SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-KSB
Mark
One:
þ
Annual
Report under Section 13 or 15(d) of the Securities Exchange Act of
1934.
For
the
fiscal year ended December
31, 2006;
or
¨
Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of
1934
For
the
transition period from __________ to __________.
Commission
File No. 1-32158
GEOGLOBAL
RESOURCES INC.
|
(Name
of small business issuer in its
charter)
|
Delaware
|
|
33-0464753
|
(State
or other jurisdiction of incorporation or organization)
|
|
(IRS
Employer Identification No.)
|
Suite
310, 605 - 1 Street SW, Calgary, Alberta, Canada
|
|
T2P
3S9
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(403)
777-9250
|
(Issuer’s
telephone number)
|
Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class
|
Name
of each exchange on which registered
|
|
None
|
Securities
registered under Section 12(g) of the Exchange Act:
|
Common
Stock, par value $.001 per share
|
|
|
(Title
of Each Class)
|
Check
whether the issuer is not required to file reports pursuant to Section 13
or
15(d) of the Exchange Act ¨
Check
whether the issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act during the past 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. þ
Yes ¨
No
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ¨
Indicate
by check whether the registrant is a shell company (as defined in Rule 12b-2
of
the Exchange Act. ¨
Yes þ
No
Issuer’s
revenues for its most recent fiscal year: $-0-
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, or the average bid and asked price of such common equity, as of April
13,
2007 was $202,227,474.
(See
definition of affiliate in Rule 12b-2 of the Exchange Act).
The
number of shares outstanding of each of the issuer’s classes of common equity,
as of April 13, 2007, was 66,228,256.
DOCUMENTS
INCORPORATED BY REFERENCE
None
Table
of Contents
|
|
|
Page
|
|
Part
I
|
|
|
|
|
|
|
Item
1.
|
Description
of Business
|
|
3
|
|
|
|
|
Item
2.
|
Description
of Property
|
|
17
|
|
|
|
|
Item
3.
|
Legal
Proceedings
|
|
17
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
|
17
|
|
|
|
|
|
Part
II
|
|
|
|
|
|
|
Item
5.
|
Market
for Common Equity & Related Stockholder Matters
|
|
18
|
|
|
|
|
Item
6.
|
Management’s
Discussion and Analysis or Plan of Operation
|
|
18
|
|
|
|
|
Item
7.
|
Financial
Statements
|
|
35
|
|
|
|
|
Item
8.
|
Changes
In and Disagreements With Accountants On Accounting and Financial
Disclosure
|
|
35
|
|
|
|
|
Item
8A
|
Controls
and Procedures
|
|
35
|
|
|
|
|
Item
8B
|
Other
Information
|
|
36
|
|
|
|
|
|
Part
III
|
|
|
|
|
|
|
Item
9.
|
Directors,
Executive Officers, Promoters and Control Persons; Compliance with
Section
16(a) of the Exchange Act.
|
|
36
|
|
|
|
|
Item
10.
|
Executive
Compensation
|
|
38
|
|
|
|
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
|
41
|
|
|
|
|
Item
12.
|
Certain
Relationships and Related Transactions
|
|
42
|
|
|
|
|
Item
13.
|
Exhibits
|
|
43
|
|
|
|
|
Item
14.
|
Principal
Accountant Fees and Services
|
|
45
|
PART
I
Item
1. Description of Business
GeoGlobal
Resources Inc. is engaged, through our subsidiaries and joint ventures in
which
we are a participant, in the exploration for and development of oil and natural
gas reserves. At present, these activities are being undertaken in locations
where we and our joint venture participants have been granted exploration
rights
pursuant to production sharing contracts (“PSCs”) we have entered into with the
Government of India ("GOI") under its New Exploration Licensing Policy (“NELP”)
bidding processes. As of April 13, 2007, we have entered into contracts with
respect to ten of these exploration blocks as follows:
· |
The
first of our agreements, entered into in February 2003 under NELP-III,
grants exploration rights in an area offshore eastern India in
the Krishna
Godavari Basin in the State of Andhra Pradesh. We refer to this
KG-OSN-2001/3 exploration block as the “KG Offshore Block” and we have a
net 5% carried interest (“CI”) under this
agreement.
|
· |
We
entered into two agreements which grant exploration rights in areas
onshore in the Cambay Basin in the State of Gujarat in western
India.
These agreements were entered into in February 2004 under NELP-IV
and we
have a 10% participating interest (“PI”) under each of these agreements.
We refer to the CB-ONN-2002/2 exploration block as the “Mehsana Block” and
the CB-ONN-2002/3 exploration block as the “Sanand/Miroli
Block.”
|
· |
Pursuant
to an agreement entered into in April 2005, we purchased from Gujarat
State Petroleum Corporation Limited (“GSPC”), a 20% PI in the agreement
granting exploration rights granted under NELP-III to an onshore
exploration block in the Cambay Basin in the State of Gujarat in
western
India. We refer to this CB-ON/2 exploration block as the “Tarapur
Block”.
|
· |
In
September 2005, we entered into agreements with respect to two
areas under
NELP-V. One area is located onshore in the Cambay Basin located
in the
State of Gujarat south-east of our three existing Cambay blocks,
for which
we hold a 10% PI. We refer to this CB-ONN-2003/2 exploration block
as the
“Ankleshwar Block”. The second area is located onshore in the Deccan
Syneclise Basin located in the northern portion of the State of
Maharashtra in west-central India for which we hold a 100% PI interest
and
are the operator. We refer to this DS-ONN-2003/1 exploration block
as the
“DS 03 Block”.
|
·
|
In
March 2007, we signed agreements with respect to four additional
locations
awarded under NELP-VI.
|
|
§
|
One
area is located onshore in the Krishna Godavari Basin in the State
of
Andhra Pradesh adjacent to our KG Offshore Block in eastern India
in which
we hold a 10% PI. We currently refer to this KG-ONN-2004/1 exploration
block as the “KG Onshore Block”.
|
|
§
|
The
second area includes two agreements located onshore in north-west
India in
the Rajasthan Basin in the State of Rajasthan and we hold a 25%
PI in each
of the agreements. We currently refer to the RJ-ONN-2004/2 exploration
block as the “RJ Block 20” and the RJ-ONN-2004/3 exploration block as the
“RJ Block 21”.
|
|
§
|
The
fourth area is located onshore in the Deccan Syneclise Basin in
the State
of Maharashtra adjacent to our DS 03 Block in west-central India
for which
we hold a 100% PI and are the operator. We currently refer to this
DS-ONN-2004/1 exploration block as the "DS 04 Block".
|
To
date,
we have not earned any revenue from these activities and we are considered
to be
in the development stage. The recoverability of the costs we have incurred
to
date is uncertain and dependent upon us achieving commercial production and
sale
of hydrocarbons, our ability to obtain sufficient financing to fulfill our
obligations under the PSCs in India and upon future profitable operations
and
upon finalizing agreements with GSPC.
All
of
the exploration activities in which we are a participant should be considered
highly speculative.
All
dollar amounts stated in this annual report are stated in United States
dollars.
Unless
the context should otherwise require, references to “we,” “us” and “our” in this
annual report refer to GeoGlobal Resources Inc. and our wholly-owned
consolidated subsidiaries. When we refer to GeoGlobal Barbados, we are referring
to GeoGlobal Resources (Barbados) Inc., our wholly-owned subsidiary incorporated
under the Companies
Act of Barbados
that is
the contracting party under our four PSCs covering four blocks in the Cambay
Basin, our two PSCs covering two blocks in the Deccan Syneclise Basin, our
two
PSCs covering two blocks in the Rajasthan Basin and one PSC covering the
KG
Onshore Block in the Krishna Godavari Basin. When we refer to GeoGlobal India,
we are referring to GeoGlobal Resources (India) Inc., our wholly-owned
subsidiary continued under the Companies
Act of Barbados
that is
the contracting party under our PSC covering one KG Offshore Block in the
Krishna Godavari Basin.
The
map
of India below shows the relative locations of the exploration blocks that
are
the subject of our ten PSCs with the GOI including the four PSCs covering
the
recently awarded blocks under NELP-VI.
Map
of
India
[this
map
denotes our locations in general and does not indicate specific size of blocks
or basins]
Our
Oil and Gas Activities
Our
oil
and gas activities are currently conducted in four geographic areas in geologic
basins offshore and onshore India where reserves of oil or natural gas are
believed by our management to exist. These areas include:
·
|
The
Krishna Godavari Basin offshore in the State of Andhra Pradesh
in eastern
India;
|
·
|
The
Cambay Basin onshore in the State of Gujarat in western
India;
|
·
|
The
Deccan Syneclise Basin onshore in the northern portion of the State
of
Maharashtra in west central India;
and
|
·
|
The
Rajasthan Basin onshore in the State of Rajasthan in north western
India.
|
Our
Krishna Godavari Basin Agreements
KG
Offshore Block
We,
along
with our joint venture partners GSPC and Jubilant Oil & Gas Pvt. Ltd.
("Jubilant") are parties to a PSC dated February 4, 2003 which grants to
the
three parties the right to conduct exploratory drilling activities in the
shallower waters of the Krishna Godavari Basin. The PSC covers an area of
approximately 1,850 square kilometers ("sq kms") (457,145 acres) and was
awarded
under NELP-III. We have a net 5% CI in this exploration block. The exploration
phase for this PSC extends for a term of up to 6.5 years commencing on March
12,
2003. The first two phases cover a period of 2.5 years each, and the last
phase
covers a period of 1.5 years. During the first exploration phase, the parties
are to acquire, process and interpret 1,250 sq km of 3-D seismic data, reprocess
2,298.4 line kilometers ("LKMs") of 2-D seismic data and conduct a bathymetric
survey, all of which has been completed. In addition, we are to drill a total
of
fourteen exploratory wells between 900 to 4,118 meters. During the second
and
third phases, if the parties elect to proceed with them, in addition to
bathymetric surveys in connection with each phase, the parties are to drill
four
exploratory wells between 1,100 to 2,850 meters and two exploratory wells
to
1,550 and 1,950 meters, respectively.
KG
Onshore Block
We,
along
with out joint venture partner Oil India Limited ("OIL") are parties to a
PSC
dated March 2, 2007. The PSC covers an area of approximately 548 sq km (135,414
acres) onshore in the Krishna Godavari Basin, is located directly adjacent
to
and south-west of our KG Offshore Block and was awarded under NELP-VI. We
hold a
10% PI in this exploration block, while OIL, as operator, holds the remaining
90% PI. On September 14, 2006, prior to submission of our NELP-VI bid, we
entered into an agreement with OIL to increase our PI up to 25% in this
exploration block, subject to the availability of sufficient net worth and
GOI
consent.
The
exploration phase for this PSC extends for a term of up to 7 years and will
commence upon the date the Production Exploration Licence ("PEL") is issued.
The
Phase I work commitment which covers a period of 4 years, consists of
reprocessing 564 LKM of 2-D seismic, conducting a gravity and magnetic and
geochemical survey, as well as a seismic acquisition program consisting of
548
sq km of 3-D seismic. This Phase I commitment further consists of the drilling
of 12 exploration wells to various depths between 2,000 and 5,000 meters.
The
Phase II work commitment which covers a period of 3 years is to drill one
exploration well to a depth of 4,600 meters.
Our
Krishna Godavari Basin Exploration Activities
The
KG Offshore Block
As
of
April 13, 2007, GSPC as operator has completed the acquisition, processing
and
interpretation of a 1,298 sq km marine 3-D seismic program as well as completed
an additional marine 3-D seismic program of approximately 300 sq km. This
data
has been processed and interpreted.
GSPC
currently has contracted with Saipem SPA, part of ENI, Italy, for the Saipem
Perro Negro 3 jack-up drilling rig to drill 10 exploratory wells, with an
option
of extending the contract for 2 additional exploratory wells. As of April
13,
2007, the Saipem Perro Negro 3 drilling rig has drilled five exploratory
wells
and is currently drilling an additional exploration well that has been
classified by the management committee as an appraisal well for the purposes
of
the PSC. Two of the five exploratory wells, the KG#1 drilled in 2004 and
the
KG#11 drilled in 2005 have both been abandoned.
GSPC
has
also entered into a 25 month contract with Atwood Oceanics Inc., a Houston
based
International Offshore Drilling Contractor, for the Atwood Beacon jack-up
drilling rig to drill additional exploration wells on the KG Offshore Block.
The
Atwood Beacon drilling rig is currently drilling one exploratory
well.
The
KG#8
exploratory well was drilled to a depth of 5,061 meters and 10 meters of
perforations across the interval from 4,747.5 to 4,777 meters were tested
which
resulted in a stabilized flow rate in excess of 10 million standard cubic
feet
per day ("MMSCFD") of gas at a wellhead flowing pressure of 4,500
psi.
The
KG#17
exploratory well was drilled from the KG#8 platform directionally to a location
1.81 kilometers to the northeast of the KG#8 wellhead location to a depth
of
5,601 meters (5,223 meters total vertical depth ("TVD")). Twenty meters of
perforations across the interval from 3,801 to 3,830 meters was tested which
resulted in a stabilized flow rate of 4.8 MMSCFD of gas plus 900 barrels
per day
("BBLD") of condensate at a wellhead flowing pressure of 1,900 psi through
a
24/64 inch choke.
The
KG#15
exploratory well was drilled also from the KG#8 platform directionally to
a
location 750 meters south southeast of the KG#8 wellhead location to a depth
of
5,745 meters (5,669 meters TVD). Thirty three meters of perforations across
the
interval from 4,651 to 4,705 meters were tested which resulted in a stabilized
flow rate of in excess of 14 MMSCFD of gas plus 300 BBLD of condensate at
a
wellhead flowing pressure of 4,200 psi through a 28/64 inch choke. An additional
33 meters of perforations across the interval from 4,464 to 4,587 meters
were
tested which resulted in a stabilized flow rate of 8.5 MMSCFD of gas plus
55
BBLD of condensate at a wellhead flowing pressure of 3,893 psi through a
20/64
inch choke.
On
February 6, 2007, the Saipem Perro Negro 3 rig commenced drilling the KG#28
well
from the KG#8 platform. The KG#28 well will be the sixth exploration well
drilled by the Saipem Perro Negro 3 jack-up drilling rig. The KG#28 well,
has
been classified by the management committee as an “appraisal well” for the
purposes of the PSC and it will be drilled directionally to a total vertical
depth (“TVD”) of 5,500 meters deviating approximately 1,500 meters east of the
KG#8 wellhead location.
On
January 3, 2007, the Atwood Beacon rig commenced drilling the KG#16 well.
This
is the first exploratory well to be drilled using the Atwood Beacon rig.
The
KG#16 well is situated approximately 5 kilometres east of the location where
the
Saipem Perro Negro 3 jack-up drilling rig is located. The KG#16 well is being
drilled vertically to an intended depth of 5,500 meters TVD in shallow waters
of
approximately 109 meters to further delineate the extent of the KG
structure.
GSPC
has
further entered into a contract with Essar Oilfield Services Limited (“EOSL”), a
subsidiary of Essar Shipping & Logistics Ltd. of Cyprus, for a
semi-submersible drilling rig named “Essar Wildcat”. The Essar Wildcat is a self
propelled drilling rig suitable for deployment in water depths of 400 meters
and
has a drilling depth capacity of 7,600 meters. GSPC intends to commence drilling
additional wells in the deeper water in the KG Offshore Block by the third
quarter of 2007. The initial term of the EOSL contract is for two years from
the
date of spud of the first well, with the option of two extensions, each for
one
year.
The
operating committee under the exploration contract relating to the KG Offshore
Block has estimated that the total gross budget for the KG Offshore Block
for
the period April 2007 to March 2008 is $503.6 million. We have a 5% net CI
in
the wells drilled on the KG Offshore Block. See “Other
Material Oil and Gas Agreements”
below
for a description of the Carried Interest Agreement.
The
KG Onshore Block
OIL,
as
operator for this KG Onshore Block is in the process of applying for the
PEL,
which when issued will allow OIL to commence the Phase I work program
commitments.
We
will
be required to fund our 10% proportionate share of the costs incurred in
these
activities estimated to be approximately US$8.5 million over the four years
of
the first phase of the work commitment with respect to a 10% participating
interest in the block and, should we be successful in increasing our interest
to
25%, we will be required to fund approximately US$21.3 million with respect
to a
25% participating interest in the block..
Matters
Relating to Our KG Offshore Block PSC
The
first
phase of the exploration period relating to the PSC for the KG Offshore Block
has expired without the required minimum of at least fourteen exploration
wells
being drilled during the first phase. GSPC, as operator and on behalf of
the
contracting parties, is engaged in seeking from the GOI its consent to an
extension of the expiration date of the first phase of the exploration period
and is also seeking to proceed to the second phase of the exploration period
without relinquishing any of the contract area at the end of the first phase.
In
connection with the process of seeking these consents, on February 24, 2006,
the
management committee for the KG Offshore Block, which includes members
representing the GOI, recommended a further extension of the first phase
of
twelve months to March 11, 2007. On February 9 2007, GSPC proposed to the
Directorate General of Hydrocarbons, a body under the Ministry of Petroleum
& Natural Gas (“DGH”) and to the GOI that the contracting parties proceed to
the next exploration phase (Phase II) upon completion of Phase I which was
expiring on March 11, 2007. It was also requested, on behalf of the contracting
parties, to not relinquish any of the contract area at the end of Phase I.
