SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F/A-6
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, for the financial period ended: December 31,1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, for the transition period from ___________ to .
COMMISSION FILE NO: 0-28794
CITYVIEW CORPORATION LIMITED
(FORMELY CITYVIEW ENERGY CORPORATION LIMITED)
(Exact name of registrant as specified in its charter)
Western Australia, Australia
(Jurisdiction of incorporation or organization)
53 Burswood Road,
Burswood, Western Australia , 6100
(Address of principal executive offices.) (Postal Code)
Registrant's area code and telephone number: (61-8) 6250 9099
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class: None Name of each exchange on which registered: N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class: None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
Title of each class: None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or Ordinary Shares as of the close of the period covered by the annual
report 29,025,216 shares at December 31, 1999.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ x ] YES [ ] NO
Indicate by check mark which financial statement item the registrant has elected
to follow:
[ x ] ITEM 17 [ ] ITEM 18
(APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] ITEM 17 [ ] ITEM 18 Not Applicable
2
INTRODUCTION
As used herein, except as the context otherwise requires, the term
"Company" refers to CityView Corporation Limited, a Western Australian
corporation, and its subsidiaries.
The Company publishes its consolidated financial statements expressed
in Australian dollars. In this document, references to "US dollars" or "US$" are
to the currency of the United States of America and references to "Australian
Dollars" or "A$" are to currency of Australia. Solely for convenience, Form 20-F
contains translations of certain Australian dollar amounts into US dollars at
specified rates. These translations should not be construed as representations
that the Australian dollar amounts actually represent such US dollar amounts or
could have been or could be converted into US dollars at the rates indicated or
any other rates. Unless otherwise indicated, the translation of Australian
dollars into US dollars has been made at the rate of A$1.00 = US$0.65, the noon
buy-in rate in New York City for cable transfers in Australian dollars as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on December 31, 1999. For information regarding rates of
exchange between Australian dollars and US dollars from 1991 to the present, see
"Item 8. Selected Financial Data - Exchange Rates."
The current financial period is for the twelve months ended December
31, 1999. References in this document to a particular prior year are to the
calendar year unless otherwise indicated. The Company produces annual reports
containing audited consolidated financial statements and an opinion thereon by
the Company's independent public accountants. Such financial statements have
been audited in accordance with Australian Standards ("AIS"). The Company also
produces quarterly reports, which contain selected financial information, and
notices to shareholders of the Company. The Company also produces financial
statements prepared in accordance with Australian Accounting Principles ("AAP"),
which are required to be furnished to shareholders under Australian law. AAP
differ from United States Generally Accepted Accounting Principles ("US GAAP")
in certain material respects however none apply to these accounts .
The Company was incorporated as CityView Investments Limited on May 3,
1987. The Company was listed on the Second Board of the Perth Stock Exchange on
October 20, 1987 and was transferred to the Main Board of the Australian Stock
Exchange on January 2, 1992. The Company changed its name to CityView
Corporation Limited on August 9, 1996, to CityView Energy Corporation Limited on
May 19, 1997 and on May 31, 2000 changed its name to CityView Corporation
Limited.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
CityView Corporation Limited (the "Company"), a corporation organized
under the laws of Western Australia on May 3, 1987 was listed on the Australian
Stock Exchange as an investment company. CityView's investments were focused
originally on realty, then gold and realty, then energy and gold and since
January 2000 e-commerce and energy.
With respect to the Company's disposal of certain gold interests during
calendar year 1999, reference is herewith made to GOLD - Raeside Joint Venture
and Duketon Prospect wherein it is indicated that in consideration for the
discharge of certain liabilities aggregating US$54,459 the Company sold its
subsidiary and interest in the Raeside Joint Venture in November 1999 to an
unaffiliated third party and sold its subsidiary and interest in Duketon
Prospect in December 1999 to an unaffiliated third party for nominal
consideration. CityView no longer holds any gold interests.
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The Company conducts its operations through a number of subsidiaries,as follows:
CITYVIEW CORPORATION LIMITED
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CityView Asia Pty Ltd - 100% Citra Management Pte Ltd - 100%
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Western Madura Pty Ltd - 25%
Western Simenggaris Petroleum Pty Ltd - 25% (Formerly Genindo Western
Petroleum Pty Ltd)
Additional Company subsidiaries, currently inactive, are as follows:
Western Akar Petroleum Pty Ltd - 90%
Western Nusentara Energi Pty Ltd - 80%
Western Sangkimah NL - 100%
Western Resources N.L - 100%
Western Wisesa Petroleum Pty Ltd - 85%
There is no assurance that any of the Company's energy properties
contain significant commercially viable reserves until appropriate and
sufficient exploration work is done and an economic and feasibility study based
upon such work is conducted. The Company also owned certain gold interests which
have been disposed of during 1999 and as aforesaid no longer holds any gold
interests.
The Sands Solution.com Pty Ltd Agreement
CityView agreed, on January 20, 2000, to acquire at an agreed to and
fixed cost of AUS$5,000,000 a 10% stockholder interest in Sands Solutions.com
Pty Ltd ("Sandssol") directly from Sandssol with certain pre-emptive rights to
acquire a further interest in Sandssol. In the event that CityView pays less
than the agreed to AUS$5,000,000, it will receive a (lesser) proportionate
number of shares, i.e., AUS$2,500,000 would result in the acquisition of a 5%
interest. The agreement was negotiated on an arms-length basis between those
officers of each corporation who did not have any overlapping interest in the
other corporation (except as may be indicated in this subsection). CityView
anticipates that payment for such 10% acquisition will be accomplished through
utilization of funds previously received and further funds expected to be
received from private placements of CityView's shares with otherwise
unaffiliated third parties. In that respect, in January 2000, 7,300,000 CityView
shares were issued to private placement participants for proceeds of
AUS$3,613,500 with such shares (once issued) then representing approximately 20%
of all outstanding CityView shares, currently (as of October 31, 2000)
representing approximately 16% of the 45,082,016 outstanding CityView shares and
with no one participant (or group of participants acting in concert) being or
becoming a principal stockholder of CityView.
At CityView's Annual General Meeting held on May 31, 2000, its
stockholders approved the issuance of up to 8,000,000 additional shares at
AUS$1.45 per share. CityView has received non-binding indications for purchase
of such shares contingent upon its being listed for trading on the Electronic
Over-the-Counter Bulletin Board ("OTCBB") (as discussed below). Such private
placement would, in all likelihood, have been concluded (at least in part if not
entirely) if not for the fact that the purchasers will not conclude the private
placement until such time as CityView's ordinary shares are trading on the
OTCBB. The OTCBB listing cannot be accomplished until such time as this Form
20-F, in its final version, responds satisfactorily to any and all outstanding
SEC comments. Once that is accomplished CityView and the unaffiliated third
parties participating in the private placement intend to expeditiously conclude
such transaction with CityView, then moving expeditiously to conclude its
agreement with Sandssol (through utilization of a portion of the private
placement funds). There is no binding agreement for the purchase of the
8,000,000 shares authorized for issuance at CityView's last Annual Meeting
although management of the Company believes that more than a sufficient number
of shares will be sold so as to fully complete its AUS$5,000,000 acquisition
price for 10% of Sandssol. Management's belief is based upon London Partners
Australia Pty Ltd's ("London") verbal assurances to CityViewas to London's
ability to locate a sufficient number of investors so as to sell a sufficient
number of shares and (as indicated in the following paragraph) London's prior
success in assisting CityView in private placement financings of this nature.
Assuming, although no assurance can be given, that the entire 8,000,000 share
private placement is concluded, proceeds from the sale of would amount to
approximately AUS$11,600,000 which, when utilized with all or a significant
portion of the AUS$3,613,500 raised in the January 2000 private placement would
give the Company more than sufficient funds to conclude the Sandssol
transaction. If insufficient funds are available to conclude the transaction in
its entirety, the Company will still nevertheless purchase a proportionate
lesser interest in Sandssol with such funds as are available therefore. Other
than as set forth herein, the Company does not have any other current means (or
current intentions to pursue alternative means) to conclude the Sandssol
transaction. In contemplation of conclusion of the proposed acquisition
CityView's Chief Executive Officer already serves as a member of Sandssol's
Board of Directors. See also Item 9 herein with respect to CityView's right to
appoint an additional otherwise independent director to Sandssol's Board.
3A
The January 2000 agreement to acquire a 10% interest in Sandssol was
negotiated between those officers and/or directors of each entity who did not
hold any positions in the other entity so as to avoid any potential conflict of
interest. This manner of proceeding was necessitated by virtue of the fact that
a family trust of CityView's CEO owns fifty percent of Sands and McDougall (the
parent of Sandssol) and one-third of Sandssol. The trustee of the Smyth family
trust is Salant Nominees Pty Ltd and its two directors are Peter Mark Smyth and
his wife Jennifer Lee Smyth. Mr. and Mrs. Smyth control the family trust in
their capacity as its sole two directors. Additionally, CityView's Chief
Executive Officer, Peter Mark Smyth, is a director of both Sands and McDougall
and Sandssol. In an attempt to avoid potential conflicts those persons
representing CityView in negotiations with Sandssol were Peter John Augustin
Remta and to a lesser degree Leslie Robert Maurice Friday while Sandssol was
primarily represented by Paul William Keogh, a Sandssol director. The initial
idea for such acquisition resulted from substantial negotiations between London
and Sands and McDougall personnel (with London then presenting its proposal to
CityView ). Mr. Smyth did not propose CityView's investment in Sandssol.
Initially, London proposed such investment in Sandssol to Sandssol and after an
extensive discussion between W. Keogh of Sands & McDougall (the parent of
Sandssol) and V. Melville of London, London felt that CityView, then being a
NASDAQ and Australian Stock Exchange ("ASX") listed company, was a good
candidate to propose an acquisition with London feeling that such stock exchange
listing(s) would give CityView a better opportunity than a non-public company to
raise funds for such acquisition. London then made such suggestion to CityView
after it (London) had both initiated, negotiated and orchestrated the proposed
transaction. The relationship between London and CityView is a business
relationship whereby London assists CityView in its private placements in its
capacity as a licensed securities dealer that assists in raising funds for
various corporations in the normal course of its business while also providing
corporate consulting advice. London is otherwise unaffiliated with either
CityView or Sandssol.
The pre-emptive rights (referred to above) which will accrue to
CityView assuming completion of the contemplated initial 10% acquisition refer
to Sandssol's offer and CityView's acceptance (contingent upon fund
availability) to acquire a further 30% interest in Sandssol for AUS$15,000,000.
Exercise of such pre-emptive rights will require completion of the entire
proposed 8,000,000 share financing and the later raising of additional funds for
such purposes. No assurance can be given that the raising of the necessary funds
can be accomplished in its entirety if at all. As with terms of the initial 10%
acquisition, the raising of less than AUS$15,000,000 to acquire a further 30%
interest will permit CityView to acquire a proportionate lesser interest. The
acquisition by CityView of any additional interest in Sandssol above the initial
interest of 10% requires that a Prospectus be filed by CityView with the
Australian Stock Exchange in accordance with requirements of Australian
Securities and Investments Commission due to the extent of potential percentage
interest which it may acquire in Sandssol. While the filing of such Prospectus
does not generate comments, it does require accuracy of all material information
so as to avoid director's personal liability for material misstatements. A
substantial due diligence process will be undertaken by CityView's two
independent directors (Messrs. Remta and Friday with Peter Mark Smyth recusing
himself from decision making with respect thereto in accordance with Australian
legal requirements and continuing to recuse himself from all negotiations with
Sands and McDougall as relates to such acquisition) prior to filing such
Prospectus and acquisition of the additional interest in Sandssol and such due
diligence process will include an overall evaluation of Sandssol with the aid
and assistance of such independent external consultants as Messrs. Remta and
Friday may deem advisable.
The proposed investment in Sandssol is intended as an expansion of
CityView business and not as a change of business operations as indicated
in this Form 20-F under the heading "Oil and Gas".
Sandssol is the IT subsidiary of Sands & McDougall, an Australian
office product supplier since 1853. Sands & McDougall has been
involved in electronic trading since 1985 and is engaged in B2B e-commerce
through Sandssol in Australia. Sandssol was established in 1994 as the in-house
IT arm of Sands & McDougall in Western Australia. In order to secure a
competitive edge in the Western Australian marketplace, Sandssol developed a
series of integrated electronic trading solutions. These strategies lowered
customers' overhead costs of acquiring and possessing office product
consumables. Sandssol suite of integrated multi vendor, B2B e-procurement
solutions are being used by customers across a diverse range of industries and
its goal is to provide business to business e-commerce applications that can be
integrated to existing legacy financial accounting systems. The significance of
Sandssol is that City View believes that Sandssol has a well established client
base and proven products which are easy to use and capable of being integrated
into existing financial accounting systems.
4
GLOSSARY
Oil and Gas Definitions
Anastomosing Shear Zone Deformation and the
interconnection resulting from stresses that
cause or tend to cause contiguous parts of a
body of rock to slide relative to each other
in a direction parallel to their plane of
contact, resulting in a tabular zone or rock
that has been crushed by many parallel
fractures due to shear strain.
Anomaly A portion of an area surveyed which is
different in appearance from the area
surveyed in general. In seismic usage,
generally synonymous with structure,
occasionally used for unexplained seismic
events.
Anticline An upwardly convex fold.
Basin A depression of large size in which
sediments have accumulated.
Biostratigraphical "Means" The methods utilized to subdivide the
stratigraphy based upon the description
and study of the fossils they contain.
Carbonates Sedimentary rocks built up of calcium and/or
magnesium carbonate or fragments of the same
material.
Cementation The digenetic process by which coarse
grained sedimentary rocks become
consolidated or bound together into hard,
compact rocks, usually through deposition or
precipitation of minerals in the spaces
among the individual grains of the rock. It
may occur simultaneously with deposition or
at a later time.
Channel Sandstone An elongated deposit or body of sand and
gravel located in the course of a stream or
river.
Clastics Sedimentary rocks built up of fragments or
pre-existing rocks produced by the process
of erosion and transported to a point of
deposition.
Claystone A very fine grained sedimentary rock
composed principally of clay; often a seal
and the principal source of oil.
Closure The vertical distance between the highest
part of a structure and the lowest
encircling contour.
Coal A readily combustible rock containing more
than 50% by weight and 70% by volume of
carbonaceous (woody) material including
inherent moisture, formed from compaction
and induration of variously altered plant
materials.
Delta System Pertaining to the low, nearly flat, alluvial
tract of land, at or near the mouth of a
river, commonly forming a triangular or fan-
shaped plain of considerable area, crossed
by many distributaries of the main river,
perhaps extending beyond the general trend
of the coast, and resulting from the
5
accumulation of sediment supplied by the
river in such quantities that it is not
removed by tides, currents and waves. Most
delta systems are partly above water and
partly below water. Includes all the
different parts and characteristics of each
individual area within the delta.
Diagenesis The physical and chemical changes in a
sedimentary rock after deposition.
Early Miocene Carbonates Carbonate bearing rocks (e.g. limestone or
dolomite) formed in the Miocene - Epoch
(i.e. between 5-23 million years ago).
Electric (Schlumberger) Logs Geophysical measurements of rock properties
including natural radioactivity, density,
acoustic and conductivity, made with probes
attached to the end of a wire line, and
recorded continuously as the probes are
winched to the surface. The data is
presented on a paper roll or film as a
trace, hence the term log. Analysts can
assess the type or rock e.g. sandstone and
claystone and whether reservoirs contain gas
oil or water and the volume thereof.
Fault An earth or rock fracture or zone of
fractures, generally included, along which
relative movement has occurred between the
bodies of rock on either side of the fault
plane. Where the movement results in overall
lateral extension of the earth's surface,
the fault is said to be normal, where the
movement results in shortening, the fault is
said to be reversed.
First Tranche Petroleum That quantity of petroleum production from
the relevant field which the parties shall
be entitled to first take and receive each
year before any deduction for recovery of
operating costs and handling of production,
to be shared between Pertamina and the
contractor in accordance with the equity
split between the parties.
Four-Way Dip Closure An anticline with strata dipping in all
directions from an apex or high.
Hanging Wall The overlying side or rock mass above an
included surface.
Igneous Rock Pertaining to rocks units or masses
which are formed by the solidification from
a molten or partially molten state.
Intercalated
Calcareous Layers The existence of one or more layers
containing a percentage of calcium carbonate
in one form or another, between other
layers.
Intrusives Rocks which have been intruded into other
rocks.
Inversion The process of transformation of the earth's
crust, whereby synclines are inverted or
transformed into mountains or anticlines,
and conversely anticlines into valleys or
synclines.
Lead Inferred geological feature or structural
pattern which requires further
investigation.
6
MMCFD A million cubic feet per day.
Mafic/Ultramafic Volcanics Pertaining to an extrusive igneous rock
expelled as molten lava from a volcano or
vent at the earth's surface or on the seabed
It is composed chiefly of one or more iron-
magnesium, dark-colored minerals in its
composition; pertaining to an extrusive
igneous rock composed almost entirely of
iron-magnesium, dark-colored minerals, and
a color classification greater than or equal
to 90.
Mafic/Ultramafic Intrusives Pertaining to an igneous rock which
solidified from molten lava below the
surface of the earth. It is composed chiefly
of one or more iron-magnesium, dark-colored
minerals in its composition; pertaining to
an igneous rock composed almost entirely of
iron-magnesium, dark-colored minerals, and a
color classification greater than or equal
to 90.
