However, the Corporation continues to manage debt levels prudently and expects net interest expense to be relatively low for the year.
STOCK-BASED COMPENSATION
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Total stock-based
compensation $ 355,195 $ 259,365 $ 639,654 $ 500,772
Capitalized
stock-based
compensation (170,419) (133,388) (306,033) (248,884)
----------------------------------------------------------------------------
Stock-based
compensation
expense $ 184,776 $ 125,977 $ 333,621 $ 251,888
----------------------------------------------------------------------------
----------------------------------------------------------------------------
During the second quarter of 2008, stock-based compensation of $184,776 was expensed and $170,419 was capitalized. This resulted in total stock-based compensation for the three months ended June 30, 2008 of $355,195, compared to $259,365 for the second quarter of 2007. For the first six months of 2008 stock-based compensation of $333,621 was expensed and $306,033 was capitalized, compared to $251,888 expensed and $248,884 capitalized for the comparative six-month period in 2007. The increases in stock-based compensation expense were due to the additional expense associated with the stock options granted in the first half of 2008. At June 30, 2008 there were 2,700,000 stock options outstanding compared to 1,922,500 outstanding at June 30, 2007.
DEPLETION, DEPRECIATION AND ACCRETION
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Depletion and
depreciation $ 4,855,942 $ 2,813,443 $ 9,103,319 $ 5,356,716
Accretion 39,911 44,636 81,334 87,059
----------------------------------------------------------------------------
Total $ 4,895,853 $ 2,858,079 $ 9,184,653 $ 5,443,775
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depletion and
depreciation
($/boe) 26.73 23.36 26.08 25.18
Accretion ($/boe) 0.22 0.37 0.23 0.41
----------------------------------------------------------------------------
Total ($/boe) 26.95 23.73 26.31 25.59
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depletion and depreciation are calculated based upon cumulative capital expenditures, production rates and reserves. Open Range recorded $4.9 million or $26.73 per boe in depletion and depreciation for the three months ended June 30, 2008 compared to $2.8 million or $23.36 per boe for the comparative period in 2007. Depletion and depreciation for the first half of 2008 increased to $9.1 million or $26.08 per boe from $5.4 million or $25.18 per boe in the first half of 2007. The per boe increase in depletion and depreciation for the second quarter of 2008 is primarily due to no new wells being drilled as access at Ansell/Sundance was limited for much of the quarter due to road bans relating to spring break-up, which in turn resulted in no new reserve additions being booked in the second quarter. The per boe increase in depletion and depreciation for the first half of 2008 is primarily due to higher average production and increased capital expenditures being partially offset by reserve additions in the first quarter.
Open Range estimates depletion on a quarterly basis throughout the year using independent inputs such as reserve and land reports when available. Undeveloped land and seismic and salvage values of $22.3 million have been excluded in the calculation and future development costs of $3.7 million have been included in the capital base used in the calculation.
INCOME TAXES
Open Range did not incur any cash tax expense in the first half of 2008. Open Range does not expect to pay any cash taxes in 2008 based on current oil and natural gas prices, existing tax pools, planned capital expenditures and forecast taxable income. For the quarter ended June 30, 2008 the Corporation recorded future income tax expense of $61,813. In the six-month period ended June 30, 2008, a future income tax reduction of $0.7 million was recorded. This reduction was primarily due to the recording of a significant future tax asset relating to the unrealized loss on commodity contracts during the second quarter and first half. The future income tax liability associated with the Corporation's $19 million in flow-through share issuances in 2007 was also recorded in the first quarter of 2008.
The Corporation estimates that at June 30, 2008 tax pools of $79.4 million are available for deduction against future taxable income.
EARNINGS (LOSS)
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Earnings (loss) $ (31,439) $ 1,277,452 $ (1,945,057) $ 256,488
Earnings (loss)
per basic and
diluted share $ - $ 0.06 $ (0.08) $ 0.01
----------------------------------------------------------------------------
The Corporation recorded a loss of $31,439 for the three months ended June 30, 2008, compared to income of $1.3 million or $0.06 per basic and diluted share for 2007. The loss of $1.9 million for the six months ended June 30, 2008 is attributable to the recording of a $1.1 million realized loss on commodity contracts and a $6.0 million unrealized loss on commodity contracts.