On
March 12, 2007 DGH noted the option of GSPC, on behalf of the contracting
parties, to enter Phase Two and advised that entry into Phase Two, effective
March 12, 2007, is subject to the following conditions: (1) Any decision
by the
GOI on the substitution of the Work Program of Phase I will be binding on
the
contracting parties; and (2) Any decision by the GOI on relinquishment of
the
25% of original contract Area (ie. 462 sq. kms.) under the PSC would be binding
on the contracting parties. The extension of Phase I for the 18 months to
March
11, 2007 would be deducted from Phase II. As such the Phase II would have
a term
of one year and expire March 11, 2008. As at April 13 2007, five exploratory
wells have been drilled and one exploratory well, the KG#16 well, is currently
being drilled on the exploration block leaving eight exploration wells to
be
drilled. A seventh well, the KG#28 is also being drilled on the exploration
block and has been classified by the management committee as an “appraisal well”
for the purposes of the PSC. Approval of the extension and the entering into
the
second phase of exploration under the PSC without relinquishment of any portion
of the contract area from the GOI is currently outstanding. Unless this approval
is granted, we may be liable for the consequences of non-fulfillment of the
minimum work commitment in a given time frame under the PSC. The PSC has
provisions for termination of the PSC on account of various reasons specified
therein including material breach of the contract. Termination rights can
be
exercised after giving ninety days written notice. This failure to timely
complete the minimum work commitment, though we have been advised by GSPC
there
is no precedence, may
be
deemed by the GOI to be a failure to comply with the provisions of the contract
in a material particular.
The
termination of the PSC by
the
GOI would result in our loss of our interest in the KG Offshore Block other
than
areas determined to encompass "commercial discoveries". The PSC sets forth
procedures whereby the operator can obtain the review of the management
committee under the PSC as to whether a discovery on the exploration block
should be declared a commercial discovery under the PSC. Those procedures
have
not been completed at present with respect to the discovery on the KG Offshore
Block and, accordingly, as of April 13, 2007, no areas on the KG Offshore
Block
have been determined formally to encompass "commercial discoveries"
as
that
term is defined under the PSC.
In
the
event the PSC for the KG Offshore Block is terminated by the GOI, or in the
event the work program is not fulfilled by the end of the relevant exploration
phase, the PSC provides that each party to the PSC is to pay to the GOI its
participating interest share of an amount which is equal to the amount that
would be required to complete the minimum work program for that phase. We
are of
the view that GSPC, under the terms of our CIA, would be liable for our
participating interest share of the amount required to complete the minimum
work
program for the phase.
Our
net
5% CI in the KG Offshore Block reflects our agreement to prospectively assign
half of the original 10% interest under the PSC to Roy Group Mauritius ("RGM")
a
Mauritius corporation wholly owned by Mr. Jean Paul Roy, our President, CEO,
Director and principal stockholder, pursuant to a Participating Interest
Agreement ("PIA") we entered into on March 27, 2003, which assignment is
subject
to GOI consent. Absent such consent, the assignment will not occur and we
are to
provide RGM with an economic benefit equivalent to the interest to be assigned.
At April 13, 2007, we have not obtained the consent of the GOI to this
assignment.
Our
Cambay Basin Agreements
Mehsana
Block
On
February 6, 2004, we, along with our joint venture partners GSPC and Jubilant,
signed a PSC with respect to this onshore Mehsana Block. This PSC covers
an area
of approximately 125 sq kms (30,888 acres) and was awarded under NELP-IV.
We
hold a 10% PI, GSPC holds a 60% PI, and Jubilant, who is the operator, holds
the
remaining 30% PI. The PSC provides that the exploration activities are to
be
conducted in three phases commencing May 21, 2004 with the first phase covering
a period of 2.5 years, the second phase covering a period of 2.0 years and
the
last phase covering a period of 1.5 years, for a maximum total duration of
6
years for all three phases.
During
the first exploration phase on this exploration block, the parties are to
acquire 75 sq kms of 3-D seismic data, reprocess 650 LKM of 2-D seismic data
and
conduct a geochemical survey, all of which has been completed. In addition,
we
are to drill seven exploratory wells between 1,000 to 2,200 meters. As at
April
13, 2007, two of the seven exploration wells have been drilled; the CB-2
and
CB-3 to 2,500 and 2,350 meters respectively, both of which were
abandoned.
The
first
exploration phase relating to the PSC for the Mehsana Block expired without
the
required minimum of seven exploration wells having been drilled. In October,
2006 the management committee under the PSC for the Mehsana Block approved
a
proposal to seek from the GOI an extension of the first exploration phase
for a
six month period from November 21, 2006 to May 20, 2007 and on April 6, 2007
the
members of the operating committee under the Mehsana Block operating agreement
resolved to submit an application to the GOI for extension for an additional
six
months to November 20, 2007 to complete the minimum work program under Phase
I.
In seeking that extension, the joint venture partners agreed to provide a
100%
Bank Guarantee and a 10% cash payment to be agreed upon based on pre-estimated
liquidated damages for the unfinished minimum work program as reasonably
determined by DGH, which has not yet been determined. As well, the contractor
would be required to relinquish 25% of the block pursuant to the provisions
of
the PSC. The period of extension will be set off against the term of the
Second
Phase which would reduce Phase II to one year expiring November 20, 2008.
Final
consent to this extension is awaiting GOI approval.
During
the second and third phases, if the parties elect to proceed, the parties
are to
drill two exploratory wells to 2,000 meters in each phase.
Sanand/Miroli
Block
Also
on
February 6, 2004, we, along with our joint venture partners GSPC, Jubilant
and
Prize Petroleum Company Limited ("Prize") signed a PSC with respect to this
onshore Sanand/Miroli Block. This PSC covers an area of approximately 285
sq kms
(70,425 acres) and was awarded under NELP-IV. We hold a 10% PI, GSPC, who
is the
operator holds a 55% PI, Jubilant holds a 20% PI with the remaining 15% held
by
Prize. The PSC provides that the exploration activities are to be conducted
in
three phases commencing July 29, 2004 with the first phase covering a period
of
2.5 years, the second phase covering a period of 2.0 years and the last phase
covering a period of 1.5 years, for a maximum total duration of 6 years for
all
three phases.
During
the first exploration phase on the Sanand/Miroli Block, the parties are to
acquire 200 sq kms of 3-D seismic data, reprocess 1,000 LKM’s of 2-D seismic
data, and conduct a geochemical survey all of which has been completed. In
addition, we are to drill twelve exploratory wells between 1,500 to 3,000
meters. As at April 13, 2007, two of the twelve wells have been drilled or
are
in the process of being drilled to depths in excess of 2,500 meters.
The
first
exploration phase relating to the PSC for the Sanand/Miroli Block expired
without the required minimum of twelve wells having been drilled. On January
29,
2007 the management committee under the PSC for the Sanand/Miroli Block approved
a proposal to seek from the GOI an extension of the first exploration phase
for
a six month period from January 28, 2007 to July 28, 2007. Final consent
to this
extension is awaiting GOI approval.
During
the second and third phases, if the parties elect to proceed with them, the
parties are to drill three and two exploratory wells to 2,000 meters,
respectively.
Tarapur
Block
Pursuant
to an agreement entered into with GSPC in April, 2005, we purchased a 20%
PI in
the onshore Tarapur Block in the Cambay Basin near our Mehsana and Sanand/Miroli
Blocks which was awarded to GSPC under a Pre NELP round. The Tarapur Block
is in
Phase III under the PSC and currently covers an area of approximately 1,211
sq
kms (299,245 acres). GSPC as operator, owns the remaining 80% PI. The assignment
of the 20% interest was subject to obtaining the consent of the GOI which
was
received effective August 24, 2006. Agreements reflecting the completion
of the
assignment are in the process of being prepared for signature as of April
13,
2007. As a condition to receiving the GOI consent, the Company provided to
the
GOI an irrevocable letter of credit in the amount of US$1,200,000 secured
by a
term deposit of the Company in the same amount. This amount represents the
Company’s performance guarantee for its 20% participating interest share (Rs.
5.3 crore) of the estimated exploration costs budgeted for the period April
1,
2006 through March 31, 2007.
Oil
and
Natural Gas Corporation Limited of India has the right to participate into
the
development of any commercial discovery on the Tarapur Block by acquiring
a 30%
participating interest as provided under the PSC. The exercise of this right
would result in the reduction of our PI to 14%.
Phase
two
under the PSC for this exploration block expired on November 22, 2005 and
GSPC
entered into the third and final phase after relinquishing, as required under
the terms of the PSC, 25% (approximately 405 sq kms) of the exploration block
back to the Government of India. Phase three has a term of 2 years ending
November 22, 2007 and the work commitment is to drill one well to a depth
of
3,000 meters or to the Deccan trap.
Ankleshwar
Block
On
September 23, 2005, we, along with our joint venture participants GSPC, Jubilant
and GAIL (India) Ltd. ("GAIL") signed a PSC with respect to this onshore
Ankleshwar Block. This PSC covers an area of approximately 448 sq km (110,703
acres) and was awarded under NELP-V. We hold a 10% PI, GSPC is the operator
and
holds a 50% PI, Jubilant holds 20% PI and the remaining 20% PI is held by
GAIL.
The PSC provides that the exploration activities are to be conducted in three
phases commencing April 1, 2006 with the first phase covering a period of
3.0
years, the second phase covering a period of 3.0 years and the last phase
covering a period of 1.0 years, for a maximum total duration of 7 years for
all
three phases.
The
work
commitment under the first phase is to acquire, process and interpret 448
sq kms
of 3-D seismic and reprocess 650 LKMs of 2-D seismic, a substantial portion
of
which as at April 13, 2007 is near completion. In addition, we are to drill
14
exploratory wells between 1,500 to 2,500 meters. If the parties elect to
proceed, in the second phase we are to drill 4 exploratory wells, and in
the
third phase we are to drill 6 exploratory wells, all between 2,500 to 3,000
meters.
Our
Cambay Basin Exploration Activities
Mehsana
Block
With
respect to the Mehsana Block, Jubilant as operator, has completed a 235 sq
km
onshore 3-D seismic acquisition program. This data has been processed and
interpreted. Drilling operations commenced on this block in December 2006.
As at
April 13, 2007, two of seven exploration wells have been drilled on this
block,
the first being CB-2 well to a TVD of 2,500 meters and the second, CB-3 well
to
a TVD of 2,350 meters. Both these wells did not proceed into a testing program
and were subsequently abandoned. Results of these wells are currently being
evaluated before proceeding to the next drilling location.
Estimated
total capital expenditures we will be required to contribute to the exploration
activities on this block during the period April 1, 2007 to March 31, 2008
based
on our 10% PI will be approximately $2.3 million.
Sanand/Miroli
Block
With
respect to the Sanand/Miroli Block, GSPC as operator completed a 463 sq km
onshore 3-D seismic acquisition program. This data has been processed and
interpreted. Drilling operations using the DALMA MR#4 rig commenced on this
block on November 15, 2006 with the drilling of the first of twelve exploration
wells. The M1 well was drilled to a TVD of 2,300 meters and was temporarily
suspended. The well has subsequently been re-entered and drilled to a TVD
of
2,463 meters. As of April 13, 2007, the well is being logged and will undergo
testing. The same rig spud a second well, the M4 well, on February 24, 2007
which was drilled to a TVD of 2,226 meters. This well was logged, cased and
is
currently being tested. A third well, the M2 well, commenced drilling using
the
DRIPL 1500 HP rig on March 26, 2007 and as of April 13, 2007, the well, had
not
reached its anticipated TVD of approximately 3,300 meters.
Estimated
total capital expenditures we will be required to contribute to the exploration
activities on this block during the period April 1, 2007 to March 31, 2008
based
on our 10% PI will be approximately $2.6 million.
Tarapur
Block
With
respect to the Tarapur Block, through April 13, 2007, GSPC has drilled eight
wells on this block, of which, three wells have been abandoned.
The
Tarapur #G well was drilled in January 2006 to a total depth of 1,650 meters
on
the eastern portion of the Tarapur Block. A gas/condensate reservoir was
discovered in the Kalol formation with an estimated reservoir pressure and
temperature of 3,300 psi and 225 degrees Fahrenheit. During testing, the
well
produced 2.5 MMSCFD of gas and 106 BBLD of condensate at an approximate well
head flowing pressure of 1,500 psi. As of April 13, 2007, this well has been
suspended.
The
Tarapur #5 well was drilled to a total depth of 1,612 meters in October 2006.
The well was logged and cased for testing. During testing, the well produced
118
mcf of gas and 264 BBLD of oil. As of April 13, 2007, a determination is
being
made whether to seek to stimulate this well before final completion and put
on
production at such time as a development plan has been prepared and approved
by
DGH.
The
Tarapur #7 well was drilled to a total depth of 1,642 meters in November
2006.
The well was logged and cased for testing. During testing, two zones were
tested
without conclusive results and one zone flowed water to surface. As of April
13,
2007, this well has been suspended.
Two
wells, the Tarapur
#P well and the Tarapur #1 well were drilled to an approximate depth of 2,250
meters to the top of the Deccan trap and encountered oil in both the Kalol
and
Olpad formations. Both of these formations were tight and tested non-commercial
flows of oil. Various stimulation techniques were assessed and a Hydro
Fracturing job was performed on the Kalol formation in the Tarapur #P well
resulting in a test flow of 150 BBLS/day of oil at 300 psi WHFP. A geological
model is being prepared to establish production potential of both the Kalol
and
Olpad formations in these wells and evaluate further drilling opportunities
in
this block.
The
remaining three wells that were drilled on the western portion of the Mitrampura
Anticline, the Tarapur D, E and F were all abandoned.
It
is the
intention of GSPC to drill one additional well to delineate the extent of
the
Tarapur #G discovery before submission for a two-well appraisal program to
the
GOI under the terms of the PSC.
Under
the
terms of our agreement with GSPC, we are to fund our 20% participating interest
share of all past exploration costs incurred on the Tarapur exploration block.
As at December 31, 2006, the amount of US$3,972,765 has been included in
Oil and
Gas Interests, not subject to depletion on our Balance Sheet for our PI share
of
costs incurred in the previous drilling of eight exploration wells and a
recently completed 500 sq km 3-D seismic acquisition program. Estimated total
capital expenditures we will be required to contribute to exploration activities
on this block over the period ending November 22, 2007 based on our 20% PI
will
be approximately $2.7 million.
Ankleshwar
Block
With
respect to the Ankleshwar Block, as at April 13, 2007, GSPC as operator has
completed a 448 sq km 3-D seismic acquisition program. Processing and
interpretation of this 3-D seismic data along with the reprocessing of 2-D
seismic data is currently ongoing.
Estimated
total capital expenditures we will be required to contribute to the exploration
activities on this block during the period April 1, 2007 and March 31, 2008,
which we anticipate will include the drilling of 8 of the 14 exploratory
wells,
based on our 10% PI will be approximately $2.7 million.
Our
Deccan Syneclise Basin Agreements
DS
03 Block
On
September 23, 2005, we signed a PSC with respect to this onshore DS 03 Block.
The PSC covers an area of approximately 3,155 sq kms (779,618 acres) and
was
awarded under NELP-V. We hold a 100% PI in this block and are the operator.
The
PSC provides that the exploration activities are to be conducted in three
phases
commencing September 4, 2006 with the first phase covering a period of 3.0
years, the second phase covering a period of 2.0 years and the last phase
covering a period of 2.0 years, for a maximum total duration of 7 years for
all
three phases.
The
work
commitment under the first phase is to complete a gravity magnetic and
geochemical survey and acquire an aero magnetic survey of 12,000 LKMs. If
we
elect to proceed to the second phase, we are to acquire 500 LKMs of 2-D seismic
and drill 1 exploration well. During the third phase, if we elect to proceed,
we
are to acquire 250 sq kms of 3-D seismic and drill 2 exploratory
wells.
DS
04 Block
On
March
2, 2007, we signed a PSC with respect to this onshore DS 04 Block. The PSC
covers an area of approximately 2,649 sq km (654,582 acres) and was awarded
under NELP-VI. We hold a 100% PI in this block and are the operator. The
exploration phase for this PSC extends for a term of up to 8 years and will
commence upon the date the PEL is issued. The Phase I work commitment which
covers a period of 4 years, consists
of conducting a gravity and magnetic and geochemical survey, as well as a
seismic acquisition program consisting of 325 LKM of 2-D seismic. We further
committed to drill 10 core holes to a depth of approximately 500
meters.
The
Phase II work commitments which cover a period of 4 years, consists of a
seismic
acquisition program consisting of 500 LKM of 2-D seismic and 200 sq kms of
3-D
seismic. We further committed to drill 1 exploratory well to a depth of 2,000
meters.
Our
Deccan Syneclise Basin Exploration Activities
DS
03 Block
With
regard to this DS 03 Block, at April 13, 2007, we as the operator have commenced
our Phase I commitment work program. The work program consists of a gravity
magnetic and geochemical survey, geological modeling and a technical assessment
of the block and the acquisition of 12,000 LKM’s and an aero magnetic survey
prior to September 3, 2009.
We
estimate our exploration costs to be approximately $400,000 over the twelve
month period April 1, 2007 to March 31, 2008.
DS
04 Block
We,
as
operator for this DS 04 Block are in the process of applying for the PEL
on this
DS 04 Block, which when issued will allow us to commence the Phase I commitment
work program.
We
will
be required to fund our 100% proportionate share of the costs incurred in
these
activities estimated to be approximately US$1.2 million over the four years
of
the first phase of the work commitment.
Our
Rajasthan Basin Agreements
RJ
Block 20
On
March
2, 2007, we, along with our joint venture partner, OIL, signed a PSC with
respect to this onshore RJ Block 20. The PSC covers an area of approximately
2,196 sq km (542,643 acres) and was awarded under NELP-VI. We hold a 25%
PI in
this block with OIL as operator holding the remaining 75% PI. The exploration
phase for this PSC extends for a term of up to 7 years and will commence
upon
the date the PEL is issued. The Phase I work commitment which covers a period
of
4 years, is to reprocess 463 LKM of 2-D seismic; conduct a gravity and magnetic
and geochemical survey; acquire, process and interpret 250 LKM of 2-D seismic
and 700 sq kms of 3-D seismic; and drill a total of 12 exploratory wells
between
2,000 and 2,500 meters. Phase II work commitment which covers a period of
3
years is to drill one well to 2,500 meters.
