EXHIBIT 99.1
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FIRST INTERIM REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2004
MESSAGE TO SHAREHOLDERS
WESTERN OIL SANDS INC. ("WESTERN") IS PLEASED TO PRESENT FIRST QUARTER 2004
RESULTS AND TO PROVIDE AN OPERATIONAL UPDATE FOR THE ATHABASCA OIL SANDS PROJECT
(THE "PROJECT" OR THE "AOSP"). IN THE FIRST THREE MONTHS OF 2004, WESTERN
GENERATED NET REVENUES OF $82.7 MILLION AND CASH FLOW FROM OPERATIONS OF $9.0
MILLION ($0.18 PER SHARE) COMPARED TO NET REVENUES OF $74.3 MILLION AND CASH
FLOW OF $ 3.4 MILLION ($0.07 PER SHARE) IN THE FOURTH QUARTER OF 2003. EBITDA
WAS $25.7 MILLION, UP FROM $20.4 MILLION IN THE FOURTH QUARTER. RISK MANAGEMENT
ACTIVITIES REDUCED REVENUE, EBITDA AND CASH FLOW BY $17.4 MILLION FOR THE FIRST
QUARTER OF 2004 AND BY $5.4 MILLION IN THE FOURTH QUARTER OF 2003.
The AOSP continued to successfully ramp-up production, averaging approximately
136,000 barrels per day (27,200 barrels per day - Western's share) or 88% of
project design capacity during the first quarter of 2004, an increase of 4.5%
over production levels in the fourth quarter of 2003. For increasing periods of
time, production was sustained at or above levels of 155,000 barrels per day,
with the quarterly average being affected by extremely cold temperatures in the
quarter that challenged both our operators and our equipment at the mine site.
The challenge of operating through our first winter season provided important
lessons for future operations. At the Upgrader we are beginning to see the
benefits of our early optimization initiatives - an improving product mix by
producing more light products - thereby increasing profitability for Western. We
continue to pursue our cost target of $12.00 to $14.00 per barrel to produce
synthetic crude oil. We believe that target will be achieved through a
combination of aggressive cost management, continuous growth of
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bitumen production volumes and steady, reliable plant production. The progress
is being made through a series of adjustments to the existing process that forms
a continuous flow of refinements known as de-bottlenecking. For Western the
equation is clear: for every dollar of cost we can eliminate, the gain in net
earnings is approximately $1.3 billion over the life of the project.
The Joint Venture achieved a satisfactory final settlement with insurers for
recovery of costs resulting from the January 2003 fire and related freezing
damage at the mine site. However, certain insurers also involved in the Cost
Overrun and Delay Insurance dispute with Western continue to withhold insurance
proceeds payable to Western for these damages. With the exception of an amount
withheld, approximately equal to the amounts recovered, these claims have now
been resolved. The Joint Venture continues to pursue claims for lost profits
resulting from production delays caused by the fire. In addition, arbitration
proceedings will commence shortly for Western's limits claim on its $200 million
Cost Overrun and Delay Insurance policy.
The AOSP has now received the major provincial and federal government approvals
required for the first phase of its Jackpine Mine located in the Athabasca oil
sands region of northern Alberta. With major approvals now in hand, we will
continue work on the project development phase, which includes feasibility
studies and ongoing community dialogue. These approvals are another positive
step towards our long-term goal of producing 500,000 barrels per day from our
Athabasca oil sands leases. As previously announced, the planned development of
the leases is as follows:
o Expansion of the existing Muskeg River Mine - to increase total
production from the current design level of 155,000 barrels per day of
bitumen to approximately 225,000 barrels per day. This development
would likely be complete before 2010.
2
o Jackpine Mine - Phase 1 - a proposed mining and extraction facility
located on the eastern portion of Lease 13 with a capacity of
approximately 200,000 barrels per day of bitumen production. The
development of this new mine is covered by the recent regulatory
approvals from the provincial and federal governments.
o Jackpine Mine - Phase 2 - additional resources on Leases 88 and 89
would be mined as an extension of the first phase of the Jackpine Mine,
allowing for additional production of approximately 100,000 barrels per
day. Development of Leases 88 and 89 requires additional regulatory
approval.
The owners are evaluating other de-bottlenecking and expansion scenarios on an
ongoing basis which may alter the volumes and time frames for these expansions.
The timing of an investment decision for these developments will depend on
market conditions, project cost and sustainable development considerations.
On behalf of the Board of Directors, Guy J. Turcotte
President and Chief
Executive Officer
April 27, 2004
3
MANAGEMENT'S DISCUSSION & ANALYSIS
THE FOLLOWING DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS WAS
PREPARED AS OF APRIL 27, 2004 AND SHOULD BE READ IN CONJUNCTION WITH THE INTERIM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED MARCH 31, 2004
AND 2003 AND THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2003
INCLUDED IN THE ANNUAL REPORT. IT OFFERS MANAGEMENT'S ANALYSIS OF OUR FINANCIAL
AND OPERATING RESULTS AND CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS RELATING
BUT NOT LIMITED TO OUR OPERATIONS, ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS
PROSPECTS AND STRATEGIES. FORWARD-LOOKING INFORMATION TYPICALLY CONTAINS
STATEMENTS WITH WORDS SUCH AS "ANTICIPATE", "ESTIMATE", "EXPECT", "POTENTIAL",
"COULD", OR SIMILAR WORDS SUGGESTING FUTURE OUTCOMES. WE CAUTION READERS TO NOT
PLACE UNDUE RELIANCE ON FORWARD-LOOKING INFORMATION BECAUSE IT IS POSSIBLE THAT
PREDICTIONS, FORECASTS, PROJECTIONS AND OTHER FORMS OF FORWARD-LOOKING
INFORMATION WILL NOT BE ACHIEVED BY WESTERN.
BY ITS NATURE, OUR FORWARD-LOOKING INFORMATION INVOLVES NUMEROUS ASSUMPTIONS,
INHERENT RISKS AND UNCERTAINTIES. A CHANGE IN ANY ONE OF THESE FACTORS COULD
CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING INFORMATION. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THE
FOLLOWING: MARKET CONDITIONS, LAW OR GOVERNMENT POLICY, OPERATING CONDITIONS AND
COSTS, PROJECT SCHEDULES, OPERATING PERFORMANCE, DEMAND FOR OIL, GAS, AND
RELATED PRODUCTS, PRICE AND EXCHANGE RATE FLUCTUATIONS, COMMERCIAL NEGOTIATIONS
OR OTHER TECHNICAL AND ECONOMIC FACTORS.