FUNDS FROM OPERATIONS AND CASH FLOW FROM OPERATING ACTIVITIES
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Funds from
operations $ 7,242,093 $ 3,708,699 $ 12,841,761 $ 6,163,167
Funds from
operations per
boe 39.87 30.79 36.79 28.98
Funds from
operations per
basic share 0.27 0.19 0.52 0.33
Funds from
operations per
diluted share 0.26 0.19 0.52 0.33
----------------------------------------------------------------------------
Cash flow from
operating
activities
(per GAAP) $ 8,310,361 $ 4,624,227 $ 13,466,332 $ 6,995,300
----------------------------------------------------------------------------
In the three months ended June 30, 2008 Open Range generated funds from operations of $7.2 million or $0.27 per basic share and $0.26 per diluted share. Second-quarter 2008 funds from operations increased by 95 percent, and funds from operations per basic share increased by 42 percent, from $3.7 million and $0.19, respectively, in the comparative period of 2007. In the second quarter of 2008 Open Range recorded cash flow from operating activities of $8.3 million, compared to $4.6 million for the comparative period in 2007. The significant increases in funds from operations and cash flow from operating activities were due to stronger operating results, primarily driven by higher average production, as well as stronger netbacks which in turn were caused mainly by higher average realized sales prices.
CAPITAL EXPENDITURES
Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Drilling and
completions $ 4,805,878 $ 6,168,197 $ 14,805,142 $ 14,488,197
Equipment and
facilities 398,523 752,800 2,378,715 4,267,799
Land 19,609 3,735,010 6,407,087 3,756,971
Capitalized G&A 650,277 587,867 1,226,131 1,121,660
Geological and
geophysical 10,666 40,650 692,515 235,170
----------------------------------------------------------------------------
Total capital
expenditures $ 5,884,953 $ 11,284,524 $ 25,509,590 $ 23,869,797
Capital items
not involving
cash:
Stock-based
compensation 230,296 176,232 413,558 341,103
Asset
retirement
obligations - 27,686 44,546 138,038
----------------------------------------------------------------------------
Total capital
expenditures
including
non-cash items $ 6,115,249 $ 11,488,442 $ 25,967,694 $ 24,348,938
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Open Range's capital budget during the second quarter of 2008 was focused almost entirely on completing wells drilled in the first quarter of 2008 and completing the farm-in well drilled at Rough, Alberta in the fourth quarter of 2007. Drilling and completions were the primary focus of capital expenditures during the first half of 2008 and during both comparative 2007 periods, along with significant investments in land acquisitions, facilities and infrastructure. During the first half of 2008, Open Range drilled five gross natural gas wells (2.6 net) at its core Ansell/Sundance property, all of which were successful. Facilities and equipment expenditures for the six months ended June 30, 2008 relate mainly to the costs associated with the construction of the new 20 mmcf per day gross operated gas plant at Ansell/Sundance and connecting successful wells to existing infrastructure. The Corporation's average working interest on new wells during the first half of 2008 was 52 percent. Expenditures on land increased significantly in the first six months of 2008 as the Corporation assembled land during the first quarter of 2008 surrounding the well drilled at Rough.
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Wells drilled Gross Net Gross Net Gross Net Gross Net
----------------------------------------------------------------------------
Exploration - - 3 2 5 2.6 7 3.80
Development - - - - - - 5 0.35
----------------------------------------------------------------------------
Total - - 3 2 5 2.6 12 4.15
----------------------------------------------------------------------------
Average working interest - 66.7% 52.0% 34.6%
Success rate - 100% 100% 100%
----------------------------------------------------------------------------
SHARE CAPITAL
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Weighted average basic
common shares
outstanding(1) 27,131,143 19,793,841 24,465,119 18,901,963
Stock option dilution 378,595 - 71,875 -
----------------------------------------------------------------------------
Weighted average diluted
common shares
outstanding(2) 27,509,738 19,793,841 24,536,994 18,901,963
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) For purposes of calculating earnings (loss) per basic and diluted share.
(2) For purposes of calculating funds from operations per diluted share
only.
Outstanding securities June 30, 2008 August 7, 2008
----------------------------------------------------------------------------
Common shares 27,334,241 27,334,241
Stock options 2,700,000 2,700,000
----------------------------------------------------------------------------
Total outstanding securities 30,034,241 30,034,241
----------------------------------------------------------------------------
Proportion of outstanding securities held by
officers and directors 15% 15%
----------------------------------------------------------------------------
On April 4, 2008 Open Range closed an equity financing for gross proceeds of $25 million. Pursuant to this financing, the Corporation issued 3,095,300 common shares at a price of $4.20 per share and 2,400,000 flow-through common shares at a price of $5.00 per share. This equity issuance, combined with cash flows from ongoing operations and the Corporation's credit facilities, will allow the Corporation to pursue its capital investment program for the year and have positioned it with financial flexibility for 2008.
