B.C. FORM 51-901F
QUARTERLY AND YEAR END REPORT
Incorporated as part of: | |
X | Schedule A |
Schedules B & C |
ISSUER DETAILS: | |
Name of Issuer: | Continental Energy Corporation |
Issuer Address: | 21795 64th Avenue Langley, B.C. V2Y 2N7 |
Issuer Fax No.: | 604-532-6068 |
Issuer Telephone No.: | 604-532-6066 |
Contact Name: | James D. Eger |
Contact Position: | Vice President & Chief Information Officer |
Contact Telephone Number: | 877-762-2366 |
Contact Email Address: | info@continentalenergy.com |
Web Site Address: | www.continentalenergy.com |
For Quarter Ended: | 2004/04/30 |
Date of Report: | 2004/06/25 |
CERTIFICATE:
THE THREE SCHEDULES REQUIRED TO COMPLETE THIS REPORT ARE ATTACHED AND THE DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY OF THIS REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT. PLEASE NOTE, THIS FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF SCHEDULE A AND SCHEDULES B & C.
“Gary Schell” | Gary Schell | 2004/06/28 |
Signature | ||
“Richard McAdoo” | Richard McAdoo | 2004/06/28 |
Signature |
CONTINENTAL ENERGY CORPORATION
An Exploration Stage Company
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
30 April 2004
Unaudited - See Notice to Reader
U.S. Funds
AVISAR
Chartered Accountants
NOTICE TO READER
We have compiled the interim consolidated balance sheet of Continental Energy Corporation (An Exploration Stage Company) as at 30 April 2004 and the interim consolidated statements of changes in shareholders’ deficiency, operations and cash flows for the periods then ended from information provided by management. We have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of such information. Readers are cautioned that these statements may not be appropriate for their purposes.
“Avisar, Chartered Accountants”
Langley, B.C., Canada | AVISAR |
25 June 2004 | CHARTERED ACCOUNTANTS |
Continental Energy Corporation | Statement 1 | |||
(An Exploration Stage Company) | ||||
Interim Consolidated Balance Sheet | ||||
U.S. Funds | ||||
Unaudited - See Notice to Reader | ||||
30 April | 31 July | |||
ASSETS |
| 2004 |
| 2003 |
Current | ||||
Cash | $ | 112,310 | $ | 802,127 |
Due from related party | 120,605 | 90,418 | ||
Prepaid expense | 86,590 | 7,015 | ||
Accounts and GST receivable |
| 53,043 |
| 7,979 |
372,548 | 907,539 | |||
Prepaid Resource Property Costs | 8,000 | 17,000 | ||
Prepaid Share Issuance Costs | 12,000 | 25,500 | ||
Resource Property Costs - Schedule 1 (Note 5) | 3 | 3 | ||
Capital Assets,net of accumulated amortization | 96,046 | 133,911 | ||
| $ | 488,597 | $ | 1,083,953 |
LIABILITIES |
|
|
|
|
Current | ||||
Accounts payable and accrued liabilities | $ | 1,128,969 | $ | 4,608,355 |
Due to related parties | 75,161 | 368,121 | ||
Promissory notes payable | 50,000 | 50,000 | ||
Cash received in advance of share issuance | - | 92,008 | ||
Capital lease obligation - current portion |
| 18,752 |
| 18,714 |
| 1,272,882 |
| 5,137,198 | |
Capital Lease Obligation |
| 17,404 |
| 32,622 |
Contingent and Conditional Liabilities(Note 6) |
| 3,481,646 |
| - |
Continued Operations(Note 1) | ||||
SHAREHOLDERS’ DEFICIENCY |
|
|
|
|
Share Capital - Statement 2 | 21,702,567 | 21,486,809 | ||
Contributed Surplus - Statement 2 | 1,647,381 | 1,177,550 | ||
Deficit-Statement 2 |
| (27,633,283) |
| (26,750,226) |
| (4,283,335) |
| (4,085,867) | |
| $ | 488,597 | $ | 1,083,953 |
ON BEHALF OF THE BOARD: | ||||
"Richard L. McAdoo" | ||||