RJ
Block 21
On
March
2, 2007, we, along with our joint venture partner, OIL and Hindustan Petroleum
Corporation Limited ("HPCL") signed a PSC with respect to this onshore RJ
Block
21. The PSC covers an area of approximately 1,330 sq km (328,650 acres) and
was
awarded under NELP-VI. We hold a 25% PI in this block, OIL as operator holds
a
60% PI and HPCL holds the remaining 15%PI. The exploration phase for this
PSC
extends for a term of up to 7 years and will commence upon the date the PEL
is
issued. The
Phase
I work commitment which covers a period of 4 years, is to reprocess 463 LKM
of
2-D seismic; conduct a gravity and magnetic and geochemical survey; acquire,
process and interpret 310 LKM of 2-D seismic and 611 sq kms of 3-D seismic;
and
drill a total of 8 exploratory wells between 2,000 and 2,500 meters. Phase
II
work commitment which covers a period of 3 years is to drill one well to
2,000
meters.
Our
Rajasthan Basin Exploration Activities
OIL,
as
operator for both these exploration blocks is in the process of applying
for the
PEL, which when issued will allow the parties to commence the Phase I work
program commitments.
We
will
be required to fund our 25% proportionate share of the costs incurred on
both
these blocks which is estimated to be approximately US$18.3 million over
the
four years of the first phase of the work commitments for both
blocks.
Additional
Terms of Our Production Sharing Contracts
General
Except
for the size and location of the exploration blocks and the work programs
to be
conducted, the PSC’s contain substantially similar terms. Under the PSCs, the
GOI has granted to the parties the right to engage in oil and natural gas
exploration activities on the exploration blocks for specified terms of years
with each contract setting forth the exploration activities to be conducted
over
periods of years in two or three phases.
The
contracts contain restrictions on the assignment of a PI, including a change
in
control of a party, without the consent of the GOI, subject to certain
exceptions which include, among others, a party encumbering its interest
subject
to certain limitations.
Each
of
the ventures is managed by a management committee representing the parties
to
the agreement, including the GOI. The contracts contain various other
provisions, including, among others, obligations of the parties to maintain
insurance, the maintenance of books and records, confidentiality, the protection
of the environment, arbitration of disputes, matters relating to income taxes
on
the parties, royalty payments, and the valuation of hydrocarbons produced.
The
Indian domestic market has the first call on natural gas produced. The contracts
are interpreted under the laws of India.
Relinquishment
on our Existing Blocks
Under
each of these contracts, if the parties elect to continue into the second
exploratory phase, the contracts provide that the parties retain up to 75%
of
the original contract area, including any developed areas and areas of
discoveries of hydrocarbons, and relinquish the remainder. Similarly, if
the
parties elect to continue into the third exploration phase, the contracts
provide that the parties retain up to 50% of the original contract area,
including any developed areas and areas of discovery of hydrocarbons, and
relinquish the remainder. At the end of the third exploration phase, only
developed areas and areas of discoveries shall be retained.
Relinquishment
on the Newly Awarded NELP-VI Blocks
Under
each of these contracts, if the parties elect to continue into the second
exploratory phase, the contracts provide that the parties shall have the
option
to relinquish a part of area in simple geometrical shape, such area to be
relinquished shall not be less than 25% of the original contract. At the
end of
the second exploration phase, the parties shall retain the balance which
includes any developed areas and areas of discoveries.
Procedure
for Allocation of Costs After a Discovery
These
PSC’s contain provisions relating to procedures to be followed once a discovery
of hydrocarbons is determined to have been made within the exploration block
and
for the further development of that discovery. Following the completion of
a
development plan for a discovery, the parties are to apply to the relevant
government entity for a lease with respect to the area to be developed with
an
initial term of 20 years for the lease. The GOI and the other parties to
the PSC
are allocated, after deduction of the costs of exploration, development,
and
production to be recovered, percentages of any remaining production with
the GOI
allocated between 20% to 40% of the production from the KG Offshore Block
and
Ankleshwar Block, 30% to 55% of the production from the Mehsana Block and
Sanand/Miroli Blocks and 10% to 30% of the production from the DS 03 Block.
The
GOI allocation of the newly awarded blocks under NELP-VI is between 91% to
9% of
the production from the KG Onshore Block, the RJ Block 20 and RJ Block 21
and
between 85% to 15% for the DS 04 Block. The balance of the production is
to be
allocated to the other joint venture participants in proportion to their
participating interests.
Bank
Guarantees
The
contracts contain provisions whereby the joint venture participants must
provide
the GOI a bank guarantee in the amount of 35% of the participant's share
of the
minimum work program for a particular Phase, to be undertaken during the
year.
This work program to be undertaken is presented annually to the management
committee for approval for the period April 1 through March 31. The work
programs for the year April 1, 2007 through March 31, 2008 and their related
budgets have been approved for our six existing PSCs, but have not yet been
approved or the four newly awarded PSCs under NELP-VI to which we are a party
and, accordingly, our estimates as to capital expenditures pursuant to these
NELP-VI PSCs for the twelve months ended March 31, 2008 and beyond are subject
to revision when the budget is approved and thereafter during the twelve-month
period.
Other
Material Oil and Gas Agreements
Our
Carried Interest Agreement
Pursuant
to an agreement we entered into with GSPC dated August 27, 2002, we, along
with
RGM, a Mauritius corporation wholly owned by Mr. Jean Paul Roy, our President,
CEO, Director and principal stockholder, have a carried interest ("CI") in
the
exploration activities conducted by the parties on the KG Offshore Block.
Under
the terms of the Carried Interest Agreement, ("CIA") we, and RGM are carried
by
GSPC for 100% of our share of any costs during the exploration phase prior
to
the start date of initial commercial production. However, our share and the
share of RGM of any capital costs incurred during the development phase will
be
paid back to GSPC out of production without interest over the projected
production life or ten years whichever is less. We are not entitled to any
share
of production until GSPC has recovered our share and the share of RGM for
the
costs and expenses that were paid by GSPC.
Our
Participating Interest Agreement
On
March
27, 2003, we entered into a Participating Interest Agreement (“PIA”) with RGM,
whereby we assigned and hold in trust for RGM, subject to GOI consent, 50%
of
the benefits and obligations of the PSC on the KG Offshore Block and the
CIA
leaving us with a net 5% participating interest in the PSC on the KG Offshore
Block and a net 5% CI in the CIA. Under the terms of the PIA, until the GOI
consent is obtained, we retain the exclusive right to deal with the other
parties to the PSC on the KG Offshore Block and the CIA and are entitled
to make
all decisions regarding the interest assigned to RGM and RGM agreed to be
bound
by and responsible for the actions taken by, obligations undertaken and costs
incurred by us in regard to RGM's interest and to be liable to us for its
share
of all costs, interests, liabilities and obligations arising out of or relating
to the RGM interest. RGM agreed to indemnify us against any and all costs,
expenses, losses, damages or liabilities incurred by reason of RGM's failure
to
pay the same. Subject to obtaining the government consent to the assignment,
RGM
is entitled to all income, receipts, credits, reimbursements, monies receivable,
rebates and other benefits in respect of its 5% interest which relate to
the PSC
on the KG Offshore Block. We
have a
right of set-off against sums owing to us by RGM. In the event that the Indian
government consent is delayed or denied, resulting in either RGM or us being
denied an economic benefit either party would have realized under the PIA,
the
parties agreed to amend the PIA or take other reasonable steps to assure
that an
equitable result is achieved consistent with the parties' intentions contained
in the PIA. As a consequence of this transaction we report our holdings under
the PSC on the KG Offshore Block and CIA as a net 5% PI.
Our
Oil and Gas Interests
We
are
engaged in the exploration for and development of oil and natural gas reserves.
At December 31, 2006, we have not produced any oil or natural gas and we
do not
claim any proved reserves of oil or natural gas. We have not reported any
proved
reserves of oil or natural gas to any United States Federal
authority.
We
do not
own any oil or natural gas wells as of April 13, 2007 and at that date we
have
not been granted any leases to properties under the terms of our
PSCs.
At
December 31, 2006, we participated in the commencement of drilling eleven
exploratory wells. One in each of Mehsana and Sanand/Miroli and four in Tarapur
in the Cambay Basin and five exploratory wells in the KG Offshore Block in
the
Krishna Godavari Basin.
In
the KG
Offshore Block, two wells were abandoned. Three wells were drilled and tested
and resulted in the discovery of natural gas. A sixth well, the KG#16 well
is
currently being drilled. A seventh well, the KG#28 well is also currently
being
drilled, but has been classified as an appraisal well by the management
committee for the purposes of the PSC, and not an exploratory well.
Development,
Exploration and Acquisition Expenditures
The
following table sets forth information regarding costs we incurred in our
development, exploration and acquisition activities by area as at December
31,
2006 and December 31, 2005.
|
|
December
31, 2006
|
|
December
31, 2005
|
|
|
|
US$
|
|
US$
|
|
Development
Costs
|
|
|
--
|
|
|
--
|
|
Exploration
Costs
|
|
|
|
|
|
|
|
Krishna
Godavari Basin Blocks
|
|
|
3,111,676
|
|
|
977,692
|
|
Cambay
Basin Blocks
|
|
|
6,558,315
|
|
|
1,220,511
|
|
Deccan
Syneclise Basin Blocks
|
|
|
52,747
|
|
|
18,460
|
|
Rajasthan
Basin Blocks
|
|
|
--
|
|
|
--
|
|
Acquisition
Costs
|
|
|
--
|
|
|
--
|
|
Capitalized
Interest
|
|
|
--
|
|
|
--
|
|
Total
|
|
|
9,722,738
|
|
|
2,216,663
|
|
As
at
December 31, 2006, GSPC has incurred costs of Rs 114.96 crore, or approximately
$26.1 million (December 31, 2005 - Rs 63.31 crore, or approximately $14.1
million) for exploration activities on the KG Offshore Block attributable
to us
under our CIA with GSPC of which 50% is for the account of RGM. We will not
realize cash flow from the KG Offshore Block until such time as the expenditures
attributed to us, including those expenditures made for the account of RGM
under
the CIA have been recovered by GSPC from future production revenue. Under
the
terms of the CIA, all of our proportionate share of capital costs for
exploration and development activities must be repaid to GSPC without interest
over the projected production life or ten years, whichever is less.
Acreage
Developed
Acreage
At
April
13, 2007, we hold no interests in acreage that may be deemed developed or
acreage assignable to productive wells.
Contract
Interests in Undeveloped Acreage
Under
the
terms of the ten PSCs to which we are a party, including the four newly signed
PSCs on March 2, 2007 which were awarded under the NELP-VI bidding round,
we
have an interest in approximately 3,409,313 gross acres (1,769,471 net acres).
Substantial work commitments must be performed pursuant to each of these
PSCs
before we will have any leasehold, concession or other interest in such acreage
and there can be no assurance that our exploration activities will result
in
leases being granted. Failure to fulfill work commitments or the relinquishment
of acreage upon the election to proceed to second and third phases of
exploration phases, as applicable under the terms of our PSCs, would result
in
the loss of material amounts of this acreage pursuant to the relinquishment
provisions of the PSC (see “Additional Terms of Our Production Sharing Contracts
- Relinquishment on our Existing Blocks”). No leases as to any of such acreage
have been granted and there can be no assurance that we will be granted a
leasehold or other interest in the acreage in the future. Under the terms
of the
PSCs, following the completion of a development plan for a discovery, the
parties are to apply for a lease from the relevant government authority to
the
area to be developed. Leases are to have an initial term of twenty (20) years.
All
such
acreage is located in India as follows:
|
|
Contract
Interest in Undeveloped Acreage
|
|
|
|
gross
|
|
net
|
|
Krishna
Godavari Basin Blocks
|
|
|
|
|
|
KG
Offshore
|
|
|
457,145
|
|
|
(1)
22,857
|
|
KG
Onshore
|
|
|
135,414
|
|
|
(2)
13,541
|
|
|
|
|
592,559
|
|
|
36,398
|
|
Cambay
Basin Blocks
|
|
|
|
|
|
|
|
Mehsana
|
|
|
30,888
|
|
|
3,088
|
|
Sanand/Miroli
|
|
|
70,425
|
|
|
7,043
|
|
Ankleshwar
|
|
|
110,703
|
|
|
11,070
|
|
Tarapur
|
|
|
299,245
|
|
|
(4)
59,849
|
|
|
|
|
511,261
|
|
|
81,050
|
|
Deccan
Syneclise Basin Blocks
|
|
|
|
|
|
|
|
DS
03
|
|
|
779,618
|
|
|
779,618
|
|
DS
04
|
|
|
654,582
|
|
|
654,582
|
|
|
|
|
1,434,200
|
|
|
1,434,200
|
|
Rajasthan
Basin Blocks
|
|
|
|
|
|
|
|
RJ
Block 20
|
|
|
542,643
|
|
|
135,661
|
|
RJ
Block 21
|
|
|
328,650
|
|
|
82,162
|
|
|
|
|
871,293
|
|
|
217,823
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,409,313
|
|
|
1,769,471
|
|
(1) |
excludes
acreage that is subject to the PIA with
RGM
|
(3)
|
one
square kilometer converts to 247.1054
acres
|
(4)
|
the
remaining acreage after relinquishment moving into Phase
III
|
Drilling
Activity
The
following table sets forth information as to the wells we drilled during
the
periods indicated, all of which are exploratory wells. Inasmuch as permanent
equipment has not been installed for the production of oil or gas at any
of the
wells, such wells should not be deemed to be completed wells. In the table,
"gross" refers to the total wells in which we have an interest and "net"
refers
to gross wells multiplied by our interest therein.
|
Year
Ended December 31,
|
|
2003
|
2004
|
2005
|
2006
|
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
Development
|
|
|
|
|
|
|
|
|
Productive
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
00
|
Non-
productive
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Exploratory
|
|
|
|
|
|
|
|
|
Productive
|
0
|
0
|
0
|
0
|
1.0
|
0.05
|
2.0
|
0.10
|
Non-productive
|
0
|
0
|
1.0
|
0.05
|
1.0
|
0.05
|
6.0
|
1.0
|
Additional
Plans for 2007
Our
business plans for 2007 include the possible participation in joint ventures
bidding for the award of further PSCs for exploration blocks in India and
elsewhere. As of April 13, 2007, we have no specific plans to join with others
for any specific PSCs in India and elsewhere. We expect that our interest
in any
such ventures would involve a minority PI in the venture. In addition, as
opportunities arise, we may seek to acquire minority PI in exploration blocks
where PSCs have been heretofore awarded. The acquisition of any such interests
would be subject to the execution of a definitive agreement and obtaining
the
requisite government consents and other approvals.
Hedging
Activities
At
December 31, 2006, we had not entered into any market risk sensitive
instruments; as such term is defined in Item 305 of Regulation S-K, relating
to
our operations.
Marketing
Under
the
terms of our PSCs, until India’s total production of crude oil and condensate
meets the Indian national demand, we are required to sell in the Indian domestic
market our entitlement to crude oil and condensate. When and so long as India
attains self-sufficiency in the production of crude oil and condensate, our
domestic sale obligation is suspended and we will have the right to export
our
entitlement.
The
PSCs
provide that the Indian domestic market will have the first call on natural
gas
produced from the areas that are the subject of the contracts.
The
PSCs
provide that the parties are to agree monthly on a price for crude oil which
is
intended to be on an import parity basis. Prices of natural gas are intended
to
be based on Indian domestic market prices.
Our
ability to market any production of crude oil and natural gas will be dependent
upon the existence and availability of pipeline or other gathering system,
storage facilities and an ability to transport the hydrocarbons to market.
Such
facilities are yet to be constructed.
We
are
not a party to any agreements providing for the delivery of fixed quantities
of
hydrocarbons.
Competition
We
experience competition from others in seeking to participate in joint ventures
and other arrangements to participate in exploratory drilling ventures in
India.
In addition, the ventures in which we participate experience competition
from
other ventures and persons in seeking from the GOI and, possibly others,
its
agreement to grant and enter into PSCs. Management of our company believes
that
competition in entering into such agreements with the GOI is based on the
extent
and magnitude of exploratory activities that the applicants will propose
to
undertake on the exploration blocks under consideration as well as the
applicants available capital and technical ability of the applicants to complete
such activities.
Employees
The
services of our President and Chief Executive Officer, Jean Paul Roy, are
provided pursuant to the terms of a Technical Services Agreement ("TSA")
we
entered into with Roy Group (Barbados) Inc. ("RGB"), a corporation wholly
owned
by Mr. Roy. The services of Allan J. Kent, our Executive Vice President and
Chief Financial Officer are provided in the year 2006 through D.I. Investments
Ltd., a corporation wholly owned by Mr. Kent. Messrs. Roy and Kent each devote
substantially all of their time to our affairs. Neither of such persons are
our
direct employees.
In
addition to Messrs. Roy and Kent, we employ approximately ten additional
persons
at various times and in various capacities as part time consultants to
us.
As
of
December 31, 2006, we employed three persons and two full time consultants
in
Calgary, Alberta, Canada and employed four persons in Gandhinagar, Gujarat
State, India.
Incorporation
and Organization
On
August
29, 2003, we acquired all of the issued and outstanding shares of GeoGlobal
Resources (India) Inc. ("GeoGlobal India") a corporation then wholly owned
by
Mr. Jean Paul Roy. The completion of the acquisition resulted in the issuance
and delivery by us of 34,000,000 common shares and delivery of our $2.0 million
promissory note to Mr. Roy. Of such shares, we issued and delivered 14.5
million
shares at the closing of the acquisition and 14.5 million shares were released
from escrow on August 27, 2004 upon the actual commencement of a drilling
program. The remaining 5.0 million shares continued to be held in escrow
at
December 31, 2005. These 5.0 million shares held in escrow will be released
only
if a commercial discovery is declared on the KG Offshore Block. If a commercial
discovery is not declared, the shares will not be released from escrow, but
will
be surrendered back to us. Common shares held during the term of the escrow
retain their voting rights. As a result of this transaction, Mr. Roy held
as of
the closing of the transaction approximately 69.3% of our issued and outstanding
shares. Mr. Roy was also elected our President and a Director on August 29,
2003. This transaction is considered an acquisition of GeoGlobal Resources
Inc.