Mud Diapirism Pertaining to the process of piercing or
7
rupturing of domed or uplifted rocks by a
mobile core of mud or shale, by the effect
of geostatic load in sedimentary strata.
Palaeogeographic Maps A map that shows the reconstructed physical
geography at a particular time during the
geological past, including such information
as the distribution of the land and the sea,
and the different environments of deposition
with those broad regions.
Permeability The ability of a fluid to flow through a
porous rock. A rock may be porous but not
necessarily very permeable.
Play A combination of geological circumstances
which provides potential hydrocarbon traps.
Point Bar Sandstone An arcuate ridge of sand and gravel which
develops on the inside bank of a meandering
or bending river by a process of slow
accumulation. This process occurs as the
river channel migrates towards the outside
bank.
PPM Parts per million.
Primary Recovery The process of commercially recovering oil
(and gas) from the reservoir rock at current
prices and costs, by conventional methods
and equipment as a result of natural energy
inherent within the reservoir.
Prospect A geological feature in the subsurface which
is a potential hydrocarbon trap for oil and
gas and which has been confirmed by
geophysical and geological studies to the
degree that it can now be tested, usually by
drilling.
Proved Oil & Gas Reserves Proved oil and gas reserves are the
estimated quantities of crude oil, natural
gas, and natural gas liquids which
geological and engineering data demonstrate
with reasonable certainty to be recoverable
in future years from known reservoirs under
existing economic and operating conditions.
i.e, prices and costs as of the date the
estimate is made. Prices include
consideration of changes in existing prices
provided only by contractual arrangements,
but not on escalations based on future
conditions.
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(i) Reservoirs are considered proved if
economic producibility is supported
by either actual production or
conclusive formation test. The area
of a reservoir considered proved
includes: (A) that portion
delineated by drilling and defined
by gas-oil and/or oil-water contacts
if any, and (B) the immediately
adjoining portions not yet drilled,
but which can be reasonably judged
as economically productive on the
basis of available geological and
engineering data. In the absence of
information on fluid contacts, the
lowest known structural occurrence
of hydrocarbons controls the lower
proved limit of the reservoir.
(ii) Reserves which can be produced
economically through application of
improved recovery techniques (such
as fluid injection) are included in
the "proved" classification when
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successful testing by a pilot
project, or the operation of an
installed program in the reservoir,
provides support for the engineering
analysis on which the project or
program was based.
(iii) Estimates or proved reserves do not
include the following: (A) oil that
may become available from known
reservoirs but is classified
separately as "indicated additional
reserves"; (B) crude oil, natural
gas, and natural gas liquids, the
recovery of which is subject to
reasonable doubt because of
uncertainty as to geology, reservoir
characteristics, or economic factors
(C) crude oil, natural gas and
natural gas liquids, that may occur
in undrilled prospects; and (D)
crude oil, natural gas and natural
gas liquids, that may be recovered
from oil shales, coal, gilsonite and
other such sources.
Proved Developed Oil
And Gas Reserves Proved developed oil and gas reserves are
reserves that can be expected to be
recovered through existing wells with
existing equipment and operating methods.
Additional oil and gas expected to be
obtained through the application of fluid
injection and other improved recovery
techniques for supplementing the natural
forces and mechanisms of primary recovery
should be included as "proved developed
reserves" only after testing by a pilot
project or after the operation of an
installed program has confirmed through
production response that increased recovery
will be achieved.
Proved Undeveloped Reserves Proved undeveloped oil and gas reserves are
reserves that are expected to be recovered
from new wells on undrilled acreage, or from
existing wells where a relatively major
expenditure is required for recompletion.
Reserves on undrilled acreage shall be
limited to those drilling units offsetting
productive units that are reasonably certain
of production when drilled. Proved reserves
for other undrilled units can be claimed
only where it can be demonstrated with
certainty that there is continuity of
production from the existing productive
formation. Under no circumstances should
estimates for proved undeveloped reserves be
attributable to acreage for which an
application of fluid injection or other
improved recovery technique is contemplated,
unless such techniques have been proved
effective by actual tests in the area and in
the same reservoir.
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Regressive Applies to sediments deposited during a
relative lowering or reduction of the ocean
and exposure of the land as the sea level
falls.
Relative Permeability The ratio between the effective permeability
to a given fluid (oil, gas or water) at a
partial saturation, and the permeability at
100% saturation.It ranges from zero at a low
saturation, to 1.0 at a saturation of 100%.
Rollover A structural feature which exhibits a
reversal of dip within the strata.
Salt Diapirism Pertaining to the process of piercing or
rupturing of domed or uplifted rocks by a
mobile core of salt, by the effect of
geostatic load in sedimentary strata.
Secondary Recovery The process of commercially recovering oil
(and gas) from the reservoir rock at current
prices and costs, in addition to the
primary recovery, as a result of
supplementing by artificial means the
natural energy inherent in the reservoir,
sometimes accompanied by a significant
change in the physical characteristics of
reservoir fluids.
Seismic Geophysical prospecting using the generation
and propagation of elastic waves at the
earth's surface, reflecting from the
subsurface strata, detection, measurement
and recording back at the earth's surface
and subsequent analysis of the data. A trace
is the data recorded at a single station.
A series of traces comprises a line. The
subsurface structure may be identified by a
consistent pattern on each trace along a
section of the line. A grid of lines is
acquired to define potential traps from
hydrocarbon accumulation. 2D seismic is the
conventional technique, as distinct from 3D
seismic in which investigations are
sufficiently closely spaced to allow a three
dimensional picture of the subsurface to be
obtained.
Shaley Referring to the relative amount of clay
fraction within a clastic rock, compared to
the amount of quartz grains for example.
Siltstone A sedimentary rock which is intermediate in
texture and grain size between sand and
claystone.
Sinistral Pertaining to the direction of relative
movement of a fault being in an
anti-clockwise or left lateral sense of
displacement.
Stratigraphic/Stratigraphy The science, arrangement and characteristics
of rock strata or layers. Concerned with the
original succession, age relations, form,
distribution, composition and all characters
and attributes of rocks as layers in the
earth's surface; also the interpretation of
the rock layers.
Sub-basin A localized depression within a basin.
Subsurface Trap An arrangement of rock strata below the
surface, whereby a body of reservoir rock is
vertically and/or laterally sealed by
caprock, in a structural configuration which
allows it to retain migrating hydrocarbons.
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Surface Structure A discrete area of deformed sedimentary
rocks which has expression at the earth's
surface and which in all likelihood reflects
the subsurface structure as a place where
the resultant bed configuration is such as
to form a potential trap for migrating
hydrocarbons.
Syncline An upward concave fold.
Tectonic Phase Pertaining to a period of geological time
during which structural movement and
deformation of the earth's crust has
occurred.
T.D. Abbreviation for total depth in meters or
feet. When drilling for oil and gas into the
earth's crust at any specific location has
terminated, the maximum depth reached is
referred to as the total depth.
Thrust Fault A fracture surface or zone in a rock,
inclined at an angle of 45(Degree) or less,
whereby the rock mass above the inclined
surface has moved upwards relative to the
mass below.
Thrust System The processes by which a series of thrust
faults are formed.
Transgressive Applies to sediments deposited during a
gradual rise or expansion of the oceans and
submersion of land as the sea level rises.
Water Cut The amount of water expressed as a
percentage of the combined total of oil and
water produced from an oil well.
Water Flooding A secondary recovery method in which water
is injected into a reservoir to obtain
additional oil recovery by movement of
reservoir oil to a producing well after the
reservoir has approached its economic
productive limit by primary recovery
methods.
Water Saturation The percentage of water within the pore
spaces of a reservoir. A "wet" reservoir
or aquifer is 100% water saturated whereas
an oil or gas-bearing reservoir may contain
for example 75% hydrocarbons and 25% water.
The water and hydrocarbon saturation must
sum to 100%. A reservoir can produce 100%
water and have less than 100% water
saturation.
Wellbore The hole in the rock made by the drill bit.
Wrenching The process by which the earth's crust is
moved resulting in a lateral fault in which
the fault surface is more or less vertical.
Zone of Thrust Fault A region or surface or plane along which
movement has occurred, whereby the rock mass
above the inclined surface has moved upwards
relative to the mass below.
12
OIL AND GAS
The Company identified Indonesia for its focus for acquisitions and
development of oil and gas reserves. Indonesia was selected after considering
prospectivity for oil and gas, demand for the produced product, availability of
supportive infrastructure, foreign company participation terms and conditions
and sovereign risk.
Benefits Associated with Indonesia
Indonesia has a record for honoring participation agreements and
keeping tax and terms stable. The process for co-operation with domestic and
foreign parties is explained as follows:
o All oil and natural gas exploitation in Indonesia is the
responsibility of Perusahaan Pertambangan Minyak dan Gas Bumi
Negara ("Pertamina"), an enterprise established under the Law
of the Republic of Indonesia Number 8 Year 1971.
o Pertamina may co-operate with other parties by way of a
"Production Sharing Contract," (hereinafter "PSC"), the form
and terms of which are established by government regulations.
o While terms have altered marginally since the PSC was first
introduced, usually the objective of the change has been to
improve the terms in an attempt to attract further foreign
investment in Indonesia.
o The PSC format has proved a stable and reliable contract for
international investment.
o The Company has two PSC's with Pertamina located onshore
Madura Island and Onshore North East Kalimantan and are held
by Western Madura Pty Ltd and Western Simenggaris Petroleum
Pty Ltd respectively (collectively hereinafter called
"Western"). See "The Company's two PSC's - Madura Block and
Simenggaris Block" hereinafter.
Indonesia is considered one of the more mature regions of the world for oil and
gas investment in respect to security of tenure in contracts covering oil and
gas rights of a foreign company.
Risks Associated with Indonesia
There are a number of factors which may have a material downside effect
on Western's future financial performance in Indonesia or the value of the
shares in the Company. These factors include:
* Fluctuations in the world market price of oil and gas;
* Fluctuations in the value of the Indonesian rupiah against the US
dollar;
* Abnormal interruptions in oil and gas production or delivery
resulting from war, political disturbance, civil unrest or industrial
disruption;
* Changes in government, government regulations or the relevant fiscal
regime;
* Unforeseen adverse geological conditions;
* Unavailability or excessive costs of industry service support, caused
by any of the above.
The Company believes that the benefits described above far outweigh the
risks. There is no assurance, however, that one or more of the aforementioned
risks will not severely damage Company prospects and operations.
Selection of Target Areas for Acquisition
The criteria for assessing oil and gas opportunities in Indonesia
includes consideration of the following:
* Detailed review of geological and geophysical information
available from Pertamina and other sources.
13
* Assessing proximity of the oil and/or gas prospect to a means
of transporting the production to market. The foregoing
component of production costs can significantly affect the
economics of a project.
* Assessing access to support services such as engineering, rig
services and service contractors. Costs for mobilization and
demobilization of such services is an important consideration.
* Assessing field prospects of oil and gas, usually determined
by quality and quantity of geophysical, geological,
petrophysical and production data available.
* Assessing the degree of difficulty in producing the oil and
gas prospect from an engineering perspective, to enable an
accurate assessment of production costs.
* Conducting commercial analysis to establish the ability of a
particular project to achieve adequate rate of return on
investment.
Evaluation Techniques
Experienced geologists and geophysicists are engaged as contractors to
employ the most advanced technologies of investigation in assessing hydrocarbon
prospects. These include reprocessing and reinterpretation of existing seismic
data. Afterwards the data in its original interpreted form can be enhanced to
enable more accurate mapping of the structure. The technology available for
seismic acquisition and processing is continually being improved. Interpretation
tools such as computer mapping and modeling packages, enable greater amounts of
data to be processed and superior interpretations to be made. Western utilizes
both the data directly relating to the field being investigated, along with
regional data to compile as complete an understanding as the available data will
allow.
Electrical wireline logs are utilized where available to interpret
reservoir parameters of interval thickness, hydrocarbon presence, porosity,
water saturation and other important parameters. This data is interpreted
utilizing experienced engineers and advanced software packages designed for such
analysis. The result are then integrated with the geological and geophysical
information, in an endeavor to use one form of analysis to confirm the other.
Utilizing the geophysical mapping and the petrophysical interpretation,
the reservoir engineer is then able to estimate potential oil and/or gas
reserves and recovery factors likely to be achieved. Any available past
production records are analyzed and can often be utilized as a means of
predicting future production rates and cumulative production forecast, by
extrapolation of the past results, utilizing accepted engineering practices. The
application of computer models can also aid the reservoir engineer in
forecasting production potential. An accurate model can duplicate past
production history.
Market for Oil and Gas Production
The market for oil and gas production in Indonesia is generally
regulated. Under the terms of the PSC, Western has the right to sell its oil
production to Pertamina at the government established Indonesian Crude Price
(hereinafter "ICP") and Pertamina cannot refuse to buy the production. The ICP
is an average price for a basket of crude oil. The basket used in the ICP
calculation is comprised of Sumatra Light Crude (SLC), Tapis crude (from
Malaysia), Oman crude, Dubai crude and Gippsland crude (Australia) prices. The
ICP is adjusted on a monthly basis at the end of each month and then applied to
the same month. The price for a particular crude oil in Indonesia is then
adjusted relative to the crude quality. Pertamina has strategically located
facilities throughout most of Indonesia, where crude oil can be delivered,
commonly referred to as the "Point of Custody Transfer." Western is responsible
for its portion of costs for delivering the crude to the Point of Custody
14
Transfer. Above certain levels of production, Western has the right to sell its
oil production on the world market if it is able to negotiate preferred selling
terms. Preferred selling terms are terms which are more favorable then those
available to the contractor under the ICP pricing system.
Under the standard terms of Technical Assistance Contracts and
Production Sharing Contracts, the contractor has the right during the term
thereof to freely lift, dispose of and export 100% of its share of crude oil,
and retain abroad the proceeds obtained therefrom. After 5 years of production
the contractor is required to meet its domestic market obligation and sell 25%
of its share of production to Pertamina at 15% of the prevailing price.
All producers in a producing region receive the same price. The major
oil companies purchase crude oil offered for sale at posted field prices. There
are price adjustments for quality difference from the Bench Mark. Oil sales are
normally contracted with a gatherer who will pick-up the oil at the well site.
In some instances there may be deductions for transportation from the well head
to the sales point. At this time the majority of crude oil purchasers do not
charge transportation fees, unless the well is outside their service area. The
oil gatherer will usually handle all check disbursements to both the working
interest and royalty owners. The Company was a working interest owner to
December 31, 1999. From January 1, 2000 to December 31, 200l the Company's
interest is carried by Pt Medco Energi Corporation Tbk. Commencing January 1,
2002 the Company expects to be a working interest owner. By being a working
interest owner, the Company will be responsible for the payment of its
proportionate share of the operating expenses of the well. Royalty owners and
over-riding royalty owners receive a percentage of gross oil production for the
particular lease and are not obligated in any manner whatsoever to pay for the
cost of operating the lease.
Gas is sold direct to consumers at prices determined by Pertamina in
the following range:
Industry Price Range per MCF
Fertilizer manufacture US$1.00 - US$1.50
Petrochemical US$2.00
Steel Industry Process US$0.65
Steel Industry Fuel/Power US$2.00
Electricity generation US$2.45 - US$3.00
Cement manufacture US$3.00
Other US$2.70
The lower gas prices in some industry sectors are a form of subsidy
imposed by the government. Larger gas reserves near to LNG facilities are able
to supply gas to these operations. Indonesia is the largest exporter of LNG in
the world.
The gas purchaser will pay the well operator 100% of the sales proceeds
each and every month for the previous months sales. The operator is responsible
for all checks and distributions to the working interest and royalty owners.
There is no standard price for gas. Depending on the type of contract, ultimate
destination, transportation, treatment and compression charges, the prices will
vary. Prices will fluctuate with the seasons and the general market conditions.
The Company does not anticipate any significant change in the manner production
is purchased. However, no assurance can be given at this time that such changes
will not occur.
As Indonesia moves closer towards becoming a net importer of crude oil,
the Indonesian government, through the state owned enterprise Pertamina in which
all oil and gas reserves are vested, is endeavoring to increase production
through new incentives to attract foreign expertise and capital for exploration
and production, through development and enhancement of existing reserves.
15
Government incentives for PSC's include:
* After tax split for oil, new incentive 35% Contractor Equity, from a
previous range of 15% to 25%. This in effect means that the Contractor
can receive a larger portion of the total production from any field,
after the deduction of Operating Costs. Allowing for a tax rate of 44%,
the Contractor is entitled under this legislation, to 62.5% of
remaining production after recovery of Operating Costs pre tax, as
opposed to the previous entitlement of 26.7857% to 44.6428% pre tax.
* After tax split for gas 40% for Contractor, from 35% previously. As
for the above, the Contractor is entitled to 71.426% of the production,
after deducting Operating Costs, as opposed to 62.5% previously.
* Domestic market oil fee increased from 15% of crude price to 25% of
crude price. Under the terms of all TAC's and PSC's, the Contractor is
required to sell and deliver to Pertamina a portion of the share of the
Crude Oil to which the Contractor is entitled, at the Domestic Market
Oil Fee, which is a set percentage of the price realized by the
Contractor for all other production from the Contract Area. Under the
previous regulations, the Contractor received only 15% of such price,
whereas under the new legislation, the Contractor receives 25% of the
realized price. The net result is that the Contractor is receiving an
additional 10% of the Crude Oil price for that portion of Crude Oil
which it is obligated to sell and deliver to Pertamina to fulfill the
Contractor's obligation towards the supply of the domestic market in
Indonesia.