, Director | ||||
“Gary Schell” | ||||
, Director |
Continental Energy Corporation | Statement 2 | |||||||||||
(An Exploration Stage Company) | ||||||||||||
Interim Consolidated Statement of Changes | ||||||||||||
In Shareholders’ Deficiency | ||||||||||||
U.S. Funds | ||||||||||||
Unaudited - See Notice to Reader | ||||||||||||
Common Shares | Deficit | Deficit | ||||||||||
Incurred | Incurred | |||||||||||
Prior to | During | |||||||||||
Contributed | Exploration | Exploration | ||||||||||
| Shares |
| Amount |
| Surplus |
| Stage |
| Stage |
| Total | |
Balance - 31 July 2002 | 29,286,233 | $ | 18,972,265 | $ | 116,550 | $ | (11,420,599) | $ | (13,283,011) | $ | (5,614,795) | |
Private placement @ | ||||||||||||
$0.15/common share | 5,408,000 | 811,200 | - | - | \ - | 811,200 | ||||||
Exercise of warrants @ | ||||||||||||
$0.15/common share | 255,551 | 38,333 |
| - | - | 38,333 | ||||||
$0.15/common share | 943,834 | 141,575 | - | - | - | 141,575 | ||||||
$0.15/common share | 165,000 | 24,750 | - | - | - | 24,750 | ||||||
$0.15/common share | 50,000 | 7,500 | - | - | - | 7,500 | ||||||
Exercise of options @ | ||||||||||||
$0.15/common share | 890,000 | 133,500 | - | - | - | 133,500 | ||||||
Finder's fee | 900,000 | 225,000 | - | - | - | 225,000 | ||||||
Share issuance costs | - | (18,500) | - | - | - | (18,500) | ||||||
Loss for the period -Statement 3 | - | - | - | - | (791,108) | (791,108) | ||||||
Balance - 30 April 2003 | 37,898,618 | $ | 20,335,623 | $ | 116,550 | $ | (11,420,599) | $ | (14,074,119) | $ | (5,042,545) | |
Balance - 31 July 2003 | 45,749,858 | $ | 21,486,809 | $ | 1,177,550 | $ | (11,420,599) | $ | (15,329,627) | $ | (4,085,867) | |
Exercise of warrants @ | ||||||||||||
$0.15/common share | 1,173,388 | 176,008 | - | - | - | 176,008 | ||||||
$0.15/common share | 285,000 | 42,750 | - | - | - | 2,750 | ||||||
Exercise of options @ | ||||||||||||
$0.15/common share | 70,000 | 10,500 | - | - | - | 10,500 | ||||||
Shares issuance costs | - | (13,500) | - | - | - | (13,500) | ||||||
Cancellation of escrow shares | (93,750) | - | - | - | - | - | ||||||
Stock option compensation | - | - | 469,831 | - | - | 469,831 | ||||||
Loss for the period -Statement 3 | - | - | - | - | (883,057) | (883,057) | ||||||
Balance - 30 April 2004 | 47,184,496 | $ | 21,702,567 | $ | 1,647,381 | $ | (11,420,599) | $ | (16,212,684) | $ | (4,283,335) | |
Continental Energy Corporation | Statement 3 | |||||||||
(An Exploration Stage Company) | ||||||||||
Interim Consolidated Statement of Operations | ||||||||||
U.S. Funds | ||||||||||
Unaudited - See Notice to Reader | ||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||
30 April | 30 April | |||||||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 | ||
Expenses | ||||||||||
Amortization | $ | 21,397 | $ | 4,020 | $ | 73,607 | $ | 6,140 | ||
Consulting | 3,465 | 10,012 | 12,078 | 30,814 | ||||||
Finder's fee | - | 225,000 | - | 225,000 | ||||||
Foreign exchange loss (gain) | (12,716) | 1,738 | 6,947 | 26,033 | ||||||
General and administrative- Schedule 2 | 108,043 | 69,814 | 303,252 | 201,478 | ||||||
Interest and bank charges | 3,574 | 4,511 | 12,592 | 9,683 | ||||||
Investor relations | 6,750 | 7,056 | 22,496 | 19,512 | ||||||
Management fees | 86,402 | 57,363 | 354,222 | 155,189 | ||||||
Wages | 4,854 | 22,868 | 16,646 | 134,720 | ||||||
|
|
|
|
|
|
|
| |||
Income (Loss) Before the Following | (221,769) | (402,382) | (801,840) | (808,569) | ||||||
