EXHIBIT 99.2
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[GRAPHIC OMITTED]
[LOGO WESTERN OIL SANDS]
WESTERN OIL SANDS RELEASES SECOND QUARTER 2004 RESULTS
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CALGARY July 28, 2004 - Western Oil Sands Inc. ("Western") is pleased to present
its second quarter 2004 results and to provide an operational update for the
Athabasca Oil Sands Project (the "Project" or the "AOSP"). In the three months
ended June 30, 2004, Western generated net revenues of $93.3 million and cash
flow from operations of $19.4 million ($0.36 per share) and in the six months
ended June 30, 2004, net revenues of $176.0 million and cash flow from
operations of $28.4 million ($0.54 per share). EBITDA was $35.5 million in the
second quarter of 2004, and $61.2 million for the six months ended June 30,
2004. Excluding the impact of Western's risk management activities EBITDA was
$62.8 million for the second quarter of 2004 and $105.9 million for the first
six months of 2004.
HIGHLIGHTS
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2004 2003
----------------------------------------------------------------------
THREE
SIX MONTHS MONTHS SIX MONTHS
THREE MONTHS ENDED, ENDED ENDED, ENDED
----------------------------------------------------------------------
JUNE 30 MARCH 31 JUNE 30 JUNE 30 (9) JUNE 30 (9)
- --------------------------------------------------------------------------------------------------------------------------
OPERATING DATA (BBLS/D)
Bitumen Production 28,400 27,197 27,798 16,957 16,957
Synthetic Crude Sales 35,661 35,786 35,723 18,612 18,612
FINANCIAL DATA ($ THOUSANDS, EXCEPT AS INDICATED)
Net Revenue 93,275 82,684 175,959 16,155 16,155
Realized Crude Oil Sales Price ($/bbl)(2) 36.07 34.61 35.34 35.26 35.26
EBITDA(1) (3) 35,468 25,732 61,200 1,274 (165)
EBITDA ($/bbl) (1) (4) 13.72 10.40 12.10 0.82 (0.11)
Cash Flow from Operations (5) 19,369 9,048 28,417 (5,009) (7,216)
Cash Flow per Share - Basic ($/Share) (1)(6) 0.36 0.18 0.54 (0.10) (0.14)
Net (Loss) Earnings Attributable to
Common Shareholders (7) (9,159) (5,703) (14,862) 1,276 (1,100)
Net (Loss) Earnings Per Share - Basic ($/Share) (0.17) (0.11) (0.28) 0.03 (0.02)
Net Capital Expenditures 7,261 5,458 12,719 25,321 137,489
Total Assets (8) 1,466,001 1,457,418 1,466,001 1,440,645 1,440,645
Long-term Liabilities 778,363 914,846 778,363 841,264 841,264
Weighted Average Shares Outstanding -
Basic (Shares) 52,531,393 50,673,495 52,168,819 50,546,903 50,098,995
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(1) PLEASE REFER TO THE DISCUSSION OF NON-GAAP FINANCIAL MEASURES IMMEDIATELY
PRECEDING THE FINANCIAL STATEMENTS.
(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, NET OF THE RISK
MANAGEMENT ACTIVITIES, DIVIDED BY THE CORRESPONDING VOLUME. PLEASE REFER TO
NET REVENUE TABLE IN THE REVENUE SECTION FOR THE CALCULATION.
1
(3) EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, DEPLETION, AMORTIZATION,
STOCK BASED COMPENSATION, ACCRETION ON ASSET RETIREMENT OBLIGATION AND
FOREIGN EXCHANGE AS CALCULATED IN THE TABLE IN THE EARNINGS SECTION.
(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) JUNE 30, 2003 TOTAL ASSETS AND LONG-TERM LIABILITIES HAVE BEEN RESTATED TO
REFLECT THE ADOPTION OF ASSET RETIREMENT OBLIGATION.
(9) THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 PRESENTED ABOVE
REPRESENT WESTERN'S OPERATIONS FROM JUNE 1, 2003, THE DATE COMMERCIAL
OPERATIONS COMMENCED.
OPERATING RESULTS
Effective June 1, 2003, the Company commenced reporting operations on a
commercial basis and, as a result, comparisons to prior year, pre-operating
information are provided only where appropriate. Accordingly, as there is no
meaningful comparable operating information for the three or six months ended
June 30, 2004, operating comparisons have been provided for the three months
ended June 30, 2004 to the first quarter of 2004, which management believes
provides more meaningful information for shareholders and potential investors.
PRODUCTION
The AOSP made significant progress during the second quarter of 2004 with
production volumes reaching a new high of 152,200 barrels per day in the month
of June, representing 98 per cent of the design capacity. During the second
quarter, production from the Project averaged approximately 142,000 barrels per
day of bitumen, or 92 per cent of the design capacity. The Mine is designed to
produce at an average rate of 155,000 barrels per day. This is derived from a
design stream day or daily rate of 182,000 barrels per day with an expected
on-stream factor or availability rate of approximately 85 per cent.