(the accounting subsidiary and legal parent) by GeoGlobal India (the accounting
parent and legal subsidiary) and has been accounted for as a purchase of
the net
assets of GeoGlobal Resources Inc. by GeoGlobal India. Accordingly, this
transaction represents a recapitalization of GeoGlobal India, the legal
subsidiary, effective August 29, 2003.
As
a
consequence of this transaction, a change in control of our company may be
deemed to have occurred.
Through
late 2001, we were engaged in the creation, operation and maintenance of
a World
Wide Web-based community, known as Suite101.com, Inc. At the end of 2001,
management at that time determined to redirect activities and by mid-2002,
the
company was no longer engaged in the former Web-based activities.
We
are a
corporation organized under the laws of the State of Delaware in December
1993.
From December 1998 to January 2004, our corporate name was Suite101.com,
Inc. At
a meeting held January 8, 2004, our stockholders approved an amendment to
our
Certificate of Incorporation to change our corporate name to GeoGlobal Resources
Inc.
Item
2. Description of Property
Our
corporate head office is located at Suite #310, 605 - 1 Street SW, Calgary,
Alberta, T2P 3S9 Canada. These premises are leased for a term of one year
ending
April 30, 2007 at an annual rental of $65,565 for base rent and operating
costs.
These premises include approximately 2,927 square feet which we consider
adequate for our present activities. We are currently in negotiations to
renew
this lease at market prices for a further two year term to April 30,
2009.
On
November 21, 2006, we entered into a Memorandum of Understanding to acquire
an
office condominium of approximately 11,203 sq. ft located in Gandhinagar,
India.
A deposit of US$28,090 was paid which is reflected in the December 31, 2006
financial statements as a deposit under property and equipment. A formal
agreement relating to the purchase of the condominium has not yet been
executed.
Our
interests in oil and gas properties are described under Item 1 - Description
of
Business.
Item
3. Legal Proceedings
There
are
no legal proceedings pending against us.
Item
4. Submission of Matters to a Vote of Security Holders
No
matter
was submitted during the fourth quarter of the year ended December 31, 2006
to a
vote of our securityholders through the solicitation of proxies or
otherwise.
PART
II
Item
5. Market for Common Equity & Related Stockholder
Matters
Market
Information
Our
Common Stock is quoted on the American Stock Exchange under the symbol GGR.
The
following table sets forth the high and low sales price on the American Stock
Exchange for the period January 1, 2005 through April 13, 2007.
Calendar
Quarter
|
|
High
|
|
Low
|
|
2005: First
Quarter
|
|
$1.80
|
|
$0.77
|
|
2005: Second
Quarter
|
|
$9.35
|
|
$0.89
|
|
2005: Third
Quarter
|
|
$8.60
|
|
$5.75
|
|
2005: Fourth
Quarter
|
|
$14.09
|
|
$4.90
|
|
2006: First
Quarter
|
|
$14.92
|
|
$7.00
|
|
2006: Second
Quarter
|
|
$9.87
|
|
$4.10
|
|
2006: Third
Quarter
|
|
$6.55
|
|
$3.28
|
|
2006: Fourth
Quarter
|
|
$9.14
|
|
$5.05
|
|
2007: First
Quarter
|
|
$8.10
|
|
$5.27
|
|
2007: Second
Quarter (up to April 13, 2007)
|
|
$6.12
|
|
$5.80
|
|
On
April
13, 2007, the closing sales price for our Common Stock, as reported on the
American
Stock Exchange was $6.00.
Holders
As
of
April 13, 2007, we had approximately 183 shareholders of record.
Dividends
We
did
not pay any dividends on our Common Stock during the years ended December
31,
2006 and 2005 and we do not intend to pay any dividends on our Common Stock
for
the foreseeable future. Any determination as to the payment of dividends
on our
Common Stock in the future will be made by our Board of Directors and will
depend on a number of factors, including future earnings, capital requirements,
financial condition and future prospects as well as such other factors as
our
Board of Directors may deem relevant.
Recent
Sales of Unregistered Securities
There
were no sales of unregistered securities in 2006.
Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
No
purchases of shares of our Common Stock were made by us or on our behalf
or by
any "affiliated purchaser", as defined in Rule 10b-18(a)(3) under the U.S.
Securities Exchange Act of 1934, as amended, during the quarter ended December
31, 2006.
Item
6. Management’s Discussion and Analysis or Plan of
Operation
General
The
following discussion and analysis of our financial condition or plan of
operation should be read in conjunction with, and is qualified in its entirety
by, the more detailed information including our Financial Statements and
the
related Notes appearing elsewhere in this Annual Report. This Annual Report
contains forward-looking statements that involve risks and uncertainties.
Our
actual results may differ materially from the results and business plans
discussed in the forward-looking statements. Factors that may cause or
contribute to such differences include those discussed below in "Risk Factors,"
as well as those discussed elsewhere in this Annual Report.
Our
Business Activities
We
are
engaged, through subsidiaries and joint ventures in which we are a participant,
in the exploration for and development of oil and gas reserves. We initiated
these activities in 2003. Through December 31, 2006, our activities have
been
undertaken in locations where we and our joint venture participants have
been
granted exploration rights pursuant to Production Sharing Contract's ("PSCs")
entered into with the Government of India ("GOI").
At
April
13, 2007, we have not reported any proved reserves of oil or natural gas.
We
have entered into ten PSCs. Each PSC relates to a separate drilling block
onshore or offshore India and each provides for multi-year and multi-phase
exploration and drilling activities. Exploration and development activities
pursuant to the terms of these agreements are expected to continue throughout
2007.
Statements
of Operations
Oil
and Gas Operations
Our
oil
and gas exploration activities commenced at our inception on August 21, 2002.
We
have not since our inception earned any revenues from these
operations.
Years
ended December 31, 2006 and 2005
During
the year ended December 31, 2006, we had expenses of $2,897,503 compared
with
expenses of $1,011,601 during the year ended December 31, 2005. This increase
is
primarily the result of the increased scale of our participation in oil and
gas
exploration activities, with commensurate additions to the office infrastructure
and the initial year of accounting for stock-based compensation
expense.
Our
general and administrative expenses increased to $1,406,000 from $495,326.
Of
this increase, $563,551 reflects the adoption of FAS 123(R) pursuant to which
we
are is required to recognize compensation costs for stock-based arrangements
with employees and consultants effective January 1, 2006. These general and
administrative expenses include costs related to the corporate head office
including administrative salaries and services, rent and office costs,
insurance, American Stock Exchange listing and filing fees and transfer agent
fees and services. Our consulting fees increased to $1,190,919 during the
year
ended December 31, 2006 from $265,446 in the prior year. Of this increase,
$626,625 is attributable to the adoption of FAS 123(R) effective January
1,
2006. These consulting fees include $70,000 (2005 - $62,000) paid under our
Technical Services Agreement with a corporation wholly owned by Mr. Roy and
other fees and expenses we incurred in employing various technical and corporate
consultants who advised us on a variety of matters. Professional fees increased
to $251,261 during the year ended December 31, 2006 from $201,298 during
the
year ended December 31, 2005. Professional fees include those paid to our
auditors for pre-approved audit, accounting and tax services and fees paid
to
our legal advisors primarily for services provided with regard to filing
various
periodic reports and other documents and reviewing our various oil and gas
and
other agreements. In addition, costs associated with initiating the modeling,
testing and documenting internal controls as required by Section 404 of the
Sarbanes Oxley Act were incurred during the latter part of the year. This
resulted in an increase of $49,963 in the fees paid to our auditors, accountants
and legal counsel for additional work incurred during the year ending December
2006 as compared to 2005.
During
the year ended December 31, 2006, depreciation decreased slightly to $49,323
from $49,531 during the year ended December 31, 2005.
Our
other
expenses and income during the year ended December 31, 2006 resulted in income
of $1,746,813 versus $530,621 for the same period in 2005. Included in other
expenses and income is a foreign exchange loss of $4,737 compared to a gain
in
2005 of $319. During the previous year ended December 31, 2005, we recovered
fees and costs of $25,900 resulting from services provided and billed out
to the
GSPC and a gain on the sale of computer equipment of $42,228. No such expense
recoveries or asset dispositions occurred during the year ended December
31,
2006. Our increase in interest income to $1,751,550 from $462,174 for the
year
ended December 31, 2005 is a result of the significant increase in the size
of
our cash balances we held during a full year in 2006 as compared to a partial
year in 2005 as well as an increase in the US prime rate.
Net
loss
for the year ended December 31, 2006 was $1,150,690 versus a net loss of
$480,980 in 2005. This result was mainly attributable to the adoption of
FAS 123
(R) requiring the Company to recognize compensation costs for the stock-based
compensation arrangements with employees and consultants effective January
1,
2006 net of the increase in interest earned during the most recent year.
We
capitalized overhead costs directly related to our exploration activities
in
India. During the year ended December 31, 2006, these capitalized overhead
costs
were $2,133,984 as compared to $469,268 during the year ended December 31,
2005.
This increase includes capitalized stock-based compensation of $766,689
recognized for the first time in 2006, as a consequence of our adoption of
FASB
123(R) effective January 2006, with the remaining increase being consistent
with
the increased scale of our participation in oil and gas exploration
activities.
Years
ended December 31, 2005 and 2004
During
the year ended December 31, 2005, we had expenses of $1,011,601 compared
with
expenses of $912,092 during the year ended December 31, 2004. This increase
is
primarily the result of the increased scale of our participation in oil and
gas
exploration activities.
Our
general and administrative expenses increased to $495,326 from $451,788.
These
general and administrative expenses include costs related to the corporate
head
office including administrative salaries and services, rent and office costs,
insurance, American Stock Exchange listing and filing fees and transfer agent
fees and services. Our consulting fees increased to $265,446 during the year
ended December 31, 2005 from $237,615 in the prior year. These consulting
fees
reflect $62,000 (2004 - $50,000) paid under our Technical Services Agreement
("TSA") with Roy Group (Barbados) Inc. ("RGB"), a corporation wholly owned
by
Mr. Roy and other fees and expenses we incurred in employing various technical
and corporate consultants who advised us on a variety of matters. Professional
fees increased to $201,298 during the year ended December 31, 2005 from $161,381
during the year ended December 31, 2004. Professional fees include those
paid to
our auditors for pre-approved audit, accounting and tax services and fees
paid
to our legal advisors primarily for services provided with regard to filing
various periodic reports and other documents and reviewing our various oil
and
gas and other agreements. The increase is attributable to an approximately
$40,000 increase in our fees paid to our auditors for additional work incurred
during the year ending December 2005 as compared to 2004.
During
the year ended December 31, 2005, depreciation decreased to $49,531 from
$61,308
during the year ended December 31, 2004.
Our
other
expenses and income during the year ended December 31, 2005 resulted in income
of $530,621 versus $44,596 for the same period in 2004. Included in other
expenses and income is a foreign exchange gain of $319 compared to a loss
in
2004 of $3,495. During the year ended December 31, 2005, we recovered fees
and
costs of $25,900 (2004 - $16,500) resulting from services provided and billed
out to the GSPC. Other expenses and income include a gain on the sale of
computer equipment of $42,228 during the year ended December 31, 2005. Our
increase in interest income to $462,174 from $31,591 for the year ended December
31, 2004 is a result of the significant increase in the size of our cash
balances we held during the year as compared to 2004 as well as an increase
in
the US prime rate.
Reflecting
the increase in our interest income during the year ended December 31, 2005
as
compared to the year ended December 31, 2004, we reduced our net loss to
$480,980 compared to a net loss of $867,496 in 2004.
We
capitalized overhead costs directly related to our exploration activities
in
India. During the year ended December 31, 2005, these capitalized overhead
costs
were $469,268 as compared to $336,535 during the year ended December 31,
2004.
This increase is consistent with the increased scale of our participation
in oil
and gas exploration activities.
Liquidity
and Capital Resources
Years
ended December 31, 2006 and 2005
Our
net
cash used in operating activities during the year ended December 31, 2006
was
$245,071 as compared to $165,558 for the year ended December 31, 2005. This
increase is mostly the result of an increase in our exploration activities
net
of our interest earned on our cash balances for the year ended December 31,
2006
as compared to 2005.
Cash
used
by investing activities during the year ended December 31, 2006 was $8,267,169
as compared to $1,679,352 during the year ended December 31, 2005. This increase
is a result of the increased scale of our participation in oil and gas
exploration activities. Funds of $6,739,386 were used for exploration activities
and $142,924 for the acquisition of property and equipment in 2006 as compared
to $1,578,124 and $36,826 in 2005. These acquisitions included computer and
office equipment totaling $114,835 plus a deposit on our office condominium
in
India of $28,090. As well we incurred $6,739,386 as our share of exploration
costs related to our PSCs for our oil and gas interests in India. The increase
in restricted cash of $3,198,284 represents additional term deposits we made
in
2006 as compared to $185,689 in 2005 which are used as collateral for letters
of
credit given to the GOI as minimum work commitment guarantees on a total
of six
exploration blocks at December 31, 2006.
Cash
provided by financing activities for the year ended December 31, 2006 was
$4,837,830 as compared to cash provided in financing activities of $33,462,700
during the year ended December 31, 2005. This consisted of $4,922,640 from
the
issuance of 3,254,000 shares of common stock on the exercise of options and
purchase warrants issued from our 2003 financing less share issuance costs
of
$74,010.
At
December 31, 2006, our cash and cash equivalents were $32,362,978 (December
31,
2005 - $36,037,388). The majority of these funds are currently held as US
funds
in our bank accounts and in term deposits earning interest based on the US
prime
rate.
Years
ended December 31, 2005 and 2004
Our
net
cash used in operating activities during the year ended December 31, 2005
was
$165,558 as compared to $1,075,637 for the year ended December 31, 2004.
This
decrease is mostly as a result of our reduced net loss for the year ended
December 31, 2005 as compared to 2004.
Cash
used
by investing activities during the year ended December 31, 2005 was $1,679,352
as compared to $748,222 during the year ended December 31, 2004. This increase
is a result of the increased scale of our participation in oil and gas
exploration activities. Funds of $1,615,000 were used for exploration activities
and the acquisition of property and equipment as compared to $547,357 in
2004.
The property and equipment acquired included computer and office equipment
totaling $36,876 with the balance of $1,578,124 incurred as exploration costs
for our oil and gas interests in India. The restricted cash of $185,689
represents additional term deposits we made in 2005 which are used as collateral
for two letters of credit given to the GOI as a minimum work commitment
guarantee on the Cambay Blocks.
Cash
provided by financing activities for the year ended December 31, 2005 was
$33,462,700 as compared to cash used in financing activities of $786,450
during
the year ended December 31, 2004. As further described below, during the
year
ended December 31, 2005, we completed the sale of 3,252,400 Units of our
securities at $6.50 per Unit, together with a concurrent sale of an additional
1,000,000 Units on the same terms, for aggregate cash gross proceeds of
$27,640,600. This amount combined with cash of $7,352,985 which was provided
from the issuance of 3,494,400 shares of common stock on the exercise of
options, purchase warrants and broker warrants issued in our 2003 financing,
less financing costs of $1,541,685 incurred in connection with the 2005
financing accounts for the increase in our cash and cash equivalents. Cash
provided by financing activities for the year ended December 31, 2005 in
the
amount of $786,450 included the full repayment of $1,000,000 of the note
payable, net of $213,550 realized from the issuance of 154,100 shares of
common
stock on the exercise of options and broker warrants.
The
sale
of the 3,252,400 Units of securities was completed in September 2005. The
securities were sold at $6.50 per Unit, together with a concurrent sale of
an
additional 1,000,000 Units on the same terms, for aggregate gross cash total
proceeds of $27,640,600.
Each
Unit
is comprised of one common share and one half of one warrant. One full warrant
("2005 Purchase Warrant") entitles the holder to purchase one additional
common
share for $9.00, for a term of two years expiring September 2007. The 2005
Purchase Warrants are subject to accelerated expiration in the event that
the
price of the Company's common shares on the American Stock Exchange is $12.00
or
more for 20 consecutive trading days, the resale of the shares included in
the
Units and issuable on exercise of the 2005 Purchase Warrants has been registered
under the US Securities Act of 1933, as amended (the “Act”), and the hold period
for Canadian subscribers has expired. In such events, the warrant term will
be
reduced to 30 days from the date of issuance of a news release announcing
such
accelerated expiration of the warrant term.
Costs
of
$1,541,685 were incurred in issuing shares in these transactions which included
a
fee of
$1,268,436 paid to Jones Gable & Company Limited with respect to the sale of
the 3,252,400 Units, and, in addition, Compensation Options were issued to
Jones
Gable & Company Limited entitling it to purchase an additional 195,144 Units
at an exercise price of $6.50 per Unit through their expiration in September
2007. Compensation Options are also subject to accelerated expiration on
the
same terms and conditions as the warrants issued in the transaction.
At
December 31, 2005, our cash and cash equivalents were $36,037,388 (December
31,
2004 - $4,419,598). The majority of these funds are currently held as US
funds
in our bank accounts and in term deposits earning interest based on the US
prime
rate.
The
KG Offshore Block and Our Carried Interest Agreement
At
December 31, 2006, GSPC, the Operator of the KG Offshore Block, has expended
on
exploration activities approximately $26.1 million attributable to us under
the
CIA as compared to $14.1 million at December 31, 2005. Of this amount, 50%
is
for the account of RGM. Under the terms of the CIA, GeoGlobal and RGM are
carried by GSPC for 100% of all our share of any costs during the exploration
phase on the KG Offshore Block prior to the start date of initial commercial
production.