During the first half of 2008 the Corporation issued 779,500 stock options to employees of the Corporation. The options vest over three years and are exercisable into common shares at an average price of $4.93. At June 30, 2008 the Corporation had 2,700,000 options outstanding with an average exercise price of $4.33.
RELATED-PARTY AND OFF-BALANCE-SHEET TRANSACTIONS
During the six months period ended June 30, 2008, the Corporation incurred $120,596 in legal costs to a law firm in which the Chairman of the Board of Directors and the Corporate Secretary of the Corporation are partners. Of the legal costs incurred in the quarter ended June 30, 2008, $10,534 was included in accounts payable at June 30, 2008.
Certain officers of Open Range purchased a total of 5,000 shares as part of the equity offering that closed on April 4, 2008, for total gross proceeds of $21,000.
Open Range was not involved in any off-balance-sheet transactions during the three and six months ended June 30, 2008.
LIQUIDITY AND CAPITAL RESOURCES
Open Range had a working capital deficiency of $5.8 million at June 30, 2008. As at June 30, 2008, Open Range had available a $36 million extendable revolving-credit facility and a $4 million acquisition and development facility with the National Bank of Canada. The interest rates on the facilities are calculated using the bank's prime rate plus an applicable facility margin based on the Corporation's net debt to cash flow ratio for the previous trailing calendar quarter. As at June 30, 2008, no amounts had been drawn on these facilities. The facilities are open for review semi-annually with the next review occurring in August 2008. The facility is a borrowing base facility that is determined based on, among other things, the Corporation's reserve report, production and operating results, and current and forecast commodity prices. Pursuant to the terms of the credit facilities, the Corporation has provided the covenant that at all times its working capital ratio shall be not less than 1 to 1. The working capital ratio is defined under the terms of the facilities as current assets, including the undrawn portion of the revolving credit facility, to current liabilities, excluding any current bank indebtedness. The Corporation is in compliance with this covenant as at June 30, 2008.
The Corporation has recently experienced a collection issue with one of its purchasers of natural gas, SemCanada Energy Company, and one of its purchasers of crude oil, SemCanada Crude Company. Both companies are Canadian subsidiaries of SemGoup, L.P. which recently filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States. As of August 7, 2008, the Corporation had receivables from SemCanada Energy Company and SemCanada Crude Company of $1.0 million and $0.1 million, respectively. It is not certain what portion, if any, of these receivables will be collectible.
As at June 30, 2008
----------------------------------------------------------------------------
Bank lines available $ 40,000,000
Working capital deficiency (5,808,924)
----------------------------------------------------------------------------
Capital resources available $ 34,191,076
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Corporation's capital expenditure budget for 2008 has been expanded to $70 million, an increase from the previously announced budget of $45 million. The capital program will be funded through a combination of funds from operations, the Corporation's credit facility and the $25 million equity financing agreement that closed on April 4, 2008. The Corporation will closely monitor the capital program in conjunction with the commodity price outlook and adjust it accordingly.