* First Tranche Petroleum reduced from 20% to 15%. First Tranche
Petroleum, being a portion of the total Petroleum production to be
split between the parties before any deduction for recovery of
Operating Costs, reduces the amount available for recovery of Operating
Costs. As the Contractor is providing funding under the contract terms,
it is in the Contractor's interest to have as much of the Petroleum
production available for recovery of such costs, prior to distribution
between the parties thereafter. Reduction of the First Tranche
Petroleum percentage from 20% to 15% means an additional 5% of the
Petroleum production is available to the Contractor for Cost Recovery.
The price for oil in Indonesia is tied to a basket of crude oils around
the world, ensuring an "international" price dependency. The basket of crude
oils used to establish the ICP effectively means that the ICP is very much
subject to world oil prices, giving it international stability as opposed to
being affected by domestic constraints. The ICP compares favorably with other
comparable crude oils in that its price is formulated from a basket of
comparable crudes from other countries.
THE COMPANY'S TWO PRODUCT SHARING CONTRACTS ("PSC's") WITH PERTAMINA
MADURA BLOCK
Onshore Madura Island
On January 28, 1997 the President Director of Pertamina awarded the
Madura Block to CityView and signed the authorization for CityView's then 100%
owned subsidiary Western Madura Pty Ltd ("Western Madura") to commence
operations on the Madura Block prior to the formal signing of the PSC-JOB
agreement. The signing of the contract took place on May 15, 1997, awarding the
2728km(2) Madura Block to Western Madura for an exploration term of 10 years and
production term of 20 years. CityView was not required to make any cash payments
for this award and no payment in cash or otherwise was made by or on behalf of
CityView for the award of the Madura Block.
16
History
Oil and gas exploration began on Madura Island in the late 1800's to
1910 with over 100 shallow (less than 500m) wells drilled on oil seeps and
surface features. Production was marginal with a cumulative total of less than
1.0MMBO ("Million barrels of Oil"). Exploration was limited on the block until
the 1970's when it was held in succession by Indonesia Cities Services,
Pertamina and Shell. Several generations of seismic data were acquired in the
1980's and 1990's but only 6 wells have been drilled on the Island since 1910.
Throughout 1999 discussions took place with P.T. Medco Energi
Corporation TBK (Medco) for Medco to supervise and pay for the work programs for
the years 2000 and 2001 for the development and bringing into production of the
Madura block.
Approval was given at the Company's General Meeting held on December
30,1999 for the Company to allot a 75% interest in Western Madura to Medco in
consideration of Medco carrying out and paying for the whole of the 2000 and
2001 work programs. The agreement was signed between CityView and Medco on
January 25, 2000. The Company's interest in Western Madura was reduced from 100%
to 25%. In accordance with the above, Medco has submitted to Pertamina for
approval a Year 2000 budget of US$3,519,000 for the drilling of three wells on
the Sebaya and Karasan prospects at Madura in the second and third quarters.
Accordingly, Medco is required to supervise and pay for work programs for years
2000/2001 for development and bringing into production of the fields. Commencing
2002 and onwards, Medico and the Company will contribute on a pro-rata basis in
accordance with the respective 75% and 25% interests with the Company continuing
to receive 25% of any profits generated.
Regional Setting
There is an E-W terrain running across the block that underwent
inversion in the Plio-Pleistocene. Within that band a number of structures have
been identified at, due to the inversion, fairly shallow levels. These
relatively shallow features are the principal target for the Western Madura
program.
Prospects
Market
Western Madura has discussed with the local Madura government
downstream projects which include a small refinery and a power plant to supply
the local market and displace imports from East Java.
SIMENGGARIS BLOCK
Onshore NE Kalimantan
On September 28, 1997 the President Director of Pertamina signed the
authorization for Cityview's then 100% owned subsidiary Genindo Western
Petroleum Pty Ltd ("Genindo") to commence operations on the Simenggaris Block
prior to the formal signing of the PSC-JOB agreement. The signing of the
Contract took place on February 24, 1998 awarding the 2734km(2) Simenggaris
Block to Genindo. The contract term is 10 years for exploration and 20 years for
production. Genindo changed its name to Western Simenggaris Petroleum Pty. Ltd
on June 22 1998.
Throughout 1999 discussions took place with P.T. Medco Energi
Corporation TBK (Medco) for Medco to supervise and pay for the work programs for
the years 2000 and 2001 for the development and bringing into production of the
Simenggaris block.
Approval was given at the Company's General Meeting held on December 30
1999 for the Company to allot a 75% interest in Western Simenggaris to Medco in
consideration of Medco carrying out and paying for the whole of the 2000 and
2001 work programs for development and bringing into production of fields. The
17
agreement was signed between CityView and Medco on January 25, 2000.
Accordingly, the Company's interest in Western Simenggaris Petroleum Pty Ltd
was reduced from 100% to 25%. In accordance with the above, Medco has submitted
to Pertamina for approval a Year 2000 budget of US$4,629,000 for the drilling of
one well on the Pidawan prospect at Simenggaris in the third quarter. Commencing
2002 and onwards, Medco and the Company will contribute on a pro-rata basis in
accordance with the respective 75% and 25% interests with the Company continuing
to receive 25% of any profits generated. CityView was not required to make any
cash payment for this award and no payment in cash or otherwise was made by or
on behalf of CityView for the award fo the Simenggaris Block.
History
The Simenggaris Block is adjacent to some of the earliest oil
production in Indonesia with exploration dating back to the 1890's. Exploration
was limited on the block until the late 1960's when portions of the block were
held in succession by Japex, ARCO, Deminex and Pertamina. Several generations of
seismic data were acquired and 15 wells were drilled within the Block leading to
four discoveries: Sembakung oil field, Bangkudulis oil field, Sesayap-1 and
S.Sembakung-1. The former two are producing fields excluded from the Contract
area and the latter two are undeveloped gas-condensate discoveries.
Regional Setting
The Simenggaris Block lies in the Tarakan Basin region. The Tarakan
Basin stratigraphy consists of a classic prograding deltaic sequence from upper
Miocene through Pliocene time. The majority of the reserves are found along the
Kalimantan coast in Pliocene age deltaic reservoirs. Further inland gas and oil
are found in upper Miocene age, paleogeographic equivalent, deltaic reservoirs.
The upper Miocene age reservoirs are underexplored and will be the focus of the
Medco work program.
Prospects
Market
Several gas markets have been identified for the Simenggaris Block with
gas prices of US $1.00-1.50 per MCF expected, based on current pricing levels.
These markets include a future fertilizer plant and also a methanol plant on
Bunyu Island.
TIMOFORO
On shore Irian Jaya
CityView's 85% owned subsidiary, Western Wisesa Petroleum Pty. Ltd, was
formed to negotiate with Pertamina to secure title to the block. During 1999 the
Company ceased its negotiations for the block on the grounds of inadequate
commerciality.
TUBA OBI EAST ("TOE")
Onshore South Sumatra
In June 1994, Pt Akar Golindo (PTAG) was invited by Pertamina to bid on
the Tuba Obi East Block in Sumatra. On August 1, 1996 CityView signed a
Memorandum of Understanding with PTAG to form a joint company Western Akar
Petroleum Pty Ltd ("Akar") to operate and develop TOE. Akar (a 90% owned
subsidiary of CityView) then signed a TAC for Tuba Obi East on May 15, 1997. The
block is 55km(2) in size.
During 1999 the Company withdrew from TOE on the grounds of inadequate
commerciality.
18
TANJUNG MIRING TIMUR ("TMT")
Onshore South Sumatra
On December 17, 1996 CityView's 80% owned subsidiary, Western Nusantara
Energi Pty Ltd ("Nusantara") signed a TAC to take over the operations of the TMT
Oilfield.
During 1999 the Company withdrew from TMT on the gounds of inadequate
commerciality
SANGATTA SANGKIMAH
East Kalimantan
On December 8, 1995 CityView's wholly owned subsidiary Western
Sangkimah NL ("Western") was assigned an 87.5% interest in a TAC for the
Sangkimah oilfield which lies within a Pertamina concession area known as
Sangatta.
To comply with Pertamina's work program a workover of Well No. SS-1 was
carried out in December 1997 which confirmed a minimum production rate of
30BOPD. Operations on Well No. SS-1 were then suspended. An exploratory well No.
SST-1 was then drilled to a depth of 1550 m to test the "Q" sands. After
encountering only minor oil content the well was plugged.
During 1999 the Company withdrew from Sangatta Sangkimah on the grounds
of inadequate commerciality.
BLOCK SC41 (formerly GSEC 74)
Offshore Western Philippines
ARCO Philippines Inc, Preussag Energies GMBH, MMC Exploration &
Production (Philippines) Pte Ltd ("MMCEPPL") and a consortium of fifteen
Filipino resource companies hold Block SC41 in the Sandakan Basin adjacent to
the border with Sadah East Malaysia. SC41 includes an area of about 12,000 km2
(3 million acres) on which ARCO has acquired 5,100 km of seismic data with
simultaneous gravity and magnetic surveys.
ARCO has mapped several large prospects in the undrilled distal portion
of the delta complex. Seismic amplitude anomalies and flat spots that conform to
these structures indicate that hydrocarbon generation, migration and entrapment
have occurred. Twelve prospects of potential have been identified in SC41
including the Rhino prospect and the Hippo prospect which was drilled in
February 1998.
During 1999 the Company executed an agreement with Malaysia Mining
Corporation Berhad (MMC) for the transfer to MMC of its 49% interest in MMCEPPL,
in satisfaction of its outstanding debt of US$9,727,656 to MMC and discharge of
the deed of charge.
On April 13, 2000 CityView acquired from ASAB Resources Limited a 2.5%
interest in Block SC41. This interest is free carried by MMCEPPL (i.e.
CityView is not required to contribute financially) through the next part of the
program being the drilling of a major offshore well.
Market
Oil is easier to produce and market as it would simply be produced from
a floating production storage unit ("FPSU")and then delivered anywhere in the
country. Gas is more difficult to monetize as it will require a pipeline to get
the gas to market and costs associated with laying a pipeline far exceed
production and marketing costs for oil in the regions discussed herein.
Marketing opportunities in nearby Sabah would be examined.
19
Reserves
A definitive statement on reserves will be provided upon completion of
the work program by Medco.
Production
The Company has no independent production.
Productive Wells and Acreage The Company has no productive wells.
Undeveloped Acreage
The Company holds exploration blocks which are referred to above.
Drilling Activity
The Company drilled no exploratory wells during 1999.
Present Activities
Present activities are set out in Review of Operations.
Delivery Commitments
The Company is not currently obligated to provide any fixed and
determinable quantity of oil or gas in the future under existing contracts or
agreements but may be so required in the future. See "Indonesian Government
Regulation" hereinafter and "Market for Oil and Gas Production", initial
paragraph as relates to Pertamina and PSC.
The methodology applied in predicting oil and gas rates for various
fields incorporates:
* Accessing and reviewing all geological and geophysical data relating
to the area.
* Analyzing petrophyscial records available for the area.
* Review of past production performance for the field and that of
similar fields in the region.
* Review of past history of existing wells to determine potential for
re-completion to exploit additional reserves and/or increase
production rates.
* Application of industry accepted engineering methods to forecast
reservoir performance.
* Commercial analysis of the field to determine optimum well spacing
verses rate of return, to establish the number of wells to be worked
over and/or drilled.
* Potential for secondary or tertiary recovery techniques to maximize
recover factors, within the economic framework.
The above are industry accepted methods for forecasting production rates for a
particular field.
Competition
The oil and gas industry is highly competitive. The Company's
competitors and potential competitors include major oil companies and
independent producers of varying sizes which are engaged in the acquisition of
producing properties and the exploration and development of prospects. Many of
20
the Company's competitors have greater financial, personnel and other resources
than does the Company and therefore have a greater leverage to use in acquiring
prospects, hiring personnel and marketing oil and gas. Accordingly, a high
degree of competition in these areas is expected to continue.
Indonesian Government Regulation
The Company may either sell its production on the international market
or opt to sell it domestically. There is a commitment to sell 25% of any oil
production domestically (called Domestic Market Obligation) at 15% of the crude
price. This commitment is imposed in the terms of all PSC's and does not vary
between PSCs. This commitment becomes effective after the first 60 months of
production. As the fields have not reached a level of commercial production, the
commitment does not currently apply. There are no constraints on production.
Indonesia has no exchange controls; therefore, foreigners are able to move funds
freely in and out of the country through accounts denominated in local foreign
currency.
On all projects in which CityView enters into a PSC with Pertamina, it
is obligated to:
* Conduct an environmental baseline assessment at the beginning of its
activities.
* Take the necessary precautions for protection of ecological systems,
navigation and fishing, and prevent extensive pollution of the area,
sea or rivers as the result of operations undertaken under the work
program.
* After the expiration or termination or relinquishment of any contract
area, or abandonment of any field, remove all equipment and
installations from the area in a manner acceptable to Pertamina, and
perform all necessary site restoration activities in accordance with
applicable government regulations, the costs of which are treated as
operating costs and are thus cost recoverable, through project
revenues.
The Company considers these environmental obligations to be a part of
its policy of good oil field practice and further acknowledges that the terms
are considered normal throughout the world. Further, the Company believes that
the foregoing obligations will not have a material impact on the Company's
operations.
GOLD
The Company's exploration operations for gold were conducted by two
wholly owned subsidiary corporations, Copperwell Pty Ltd ("Copperwell") and
Artane Minerals NL ("Artane"). The exploration operations were conducted in
joint venture with other affiliated and non-affiliated entities.
Raeside Joint Venture
Copperwell owns a 10% interest in the Raeside Joint Venture which owns
77 mining and exploration tenements (hereinafter referred to as "claims")
covering an area of approximately 168 square kilometres south east of Leonora in
Western Australia. The remaining 90% is held by Triton Resources Limited. The
main Raeside project area covers some 64 square miles of ground and includes the
Leonardo ore body.
In consideration of all outstanding liabilities for the Raeside project,
CityView sold its subsidiary to Triton Resources Limited on November 5, 1999 for
A$86,444 (US$54,459).
In consideration of all outstanding liabilities for the Raeside
project, CityView sold its subsidiary to Triton Resources Limited on November 5,
1999 for Aus$86,444 (US$54,459).
Duketon Prospect
Artane is the registered holder of 194/200ths of Exploration Licenses
E30/442 and E38/550, Application for Mining Lease 38/402 and Prospecting License
38/2455 in the Mt. Margaret Mineral Field Western Australia which have been
farmed-out to Johnson's Well Mining NL.
21
Cityview sold its subsidiary Artane to Yule River Mining Pty Ltd on
December 1, 1999 for a nominal consideration due to the fact that the Duketon
Prospect had not yielded any success whatsover and management did not fell that
there was any point in spending further monies with respect to this project.
Australian Government Regulation
The Australian Corporations and Securities Legislation ("ACSL") is the
main body of law governing companies in Australia, such as the Company. The
Australian Securities and Investment Commission is an Australian government
instrumentality that administratively enforces the ACSL. The ACSL covers matters
such as directors' duties and responsibilities, preparation of accounts, auditor
control, issue and transfer of shares, control of shareholder; meetings, rights
of minority interests, amendments to capital structure, preparation and filing
of public documents such as annual reports, changes in directors and changes in
capital.
The Australian Stock Exchange Limited imposes listing rules on all
listed companies, such as the Company. The rules cover such issues as immediate
notification to the market of relevant information, periodic financial reporting
and the prior approval of shareholder reports by the Australian Stock Exchange
Limited.
The Company believes that it is in compliance with the foregoing
Australian laws and regulations.
Management and Employees
At December 31, 1999 the Company had 28 full time employees, comprising
24 in Indonesia and 4 in Australia. Staffing has subsequently been reduced to 4
in Indonesia and 4 in Australia. Much of the Company's work is undertaken by
consultants on a per diem basis.
Company's Offices
The Company's principal office was located (until April 30, 2000) at 62
Glyde Street, Mosman Park, Western Australia. Commencing May 1, 2000 the
Company's offices relocated to 53 Burswood Road, Burswood, Western Australia
6100, telephone number is (61-8) 6250 9099. The Company leases this office space
from Sands & McDougall Office Products Pty Ltd.
ITEM 2. DESCRIPTION OF PROPERTY
Particulars of Oil Leases
Madura - Western Madura Pty Ltd
At December 31, 1999 Madura Pty Ltd was a 100% owned subsidiary of
CityView Corporation Limited's wholly owned subsidiary CityView Asia Pty Ltd. At
May 26, 2000 it is 25% owned.
Simenggaris - Western Simenggaris Petroleum Pty. Ltd.
At December 31, 1999 Western Simenggaris Petroleum Pty Ltd was an
85% owned subsidiary of CityView Corporation Limited's wholly owned subsidiary
CityView Asia Pty. Ltd. At May 26, 2000 Western Simenggaris Petroleum Pty. Ltd
is 25% owned.
22
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any litigation and to its knowledge, no
action,suit or proceedings against it has been threatened by any person or firm.
A claim asserted by Consolidated Securities S.A ("CSSA")for fees of (pound)
78,795.62p (Aus$196,841.42) was settled on September 21, 2000 and in accordance
therewith the Company was required to issue and did issue 104,000 of its
ordinary shares to CSSA and in additional was required to and has paid, on
September 21, 2000, CSSA the sum of US$65,630. As a result thereof a District
Court Order dismissing such action was filed on October 12, 2000.
ITEM 4. CONTROL OF REGISTRANT.