OVERVIEW
Western Oil Sands Inc. ("Western") is a Canadian oil sands corporation that
holds a 20 per cent undivided ownership interest in a multibillion dollar Joint
Venture that is exploiting the recoverable bitumen resources found in oil sands
deposits in the Athabasca region of Alberta, Canada. Shell Canada Limited and
Chevron Canada Limited hold the remaining 60 per cent and 20 per cent undivided
ownership interests, respectively, in the Joint Venture. The Athabasca Oil Sands
Project (the "AOSP" or the "Project"), which includes facilities owned by the
Joint Venture and third parties, uses established processes to mine oil sands
deposits, extract, and upgrade the bitumen into synthetic crude oil and vacuum
gas oil. Currently, apart from our interest in the Project, we have no other
material assets nor do we have any other ongoing operations. Western is,
however, actively pursuing other oil sands and related business opportunities.
4
HIGHLIGHTS
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THREE MONTHS ENDED,
---------------------------------------------
MAR. 31, 2004 DEC. 31, 2003 MAR. 31, 2003
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OPERATING DATA (bbls/d)
Bitumen Production 27,197 26,034 --
Synthetic Crude Sales 35,786 37,453 --
FINANCIAL DATA ($ thousands, except as indicated)
Net Revenue 82,684 74,342 --
Realized Crude Oil Sales Price - Oil Sands ($/bbl) (1)(2) 34.61 31.30 --
EBITDA(1) (3) 25,732 20,370 (1,439)
EBITDA ($/bbl) (1)(4) 10.40 8.50 --
Cash Flow from Operations (5) 9,048 3,444 (2,207)
Cash Flow per Share - Basic ($/Share) (1)(6) 0.18 0.07 (0.04)
Net (Loss) Earnings Attributable to Common Shareholders (7) (5,703) 17,618 (2,376)
Net (Loss) Earnings Per Share - Basic ($/Share) (0.11) 0.35 (0.05)
Net Capital Expenditures 5,458 7,703 112,168
Total Assets (8) 1,457,418 1,458,424 1,428,950
Long-term Liabilities 914,846 921,910 815,195
Weighted Average Shares Outstanding - Basic (Shares) 50,673,495 50,592,445 49,646,110
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(1) PLEASE REFER TO PAGE 17 FOR A DISCUSSION OF NON-GAAP FINANCIAL MEASURES.
(2) THE REALIZED CRUDE OIL SALES PRICE IS THE REVENUE DERIVED FROM THE SALE OF
WESTERN'S SHARE OF THE PROJECT'S SYNTHETIC CRUDE OIL DIVIDED BY THE
CORRESPONDING VOLUME. PLEASE REFER TO PAGE 7 FOR CALCULATION.
(3) EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, DEPLETION, AMORTIZATION,
STOCK BASED COMPENSATION, ACCRETION ON ASSET RETIREMENT OBLIGATION AND
FOREIGN EXCHANGE AS CALCULATED ON PAGE 12.
(4) EBITDA ($/BBL) IS EBITDA DIVIDED BY TOTAL BITUMEN PRODUCTION FOR THE
PERIOD.
(5) CASH FLOW FROM OPERATIONS IS EXPRESSED BEFORE CHANGES IN NON-CASH WORKING
CAPITAL.
(6) CASH FLOW PER SHARE IS CALCULATED AS CASH FLOW FROM OPERATIONS DIVIDED BY
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC.
(7) WESTERN HAS NOT PAID CASH DIVIDENDS IN ANY OF THE ABOVE REFERENCED PERIODS.
(8) MARCH 31, 2003 TOTAL ASSETS AND LONG-TERM LIABILITIES HAVE BEEN RESTATED TO
REFLECT THE ADOPTION OF ASSET RETIREMENT OBLIGATION.
OPERATING RESULTS
The Company commenced reporting operations on a commercial basis effective June
1, 2003 and, as a result, comparisons to prior year, pre-operating information
are provided only where appropriate. Accordingly, as there is no comparable
operating information for the three months ended March 31, 2003, operating
comparisons have been provided for the fourth quarter of 2003, which management
believes provides more meaningful information for shareholders and potential
investors.
5
PRODUCTION
The AOSP continued to make progress during the first quarter of 2004 with
production volumes reaching new daily and weekly highs. Production from the
Project averaged approximately 136,000 barrels per day of bitumen, representing
88 per cent of the design capacity rate. While extreme cold in January and
unplanned maintenance in March at the Muskeg River Mine affected volumes for the
first quarter of 2004, our average production for the period increased 4.5% over
the previous quarter, and we gained further insight into key factors to
sustaining high production levels. Entering the second quarter, the focus
remains on continuous improvement - safely and steadily increasing reliability
and production while consistently meeting customers' needs.
[GRAPHIC OMITTED]
[BAR CHART]
QUARTERLY PRODUCTION VOLUMES
Q1 Q2 Q3 Q4 Q1
2003 2003 2003 2003 2004
---- ---- ---- ---- ----
AOSP -- 85.7 116.3 130.0 135.9
WESTERN -- 17.1 23.3 26.0 27.2
REVENUE
Western achieved $132.6 million in crude oil sales revenue in the first quarter
of 2004, including $112.7 million from our share of proprietary production,
compared to $133.7 million in revenues of
6
which $107.9 million was proprietary production in the fourth quarter of 2003.
The slight decrease in gross sales revenue is due to a reduction in third party
marketing activities in the first quarter. The increase in revenue from our
proprietary production is the result of an increase in Edmonton PAR (the
reference price for light sweet crude at Edmonton), partially offset by a
decrease in sales volumes as Western had larger volumes left in inventory at the
end of the first quarter of 2004. Included in sales revenue are our risk
management activities, which reduced revenue by $17.4 million in 2004, and by
$5.4 million in the fourth quarter of 2003. Western generated net revenue of
$82.7 million in the first quarter of 2004, after considering the impact of
purchased feedstocks and transportation costs downstream of Edmonton, compared
to net revenue of $74.3 million in the fourth quarter of 2003. Feedstocks are
crude products introduced at the Upgrader. Some are introduced into the
hydrocracking/hydrotreating process and some are used as blendstock to create
various qualities of synthetic crude oil products. The cost of these feedstocks
is dependent upon world oil markets and the spread between heavy and light crude
oil prices.
