,714 105,909 79,259 571,090
----------------------------------------------------------------------------
Total commitments contractual 816,646 60,388 105,909 79,259 571,090
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liquidity and Capital Resources
At September 30, 2009, Caza had a working capital surplus of
$8,854,631 (December 31, 2008 $10,812,048). The decrease in working
capital of $1,957,416 for the nine month period was a result of a net
funds outflow from operations of $483,139 and capital expenditures of
$1,474,278. During the quarter ended September 30, 2009 the Company's
cash position decreased to $11,116,454 from $14,103,827 at December
31, 2008. This was a result of joint venture partner lease
acquisition reimbursements of $992,089 offset by a net outflow of
working capital of $1,029,956 which was accompanied by a net use of
funds in operations of $483,139 and by exploration and leasehold
expenditures of $2,466,367. Caza had no bank credit facilities drawn
or in place.
On April 8, 2009, the Company entered into a participation agreement
with Endeavour Operating Corporation to participate in a jointly
established exploration and development program in the United States.
The exploration program will primarily focus on Caza's existing
onshore acreage position and portfolio of identified opportunities
throughout Texas, Louisiana and New Mexico. Under the terms of the
Agreement, Endeavour has the right to participate in assets presented
to it in its sole discretion. With respect to those assets in which
Endeavour elects to participate, Endeavour will fund the acquisition,
exploration and appraisal activity costs attributable to Caza's
interest in such assets. In consideration for these payments,
Endeavour will earn a 75% participating interest in any interest then
owned by Caza in any particular asset in which Endeavour elects to
participate. The term of the Agreement will run for two years.
Endeavour has also agreed to pay a program fee of US$3 million per
annum to be paid monthly. However, either party may terminate the
Agreement as of the end of each anniversary period by giving 60 days
prior written notice. If neither party terminates the Agreement, it
shall automatically renew for subsequent one-year periods.
Caza will typically use four sources of funding to finance its
capital expenditure program: internally generated cash flow from
operations, proceeds from the sale of properties, bank debt where
appropriate and if available new equity issues.
The Company's investing activities in the quarter consisted primarily
of expenditures on its capital program. As a result of the current
international credit crisis, capital markets with respect to both
equities and debt have tightened significantly. However, due to the
$21.4 million financing completed in 2008 and the joint venture with
Endeavour Operating Corporation completed on April 8, 2009,
management anticipates that the Company will have adequate liquidity
to fund its operations and budgeted capital expenditures.
Caza and its subsidiary, Caza Petroleum, Inc. ("Caza Petroleum") may
be considered to be "related parties" for the purposes of
Multilateral Instrument 61-101 of the Canadian Securities
Administrators. As a result, Caza or Caza Petroleum may therefore be
required to obtain a formal valuation or disinterested shareholder
approval before completing certain transactions with the other
party.
Summary of Quarterly Results
Three months Three months Three months Three months ended ended ended ended
September 30, June 30, March 31, December 31,
2009 2009 2009 2008
--------------------------------------------------------------------------
Petroleum and
natural gas
sales 553,793 561,083 553,916 650,186
Net income (loss) (553,423) (982,247) (1,335,880) (1,749,825)
Per share
- basic and diluted (0.00) (0.01) (0.01) (0.01)
Funds flow
from operations
(non-GAAP)(1) 157,545 (117,808) (522,877) (1,046,915)
Per share
- basic and diluted 0.00 (0.00) (0.00) (0.00)
Net capital
expenditures
(recovery) (361,311) (202,139) 1,315,105 3,851,867
Average daily
production (mcfe/d) 1,261 1,338 1,258 1,130
Weighted average
shares
outstanding 145,821,000 145,821,000 145,821,000 145,821,000
Three months Three months Three months Three months
ended ended ended ended
September 30, June 30, March 31, December 31,
2008 2008 2008 2007
--------------------------------------------------------------------------
Petroleum and
natural gas sales 905,055 1,067,364 729,284 600,431
Net income (loss) (2,164,475) (536,701) (635,685) (554,402)
Per share
- basic and diluted (0.01) (0.01) (0.01) (0.01)
Funds flow from
(used in)
operations
(non-GAAP)(1) (841,092) (326,850) (349,312) (427,152)
Per share
- basic and diluted (0.01) (0.00) (0.00) (0.01)
Net capital
expenditures 6,691,112 3,237,140 4,153,166 3,047,631
Average daily
production (mcfe/d) 994 1,005 957 1,019
Weighted average
shares
outstanding 145,675,139 97,723,874 95,821,000 80,782,196
(1) Calculated based on cash flow from operating activities before changes
in non-cash working capital.