Planned and unplanned maintenance affected volumes for the second quarter of
2004, however our average production for the period increased 4.4% over the
previous quarter. While these results are encouraging, additional operational
challenges are not unexpected as the Project continues to progress towards
sustained production design rates. Entering the third quarter, the Mine was
achieving production rates well in excess of the design capacity rate of 155,000
barrels per day, although a failure of bolts supporting a suspended distributor
ring internal to one of the settler tanks in the froth treatment plant caused a
shutdown of one of the two trains for a two week period.
2
In the second quarter, environmental management systems for the Project's Muskeg
River Mine were registered under ISO 14001, making the entire AOSP ISO 14001
compliant. It is the first oil sands project to become ISO 14001 registered.
REVENUE
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NET REVENUE 2004 2003
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS THREE & SIX
THREE MONTHS ENDED, ENDED, MONTHS ENDED,
-------------------------------------------------------------
($ thousands, except as indicated) JUNE 30 MARCH 31 JUNE 30 JUNE 30(2)
- ---------------------------------------------------------------------------------------------------------------------
REVENUE
Oil Sands (1) 117,057 112,713 229,770 19,688
Marketing 25,232 19,522 44,754 5,242
Transportation 492 322 814 --
-------------------------------------------------------------
Total Revenue 142,781 132,557 275,338 24,930
=============================================================
PURCHASED FEEDSTOCKS AND TRANSPORTATION
Oil Sands 23,926 29,701 53,627 3,599
Marketing 25,088 19,478 44,566 5,176
Transportation 492 694 1,186 --
-------------------------------------------------------------
Total Purchased Feedstocks and
Transportation 49,506 49,873 99,379 8,775
=============================================================
NET REVENUE
Oil Sands (1) 93,131 83,012 176,143 16,089
Marketing 144 44 188 66
Transportation -- (372) (372) --
-------------------------------------------------------------
Total Net Revenue 93,275 82,684 175,959 16,155
=============================================================
SYNTHETIC CRUDE SALES (BBLS/D) 35,661 35,786 35,723 18,612
=============================================================
REALIZED CRUDE OIL SALES PRICE ($/BBL) 36.07 34.61 35.34 35.26
=============================================================
(1) OIL SANDS REVENUE AND NET REVENUE ARE PRESENTED NET OF WESTERN'S RISK
MANAGEMENT ACTIVITIES.
(2) THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 PRESENTED ABOVE
REPRESENT WESTERN'S OPERATIONS FROM JUNE 1, 2003, THE DATE COMMERCIAL
OPERATIONS COMMENCED.
Western recorded $142.8 million in crude oil sales revenue in the second quarter
of 2004, including $117.1 million from our share of proprietary production,
compared to $132.6 million in revenues, $112.7 million of which was from
proprietary production in the first quarter of 2004. The increase in gross sales
revenue is due to increases in both our oil sands revenue and our marketing of
third party crude oil during the period. The increase in oil sands revenue
during the quarter is the result of an increase in the Edmonton PAR price (the
reference price for light sweet crude at Edmonton) partially offset by a wider
heavy oil differential and the impact of our risk management activities.
The Edmonton PAR benchmark averaged $51.04 per barrel over the three-month
period ended June 30, 2004, resulting in an average synthetic crude oil quality
differential for Western of $6.57 per barrel. This compares to an average
synthetic crude oil quality differential of $6.16 per barrel in the
3
first quarter of 2004 based on an average Edmonton PAR price of $46.10 per
barrel. The widening in the average synthetic crude oil quality differential
during the quarter was the result of a widening in the heavy oil price
differential in the market, which was partially offset by an improvement in the
market light oil price differentials. Our price realizations continue to reflect
a greater discount from Edmonton PAR than our long-term target of $1.75 to $2.75
per barrel due to wider than anticipated heavy oil price differentials and
higher ratios of heavy synthetic product in the overall sales mix. 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.
Western initiated a risk management program in 2003 providing downside price
protection on realized crude oil prices to ensure stable cash flows from the
sale of our synthetic crude products, so that we could fund our debt service
obligations and base capital program. The strengthening in the price of crude
oil since this program was initiated resulted in Western not participating in
Edmonton PAR increases to the extent of our hedged volumes. For the second
quarter of 2004 this additional realized differential to Edmonton PAR was $8.40
per barrel ($27.3 million). This compares to $5.33 per barrel ($17.4 million) in
the first quarter of 2004.
Western generated net revenue of $93.3 million in the second quarter of 2004,
after considering the impact of purchased feedstocks and transportation costs
downstream of Edmonton, compared to net revenue of $82.7 million in the first
quarter of 2004. Feedstocks are crude products introduced at the Upgrader. Some
are introduced into the hydrocracking/hydrotreating process and some are used as
blendstock to create various qualities of synthetic crude oil products. The cost
of these feedstocks is dependent upon world oil markets and the spread between
heavy and light crude oil prices.