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NET REVENUE THREE MONTHS ENDED,
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MAR. 31, 2004 DEC. 31, 2003
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REVENUE
Oil Sands 112,713 107,857
Marketing 19,522 25,383
Transportation 322 427
-----------------------------------
Total Revenue 132,557 133,667
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PURCHASED FEEDSTOCKS AND TRANSPORTATION
Oil Sands 29,701 33,626
Marketing 19,478 25,367
Transportation 694 332
-----------------------------------
Total Purchased Feedstocks and Transportation 49,873 59,325
===================================
NET REVENUE
Oil Sands 83,012 74,231
Marketing 44 16
Transportation (372) 95
-----------------------------------
Total Net Revenue 82,684 74,342
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SYNTHETIC CRUDE SALES (BBLS/D) 35,786 37,453
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REALIZED CRUDE OIL SALES PRICE ($/BBL) 34.61 31.30
===================================
NOTE: THERE WAS NO REVENUE FOR THE FIRST QUARTER, ENDED MARCH 31, 2003.
7
The Edmonton PAR benchmark averaged $46.10 per barrel over the three-month
period ended March 31, 2004, resulting in an average synthetic crude oil quality
differential of $6.16 per barrel for Western. This compares to an average
synthetic crude oil quality differential in the fourth quarter of 2003 of $7.09
per barrel based on an average Edmonton PAR price of $39.95 per barrel.
[GRAPHIC OMITTED]
[BAR CHART]
SALES PRICE REALIZATIONS
Q3, 2003 Q4, 2003 Q1, 2004
-------- -------- --------
Realized Drude Oil Price $ 34.14 $ 31.30 $ 34.61
Impact of Hedging 0.92 1.56 5.33
Differential to Emonton Par 6.27 7.09 6.16
Upgrader optimization initiatives in the first quarter increased the light to
heavy ratio in the overall sales mix, resulting in the improved average price
realization relative to Edmonton light crude oil, when compared to the fourth
quarter. Due to wider than anticipated heavy oil price differentials and higher
ratios of heavy synthetic product in the overall sales mix, our price
realizations reflect a greater discount from Edmonton PAR than our long-term
target of $1.75 to $2.75 per barrel. However, our differentials are expected to
continue to improve as our operations stabilize, our products become more
established in the marketplace and further Upgrader optimization initiatives are
undertaken.
8
OPERATING COSTS
High natural gas prices, production volumes below design rates and incremental
non-recurring costs associated with non-scheduled maintenance activities
resulted in unit cash operating costs of $20.94 per barrel for the quarter
compared to $20.80 for the fourth quarter of 2003. Unit cash operating costs are
expected to improve in 2004 as volumes increase and ramp-up challenges are
resolved, but as previously reported, for the balance of the year unit costs are
still expected to be above the long-term target range of $12.00 to $14.00 per
barrel. We believe that target will be achieved through a combination of
aggressive cost management, continuous growth of bitumen production volumes and
steady, reliable plant production.
ROYALTIES
Royalties were $0.7 million or $0.27 per barrel in the first quarter, up from
the $0.5 million or $0.21 per barrel recorded in the fourth quarter 2003. The
increase in total royalties is due to growing production volumes, as well as
certain royalty adjustments relating to prior periods.
CORPORATE RESULTS
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $2.0 million for the first quarter of
2004, compared to $1.4 million for the same period in 2003. This year-over-year
increase is the result of the timing for payment of directors' fees, expenses
for additional financial reporting and operational requirements. Administrative
expenses were $2.2 million in the fourth quarter of 2003; these expenses were
slightly higher than the first quarter of 2004 due to additional consulting and
legal expenses in the fourth quarter.
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INSURANCE EXPENSES
Insurance expenses were $2.5 million for the first quarter of 2004 (first
quarter 2003 - nil), compared to $1.4 million in the fourth quarter of 2003. As
operational insurance coverage commenced November 1, 2003, insurance expenses
for the fourth quarter of 2004 include premiums for two months only.
INTEREST EXPENSE
Interest expense was $15.8 million in the first quarter of 2004 compared to
$16.0 million in the fourth quarter of 2003. Interest charges of $15.2 million
incurred in the first quarter of 2003, prior to commercial operations, were
capitalized and will be amortized over the life of the Project's reserves. A
lower prime lending rate combined with a reduction in our debt level have
reduced interest charges on Western's credit facilities compared to the fourth
quarter of 2003. This has been partially offset by increased interest charges on
our US denominated Notes caused by a strengthening of the US dollar.
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization ("DD&A") totaled $10.6 million for the
first quarter of 2004 (first quarter 2003 - $0.1 million) compared to $11.8
million in DD&A charges for the fourth quarter of 2003. The reduction in DD&A
was mainly due to amortization of deferred charges relating to an $88 million
note purchase facility that matured and was repaid in October 2003 increasing
the amortization expense in the previous quarter. The quarter-to-quarter
reduction was partially offset by an increased depletion rate in the first
quarter of 2004 as a result of increased bitumen production and incorporating
revised independent reserves estimates as at December 31, 2003.
FOREIGN EXCHANGE
A strengthening of the US dollar during the first quarter reduced the value of
the Canadian dollar from US $0.7738 to US $0.7631. This resulted in an
unrealized foreign exchange loss of $8.2 million for
10
the quarter, relating to the conversion of the US denominated Senior Secured
Notes into Canadian dollars.