Factors that have caused variations over the quarters:
- In 2009 Caza acquired all of the working interest of Probe
Resources, Inc. in the Safari Project located in Wharton County,
Texas. The acquisition dated April 1, 2009, included among other
lease hold Probe's 19.2% working interest in the Andel #2201 well,
18.36% working interest in the Hinton #1501 well, 18.36% working
interest in the Rachunek #201 well and 19.2% working interest in the
Gavranovic #701 well. All four wells are operated by Caza.
- In 2009 the Company drilled 2 gross (0.25 net) wells in Lea County
New Mexico. The two wells are the Lucky Penny 10 State #1 and the
Moore Bailout 11 State #1, both wells are currently undergoing
completion operations.
- On April 8, 2009, the Company completed a participation agreement
with Endeavour Operating Corporation to participate in a jointly
established exploration and development program in the United States.
- The Company drilled 16 gross (6.15 net) wells in Texas, New Mexico
and Louisiana during 2007 and 2008 of which 13 gross (4.33 net) wells
were completed. One well is waiting further completion operations
pending the drilling of an appraisal well.
Financial Instruments
For a discussion about financial instruments, please refer to the
corresponding September 30, 2009 consolidated interim financial
statements and our Management's Discussion and Analysis for the year
ended December 31, 2008 available at www.sedar.com.
Critical Accounting Estimates
Certain of our accounting policies require that we make appropriate
decisions with respect to the formulation of estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. For a discussion about those accounting
policies, please refer to our annual management's discussion and
analysis and Note 2 of the corresponding audited consolidated
financial statements for the year ended December 31, 2008 available
at www.sedar.com.
Recent Accounting Pronouncements
The Company has assessed new and revised accounting pronouncements
that have been issued that are not yet effective and determined that
the following may have a significant impact on the Company: In
February 2008, the Canadian Accounting Standards Board (AcSB)
confirmed that effective January 1, 2011, Canadian GAAP for publicly
accountable entities will be replaced in full with International
Financial Reporting Standards (IFRS) as promulgated by the
International AcSB. Management is currently assessing the impact of
adopting IFRS and is developing a plan to achieve convergence to IFRS
by January 1, 2011. Based on management's initial assessments, the
Company has identified that the accounting and disclosure of capital
assets are the areas that will have the greatest potential impact
upon conversion.
In February 2008, the AcSB issued Section 3064, Goodwill and
Intangible Assets and amended Section 1000, Financial Statement
Concepts clarifying the criteria for recognizing assets, intangible
assets and internally developed intangible assets. Items that no
longer meet the definition of an asset are no longer recognized with
assets. The standard was adopted on January 1, 2009 and did not have
a material impact on our results of operations or financial position.
In January 2009, the AcSB issued Section 1582, Business Combinations,
which replaces former guidance on business combinations. Section 1582
establishes principles and requirements of the acquisition method for
business combinations and related disclosures. This statement applies
prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period
beginning on or after January 2011 with earlier application
permitted. Management does not expect the adoption of this section to
have a material impact on the results of operations or financial
position.
In January 2009, the AcSB issued Sections 1601, Consolidated
Financial Statements, and 1602, Non-controlling Interests, which
replaces existing guidance. Section 1601 establishes standards for
the preparation of consolidated financial statements. Section 1602
provides guidance on accounting for a non-controlling interest in a
subsidiary in consolidated financial statements subsequent to a
business combination. These standards are effective on or after the
beginning of the first annual reporting period beginning on or after
January 2011 with earlier application permitted. Management does not
expect the adoption of this section to have a material impact on the
results of operations or financial position.