Principal Shareholders
The following table sets forth the Ordinary Shares ownership of each
person known by the Company to be the beneficial owner of ten percent or more of
the Company's Ordinary Shares, each director individually and all officers and
directors of the Company as a group. Each person has sole voting and investment
power with respect to the shares of Ordinary Shares shown, and all ownership is
of record and beneficial.
Name and address Number of Percent of
of owner Shares Position Class[1]
- --------------------------------------------------------------------------------
Peter Mark Smyth 238,084 Director and Chief Executive *
19 View Street Officer and Chairman of Western
Peppermint Grove 6011 Resources N.L.
Western Australia
Peter John Augustin Remta 50,202 Non executive Director *
34 Karoo Street
South Perth 6151
Western Australia
Leslie Robert Maurice Friday 68,740 Non executive Director *
23 Nisbet Road,
Applecross
Western Australia
Warren M Baillie -- Secretary/General Counsel/ *
3 Bennets Place Chief Financial Officer
Sorrento 6020
Western Australia
Lutfi Heyder -- Chief Executive of Western *
Selatan 1X/2 Resources N.L.
Kemang Jakarta
Indonesia
All officers and directors
as a group (4 persons) *
- ------------------------------
* Represents less than 1%
23
Malaysia Mining Corporation
Corporation Berhad.
32nd Floor, Menara PNB
201A Jalan Tung Razak
Kuala Lumpur 50400 Malaysia 8,616,188 19.11%(1)
24
Based on 45,082,016 shares outstanding as of October 30, 2000. (1)
(1) Inclusive of an additional 6,624,790 Ordinary Shares issued on July 11, 2000
subject to an irrevocable contractual arrangement made as of December 1999 to
Malaysia Mining Corporation for consideration received.
ITEM 5. NATURE OF TRADING MARKET
The Company's ordinary shares commenced trading on the Australian Stock
Exchange Limited on January 2, 1992 and commenced trading on the Electronic
Over-the-Counter Bulletin Board in the United States on April 11, 1997. The
Company subsequently gained clearance to trade on the NASDAQ Small Capital
Market on June 11, 1997 and continuously traded on such exchange until its
delisting effective May 8, 2000 subsequent to a February 11, 2000 oral hearing
before the NASDAQ Listing Qualifications Panel. The Company has timely indicated
in writing to NASDAQ that it intends to appeal such delisting to the NASDAQ
Listing and Hearing Review Council. As of the date hereof no determination has
been made as to when such appeal will be held. Pending such determination the
Company is cooperating with broker-dealer(s) in order to have its securities
cleared for trading on the Electronic Over-the-Counter Bulletin Board and a
broker-dealer has filed an application with the NASD in accordance with Exchange
Act Rule 15c2-11 for such purposes. The Company was listed for trading on the
main board of the Australian Stock Exchange Limited on January 2, 1992. As of
May 29, 2000 the Company had 783 holders of record of its Ordinary Shares.
The Company has not paid any dividends since it's inception and does
not anticipate paying any dividends on its Ordinary Shares in the foreseeable
future.
The following reflects the high and low bid price for the Company's
Ordinary Shares as reflected on the Australian Stock Exchange Limited for the
last three years.
Trading
Volume
Quarter Ending High - A$ High - US$ Low - A$ Low - US$ in 000's
- -------------- --------- ---------- -------- --------- --------
March 31, 1998 $2.35 $1.56 $2.32 $1.00 412
June 30, 1998 $2.00 $1.62 $1.93 $1.12 816
September 30, 1998 $1.30 $0.84 $1.20 $0.69 1,539
December 31, 1998 $0.90 $0.50 $0.90 $0.47 411
March 31, 1999 $1.02 $0.69 $0.63 $0.34 1,551
June 30, 1999 $0.80 $0.53 $0.55 $0.31 929
September 30, 1999 $1.00 $0.71 $0.47 $0.22 2,748
December 31, 1999 $0.95 $0.59 $0.65 $0.31 9,423
March 31, 2000 $3.91 $2.72 $0.56 $0.34 132,074
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Australia has largely abolished exchange controls on investment
transactions. The Australian dollar is freely convertible into US dollars. In
addition, there are currently no specific rules or limitations regarding the
export from Australia of profits, dividends, capital or similar funds belonging
to foreign investors, except that all payments to non-residents must be reported
to the Australian Cash Transaction Agency, which monitors such transactions,
whether they be in the form of cash, dividends, capital or profits.
25
The Foreign Acquisitions Acts sets forth limitations on the rights of
non-Australian residents to own or vote the ordinary shares of an Australian
company. The Foreign Acquisitions Acts permits the Commonwealth Treasurer to
examine acquisitions and arrangements that could result in foreign persons
controlling an Australian business. The Commonwealth Treasurer may prohibit a
proposed takeover if it would lead to a change of control of a business where
the resultant control would be foreign and therefore considered to be against
the national interest. The Foreign Acquisitions Acts contains divestiture
provisions to ensure it can be enforced, as well as, stringent monetary-penalty
provisions for breaches and the making of false or misleading statements.
The Foreign Acquisitions Acts requires the prior approval of the
Commonwealth Treasurer for certain classes of persons to enter into an agreement
to acquire shares of an Australian company, if, after the acquisition, such
person or corporation would hold a substantial interest in such corporation, as
explained below. The foregoing approval requirement applies to the following
classes of persons: (i) any natural person not ordinarily resident in Australia,
(ii) any corporation in which either a natural person not ordinarily resident in
Australia or a foreign corporation (as defined in the Foreign Acquisitions Acts)
holds a substantial interest, and (iii) two or more such persons or corporations
which hold an aggregate substantial interest.
The Foreign Acquisitions Acts requires foreign persons or
foreign-controlled entities to give forty (40) days notice to the Commonwealth
Treasurer of a proposal to acquire or increase (or offer to acquire or increase)
a single interest of 15% or more of the ownership or voting power of an
Australian company. If two or more foreign persons or foreign-controlled
entities are acting together, the threshold is 40% in the aggregate.
The Memorandum of Association and Articles of Association of the
Company do not contain any additional limitations on a non-resident's right to
hold or vote the Company's securities.
ITEM 7. TAXATION
The following discussion summarizes US federal and Australian tax
consequences of the ownership of Shares by a person ("US Portfolio Stockholder")
that: (i) is a citizen or resident of the US, a US corporation or that otherwise
will be subject to US federal income tax on a net income basis in respect of the
Shares; (ii) is not a resident of Australia for Australian tax purposes; (iii)
has not, within the preceding five years, beneficially owned 10% of the issued
capital or voting stock in the Company; and, (iv) has not used the Shares in
carrying on a trade or business, wholly or partly through a permanent
establishment in Australia.
The statements regarding US and Australian tax laws set forth herein
are based on those laws as in force on the date of this document that may affect
the tax consequence described herein (some of which may have retroactive
effect). This summary is not exhaustive of all possible tax consideration and
investors are advised to satisfy themselves as to the overall tax consequences,
including specifically the consequences under US, state, local and other laws,
of the acquisition, ownership and disposition of Shares by consulting their own
tax advisers.
Taxation of Gains on Sale
A US Portfolio Stockholder is not subject to Australian income tax on
the sale of its Shares in the Company.
Passive Foreign Investment Company Status
A foreign corporation is classified as a passive foreign investment
company (a "PFIC") in any taxable year in which, after taking into account the
26
income and assets of certain subsidiaries pursuant to the applicable US Internal
Revenue Code "look-through" rules, either (i) at least 75% of its gross income
is passive income, or (ii) at least 50% of the average value of its assets is
attributable to assets that produce passive income from cash holdings and
profits from the sale of marketable securities, even if derived from an active
business.
If the Company were a PFIC during any year in which a US Portfolio
Stockholder owned Shares, that US Portfolio Stockholder would be subject to
additional taxes on any gain realized from the sale or any other disposition of
the Shares, or any excess distribution received from the Company.
A US Portfolio Stockholder will have an excess distribution to the
extent that distributions on Shares during a taxable year exceeded 125% of the
average amount received during the three preceding taxable years (or, if
shorter, the US Portfolio Stockholders' holding period for the Shares). To
compute the tax on gain or on an excess distribution, (i) the excess
distribution or the gain is allocated ratably over the US Portfolio
Stockholder's holding period for the Shares, (ii) the amount allocated to the
current taxable year at the highest applicable marginal rate in effect for each
year and (iii) an interest charge is imposed to recover the deemed benefit from
the deferred payment of the tax attributable to each year.
If the Company is a PFIC, US persons that own an interest in another
entity that owns shares in the Company may be treated as indirect holders of
their proportionate share of that entity's Shares, and may be taxed on their
proportional share of any gain or excess distribution from that entity
attributable to the entity's in the Company. A US person that owns an interest
in the entity that is an actual holder of Shares will be treated as an indirect
holder if (i) the actual holder is itself a PFIC, (ii) the actual holder is a
foreign corporation other than a PFIC in which the US person who owns an
interest in the actual holder owns (directly or indirectly) at least 50% in
value of the actual holder's shares, or (iii) the actual holder is a
partnership, trust or estate in which the US Portfolio Stockholder is a partner
or beneficiary. An indirect holder must take into income its portion of any
excess distribution received by the actual holder or any gain recognized by the
actual holder on the Shares. An indirect holder also must treat an appropriate
portion of its gain on the sale or disproportion of its interest in the actual
holder as gain on the sale of the Shares. If the Company were a PFIC, a US
Portfolio Stockholder of Shares would generally be subject to similar rules with
respect to distribution by, and dispositions of the shares of, any direct or
indirect subsidiaries of the Company that were PFICs.
The Internal Revenue Code provides each US stockholder in an PFIC with
an election whereby the additional US tax burden imposed on gain on sale of PFIC
stock and receipt of excess distributions from a PFIC, as described above, can
be avoided. This election generally requires that the PFIC stockholder include
in its income, its pro-rata share of the PFIC's distributed and undistributed
income, as computed under US tax accounting principles, on an current basis. In
certain cases, a further election is available to an electing PFIC stockholder
to defer the tax payable with respect to the stockholder's pro-rata share of the
PFIC's undistributed income, although in this case interest applies on the
deferred tax. Thus, even if the first or both of these elections are made, a US
stockholder of a PFIC loses the tax benefit, which is available with respect to
investment in a non-PFIC corporation, of deferring and converting to capital
gain the investor's personal US tax liability with respect to the Company's
undistributed income. These elections also generally require that the PFIC
annually provide the electing PFIC shareholder, for inspection by the Internal
Revenue Service, an analysis of the PFIC's income computed under US tax
accounting principals.
The Company does not intend to furnish any US Portfolio Stockholder
with the information that it would need in order to avoid the PFIC tax treatment
described by electing to include its share of the Company's income on a current
basis. Therefore these elections may not be available to the Company's US
Portfolio Stockholders.
27
There are other adverse US tax rules associated with holding Shares in
a company that has been a PFIC during any part of a US Portfolio Stockholders
holding period. These include a denial of a step-up in a tax basis on the death
of a US individual stockholder, and burdensome reporting requirements.
If the Company ceases to be a PFIC, a US Portfolio Stockholder may
avoid the contained application of the tax treatment described above by electing
to be treated as if it sold its Shares on the last day of the last taxable year
in which the Company was a PFIC. Any gain is recognized and subjected to tax
under the rules described above. Loss is not recognized. The US Portfolio
Stockholder's basis in the Shares is increased by the amount of gain recognized
on the deemed sale. This election is not available to a US Portfolio Stockholder
that previously elected to include its share of the Company's income on a
current basis. The US Congress recently has considered legislation that would
alter the PFIC rules substantially. Prospective investors should consult their
own tax advisors as to the potential application of the PFIC rules, as well as,
the impact of any proposed legislation that could affect them.
Taxation of Dividends.
The Company does not expect to pay cash dividends for the foreseeable
future, but, rather, to retained earnings, if any, to finance expansion of its
business. Should the Company begin paying dividends, however, the Company's
dividends to its US Portfolio Stockholders would be exempt from Australian
dividend withholding tax to the extent such dividends are considered to be
"franked" for Australian tax purposes. A dividend is considered to be "franked"
to the extent that such dividend is paid out of the Company's income on which
Australian corporate tax has been levied. Even if not "franked," a dividend will
be exempt from Australian dividend withholding tax if it is paid out of the
Company's non-Australian source dividend income and the Company specifies a
"foreign dividend account declaration percentage" for such purpose. The Company
anticipates that if it pays dividends, such dividends would likely be either
"franked," or paid from the Company's non-Australian source dividend income as
specified in the foreign dividend account declaration percentage, and therefore
would be exempt from Australian dividend withholding tax.
If, however, dividends are paid by the Company that are not "franked,"
nor paid from the initial Company's non-Australian source dividend income as
specified in the foreign dividend account declaration percentage, such dividend
would then be subject to Australian dividend withholding tax. However, in
accordance with the provisions of the Australia/United States Income Tax Treaty,
Australian withholding tax on dividend income derived by a US stockholder would
be limited to 15% of the gross amount of the dividend. Subject to certain
limitations, any Australian dividend withholding tax may be claimed as a credit
against the federal income tax liability of the US stockholder. The overall
limitation on non-US taxes eligible for US credit is calculated separately with
respect to specific classes, or "baskets" of income. For this purpose, dividends
distributed by the Company will generally constitute "passive income" or, in the
case of certain US Portfolio Stockholder, "financial service income." The US tax
credits allowable with respect to each income basket cannot exceed the US
federal income tax payable with respect to such income. The consequences of the
separate limitation calculation will depend on the nature and sources of each US
Portfolio Stockholder's income and the deductions allocable thereto.
Distributions on the Shares will constitute dividends for US Federal
income tax purposes to the extent paid out of current or accumulated earnings
and profits, if any of the Company, as determined for US federal income tax
purposes. If the Company pays a dividend, such dividend would likely be paid in
Australian dollars. The amount of dividend income for a US Portfolio Stockholder
will be the US dollar value of the dividend payment on the date of receipt, even
if the dividend is not converted into US dollars. Gain or loss, if any,
realized on a sale or other disposition of Australian Dollars will be ordinary
income or loss to the US Portfolio Stockholder. Dividends paid by the Company
will not be eligible for the "inter-corporate dividends received" deduction
allowed to US corporations.
28
Estate and Gift Tax
Australia does not impose any estate, inheritance or gift taxes.
Therefore, no Australian estate tax, inheritance tax or gift tax will be imposed
on the death or upon a lifetime gift by, a US Portfolio Stockholder.
ITEM 8. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data
The selected historical data presented below has been derived from the
financial statements of the Company, which have been examined solely by Deloitte
Touche Tohmatsu, Chartered Accountants, in their report included elsewhere
herein for the years ended December 31, 1999, 1998, 1997 and 1996 and the six
months ended December 31, 1996 and by Grant Thornton, Chartered Accountants, and
Deloitte Touche Tohmatsu, Chartered Accountants, for the Company's subsidiary,
Western Resources NL, for the financial periods ended June 30, 1995 and 1996.
The consolidated financial statements are presented in Australian
dollars and have been prepared in accordance with Australian generally accepted
accounting principles ("Australian GAAP"), which may vary in certain respects
from generally accepted accounting principles in the United States ("US GAAP").
The following table summarizes certain financial information and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company has not declared a dividend
during each of the financial periods ended June 30, 1995, 1996, and
December 31, 1996,1997,1998 and 1999. There were significant fluctuations in
revenues and net income (loss) between the years stated in the table below.
Please refer to Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations. For the reasons set
forth herein the information shown below may not be indicative of the Company's
future results of operation.
Statement of Loss and Accumulate Deficit Data:
Year Ended Year Ended Six months Year Ended Year Ended Year Ended
June 30 June 30 December 31 December 31 December 31 December 31
1995 1996 1996 1997 1998 1999
------------ ------------ ---------------- --------------- ------------ -----------
Amounts in Accordance with Australian GAAP A$ A$ A$ A$ A$ A$
Income Statement Data:
Operating revenues 0 0 0 0 0 0
Loss from continuing
Operations [1] (269,792) (3,182,272) (2,065,874) (2,382,196) (20,362,087) (11,095,107)
Loss from continuing
Per Ordinary share (0.15) (1.40) (0.38) (0.21) (1.53) (0.70)
(dollars) [2]
Balance Sheet Data:
Total assets 3,012,624 4,468,564 15,635,535 24,688,249 13,247,886 7,579,445
Shareholders' equity 2,255,758 3,069,848 14,842,222 16,150,035 (2,803,225) 5,491,274
Amounts in Accordance with US GAAP
Income Statement Data:
Operating revenues 0 0 0 0 0 0
Loss from continuing
Operations [1] (269,792) (3,182,272) (2,065,874) (20,973,206) (12,188,902) (8,043,615)
Loss from continuing
Operations Per Ordinary (0.03) (0.28) (0.38) (1.84) (.92) (0.51)
share (dollars) [2]
Balance Sheet Data:
Total assets 2,686,840 2,891,352 13,986,629 5,052,513 737,413 136,645
Shareholders' equity 1,929,974 1,492,636 13,193,296 (3,485,701) (15,313,698) (1,951,526)
[1] Net income (loss) consists of operating profit (loss) after income tax
attributable to members of the chief entity.
[2] Per share data has been retroactively restated to reflect the effects
of a 1 for 5 reverse stock split effective April 14, 1997.
29
Exchange Rates
Solely for informational purposes, this Form 20-F contains translations
of certain Australian dollar amounts into or from US dollars at a specified
rate. These translations should not be construed as representation that the
Australian dollar amounts represented in the US dollar amounts indicated, or
could be converted into or from US dollars at the rate indicated. The following
table sets forth, for the financial periods indicated, certain information
concerning the Noon Buying Rate for Australian dollars expressed in US dollars
per A$1.00.