Under
the
terms of the PSC, GSPC is committed to expend further funds for the exploration
of and drilling on the KG Offshore Block. Preliminary estimates were that
these
expenditures attributable to us will total approximately $22.0 million over
the
6.5 year term of the PSC. Additional drilling costs incurred in drilling
to
depths in excess of 5,000 meters versus shallower depths as originally
anticipated, as well as the testing and completion costs of these wells,
has
resulted in our actual costs significantly exceeding our original budgeted
expenditures. The estimated annual budget for costs to be incurred by GSPC
for
the twelve month period April 1, 2007 to March 31, 2008 attributable to us
under
the CIA is approximately $50.4 million. Of this amount, 50% is for the account
of RGM. We are unable to estimate the amount of additional expenditures GSPC
will make attributable to us prior to the start date of initial commercial
production under the CIA or when, if ever, any commercial production will
commence. As provided in the CIA, we will be required to bear the expenditures
attributable to us after the start date of initial commercial production
on the
KG Offshore Block.
We
will
not realize cash flow from the KG Offshore Block until such time as the
expenditures attributed to us, including those expenditures made for the
account
of RGM under the CIA have been recovered by GSPC from future production revenue.
Under the terms of the CIA, all of our proportionate share of capital costs
for
exploration and development activities must be repaid to GSPC without interest
over the projected production life or ten years, whichever is less.
KG
Onshore Block Agreement
Under
the
PSC for the KG Onshore Block, the Phase I work commitment consists of
reprocessing 564 LKM of 2-D seismic, conducting a gravity and magnetic and
geochemical survey, as well as a seismic acquisition program consisting of
548
sq km of 3-D seismic. This Phase I commitment further consists of the drilling
of 12 exploration wells to various depths between 2,000 and 5,000 meters.
The
Company will be required to fund its 10% proportionate share of the costs
incurred in these activities estimated to be approximately US$8.5 million
over
the four years of the first phase of the work commitment with respect to
a
10%participating interest in the block and approximately US$21.3 million
with
respect to a 25% participating interest in the block.
Cambay
Block Agreements
We
originally committed to expend a minimum aggregate of approximately $2.5
million
for exploration activities under the terms of the PSCs on the Mehsana and
Sanand/Miroli Cambay Blocks over a period of 6 years. At December 31, 2006,
we
have incurred costs of approximately $1.0 million with respect to the Mehsana
Block and approximately $1.1 million with respect to the Sanand/Miroli Block.
We
estimate that our expenditures for exploration activities during the 2007
fiscal
year will be approximately $2.3 million on the Mehsana Block and approximately
$2.6 million on the Sanand/Miroli Block based upon our 10% PI in these
PSCs.
At
December 31, 2006, we have provided to the GOI three irrevocable letters
of
credit totaling $2,216,445 (Mehsana US$711,445, Sanand/Miroli US$905,000
and
Ankleshwar US$600,000) (December 31, 2005 - $392,485) secured by our term
deposits in the same amount. These letters of credit serve as guarantees
for the
performance of the minimum work commitments for the budget period April 1,
2006
to March 31, 2007 of Phase I of these Cambay Blocks.
As
the
holder of a participating interest in the Tarapur Block, we are required
to fund
a 20% share of all exploration and development costs incurred on the exploration
block. To December 31, 2006, we have incurred costs of approximately $4.0
million under the terms of our agreement with GSPC. We originally committed
to
expend an aggregate of approximately $1.2 million for exploration activities
under the terms of the agreement entered into covering the Tarapur block
over
the period ending November 22, 2007. It is expected however, that with the
increase in GSPC’s current drilling activities, we have increased our estimated
expenditures to $2.7 million over the period April 1 to November 22, 2007.
At
December 31, 2006, we provided to the GOI an irrevocable letter of credit
in the
amount of US$1,200,000 for the Tarapur Block secured by a term deposit of
the
Company in the same amount. This letter of credit serves as a guarantee for
the
performance of the exploration work commitment for the Tarapur Block for
the
budget period also ending March 31, 2007. Under the terms of the agreement,
the
Company will be required to keep in force a Financial and Performance Guarantee
in an amount sufficient to secure its performance under the Tarapur PSC.
Under
the
terms of our PSC for the Ankleshwar Block, we have committed to expend
approximately $1.7 million for exploration activities over a period of seven
years. As at December 31, 2006, we have incurred costs of approximately $400,000
on the Ankleshwar Block. We estimate our expenditures for exploration activities
during the period April 1, 2007 to March 31, 2008 will be approximately $2.7
million on Ankleshwar Block.
The
Deccan Syneclise Block Agreements
Under
the
terms of the PSC for the DS 03 Block, we have committed to expend approximately
$9.6 million for exploration activities over a period of seven years. As
at
December 31, 2006, we have incurred costs of approximately $50,000 on this
block. We estimate our expenditures for exploration activities during the
period
April 1, 2007 to March 31, 2008 will be approximately $400,000 based upon
our PI
in this PSC.
Under
the
PSC for the DS 04 Block, the Phase I work commitment consists of conducting
a
gravity and magnetic and geochemical survey, as well as a seismic acquisition
program consisting of 325 LKM of 2-D seismic. We further committed to drill
10
core holes to a depth of approximately 500 meters. We will be required to
fund
our 100% proportionate share of the costs incurred in these activities estimated
to be approximately US$1.2 million over the four years of the first phase
of the
work commitment.
Rajasthan
Block Agreements
The
combined Phase I work commitments under the PSCs for RJ Block 20 and RJ Block
21
consist of reprocessing of a total 926 LKM of 2-D seismic, conducting a gravity
and magnetic and geochemical survey, as well as a seismic acquisition program
consisting of 560 LKM of 2-D seismic and 1,311 sq km of 3-D seismic. The
combined Phase I commitments further consist of drilling a total of 20
exploration wells over both blocks to various depths between 2,000 and 2,500
meters. We will be required to fund our 25% proportionate share of the costs
incurred in these activities estimated to be approximately US$18.3 million
over
the four years of the first phase of the work commitments.
Plan
of Operations in 2007
We
expect
our exploration and development activities pursuant to the PSCs we are parties
to will continue throughout 2007 in accordance with the terms of those
agreements. In addition, we may seek to participate in joint ventures bidding
for the award of further PSCs for exploration blocks expected to be awarded
by
the GOI in the future. As of April 13, 2007, we have no specific plans to
join
with others in bidding for any specific PSCs in India. We expect that our
interest in any such ventures would involve a minority PI in the venture.
In
addition, as opportunities arise, we may seek to acquire minority PI's in
exploration blocks where PSCs have been heretofore awarded by the GOI. The
acquisition of any such interests would be subject to the execution of a
definitive agreement and obtaining the requisite government consents and
other
approvals.
We
may
during the year 2007 seek to participate in joint venture bidding for the
acquisition of oil and gas interests in other international countries. As
of
April 13, 2007, we have not been awarded any such interests.
Depending
upon the scope of our activities during the year 2007, we may require additional
capital for the possible acquisition of further minority PIs in PSCs in drilling
blocks heretofore awarded and that we may hereafter propose to enter into
in
India and possibly elsewhere. We believe it can be expected that our interest
in
such ventures would be a PI. As of April 13, 2007, the scope of any possible
such activities has not been definitively established and, accordingly, we
are
unable to state the amount of any funds that may be required for these purposes.
As the holder of a PI in any such possible activities, it can be expected
that
we will be required to contribute capital to any such ventures in proportion
to
our percentage interest. No specific plans or arrangements have been made
to
raise additional capital and we have not entered into any agreements in that
regard. We expect that if we seek to raise additional capital it will be
through
the sale of equity securities. As of April 13, 2007, we are unable to estimate
the terms on which any such capital may be raised, the price per share or
possible number of shares involved.
We
believe that our available cash resources will be sufficient to meet all
our
expenses and cash requirements during the year ended December 31, 2007 for
our
present level of operations. We do not expect to have any significant change
in
2007 in our number of employees.
Critical
Accounting Policies and Estimates
The
Company’s Significant Accounting Policies are outlined in Note 2 to our
Consolidated Financial Statements in Item 7 of this Annual Report. In the
ordinary course of business, we have made a number of estimates and assumptions
relating to the reporting of our consolidated financial position and the
consolidated results of our operations and our cash flows in conformity with
U.S. generally accepted accounting principles. Actual results could differ
significantly from those estimates under different assumptions and conditions.
We believe that the following discussion addresses our most critical accounting
policies.
Property
and equipment
The
Company follows the full cost method of accounting for its petroleum and
natural
gas operations. Upon the commencement of economic production quantities of
petroleum and natural gas, depletion of our exploration costs in India included
in Property and Equipment, will be provided on a country-by-country basis
using
the unit-of-production method based upon estimated proven petroleum and natural
gas reserves. The costs of acquiring and evaluating our unproven properties
in
India will not be depleted until it is determined whether or not proven reserves
are attributable to the properties, the major development projects are
completed, or impairment occurs. To date we are currently in the development
stage and have not yet found any commercial reserves in India. We are continuing
with our exploratory drilling programs in India and have no basis for impairment
of the costs incurred to date.
Recent
Accounting Standards
Accounting
for Uncertainty in Income Taxes
In
June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109,
“Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of
a tax position taken or expected to be taken in a tax return. The Interpretation
requires that the Corporation recognize in the financial statements, the
impact
of a tax position, if that position is more likely than not of being sustained
on audit, based on the technical merits of the position. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods and disclosure. The provisions of FIN 48 are effective beginning
January 1, 2007 with the cumulative effect of the change in accounting principle
recorded as an adjustment to the opening balance of deficit. The Corporation
is
currently evaluating the impact FIN 48 will have on its consolidated financial
statements.
Fair
Value Measurements
In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS
157”), which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The Company is currently
evaluating the impact that FAS 157 will have on its consolidated financial
statements.
The
Fair Value Option for Financial Assets and Financial
Liabilities
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities - Including an amendment of FASB Statement
No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates.
A
business entity is required to report unrealized gains and losses on items
for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those
fiscal
years, and is applicable beginning in the first quarter of 2008. The Company
is
currently evaluating the impact that FAS 159 will have on its consolidated
financial statements.
Cautionary
Statement For Purposes Of The "Safe Harbor" Provisions Of The Private Securities
Litigation Reform Act Of 1995
With
the
exception of historical matters, the matters discussed in this Report are
“forward-looking statements” as defined under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, that involve
risks
and uncertainties. Forward-looking statements made herein include, but are
not
limited to:
|
·
|
the
statements in this Report regarding our plans and objectives relating
to
our future operations,
|
|
·
|
plans
and objectives regarding the exploration, development and production
activities conducted on the exploration blocks in India in which
we have
interests,
|
|
·
|
plans
regarding drilling activities intended to be conducted through
the
ventures in which we are a participant, the success of those drilling
activities and our ability and the ability of the ventures to complete
any
wells on the exploration blocks, to develop reserves of hydrocarbons
in
commercially marketable quantities, to establish facilities for
the
collection, distribution and marketing of hydrocarbons, to produce
oil and
natural gas in commercial quantities and to realize revenues from
the
sales of those hydrocarbons,
|
|
·
|
our
ability to maintain compliance with the terms and conditions of
our PSCs,
including the related work commitments, to obtain consents, waivers
and
extensions from the GOI as and when required, and our ability to
fund
those work commitments,
|
|
·
|
our
plans and objectives to join with others or to directly seek to
enter into
or acquire interests in additional PSCs with the GOI and others,
|
|
·
|
our
assumptions, plans and expectations regarding our future capital
requirements,
|
|
·
|
our
plans and intentions regarding our plans to raise additional capital,
|
|
·
|
the
costs and expenses to be incurred in conducting exploration, well
drilling, development and production activities and the adequacy
of our
capital to meet our requirements for our present and anticipated
levels of
activities are all forward-looking statements.
|
These
statements appear, among other places, under the captions "Management's
Discussion and Analysis or Plan of Operations" and "Risk Factors". If our
plans
fail to materialize, your investment will be in jeopardy.
|
·
|
We
cannot assure you that our assumptions or our business plans and
objectives discussed herein will prove to be accurate or be able
to be
attained.
|
|
·
|
We
cannot assure you that any commercially recoverable quantities
of
hydrocarbon reserves will be discovered on the exploration blocks
in which
we have an interest.
|
|
·
|
Our
ability to realize revenues cannot be assured. Our ability to successfully
drill, test and complete producing wells cannot be assured.
|
|
·
|
We
cannot assure you that we will have available to us the capital
required
to meet our plans and objectives at the times and in the amounts
required
or we will have available to us the amounts we are required to
fund under
the terms of the PSCs we are a party to.
|
|
·
|
We
cannot assure you that we will be successful in joining any further
ventures seeking to be granted PSCs by the GOI or that we will
be
successful in acquiring interests in existing ventures.
|
|
·
|
We
cannot assure you that we will obtain all required consents, waivers
and
extensions from the GOI as and when required to maintain compliance
with
our PSCs and that we may not be adversely affected by any delays
we may
experience in receiving those consents, waivers and
extensions.
|
|
·
|
We
cannot assure you that the outcome of testing of one or more wells
on the
exploration blocks under our PSCs will be satisfactory and result
in a
commercially-productive wells or that any further wells drilled
will have
commercially-successful results.
|
Our
inability to meet our goals and objectives or the consequences to us from
adverse developments in general economic or capital market conditions, events
having international consequences, or military or terrorist activities could
have a material adverse effect on us. We caution you that various risk factors
accompany those forward-looking statements and are described, among other
places, under the caption "Risk Factors" herein. They are also described
in our
Quarterly Reports on Form 10-QSB and 10-Q, and our Current Reports on Form
8-K.
These risk factors could cause our operating results, financial condition
and
ability to fulfill our plans to differ materially from those expressed in
any
forward-looking statements made in this Report and could adversely affect
our
financial condition and our ability to pursue our business strategy and
plans.
Risk
Factors
An
investment in shares of our common stock involves a high degree of risk.
You
should consider the following factors, in addition to the other information
contained in this Annual Report, in evaluating our business and current and
proposed activities before you purchase any shares of our common stock. You
should also see the "Cautionary Statement for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995" regarding
risks and uncertainties relating to us and to forward-looking statements
in this
Annual Report.
There
can
be no assurance that the exploratory drilling to be conducted on the exploration
blocks in which we hold an interest will result in any discovery of reserves
of
hydrocarbons or that any hydrocarbons that are discovered will be in
commercially recoverable quantities. In addition, the realization of any
revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered.
The
presence of hydrocarbon reserves on contiguous properties is no assurance
or
necessary indication that hydrocarbons will be found in commercially marketable
quantities on the exploration blocks in which we hold an interest.
Risks
Relating to Our Oil and Gas Activities
Because
We Are In the Early Stage Of Developing Our Activities, There Are Considerable
Risks That We Will Be Unsuccessful
We
are in
the early stage of developing our operations. Our only activities in the
oil and
natural gas exploration and production industry have primarily involved entering
into ten PSCs with the GOI. We have realized no revenues from our oil and
natural gas exploration and development activities and do not claim any proved
reserves of oil or natural gas. As of April 13, 2007, a venture in which
we have
a net 5% carried interest has drilled and abandoned two wells, has drilled,
tested and cased three wells and is currently drilling two wells. Two ventures
that we have a 10% participating interest have drilled and abandoned two
wells,
are in the testing phase of two wells and have suspended one well. One venture
that we have a 20% PI has drilled eight wells of which three have been abandoned
and five that are either currently suspended or are being tested.
Our
current plans are to conduct the exploration and development activities on
the
areas offshore and onshore India in accordance with the terms of the PSCs
we are
a party to. There can be no assurance that the exploratory drilling to be
conducted on the exploration blocks in which we hold will result in any
discovery of hydrocarbons or that any hydrocarbons that are discovered will
be
in commercially recoverable quantities. In addition, the realization of any
revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered
and as
of April 13, 2007, there are no or limited facilities for the delivery and
storage of hydrocarbons on the areas covered by our PSCs. The presence of
hydrocarbon reserves on contiguous properties is no assurance or necessary
indication that hydrocarbons will be found in commercially marketable quantities
on the exploration blocks in which we hold an interest. Our exploration
opportunities are highly speculative and should any of these opportunities
not
result in the discovery of commercial quantities of oil and gas reserves,
our
investment in the venture could be lost.
Our
business plans also include seeking to enter into additional joint ventures
or
other arrangements to acquire interests in additional government created
and
granted hydrocarbon exploration opportunities, primarily located onshore
or in
the offshore waters of India and possibly elsewhere. Opportunities to acquire
interests in exploration opportunities will be dependent upon our ability
to
identify, negotiate and enter into joint venture or other similar arrangements
with respect to specific exploration opportunities and upon our ability to
raise
sufficient capital to fund our participation in those joint ventures or other
exploration activities. Our success will be dependent upon the success of
the
exploration activities of the ventures in which we acquire an interest and
our
ability to have adequate capital resources available at the times
required.
Our
Interest In The Production Sharing Contracts Involve Highly Speculative
Exploration Opportunities That Involve Material Risks That We Will Be
Unsuccessful
Our
interests in the exploration blocks should be considered to be highly
speculative exploration opportunities that involve material risks. None of
the
exploration blocks in which we have an interest have any proven reserves
and are
not producing any quantities of oil or natural gas. Exploratory drilling
activities are subject to many risks, including the risk that no commercially
productive reservoirs will be encountered. There can be no assurance that
wells
drilled on any of the exploration blocks in which we have an interest or
by any
venture in which we may acquire an interest in the future will be productive
or
that we will receive any return or recover all or any portion of our investment.
Drilling for oil and gas may involve unsuccessful or unprofitable efforts,
not
only from dry wells, but from wells that are productive but do not produce
sufficient net revenues to return a profit after drilling, operating and
other
costs. The cost of drilling, completing and operating wells is often uncertain.
Drilling operations may be curtailed, delayed or cancelled as a result of
numerous factors, many of which are beyond the operator’s control, including
economic conditions, mechanical problems, extreme downhole pressures and
temperatures, title problems, weather conditions, compliance with governmental
requirements and shortages or delays of equipment and services. Drilling
activities on the exploration blocks in which we hold an interest may not
be
successful and, if unsuccessful, such failure may have a material adverse
effect
on our future results of operations and financial condition.