Risks and Uncertainties
For a discussion about risk and uncertainties, please refer to our
Management's Discussion and Analysis and Annual Information Form for
the year ended December 31, 2008 available at www.sedar.com.
Internal Control Over Financial Reporting
There was no change to Caza's internal control over financial
reporting during the nine month period ended September 30, 2009 that
would materially affect, or is reasonably likely to materially
affect, Casa's internal control over financial reporting.
Caza Oil & Gas, Inc.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
(In United States dollars) 2009 2008
--------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 11,116,454 $ 14,103,827
Accounts receivable 2,173,605 3,346,720
Prepaid and other 47,562 215,301
------------ ------------
13,337,621 17,665,848
Property and equipment (Note 3) 36,684,362 37,112,470
------------ ------------
$ 50,021,983 $ 54,778,318
------------ ------------
Liabilities
Current
Accounts payable and accrued liabilities $ 4,482,990 $ 6,853,800
Asset retirement obligations (Note 4) 526,929 493,919
------------ ------------
5,009,919 7,347,719
------------ ------------
Shareholders' Equity
Share capital (Note 5(b)) 51,481,597 51,481,597
Contributed surplus (Note 5(f)) 4,670,150 4,217,135
Deficit (11,139,683) (8,268,133)
------------ ------------
45,012,064 47,430,599
------------ ------------
$ 50,021,983 $ 54,778,318
------------ ------------
See accompanying notes to the interim consolidated financial statements
Caza Oil & Gas, Inc.
Consolidated Statements of Net Loss, Comprehensive Loss, and Deficit
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
(In United States dollars) 2009 2008 2009 2008
--------------------------------------------------------------------------
Revenue
Petroleum and
natural gas $ 553,793 $ 905,055 $ 1,668,792 $ 2,701,703
Interest income
and other income 193 132,295 3,074 277,208
-----------------------------------------------------
553,986 1,037,350 1,671,866 2,978,911
-----------------------------------------------------
Expenses
Production 219,709 153,329 633,246 428,293
General and
administrative 267,295 1,857,337 1,884,971 4,457,153
Depletion,
depreciation,
amortization
and accretion 620,405 323,608 2,025,199 1,001,850
-----------------------------------------------------
1,107,409 2,334,274 4,543,416 5,887,296
-----------------------------------------------------
Loss before income
taxes (553,423) (1,296,924) (2,871,550) (2,908,385)
Income taxes
Current income taxes - 16,991 - 2,394
Future income tax
recovery - 850,560 - 426,082
-----------------------------------------------------
- 867,551 - 428,476
-----------------------------------------------------
Net loss and
comprehensive loss (553,423) (2,164,475) (2,871,550) (3,336,861)
Deficit, Beginning
of Period (10,586,260) (4,353,826) (8,268,133) (3,181,440)
-----------------------------------------------------
Deficit, End of
Period $(11,139,683) $(6,518,301) $(11,139,683) $(6,518,301)
-----------------------------------------------------
-----------------------------------------------------
Loss per share
basic and diluted $ (0.00) $ (0.01) $ (0.02) $ (0.03)
-----------------------------------------------------
-----------------------------------------------------
Weighted average
shares
outstanding
basic and
diluted(1) 145,821,000 145,675,139 145,821,000 113,192,322
-----------------------------------------------------
-----------------------------------------------------
(1) The options and warrants have been excluded from the diluted loss per
share computation as they are anti-dilutive.