Other Income (Expenses) | ||||||||||
Farm out proceeds in excess of | ||||||||||
resource property costs | - | 9,000 | - | 17,461 | ||||||
Gain on reduction of contingent and | ||||||||||
conditional liabilities | 328,500 | - | 328,500 | - | ||||||
Stock option compensation | (38,196) | - | (469,830) | - | ||||||
Terminated farm out proceeds(Note 5) | - | - | 251,869 | - | ||||||
Write-down of resource property costs |
| (191,756) |
| - |
| (191,756) |
| - | ||
Income (Loss) for the Period | $ | (123,221) | $ | (393,382) | $ | (883,057) | $ | (791,108) | ||
Income (Loss) per Share - Basic and Diluted | $ | (0.003) | $ | (0.004) | $ | (0.019) | $ | (0.016) | ||
Weighted Average Number of Shares Outstanding |
| 47,116,051 |
| 37,312,663 |
| 46,887,961 |
| 35,294,322 | ||
Continental Energy Corporation | Statement 4 | |||||||||
(An Exploration Stage Company) | ||||||||||
Interim Consolidated Statement of Cash Flows | ||||||||||
U.S. Funds | ||||||||||
Unaudited - See Notice to Reader | ||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||
30 April | 30 April | |||||||||
Cash Resources Provided By (Used In) |
| 2004 |
| 2003 |
| 2004 |
| 2003 | ||
Operating Activities | ||||||||||
Loss for the period | $ | (123,221) | $ | (393,382) | $ | (883,057) | $ | (791,108) | ||
Item not affecting cash | ||||||||||
Amortization | 21,397 | 4,020 | 73,607 | 6,140 | ||||||
Gain on reduction of contingent and conditional liabilities | (328,500) | - | (328,500) | - | ||||||
Stock compensation expense | 38,196 | - | 469,830 | - | ||||||
Write-down of resource property costs | 191,756 | - | 191,756 | - | ||||||
Changes in current assets and liabilities | ||||||||||
Prepaid expenses | (7,915) | (984) | (79,575) | (8,587) | ||||||
GST and accounts receivable | (1,975) | 9,409 | (45,064) | 12,135 | ||||||
Accounts payable | (3,099,373) | 72,411 | (3,150,885) | (735,575) | ||||||
Due to related parties |
| (440,094) |
| 31,992 |
| (323,147) |
| (670,929) | ||
| (3,749,729) |
| (276,534) |
| (4,075,035) |
| (2,187,924) | |||
Investing Activities | ||||||||||
Prepaid resource property costs | 3,000 | 3,000 | 9,000 | 9,000 | ||||||
Resource property costs | (96,746) | (75,132) | (500,005) | (288,351) | ||||||
Resource property recovery | 50,000 | 145,000 | 308,249 | 1,073,290 | ||||||
Capital asset additions |
| (532) |
| (36,458) |
| (35,742) |
| (36,458) | ||
| (44,278) |
| 36,410 |
| (218,498) |
| 757,481 | |||
Financing Activities | ||||||||||
Prepaid share issuance costs | 4,500 | 4,500 | 13,500 | 13,500 | ||||||
Cash received in advance of share issuance | - | 71,000 | (92,008) | (64,000) | ||||||
Capital lease | (5,520) | - | (15,180) | - | ||||||
Contingent and conditional liabilities | 3,481,646 | - | 3,481,646 | - | ||||||
Share capital issued for cash, net |
| 6,000 |
| 223,000 |
| 215,758 |
| 1,363,358 | ||
| 3,486,626 |
| 298,500 |
| 3,603,716 |
| 1,312,858 | |||
Net Increase (Decrease) Cash | (307,381) | 58,376 | (689,817) | (117,585) | ||||||
Cash position - Beginning of period |
| 419,691 |
| 49,453 |
| 802,127 |
| 225,414 | ||
Cash Position - End of period | $ | 112,310 | $ | 107,829 | $ | 112,310 | $ | 107,829 | ||
Continental Energy Corporation | Schedule 1 | |||||||||||
(An Exploration Stage Company) | ||||||||||||
Interim Consolidated Schedule of Resource Property Costs | ||||||||||||
U.S. Funds | ||||||||||||