The details of the revised 2008 budget are provided in the following table:
2008
----------------------------------------------------------------------------
Drilling and completions $ 54,600,000
Equipment and facilities 3,200,000
Land and seismic 10,000,000
Capitalized G&A 2,200,000
----------------------------------------------------------------------------
Total $ 70,000,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SELECTED QUARTERLY INFORMATION
2008 2007 2006
----------------------------------------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
Production
Natural gas
(mcf/d) 10,630 9,746 8,862 9,545 7,009 5,460 5,111 3,951
Oil and NGL
(bbls/d) 225 216 171 225 156 115 81 74
Total (boe/d) 1,996 1,840 1,648 1,815 1,324 1,025 933 733
Total (boe) 181,652 167,448 151,660 167,009 120,451 92,251 85,795 67,420
% natural gas 89 88 90 88 88 89 91 90
----------------------------------------------------------------------------
Financial
($000s except
per share
amounts and
share numbers)
Revenue (1) 11,281 9,167 7,097 6,823 5,556 4,436 3,747 2,550
Net earnings
(loss) (31) (1,914) (345) 611 1,277 (1,020) (160) 361
Net earnings
(loss)
per basic and
diluted share
($) - (0.09) (0.02) 0.03 0.06 (0.06) (0.01) 0.03
Funds from
operations 7,242 5,600 4,583 4,413 3,709 2,454 1,931 1,615
Funds from
operations per
basic share
($) 0.27 0.26 0.23 0.22 0.19 0.14 0.12 0.11
Funds from
operations per
diluted share
($) 0.26 0.26 0.23 0.22 0.19 0.14 0.12 0.11
Cash flow from
operating
activities 8,310 5,156 2,867 3,728 4,624 2,371 758 1,507
Total assets
(end of
period) 117,265 114,415 97,517 93,289 86,746 85,984 78,656 64,303
Capital
expenditures 5,885 19,625 9,354 8,780 11,285 12,585 6,985 6,277
Weighted average
basic and
diluted
shares (000s) 27,131 21,799 20,029 19,764 19,764 18,031 15,779 14,410
----------------------------------------------------------------------------
Per Unit
Oil and NGL
($/bbl) 105.18 79.60 73.10 61.32 57.68 55.05 49.73 65.71
Natural gas
($/mcf)(1) 9.44 8.58 7.29 6.33 7.43 7.87 7.19 5.78
Revenue
($/boe)(1) 62.10 54.74 46.80 40.85 46.13 48.08 43.67 37.82
Operating
netback
($/boe) 42.64 38.58 35.75 30.43 35.58 33.36 30.16 28.18
----------------------------------------------------------------------------
(1) Includes realized gains (losses) on commodity contracts.
Open Range's quarterly growth in production, revenues, funds from operations, funds from operations per share and total assets is attributable to the active exploration and development drilling program at the Corporation's Deep Basin properties, particularly the Ansell/Sundance core area.
CONTRACTUAL OBLIGATIONS (1),(2)
Less than 1-3 4-5 After 5
As at June 30, 2008 Total 1 Year Years Years Years
----------------------------------------------------------------------------
Payments for office
lease $ 2,381,265 $ 985,351 $ 1,395,914 $ - $ -
Payments for office
equipment lease 39,223 14,263 24,960 - -
----------------------------------------------------------------------------
Total $ 2,420,488 $ 999,614 $ 1,420,874 $ - $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Corporation has entered into farm-in agreements in the normal course
of its business which are not included in this table.
(2) The Corporation has entered into commodity contracts which are not
included in this table. For a complete listing refer to note 8,
Financial Instruments, in the interim financial statements for the three
and six months ended June 30, 2008.
On December 20, 2007 the Corporation issued 2,029,100 flow-through common shares for gross proceeds of $7 million. Under the terms of the flow-through share agreements, the Corporation is required to renounce qualifying oil and natural gas expenditures in 2008 and has until December 31, 2008 to incur the expenditures. As at June 30, 2008 the Corporation had incurred $7 million of qualifying expenditures and is not required to incur any additional expenditures.
On April 4, 2008 the Corporation issued 2,400,000 flow-through common shares for gross proceeds of $12 million. Under the terms of the flow-through share agreements, the Corporation is required to renounce the $12 million of qualifying oil and natural gas expenditures effective December 31, 2008 and has until December 31, 2009 to incur the expenditures. As at June 30, 2008 the Corporation had incurred $4.8 million of qualifying expenditures and is required to incur an additional $7.2 million of expenditures.
ACCOUNTING POLICY UPDATES
On January 1, 2008, the Corporation adopted the following standards contained in the Handbook of the Canadian Institute of Chartered Accountants: Section 1535 - Capital Disclosures, Section 3862 - Financial Instruments Disclosures and Section 3863 - Financial Instruments Presentation. Section 1535 establishes standards for disclosing information about an entity's capital and how it is managed. This section specifies disclosure about objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital, whether the entity has complied with all capital requirements, and if it has not complied, the consequences of such non-compliance. Sections 3862 and 3863 establish standards for the presentation and disclosure of information that enable users to evaluate the significance of financial instruments to the entity's financial position, and the nature and extent of risks arising from financial instruments and how the entity manages those risks. The implementation of these new standards did not impact the Corporation's financial results, but did result in additional disclosures. Refer to note 6 and note 8 in the interim financial statements for the three and six months ended June 30, 2008.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
In February 2008, the CICA Accounting Standards Board (AcSB) confirmed that the convergence of Canadian GAAP to IFRS will be required for publicly accountable enterprises' interim and annual financial statements effective for fiscal years beginning on or after January 1, 2011. The AcSB issued the "omnibus" exposure draft of IFRS with comments due by July 31, 2008, wherein early adoption by Canadian entities is also permitted. The Canadian Securities Administrators (CSA) has also issued Concept Paper 52-402, which requested feedback on the early adoption of IFRS as well as the continued use of US GAAP by domestic issuers. The eventual changeover to IFRS represents a change due to new accounting standards. The transition from current Canadian GAAP to IFRS is a significant undertaking that may materially affect the Corporation's reported financial position and results of operations.