See accompanying notes to the interim consolidated financial statements
Caza Oil & Gas, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
(In United States dollars) 2009 2008 2009 2008
--------------------------------------------------------------------------
CASH FLOWS RELATED TO
THE FOLLOWING ACTIVITIES:
OPERATING
Net loss (553,423) (2,164,475) (2,871,550) (3,336,681)
Adjustments for
items not affecting
cash:
Depletion,
depreciation,
amortization
and accretion 620,405 323,608 2,025,199 1,001,850
Stock-based
compensation 90,563 149,215 363,212 401,441
Future income
tax expense
(recovery) - 850,560 - (426,082)
Asset retirement
obligations settled - - - (9,767)
Changes in non-cash
working capital
(Note 8(a)) (232,037) 1,529,745 (2,928,631) 1,232,985
-----------------------------------------------------
Cash flows from
(used in)
operating
activities (74,492) 688,653 (3,411,770) (284,270)
-----------------------------------------------------
FINANCING
Proceeds from
issuance of shares,
net of issue costs - 3,084,668 - 21,386,409
Changes in non-cash
working capital
(Note 8(a)) - - - (650,899)
-----------------------------------------------------
Cash flows from
financing
activities - 3,084,668 - 20,735,510
-----------------------------------------------------
INVESTING
Exploration and
development
expenditures (775,835) (6,643,351) (2,458,903) (13,959,449)
Purchase of
equipment (7,464) (47,761) (7,464) (121,970)
Partner reimbursement - - 992,089 -
Changes in
non-cash working
capital (Note 8(a)) 758,431 (780,235) 1,898,675 (1,770,723)
-----------------------------------------------------
Cash flows used
in investing
activities (24,868) (7,471,347) 424,397 (15,852,142)
-----------------------------------------------------
INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (99,360) (3,698,026) (2,987,373) 4,599,098
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 11,215,814 21,491,713 14,103,827 13,194,589
-----------------------------------------------------
CASH AND CASH
EQUIVALENTS,
END OF PERIOD 11,116,454 17,793,687 11,116,454 17,793,687
-----------------------------------------------------
-----------------------------------------------------
1. Basis of Presentation
Caza Oil & Gas, Inc. ("Caza" or the "Company") was incorporated under
the laws of British Columbia on June 9, 2006 for the purposes of
acquiring shares of Caza Petroleum, Inc. ("Caza Petroleum"). The
Company and its subsidiaries are engaged in the exploration for and
the development, production and acquisition of, petroleum and natural
gas reserves.
The interim unaudited consolidated financial statements of Caza have
been prepared by management, in accordance with Canadian generally
accepted accounting principles. The preparation of financial
statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that
affect the amounts reported in the interim consolidated financial
statements and accompanying notes. Actual results could differ from
those estimates. The interim consolidated financial statements have,
in management's opinion, been properly prepared using careful
judgment with reasonable limits of materiality. These interim
consolidated financial statements do not include all the note
disclosures required for annual financial statements and therefore
they should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31,
2008. The interim consolidated financial statements have been
prepared following the same significant accounting policies as the
most recently reported audited consolidated financial statements of
Caza except as disclosed in Note 2.
Caza's reporting currency is the United States ("US") dollar as the
majority of its transactions are denominated in that currency.
2. Changes in Significant Accounting Policies
The Canadian Institute of Chartered Accountants ("CICA") issued the
following new Handbook Sections, which were effective for interim
periods beginning on or after January 1, 2009.
(a) The Company adopted Section 3064, Goodwill and Intangible Assets
and amended Section 1000, Financial Statement Concepts clarifying the
criteria for recognizing assets, intangible assets and internally
developed intangible assets. Items that no longer meet the definition
of an asset are no longer recognized with assets. The adoption of
this section did not have a material impact on the results of
operations or financial position.
(b) On January 20, 2009 the Emerging Issues Committee ("EIC") issued
a new abstract EIC 173 "Credit risk and the fair value of financial
assets and financial liabilities". This abstract concludes that an
entity's own credit risk and the credit risk of the counterparty
should be taken into account when determining the fair value of
financial assets and financial liabilities, including derivative
instruments. This abstract is to apply to all financial assets and
liabilities measured at fair value in interim and annual financial
statements for periods ending on or after January 20, 2009. The
adoption of this abstract did not have a significant impact on the
Company's financial statements.
(c) In February 2008, the AcSB confirmed that all Canadian publicly
accountable enterprises will be required to adopt International
Financial Reporting Standards (IFRS) for interim and annual reporting
purposes for fiscal years beginning on or after January 1, 2011.
Management is currently assessing the impact of the convergence of
Canadian GAAP with IFRS on the results of operations, financial
position and disclosures.