4
OPERATING COSTS
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2004 2003
--------------------------------------------------------------
SIX MONTHS THREE & SIX
THREE MONTHS ENDED, ENDED, MONTHS ENDED,
--------------------------------------------------------------
($ thousands, except as indicated) JUNE 30 MARCH 31 JUNE 30 JUNE 30 (2)
========================================================================================================================
OPERATING EXPENSES FOR BITUMEN SOLD
Operating Expense - Income Statement 52,828 51,825 104,653 12,881
Operating Expense - Inventoried (1,694) (939) (2,633) (1,275)
--------------------------------------------------------------
Total Operating Expenses For Bitumen Sold 51,134 50,886 102,020 11,606
--------------------------------------------------------------
SALES (BARRELS PER DAY)
Total Synthetic Crude Sales 35,661 35,786 35,723 18,612
Purchased Upgrader Blend Stocks (7,717) (8,766) (8,242) (3,895)
--------------------------------------------------------------
Synthetic Crude Sales Excluding Blend Stocks 27,944 27,020 27,481 14,717
==============================================================
OPERATING EXPENSES PER PROCESSED BARREL ($/BBL) 20.11 20.69 (1) 20.40 26.29
==============================================================
(1) RESTATED TO CONFORM WITH THE PRESENTATION ADOPTED FOR THE SECOND QUARTER OF
2004, PREVIOUSLY DISCLOSED AS $20.94 PER BARREL.
(2) THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 PRESENTED ABOVE
REPRESENT WESTERN'S OPERATIONS FROM JUNE 1, 2003, THE DATE COMMERCIAL
OPERATIONS COMMENCED.
The above table calculates operating expenses per processed barrel on the basis
of the operating costs that are associated with the synthetic crude sales
excluding purchased blend stocks for the relevant period. This calculation
recognizes that, intrinsic in the Project's operations, bitumen production from
the Mine receives an approximate 3 per cent uplift as a result of the
hydrotreating/hydroconversion process, which is included in synthetic crude
sales excluding blendstocks. This represents a change in methodology in
calculating unit operating costs from that previously used in the first quarter
of 2004.
Western's unit cash operating costs were $20.11 per barrel for the second
quarter of 2004 compared to $20.69 for the first quarter of 2004 (restated to
conform with the presentation adopted for the second quarter of 2004). Excluding
the impact of natural gas these unit cash operating costs were $15.38 per barrel
in the second quarter 2004 compared to $16.23 per barrel in the first quarter of
2004, a decrease of $0.85 per barrel. The majority of this $0.85 per barrel
decrease was the result of increased bitumen production.
High natural gas prices, production volumes below design rates and incremental
non-recurring costs associated with non-scheduled maintenance activities
continue to impact these per unit cash operating costs which remain above the
long-term target of $12.00 to $14.00 per barrel, based on natural gas prices at
current levels. However, we believe that long-term target will be achieved
through a combination of aggressive cost management, continuous growth of
bitumen production volumes and steady, reliable plant production.
5
NET EARNINGS
During the second quarter of 2004, Western's net loss attributable to common
shareholders was $9.2 million ($0.17 per share) compared to a net loss
attributable to common shareholders of $5.7 million ($0.11 per share) in the
first quarter of 2004. Net earnings attributable to common shareholders in the
second quarter of 2003 were $1.2 million ($0.03 per share), which represented
only one month of operational start-up. Western's net earnings/loss is heavily
impacted by the effects of unrealized foreign exchange gains or losses on our US
denominated debt. In the second quarter of 2004, there was an unrealized foreign
exchange loss of $13.5 million (second quarter of 2003 - gain of $7.0 million)
compared an unrealized loss of $8.1 million in the first quarter of 2004.
The following table provides the reconciliation between Net (Loss) Earnings
Attributable to Common Shareholders, Cash Flow from Operations (before changes
in non-cash working capital) and EBITDA:
RECONCILIATION: NET (LOSS) EARNINGS TO EBITDA
- -------------------------------------------------------------------------------------------------------------------------
2004 2003
---------------------------------------------------------------------
THREE
SIX MONTHS MONTHS SIX MONTHS
THREE MONTHS ENDED, ENDED, ENDED, ENDED,
---------------------------------------------------------------------
($ thousands) JUN 30 MAR 31 JUN 30 JUNE 30 (1) JUNE 30 (1)
- -------------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (9,159) $ (5,703) $ (14,862) $ 1,276 $ (1,100)
Add (Deduct):
Depreciation, Depletion and Amortization 11,771 10,561 22,332 3,311 3,367
Accretion on Asset Retirement Obligation 125 125 250 -- --
Stock-based Compensation 392 152 544 76 92
Foreign Exchange Loss (Gain) 13,455 8,145 21,600 (6,975) (6,975)
Future Income Tax Expense (Recovery) 2,785 (4,232) (1,447) (3,417) (4,069)
Charge for Convertible Notes -- -- -- 720 1,469
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATIONS, BEFORE
CHANGES IN NON-CASH WORKING CAPITAL $ 19,369 $ 9,048 $ 28,417 $ (5,009) $ (7,216)
Add (Deduct):
Interest 16,074 15,848 31,922 5,533 5,533
Realized Foreign Exchange Loss 68 68 136 (18) (18)
Large Corporations Tax (43) 768 725 768 1,536
- ---------------------------------------------------------------------------------------------------------------------------
EBITDA $ 35,468 $ 25,732 $ 61,200 $ 1,274 $ (165)
- ---------------------------------------------------------------------------------------------------------------------------
(1) THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 PRESENTED ABOVE
REPRESENT WESTERN'S OPERATIONS FROM JUNE 1, 2003, THE DATE COMMERCIAL
OPERATIONS COMMENCED.