The International Accounting Standards Board (IASB) has stated that it plans to issue an exposure draft relating to certain amendments and exemptions to IFRS 1 in order to make it more useful to Canadian entities adopting IFRS for the first time. One such exemption relating to full cost oil and gas accounting is expected to reduce the administrative burden in the transition from the current Canadian Accounting Guideline 16 to IFRS. It is anticipated that this exposure draft will not result in an amended IFRS 1 standard until late 2009. The amendment will potentially permit the Corporation to apply IFRS prospectively to their full cost pool, rather than the retrospective assessment of capitalized exploration and development expenses, with the proviso that a ceiling test, under IFRS standards, be conducted at the transition date.
Although the Corporation has not completed the development of its IFRS changeover plan, when finalized it will include project structure and governance, resourcing and training, an analysis of key GAAP differences and a phased plan to assess accounting policies under IFRS as well as potential IFRS 1 exemptions. The Corporation anticipates completing its project scoping, which will include a timetable for assessing the impact on data systems, internal controls over financial reporting, and business activities, such as financing and compensation arrangements, by the fourth quarter of 2008.
FINANCIAL REPORTING
The Chief Executive Officer and Chief Financial Officer of the Corporation are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. The Corporation has assessed the design of its internal controls over financial reporting and has not identified any weaknesses other than those disclosed in the MD&A for the year ended December 31, 2007. No material changes in the Corporation's internal controls over financial reporting were identified during the three and six months ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Corporation's internal financial reporting processes.
The management of Open Range is responsible for the integrity of the information contained in this quarterly report and for the consistency between the MD&A and the financial statements. In the preparation of the financial statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected with all information available up to August 7, 2008. The financial statements have been prepared using policies and procedures established by management in accordance with Canadian GAAP and reflect fairly Open Range's financial position, results of operations and cash flow.
The Board of Directors and the Audit Committee have reviewed and approved the financial statements and the MD&A.
Balance Sheets
As at As at
June 30, December 31,
(Unaudited) 2008 2007
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,715,527 $ -
Accounts receivable 7,135,074 7,891,264
Prepaid expenses and deposits 1,067,112 813,772
Fair value of commodity contracts (note 8) - 713,075
Future income taxes 1,383,362 -
----------------------------------------------------------------------------
12,301,075 9,418,111
Property, plant and equipment (note 2) 104,963,543 88,099,168
----------------------------------------------------------------------------
$ 117,264,618 $ 97,517,279
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness (note 3) $ - $ 12,855,623
Accounts payable and accrued liabilities 13,420,530 9,184,239
Fair value of commodity contracts (note 8) 4,689,469 -
Future income taxes - 210,356
----------------------------------------------------------------------------
18,109,999 22,250,218
Fair value of commodity contracts (note 8) 600,619 -
Future income taxes 5,935,413 440,742
Asset retirement obligations (note 4) 2,299,675 2,342,760
Shareholders' equity:
Share capital (note 5) 90,050,109 70,884,500
Contributed surplus (note 5) 2,490,206 1,875,405
Deficit (2,221,403) (276,346)
----------------------------------------------------------------------------
90,318,912 72,483,559
Commitments (note 7)
----------------------------------------------------------------------------
$ 117,264,618 $ 97,517,279
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to financial statements.