(d) In January 2009, the AcSB issued Section 1582, Business
Combinations, which replaces former guidance on business
combinations. Section 1582 establishes principles and requirements of
the acquisition method for business combinations and related
disclosures. This statement applies prospectively to business
combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
January 2011 with earlier application permitted. Management is
currently assessing the impact of the adoption of this section on the
results of operations, financial position and disclosures.
(e) In January 2009, the AcSB issued Sections 1601, Consolidated
Financial Statements, and 1602, Non-controlling Interests, which
replaces existing guidance. Section 1601 establishes standards for
the preparation of consolidated financial statements. Section1602
provides guidance on accounting for a non-controlling interest in a
subsidiary in consolidated financial statements subsequent to a
business combination. These standards are effective on or after the
beginning of the first annual reporting period beginning on or after
January 2011 with earlier application permitted. Management is
currently assessing the impact of the adoption on the results of
operations or financial position. 3. Property and Equipment
-----------------------------------------------------------------------
---
September 30, 2009
----------------------------------------
Accumulated
depletion
and Net Book
Cost depreciation Value
----------------------------------------
Petroleum and natural gas
properties and equipment $40,902,047 $4,589,352 $36,312,695
Office equipment and furniture $ 725,987 $ 354,320 $ 371,667
----------------------------------------
$41,628,034 $4,943,672 $36,684,362
----------------------------------------
--------------------------------------------------------------------------
December 31, 2008
----------------------------------------
Accumulated
depletion
and Net Book
Cost depreciation Value
----------------------------------------
Petroleum and natural gas
properties and equipment $39,330,883 $2,681,632 $36,649,251
Office equipment and furniture $ 718,523 $ 255,304 $ 463,219
----------------------------------------
$40,049,406 $2,936,936 $37,112,470
----------------------------------------
At September 30, 2009 the cost of petroleum and natural gas
properties includes $11,364,481 (December 31, 2008 - $10,778,079)
relating to unproven properties which have been excluded from costs
subject to depletion and depreciation. No events or circumstances
suggest that the undeveloped properties, and all associated costs are
impaired at September 30, 2009. Future development costs of proved
undeveloped reserves of $4,366,750 were included in the depletion
calculation at September 30, 2009 and $11,224,800 was included in the
depletion calculation at December 31, 2008.
During the nine month period ended September 30, 2009 the Company
received reimbursements of prior period costs as a result of joint
exploration agreements with other companies. This resulted in a
decrease of $992,089 to the petroleum and natural gas properties and
equipment. In addition the Company increased its working interest in
certain oil and gas properties in consideration for the settlement of
certain accounts receivable of the Company.
During the three and nine month periods ended September 30, 2009 the
Company capitalized general and administrative expenses of $58,887
and $481,492 respectively (three and nine month periods ended
September 30, 2008 - $305,469 and $909,416) directly relating to
exploration and development activities of which $39,422 and $154,687
related to stock based compensation for the period ended September
30, 2009 (2008 - $49,276 and $166,865 respectively).
4. Asset Retirement Obligations
The following table presents the reconciliation of the beginning and
ending aggregate carrying amount of the obligation associated with
the retirement of oil and gas properties:
September December
30, 2009 31, 2008
--------- ---------
Asset retirement obligation, beginning of period $ 493,919 $ 286,019
Obligations incurred 14,549 203,405
Accretion expense 18,461 14,262
Obligations settled - (9,767)
--------- ---------
Asset retirement obligation, end of period $ 526,929 $ 493,919
--------- ---------
The undiscounted amount of cash flows, required over the estimated
reserve life of the underlying assets, to settle the obligation,
adjusted for inflation, is estimated as at September 30, 2009 to be
$767,972 (December 31, 2008 - $740,472). The obligation was
calculated using a credit-adjusted risk free discount rate of 6
percent and an inflation rate of 3 percent.
5. Share Capital
(a) Authorized
Unlimited number of voting common shares.