EBITDA (Earnings before Interest Taxes Depreciation, Depletion and Amortization)
was $35.5 million for the three-month period ended June 30, 2004 reflecting a 38
per cent increase over the $25.7 million recorded for the first quarter of 2004.
Excluding the impact of Western's risk management activities EBITDA was $62.8
million for the second quarter of 2004, compared to $43.1 million for the first
quarter of 2004, an increase of 46 per cent. Cash flow from operations for the
second quarter 2004 was $19.4 million compared to $9.0 million for the first
quarter of 2004. The improvement in EBITDA and cash flow are mainly the result
of increases in bitumen production, some of which was
6
inventoried in the second quarter, an increase in the average synthetic crude
sales price and a reduction in the unit operating costs of the Project.
FINANCIAL POSITION
BANK DEBT
During the second quarter of 2004, Western applied proceeds from its equity
offering to reduce its Revolving Credit Facility by $60 million, leaving a
balance of $112 million outstanding at June 30, 2004. An amount of $95 million
of bank debt has been reclassified from long-term to short-term due to the
scheduled maturity of the $100 million Senior Credit Facility in April 2005.
Western intends to re-finance this facility into the new $240 million Revolving
Credit Facility thereby increasing this facility by $100 million to $340
million, either through the addition of other financial institutions or
increasing the commitments of the current syndicate participants. However, under
Canadian Generally Accepted Accounting Principles Western does not meet the
requirements to continue to classify the Senior Credit Facility as long-term
debt, and therefore has reclassified the outstanding balance of $95 million to
current. Western expects this re-financing to be complete by the first quarter
of 2005, at which time this amount will be re-classified to long-term debt.
CAPITAL EXPENDITURES
Western's capital expenditures totaled $19.2 million for the six-month period
ending June 30, 2004, including $16.0 million for sustaining capital, $2.7
million for growth and new venture investments and $0.5 million for other
corporate purposes. This total is down significantly from the $141.4 million of
capital expenditures for the same period in 2003 when the Project was completing
construction and performing repairs for the January 2003 fire at the Mine.
Western anticipates spending a further $26.8 million on capital activities
throughout the remainder of 2004.
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. These amounts being withheld are
approximately equal to the amounts recovered. During the second quarter we
received insurance proceeds totaling $1.8 million, bringing the total recovered
to date under the insurance coverage provided in our Joint Venture construction
policies to $16.1 million for our share. Proceeds received during the quarter
were recorded as a reduction in the capital costs for the period.
7
Western and its Joint Venture partners have recently filed a joint arbitration
notice with the insurers in respect of the $500 million delay in start-up claim
related to the fire at the Muskeg River Mine on January 6, 2003. This
arbitration notice has been filed in an attempt to expedite collection of
insurance proceeds on this claim. In addition, arbitration proceedings have
commenced for Western's limits claim on its $200 million Cost Overrun and Delay
Insurance policy.
OTHER EVENTS
Mr. Guy Turcotte recently announced his intention to step down as President and
Chief Executive Officer by the end of this year or early next year and move into
the position of Chairman of the Board of Western. Mr. Turcotte commented: "Now
that the ramp-up to full production of the AOSP is nearing completion, I feel
comfortable in making this change. The past five years have been very exciting
and challenging, and I expect that the next few years will be equally so as
Western pursues its expansion plans. The Board of Directors has established a
search committee to identify and evaluate potential candidates and to select a
suitable person for the position of President and Chief Executive Officer, which
is anticipated at the end of this year or early next year. Western has developed
a strong management team that is executing our Corporate objectives, and I
intend to remain involved by providing strategic direction to Western in my new
role as non-executive Chairman of the Board. As Chairman of the Board, I will
continue to office at Western, maintain a role in managing our relationships
with our Joint Venture partners, Shell Canada Limited and Chevron Canada
Limited, and advise the management team on strategic, operational and financial
matters, including pursuing Western's resolution of its outstanding insurance
claims."
OUTLOOK
Significant progress has been made over the first six months of this year to
improve the reliability of production of bitumen from the Project. The Mine
facilities are designed to produce at a rate of 182,000 barrels per day with an
on-stream or availability factor of approximately 85 per cent to provide design
throughput capacity of 155,000 barrels per day on an average calendar day basis.