Period High Low Period-End Average[1]
12 months to June 30, 1995 0.7753 0.7108 0.7180 0.7404
12 months to June 30, 1996 0.7980 0.7108 0.7856 0.7587
6 months to December 31, 1996 0.8137 0.7735 0.7944 0.7918
12 months to December 31, 1997 0.7944 0.6515 0.6515 0.7428
12 months to December 31,1998 0.6806 0.5500 0.6139 0.6150
12 months to December 31,1999 0.6569 0.6240 0.6500 0.6429
At June 9, 2000 the Australian dollar expressed in US dollars per
A$1.00 is $0.583.
[1] Represents the average of the Noon Buying Rates on the last day of each
month during the period.
30
ITEM 8(a) CHANGE OF COMPANY AUDITORS
Deloitte Touche Tohmatsu ("D&T") (through its branch office in Perth,
Western Australia) had previously audited the Company's consolidated financial
statements for calendar years ended December 31, 1999, 1998 and 1997 but no
longer acts as the Company's independent auditors. All or certain specific
portions of such audit were subsequently reviewed by Nasdaq personnel during the
course of certain hearings which subsequently led to the Company's Nasdaq
delisting. During the course of such review questions were raised as to the
applicability of Australian Auditing Standards as opposed to US Generally
Accepting Accounting Principles ("US GAAP") and what reconciliation, if any, had
to be made between these two standards. Additionally, questions regarding
related issues were raised during the course of the Securities and Exchange
Commission ("SEC") review of this Form 20-F.
As a result of the above and notwithstanding the fact that D&T had
initially opined on the Company's financial statements included in its 1999 Form
20-F, D&T subsequently refused to opine on US GAAP matters (due to its
representation of lack of sufficient familiarity therewith) and, in effect,
withdrew its earlier opinion. In addition to the reason cited herein D&T
indicated that its refusal to opine was also based upon its opinion that it now
retroactively felt that it lacked the necessary independence to do so due to the
fact that it had prepared an "Independent Experts Report" on behalf of the
Company in October of 1996 and that, accordingly, D&T was of the opinion that it
should not have acted as CityView's auditors for subsequent years with respect
to U.S. matters (notwithstanding the fact that D&T felt that Australian
independence requirements did not preclude it from auditing the Company's
financial statements for Australian reporting purposes).
Management turned to Feldman Sherb & Co., P.C. ("FS"). FS, having
previously been introduced to the Company by its counsel, had initially rendered
certain consultatory services to the Company (regarding US GAAP disclosures in
the Company's Form 20-F and US GAAP treatment of certain completed transactions;
specifically relating to oil and gas acquisition and exploration costs. Such
consulting services did not relate to (a) the application of accounting
principles to proposed transactions or (b) the type of audit opinion that might
be rendered by FS on the Company's financial statements. FS did not consult with
D&T regarding the above mentioned issues. As a direct result of the consultatory
services rendered by FS to the Company, management decided to utilize such firms
services for auditing purposes and filings within the U.S. for purposes of
compliance with US GAAP and securities related matters. Accordingly, FS which
was already familiar with the Company's Form 20-F having acted as consultants
with respect to responses to SEC comment letters and Nasdaq inquiries (and
having assisted in compilation and preparation of various correspondence and
filing with the SEC in regards to the Company's Form 20-F) filings was engaged
(on October 16, 2000) to audit the Company's financial statements for years
ended December 31, 1997, 1998 and 1999. A field audit was subsequently conducted
commencing October 23, 2000. FS's audit report dated October 27, 2000 is part of
this Form 20-F.
At the Company's May 31, 2000 Annual Meeting of Stockholders D&T was
replaced as auditors (in Australia) by the firm of BDO Nelson Parkhill (BDO) of
Perth, Western Australia, which latter appointment was carried out with the
consent of Australian Securities and Investments Commission, the statutory body
in Australia empowered with the administration and regulation of corporations
and corporate law. The Company's Board of Directors participated in and approved
the decision to change independent accountants.
While D&T no longer acts as the Company's auditors it still acts, from
time to time, as a consultant to the Company and provided assistance and backup
documentation as was required by FS during the latter's audit included in this
Form 20-F.
As a result of all of the above and most specifically the initial and
ongoing consultatory services rendered by FS to the Company and (as aforesaid)
its active and ongoing participation in preparing necessary responses to
inquiries made of the Company by both Nasdaq and the SEC and its knowledge with
respect to US GAAP matters management decided to utilize the services of FS as
its auditors for all matters regarding or relating to US governmental and/or
administrative agencies and/or accounting matters.
To summarize the above, D&T had been engaged as Company independent
auditors in connection with Company reporting obligations in both Australia and
the U.S. On May 31, 2000 BDO Nelson Parkhill replaced D&T as Company independent
auditors in connection with its reporting obligations in Australia only while FS
replaced D&T as the Company's independent auditors in connection with U.S.
reporting obligations.
The report of D&T on the financial statements for the years indicated
above contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with D&T's audits for the years indicated above, there
were no disagreements with D&T on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of D&T would have caused D&T
to make reference to them in their report on the financial statements for such
years.
30A
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The current financial period is for the twelve months ended December
31, 1999. The Company's consolidated financial statements are prepared in
accordance with Australian Generally Accepted Accounting Principals (Australian
GAAP) which may vary in certain respects from Generally Accepted Accounting
Principals in the United States ("US GAAP"). A reconciliation between Australian
and US GAAP for the financial periods ended December 31, 1999, 1998 and 1997 are
disclosed in footnote 30 to the financial statements contained herein.
The following discussion references the amounts computed in accordance
with Australian GAAP for the results of operations of the Company for the three
financial periods ended December 31, 1999, December 31, 1998 and December 31,
1997.
Overview
Risks of Investing in Respect to the Company's Operations and Industry
The future profitability and viability of the Company's operations and
activities will depend on a number of risks, including but not limited to the
following:
1. Commodity prices and in particular the price of oil and gas
2. Currency exchange rate fluctuations;
3. The strength of the equity markets at the time of any capital raising
by the Company;
4. Judicial decisions and legislative amendments
5. Environmental management issues with which the Company may from time to
time have to comply;
6. General economic conditions in Australia and Indonesia and its major
trading partners and in particular inflation rates, commodity supply
and demand factors and industrial disruption;
7. Risks inherent in exploration including, amongst other things,
successful exploration, identification, development and exploitation of
use of resources and reserves, and competent management;
8. Political stability of Indonesia.
In January 2000 CityView had the opportunity to diversify its investment
portfolio from purely oil interests, which had not benefited the Company for
some time, and to acquire by subscription a 10% interest in Sands Solutions.
com Pty Ltd ("Sandssol") with pre-emptive rights to acquire further interests
in Sandssol.
Sandssol is the IT subsidiary of Sands & McDougall, and has been an Australian
office product supplier since 1853. Sands & McDougall has been involved in
electronic trading since 1985 and is engaged in B2B e-commerce in Australia. The
significance of Sandssol is that CityView believes that Sandssol has a well
established client base and proven products which are easy to use and capable of
being integrated into existing financial accounting systems.
CityView's role is as an investor and CityView will have representation on the
Sandssol Board in that CityView's CEO services on such Board. While CityView
currently does not have the right to appoint an additional director to
Sandssol's Board such right, to appoint a single additional director, will
commence if and when CityView acquires 10% interest in Sandssol.
CityView will not be responsible for the normal day to day running costs
associated with Sandssol. The only payment CityView will make in acquiring
Sandssol is the injection of funds relating to the acquisition.
Results of Operations
The discussion set forth below relates to the Company's results of
operations as prepared in accordance with Australian GAAP. A reconciliation
between Australian and US GAAP for the financial periods ended December 31, 1999
, 1998 and 1997 are disclosed in footnote 30 to the financial statements
contained herein.
31
Year Ended December 31, 1999 compared to Year Ended December 31, 1998.
The Company's gross revenues for the year ended December 31, 1999 were
A$208 as compared to A$335,980 for the year ended December 31, 1998.
There was no operating revenue from operations in Indonesia for both
the year ended December 31, 1999 and December 31, 1998.
The Company incurred an operating loss before tax of A$11,095,107 in
the year ended December 31, 1999 compared to a loss of A$20,362,087 in
the year ended December 31, 1998. The decrease in operating loss
resulted primarily from the loss on disposal of a subsidiary of A$12,673,100
in 1998 offset by an increase of write-off of exploration expenditures in
1999 of A$2,465,587.
The Company disposed of subsidiaries engaged in unprofitable
ventures, principally oil and gas exploration projects. All costs incurred by
the subsidiaries were written off as incurred.The impact on the Company's future
results of operations, financial position and liquidity resulting from the
disposal of these subsidiaries will be nil.
The Company wrote-off exploration costs of A$4,786,387 in 1999 and
A$2,320,000 in 1998. These costs related to properties in Indonesia. The
Company wrote off these costs because these areas were determined to be
non-economic because the production costs would exceed any expected revenues.
Year Ended December 31, 1998 compared to Year Ended December 31, 1997.
The Company's gross revenues for the year ended December 31, 1998 were
A$335,980 as compared to A$141,236 for the year ended December 31, 1997.
There was no operating revenue from operations in Indonesia for both
the year ended December 31, 1998 and the year ended December 31, 1997.
The Company incurred an operating loss before tax of A$20,362,087 in
the year ended December 31, 1998 compared to a loss of A$2,382,196 in the year
ended December 31, 1997. This increase in operating loss resulted primarily from
the loss on disposal of subsidiaries.
The Company disposed of subsidiaries engaged in unprofitable
ventures, principally oil and gas exploration projects. All costs incurred by
the subsidiaries were written off as incurred.The impact on the Company's future
results of operations, financial position and liquidity resulting from the
disposal of these subsidiaries will be nil.
In the year ended December 31, 1998 there was a nil operating profit/
(loss) after tax for Indonesian activities.
Inflationary and Other Economic Pressures
The Company is not currently generating revenues from its oil and gas
operations. Future revenues in this segment are governed primarily by worldwide
commodity pricing. No immediate effect in respect to inflation and changes on
prices is expected. However, inflationary pressures affect the Company's
exploration and development expenditure which is primarily incurred in U.S.
dollars. The directors estimation of inflation is considered in regards to the
general state of the world economy, and of the United States and Indonesia in
particular. This exposure to inflationary pressure is dependent on the mix of
goods and services provided to the Company by suppliers, sourced internally in
Indonesia and externally. At this stage the Company is unable to quantify the
mix of inflationary pressures from different sources that will affect the supply
of goods and services to the Company.
The average official government released Indonesian inflation rates for
the seven years beginning 1992 were as follows:
32
1992 1993 1994 1995 1996 1997 1998
Inflation Rates % 4.9 9.77 9.24 8.64 6.47 11.05 -20av.
It is the policy of the directors to regularly monitor the cost of
operations on a per barrel basis in respect to viability of individual projects
and they will take any necessary actions.
The Company's operations in these industries comprise exploration and
development expenditure and therefore are not affected by inflationary and price
pressures of oil and gas product pricing. However, this expenditure is effected
by normal inflationary pressures on the Company's general expenditure on goods
and services.
Government Policies
The Company has considered the issue of political risk in the Republic
of Indonesia in which the Company has acquired assets and will continue to do so
as a matter of normal business practice. The Company's expected initial
producing properties are located in Indonesia where there has been a long
established petroleum industry, with significant elements of foreign capital
investments and no history of expropriation.
The Republic of Indonesia is a separate national state and like many
other national states regulates, controls and taxes activities conducted by
residents and non-residents in the country and the flow of investment into the
country and the return of capital out of the country. All of these controls and
regulations are subject to change from time to time. Some of the interests of
the Company in Indonesia are by way of contract between a subsidiary of the
Company and bodies which are wholly owned arms of the Government of the Republic
of Indonesia. These contracts are subject to controls and regulations by the
contracting parties and by the government of the Republic of Indonesia. These
factors, in addition to the usual exploration and production risk and the
economic and political stability of the host country, Indonesia must all be
taken into account in relation to the Company's operations in Indonesia.
Other than the effect of the government's economic fiscal monetary or
political policies of the Republic of Indonesia, or factors upon the operations
of the Company, these policies or factors do not affect investments by United
States Nationals in Ordinary Shares of the Company.
33
Liquidity and Capital Resources
Year Ended December 31, 1999 compared to Year Ended December 31, 1998
For the year ended 1999 the Company agreed to allot 75% interest in its
Indonesia oil and gas properties to Medco,in consideration of Medco carrying out
and paying for the whole of the 2000 and 2001 work programs. Accordingly, the
Company has no planned expenditures for its Indonesian oil and gas properties
for fiscal 2000 and 2001.
At December 31, 1999, the Company had a working capital deficit of A$
1,951,526 compared to A$15,431,298 at December 31, 1998. This decrease in
working capital deficit resulted mainly from the settlement of debt to MMC.
Cash flow used in operating activities decreased from A$2,495,512 in
the year ended December 31,1998 to A$1,982,595 in the year ended December 31,
1999. The primary differences for decrease in funds used was due to the slow
down of activity, mainly in Jakarta.
Cash flow used for investing decreased from A$9,402,910 for the year
ended December 31, 1998 to A$ nil in the year ended December 31, 1999.
This decrease in funds used for investing activities was primarily due to
decreased payments for acquisition, exploration, evaluation and development of
oil fields. Due to oil prices during 1998/1999 exploration expenditure was cut
back and a greater emphasis placed on reducing debt and restructuring the
Company primarily through agreement with Medco.
The Company generated cash flows from financing activities of
A$1,992,771 in the year ended December 31, 1999 compared to
A$10,022,062 in the year ended December 31, 1998. Cash flows from financing
activities principally comprise the issue of ordinary shares in the Company
by private placements and the conversion of share options into ordinary share
capital of the Company and loans from related party of A$5,951,600 in 1998.
For the period from December 31, 1999 through June 2000, A$660,000
of debentures were converted into shares capital. The Company also raised
additional equity capital of A$9,808,000 and A$1,662,000 of proceeds were
received from the exercise of options. Accordingly working capital increased by
A$12,130,000 as a result of these transactions.
Year Ended December 31, 1998 compared to Year Ended December 31, 1997
At December 31, 1998, the Company had a working capital deficit of A$
15,431,298 compared to A$4,659,118 at December 31, 1997. This decrease in
working capital resulted mainly from the write off of prepayments and deposits
to Pertamina on the sale of Western Resources.
Cash flow used in operating activities increased from A$1,788,810 in
the year ended December 31, 1997 to A$2,495,512 in the year ended December 31,
1998. The primary differences for increase in funds used was due to the
payment of outstanding accounts payable mainly in Jakarta.
Cash flow used for investing decreased from A$15,521,661 for the year
ended December 31, 1997 to A$9,402,910 in the twelve months ended December 31,
1998. This decrease in funds used for investing activities was primarily
due to decreased payments for acquisition, exploration, evaluation and
development of oil fields due to the increased instability in Indonesia in this
period.
The Company generated cash flows from financing activities of
A$10,022,062 in the twelve months ended December 31, 1998 compared to
A$19,040,371 year ended December 31, 1997. Cash flows from financing activities
principally comprise the issue of ordinary shares in the Company by private
placement and the conversion of share options into ordinary share capital of the
Company.
For further details on the foregoing cash flow movements of the Company
refer to Item 17. Financial Statements - Cashflow Statement.
34
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
Officers and Directors
The Officers and Directors of the Company are as follows:
Name Age Position
Peter Mark Smyth 60 Chief Executive
Officer and Director
Peter John Augustin Remta 59 Director and member of Audit
Committee
Leslie Robert Friday 62 Director and member of Audit
Committee
Warren Baillie 28 Secretary / Chief Financial
Officer/General Counsel
All directors hold office until the next annual meeting of shareholders
and until their successors have been elected and qualified. The Company's
officers are elected by the Board of Directors at the annual meeting after each
annual meeting of the Company's shareholders and hold office until their death,
or until they resign or have been removed from office.
Peter Mark Smyth-Chief Executive Officer and a member of the Board of Directors
Mr. Smyth has been a member of the Board of Directors of the Company
since December 15, 1995 and was appointed Chief Executive on January 11, 1996.
Mr. Smyth has been in the resources industry since 1969 when he became Secretary
of the Australian branch of the Selection Trust Group (now BP Minerals). He has
been actively involved in the successful establishment and management of a
number of petroleum and mineral companies with global activities. He has also
formed a wide network of business relationships throughout Asia and has an
extensive knowledge of its history and diverse cultures. In 1991, Mr. Smyth was
co-founder of the Quest Petroleum Group which held a 50% interest in the Komi
Quest Limited Liability Society through Quest Petroleum Exploration g.m.b.H.L.
("Quest Group") and undertook a major oil production enhancement and well
modernization program in the Vozey oilfields of the Komi Republic in Russia.
Quest Group also held a 50% interest in the Zhetybay Quest Limited Liability
Society through Quest Petroleum Kazakhstan g.m.b.H. to establish a reservoir
management project in the Mangistau region of Kazakhstan. The Quest Group was
sold in April 1994 whereupon Mr. Smyth resigned as Director of the various
companies in the Group. In 1993, Mr. Smyth helped found Archangel Diamond
Corporation and formed a joint venture with Arkhangelskgeologiya resulting in a
discovery of the Grib diamond pipe. Mr. Smyth helped found Northern Petroleum
plc which was listed on the Alternative Investment Market of the London Stock
Exchange in December 1995 to invest in the Polar Bear joint venture focusing on
the Timan-Pechora Basin in the Arkhangelsk region of Russia.