INCOME TAXES
For the three months ended March 31, 2004 Western had a future income tax
recovery of $4.2 million (first quarter 2003 - $0.7 million). This recovery is
comprised of the future income tax effect of: (1) the unrealized foreign
exchange loss recognized in the quarter and (2) a reduction in the capital
assets in excess of tax values, due to the depreciation, depletion and
amortization recognized in the quarter. We anticipate using non-capital loss
carryforwards in the first quarter of 2004, instead of depreciable capital
pools, to negate any taxable income and this use has partially mitigated the
future income tax effect of these other items. For the fourth quarter of 2003
Western had a future income tax recovery of $0.2 million. This recovery
reflected a recovery for the net loss, before consideration of the unrealized
foreign exchange gain, offset by the future income tax expense for this
unrealized foreign exchange gain.
NET EARNINGS
During the first quarter of 2004, Western's net loss attributable to common
shareholders was $5.7 million ($0.11 per share) compared to a net loss of $2.4
million ($0.05 per share) in the first quarter of 2003, prior to operational
start-up. Earnings in the fourth quarter of 2003 were $17.6 million ($0.35 per
share). The net earnings are heavily impacted by the effects of unrealized
foreign exchange gains or losses on our US denominated debt. In the first
quarter of 2004, there was an unrealized foreign exchange loss of $8.1 million
while in the fourth quarter of 2003 there was an unrealized gain of $26.1
million, representing a total movement of $34.2 million.
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The following table provides the reconciliation between Net (Loss) Earnings
Attributable to Common Shareholders, Cash Flow from Operations (before changes
in non-cash working capital) and EBITDA:
RECONCILIATION: NET (LOSS) EARNINGS TO EBITDA
Three Months Ended (thousands)
MAR 31, 2004 Dec 31, 2003 Mar 31, 2003
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NET EARNINGS (LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (5,703) $ 17,618 $ (2,376)
Add (Deduct):
Depreciation, Depletion and Amortization 10,561 11,797 56
Accretion on Asset Retirement Obligation 125 236 -
Stock-based Compensation 152 108 16
Foreign Exchange Loss (Gain) 8,145 (26,100) -
Future Income Tax Recovery (4,232) (215) (652)
Charge for Convertible Notes -- -- 749
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CASH FLOW FROM OPERATIONS, BEFORE
CHANGES IN NON-CASH WORKING CAPITAL $ 9,048 $ 3,444 $ (2,207)
Add (Deduct):
Interest 15,848 16,000 --
Realized Foreign Exchange Loss 68 158 --
Large Corporations Tax 768 768 768
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EBITDA $ 25,732 $ 20,370 $ (1,439)
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EBITDA (Earnings before Interest Taxes Depreciation, Depletion and Amortization)
was $25.7 million for the three-month period ended March 31, 2004 reflecting a
29% increase over the $20.4 million recorded for the fourth quarter of 2003.
Cash flow from operations for the first quarter 2004 was $9.0 million compared
with $ 3.4 million for the fourth quarter of 2003. The improvement in EBITDA and
cash flow are mainly the result of an increase in the average synthetic crude
sales price driven by increased Edmonton PAR and a slightly improved light to
heavy mix generating improved returns. These improvements were tempered by
marginally higher operating and insurance costs.
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FINANCIAL POSITION
DEBT FINANCING
During the first quarter of 2004, Western paid down the amount outstanding
against its $240 million Revolving Credit Facility by $16 million. At March 31,
2004 a total of $172 million remained outstanding. This compares to a total of
$188 million that was drawn and outstanding at December 31, 2003. This Revolving
Credit Facility, of which $15 million is restricted to letter of credit
requirements only, is subject to certain financial covenants, including a limit
on the amount available for drawdown. This limit is determined through an
independent evaluation of our reserves, which calculates a net present value of
cash flows from these reserves, using constant prices and costs, before income
taxes and discounted at 10%. As a result of the evaluation, the amount available
for drawdown for general corporate purposes decreased from the $215 million
available at December 31, 2003 to $181 million at March 31, 2004.
EQUITY FINANCING
In April 2004, Western issued 2,000,000 Class A shares ("Common Shares") at a
price of $34.00 per share for gross proceeds of $68 million (net proceeds of
approximately $65.3 million) pursuant to Western's previously announced public
offering. The Common Shares were offered to the public on a bought-deal basis
through a syndicate of Canadian underwriters. Net proceeds from the issue will
be used for general corporate purposes and for expansion opportunities. In
addition, Western will consider the acquisition of additional oil sands leases
in the Athabasca oil sands area. Pending application of the net proceeds,
Western applied a portion of the net proceeds to temporarily reduce its
indebtedness.
CAPITAL EXPENDITURES
Western's capital expenditures totaled $10.1 million in the first quarter of
2004, including $8.2 million for sustaining capital, $1.3 million for growth and
new venture investments and $0.6 million
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for other corporate purposes. This total is down significantly from the $112.1
million of capital expenditures for the same period in 2003 when the project was
nearing the end of the construction phase. Western anticipates spending a
further $36 million, approximately, on capital activities throughout the
remainder of 2004.
ANALYSIS OF CASH RESOURCES
Cash balances increased by $0.9 million over the three-month period ended March
31, 2004 to $4.7 million. Cash inflows included: a $13.0 million decrease in
working capital, $9.1 million cash flow from operations, $4.6 million in
insurance proceeds and $0.6 million from the exercise of employee stock options.
Outflows included: the $16.0 million repayment of long term debt, $10.1 million
of capital expenditures and $0.3 million in repayment of obligations under
capital lease and deferred charges.
INSURANCE CLAIMS
The Joint Venture achieved a satisfactory final settlement with insurers for
recovery of costs resulting from the January 2003 fire and related freezing
damage at the mine site. However, certain insurers also involved in the Cost
Overrun and Delay Insurance dispute with Western continue to withhold insurance
proceeds payable to Western for these damages. With the exception of an amount
withheld, approximately equal to the amounts recovered, these claims have now
been resolved. During the first quarter we received insurance proceeds totaling
$4.6 million, bringing the total recovered to date under the insurance coverage
provided in our Joint Venture construction policies to $14.3 million for our
share. Proceeds received during the quarter were recorded as a reduction in the
amount of capital costs in the period. The Joint Venture continues to pursue
claims for lost profits resulting from production delays caused by the fire. In
addition, arbitration proceedings will commence shortly for Western's limits
claim on its $200 million Cost Overrun and Delay Insurance policy.