The Mine has produced at or above daily rates of 182,000 barrels per day and we
are now focused on improving the availability rates of the facilities up to the
85 per cent design rate. The operational teams remain focused on achieving
continuous improvements to production levels and the quality of the upgraded
crude products from the Upgrader. With the previously announced unplanned outage
in July unit operating costs will be higher than our previous guidance of $16.00
to $17.00 per barrel for 2004. However, we remain confident in ultimately
achieving our long-term operating cost target of $12.00 to $14.00 per barrel,
based on natural gas prices at current levels.
8
EXPANSIONS
Regarding future growth, technical work is progressing to debottleneck and
expand the existing project. Identification of debottlnecking opportunities
continued during the second quarter and related project execution work is
expected to begin later this year. It is anticipated that this debottlenecking
will increase the average calendar day throughput capacity from 155,000 barrels
per day to 180,000 barrels per day by the end of 2006. Preliminary evaluation of
additional trains at the Muskeg River Mine and Scotford Upgrader to expand
bitumen production by 70,000 to 90,000 barrels per day is now essentially
complete and front-end design work has begun. Approval for this expansion
project is currently targeted for late 2006 with first production expected
towards the end of the decade. In addition, the federal and provincial
governments approved Phase 1 of the Jackpine Mine in the second quarter. This
growth project includes a mining and extraction facility on the eastern portion
of Lease 13 to produce approximately 200,000 barrels per day of bitumen on a
calendar day basis. The timing of final investment decisions for these projects
will depend on market conditions, project cost and sustainable development
considerations.
On July 22 Shell announced the acquisition of Leases 9 and 17 in the Athabasca
region from EnCana Corporation. Under the terms of our joint venture agreement
with Shell, Western has the right to participate in any expansion of the
Athabasca Oil Sands Project, which now includes Leases 9 and 17. The newly
acquired leases are located about 20 kilometers northwest of the Muskeg River
Mine and Shell's other oil sands leases. Shell estimates that Lease 9 contains
approximately one billion barrels of recoverable bitumen (200 million barrels
net to Western) and could support a mine producing up to 100,000 barrels per day
(20,000 barrels per day net to Western). There is not enough data available on
Lease 17 to determine if a mining project is feasible. Additional drilling will
be necessary. The development of Leases 9 and 17 will depend on a number of
factors, including further drilling and resource evaluation, project planning,
market conditions, economic robustness, ability to meet the necessary
sustainable development principles and the outcome of regulatory approval
processes.
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
9
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.
10
WESTERN OIL SANDS INC.
CONSOLIDATED BALANCE SHEETS
AS AT AS AT
JUNE 30, December 31,
($ thousands) 2004 2003
- --------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current Assets
Cash $ 2,525 $ 3,770
Accounts Receivable 65,821 57,994
Inventory 16,812 9,100
Prepaid Expense 5,108 7,033
- --------------------------------------------------------------------------------
90,266 77,897
- --------------------------------------------------------------------------------
Capital Assets (note 2) 1,347,268 1,353,317
Deferred Charges 19,639 20,903
Future Income Taxes (note 9) 8,828 6,307
- --------------------------------------------------------------------------------
1,375,735 1,380,527
- --------------------------------------------------------------------------------
$ 1,466,001 $ 1,458,424
================================================================================
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Liabilities $ 69,078 $ 65,949
Current Portion Long-term Debt 95,000 --
Obligations Under Capital Lease 1,340 1,340
- --------------------------------------------------------------------------------
165,418 67,289
Long-term Liabilities
Long-term Debt (note 3) 715,180 860,580
Obligations Under Capital Lease 50,939 51,610
Other (note 4) 12,244 9,720
- --------------------------------------------------------------------------------
778,363 921,910
- --------------------------------------------------------------------------------
943,781 989,199
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share Capital (note 5) 543,980 476,667
Contributed Surplus 822 278
Deficit (22,582) (7,720)
- --------------------------------------------------------------------------------
522,220 469,225
- --------------------------------------------------------------------------------
$ 1,466,001 $ 1,458,424
================================================================================
Commitments and Contingencies (note 10)
See accompanying Notes to the Consolidated Financial Statements
11
WESTERN OIL SANDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(Unaudited - $ thousands, except per share amounts) 2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------
REVENUES $ 142,781 $ 24,930 $ 275,338 $ 24,930
EXPENSES:
Purchased Feedstocks and Transportation 49,506 8,775 99,379 8,775
Operating 52,828 12,881 104,653 12,881
Royalties 768 138 1,448 138
General and Administrative 1,808 1,620 3,795 3,059
Insurance 2,403 242 4,863 242
Interest (note 7) 16,074 5,533 31,922 5,533
Stock-based Compensation (note 8) 392 76 544 92
Accretion on Asset Retirement Obligation 125 -- 250 --
Depreciation, Depletion and Amortization 11,771 3,311 22,332 3,367
Foreign Exchange Loss (Gain) 13,523 (6,993) 21,736 (6,993)
- ---------------------------------------------------------------------------------------------------------------------
149,198 25,583 290,922 27,094
- ---------------------------------------------------------------------------------------------------------------------
NET LOSS BEFORE INCOME TAXES (6,417) (653) (15,584) (2,164)