Unaudited - See Notice to Reader | ||||||||||||
Additions For the | ||||||||||||
Three Months Ending | ||||||||||||
Balance | Balance | |||||||||||
31 July | 31 October | 31 January | 30 April | 30 April | ||||||||
|
|
| 2003 |
| 2003 |
| 2004 |
| 2004 |
| 2004 | |
Indonesia | ||||||||||||
Bengara | ||||||||||||
Production sharing contract acquisition | $ | 1,315,953 | $ | - | $ | - | $ | - | $ | 1,315,953 | ||
Geological and geophysical interpretation and evaluation | 1,212,904 | 266,914 | 93,869 | 46,244 | 1,619,931 | |||||||
Seismic acquisition, surveys and data processing | 97,360 | - | - | - | 97,360 | |||||||
Field exploration, surveys and data acquisition | 17,393 | - | - | - | 17,393 | |||||||
Prepaid resource property costs | 75,000 | - | - | - | 75,000 | |||||||
Costs for the period | 2,718,610 | 266,914 | 93,869 | 46,244 | 3,125,637 | |||||||
Impairment | (801,683) | - | - | (98,778) | (900,461) | |||||||
Costs recovery | (1,916,926) | (141,286) | (116,963) | (50,000) | (2,225,175) | |||||||
Net property costs for the period | 1 | 125,628 | (23,094) | (102,534) | 1 | |||||||
Yapen | ||||||||||||
Production sharing contract acquisition | 623,784 | - | - | - | 623,784 | |||||||
Geological and geophysical interpretation and evaluation | 185,449 | - | - | - | 185,449 | |||||||
Seismic acquisition, surveys and data processing |
| 383,378 |
| - |
| - |
| - |
| 383,37 | ||
Costs for the period | 1,192,611 | - | - | - | 1,192,611 | |||||||
Impairment | (81,923) | - | - | - | (81,923) | |||||||
Cost allocated on disposal | (535,024) | - | - | - | (535,024) | |||||||
Costs recovery |
| (575,663) |
| - |
| - |
| - |
| (575,663) | ||
Net property costs for the period |
| 1 |
| - |
| - |
| - |
| 1 | ||
GATB | ||||||||||||
Technical assistance contract acquisition | 6,205,302 | - | - | - | 6,205,302 | |||||||
Geological and geophysical interpretation and evaluation |
| 189,494 |
| 9,316 |
| 33,160 |
| 50,502 |
| 282,472 | ||
Costs for the period | 6,394,796 | 9,316 | 33,160 | 50,502 | 6,487,774 | |||||||
Impairment |
| (6,394,795) |
| - |
| - |
| (92,978) |
| (6,487,773) | ||
Net property costs for the period |
| 1 |
| 9,316 |
| 33,160 |
| (42,476) |
| 1 | ||
Balance - End of Period | $ | 3 | $ | 134,944 | $ | 10,066 | $ | (145,010) | $ | 3 | ||
Continental Energy Corporation | Schedule 2 | ||||||||
(An Exploration Stage Company) | |||||||||
Interim Consolidated Schedule of General and | |||||||||
Administrative Expenses | |||||||||
U.S. Funds | |||||||||
Unaudited - See Notice to Reader | |||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||
30 April | 30 April | ||||||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 | |
General and Administrative Expenses | |||||||||
Filing fees | $ | 889 | $ | 1,047 | $ | 4,100 | $ | 5,564 | |
Office expenses | 39,361 | 55,018 | 119,462 | 126,586 | |||||
Professional fees, legal, audit and translation | 7,348 | 4,165 | 55,971 | 18,581 | |||||
Rent, office maintenance and utilities | 21,346 | 1,301 | 35,970 | 12,550 | |||||
Shareholder information | 8,512 | 1,434 | 20,126 | 9,575 | |||||
Telephone | 6,200 | 6,849 | 21,736 | 17,480 | |||||
Travel |
| 24,387 |
| - |
| 45,887 |
| 11,142 | |
| $ | 108,043 | $ | 69,814 | $ | 303,252 | $ | 201,478 | |
Continental Energy Corporation (An Exploration Stage Company) | ||
Notes to Interim Consolidated Financial Statements | ||
30 April 2004 | ||
U.S. Funds | ||
Unaudited - See Notice to Reader |
1.