Mr. Smyth received from the University of Oxford an Honours degree in
Jurisprudence in 1964 and a Masters degree in 1969. Mr. Smyth was admitted as an
attorney in England in 1966, New South Wales Australia in 1967, Western
Australia in 1974 and Hong Kong in 1976, but no longer holds practicing
certificates as Mr. Smyth voluntarily ceased to practice law in order to pursue
various business opportunities.
35
Peter John Augustin Remta - Member of the Board of Directors and Audit Committee
Mr. Remta is a founding director of the Company and was appointed
to the Board on May 6, 1987. From that date until December 19, 1989, he was
executive chairman of the Company and since the latter date until January 1996
was its executive director. He is still a director of the Company and undertakes
some executive duties as and when required. Mr. Remta is Chairman of the
Company's Audit Committee. Mr. Remta graduated with a bachelor of law degree
from the University of Western Australia in 1966 and was admitted as a barrister
and solicitor of the Supreme Court of Western Australia in 1968. Following his
admission to the Bar, Mr. Remta practiced as a lawyer specializing in corporate
and commercial, and mining law on a full time basis until February 1983, when he
became executive chairman of Kulim Limited which was a successful gold mining
company in Western Australia. Mr. Remta resigned from the executive chairmanship
of that company in May 1986, but remained a director until February 1987. In
August 1987, Mr. Remta became the chief executive director of Triton Resources
Limited but resigned in April 1999. Mr. Remta was the Honorary Consul General
for the Philippines in Western Australia for many years and is a Knight of St.
Lazarus.
Leslie Robert Maurice Friday - Member of the Board of Directors and Audit
Committee.
Mr. Friday has extensive business interests in Western Australia and
has a long record of successful investments. He was a director of CityView from
May 1987 to September 1996 and was reappointed a director on December 31, 1999.
Warren Baillie - Secretary, Chief Financial Officer and General Counsel
On May 22, 2000 Warren Baillie was appointed the Secretary, Chief
Financial Officer and General Counsel of the Company. Mr. Baillie's experience
has been in both financial and legal arenas. He recently practiced as an
attorney in the areas of commercial and corporate law with the law firm Jackson
McDonald. Jackson McDonald is the largest independent law firm in Western
Australia. He has also worked with the Perth office of Ernst & Young, Chartered
Accountants. Mr. Baillie's qualifications include a Bachelor of Commerce degree
from the University of Western Australia and a Bachelor of Laws degree from
Murdoch University of Western Australia.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
Total compensation for directors during the twelve months ending
December 31, 1999 was A$985,000 including fees paid to Peter Mark Smyth through
his consulting company, Romarcam Investments Pty Limited of A$10,000 per month.
Mr Smyth is the Chief Executive Officer of the Company. The consulting services
of Romarcam Investments Pty Limited is the provision of Mr. Smyth to act as
Chief Executive Officer and Director of CityView. No amount of money has been
set aside by the Company to provide pension or similar benefits for its officers
and directors.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
None at December 31, 1999
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
There are no additional interests of management in transactions
involving the Company except for those stated herein or in Item 17 - Notes to
the Financial Statements.
36
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
None at December 31, 1999.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
PART IV
ITEM 17. FINANCIAL STATEMENTS
See Item 19.
ITEM 18. FINANCIAL STATEMENTS
Not applicable. Consolidated financial statements are provided under
Item 17.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements of Registrant. (Annual Reports for, 1997 , 1998 &
1999)
37
STATEMENT OF THE DIRECTORS
The directors declare that:
a) The attached financial statements and notes thereto comply with accounting
standards;
b) The attached financial statements and notes thereto give a true and fair view
of the financial position and performance of the company and the consolidated
entity.
c) In the directors' opinion, the attached financial statements and notes
thereto are in accordance with the Corporations Law; and
d) In the directors' opinion, there are reasonable grounds to believe that the
company will be able to pay its debts as and when they become due and
payable.
Signed in accordance with a resolution of the directors made pursuant to s.295
(5) of the Australian Corporations Law.
On behalf of the Directors
/Mark Smyth/
Mr P M Smyth
Director
PERTH, WESTERN AUSTRALIA
December 18, 2000
38
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the Registrant certifies that it meets all the requirements
for filing on Form 20-F and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, there unto duly authorises.
Dated At Perth, Western Australia, December 18, 2000.
CITYVIEW CORPORATION LIMITED
/Mark Smyth/
- ------------------------------
BY: PETER MARK SMYTH
Chief Executive and Member of the Board of Directors
Perth,
Western Australia
December 18, 2000
39
CITYVIEW ENERGY CORPORATION LIMITED
ACN 009 235 634
Annual Report For The Financial Year Ended 31 December 1999
Page Number
Auditors' Report 8
Profit and Loss Statement 10
Balance Sheet 11
Statement of Cash Flows 12
Notes to and forming Part of the Financial Statements 13 - 36
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CityView Energy Corporation Limited
We have audited the accompanying consolidated balance sheets of CityView
Energy Corporation Limited as of December 31, 1999 and 1998 and the related
consolidated statements of profit and loss, and cash flows for the years ended
December 31, 1999, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, the consolidated financial position of CityView Energy Corporation
Limited as of December 31, 1999 and 1998 and the consolidated results of its
profit and loss and its cash flows for the years ended December 31, 1999, 1998
and 1997 in conformity with Australian generally accepted accounting principles.
The financial statements for the year ended December 31, 1999 have been restated
(See note 29).
/s/Feldman Sherb & Co, P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
October 27, 2000
8
The accompanying financial statements have been prepared in accordance with
Australian generally accepted accounting principles.
9
CITYVIEW ENERGY CORPORATION LIMITED
Profit and Loss Statement
For the Financial Year Ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
NOTE A$ A$ A$ A$ A$
(Restated)
Operating profit (loss) before income tax 2 (11,095,107) (20,362,087) (2,382,196) (10,505,250) (24,454,104)
Income tax attributable to operating
profit (loss) 3 - - - - -
---------------------------------------------- -----------------------------
Operating profit (loss) after income tax (11,095,107) (20,362,087) (2,382,196) (10,505,250) (24,454,104)
Outside equity interests in operating
profit (loss) - - - - -
---------------------------------------------- -----------------------------
Operating profit (loss) after income tax
attributable to members of the parent entity (11,095,107) (20,362,087) (2,382,196) (10,505,250) (24,454,104)
Accumulated losses at the beginning of the
financial year (28,304,095) (7,942,008) (5,559,812) (28,924,566) (4,470,462)
---------------------------------------------- -----------------------------
Accumulated losses at the end of the
financial year (39,399,202) (28,304,095) (7,942,008) (39,429,816) (28,924,566)
============================================== =============================
Notes to and forming part of the financial
statements are included on pages 13 to 30.
10
CITYVIEW ENERGY CORPORATION LIMITED
Balance Sheet as at 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
NOTE A$ A$ A$ A$
(Restated)
CURRENT ASSETS
Cash 11,679 1,503 - 1,138
Receivables 7 4,115 487,446 - 330,113
Investments 8 - 9,998 - 9,998
--------------------------------- --------------------------------
TOTAL CURRENT ASSETS 15,794 498,947 - 341,249
--------------------------------- --------------------------------
NON CURRENT ASSETS
Receivables 9 - - 7,563,651 11,219,189
Investments 10 - 382,804 10 339,418
Property, plant and equipment 11 - 16,097 - 8,252
Acquisition, exploration and development 12 7,563,651 12,350,038 - -
--------------------------------- --------------------------------
TOTAL NON CURRENT ASSETS 7,563,651 12,748,939 7,563,661 11,566,859
--------------------------------- --------------------------------
TOTAL ASSETS 7,579,445 13,247,886 7,563,661 11,908,108
--------------------------------- --------------------------------
CURRENT LIABILITIES
Accounts payable 13 1,419,561 804,658 1,310,169 403,221
Borrowings 14 668,610 15,246,438 671,981 15,209,869
--------------------------------- --------------------------------
TOTAL CURRENT LIABILITIES 2,088,171 16,051,096 1,982,150 15,613,090
--------------------------------- --------------------------------
TOTAL LIABILITIES 2,088,171 16,051,096 1,982,150 15,613,090
--------------------------------- --------------------------------
NET ASSETS/(LIABILITIES) 5,491,274 (2,803,210) 5,460,660 (3,704,982)
================================= ================================
SHAREHOLDERS' EQUITY
Share capital 15 44,890,476 25,219,584 44,890,476 25,219,584
Reserves 16 - 281,286 - -
Accumulated losses (39,399,202) (28,304,095) (39,429,816) (28,924,566)
--------------------------------- --------------------------------
Shareholders' equity attributable to the
members of the parent entity 5,491,274 (2,803,225) 5,460,660 (3,704,982)
Outside equity interest in a controlled entity 17 - 15 - -
--------------------------------- --------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 5,491,274 (2,803,210) 5,460,660 (3,704,982)
================================= ================================
Notes to and forming part of the financial
statements are included on pages 13 to 30.
11
CITYVIEW ENERGY CORPORATION LIMITED
Statement of Cash Flows
For the Financial Year Ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
NOTE A$ A$ A$ A$ A$
Cash Flows From Operating Activities
Interest received 205 10,187 122,642 205 10,034
Interest and other costs of finance paid (11,040) (4,667) - (3,635) (4,667)
Payments of deposits / rent prepayments - - (259,789) - -
Payments to suppliers and employees (1,971,700) (2,501,032) (1,651,663) (1,993,850) (1,317,125)
------------------------------------------ ---------------------------
Net cash provided (used) by operating activities 24(d) (1,982,595) (2,495,512) (1,788,810) (1,997,280) (1,311,758)
------------------------------------------ ---------------------------
Cash flows from investing activities
Proceeds from the sale of plant and equipment - - 52,314 - -
Purchase of property, plant and equipment (1,362,380) - -
Payment for the acquisition, exploration,
evaluation and development of oil fields - (9,402,910) (14,211,197) - -
Advances to controlled entities - - - (9,400,413)
Payment of Department of Minerals and
Energy deposit (398) - -
------------------------------------------ ---------------------------
Net cash provided (used) by investing activities - (9,402,910) (15,521,661) - (9,400,413)
------------------------------------------ ---------------------------
Cash from financing activities
Proceeds from the issue of shares 1,992,771 2,431,118 13,190,024 1,992,771 2,431,118
Proceeds from issue of debentures - 1,639,344 - - 1,639,344
Loan from related party - 5,951,600 6,309,092 - 5,925,613
Repayment of loan from related party - - (458,745) - -
------------------------------------------ ---------------------------
Net cash provided (used) by financing activities 1,992,771 10,022,062 19,040,371 1,992,771 9,996,075
------------------------------------------ ---------------------------
Net increase/ (decrease) in cash 10,176 (1,876,360) 1,729,900 (4,509) (716,096)
Cash at the Beginning of The Financial Year 1,503 1,882,576 152,676 1,138 717,234
Adjustment re cash held in entities disposed - (4,713) - - -
------------------------------------------ ---------------------------
Cash at the End of The Financial Year 24(a) 11,679 1,503 1,882,576 (3,371) 1,138
------------------------------------------ ---------------------------
Notes to and forming part of the financial
statements are included on pages 13 to 30.
12
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
1. Summary of Accounting Policies
Financial Reporting Framework
The financial report is a general purpose financial report which has been
prepared in accordance with the Corporations Law, applicable Accounting
Standards and Urgent Issues Group Consensus Views, and complies with other
requirements of the law.
The financial report has been prepared on the basis of historical cost and
except where stated, do not take into account changing money values or
current valuations of non current assets. Cost is based on the
consideration given in exchange for assets.
Significant Accounting Policies
Accounting policies are selected and applied in a manner, which ensures
that the resultant financial information satisfies the concepts of
relevance and reliability, thereby, ensuring that the substance of the
underlying transactions and other events is reported.
The following significant accounting policies have been adopted in the
preparation and presentation of the financial report:
(a) Foreign Currency
All foreign currency transactions during the financial year have been
brought to account using the exchange rate in effect at the date of the
transaction. Foreign currency monetary items at reporting date are
translated at the exchange rate existing at that date.
Exchange differences are brought to account in the profit and loss account
in the period in which they arise.
(b) Taxation
The company adopts the liability method of tax effect accounting whereby
the income tax expense shown in the profit and loss statement is calculated
on operating profit adjusted for permanent differences. The tax effect of
timing differences which arise from items being brought to account in
different periods for income and accounting purposes, is carried forward in
the balance sheet as a future tax benefit or a deferred tax liability.
Future income tax benefits are not brought to account unless realisation of
the asset is assured beyond reasonable doubt. Future income tax benefits
relating to tax losses are only brought to account when their realisation
is virtually certain.
13
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
(c) Acquisition, Exploration and Development Expenditure
The consolidated entity has entered into contracts to develop and operate
oil fields in Indonesia. These contracts are under standard terms for
foreign companies operating in Indonesia. These amounts are recorded at
directors valuation. The contracts are subject to controls and regulations
by the controlling parties and by the Republic of Indonesia and as such are
impacted by the political stability of the host country. Whilst the
consolidated entity's share of revenue from shareable oil from its
operations in Indonesia will be receivable in US dollars, the ultimate
recoverability of the acquisition, exploration and development expenditure
is dependent upon the future development, exploitation and/or sale of the
respective areas of interest. The directors are not able to determine the
impact (if any) that the above factors, together with any fall in world oil
prices, may have on the future carrying values of the above carried forward
expenditure.
(d) Depreciation
Depreciation is provided on property, plant and equipment, excluding land
and buildings. Depreciation is calculated on a straight-line basis so as to
write off the net cost of each asset over its expected useful life. The
following estimated useful lives are used:
Plant and equipment 3 years
Leasehold improvements 5 years
(e) Investments
Investments in controlled entities are recorded at cost, less any provision
for diminution. Other investments are recorded at cost.
(f) Accounts Payable
Trade payables and other accounts payable are recognised when the
consolidated entity becomes obliged to make future payments resulting from
the purchase of goods and services.
14
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
(g) Borrowings
Debentures, bank loans and other loans are recorded at an amount equal to
the net proceeds received. Interest expense is recognised on an accrual
basis.
(h) Financial instruments issued by the company
Debt and equity instruments are classified as either liabilities or as
equity in accordance with the substance of the contractual agreements
(i) Receivables
Trade receivables and other receivables are recorded at amounts due less
any provision for doubtful debts.
(j) Recoverable Amount of Non-current Assets
Non-current assets are written down to recoverable amount where the
carrying value of any non-current asset exceeds recoverable amount. In
determining recoverable amount expected net cash flows have not been
discounted.
(k) Sale of Western Resources NL
The financial statements for the year ended 31 December 1998 included the
effects of the sale for a note of A$325,786 made as of 18 December 1998 of
the Company's 100% interest in Western Resources NL and its subsidiaries.
The aggregate loss recorded as at 31 December 1998 of this transaction to
the consolidated entity was A$12,673,100. During the year ended December 31
1999 the Company wrote off the note of A$325,786 due to uncollectibility.
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
A$ A$ A$ A$ A$
(Restated)
2.Operating Profit (Loss)
The operating profit/loss before income tax
includes the following items of revenue
and expense:
Proceeds from the sale of non current investment 3 325,786 - 3 325,786
Revenue - Operating
Sales - - - - -
Interest - other entities 205 10,194 122,650 205 10,041
Sale of shares - - 14,586 - -
Proceeds on Sale of Investments - - - 179,889 -
Other income - - 4,000 - -
------------------------------------------------------------------------
Total Revenue 208 335,980 141,236 180,097 335,827
15
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Expenses
Selling, General and Administrative 4,090,798 3,727,582 1,562,459 4,413,816 2,543,225
Depreciation 9,097 8,446 290,368 8,252 8,252
Provision for doubtful debts in respect of amounts
receivable from controlled entities - - - 4,088,760 4,770,017
Interest expense 973,121 963,553 86,057 973,121 963,553
Loss on disposal of property, plant and equipment - 12,002 12,002 - -
Write off unidentified assets - 74,981 - - 74,981
Loss on disposal of subsidiary 1,201,388 12,673,100 - 1,201,388 15,740,808
Provision for diminution of investment 214,413 689,095 - 10 689,095
Foreign currency translation losses - 228,508 310,046 - -
Write off exploration expenditure 4,786,387 2,320,800 - - -
Amortization of contract rights - - 262,500 - -
---------------------------------------------------------------------
Total expenses 11,275,204 20,698,067 960,973 10,685,347 24,789,931
---------------------------------------------------------------------
Net Income (Loss) (11,095,107) (20,362,087) (2,382,196) (10,505,250) 24,454,104
====================================================================
3.Income Tax
(a)The prima facie income tax benefit on pre-tax accounting profit reconciles
to the income tax benefit in the financial statements as follows:
Operating Profit / (loss) (11,095,107) (20,362,087) (2,382,196)(10,505,250) (24,454,104)
Income tax expense/(benefit) calculated at 36% of
operating profit (3,994,239) (7,330,351) (857,591) 3,781,890 (8,803,477)
Permanent differences - - - - -
Tax loss now brought to account - - - (3,781,890) -
Timing differences and tax losses not brought to
account as future income tax benefits 3,994,239 7,330,351 857,591 - 8,803,477
---------------------------------------------------------------------
Income tax expense - - - - -
---------------------------------------------------------------------
(b) Future income tax benefits not brought to
account as assets : 30% (1998: 36%) 8,728,305 10,279,690 2,949,339 8,020,296 9,887,227
---------------------------------------------------------------------
8,728,305 10,279,690 2,949,339 8,020,296 9,887,227
---------------------------------------------------------------------
16
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
3. Income Tax (cont.)
The taxation benefits of tax losses and timing differences not brought to
account will only be obtained if:
a) assessable income is derived of a nature and of an amount sufficient to
enable the benefit from the deductions to be realized;
b) conditions for deductibility imposed by the law are complied with; and
c) no changes in tax legislation adversely affect the realization of the
benefit from the deductions.