Income Tax Expense (Recovery) (note 9) 2,742 (2,649) (722) (2,533)
=====================================================================================================================
NET (LOSS) EARNINGS (9,159) 1,996 (14,862) 369
Charge for Convertible Notes (net of tax) -- 720 -- 1,469
- ---------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS ATTRIBUTABLE TO
COMMON SHAREHOLDERS (9,159) 1,276 (14,862) (1,100)
Deficit at Beginning of Period (13,423) (25,099) (7,720) (22,723)
- ---------------------------------------------------------------------------------------------------------------------
DEFICIT AT END OF PERIOD $ (22,582) $ (23,823) $ (22,582) $ (23,823)
=====================================================================================================================
NET (LOSS) EARNINGS PER SHARE (NOTE 6):
Basic $ (0.17) $ 0.03 $ (0.28) $ (0.02)
Diluted $ (0.17) $ 0.02 $ (0.28) $ (0.02)
=====================================================================================================================
See accompanying Notes to the Consolidated Financial Statements
12
WESTERN OIL SANDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(Unaudited - $ thousands) 2004 2003 2004 2003
- --------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net (Loss) Earnings $ (9,159) $ 1,996 $ (14,862) $ 369
Non-cash Items:
Depreciation, Depletion and Amortization 11,771 3,311 22,332 3,367
Accretion on Asset Retirement Obligation 125 -- 250 --
Stock-based Compensation (note 8) 392 76 544 92
Unrealized Foreign Exchange
Loss (Gain) (note 3) 13,455 (6,975) 21,600 (6,975)
Future Income Tax Expense
(Recovery) (note 9) 2,785 (3,417) (1,447) (4,069)
====================================================================================================================
CASH FROM OPERATIONS 19,369 (5,009) 28,417 (7,216)
(Increase) Decrease in Non-Cash Working
Capital (note 12) (23,865) 12,931 (5,950) 12,325
- --------------------------------------------------------------------------------------------------------------------
(4,496) 7,922 22,467 5,109
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of Share Capital (note 5) 68,504 413 69,104 51,210
Share Issue Expenses (2,865) (4) (2,865) (2,191)
Issue of Long-term Debt (56,000) 75,000 (72,000) 106,000
Deferred Charges (22) (273) (26) (353)
Charge for Convertible Notes -- (1,223) -- (2,517)
(Repayment) Issue of Obligations Under
Capital Lease (335) 1,044 (671) (27)
- --------------------------------------------------------------------------------------------------------------------
CASH GENERATED 9,282 74,957 (6,458) 152,122
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital Expenditures (9,089) (29,281) (19,150) (141,449)
Insurance Proceeds (note 10) 1,828 3,960 6,431 3,960
Decrease (Increase) in Non-Cash
Working Capital (note 12) 342 (64,743) (4,535) (31,645)
- --------------------------------------------------------------------------------------------------------------------
CASH INVESTED (6,919) (90,064) (17,254) (169,134)
- --------------------------------------------------------------------------------------------------------------------
Decrease in Cash (2,133) (7,185) (1,245) (11,903)
Cash at Beginning of Period 4,658 9,710 3,770 14,428
- --------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 2,525 $ 2,525 $ 2,525 $ 2,525
====================================================================================================================
See accompanying Notes to the Consolidated Financial Statements
13
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. The adoption of
this standard required that the comparative three and six-month periods
ending June 30, 2003 be restated by $10,000 for additional depletion
for the asset retirement obligation.
(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 three and six-month periods
ending June 30, 2003 be restated by $76,000 and $92,000 respectively
for stock-based compensation expense.
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. During the three and six-month periods ending June
30, 2004 the Corporation recognized $209,000 in compensation expense
related to this plan.
14
2. CAPITAL ASSETS
Accum. Net Book
June 30, 2004 Cost DD&A* Value
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
Oil Sands Project $ 1,316,784 $ (39,024) $ 1,277,760
Oil Sands Project Assets Under Capital Lease 52,744 (1,625) 51,119
Other Assets 19,308 (919) 18,389
- ----------------------------------------------------------------------------------------------------------------------
$ 1,388,836 $ (41,568) $ 1,347,268
======================================================================================================================
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
June 30, 2004 December 31, 2003
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
US$450 million Senior Secured Notes $ 603,180 $ 581,580
Senior Credit Facility 95,000 91,000
Revolving Credit Facility 112,000 188,000
- ----------------------------------------------------------------------------------------------------------
810,180 860,580
Less: Current Portion of Long-term Debt (95,000) --
- ----------------------------------------------------------------------------------------------------------
$ 715,180 $ 860,580
==========================================================================================================
The $100 million Senior Credit Facility, which was used to fund the first year's
debt service on the Senior Secured Notes and construction completion costs,
matures and is repayable on April 23, 2005. The Corporation, anticipating the
requirement to refinance this agreement, included a clause that would enable it
to increase the $240 million Revolving Credit Facility by $100 million to
complete this refinancing. This $100 million increase would be completed by the
addition of other financial institutions or by increasing the commitments of the
current syndicate, after receiving their consent. Under Canadian Generally
Accepted Accounting Principles the Corporation does not meet all of the required
criteria to classify the Senior Credit Facility as long-term, as such the amount
has been reclassified to current.