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FINANCIAL RISKS
The objective of Western's hedging program is to mitigate exposure to the
volatility of crude oil prices, thereby stabilizing current and future cash flow
from the sale of our synthetic crude products, protecting the base capital
program and ensuring the funding of debt obligations. To this end Western has
entered into the following contracts, summarized below as at March 31, 2004:
HEDGING SUMMARY
Unrealized Increase
Notional Hedge Swap (Decrease) to Future
Instrument Volume Period Price Revenue(thousands)
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WTI Swaps 20,000 bbls/d Apr 1, 2004 to June 30, 2004 US$27.29 $ (18,149)
WTI Swaps 20,000 bbls/d Jul 1, 2004 to Dec 31, 2004 US$27.14 (27,910)
WTI Swaps 16,000 bbls/d Jan 1, 2005 to Mar 31, 2005 US$26.17 (10,078)
WTI Swaps 7,000 bbls/d Apr 1, 2005 to Dec 31, 2005 US$26.87 (8,741)
- -------------------------------------------------------------------------------------------------------------------
$ (64,878)
OUTLOOK
Looking ahead into 2004, the Project remains focused on continuous improvement,
moving towards sustained production of 155,000 barrels per day while reducing
operating expenses and improving product netbacks. Unit costs are expected to
decline through 2004 with continued increases in production volumes throughout
the year, but as previously reported, are expected to be above the long-term
target range.
The valuable experience gained in meeting the challenges faced in the quarter
will ensure that ramp-up continues in a safe and reliable manner. Furthermore,
the Joint Venture group is beginning to turn its attention to the expansion
phase of the AOSP, looking to modest increases in production from
de-bottlenecking and moving ahead with the MRM Expansion and the project
development of the Jackpine Mine Expansion - Phase 1.
15
JACKPINE EXPANSION
The AOSP has now received the major provincial and federal government approvals
required for the first phase of its Jackpine Mine located in the Athabasca oil
sands region of northern Alberta. With major approvals now in hand, we will
continue work on the project development phase, which includes feasibility
studies and ongoing community dialogue. These approvals are another positive
step towards our long-term goal of producing 500,000 barrels per day from our
Athabasca oil sands leases. As previously announced, the planned development of
the leases is as follows:
o Expansion of the existing Muskeg River Mine - to increase total
production from the current design level of 155,000 barrels per day of
bitumen to approximately 225,000 barrels per day. This development
would likely be complete before 2010.
o Jackpine Mine - Phase 1 - a proposed mining and extraction facility
located on the eastern portion of Lease 13 with a capacity of
approximately 200,000 barrels per day of bitumen production. The
development of this new mine is covered by the recent regulatory
approvals from the provincial and federal governments.
o Jackpine Mine - Phase 2 - additional resources on Leases 88 and 89
would be mined as an extension of the first phase of the Jackpine Mine,
allowing for additional production of approximately 100,000 barrels per
day. Development of Leases 88 and 89 requires additional regulatory
approval.
The owners are evaluating other de-bottlenecking and expansion scenarios on an
ongoing basis, which may alter the volumes and time frames for these expansions.
The timing of an investment decision for
16
these developments will depend on market conditions, project cost and
sustainable development considerations.
BUSINESS RISKS
Western is subject to a number of business risks that are typical given the
nature of Western's operations. These risks are described in Western's previous
public disclosures, including the 2003 Annual Report, which are available on the
Company's website.
NON-GAAP FINANCIAL MEASURES
Western includes cash flow from operations per share and earnings before
interest, taxes, depreciation, depletion and amortization, stock based
compensation, accretion on asset retirement obligation and foreign exchange
gains ("EBITDA") as investors may use this information to better analyze our
operating performance. We also include certain per barrel information, such as
realized crude oil sales price, to provide per unit numbers that can be compared
against industry benchmarks, such as the Edmonton PAR benchmark. The additional
information should not be considered in isolation or as a substitute for
measures of operating performance prepared in accordance with Canadian Generally
Accepted Accounting Principles ("GAAP"). Non-GAAP financial measures do not have
any standardized meaning prescribed by Canadian GAAP and are therefore unlikely
to be comparable to similar measures presented by other issuers. Management
believes that, in addition to Net Earnings (Loss) per Share and Net Earnings
(Loss) Attributable to Common Shareholders (both Canadian GAAP measures), cash
flow from operations per share and EBITDA provide a better basis for evaluating
our operating performance, as they both exclude fluctuations on the US dollar
denominated Senior Secured Notes and certain other non-cash items, such as
depreciation, depletion and amortization, and future income tax recoveries. In
addition, EBITDA provides a useful indicator of our ability to fund our
financing costs and any future capital requirements.
17
WESTERN OIL SANDS INC.