4. Directors Remuneration
The directors of CityView for the year ended 31 December 1999 were :
P M Smyth
P J A Remta
L Heyder (retired 30 December 1999)
LRM Friday (appointed 30 December 1999) Parent Entity
The aggregate of income paid or payable, 31-Dec-99 31-Dec-98 31-Dec-97
or otherwise made available, in respect A$ A$ A$
of the financial year, to all directors
of the company, directly or indirectly, 985,000 413,207 120,000
by the company or by any related party. -----------------------------------
The aggregate of income paid or payable,
or otherwise made available, in respect Consolidated Entity
of the financial year, to all directors 31-Dec-99 31-Dec-98 31-Dec-97
of each entity in the consolidated A$ A$ A$
entity, directly or indirectly, by the
entities in which they are directors or 985,000 413,207 734,916
by any related party. -----------------------------------
The number of directors of the company
whose total income falls within each
successive A$10,000 band of income;
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
0 - $9,999 1 - 1 -
$10,000 - $19,999 - 4 - 4
$60,000 - $69,999 1 - 1 -
$180,000 - $199,999 - 1 - 1
$280,000 - $289,999 1 - 1 -
$290,000 - $299,999 - 1 - 1
$630,000 - $639,999 1 - 1 -
There were no executives of the company that were not also directors of the
company, and therefore disclosed above.
17
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
5. Executive and Employee Share Option Plan
The company has an ownership based remuneration scheme for executives. In
accordance with the provisions of the scheme, as approved by shareholders at the
annual general meeting certain directors are entitled to purchase shares. As at
31 December 1999 there were :
(i) 250,000 unlisted employee options on issue convertible into fully paid
ordinary shares at an exercise price of A$0.70 per option,on or before 30
June 2000.
(ii) 500,000 unlisted Directors options on issue convertible into fully paid
ordinary shares at an exercise price of A$0.76 per option, on or before
30 June 2001.
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
A$ A$ A$ A$ A$
6.Remuneration of Auditors
Amounts received, or due and receivable from the
company and any related organisation for:
Auditing the financial statements 25,000 20,000 22,303 25,000 20,000
Other Services 20,000 - - 20,000 -
--------------------------------------- --------------------------
45,000 20,000 22,303 45,000 20,000
--------------------------------------- --------------------------
7.Current Receivables
Prepayments and deposits - 132,845 - - -
Deposits with the Department of Minerals
and Energy - 7,833 - - -
Other debtors 4,115 346,768 - - 330,113
------------------------------------- --------------------------
4,115 487,446 - 330,113
------------------------------------- --------------------------
Prepayments and deposits comprise deposits to vendors for oil field evaluation
and development and payments to the Indonesian state owned oil and gas
organization Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina")
which cover expenditure on production facilities to be incurred by Pertamina at
the company's request.
8.Current Investments
At cost:
Shares and options - 10,498 - 10,498
Less provision for diminution - (500) - (500)
Associated corporations - 36,000 - 36,000
Less provision for loss - (36,000) - (36,000)
--------------------------------- --------------------------------
- 9,998 - 9,998
--------------------------------- --------------------------------
9.Non Current Receivables
Loans to controlled entities - - 7,563,651 15,989,206
Less provision for loss - - - (4,770,017)
--------------------------------- --------------------------------
- - 7,563,651 11,219,189
--------------------------------- --------------------------------
The ultimate recoverability of the loans to controlled entities is dependent
upon the future development, sale and or exploitation of the respective areas of
interest which each of these controlled entities controls.
18
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
10.Non-Current Investments
At cost:
Shares in controlled entities
Artane Minerals NL - - - 1
Western Resources NL - - - -
Copperwell Pty Ltd - - - 2
CityView Asia Pty Ltd - - 10 10
Shares in Unlisted Corporations
MMC Exploration & Production (Philippines) Pte Ltd - 49 - -
Shares in listed corporations - 2,117,650 - 2,074,300
Less provision for diminution - (1,734,895) - (1,734,895)
--------------------------------- --------------------------------
- 382,804 10 339,418
--------------------------------- --------------------------------
11.Property, Plant and Equipment
Land and buildings at cost - 7,000 - -
--------------------------------- --------------------------------
- 7,000 - -
--------------------------------- --------------------------------
Plant and equipment at cost 27,907 27,907 24,752 24,752
Less accumulated depreciation (27,907) (18,810) (24,752) (16,500)
--------------------------------- --------------------------------
- 9,097 - 8,252
--------------------------------- --------------------------------
--------------------------------- --------------------------------
- 16,097 - 8,252
--------------------------------- --------------------------------
19
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
12.Acquisition, Exploration and Development
Exploration and development expenditure
Costs carried forward in respect of areas of
interest in:
Gold and mineral exploration and development
- at Director's valuation 31 December 1998 - 1,000,000 - -
Oil field acquisition, exploration and development
- at cost - 11,350,038 - -
- at directors valuation at 31 December 1999 7,563,651 -
--------------------------------- --------------------------------
7,563,651 12,350,038 - -
--------------------------------- --------------------------------
The consolidated entity has entered into contracts to develop and operate oil
fields in Indonesia. These contracts are under standard terms for foreign
companies operating in Indonesia. The directors valuation reflects a write down
of the carried forward costs to the directors assessment of recoverable amount.
The directors valuation will be amortized over the life of the various projects
once production commences (refer Note 1 (c)). The ultimate recoverability of
these assets is dependent upon the future development, exploration and/or sale
of the respective areas of interest.
13.Current Accounts Payable
Unsecured:
Trade creditors 476,156 804,658 115,393 403,221
Accrued expenses 943,405 - 1,194,776 -
Directors fees accrued - - - -
--------------------------------- --------------------------------
1,419,561 804,658 1,310,169 403,221
--------------------------------- --------------------------------
Trade creditors principally comprise amounts owing on services in the
exploration and developments of oil fields in Indonesia.
14.Current Borrowings
Loan from controlling entity (i) - 13,522,737 13,522,737
Debentures (ii) 668,610 1,687,132 668,610 1,687,132
Other - 36,569 3,371 -
--------------------------------- --------------------------------
668,610 15,246,438 671,981 15,209,869
--------------------------------- --------------------------------
(i) The loan from MMC was extinguished at 30 December 1999.
(ii)The debentures were converted into fully paid ordinary
shares on 24 January 2000.
20
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
15.Share Capital
Issued and fully paid ordinary shares at 31 Dec 99:
29,025,216 ordinary shares (1998:13,657,068) 44,890,476 25,219,584 44,890,476 25,219,584
--------------------------------- --------------------------------
44,890,476 25,219,584 44,890,476 25,219,584
--------------------------------- --------------------------------
During the current year the company issued the following shares:
Date Issue of shares Issue price Number Share Capital
per share $
18/01/99 Shares issued for services 0.60 *25,000 15,000
02/02/99 Conversion debenture 0.55 149,678 81,724
17/02/99 Shares issued for services 0.68 *39,000 26,520
23/03/99 Conversion debenture 0.56 147,394 83,130
27/04/99 Conversion debenture 0.4935 167,385 82,604
12/07/99 Shares issued for services 0.50 *300,000 150,000
20/07/99 Shares issued for services 0.53 *17,580 9,317
12/08/99 Sale of shares 0.41 200,000 81,776
17/08/99 Sale of shares 0.41 4,200,000 1,758,995
31/08/99 Shares issued for services 0.94 *1,579,872 1,485,079
28/10/99 Conversion debenture 0.4695 177,450 83,312
30/12/99 Shares issued for services 0.65 *6,624,790 4,306,113
31/12/99 Shares issued for services 0.66 *183,174 120,000
31/12/99 Conversion Debenture 0.501 1,356,825 679,872
31/12/99 Options exercise 0.76 200,000 152,000
--------------------------------------------
15,368,148 9,115,442
--------------------------------------------
* Shares issued for services rendered or payment of debt.
Options:
As at 31 December 1999 there were
(i) 250,000 unlisted employee options on issue convertible into fully paid
ordinary shares at an exercise price of A$0.70 per option.
(ii) 2,000,000 unlisted consultant options on issue convertible into fully paid
ordinary shares at an exercise price of A$0.76 per option.
(iii)500,000 unlisted Directors options on issue convertible into fully paid
ordinary shares at an exercise price of A$0.76 per option.
21
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
16.Reserves
(a) Reserves comprise
Share premium reserve - - - -
Asset revaluation reserve - 281,286 - -
--------------------------------- -----------------------------
- 281,286 - -
--------------------------------- -----------------------------
(b) Movements in Reserves Share premium reserve
Balance at beginning of financial year - 10,053,890 - 10,053,890
Premium on shares issued during financial year - 1,508,641 - 1,508,641
Transferred to share capital - (11,562,531) - (11,562,531)
--------------------------------- -----------------------------
Balance at the end of the financial year - - - -
--------------------------------- -----------------------------
Asset revaluation reserve
Balance at beginning of financial year 281,286 1,431,100 - -
Devaluation of exploration and development (281,286) (1,149,814) - -
--------------------------------- ------------------------------
Balance at the end of the financial year - 281,286 - -
--------------------------------- ------------------------------
22
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
17.Outside Equity Interests
Ordinary share capital held by outside equity
interest - 15 - -
--------------------------------- --------------------------------
Total outside equity interests in controlled - 15 - -
entities
--------------------------------- --------------------------------
- 15 - -
--------------------------------- --------------------------------
1999 1998 1997
(Restated)
18.Earning per share Cents per Share Cents per Share Cents per Share
Basic earnings per share A$(.70) A$(1.53) A$(.21)
The weighted average number of ordinary shares
on issue used in the calculation of basic earnings
per share
-----------------------------------------------------------
15,899,719 13,299,260 11,407,010
Diluted earnings per share is not disclosed as it is not materially different to
basic earnings per share
19.Financial Reporting by Segments
(a)Industry Segments Investments Mining and Exploration
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
99 98 97 99 98 97
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity 208 10,194 141,506 208 325,786 -
-------------------------------------- -----------------------------------------
Segment operating
profit and (loss) - (715,074) (2,109,319) (11,095,107) (19,647,013) (272,877)
-------------------------------------- -----------------------------------------
Segment operating
profit and (loss)
after tax - (715,074) (2,109,319) (11,095,107) (19,647,013) (272,877)
-------------------------------------- -----------------------------------------
Segment Assets - 12,237,888 24,568,116 7,579,445 12,657,973 22,944,036
(a)Industry Segments Eliminations Consolidated
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
99 98 97 99 98 97
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity - - - 208 335,980 141,236
-------------------------------------- ------------------------------------------
Segment operating
profit and (loss) - - - (11,095,107) (20,362,087) (2,382,196)
--------------------------------------- ------------------------------------------
Segment operating
profit and (loss)
after tax - - - (11,095,107) (20,362,087) (2,382,196)
--------------------------------------- ----------------------------------------
Segment Assets - (11,647,975) (22,823,903) 7,579,445 13,247,886 24,688,249
The major products and services from which the above segments derive revenue
are: Investments from financing and corporate overhead activities, Mining and
Exploration from oil and gas.
23
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
19.Financial Reporting by Segments (cont.)
(b)Geographical Segments Indonesia Australia
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
99 98 97 99 98 97
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity - - - 208 335,980 141,236
---------------------------------------- ----------------------------------------
Segment operating
profit and (loss) (11,545,307) (3,715,637) (171,019) 450,200 (24,484,142) (2,211,177)
---------------------------------------- ----------------------------------------
Segment operating
profit and (loss)
after tax (11,545,307) (3,715,637) (171,019) 450,200 (24,484,142) (2,211,177)
---------------------------------------- ----------------------------------------
Segment Assets 7,579,445 11,485,351 20,166,637 7,442,800 12,981,824 5,577,919
(b)Geographical Segments Eliminations Consolidated
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
99 98 97 99 98 97
A$ A$ A$ A$ A$ A$
Revenue Outside the
consolidated entity - - - 208 335,980 141,236
---------------------------------------- ---------------------------------------------
Segment operating
profit and (loss) - (7,837,692) - (11,095,107) (20,362,087) (2,382,196)
---------------------------------------- ---------------------------------------------
Segment operating
profit and (loss)
after tax - (7,837,692) - (11,095,107) (20,362,087) (2,382,196)
---------------------------------------- ---------------------------------------------
Segment Assets (7,442,800) (11,219,289) (1,056,307) 7,579,445 13,247,886 24,688,249
20. Particulars Relating to Controlled Entities
Ownership interest
Parent Entity 1999 1998
CityView Energy Corporation Limited Australia Ordinary 100% 100%
Controlled
CityView Asia Pty Ltd Australia Ordinary 100% 100%
Western Resources NL (c) Australia Ordinary 100% 100%
Western Sangkimah NL (a) Australia Ordinary 100% 100%
Western Nusantara Energi Pty Ltd (a) Australia Ordinary 80% 80%
Western Akar Petroleum Pty Ltd (a) Australia Ordinary 90% 90%
Western Madura Pty Ltd (b) Australia Ordinary 100% 100%
Western Simenggaris Petroleum Pty Ltd (b) Australia Ordinary 100% 100%
Western Wisesa Petroleum Pty Ltd (b) Australia Ordinary 85% 85%
Copperwell Pty Ltd Australia Ordinary - 100%
Artane Minerals NL Australia Ordinary - 100%
(a) Held by Western Resources NL
(b) Held by CityView Asia Pty Ltd
(c) Western Resources NL and its controlled entities have ceased operations and
CityView intends to have them wound up as soon as practicable.
21.Disposal of Controlled Entities
During the financial year the consolidated entity disposed of its ownership
interest in
o Artane Minerals NL ("Artane")
o Copperwell Pty Ltd ("Copperwell")
The aggregate loss to the consolidated entity was A$1,201,388.
Artane was sold to an unrelated third party-Yule River Mining Pty Ltd,for A$1.
The carrying value of the Company's interest in Artane of A$275,111 was written
off.
Copperwell was sold to an unrelated third party-Triton Resources, for A$1. The
carrying value of the Company's interest in Copperwell of A$926,277 was written
off.
24
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
A$ A$ A$ A$
22.Interests in Joint Ventures
Raeside Gold Project
The Company disposed of its interest in the Raeside joint venture during the
financial year.
CURRENT ASSETS
Cash - (1,867) - -
Receivables - 7,832 - -
------------------------- --------------------
Total current assets - 5,965 - -
------------------------- --------------------
NON CURRENT ASSETS
Plant and equipment - at cost - 3,155 - -
Accumulated depreciation - (2,310) - -
------------------------- --------------------
- 845 - -
Land and buildings at cost - 7,000 - -
Costs carried forward in
respect of areas of interest
in the exploration and
evaluation phase of the
Raeside Gold Project areas
- Tenement at cost - 4,744 - -
- Exploration and development - 1,514,865 - -
------------------------- --------------------
- 1,519,609 - -
------------------------- --------------------
Total non current assets - 1,527,454 - -
------------------------- --------------------
TOTAL ASSETS - 1,533,419 - -
------------------------- --------------------
CURRENT LIABILITIES
Trade Creditors - 15,482 - -
Borrowings - 26,100 - -
------------------------- --------------------
Total current liabilities - 41,582 - -
------------------------- --------------------
NET ASSETS - 1,491,837 - -
------------------------- --------------------
25
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
A$ A$ A$ A$ A$
23.Notes to Statement of Cash Flow
(a) Reconciliation of cash
For the purpose of the statement
of cash flows, cash includes
cash on hand and in banks and
investments in money market
instruments, net of outstanding
bank overdrafts. Cash at the end
of the financial year as shown
in the statement of cash flows is
reconciled to the related items
in the balance sheet as follows:
Borrowings - - - (3,371) -
Cash 11,679 1,503 1,882,576 - 1,138
-------------------------------- --------------------
11,679 1,503 1,882,576 (3,371) 1,138
-------------------------------- --------------------
(b) Business acquired
During the financial year
there were no business'
acquired.