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 $21.6 million for the six months
ended June 30, 2004. For the six month period ended June 30, 2003 an unrealized
foreign exchange gain arising on the Notes was $101 million, of which $94
million was capitalized as part of the costs of the Oil Sands Project,
representing the unrealized foreign exchange gain before commercial operations
commenced on June 1, 2003.
15
4. OTHER LONG -TERM LIABILITIES
June 30, 2004 December 31, 2003
- -------------------------------------------------------------------------------------------------
(Unaudited)
Operating Lease Guarantee Obligation $ 4,857 $ 2,583
Asset Retirement Obligation 7,387 7,137
- -------------------------------------------------------------------------------------------------
$ 12,244 $ 9,720
=================================================================================================
5. SHARE CAPITAL
ISSUED AND OUTSTANDING:
(Unaudited) Number of Shares Amount
- ---------------------------------------------------------------------------------------------------
COMMON SHARES
Balance at December 31, 2003 49,956,271 $ 464,704
Issued on Exercise of Employee Stock Options 106,100 1,104
Issued for Cash 2,000,000 68,000
Share Issue Costs, Net of Tax -- (1,791)
- ---------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2004 52,062,371 532,017
===================================================================================================
CLASS D PREFERRED SHARES, SERIES A
Balance at December 31, 2003 and June 30, 2004 666,667 11,963
- ---------------------------------------------------------------------------------------------------
TOTAL ISSUED SHARE CAPITAL AT JUNE 30, 2004 52,729,038 $ 543,980
=======================
OUTSTANDING:
Class A Warrants 494,224
Stock Options 1,273,000
- --------------------------------------------------------------------------
DILUTED SHARES AT JUNE 30, 2004 54,496,262
==========================================================================
On April 8, 2004, the Corporation completed a public offering for the issuance
of 2,000,000 Common Shares for total proceeds of $68.0 million, before
consideration of the share issue costs of $2.9 million ($1.8 million net of
tax). 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.
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.
16
6. LOSS PER SHARE
The basic weighted average number of shares for the three and six-month periods
ended June 30, 2004 are 52,531,393 and 52,168,819 (June 30, 2003 - 50,546,903
and 50,098,995 respectively). Due to a loss for the three and six-month period
ended June 30, 2004 zero incremental shares are included for the diluted
earnings per share weighted average number because the effect would be
anti-dilutive. The diluted weighted average number of shares for the three and
six-month periods ended June 30, 2003 were 51,462,216 and 50,996,305
respectively.
7. INTEREST EXPENSE
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) 2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Interest on Long-term Debt $ 15,596 $ 13,846 $ 30,966 $ 29,030
Capitalized Interest in Oil Sands Project -- (8,313) -- (23,497)
- ------------------------------------------------------------------------------------------------------------------
Interest Expense, Net 15,596 5,533 30,966 5,533
Interest on Obligations Under Capital Lease 478 -- 956 --
- ------------------------------------------------------------------------------------------------------------------
$ 16,074 $ 5,533 $ 31,922 $ 5,533
==================================================================================================================
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 had been
capitalized as part of the Oil Sands Project.
Cash interest paid for the six months ended June 30, 2004 was $31.2 million
(June 30, 2003 - $30.8 million). Cash interest of $0.1 million was received for
the six months ended June 30, 2004 (June 30, 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. During the three and six-month periods ended June 30, 2004
$209,000 has been recognized as compensation expense for the 38,679 Unit Awards
granted, based upon the Corporation's top quartile performance relative to its
peer group.