CONSOLIDATED BALANCE SHEETS
AS AT As at
MARCH 31 December 31
($ thousands) 2004 2003
- --------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current Assets
Cash $ 4,658 $ 3,770
Accounts Receivable 53,953 57,994
Inventory 11,670 9,100
Prepaid Expense 6,475 7,033
- --------------------------------------------------------------------------------
76,756 77,897
- --------------------------------------------------------------------------------
Capital Assets (note 2) 1,349,857 1,353,317
Deferred Charges 20,266 20,903
Future Income Taxes (note 9) 10,539 6,307
- --------------------------------------------------------------------------------
1,380,662 1,380,527
- --------------------------------------------------------------------------------
$ 1,457,418 $ 1,458,424
================================================================================
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Liabilities $ 76,958 $ 65,949
Obligations Under Capital Lease 1,340 1,340
- --------------------------------------------------------------------------------
78,298 67,289
Long-term Liabilities
Long-term Debt (note 3) 852,725 860,580
Obligations Under Capital Lease 51,274 51,610
Other (note 4) 10,847 9,720
- --------------------------------------------------------------------------------
914,846 921,910
- --------------------------------------------------------------------------------
993,144 989,199
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share Capital (note 5) 477,267 476,667
Contributed Surplus 430 278
Deficit (13,423) (7,720)
- --------------------------------------------------------------------------------
464,274 469,225
- --------------------------------------------------------------------------------
$ 1,457,418 $ 1,458,424
================================================================================
Commitments and Contingencies (note 10)
Subsequent Events (note 13)
See accompanying Notes to the Consolidated Financial Statements
18
WESTERN OIL SANDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
THREE MONTHS ENDED MARCH 31,
(UNAUDITED) 2004 2003
- --------------------------------------------------------------------------------------------------
($ thousands, except per share amounts)
REVENUES $ 132,557 $ --
EXPENSES:
Operating 51,825 --
Purchased Feedstocks and Transportation 49,873 --
Royalties 680 --
General and Administrative 1,987 1,439
Insurance 2,460 --
Interest (note 7) 15,848 --
Stock-based Compensation (note 8) 152 16
Accretion on Asset Retirement Obligation (note 4) 125 --
Depreciation, Depletion and Amortization 10,561 56
Foreign Exchange Loss 8,213 --
- --------------------------------------------------------------------------------------------------
141,724 1,511
- --------------------------------------------------------------------------------------------------
NET LOSS BEFORE INCOME TAXES (9,167) (1,511)
Income Tax (Recovery) Expense (note 9) (3,464) 116
- --------------------------------------------------------------------------------------------------
NET LOSS (5,703) (1,627)
Charge for Convertible Notes (net of tax) -- 749
- --------------------------------------------------------------------------------------------------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (5,703) $ (2,376)
==================================================================================================
Deficit at Beginning of Period (7,720) (22,723)
- --------------------------------------------------------------------------------------------------
DEFICIT AT END OF PERIOD $ (13,423) $ (25,099)
- --------------------------------------------------------------------------------------------------
NET LOSS PER SHARE (NOTE 6):
Basic $ (0.11) $ (0.05)
==================================================================================================
See accompanying Notes to the Consolidated Financial Statements
19
WESTERN OIL SANDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED) 2004 2003
- ----------------------------------------------------------------------------------------------------------
($ thousands)
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net Loss $ (5,703) $ (1,627)
Non-cash items:
Depreciation, Depletion and Amortization 10,561 56
Accretion on Asset Retirement Obligation (note 4) 125 --
Stock Based Compensation (note 8) 152 16
Unrealized Foreign Exchange Loss (note 3) 8,145 --
Future Income Tax Recovery (note 9) (4,232) (652)
- ----------------------------------------------------------------------------------------------------------
CASH FROM OPERATIONS 9,048 (2,207)
Decrease in Non-Cash Working Capital (note 12) 17,915 (606)
- ----------------------------------------------------------------------------------------------------------
26,963 (2,813)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of Share Capital (note 5) 600 50,797
Share Issue Expenses -- (2,187)
(Repayment) Issue of Long-term Debt (16,000) 31,000
Deferred Charges (4) (80)
Charge for Convertible Notes -- (1,294)
Repayment of Obligations Under Capital Lease (336) --
Repayment of Other Long-term Liabilities -- (1,071)
- ----------------------------------------------------------------------------------------------------------
CASH (USED) GENERATED (15,740) 77,165
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital Expenditures (10,061) (112,168)
Insurance Proceeds (note 10) 4,603 --
(Increase) Decrease in Non-Cash Working Capital (note 12) (4,877) 33,098
- ----------------------------------------------------------------------------------------------------------
CASH INVESTED (10,335) (79,070)
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash 888 (4,718)
Cash at Beginning of Period 3,770 14,428
- ----------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 4,658 $ 9,710
==========================================================================================================
See accompanying Notes to the Consolidated Financial Statements
20
WESTERN OIL SANDS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollar amounts in thousands)
The interim consolidated financial statements include the accounts of Western
Oil Sands Inc. and its subsidiaries (the "Corporation"), and are presented in
accordance with Canadian Generally Accepted Accounting Principles. The interim
consolidated financial statements have been prepared using the same accounting
policies and methods of computation as the consolidated financial statements for
the year ended December 31, 2003. The disclosures provided below are incremental
to those included in the annual consolidated financial statements. The interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto in the Corporation's
annual report for the year ended December 31, 2003.
Effective June 1, 2003 the Corporation commenced commercial operations and
accordingly has only recorded revenues and expenses related to the Corporation's
share of operations of the Oil Sands Project since that date.
1. CHANGE IN ACCOUNTING POLICY
(a) ASSET RETIREMENT OBLIGATION
In the fourth quarter of 2003, the Corporation early-adopted the new
Canadian accounting standard for asset retirement obligations effective
for January 1, 2003. Under the new accounting policy, the Corporation
recognizes asset retirement obligations in the period in which they are
incurred if a reasonable estimate of fair value can be determined. The
liability is measured at fair value and is adjusted to its present
value in subsequent periods as accretion expense is recorded. The
associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and the asset is depreciated
over the estimated useful life, which for the Oil Sands Project is the
life of the associated proved and probable reserves. As the Corporation
had not commenced commercial operations until June 1, 2003 there is no
impact to the comparative consolidated statement of operations, as
depreciation and accretion were not recorded until commercial
operations commenced.
(b) STOCK-BASED COMPENSATION
In the fourth quarter of 2003, the Corporation expensed stock options
on a prospective basis effective January 1, 2003. Prospective adoption
requires the fair value of compensation cost related to stock options
granted in 2003 be expensed in the consolidated statement of operations
over the vesting period, with a corresponding amount being recorded as
contributed surplus on the consolidated balance sheet. The adoption of
this standard required that the comparative quarter of 2003 be restated
by $16,000.
During the first quarter of 2004, the Board of Directors approved a
Performance Share Unit Plan, which is described in note 8. The
Corporation, under CICA 3870 "Stock-based Compensation and Other
Stock-based Payments", is required to recognize compensation expense,
and contributed surplus, related to this plan in accordance with the
fair value method.
21
2. CAPITAL ASSETS
Accum.