(b) Issued
Nine months Ended Year Ended
September 30, 2009 December 31,2008
Shares Amounts Shares Amounts
Opening balance
common shares 119,319,000 $46,423,526 69,319,000 $25,037,117
Private placement - - 50,000,000 21,386,409
--------------------------------------------------------------------------
Balance end of period 119,319,000 $46,423,526 119,319,000 $46,423,526
--------------------------------------------------------------------------
Opening and ending
exchangeable rights 26,502,000 918,571 26,502,000 918,571
--------------------------------------------------------------------------
Opening balance
warrants 20,500,000 4,139,500 25,100,000 4,855,100
Expired broker
warrants
March 22, 2008 - - (2,400,000) (285,600)
Surrendered warrants
May 21, 2008 - - (2,200,000) (430,000)
--------------------------------------------------------------------------
Balance end of
period(i) 20,500,000 4,139,500 20,500,000 4,139,500
--------------------------------------------------------------------------
$51,481,597 $51,481,597
--------------------------------------------------------------------------
(i) The weighted average life of the warrants is 0.98 years (December 2008
- 1.73 years) and the weighted average exercise price is $0.99
(December 2008 - $0.99).
(c) Warrants
The following table summarizes the warrants outstanding as at
September 30, 2009.
Number
Remaining Exercisable
Number Exercise Contractual September
Date of Grant Outstanding Price Life Date of Expiry 30, 2009
---------------------------------------------------------------------------
September 22, 16,731,000 1.00 0.98 September 22, 16,731,000
2006 2010
November 20, 2,535,500 1.00 1.14 November 20, 2,535,500
2006 2010
January 17, 533,500 1.00 1.20 December 12, 533,500
2007 2010
December 12, 700,000 0.80 0.20 December 12, 700,000
2007 2009
---------------------------------------------------------------------------
20,500,000 20,500,000
---------------------------------------------------------------------------
(d) Stock options
A summary of the Company's stock option plan as at September 30, 2009
and December 31, 2008 and changes during the respective periods ended
on those dates is presented below.
September 30, 2009 December 31, 2008
Weighted Weighted
average average
Number of Exercise Number of exercise
Stock Options options price options price
---------------------------------------------------------------------------
Beginning of period 6,585,000 $ 0.61 6,605,000 $ 0.62
Granted - - 980,000 0.52
Forfeited (466,667) 0.58 (1,000,000) 0.59
-----------------------------------------------------
End of period 6,118,334 $ 0.61 6,585,000 $ 0.61
-----------------------------------------------------
Exercisable, end
of period 4,025,000 $ 0.56 2,876,667 $ 0.58
-----------------------------------------------------
-----------------------------------------------------
Weighted
Average Number
Remaining Exercisable
Number Exercise Contractual September
Date of Grant Outstanding Price Life Date of Expiry 30, 2009
---------------------------------------------------------------------------
January 31, 2,691,667 0.50 7.34 January 31, 2,691,667
2007 2017
May 10, 2007 220,000 0.50 7.59 May 10, 2017 146,667
June 11, 2007 20,000 0.50 7.70 June 11, 2017 13,333
December 12, 2,206,667 0.79 8.20 December 12, 846,667
2007 2017April 7, 2008 500,000 0.59 8.52 April 7, 2018 166,667
August 11, 2008 480,000 0.44 8.86 August 11, 160,000
2018
---------------------------------------------------------------------------
6,118,334 7.88 4,025,000
(e) Escrowed securities
At September 30, 2009, no securities remained in escrow.
(f) Contributed surplus
The following table presents the changes in contributed
surplus:
September 30, December 31,
2009 2008
--------------------------------------------------------------------------
Balance, beginning of period $ 4,217,135 $ 2,787,434
Expired broker warrants - 285,600
Surrendered warrants - 430,000
Stock based compensation(i) 453,015 714,101
--------------------------------------------------------------------------
Balance, end of period $ 4,670,150 $ 4,217,135
--------------------------------------------------------------------------
(i) For the three and nine month periods ended September 30, 2009, $90,563
and $363,212 of stock based compensation expense was recognized in the
statement of net loss (2008 - $149,215 and $401,441) and $39,422 and
$154,686 was capitalized during the respective three and nine month
periods (2008 - $49,276 and $166,865).