Continued Operations
These interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Adverse conditions and events cast substantial doubt upon the validity of this assumption. The company has incurred significant operating losses over the past several fiscal years and the current nine-month period. As at 30 April 2004 and 31 July 2003 the company had a working capital deficiency of $900,300 and $4,230,000 respectively. In addition, the company has insufficient funds to meet the expenditure obligations related to its Indonesian properties. These facts create uncertainty surrounding the timing and capacity of the company to meet its financial obligations.
The company’s ability to continue as a going concern is dependent upon its ability to raise additional capital by issuance of treasury shares or debt, receive significant disposal or farm-out proceeds for its Indonesian oil and gas properties or achieve profitable operations.
If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.
2.
Significant Accounting Policies
These interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim financial statements should be read in conjunction with the audited financial statements of the Company as at 31 July 2003.
3.
Segmented Information
Details are as follows:
Canada | Indonesia | Consolidated | ||||
30 April 2004 | ||||||
Segmented operating loss | $ | (525,544) | $ | (357,513) | $ | (883,057) |
Identifiable assets | $ | 142,683 | $ | 345,914 | $ | 488,597 |
Continental Energy Corporation (An Exploration Stage Company) | ||
Notes to Interim Consolidated Financial Statements | ||
30 April 2004 | ||
U.S. Funds | ||
Unaudited - See Notice to Reader |
4.
Related Party Transactions
All related party transactions have been disclosed elsewhere in these interim consolidated financial statements, except as follows:
a)
During the nine month period ended 30 April 2004, management and/or director fees in the amount of $360,000 were paid or accrued to a director and a company controlled by a director or subsidiary directors.
b)
As at 30 April 2004, accounts payable include $75,161 and contingent & conditional liabilities include $123,000 payable to directors, or directors of one of the company’s subsidiaries. During the period, contingent & conditional liabilities owed to former directors/officers of GATB in the amount of $328,500 were written off as a result of the termination of employment contracts.
c)
During the nine months ended 30 April 2004, resource property consulting fees in the amount of $70,000 were paid or accrued to a former director of one of the company’s subsidiaries.
d)
As at 30 April 2004 accounts receivable includes $120,604 receivable from a director or a company controlled by a director.
e)
During the nine months ended 30 April 2004, 659,188 warrants were exercised by an officer of one of the company’s subsidiaries and a former director of one of the company’s subsidiaries resulting in the issuance of 659,188 common shares for total proceeds of $98,878.
5.
Resource Property Costs
China Wisdom International (HK) Ltd. (“China Wisdom”)
During the year ended 31 July 2003, the Company and its farm out partner, GeoPetro, entered into an agreement with an unrelated partner, China Wisdom, to dispose of 40% of the Bengara subsidiary. To earn its 40% interest, China Wisdom was to:
-
pay $720,000 by way of $120,000 cash and six separate promissory notes in the amount of $100,000 each due and payable on the last day of each month of June to November 2003.
-
drill five exploration wells no later than 31 December 2004, at least three of which are to be drilled in 2003, with the first of the three completed by 30 September 2003. As at 31 July 2003 and 30 November 2003, drilling had not begun.
As at 31 July 2003, to fulfill its obligation under the farm out agreement, 40% of the issued and outstanding shares of Bengara had been transferred to China Wisdom.
As at 31 July 2003, $300,000 had been received with 60% ($180,000) and 40% ($120,000) of the proceeds being allocated to the Company and GeoPetro. Subsequent to 31 July 2003 and prior to 31 January 2004, an additional $419,782 had been received with 60% ($251,869) and 40% ($167,913) of the proceeds being allocated to the Company and GeoPetro. The promissory notes had not been delivered. In a letter dated 4 November 2003, Bengara notified China Wisdom that it was in default of its agreement because it had not drilled its first well on or before 30 September 2003 and it had not fulfilled its cash payment obligations.