March 31, 2004 Cost DD&A* Net Book Value
- ----------------------------------------------------------------------------------------------------------------
(Unaudited)
Oil Sands Project $ 1,309,725 $ (28,409) $ 1,281,316
Oil Sands Project Assets Under Capital Lease 52,540 (1,191) 51,349
Other Assets 18,038 (846) 17,192
- ----------------------------------------------------------------------------------------------------------------
$ 1,380,303 $ (30,446) $ 1,349,857
================================================================================================================
December 31, 2003
- ----------------------------------------------------------------------------------------------------------------
Oil Sands Project $ 1,304,460 $ (18,954) $ 1,285,506
Oil Sands Project Assets Under Capital Lease 52,744 (795) 51,949
Other Assets 16,639 (777) 15,862
- ----------------------------------------------------------------------------------------------------------------
$ 1,373,843 $ (20,526) $ 1,353,317
================================================================================================================
* Accumulated Depreciation, Depletion and Amortization
3. LONG -TERM DEBT
MARCH 31, 2004 December 31, 2003
- --------------------------------------------------------------------------------------------------------
(UNAUDITED)
US$450 million Senior Secured Notes $ 589,725 $ 581,580
Senior Credit Facility 91,000 91,000
Revolving Credit Facility 172,000 188,000
- --------------------------------------------------------------------------------------------------------
$ 852,725 $ 860,580
- --------------------------------------------------------------------------------------------------------
The Corporation's US dollar denominated Senior Secured Notes (the "Notes") are
translated into Canadian dollars at the period end exchange rate. The unrealized
foreign exchange loss arising on the Notes was $8.1 million for the three months
ended March 31, 2004. For the three month period ended March 31, 2003, as the
Corporation had not yet commenced commercial operations, an unrealized foreign
exchange gain of $47.6 million was capitalized as part of the costs of the Oil
Sands Project.
Under the terms of the Revolving Credit Facility, of which $15 million is
available only for letter of credit requirements, there is a limit on the amount
available for drawdown. This limit is determined as a function of the net
present value of cash flows before income taxes discounted at 10% from our
reserves as determined on a constant price basis by the independent reserves
evaluators. As a result of the evaluation, the amount available for drawdown for
general corporate purposes decreased from the $215 million available at December
31, 2003 to $181 million at March 31, 2004.
22
4. OTHER LONG -TERM LIABILITIES
MARCH 31, 2004 December 31, 2003
- -------------------------------------------------------------------------------------------------------
(UNAUDITED)
Operating Lease Guarantee Obligation $ 3,585 $ 2,583
Asset Retirement Obligation 7,262 7,137
- -------------------------------------------------------------------------------------------------------
$ 10,847 $ 9,720
=======================================================================================================
5. SHARE CAPITAL
ISSUED AND OUTSTANDING:
Number of Shares Amount
- -------------------------------------------------------------------------------------------------------
COMMON SHARES
Balance at December 31, 2003 49,956,271 $ 464,704
Issued on Exercise of Employee Stock Options 67,750 600
- -------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2004 50,024,021 465,304
- -------------------------------------------------------------------------------------------------------
CLASS D PREFERRED SHARES, SERIES A
Balance at December 31, 2003 and March 31, 2004 666,667 11,963
- -------------------------------------------------------------------------------------------------------
TOTAL ISSUED SHARE CAPITAL AT MARCH 31, 2004 50,690,688 $ 477,267
===============
OUTSTANDING:
Class A Warrants 494,224
Stock Options 1,337,533
- ----------------------------------------------------------------------------------
DILUTED SHARES AT MARCH 31, 2004 52,522,445
==================================================================================
The Corporation has 494,224 Class A Warrants outstanding. Each Class A Warrant
entitles the holder to purchase one Common Share at $2.50 per share until five
years after start-up of the Oil Sands Project.
6. LOSS PER SHARE
The basic weighted average number of shares for the three-month period ended
March 31, 2004 is 50,673,495 (March 31, 2003 - 49,646,110). Due to a loss for
the three-month period ended March 31, 2004 and 2003 zero incremental shares are
included for the diluted earnings per share weighted average number because the
effect would be anti-dilutive.
23
7. INTEREST EXPENSE
Three Months Ended March 31,
2004 2003
- ---------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Interest on Long-term Debt $ 15,370 $ 15,184
Capitalized Interest in Oil Sands Project -- (15,184)
- ---------------------------------------------------------------------------------------------------------
Interest Expense, Net 15,370 --
Interest on Obligations Under Capital Lease 478 --
- ---------------------------------------------------------------------------------------------------------
$ 15,848 $ --
=========================================================================================================
It is the Corporation's policy to capitalize carrying costs including interest
expense for capital assets acquired, constructed or developed over time up until
the point in time when the assets are substantially complete and after
commercial production has begun. As the Corporation commenced reporting
commercial operations on June 1, 2003, interest is no longer being capitalized.
At June 1, 2003 a total of $87.1 million of net interest expense (March 31, 2003
- - $78.8 million) had been capitalized as part of the Oil Sands Project.
Cash interest paid for the three months ended March 31, 2004 was $3.2 million
(March 31, 2003 - $0.7 million). No cash interest was received for the three
months ended March 31, 2004 (March 31, 2003 - $0.1 million).
8. STOCK-BASED COMPENSATION
In February 2004 the Board of Directors approved a Performance Share Unit Plan
("PSUP"). Awards under PSUP will be in the form of units ("Unit Awards"), with
each unit entitling the holder to receive one Common Share of the Corporation
for no additional consideration and subject to certain restrictions. Each Unit
Award will vest at a rate of one third of the units awarded thereunder annually
over a three-year period, conditional on the Corporation achieving an acceptable
total shareholder return against a peer group. If total shareholder return at a
particular vesting date is in the bottom 25 percent of the peer group, none of
the units otherwise eligible to vest with respect to such Unit Award will vest.
If total shareholder return at a particular vesting date is in the top 25
percent of the peer group, 150 percent of the units eligible to vest on such
date will vest. If total shareholder return at a particular vesting date is in
the middle 50 percent of the peer group, all of the units eligible to vest on
such date will vest. No value has been recognized for the 38,679 Unit Awards
granted during the three months ended March 31, 2004.