Possible
Inability of Contracting Parties to Fulfill Phase One of the Minimum Work
Program for Certain of Our PSCs
Our
PSC
relating to the KG Offshore Block provides that by the end of the first phase
of
the exploration phase the contracting parties shall have drilled at least
fourteen wells. The first phase of the exploration period relating to the
PSC
for the KG Offshore Block has expired without the required minimum of at
least
fourteen exploration wells being drilled during the first phase. GSPC, as
operator and on behalf of the contracting parties, is engaged in seeking
from
the GOI its consent to an extension of the expiration date of the first phase
of
the exploration period and is also seeking to proceed to the second phase
of the
exploration period without relinquishing any of the contract area at the
end of
the first phase. In connection with the process of seeking these consents,
on
February 24, 2006, the management committee for the KG Offshore Block, which
includes members representing the GOI, recommended a further extension of
the
first phase of twelve months to March 11, 2007. On February 9 2007, GSPC
proposed to the Directorate General of Hydrocarbons, a body under the Ministry
of Petroleum & Natural Gas (“DGH”) and to the GOI that the contracting
parties proceed to the next exploration phase (Phase II) upon completion
of
Phase I which was expiring on March 11, 2007. It was also requested, on behalf
of the contracting parties, to not relinquish any of the contract area at
the
end of Phase I. On March 12, 2007 DGH noted the option of GSPC, on behalf
of the
contracting parties, to enter phase two and advised that entry into phase
two,
effective March 12, 2007, is subject to the following conditions: (1) Any
decision by the GOI on the substitution of the Work Program of Phase I will
be
binding on the contracting parties; and (2) Any decision by the GOI on
relinquishment of the 25% of original contract Area (ie. 462 sq. kms.) under
the
PSC would be binding on the contracting parties. The extension of the first
phase for the 18 months to March 11, 2007 would be deducted from the next
succeeding exploration phase. As such the second phase would have a term
of one
year and expire March 11, 2008. As at April 13, 2007, five exploratory wells
have been drilled and one exploratory well, the KG#16 well, is currently
being
drilled on the exploration block leaving eight exploration wells to be drilled.
A seventh well, the KG#28 is also being drilled on the exploration block,
but
has been classified by the management committee as an appraisal well for
the
purposes of the PSC and not as an exploration well. Approval of the extension
and the entering into the second phase of exploration under the PSC without
relinquishment of any portion of the contract area from the GOI is currently
outstanding. Unless this approval is granted, the Company may be liable for
the
consequences of non-fulfillment of the minimum work commitment in a given
time
frame under the PSC. The PSC has provisions for termination of the PSC on
account of various reasons specified therein including material breach of
the
contract. Termination rights can be exercised after giving ninety days written
notice. This failure to timely complete the minimum work commitment, though
the
Company has been advised by GSPC there is no precedence, may
be
deemed by the GOI to be a failure to comply with the provisions of the contract
in a material particular.
The
termination of the PSC by
the
GOI would result in the loss of the Company’s interest in the KG Offshore Block
other than areas determined to encompass "commercial discoveries". The PSC
sets
forth procedures whereby the operator can obtain the review of the management
committee under the PSC as to whether a discovery on the exploration block
should be declared a commercial discovery under the PSC. Those procedures
have
not been completed at present with respect to the discovery on the KG Offshore
Block and, accordingly, as of April 13, 2007, no areas on the KG Offshore
Block
have been determined formally to encompass "commercial discoveries"
as
that
term is defined under the PSC.
In
the
event the PSC is terminated by the Government of India, or in the event the
work
program is not fulfilled by the end of the relevant exploration phase, the
PSC
provides that each party to the PSC is to pay to the GOI its participating
interest share of an amount which is equal to the amount that would be required
to complete the minimum work program for that phase. We are of the view that
GSPC, under the terms of our CIA, would be liable for our participating interest
share of the amount required to complete the minimum work program for the
phase.
The
PSC
relating to the Mehsana Block expired without the required minimum of seven
wells having been drilled. In October, 2006 the management committee under
the
PSC for the Mehsana Block approved a proposal to seek from the GOI an extension
of the first exploration phase for a six month period from November 21, 2006
to
May 20, 2007 and on April 6, 2007 the members of the operating committee
under
the Mehsana Block operating agreement resolved to submit an application to
the
GOI for extension for an additional six months to November 20, 2007 to complete
the minimum work program under Phase I. In seeking that extension, the joint
venture partners agreed to provide a 100% Bank Guarantee and a 10% cash payment
to be agreed upon based on pre-estimated liquidated damages for the unfinished
minimum work program as reasonably determined by DGH, which has not yet been
determined. As well, the contractor would be required to relinquish 25% of
the
block pursuant to the provisions of the PSC. The period of extension will
be set
off against the term of the Second Phase which would reduce Phase II to one
year
expiring November 20, 2008. Final consent to this extension is awaiting GOI
approval.
The
PSC
relating to the Sanand/Miroli Block expired without the required minimum
of
twelve wells having been drilled. On January 29, 2007 the management committee
under the PSC for the Sanand/Miroli Block approved a proposal to seek from
the
GOI an extension of the first exploration phase for a six month period from
January 28, 2007 to July 28, 2007. Final consent to this extension is awaiting
GOI approval.
Because
Our Activities Have Only Recently Commenced And We Have No Operating History
And
Reserves Of Oil And Gas, We Anticipate Future Losses; There Is No Assurance
Of
Our Profitability
Our
oil
and natural gas operations have been only recently established and we have
very
limited operating history, oil and gas reserves or assets upon which an
evaluation of our business, our current business plans and our prospects
can be
based. Our prospects must be considered in light of the risks, expenses and
problems frequently encountered by all companies in their early stages of
development and, in particular, those engaged in exploratory oil and gas
activities. Such risks include, without limitation:
·
|
We
will experience failures to discover oil and gas in commercial
quantities;
|
·
|
There
are uncertainties as to the costs to be incurred in our exploratory
drilling activities, cost overruns are possible and we may encounter
mechanical difficulties and failures in completing
wells;
|
·
|
There
are uncertain costs inherent in drilling into unknown formations,
such as
over-pressured zones, high temperatures and tools lost in the hole;
and
|
·
|
We
may make changes in our drilling plans and locations as a result
of prior
exploratory drilling.
|
During
the exploration phase prior to the start date of initial commercial production,
we have a carried interest in the exploration activities on the KG Offshore
Block. Our interests in our other exploration blocks are participating interests
which require us to pay our proportionate share of exploration, drilling
and
development expenses on these blocks substantially as those expenses are
incurred. Unexpected or additional costs can affect the commercial viability
of
producing oil and gas from a well and will affect the time when and amounts
that
we can expect to receive from any production from a well. Because our carried
costs of exploration and drilling on the KG Offshore Block are to be repaid
in
full to the operator, GSPC, before we are entitled to any share of production,
additional exploration and development expenses will reduce and delay any
share
of production and revenues we will receive.
There
can
be no assurance that the ventures in which we are a participant will be
successful in addressing these risks, and any failure to do so could have
a
material adverse effect on our prospects for the future. Our operations were
recently established, and as such, we have no substantial operating history
to
serve as the basis to predict our ability to further the development of our
business plan. Likewise, the outcome of our exploratory drilling activities,
as
well as our quarterly and annual operating results cannot be predicted.
Consequently, we believe that period to period comparisons of our exploration,
development, drilling and operating results will not necessarily be meaningful
and should not be relied upon as an indication of our stage of development
or
future prospects. Through April 13, 2007, we abandoned two wells drilled
on the
KG Offshore Block, two wells on the Mehsana Block and three wells on the
Tarapur
Block and it is likely that in some future quarter our stage of development
or
operating or drilling results may fall below our expectations or the
expectations of securities analysts and investors and that some of our drilling
results will be unsuccessful and the wells abandoned. In such event, the
trading
price of our common stock may be materially and adversely affected.
We
Expect to Have Substantial Requirements For Additional Capital That May Be
Unavailable To Us Which Could Limit Our Ability To Participate In Our Existing
and Additional Ventures Or Pursue Other Opportunities. Our Available Capital
is
Limited
In
order
to participate under the terms of our PSCs as well as in further joint venture
arrangements leading to the possible grant of exploratory drilling
opportunities, we will be required to contribute or have available to us
material amounts of capital. Under the terms of our CIA relating to the KG
Offshore Block, after the start date of initial commercial production on
the KG
Offshore Block, and under the terms of the nine other PSCs we are parties
to, we
are required to bear our proportionate share of costs during the exploration
phases of those agreements. There can be no assurance that our currently
available capital will be sufficient for these purposes or that any additional
capital that is required will be available to us in the amounts and at the
times
required. Such capital also may be required to secure bonds in connection
with
the grant of exploration rights, to conduct or participate in exploration
activities or be engaged in drilling and completion activities. We intend
to
seek the additional capital to meet our requirements from equity and debt
offerings of our securities. Our ability to access additional capital will
depend in part on the success of the ventures in which we are a participant
in
locating reserves of oil and gas and developing producing wells on the
exploration blocks, the results of our management in locating, negotiating
and
entering into joint venture or other arrangements on terms considered
acceptable, as well as the status of the capital markets at the time such
capital is sought.
There
can
be no assurance that capital will be available to us from any source or that,
if
available, it will be at prices or on terms acceptable to us. Should we be
unable to access the capital markets or should sufficient capital not be
available, our activities could be delayed or reduced and, accordingly, any
future exploration opportunities, revenues and operating activities may be
adversely affected and could also result in our breach of the terms of a
PSC
which could result in the loss of our rights under the contract.
As
of
December 31, 2006, we had cash and cash equivalents of approximately $33.4
million. We currently expect that our available cash will be sufficient to
fund
us through the budget periods ending March 31, 2008 and through the balance
of
2007 at our present level of operations on the ten exploration blocks in
which
we are currently a participant including our newly acquired NELP-VI exploration
blocks. Although exploration activity budgets are subject to ongoing review
and
revision, our present estimate of our commitments of capital pursuant to
the
terms of our PSCs relating to our six exploration blocks, excluding our newly
acquired NELP-VI exploration blocks, totals approximately $12.7 million during
the period April 1, 2007 to March 31, 2008. We anticipate total expenditures
on
the four newly acquired NELP-VI blocks for the first exploration phase which
covers four years to be approximately $28 million. Any
further PSC's we may seek to enter into or any expanded scope of our operations
or other transactions that we may enter into may require us to fund our
participation or capital expenditures with amounts of capital not currently
available to us. We may be unsuccessful in raising the capital necessary
to meet
these capital requirements. There can be no assurance that we will be able
to
raise the capital.
India’s
Regulatory Regime May Increase Our Risks And Expenses In Doing
Business
All
phases of the oil and gas exploration, development and production activities
in
which we are participating are regulated in varying degrees by the Indian
government, either directly or through one or more governmental entities.
The
areas of government regulation include matters relating to restrictions on
production, price controls, export controls, income taxes, expropriation
of
property, environmental protection and rig safety. In addition, the award
of a
PSC is subject to GOI consent and matters relating to the implementation
and
conduct of operations under the PSC are subject, under certain circumstances,
to
GOI consent. As a consequence, all future drilling and production programs
and
operations we undertake or are undertaken by the ventures in which we
participate in India must be approved by the Indian government. Shifts in
political conditions in India could adversely affect our business in India
and
the ability to obtain requisite government approvals in a timely fashion
or at
all. We, and our joint venture participants, must maintain satisfactory working
relationships with the Indian government. This regulatory environment and
possible delays inherent in that environment may increase the risks associated
with our exploration and production activities and increase our costs of
doing
business.
Our
Control By Directors And Executive Officers May Result In Those Persons Having
Interests Divergent From Our Other Stockholders
As
of
April 13, 2007, our Directors and executive officers and their respective
affiliates, in the aggregate, beneficially hold 32,523,667 shares or
approximately 49.1% of our outstanding Common Stock. As a result, these
stockholders possess significant influence over us, giving them the ability,
among other things, to elect a majority of our Board of Directors and approve
significant corporate transactions. These persons will retain significant
control over our present and future activities and our other stockholders
and
investors may be unable to meaningfully influence the course of our actions.
These persons may have interests regarding the future activities and
transactions in which we engage which may diverge from the interests of our
other stockholders. Such share ownership and control may also have the effect
of
delaying or preventing a change in control of us, impeding a merger,
consolidation, takeover or other business combination involving us, or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of us which could have a material adverse effect
on
the market price of our Common Stock. Although management has no intention
of
engaging in such activities, there is also a risk that the existing management
will be viewed as pursuing an agenda which is beneficial to themselves at
the
expense of other stockholders.
Our
Reliance On A Limited Number Of Key Management Personnel Imposes Risks On
Us
That We Will Have Insufficient Management Personnel Available If The Services
Of
Any Of Them Are Unavailable
We
are
dependent upon the services of our President and Chief Executive Officer,
Jean
Paul Roy, and Executive Vice President and Chief Financial Officer, Allan
J.
Kent. The loss of either of their services could have a material adverse
effect
upon us. We currently do not have employment agreements with either of such
persons or key man life insurance. The services of both Mr. Roy and Mr. Kent
are
provided pursuant to the terms of agreements with corporations wholly-owned
by
each of them. At present, Mr. Kent’s services are provided through an oral
agreement with the corporation he owns. Accordingly, these agreements do
not
contain any provisions whereby Mr. Roy and Mr. Kent have direct contractual
obligations to us to provide services or refrain from other
activities.
At
present, our future is substantially dependent upon the geological and
geophysical capabilities of Mr. Roy to locate oil and gas exploration
opportunities for us and the ventures in which we are a participant. His
inability to do the foregoing could materially adversely affect our future
activities. We entered into a three-year TSA with RGB dated August 29, 2003,
a
company owed 100% by Mr. Roy, to perform such geological and geophysical
duties
and exercise such powers related thereto as we may from time to time assign
to
it. The expiration term of this contract has subsequently been extended to
December 31, 2007. We have no agreement directly with Mr. Roy regarding his
services to us.
Our
Success Is Largely Dependent On The Success Of The Operators Of The Ventures
In
Which We Participate And Their Failure Or Inability To Properly Or Successfully
Operate The Oil And Gas Exploration, Development And Production Activities
On An
Exploration Block, Could Materially Adversely Affect Us
At
present, our only oil and gas interests are our contractual rights under
the
terms of the ten PSCs with the GOI that we have entered into. We are not
and
will not be the operator of any of the exploration, drilling and production
activities conducted on our exploration blocks, with the exception of the
DS
block in which we are the operator. Accordingly, the realization of successes
in
the exploration of the blocks is substantially dependent upon the success
of the
operators in exploring for and developing reserves of oil and gas and their
ability to market those reserves at prices that will yield a return to
us.
Under
the
terms of our CIA for the KG Offshore Block, we have a carried interest in
the
exploration activities conducted by the parties on the KG Offshore Block
prior
to the start date of initial commercial production. However, under the terms
of
that agreement, all of our proportionate share of capital costs for exploration
and development activities must be repaid without interest over the projected
production life or ten years, whichever is less. Our proportionate share
of
these costs and expenses expected to be incurred over the 6.5 year term of
the
PSC for which our interest is carried was originally estimated to be
approximately $22.0 million. Additional drilling costs including the drilling
to
depths in excess of 5,000 meters, where higher downhole temperatures and
pressures are encountered, versus shallower depths as originally anticipated,
as
well as the testing and completion costs of these wells, has resulted in
additional costs exceeding originally estimated expenditures. As a consequence
of these additional drilling costs incurred, as of April 13, 2007, the annual
budget for the period April 1, 2007 to March 31, 2008 submitted to the
Management Committee under the PSC for the KG Offshore Block estimates that
GSPC
will expend approximately $50.4 million attributed to us (including the amount
attributable to RGM) under the CIA over the period April 1, 2007 to March
31,
2008. Further additional expenditures may be required for cost overruns and
completions of commercially successful wells. We are unable to estimate the
amount of additional expenditures GSPC will make as operator attributable
to us
prior to the start date of initial commercial production under the CIA or
when,
if ever, any commercial production will commence. Of these expenditures,
50% are
for the account of Roy Group (Mauritius) Inc. under the terms of the
Participating Interest Agreement between us and Roy Group (Mauritius) Inc.
We
are not entitled to any share of production from the KG Offshore Block until
such time as the expenditures attributed to us, including those expenditures
made for the account of Roy Group (Mauritius) Inc., under the CIA, have been
recovered by GSPC from future production revenue. Therefore, we are unable
to
estimate when we may commence to receive distributions from any production
of
hydrocarbon reserves found on the KG Offshore Block. As provided in the CIA,
in
addition to repaying our proportionate share of capital costs incurred for
which
we were carried, we will be required to bear our proportionate share of the
expenditures attributable to us after the start date of initial commercial
production on the KG Offshore Block.
Certain
Terms Of The Production Sharing Contracts May Create Additional Expenses
And
Risks That Could Adversely Affect Our Revenues And
Profitability
The
PSCs
contain certain terms that may affect the revenues of the joint venture
participants to the agreements and create additional risks for us. These
terms
include, possibly among others, the following:
|
·
|
The
venture participants are required to complete certain minimum work
programs during the two or three phases of the terms of the PSCs.
In the
event the venture participants fail to fulfill any of these minimum
work
programs, the parties to the venture must pay to the GOI their
proportionate share of the amount that would be required to complete
the
minimum work program. Accordingly, we could be called upon to pay
our
proportionate share of the estimated costs of any incomplete work
programs. At April 13, 2007, we have failed to complete phase one
work
programs under three of our PSCs within the time periods agreed.