6. Related Party Transactions
The aggregate amount of expenditures made to related parties:
In February 2008, Caza Petroleum entered into a farm out agreement
with Singular Oil & Gas Sands, LLC ("Singular") to participate in the
drilling of the Jonell Cerny well in Wharton County, Texas. Under the
terms of that agreement, Singular paid 13.33% of the drilling costs
through completion of the Jonell Cerny well to earn a 10.00% interest
in the property thereafter. This participation was in the normal
course of Caza's business and on the same terms and conditions to
those of other joint venture partners. Singular owes the Company
$14,760 in joint venture partner receivables as at September 30,
2009. Singular is a related party as it is a company under common
control with Zoneplan Limited, which is a significant shareholder of
Caza.
All related party transactions are in the normal course of operations
and have been measured at the agreed to exchange amounts, which is
the amount of consideration established and agreed to by the related
parties and which is comparable to those negotiated with third
parties.
7. Commitments and Contingencies
As of September 30, 2009, the Company is committed under operating
leases for its offices and corporate apartment. The Company is
committed to the following aggregate minimum lease payments which are
shown below:
2009 $48,674
8. Supplementary Information
(a) net change in non-cash working capital
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Provided by (used in)
--------------------
Accounts receivable (426,274) 634,556 1,173,115 164,150
Prepaid and other 88,310 88,463 167,739 248,411
Accounts payable and
accrued liabilities 864,358 26,481 (2,370,810) (1,601,198)
----------------------------------------------
526,394 749,510 (1,029,956) (1,188,637)
----------------------------------------------
Summary of changes
Operating (232,037) 1,529,745 (2,928,631) 1,232,985
Financing - - - (650,899)
Investing 758,431 (780,235) 1,898,675 (1,770,723)
----------------------------------------------
526,394 749,510 (1,029,956) (1,188,637)
----------------------------------------------
(b) supplementary cash flow information
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Interest paid 4 6,198 749 10,144
Interest received 193 132,295 3,074 277,208
Taxes paid - 12,891 - 16,046
--------------------------------------------------------------------------
(c) cash and cash equivalents
September 30, December 31,
2009 2008
--------------------------------------------------------------------------
Cash on deposit 3,839,297 1,129,745
Money market instruments 7,277,157 12,974,082
-------------------------
Cash and cash equivalents 11,116,454 14,103,827
-------------------------
-------------------------
The money market instruments bear interest at a rate of 0.01% as at
September 30, 2009 (December 31, 2008 - 0.089%).
9. Capital Risk Management
The Company's objectives when managing capital is to safeguard the
entity's ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other
stakeholders. The Company defines capital as shareholders' equity
($45,012,064, 2008 - $47,430,599), working capital ($8,854,632, 2008
- $10,812,048) and credit facilities when available. Currently the
Company does not have a credit facility in place. The Company manages
the capital structure and makes adjustments to it in light of changes
in economic conditions and the risk characteristics of the underlying
assets. The Company's objective is met by retaining adequate equity
and working capital to provide for the possibility that cash flows
from assets will not be sufficient to meet future cash flow
requirements. The Board of Directors does not establish quantitative
return on capital criteria for management; but rather promotes year
over year sustainable profitable growth.
10. Financial Instruments
The Company holds various forms of financial instruments. The nature
of these instruments and the Company's operations expose the Company
to commodity price, credit, and foreign exchange risks. The Company
manages its exposure to these risks by operating in a manner that
minimizes its exposure to the extent practical.
(a) Commodity Price Risk
The Company is subject to commodity price risk for the sale of oil
and natural gas. The Company may enter into contracts for risk
management purposes only, in order to protect a portion of its future
cash flow from the volatility of oil, natural gas and natural gas
liquids commodity prices. To date the Company has not entered into
any forward commodity contracts.
(b) Credit Risk
Credit risk arises when a failure by counter parties to discharge
their obligations could reduce the amount of future cash inflows from
financial assets on hand at the balance sheet date. A majority of the
Company's accounts receivable at the balance sheet date arise from
oil, natural gas liquids and natural gas sales and the Company's
accounts receivable that are with these customers and joint venture
participants in the oil and natural gas industry. Industry standard
dictates that commodity sales are settled on the 25th day of the
month following the month of production. The Company's natural gas
and condensate production is sold to large marketing companies.