Statements of Operations, Comprehensive Income (Loss) and Deficit
Three months ended Six months ended
(Unaudited) June 30, June 30, June 30, June 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Revenues:
Petroleum and
natural gas $ 12,527,217 $ 5,535,394 $ 21,500,768 $ 9,947,047
Royalties (2,297,059) (520,772) (3,755,151) (1,191,272)
Interest 39,050 37,591 43,510 89,697
Realized gain
(loss) on
commodity contracts
(note 8) (1,246,388) 20,563 (1,053,041) 44,753
Unrealized gain
(loss) on
commodity contracts
(note 8) (2,131,090) 1,168,139 (6,003,163) 11,642
----------------------------------------------------------------------------
6,891,730 6,240,915 10,732,923 8,901,867
Expenses:
Operating 1,236,784 750,879 2,484,125 1,438,277
General and
administrative 493,671 577,343 1,159,979 1,223,640
Stock-based
compensation 184,776 125,977 333,621 251,888
Interest 50,272 35,855 250,221 65,141
Depletion and
depreciation 4,855,942 2,813,443 9,103,319 5,356,716
Accretion of asset
retirement
obligations 39,911 44,636 81,334 87,059
----------------------------------------------------------------------------
6,861,356 4,348,133 13,412,599 8,422,721
----------------------------------------------------------------------------
Earnings (loss)
before income
taxes 30,374 1,892,782 (2,679,676) 479,146
Future income tax
expense
(reduction) 61,813 615,330 (734,619) 222,658
----------------------------------------------------------------------------
Net earnings (loss)
and comprehensive
income (loss) (31,439) 1,277,452 (1,945,057) 256,488
Deficit, beginning
of period (2,189,964) (1,820,449) (276,346) (799,485)
----------------------------------------------------------------------------
Deficit, end of
period $ (2,221,403) $ (542,997) $ (2,221,403) $ (542,997)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss) per
share (note 5):
Basic $ - $ 0.06 $ (0.08) $ 0.01
Diluted $ - $ 0.06 $ (0.08) $ 0.01
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to financial statements.
Statements of Cash Flows
Three months ended Six months ended
June 30, June 30, June 30, June 30,
(Unaudited) 2008 2007 2008 2007
----------------------------------------------------------------------------
Cash provided by
(used in):
Operating:
Net earnings (loss) $ (31,439) $ 1,277,452 $ (1,945,057) $ 256,488
Items not involving
cash:
Depletion and
depreciation 4,855,942 2,813,443 9,103,319 5,356,716
Accretion of asset
retirement
obligations 39,911 44,636 81,334 87,059
Future income tax
expense
(reduction) 61,813 615,330 (734,619) 222,658
Stock-based
compensation 184,776 125,977 333,621 251,888
Unrealized loss
(gain) on
commodity contracts 2,131,090 (1,168,139) 6,003,163 (11,642)
Asset retirement
expenditures (47,142) - (168,965) -
Change in non-cash
working capital 1,115,410 915,528 793,536 832,133
----------------------------------------------------------------------------
8,310,361 4,624,227 13,466,332 6,995,300
Financing:
Issue of common
shares, net
of issue costs 23,617,167 (3,374) 23,668,803 11,291,558
Bank indebtedness (21,878,434) 4,734,340 (12,855,623) 897,872
----------------------------------------------------------------------------
1,738,733 4,730,966 10,813,180 12,189,430
Investing:
Acquisition of
property,
plant and equipment (5,884,953) (11,284,524) (25,509,590) (23,869,797)
Change in non-cash
working capital (1,448,614) (2,457,241) 3,945,605 4,685,067
----------------------------------------------------------------------------
$ (7,333,567) (13,741,765) (21,563,985) (19,184,730)
----------------------------------------------------------------------------
Change in cash 2,715,527 (4,386,572) 2,715,527 -
Cash, beginning of
period - 4,386,572 - -
----------------------------------------------------------------------------
Cash, end of period $ 2,715,527 $ - $ 2,715,527 $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest received $ 39,050 $ 37,591 $ 43,510 $ 89,697
----------------------------------------------------------------------------
Interest paid $ 50,272 $ 35,855 $ 250,221 $ 65,141
----------------------------------------------------------------------------
Cash is defined as cash and cash equivalents.
See accompanying notes to financial statements.
Notes to Financial Statements
For the three and six months ended June 30, 2008
(Unaudited)
The interim financial statements of Open Range Energy Corp. ("Open Range" or the "Corporation") have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP). The interim financial statements have been prepared following the same accounting policies and methods of computation as the financial statements for the year ended December 31, 2007, except as noted below. The following disclosure is incremental to the disclosure included with the annual financial statements. These interim financial statements should be read in conjunction with the financial statements and notes thereto in the Corporation's annual report for the year ended December 31, 2007. Certain comparative figures have been reclassified to conform to the current period's presentation.
1.