We have
applied to the GOI for extensions of these allotted time periods
and are
awaiting the GOI response.
|
|
·
|
Until
such time as the GOI attains self sufficiency in the production
of crude
oil and condensate and is able to meet its national demand, the
parties to
the venture are required to sell in the Indian domestic market
their
entitlement under the PSCs to crude oil and condensate produced
from the
exploration blocks. In addition, the Indian domestic market has
the first
call on natural gas produced from the exploration blocks and the
discovery
and production of natural gas must be made in the context of the
government’s policy of utilization of natural gas and take into account
the objectives of the government to develop its resources in the
most
efficient manner and promote conservation measures. Accordingly,
this
provision could interfere with our ability to realize the maximum
price
for our share of production of
hydrocarbons;
|
|
·
|
The
parties to each agreement that are not Indian companies, which
includes
us, are required to negotiate technical assistance agreements with
the GOI
or its nominee whereby such foreign company can render technical
assistance and make available commercially available technical
information
of a proprietary nature for use in India by the government or its
nominee,
subject, among other things, to confidentiality restrictions. Although
not
intended, this could increase each venture’s and our cost of operations;
and
|
|
·
|
The
parties to each venture are required to give preference, including
the use
of tender procedures, to the purchase and use of goods manufactured,
produced or supplied in India provided that such goods are available
on
equal or better terms than imported goods, and to employ Indian
subcontractors having the required skills insofar as their services
are
available on comparable standards and at competitive prices and
terms.
Although not intended, this could increase the ventures and our
cost of
operations.
|
These
provisions of the PSCs, possibly among others, may increase our costs of
participating in the ventures and thereby affect our profitability. Failure
to
fully comply with the terms of the PSCs creates additional risks for
us.
The
Requirements of Section 404 of the Sarbanes-Oxley Act of 2002 Require That
We
Undertake an Evaluation of Our Internal Controls That May Identify Internal
Control Weaknesses.
The
Sarbanes-Oxley Act of 2002 imposes new duties on us and our executives,
directors, attorneys and independent registered public accounting firm. In
order
to comply with the Sarbanes-Oxley Act, we are evaluating our internal controls
systems to allow management to report on, and our independent auditors to
attest
to, our internal controls. We have initiated establishing the procedures
for
performing the system and process evaluation and testing required in an effort
to comply with the management certification and auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act. We anticipate being able to fully
implement the requirements relating to reporting on internal controls and
all
other aspects of Section 404 in a timely fashion. If we are not able to
implement the reporting requirements of Section 404 in a timely manner or
with
adequate compliance, our management and/or our auditors may not be able to
render the required certification and/or attestation concerning the
effectiveness of the internal controls over financial reporting, we may be
subject to investigation and/or sanctions by regulatory authorities, such
as the
Securities and Exchange Commission or American Stock Exchange, and our
reputation may be harmed. Any such action could adversely affect our financial
results and the market price of our common stock.
Oil
And Gas Prices Fluctuate Widely And Low Oil And Gas Prices Could Adversely
Affect Our Financial Results
There
is
no assurance that there will be any market for oil or gas produced from the
exploration blocks in which we hold an interest and our ability to deliver
the
production from any wells may be constrained by the absence of or limitations
on
collector systems and pipelines. Future price fluctuations could have a major
impact on the future revenues from any oil and gas produced on these exploration
blocks and thereby our revenue, and materially affect the return from and
the
financial viability of any reserves that are claimed. Historically, oil and
gas
prices and markets have been volatile, and they are likely to continue to
be
volatile in the future. A significant decrease in oil and gas prices could
have
a material adverse effect on our cash flow and profitability and would adversely
affect our financial condition and the results of our operations. In addition,
because world oil prices are quoted in and trade on the basis of U.S. dollars,
fluctuations in currency exchange rates that affect world oil prices could
also
affect our revenues. Prices for oil and gas fluctuate in response to relatively
minor changes in the supply of and demand for oil and gas, market uncertainty
and a variety of additional factors that are beyond our control, including:
|
·
|
political
conditions and civil unrest in oil producing regions, including
the Middle
East and elsewhere;
|
|
·
|
the
domestic and foreign supply of oil and gas;
|
|
·
|
quotas
imposed by the Organization of Petroleum Exporting Countries upon
its
members;
|
|
·
|
the
level of consumer demand;
|
|
·
|
domestic
and foreign government regulations;
|
|
·
|
the
price and availability of alternative fuels;
|
|
·
|
overall
economic conditions; and
|
|
·
|
international
political conditions.
|
In
addition, various factors may adversely affect the ability to market oil
and gas
production from our exploration blocks, including:
|
·
|
the
capacity and availability of oil and gas gathering systems and
pipelines;
|
|
·
|
the
ability to produce oil and gas in commercial quantities and to
enhance and
maintain production from existing wells and wells proposed to be
drilled;
|
|
·
|
the
proximity of future hydrocarbon discoveries to oil and gas transmission
facilities and processing equipment (as well as the capacity of
such
facilities);
|
|
·
|
the
effect of governmental regulation of production and transportation
(including regulations relating to prices, taxes, royalties, land
tenure,
allowable production, importing and exporting of oil and condensate
and
matters associated with the protection of the
environment);
|
|
·
|
the
imposition of trade sanctions or embargoes by other
countries;
|
|
·
|
the
availability and frequency of delivery vessels;
|
|
·
|
changes
in supply due to drilling by others;
|
|
·
|
the
availability of drilling rigs and qualified personnel; and
|
Our
Ability To Locate And Participate In Additional Exploration Opportunities
And To
Manage Growth May Be Limited By Reason Of Our Limited History Of Operations
And
The Limited Size Of Our Staff
While
our
President and Executive Vice President have had extensive experience in the
oil
and gas exploration business, we have been engaged in limited activities
in the
oil and gas business over approximately the past three years and have a limited
history of activities upon which you may base your evaluation of our
performance. As a result of our brief operating history and limited activities
in oil and gas exploration activities, our success to date in entering into
ventures to acquire interests in exploration blocks may not be indicative
that
we will be successful in entering into any further ventures. There can be
no
assurance that we will be successful in growing our oil and gas exploration
and
development activities.
Any
future significant growth in our oil and gas exploration and development
activities will place demands on our executive officers, and any increased
scope
of our operations will present challenges to us due to our current limited
management resources. Our future performance will depend upon our management
and
its ability to locate and negotiate opportunities to participate in joint
venture and other arrangements whereby we can participate in exploration
opportunities. There can be no assurance that we will be successful in these
efforts. Our inability to locate additional opportunities, to hire additional
management and other personnel or to enhance our management systems could
have a
material adverse effect on our results of operations.
Our
Future Performance Depends Upon Our Ability And The Ability Of The Ventures
In
Which We Participate To Find Or Acquire Oil And Gas Reserves That Are
Economically Recoverable
Our
success in developing our oil and gas exploration and development activities
will be dependent upon establishing, through our participation with others
in
joint ventures and other similar activities, reserves of oil and gas and
maintaining and possibly expanding the levels of those reserves. We and the
joint ventures in which we may participate may not be able to locate and
thereafter replace reserves from exploration and development activities at
acceptable costs. Lower prices of oil and gas may further limit the kinds
of
reserves that can be developed at an acceptable cost. The business of exploring
for, developing or acquiring reserves is capital intensive. We may not be
able
to make the necessary capital investment to enter into joint ventures or
similar
arrangements to maintain or expand our oil and gas reserves if capital is
unavailable to us and the ventures in which we participate. In addition,
exploration and development activities involve numerous risks that may result
in
dry holes, the failure to produce oil and gas in commercial quantities, the
inability to fully produce discovered reserves and the inability to enhance
production from existing wells.
We
expect
that we will continually seek to identify and evaluate joint venture and
other
exploration opportunities for our participation as a joint venture participant
or through some other arrangement. Our ability to enter into additional
exploration activities will be dependent to a large extent on our ability
to
negotiate arrangements with others and with various governments and governmental
entities whereby we can be granted a participation in such ventures. There
can
be no assurance that we will be able to locate and negotiate such arrangements,
have sufficient capital to meet the costs involved in entering into such
arrangements or that, once entered into, that such exploration activities
will
be successful. Successful acquisition of exploration opportunities can be
expected to require, among other things, accurate assessments of potential
recoverable reserves, future oil and gas prices, projected operating costs,
potential environmental and other liabilities and other factors. Such
assessments are necessarily inexact, and as estimates, their accuracy is
inherently uncertain. We cannot assure you that we will successfully consummate
any further exploration opportunities or joint venture or other arrangements
leading to such opportunities.
Estimating
Reserves And Future Net Revenues Involves Uncertainties And Oil And Gas Price
Declines May Lead To Impairment Of Oil And Gas Assets
Currently,
we do not claim any proved reserves of oil or natural gas. Any reserve
information that we may provide in the future will represent estimates based
on
reports prepared by independent petroleum engineers, as well as internally
generated reports. Petroleum engineering is not an exact science. Information
relating to proved oil and gas reserves is based upon engineering estimates
derived after analysis of information we furnish or furnished by the operator
of
the property. Estimates of economically recoverable oil and gas reserves
and of
future net cash flows necessarily depend upon a number of variable factors
and
assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulations
by
governmental agencies and assumptions concerning future oil and gas prices,
future operating costs, severance and excise taxes, capital expenditures
and
workover and remedial costs, all of which may in fact vary considerably from
actual results. Oil and gas prices, which fluctuate over time, may also affect
proved reserve estimates. For these reasons, estimates of the economically
recoverable quantities of oil and gas attributable to any particular group
of
properties, classifications of such reserves based on risk of recovery and
estimates of the future net cash flows expected therefrom prepared by different
engineers or by the same engineers at different times may vary substantially.
Actual production, revenues and expenditures with respect to reserves we
may
claim will likely vary from estimates, and such variances may be material.
Either inaccuracies in estimates of proved undeveloped reserves or the inability
to fund development could result in substantially reduced reserves. In addition,
the timing of receipt of estimated future net revenues from proved undeveloped
reserves will be dependent upon the timing and implementation of drilling
and
development activities estimated by us for purposes of the reserve report.
Quantities
of proved reserves are estimated based on economic conditions in existence
in
the period of assessment. Lower oil and gas prices may have the impact of
shortening the economic lives on certain fields because it becomes uneconomic
to
produce all recoverable reserves on such fields, thus reducing proved property
reserve estimates. If such revisions in the estimated quantities of proved
reserves occur, it will have the effect of increasing the rates of depreciation,
depletion and amortization on the affected properties, which would decrease
earnings or result in losses through higher depreciation, depletion and
amortization expense. The revisions may also be sufficient to trigger impairment
losses on certain properties that would result in a further non-cash charge
to
earnings.
Risks
Relating To The Market For Our Common Stock
Volatility
Of Our Stock Price
The
public market for our common stock has been characterized by significant
price
and volume fluctuations. There can be no assurance that the market price
of our
common stock will not decline below its current or historic price ranges.
The
market price may bear no relationship to the prospects, stage of development,
existence of oil and gas reserves, revenues, earnings, assets or potential
of
our company and may not be indicative of our future business performance.
The
trading price of our common stock could be subject to wide fluctuations.
Fluctuations in the price of oil and gas and related international political
events can be expected to affect the price of our common stock. In addition,
the
stock market in general has experienced extreme price and volume fluctuations
that have affected the market price for many companies which fluctuations
have
been unrelated to the operating performance of these companies. These market
fluctuations, as well as general economic, political and market conditions,
may
have a material adverse effect on the market price of our company's common
stock. In the past, following periods of volatility in the market price of
a
company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on our company's business, results of operations
and
financial condition.
Item
7. Financial Statements
Our
Financial Statements are included in a separate section of this report. See
page
F-1.
Item
8. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
No
disclosure is required in response to this Item 8.
Item
8A. Controls and Procedures
Under
the
supervision and with the participation of our management, including Jean
Paul
Roy, our President and Chief Executive Officer, and Allan J. Kent, our Executive
Vice President and Chief Financial Officer, we have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures within
90
days of the filing date of this annual report, and, based on their evaluation,
Mr. Roy and Mr. Kent have concluded that these controls and procedures are
effective. There were no significant changes in our internal controls or
in
other factors that could significantly affect these controls subsequent to
the
date of their evaluation.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports
that we
file or submit under the Exchange Act are recorded, processed, summarized
and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under
the
Exchange Act is accumulated and communicated to our management, including
Mr.
Roy and Mr. Kent, as appropriate to allow timely decisions regarding required
disclosure.
Item
8B. Other Information
No
information is required to be disclosed in response to this Item
8B.
PART
III
Item
9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with
Section 16(a) of the Exchange Act
Our
Directors and Executive Officers and their ages are as follows:
NAME
|
AGE
|
EMPLOYMENT
HISTORY
|
Jean
Paul Roy
|
50
|
Mr.
Roy was elected a Director, President and Chief Executive Officer
on
August 29, 2003. For more than the past five years, Mr. Roy has
been
consulting in the oil and gas industry through his private company,
GeoGlobal Technologies Inc. which he owns 100%. Mr. Roy has in
excess of
20 years of geological and geophysical experience in basins worldwide
as
he has worked on projects throughout India, North and South America,
Europe, the Middle East, the former Soviet Union and South East
Asia. His
specialties include modern seismic data acquisition and processing
techniques, and integrated geological and geophysical data interpretation.
Since 1981 he has held geophysical positions with Niko Resources
Ltd.,
Gujarat State Petroleum Corporation, Reliance Industries, Cubacan
Exploration Inc., PetroCanada, GEDCO, Eurocan USA and British Petroleum.
Mr. Roy graduated from St. Mary’s University of Halifax, Nova Scotia in
1982 with a B.Sc. in Geology and has been certified as a Professional
Geophysicist. Mr. Roy is a resident of Guatemala.
|
|
|
|
Allan
J. Kent
|
53
|
Mr.
Kent was elected a Director, Executive Vice President and Chief
Financial
Officer of our company on August 29, 2003. Mr. Kent has in excess
of 20
years experience in the area of oil and gas exploration finance
and has,
since 1987, held a number of senior management positions and directorships
with Cubacan Exploration Inc., Endeavour Resources Inc. and MacDonald
Oil
Exploration Ltd., all publicly listed companies. Prior thereto,
beginning
in 1980, he was a consultant in various capacities to a number
of
companies in the oil and gas industry. He received his Bachelor
of
Mathematics degree in 1977 from the University of Waterloo,
Ontario.
|
|
|
|
Brent
J. Peters
|
34
|
Mr.
Peters was elected a Director of our company on February 25, 2002.
Mr.
Peters has been Vice President of Finance and Treasurer of Northfield
Capital Corporation, a publicly traded investment company acquiring
shares
in public and private corporations since 1997. Mr. Peters has a
Bachelor
of Business Administration degree, specializing in
accounting.
|
|
|
|
Peter
R. Smith
|
59
|
Mr.
Smith was elected a Director and Chairman of the Board of our company
on
January 8, 2004. Mr. Smith was elected Vice Chairman of the Board
of the
Greater Toronto Transportation Authority (GO Transit) in March
2004, and a
director of Tarion Warranty Corporation (a Canadian new home warranty
company) in April 2004. Since 1989, Mr. Smith has been President
and
co-owner of Andrin Limited, a large developer/builder of housing
in
Canada. Mr. Smith has held the position of Chairman of the Board
of
Directors, Canada Mortgage and Housing Corporation (CMHC), from
September
1995 to September 2003.
On
February 14, 2001, the Governor General of Canada announced the
appointment of Mr. Smith as a Member of the Order of Canada, effective
November 15, 2000. Mr. Smith holds a Masters Degree in Political
Science
(Public Policy) from the State University of New York, and an Honours
B.A.
History and Political Science, Dean’s Honour List, McMaster University,
Ontario.
|
NAME
|
AGE
|
EMPLOYMENT
HISTORY
|
Michael
J. Hudson
|
60
|
Mr.
Hudson was elected a Director of our company on May 17, 2004. Mr.
Hudson
is a retired partner with the accounting firm Grant Thornton LLP.
Mr.
Hudson was with Grant Thornton for 20 years and with his experience
in the
oil and gas industry he was responsible for Assurance services
and
providing advice to private, not-for-profit and public company
clients
listed on Canadian and US exchanges. Mr. Hudson spent two years
in London,
England assisting the Institute of Chartered Accountants in England
and
Wales with the start up of a consulting service to members on best
practices for the management of their firms including ethics and
governance issues. Upon returning to Canada he went on secondment
for 18
months with the Auditor General of Canada to learn and apply the
disciplines of "value for money" auditing. He was co-director of
the
comprehensive (value for money) audit of Statistics Canada reporting
in
the 1983 Auditor General’s Report.
|
|
|
|
Dr.
Avinash Chandra
|
64
|
Dr.
Chandra was elected a Director of our company on October 1, 2005.
Dr.
Chandra has over 40 years of experience in the international as
well as
the Indian oil and gas sector. He was the first Directorate General
of
Hydrocarbons, at the level of Special Secretary to the Government
of India
for a period of 10 years until his retirement in 2003. Dr. Chandra
received his Ph.D. in petroleum geology from the Imperial College,
University of London, United Kingdom. His post graduate work includes
a
Post Graduate Diploma of Imperial College in Petroleum Geology
and
Petroleum Reservoir Engineering as well as a M.Sc. (Applied Geology)
and
B.Sc. (Hons) from the Lucknow University in
India.
|
Mr.
Roy,
Mr. Kent, Mr. Peters, Mr. Smith, Mr. Hudson and Dr. Chandra have been elected
to
serve as Directors of our company until our annual meeting of stockholders
in
2007 and the election and qualification of their successors.
Our
Board
of Directors has determined that Messrs. Peters, Smith, Hudson and Dr. Chandra
are "independent directors" under the listing standards of the American Stock
Exchange. Our Board of Directors had two meetings in person during the year
ended December 31, 2006.
Director
and Officer Securities Reports
The
Federal securities laws require our Directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of our
equity
securities to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of any of our equity
securities. Copies of such reports are required to be furnished to us. To
our
knowledge, based solely on a review of the copies of such reports and other
information furnished to us, all persons subject to these reporting requirements
filed the required reports on a timely basis with respect to the year ended
December 31, 2006.