Continental Energy Corporation (An Exploration Stage Company) | ||
Notes to Interim Consolidated Financial Statements | ||
30 April 2004 | ||
U.S. Funds | ||
Unaudited - See Notice to Reader |
5.
Resource Property Costs -Continued
China Wisdom did not satisfy the terms of the agreement and the agreement was terminated effective 1 December 2003 and any money paid to date by China Wisdom has been forfeited to the Company and GeoPetro. It is management’s opinion that the Bengara subsidiary will continue to be accounted for as a wholly owned subsidiary. On 4 December 2003, the Company and GeoPetro gave China Wisdom notice that the agreement is to be terminated effective 1 December 2003 and requested that the Bengara shares previously transferred to China Wisdom be returned to the Company and GeoPetro. As at the report date, the Bengara shares had not yet been returned to the Company or GeoPetro. The Company and GeoPetro have retained legal counsel to recover their Bengara shares. Any additional funds received by the Company subsequent to 30 April 2004 will be treated as income when received.
6.
Contingent and Conditional Liabilities
The contingent and conditional liabilities are attributable solely to the Company's majority owned GAT Bangkudulis subsidiary ("GATB"). Most of these liabilities were acquired together with the GATB subsidiary upon the Company's acquisition of a 70% stake in GATB in 2001.
GATB has accrued and made provision for contingent and conditional liabilities totaling an amount of $3,481,646. Contingent and conditional liabilities include the following:
Fees:GATB has accrued an amount of $123,000 as a contingent and conditional liability payable to current and former GATB directors and management in respect of deferred compensation for personal services as directors and managers. By agreement this entire amount is payable only in the event GAT Bangkudulis commences commercial production from the Bangkudulis Field. If no production is achieved this liability is not payable.
Labor Dispute Provision: GATB has made provision for a Rupiah settlement of a labor dispute descried below in the section entitled "Claims, Contingencies & Litigation". At the end of the quarter this provision amounts to a US$ equivalent of $48,016. This amount is contingent and represents a maximum payable. Actual payment of the claim may occur at some reduced amount and is conditional upon settlement of the labor dispute claim.
Tax Penalties & Interest: GATB has made provision for payment of estimated Rupiah penalties and interest conditionally applicable to outstanding withholding taxes due to Indonesian tax authorities in the amounts indicated in the section above entitled "Firm Payables". At the end of the quarter this provision amounts to a US$ equivalent of $217,313. This amount is contingent and represents an estimated maximum payable. Actual payment of the claim may occur at some reduced amount and is conditional upon settlement terms.
Continental Energy Corporation (An Exploration Stage Company) | ||
Notes to Interim Consolidated Financial Statements | ||
30 April 2004 | ||
U.S. Funds | ||
Unaudited - See Notice to Reader |
6.
Contingent and Conditional Liabilities -Continued
Value Added Tax:GATB has accrued a US$ equivalent amount of $531,135 at the quarter end for Value Added Tax ("VAT") which is a contingent payable. VAT taxes are deferred under current Indonesian tax law and GATB shall be obliged to pay accrued VAT, if and only if, Bangkudulis Field production is achieved. VAT is not due and payable until such time as commercial production from the Bangkudulis Field and is not payable at all in the event no production is achieved. VAT is denominated in Indonesian Rupiah and the total amount changes monthly depending upon the US$ to Rupiah exchange rate applied.
APOG Shareholder Loan:Also included in the total is a contingent shareholder loan repayable to former GATB shareholder Apex Oil & Gas Ltd. ("APOG") in the amount of $2,562,182. APOG no longer owns shares of GATB but pursuant to a shareholders agreement signed by the Company dated 9-April-2001 the Company and other GATB shareholder have agreed to repay APOG the amount from cost recovery proceeds of Bangkudulis Field production, if and only if, Bangkudulis Field production is achieved. The APOG shareholder loan does not bear interest. If the Bangkudulis TAC is terminated or the Bangkudulis Field never achieves sufficient cost recovery from production to repay the shareholder loan to APOG then there is no obligation of GATB or of the Company to repay it.