(c) Business disposed of
During the financial year,
the consolidated entity
disposed of its 100% interests
in Artane Minerals NL and
Copperwell Pty Ltd
Consideration
Cash 3 325,786 - 3 325,786
-------------------------------- --------------------
Book value of net assets sold
Cash - 4,713 - - -
Non current receivables (net
of foreign exchange gain) - 15,005,577 - - 15,010,290
Non current investments - 1,056,304 - - 1,056,304
-------------------------------- --------------------
Net assets disposed - 16,066,594 - - 16,066,594
Adjustment accumulated
losses already brought
to account (1,201,391)(3,067,708) - (1,201,391) -
Loss on disposal 1,201,388 12,673,100 - 1,201,388 15,740,808
-------------------------------- --------------------
3 325,786 - 3 325,786
-------------------------------- --------------------
26
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-97 31-Dec-99 31-Dec-98
A$ A$ A $ A$ A$
(Restated)
23.Note to Statement of Cash Flow (cont)
(d) Reconciliation of Operating Profit to Net Cash
Provided by Operating Activities
Operating profit (loss) after income tax (11,095,107) (20,362,087) (2,382,196)(10,505,250) (24,454,104)
Less non cash operating items:
Depreciation 9,097 (273,678) 290,368 8,252 (273,869)
Mineral exploration expenditure written off 4,786,387 2,320,800 - - -
Contract rights amortization - - 262,500 - -
Provision for loss on loan to associated entities - - - 4,088,760 4,770,017
Provision for exchange gain - - 310,046 - -
Interest expense 973,121 963,553 86,057 973,121 963,553
Loss on disposal of subsidiaries 1,201,388 12,673,100 - 1,201,388 15,740,808
Loss on disposal of plant and equipment - 12,002 - - -
Loss on sale of investments 214,413 689,095 - 169,516 689,095
Issue of shares in lieu of payment to suppliers &
employees 829,872 127,500 - 829,872 127,500
Write off of unidentified assets - 74,981 - - 74,981
Write back amortized rent - (335,937) - - (335,937)
Change in assets and liabilities
(Increase) decrease in:
Deposits/rent payments - - (258,187) - -
Receivables 483,331 149,460 - 330,113 256,150
(Decrease) increase in :
Trade creditors and accruals 614,903 1,465,699 (97,398) 906,948 1,130,048
---------------------------------------------------------------------
Net cash provided (used) by operating activities (1,982,595) (2,495,512) (1,788,810) (1,997,280) (1,311,758)
---------------------------------------------------------------------
(e)Non-cash financing and investing activities
The company settled a number of creditor and debentures through the issue of
shares as detailed in Note15.
27
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
24.Related Party Disclosures
(a)Directors
The following persons held the position of director of the company during the
financial period:
Mr Peter Mark Smyth (appointed 15 December 1995)
Mr Peter John Augustin Remta (appointed 6 May 1987)
Mr Lutfi Heyder (retired 30 December 1999)
Mr Leslie Robert Maurie Friday (appointed 30 December 1999)
Directors' remuneration is disclosed in note 4 of the financial statements.
(b)Directors and Directors' Interests
The directors and director related entities hold a relevant interest in the
following shares in the company.
31 Dec 99 31 Dec 98
Number Number
Ordinary shares 442,545 714,537
Options - unlisted 550,000 100,000
(c)Transactions with Directors and related entities
(i)Mr P M Smyth is a director and shareholder of Romarcam Investments Pty Ltd.
The company has entered into a contract with Romarcam Investments Pty Ltd for
the provision of management services. Fees paid during the period at normal
commercial rates were $180,000 (31 December 1998 $120,000). These transactions
have been reflected in the directors remuneration note.
(ii) Mr L Heyder had a management contract with the company. Fees paid during
the year were $180,000
(d)Interests in Director-related entities
CityView sold its shares in Triton Resources and Sabre Resources of which Mr P J
A Remta was a Director. Apart from the details disclosed in this note, no
director has entered into a material contract with the company since the end of
the financial period and there were no material contracts involving director's
interests or payment upon termination subsisting at period end.
(e)Equity Interests in controlled entities
Details of the percentage of ordinary shares held in controlled entities are
disclosed in note 20 to the financial statements.
28
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
25.Commitments for Expenditure
The consolidated entity's contractual exploration and development expenditure
commitments for Western Madura and Western Simenggaris have been taken over by
PT Medco for the years 2000 and 2001. As such CityView has no obligations in
regard to maintaining its interests.
Consolidated Entity Parent Entity
31-Dec-99 31-Dec-98 31-Dec-99 31-Dec-98
$ $ $ $
No later than 1 year - 10,963,406 - -
Later than 1 year and
not later than 2 years - 10,963,406 - -
Future commitments are
subject to annual review.
26. Subsequent Events
(a) 19 January 2000, Share Placement to London Partners Australia Pty Ltd to
subscribe $3,613,500 for 7,300,000 shares of CityView at a price of $0.495
per share. The funds were received on January 19, 2000.
(b) 20 January 2000, CityView agreed to acquire by subscription an interest of
10% in the e-commerce company Sands Solutions.com Pty Ltd, an Australian
leader in Business to Business (B2B) electronic commerce.
(c) 19 January 2000, Receipt of Notice of Conversion of US$100,000 Convertible
Debenture plus interest of US$9,780.82 into 312,735 ordinary fully paid
shares based on the conversion formula of the Australian dollar equivalent
of the average five day closing bid price on the NASDAQ Small Cap Market
($0.7060) issued at a discount of 25%, equating to $0.5295 per share.
(d) 24 January 2000, Receipt of Notice of Conversion of US$300,000 Convertible
Debenture plus interest of US$29,391 into 808,255 ordinary fully paid
shares based on the conversion formula of the Australian dollar equivalent
of the average five day closing bid price on the NASDAQ Small Cap Market
($0.8142) issued at a discount of 25%, equating to $0.6107 per share.
(e) 25 January 2000, agreements signed between CityView and PT. Medco Energi
Corporation Tbk (Medco) in respect of the Madura and Simenggaris Production
Sharing Contracts. Under these agreements Medco will supervise and pay for
the work programs throughout the years 2000 and 2001 for the development
and bringing into production of the oil and gas fields covered by these
contracts. From 2002 onwards each party will contribute on a pro-rata basis
in accordance with their interests - Medco 75% and CityView 25%.
29
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
27.Financial Instruments
(a) Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
revenues and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 1 to the
financial statements.
(b) Interest Rate Risk
FIXED INTEREST
Average Variable Less than 1 to 5 More than Non-Interest Total
Interest Interest 1 Year Years 5 years Bearing
1999 rate % rate $'000 $'000 $'000 $'000 $'000 $'000
Financial Assets
Cash 11,679 11,679
Trade receivables 4,115 4,115
Financial Liabilities
Trade payables 1,419,561 1,419,561
Shareholder loan
Debentures 6 % 668,610 668,610
Other Borrowings
FIXED INTEREST
Average Variable Less than 1 to 5 More than Non-Interest Total
Interest Interest 1 Year Years 5 years Bearing
1998 rate % rate $'000 $'000 $'000 $'000 $'000 $'000
Financial Assets
Cash 1,503 1,503
Trade receivables 487,446 487,446
Financial Liabilities
Trade payables 804,658 804,658
Shareholder loan
Debentures 6 % 1,687,132 1,687,132
Other Borrowings
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the consolidated entity.
The consolidated entity has adopted the policy of only dealing with credit
worthy counterparties and obtaining sufficient collateral or other security
where appropriate, as a means of mitigating the risk of financial loss for
defaults. The consolidated entity measures credit risk on fair value basis.
The consolidated entity does not have any significant credit risk exposure to
any single counterparty or any group of counterparties having similar
characteristics.
The carrying amount of financial assets recorded in the financial statements,
net of any provision for losses, represents the consolidated entity's maximum
exposure to credit risk without taking account of the value of any collateral or
other security obtained.
(d) Currencies hedges
The consolidated entity has not entered into forward foreign exchange contracts
to hedge the exchange rate risk arising from transactions in foreign currencies.
(e) Net Fair Value
The carrying amount of financial assets and financial liabilities recorded in
the financial statements represents their respective net fair values, determined
in accordance with the accounting policies disclosed in note 1 to the financial
statements.
30
CITYVIEW ENERGY CORPORATION LIMITED
Notes to and Forming Part of the Financial Statements
for the financial year ended 31 December 1999
28.Contingent Liabilities
(i)The parent entity, CityView has agreed to provide financial support to enable
its subsidiaries to meet their debts as and when they fall due over the next
twelve months.
(ii)The Company has assets in Indonesia. Some of the interests in Indonesia are
by way of contracts with the Government of the Republic of Indonesia, and other
Indonesian entities. These contracts are subject to controls and regulations by
contracting parties by the Government of Indonesia. These factors, in addition
to the usual exploration and production risk and the economic and political
stability of Indonesia must all be taken into account.
(iii)As the Company is in the process of winding down its interests in
Indonesia there is potential for contingent liabilities to arise principally
wages, taxes,severance payments and rents under non-cancellable lease agreement.
The directors have included in the financial statements all such liabilities,
however it is possible that additional liabilities may arise which have not been
accounted for.After considering the financial position of the subsidiaries, the
company has written down its assets as appropriate and raised an additional
provision for A$400,000.
(iv)In June 1998 CityView Energy Corporation Limited entered into an
agreement with Consolidated Securities SA (Consolidated) by which Consolidated
agreed to provide CityView with various consulting services, and CityView agreed
to pay fees, commissions and expenses to Consolidated. In June 1999 a writ was
issued by Consolidated against CityView claiming the Australian dollar
equivalent of UK 78,795.62 Pounds under the agreement. CityView is defending the
writ, but the outcome of the proceedings cannot be predicted at this stage.
29.Financial Statement Restatement
The accompanying financial statements for the year ended December 31, 1999 have
been restated to properly record the debt settlement with MMC as a capital
transaction.
The effect of such restatement on the Company's financial statements is as
follows:
As As
Reported Adjustment Restated
A$ A$ A$
----------- -------------- -------------
Profit & Loss Statment
Net Loss (539,657) (10,555,450) (11,095,107)
Net Loss per common share (.03) (.67) (.70)
31
30.UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES RECONCILIATION
("US GAAP")
The following is a summary of all material differences between Australian and
United States generally accepted accounting principles.
(a) Joint Venture Accounting
Australian GAAP requires joint venture interests to be included under the
proportionate method and details of the assets, liabilities, and contribution to
net profit/loss included are shown in Note 24 to the financial statements. These
joint ventures allow the company a share of the assets, liabilities, expenditure
and output of the joint ventures. It does not give participants a share of any
income of the joint venture, as each participant is given the output (for
example gold bullion in gold mining joint venture) and will realise this output
as part of their own operations. If the cost method as detailed in APB 18 is
adopted, income is only recognised to the extent of dividends received and
proportionate operating losses are not recognised. As the joint ventures do not
have any income, the application of the cost method will result in those assets
and liabilities being eliminated and replaced by a single line item called
Investment in Joint Venture $A-($US$-) at 31 December 1999 and $A1,491,837
(US$915,855) at 31 December 1998. The would not affect net profit or net equity
of the company as the value of the investment would be reduced to the value of
the net assets of the joint venture. Consequently no adjustment is required in
the reconciliation statements.
(b) Marketable Securities
As stated in Note 1, Investments (or Marketable Securities) are valued at the
lower of cost and recoverable amount (often equated to market value). Any such
write-down is adjusted through the profit and loss account. For US GAAP
purposes, securities are separated into portfolios of "Trading", "Available for
Sale" and "Held to Maturity". The amounts recorded as current investments
represent which would be classified as "Available for Sale" under US GAAP.
Available for Sale" under US GAAP. Available for Sale are accounted for at
market value, with movements adjusted through shareholders' equity. An "other
than temporary" decline in the market value of investments has been recognised
as impairments and recorded in the profit and loss account. Realised profits and
losses are reversed and adjusted to the profit and loss account.
32
(c) Investments in Associated Companies
As stated in Note 1, investments in associated companies are recorded at cost
with additional equity accounting information begin disclosed by way of note. US
GAAP requires investments in associated companies to be accounted for using the
equity method of accounting. Adjustment in the value of the investment are
recorded in the profit and loss account. In accordance with US GAAP, an
adjustment in the value of the investment and advances to the associated entity
has been made in accordance with the equity method of accounting. Medical
Development Finance Limited ("MDFL") has significant accumulated losses as at 31
December 1998, and the value of the investment and advances had been written
down in accordance with the equity method of accounting to reflect those losses.
(d) Capitalised Exploration Expenditure
As stated in Note 1 to the financial statements, exploration expenditure
incurred by CityView, directly or through it's joint venture interest, are
capitalised as incurred to the extent the expenditure is expected to be recouped
through the sale of successful development of the area, or where the activities
have not yet reached a stage that permits reasonable assessment of the existence
of economically recoverable reserves. US GAAP requirements indicate that these
costs are generally written-off as incurred, or until economically recoverable
reserves are identified.
(e) Income tax
There are no major differences between accounting for income tax under
Australian and US GAAP. However, where adjustments for other reconciling items
result in a permanent difference, appropriate adjustment has been made.
(f) SFAS 121: Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of
This pronouncement is similar to an Australian Corporations Law requirement that
requires directors to review the carrying value of all non-current assets
annually, determine if they are being recorded at greater than their recoverable
amount, and if so, write-down the value of the asset to its recoverable amount
of disclose information to prevent the accounts from being misleading.
33
(g) Principles of Consolidation
As indicated in Note 1(b) to the financial statements, Australian GAAP requires
consolidation of controlled entities. In accordance with Australian GAAP,
control exists where an entity has the "capacity to dominate the decision making
in relation to the financial and operating policies of another entity..." US
GAAP, however, requires than an entity must control another entity usually as
indicated by its ownership interests. This difference in accounting policies has
been recognised, however, no adjustment has been made based on the information
disclosed in Note 17 to the financial statements. This note discloses the
ownership interest of CityView in each of the entities its controls for
Australian GAAP purposes. As the ownership interest is greater then 50% in all
cases (representing ownership and actual control), no reconciling Australian/US
GAAP adjustments are required.
(h) As indicated in Note 1(c) to the financial statements, the company's
accounting policy in respect of amortisation of carried forward exploration
expenditure is calculated based on the economically recoverable proven reserves
of the company. US GAAP requires the amortisation to be based on the proven and
probable reserves of the company. As significant production has not commenced
CityView has not applied this accounting policy in the financial statements for
the financial periods ended 31 December 1998 and 31 December 1999 and therefore
no reconciliation adjustment is required.
(i) New Accounting Standards
The effect of the application of the following recent pronouncements is
considered below. Their application will not have a material effect on the
Australian/US GAAP reconciliations detailed in this note.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 -
"Accounting for Derivative Instruments and Hedging Activities" which is
effective for fiscal quarters beginning June 15, 1999. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts for hedging
activities. It requires that an entity recognise all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. This statement amends SFAS No. 52 - "Foreign Currency Translation", and
supersedes SFAS No. 80 - "Accounting for Future Contracts", No. 105 -
"Disclosure of Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentration of Credit Risk", No. 107 -
"Disclosure about Fair Value of Financial Instruments". The Company adopted SFAS
No. 133 in fiscal 2000. As the Company has no derivative instruments no
reconciliation adjustment is required.
34
(j) Employee Stock Purchase Plan
The Company has one stock-based compensation plan.The Company applies Australian
GAAP and related interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for its stock option plan.Under US GAAP
under FASB 123, Accounting for Stock Based Compensation, disclosure is required
of compensation expense that would have been recognized on FASB 123. Had
compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, the Company's net loss
and loss per share would have been increased to the pro forma amounts indicated
below:
31-Dec-99 31-Dec-99 31-Dec-98 31-Dec-97
US$ A$ A$ A$
Net Profit(Loss) after
Income Tax attributable
to members of the parent
company - As reported (7,133,044) (11,095,107) (20,362,087) (2,382,196)
- Pro forma (7,223,050) (11,235,107) (20,362,087) (2,382,196)
Basic earnings per share
- As reported (.45) (0.70) (1.53) 00.0
- Pro forma (.45) (0.71) (1.53) 00.0
The fair value of each option grant was estimated as of the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the period ended December 31, 1999: no dividends
will be paid, expected volatility of 50.0% risk-free interest rate of 5% and
expected lives of 1 year.
Reconciliation Adjustments
The following reconciliations show the effect on net profit/loss for the
financial periods ended December 31, 1999, 1998 and 1997 using the US GAAP basis
of accounting for the matters outlined in items (a) to (i) above.
Note 31-Dec-99 31-Dec-99 31-Dec-98 31-Dec-97
US$ A$ A$ A$
Reconciliation adjustments:
Net income after tax in accordance
with Australian GAAP (7,133,044) (11,095,107) (20,362,087) (2,382,196)
Reconciliation adjustments
Transfer realized temporary
share portfolio losses from
shareholder's equity (reserve) (d)(1) (1,116,145) (1,734,895) - 1,045,800
Exploration expenditure
written-off as incurred 3,078,062 4,786,387 8,173,185 (17,710,985)
Adjustment to amortize
goodwill on acquisition
(capitalized in accordance
with US GAAP) over a period
of four years from the date
of acquisition (f) - - - (275,825)
Stock based compensation cost (j) - - - (1,650,000)
------------------------------------------------------------------
Net income after tax in
accordance with US GAAP (5,171,127) (8,043,615) (12,188,902) (20,973,206)
==================================================================
Earnings (loss) per share
from Continuing Operations
in accordance with US GAAP (.30) (.51) (.92) (1.84)
(in cents)
(1) Represents the realized loss on the sale of Triton Investment.
35
The following reconciliations show the effect on shareholder's equity for the
financial periods ended December 31, 1999, 1998 and 1997 using the US GAAP
basis of accounting for the matters outlined in items (a) to (i) above.
Note 31-Dec-99 31-Dec-99 31-Dec-98 31-Dec-97
US$ A$ A$ A$
Reconciliation adjustments:
Shareholder's equity attributable
to member of the chief entity
in accordance with Australian GAAP 3,531,366 5,491,274 (2,803,225) 16,150,035
Reconciliation adjustments:
Exploration expenditure
written-off as incurred (d) (4,786,367) (7,442,800) (12,510,473) (19,635,736)
------------------------------------------------------------------
Total shareholder's equity
in accordance with US GAAP 1,255,001 (1,951,526) (15,313,698) (3,485,701)
==================================================================
36