Under the Corporation's stock-based compensation plan 66,183 options were
granted during the three-month period ended March 31, 2004 (March 31, 2003 -
142,000) at an average exercise price of $32.48. The fair values of all options
granted during the period are estimated as at the grant date using the
Black-Scholes option-pricing model. The weighted-average fair values of the
options and the assumptions used in their determination are as follows:
24
Three Months Ended March 31,
- -------------------------------------------------------------------------------
(Unaudited) 2004 2003
- -------------------------------------------------------------------------------
Weighted-average Fair Value $ 12.30 $ 8.67
Risk Free Interest Rate 4.12% 4.77%
Expected Life (in years) 6.00 5.00
Expected Volatility 0.30 0.30
Dividend Per Share $ -- $ --
===============================================================================
During 2003, the Corporation adopted CICA 3870 "Stock-based Compensation and
Other Stock-based Payments" which results in the recognition of compensation
expense for any options granted on or after January 1, 2003 under the fair value
method. Accordingly, for the three-month period ended March 31, 2004, $0.2
million has been recognized (March 31, 2003 - $0.02 million) in compensation
expense by the Corporation in accordance with the options granted since that
date. Under CICA 3870 no compensation expense is required to be recognized for
stock options granted before January 1, 2003. Had compensation expense been
determined based on the fair value method for awards made on or after January 1,
2002 but before January 1, 2003, the Corporation's net loss and net loss per
share would have been adjusted to the proforma amounts indicated below:
Three Months Ended March 31,
- ------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003
- ------------------------------------------------------------------------------------------------------
Compensation Expense $ 224 $ 221
Net Loss Attributable to Common Shareholders - as Reported 5,703 2,376
- ------------------------------------------------------------------------------------------------------
Net Loss Attributable to Common Shareholders - Proforma $ 5,927 $ 2,597
======================================================================================================
Basic Net Loss per share:
- as Reported $ 0.11 $ 0.05
======================================================================================================
- Proforma $ 0.12 $ 0.05
======================================================================================================
9. INCOME TAX
Three Months Ended March 31,
2004 2003
- ------------------------------------------------------------------------------------------------------
(UNAUDITED) (Undaudited)
Large Corporations Tax $ 768 $ 768
Future Income Tax (4,232) (652)
- ------------------------------------------------------------------------------------------------------
Income Tax (Recovery) Expense $ (3,464) $ 116
- ------------------------------------------------------------------------------------------------------
The future income tax asset (liability) consists of:
MARCH 31, 2004 December 31, 2003
- -------------------------------------------------------------------------------------------------------
(UNAUDITED)
Future Income Tax Assets:
Net Losses Carried Forward $ 47,985 $ 49,682
Share Issue Costs 1,400 1,723
Future Income Tax Liabilities:
Capital Assets in Excess of Tax Values (33,662) (38,860)
Unrealized Foreign Exchange Gain (4,550) (6,209)
Debt Issue Costs (634) (29)
- --------------------------------------------------------------------------------------------------------
NET FUTURE INCOME TAX ASSET $ 10,539 $ 6,307
========================================================================================================
25
The following table reconciles income taxes calculated at the Canadian statutory
rate of 38.87% (2003 - 41.12%) with actual income taxes:
Three Months Ended March 31,
2004 2003
- -----------------------------------------------------------------------------------------------------
(UNAUDITED) (Unaudited)
Net Loss Before Income Taxes $ (9,167) $ (1,511)
- -----------------------------------------------------------------------------------------------------
Income Tax Recovery at Statutory Rate (3,563) (621)
Effect of Tax Rate Changes (541) (31)
Non-taxable Portion of Foreign Exchange Loss 1,811 -
Impact of Resource Allowance (1,939) -
Large Corporations Tax 768 768
- -----------------------------------------------------------------------------------------------------
INCOME TAX (RECOVERY) EXPENSE $ (3,464) $ 116
=====================================================================================================
10. COMMITMENTS AND CONTINGENCIES
During the three months ended March 31, 2004 the Corporation received $4.6
million in respect of the insurance coverage provided in our Joint Venture
construction policies for the fire that occurred in January 2003 at the Muskeg
River Mine Extraction Plant. The Corporation has received a total of $14.3
million for these property damages as of March 31, 2004. No further amounts,
other than those collected at March 31, 2004, have been recognized in these
statements relating to this insurance policy or the Corporation's other
insurance policies, nor will an amount be recognized until the proceeds are
received.
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Corporation has entered into various commodity-pricing agreements designed
to mitigate the exposure to the volatility of crude oil prices in US dollars.
The agreements are summarized as follows at March 31, 2004:
- --------------------------------------------------------------------------------------------------------------------------
Instrument Notional Volume Hedge Period Swap Price Unrealized Decrease
(bbls/d) (US$/bbl) to Future Revenue
(Cdn $'s)
- --------------------------------------------------------------------------------------------------------------------------
WTI Swaps 20,000 April 1,2004 to June 30, 2004 US$27.29 $ (18,149)
WTI Swaps 20,000 July 1, 2004 to December 31, 2004 US$27.14 (27,910)
WTI Swaps 16,000 January 1, 2005 to March 31, 2005 US$26.17 (10,078)
WTI Swaps 7,000 April 1, 2005 to December 31, 2005 US$26.87 (8,741)
- --------------------------------------------------------------------------------------------------------------------------
$ (64,878)
==========================================================================================================================
26
12. CHANGES IN NON-CASH WORKING CAPITAL
Three Months Ended March 31,
- --------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003
- --------------------------------------------------------------------------------------------------------
Source (Use):
Operating Activities
Accounts Receivable $ 3,427 $ 814
Inventory (2,570) (1,139)
Prepaid Expense 558 --
Accounts Payable and Accrued Liabilities 16,500 (281)
- --------------------------------------------------------------------------------------------------------
$ 17,915 $ (606)
- --------------------------------------------------------------------------------------------------------
Investing Activities
Accounts Receivable $ 614 $ (1,262)
Accounts Payable and Accrued Liabilities (5,491) 34,360
- --------------------------------------------------------------------------------------------------------
$ (4,877) $ 33,098
========================================================================================================
13. SUBSEQUENT EVENTS
On April 8, 2004, the Corporation completed a public offering for the issuance
of 2,000,000 Common Shares for net proceeds of approximately $65.3 million. The
offering was underwritten by a syndicate of Canadian underwriters and undertaken
through the filing of a short form prospectus. Net proceeds from the issue will
be used for general corporate purposes and for expansion opportunities. In
addition, Western will consider the acquisition of additional oil sands leases
in the Athabasca oil sands area. Western applied a portion of the net proceeds
to temporarily reduce its indebtedness.
27