Typically, the Company's maximum credit exposure to customers is
revenue from two months of sales. During the period ended September
30, 2009, the Company sold 40.94% (September 30, 2008 - 91.69%) of
its natural gas and condensates to a single purchaser. These sales
were conducted on transaction terms that are typical for the sale of
natural gas and condensates in the United States. In addition, when
joint operations are conducted on behalf of a joint venture partner
relating to capital expenditures, costs of such operations are paid
for in advance to the Company by way of a cash call by the partner of
the operation being conducted. The Company currently holds its cash
and cash equivalent balances in a large national bank therefore
management believes the credit risk on cash and cash equivalents are
minimal.
Caza management assesses quarterly if there should be any impairment
of the financial assets of the Company. At September 30, 2009, the
Company had overdue accounts receivable from certain joint interest
partners of $19,995 which were outstanding for greater than 60 days
and $109,432 that were outstanding for greater than 90 days.
During the nine month period ended September 30, 2009, there was no
impairment required on any of the financial assets of the Company. At
September 30, 2009, the Company's two largest joint venture partners
represented approximately 35% and 10% of the Company's receivable
balance (December 31, 2008 21% and 15% respectively). The maximum
exposure to credit risk is represented by the carrying amount on the
balance sheet of cash and cash equivalents, accounts receivable and
deposits. (c) Foreign Currency Exchange Risk
The Company is exposed to foreign currency exchange fluctuations, as
certain general and administrative expenses are or will be
denominated in Canadian dollars and United Kingdom pounds sterling.
The Company's sales of oil and natural gas are all transacted in US
dollars. At September 30, 2009, the Company considers this risk to be
relatively limited and not material and therefore does not hedge its
foreign exchange risk.
(d) Fair Value of Financial Instruments
The Company has determined that the fair values of the financial
instruments consisting of cash and cash equivalents, accounts
receivable and accounts payable are not materially different from the
carrying values of such instruments reported on the balance sheet due
to their short-term nature.
All financial assets except for cash and cash equivalents which are
classified as held for trading, are classified as either loans or
receivables and are accounted for on an amortized cost basis. All
financial liabilities are classified as other liabilities. There are
no financial assets on the balance sheet that have been designated as
held-for-trading or available-for-sale. There have been no changes to
the aforementioned classifications in the nine month period ended
September 30, 2009.
(e) Liquidity Risk
Liquidity risk includes the risk that, as a result of our operational
liquidity requirements:
- The Company will not have sufficient funds to settle a transaction
on the due date;
- The Company will be forced to sell financial assets at a value
which is less than what they are worth; or
- The Company may be unable to settle or recover a financial asset at
all.
The Company's operating cash requirements including amounts projected
to complete the Company's existing capital expenditure program are
continuously monitored and adjusted as input variables change. These
variables include but are not limited to, available bank lines if
any, oil and natural gas production from existing wells, results from
new wells drilled, commodity prices, cost overruns on capital
projects and regulations relating to prices, taxes, royalties, land
tenure, allowable production and availability of markets. As these
variables change, liquidity risks may necessitate the Company to
conduct equity issues or obtain project debt financing. The Company
also mitigates liquidity risk by maintaining an insurance program to
minimize exposure to insurable losses. The financial liabilities as
at September 30, 2009 that impact the Company's liquidity risk are
accounts payable and accrued liabilities. The contractual maturity of
these financial liabilities is generally the following sixty days
from the receipt of the invoices for goods of services and can be up
to the following next six months. Management believes that current
working capital will be adequate to support these financial
liabilities.
The Toronto Stock Exchange has neither approved nor disapproved the
information contained herein.
Contacts:
Caza Oil & Gas, Inc.
John McGoldrick
Executive Chairman
+1 281 363 4442
Caza Oil & Gas, Inc.
W. Michael Ford
CEO
+1 432 682 7424
www.cazapetro.com
Hanson Westhouse Limited
Tim Feather/Richard Baty
+44 (0)20 7601 6100
Aquila Financial Limited
Peter Reilly
+44 (0)118 979 4100
SOURCE: Caza Oil & Gas, Inc.
http://www.cazapetro.com
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