17
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 and six-month periods ended June 30, 2004,
$183,000 and $335,000 respectively have been recognized (June 30, 2003 - $76,000
and $92,000 respectively) 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 Six months ended
June 30, June 30,
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Compensation Expense $ 225 $ 301 $ 449 $ 538
Net (Loss) Earnings Attributable to
Common Shareholders - as Reported (9,047) 1,276 (14,750) (1,100)
- -------------------------------------------------------------------------------------------------------------------
Net (Loss) Earnings Attributable to
Common Shareholders - Proforma $ (9,272) $ 975 $(15,199) $ (1,638)
- -------------------------------------------------------------------------------------------------------------------
Basic (Loss) Net Earnings per share:
- as Reported $ (0.17) $ 0.03 $ (0.28) $ (0.02)
- -------------------------------------------------------------------------------------------------------------------
- Proforma $ (0.18) $ 0.02 $ (0.29) $ (0.03)
- -------------------------------------------------------------------------------------------------------------------
9. INCOME TAX
Three months ended Six months ended
June 30, June 30,
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Large Corporations Tax $ (43) $ 768 $ 725 $ 1,536
Future Income Tax 2,785 (3,417) (1,447) (4,069)
- -------------------------------------------------------------------------------------------------------------------
Income Tax (Recovery) Expense $ 2,742 $ (2,649) $ (722) $ (2,533)
- -------------------------------------------------------------------------------------------------------------------
The future income tax asset (liability) consists of:
June 30, 2004 December 31, 2003
- ---------------------------------------------------------------------------------------------------------
(Unaudited)
Future Income Tax Assets:
Net Losses Carried Forward $ 56,212 $ 49,682
Share Issue Costs 2,111 1,723
Future Income Tax Liabilities:
Capital Assets in Excess of Tax Values (45,959) (38,860)
Unrealized Foreign Exchange Gain (2,300) (6,209)
Debt Issue Costs (1,236) (29)
- ---------------------------------------------------------------------------------------------------------
NET FUTURE INCOME TAX ASSET $ 8,828 $ 6,307
=========================================================================================================
18
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 Six months ended
June 30, June 30,
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Loss Before Income Taxes $ 6,417 $ 653 $ 15,584 $ 2,164
- -------------------------------------------------------------------------------------------------------------------
Income Tax Recovery at
Statutory Rate (2,495) (269) (6,058) (890)
Effect of Tax Rate Changes (152) (555) (693) (555)
Non-taxable Portion of
Foreign Exchange Loss (Gain) 2,954 (1,642) 4,765 (1,642)
Impact of Resource Allowance (2,065) - (4,004) -
Provision to Actual 4,764 (951) 4,764 (951)
Other (221) - (221) (31)
Large Corporations Tax (43) 768 725 1,536
- -------------------------------------------------------------------------------------------------------------------
INCOME TAX EXPENSE (RECOVERY) $ 2,742 $ (2,649) $ (722) $ (2,533)
===================================================================================================================
10. COMMITMENTS AND CONTINGENCIES
During the three months ended June 30, 2004 the Corporation received $1.8
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 $16.1
million for these property damages as of June 30, 2004. No further amounts,
other than those collected at June 30, 2004, have been recognized in these
statements relating to this insurance policy or the Corporation's other
insurance policies, nor will an amount be recognized until the proceeds are
received.
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Corporation has entered into various commodity-pricing agreements designed
to mitigate the exposure to the volatility of crude oil prices in US dollars.
The agreements are summarized as follows at June 30, 2004:
- -----------------------------------------------------------------------------------------------------------------
Unrealized Decrease
Notional Volume Swap Price to Future Revenue
Instrument (bbls/d) Hedge Period (US$bb/) (Cdn $'s)
- -----------------------------------------------------------------------------------------------------------------
WTI Swaps 20,000 July 1, 2004 to December 31, 2004 US$27.14 $ (53,381)
WTI Swaps 16,000 January 1, 2005 to March 31, 2005 US$26.17 (20,168)
WTI Swaps 7,000 April 1, 2005 to December 31, 2005 US$26.87 (21,053)
- -----------------------------------------------------------------------------------------------------------------
$ (94,602)
=================================================================================================================
19
12. CHANGES IN NON-CASH WORKING CAPITAL
Three Months ended June 30, Six months ended June 30,
- -----------------------------------------------------------------------------------------------------------
(Unaudited) 2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------
Source (Use):
Operating Activities
Accounts Receivable $ (11,868) $ (30,984) $ (8,441) $ (30,170)
Inventory (5,142) (7,268) (7,712) (8,407)
Prepaid Expense 1,367 -- 1,925 --
Accounts Payable and Accrued
Liabilities (8,222) 51,183 8,278 50,902
- -----------------------------------------------------------------------------------------------------------
$ (23,865) $ 12,931 $ (5,950) $ 12,325
- -----------------------------------------------------------------------------------------------------------
Investing Activities
Accounts Receivable $ -- $ 2,575 $ 614 $ 1,313
Accounts Payable and Accrued
Liabilities 342 (67,318) (5,149) (32,958)
- -----------------------------------------------------------------------------------------------------------
$ 342 $ (64,743) $ (4,535) $ (31,645)
===========================================================================================================
The Common Shares of Western are listed on the Toronto Stock Exchange under the
symbol "WTO".
FOR FURTHER INFORMATION PLEASE CONTACT:
Guy J. Turcotte David A. Dyck
President Vice-President, Finance
and Chief Executive Officer and Chief Financial Officer
(403) 233-1700 (403) 233-1700
THIS INFORMATION INCLUDES "FORWARD LOOKING STATEMENTS" BASED UPON CURRENT
EXPECTATIONS, ESTIMATES AND PROJECTIONS OF FUTURE PRODUCTION, PROJECT START-UPS
AND FUTURE CAPITAL SPENDING, THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED BY
THE CORPORATION. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO,
CHANGES IN; 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.
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES
OR DISSEMINATION IN THE UNITED STATES
20