Audit
Committee and Audit Committee Financial Expert
Our
Board
of Directors had appointed an Audit Committee consisting of Messrs. Hudson,
who
is the Chairman, Mr. Peters and Dr. Chandra. Our Board of Directors has
determined that all three of these individuals are "independent directors"
under
the listing standards of the American Stock Exchange. Under our Audit Committee
Charter, adopted on March 26, 2004, our Audit Committee’s responsibilities
include, among other responsibilities, the appointment, compensation and
oversight of the work performed by our independent auditor, the adoption
and
assurance of compliance with a pre-approval policy with respect to services
provided by the independent auditor, at least annually, obtain and review
a
report by our independent auditor as to relationships between the independent
auditor and our company so as to assure the independence of the independent
auditor, review the annual audited and quarterly financial statements with
our
management and the independent auditor, and discuss with the independent
auditor
their required disclosure relating to the conduct of the audit.
Our
Board
of Directors has determined that Mr. Michael J. Hudson has the attributes
of an
Audit Committee Financial Expert.
Our
Audit
Committee had five meetings during the year ended December 31,
2006.
Compensation
Committee
Our
Compensation Committee consists of Mr. Hudson, who is the Chairman, and Mr.
Peters.
Our
Compensation Committee, among other things, exercises general responsibility
regarding overall employee and executive compensation. Our Compensation
Committee sets the annual salary, bonus and other benefits of the President
and
the Chief Executive Officer and approves compensation for all our other
executive officers, consultants and employees after considering the
recommendations of our President and Chief Executive Officer.
Nominating
Committee
Our
Nominating Committee consists of Mr. Smith, Mr. Peters and Mr. Hudson. Our
Nominating Committee, among other things, exercises general responsibility
regarding the identification of individuals qualified to become Board members
and recommend that the Board select the director nominees for the next annual
meeting of stockholders. Our Board of Directors had determined that Messrs.
Smith, Peters and Hudson are "independent directors" under the listing standards
of the American Stock Exchange. Our Board of Directors has adopted a charter
for
the nominating committee.
Code
of Ethics
We
have
adopted a Code of Ethics that applies to our principal executive officer
and
principal financial and accounting officer. A copy of our Code of Ethics
was
filed as an exhibit to our Annual Report on Form 10-KSB for the year ended
December 31, 2003.
Item
10. Executive Compensation
The
following table sets forth the compensation of our principal executive officer
and all of our other executive officers for the two fiscal years ended December
31, 2006 who received total compensation exceeding $100,000 for the year
ended
December 31, 2006 and who served in such capacities at December 31, 2006.
SUMMARY
COMPENSATION TABLE
Annual
Compensation
|
|
|
|
|
|
|
|
|
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
(1)
|
Non-Equity
Incentive Plan Compen-
sation
($)
|
Nonqualified
Deferred Compen-
Sation
Earnings
($)
|
All
Other Compen-sation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Jean
Paul Roy,
|
2006
|
350,000
|
-0-
|
-0-
|
570,500
|
Nil
|
Nil
|
44,280
(5)
|
964,780
|
President
& CEO
|
2005
|
250,000
|
60,000
|
-0-
|
186,600
|
Nil
|
Nil
|
40,700
(6)
|
537,300
|
Allan
J. Kent,
|
2006
|
185,000
|
-0-
|
-0-
|
570,500
|
Nil
|
Nil
|
Nil
|
755,500
|
Exec
VP & CFO
|
2005
|
120,000
|
30,000
|
-0-
|
186,600
|
Nil
|
Nil
|
Nil
|
336,600
|
|
(1)
|
Represents
the dollar amount recognized for financial statement reporting
purposes
with respect to the fiscal year in accordance with FAS 123R. See
Note 8 to
Notes to Financial Statements for the year ended December 31,
2006.
|
|
(2)
|
Messrs.
Roy and Kent are also Directors of our company; however they receive
no
additional compensation for serving in those
capacities.
|
|
(3)
|
The
salary and bonus amounts are paid to RGB, a Barbados company wholly
owned
by Mr. Roy, pursuant to the terms of a TSA described
below.
|
|
(4)
|
The
salary and bonus amounts are paid to D.I. Investments Ltd., a company
controlled by Mr. Kent, pursuant to an oral arrangement described
below.
|
|
(5)
|
Costs
paid for by the Company included in this amount are $18,780 for
airfare
for the family of Mr. Roy to travel to India from their home two
times
during the calendar year and $25,500 for medical coverage for Mr.
Roy and
his family.
|
|
(6)
|
Costs
paid for by the Company included in this amount are $16,800 for
airfare
for the family of Mr. Roy to travel to India from their home two
times
during the calendar year, $23,400 for medical coverage for Mr.
Roy and his
family and $500 for membership
fees.
|
Narrative
Disclosure to Summary Compensation Table.
On
August
29, 2003, we entered into a TSA with RGB, a company organized under the laws
of
Barbados and wholly owned by Mr. Roy. Under the agreement, RGB agreed to
perform
such geologic and geophysical duties as are assigned to it by us. The term
of
the agreement, as amended, extends through December 31, 2007 and continues
for
successive periods of one year thereafter unless otherwise agreed by the
parties
or either party has given notice that the agreement will terminate at the
end of
the term. On January 31, 2006, the terms of the agreement were amended to
extend
the term of the agreement from August 31, 2006 to December 31, 2007 and amended
the fee payable from $250,000 to $350,000 effective January 1, 2006. RGB
also is
reimbursed for authorized travel and other out-of-pocket expenses. The agreement
prohibits RGB from disclosing any of our confidential information and from
competing directly or indirectly with us for a period ending December 31,
2007
with respect to any acquisition, exploration, or development of any crude
oil,
natural gas or related hydrocarbon interests within the area of the country
of
India. The agreement may be terminated by either party on 30 days’ prior written
notice, provided, however, the confidentiality and non-competition provisions
will survive the termination.
D.I.
Investments Ltd., a company controlled by Mr. Kent, is paid by us for consulting
services. The services of Mr. Kent are provided to us pursuant to the oral
arrangement with D.I. Investments Ltd. The oral agreement has been amended
to
provide for an annual fee payable of $185,000 effective January 1, 2006.
We
do not
have any employment agreements with any of our named executive officers or
other
significant employees.
Outstanding
Equity Awards at December
31, 2006.
The
following table provides information with respect to our named executive
officers above regarding outstanding equity awards held at December 31, 2006.
|
Option
Awards
|
Stock
Awards
|
|
|
Name
|
Number
of securities underlying unexercised Options
(#)
Exercisable/
Unexercisable
|
Equity
Incentive Plan Awards:
Number
of Securities Underlying Unexercised Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of shares or units of Stock held that have not vested
(#)
|
Market
value of shares or units of Stock held that have not vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or payout value of Unearned Shares,
Units or
Other Rights That Have Not Vested
($)
|
(a)
|
(b-c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
Jean
Paul Roy
|
300,000
|
-0-
|
$1.10
|
08/31/08
|
-0-
|
-0-
|
-0-
|
-0-
|
|
250,000/
|
-0-
|
$3.95/
|
07/25/16/
|
-0-
|
-0-
|
-0-
|
-0-
|
|
250,000
(1)
|
|
$3.95
|
07/25/16
|
|
|
|
|
Allan
J. Kent
|
300,000
|
-0-
|
$1.10
|
08/31/08
|
-0-
|
-0-
|
-0-
|
-0-
|
|
250,000/
|
-0-
|
$3.95/
|
07/25/16/
|
-0-
|
-0-
|
-0-
|
-0-
|
|
250,000
(1)
|
|
$3.95
|
07/25/16
|
|
|
|
|
|
1)
|
Such
unexercisable options will become exercisable on July 25,
2007.
|
Director
Compensation
The
following table provides information with respect to compensation of our
Directors during the year ended December 31, 2006. The compensation paid
to our
named executive officers who are also Directors is reflected in the Summary
Compensation Table above.
Name
|
Fees
earned or paid in cash
($)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
(1)
|
Non-Equity
Incentive Plan Compensation
($)
|
Non-Qualified
Deferred Compensation Earnings
|
All
Other Compensation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
Peter
Smith
|
$3,500
|
-0-
|
102,850
|
-0-
|
-0-
|
-0-
|
106,350
|
Brent
Peters
|
$3,500
|
-0-
|
102,850
|
-0-
|
-0-
|
-0-
|
106,350
|
Michael
Hudson
|
$4,000
|
-0-
|
102,850
|
-0-
|
-0-
|
-0-
|
106,850
|
Dr.
Avinash Chandra
|
$1,500
|
-0-
|
102,850
|
-0-
|
-0-
|
-0-
|
104,350
|
|
(1)
|
Represents
the dollar amount recognized for financial statement reporting
purposes
with respect to the fiscal year in accordance with FAS 123R. See
Note 6b
to Notes to Financial Statements for the year ended December 31,
2006.
|
Our
non-employee Board members receive cash compensation of $1,000 for personally
attending each board meeting and $500 for attendance by phone. During the
year
ended December 31, 2006, each non-employee Board member was paid a total
of
$3,500 to each of Peter Smith and Brent Peters, $4,000 to Michael Hudson
and
$1,500 to Dr. Avinash Chandra. Our Directors are also reimbursed for their
out-of-pocket expenses in attending meetings. Pursuant to the terms of our
1998
Stock Incentive Plan, each non-employee Director automatically receives an
option grant for 50,000 shares on the date such person joins the Board. In
addition, on the date of each annual stockholder meeting, provided such person
has served as a non-employee Director for at least six months, each non-employee
Board member who is to continue to serve as a non-employee Board member will
automatically be granted an option to purchase 50,000 shares. Each such option
has a term of ten years, subject to earlier termination following such person's
cessation of Board service, and is subject to certain vesting provisions.
For
the purposes of the automatic grant provisions of the Plan, all of our
Directors, other than Messrs. Roy and Kent are considered non-employee Board
members.
Item
11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Set
forth
below is information concerning the Common Stock ownership of all persons
known
by us to own beneficially 5% or more of our Common Stock, and the Common
Stock
ownership of each of our Directors and all Directors and officers as a group,
as
of April 13, 2007. As of April 13, 2007, we had 66,228,256 shares of Common
Stock outstanding.
Name
and Address of Beneficial Owner
|
Number
of Shares Beneficially Owned (1)
|
Percentage
of Outstanding Common Stock
|
Jean
Paul Roy (2)
c/o
GeoGlobal Resources Inc.
Suite
310, 605 - 1 Street SW
Calgary,
Alberta T2P 3S9
|
32,566,000
(3)
|
49.2%
|
Allan
J. Kent
c/o
GeoGlobal Resources Inc.
Suite
310, 605 - 1 Street SW
Calgary,
Alberta T2P 3S9
|
925,000
(4)
|
1.4%
|
Brent
J. Peters
c/o
Northfield Capital Corporation
Suite
301, 141 Adelaide Street West
Toronto,
ON M5H 3L5
|
121,567
(5)
|
Less
than 0.5%
|
Peter
R. Smith
c/o
Andrin Limited
Suite
202, 197 County Court Boulevard
Brampton,
Ontario L6W 4P6
|
50,000
(6)
|
Less
than 0.5%
|
Michael
J. Hudson
439
Mayfair Avenue
Ottawa,
ON K1Y 0K7
|
60,000
(7)
|
Less
than 0.5%
|
Dr.
Avinash Chandra
B-102,
Sector 26
Noida,
Uttar Pradesh
India
201301
|
67,767
(8)
|
Less
than 0.5%
|
All
officers and directors as a group (6 persons)
|
33,790,334
|
51.1%
|
(1)
|
For
purposes of the above table, a person is considered to "beneficially
own"
any shares with respect to which he or she exercises sole or shared
voting
or investment power or of which he or she has the right to acquire
the
beneficial ownership within 60 days following April 13,
2007.
|
(2)
|
Of
the shares held beneficially by Mr. Roy, an aggregate of 5 million
shares
are held in escrow pursuant to the terms of the agreement whereby
we
purchased the outstanding capital stock of GeoGlobal Resources
(India)
Inc. from Mr. Roy. Under the terms of the escrow agreement, Mr.
Roy has
the voting rights with respect to these
shares.
|
(3)
|
Includes
32,016,000 shares of Common Stock and 550,000 options to purchase
Common
Stock exercisable within 60 days of April 13,
2007
|
(4)
|
Includes
375,000 shares of Common Stock and 550,000 options to purchase
Common
Stock exercisable within 60 days of April 13,
2007.
|
(5)
|
Includes
71,567 shares of Common Stock and options to purchase 50,000 shares
of
Common Stock exercisable within 60 days of April 13,
2007.
|
(6)
|
Includes
options to purchase 50,000 shares of Common Stock exercisable within
60
days of April 13, 2007.
|
(7)
|
Includes
10,000 shares of Common Stock and options to purchase 50,000 shares
of
Common Stock exercisable within 60 days of April 13,
2007.
|
(8)
|
Includes
51,100 shares of Common Stock and options to purchase 16,667 shares
of
Common Stock exercisable within 60 days of April 13,
2007.
|
Securities
Authorized for Issuance Under Equity Compensation
Plans
We
have
one equity compensation plan for our employees, directors and consultants
pursuant to which options, rights or shares may be granted or issued. It
is
referred to as our 1998 Stock Incentive Plan ("the Plan"). See Note 5 to
the
Notes to Consolidated Financial Statements to the attached financial statements
for further information on the material terms of this plan.
At
the
annual stockholder meeting held on June 14, 2006, the stockholders of the
Company approved amendments to the Plan to increase the shares of Common
Stock
reserved for issuance under the Plan from 8,000,000 shares to 12,000,000
shares.
The
following table provides information as of December 31, 2006 with respect
to our
compensation plans (including individual compensation arrangements), under
which
securities are authorized for issuance aggregated as to (i) compensation
plans
previously approved by stockholders, and (ii) compensation plans not previously
approved by stockholders:
Equity
Compensation Plan Information
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
Equity
compensation plans approved by security holders
|
|
|
3,517,500
|
|
$
|
3.37
|
|
|
3,650,697
|
|
Equity
compensation plans not approved by security holders
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Total
|
|
|
3,517,500
|
|
$
|
3.37
|
|
|
3,650,697
|
|
Item
12. Certain Relationships and Related Transactions
On
March
27, 2003, GeoGlobal entered into a Participating Interest Agreement (“PIA”) with
RGM, whereby GeoGlobal assigned and holds in trust for RGM subject to GOI
consent, 50% of the benefits and obligations of the PSC covering the Exploration
Block KG-OSN-2001/3 ("PSC-KG") and the CIA leaving GeoGlobal with a net 5%
participating interest in the PSC-KG and a net 5% carried interest in the
CIA.
Under the terms of the PIA, until the GOI consent is obtained, GeoGlobal
retains
the exclusive right to deal with the other parties to the PSC-KG and the
CIA and
is entitled to make all decisions regarding the interest assigned to RGM.
RGM
has agreed to be bound by and be responsible for the actions taken by,
obligations undertaken and costs incurred by GeoGlobal in regard to RGM's
interest, and to be liable to GeoGlobal for its share of all costs, interests,
liabilities and obligations arising out of or relating to the RGM interest.
RGM
has agreed to indemnify GeoGlobal against any and all costs, expenses, losses,
damages or liabilities incurred by reason of RGM's failure to pay the same.
Subject
to obtaining the government consent to the assignment, RGM is entitled to
all
income, receipts, credits, reimbursements, monies receivable, rebates and
other
benefits in respect of its 5% interest which relate to the PSC-KG. GeoGlobal
has a right of set-off against sums owing to GeoGlobal by RGM. In the event
that
the Indian government consent is delayed or denied, resulting in either RGM
or
GeoGlobal being denied an economic benefit it would have realized under the
PIA,
the parties agreed to amend the PIA or take other reasonable steps to assure
that an equitable result is achieved consistent with the parties' intentions
contained in the PIA. In the event the consent is denied, neither party is
entitled to assert any claim against the other except as is specifically
set
forth in the agreement. We have not yet obtained the consent of the GOI.
As a
consequence of this transaction the Company reports its holdings under the
PSC-KG and CIA as a net 5% PI.
Roy
Group
(Mauritius) Inc. further agreed in the Participating Interest Agreement that
it
would not dispose of any interest in the agreement, its 5% interest, or the
shares of Roy Group (Mauritius) Inc. without first giving notice to GeoGlobal
India of the transaction, its terms, including price, and the identity of
the
intended assignee and any other material information, and GeoGlobal India
has
the first right to purchase the interest proposed to be sold on the terms
contained in the notice to GeoGlobal India. GeoGlobal India is now our
wholly-owned subsidiary corporation.
On
August
29, 2003, we entered into a TSA with RGB, a company organized under the laws
of
Barbados and wholly owned by Mr. Roy. Under the agreement, RGB agreed to
perform
such geologic and geophysical duties as are assigned to it by us. The term
of
the agreement, as amended, extends through December 31, 2007 and continues
for
successive periods of one year thereafter unless otherwise agreed by the
parties
or either party has given notice that the agreement will terminate at the
end of
the term. On January 31, 2006, the terms of the agreement were amended to
extend
the term of the agreement from August 31, 2006 to December 31, 2007 and amended
the fee payable from $250,000 to $350,000 effective January 1, 2006. RGB
also is
reimbursed for authorized travel and other out-of-pocket expenses. The agreement
prohibits RGB from disclosing any of our confidential information and from
competing directly or indirectly with us for a period ending December 31,
2007
with respect to any acquisition, exploration, or development of any crude
oil,
natural gas or related hydrocarbon interests within the area of the country
of
India. The agreement may be terminated by either party on 30 days’ prior written
notice, provided, however, the confidentiality and non-competition provisions
will survive the termination. RGB received $350,000 from us during 2006
($250,000 plus a bonus of $60,000 in 2005, $250,000 in 2004 and $83,333 in
2003), under the terms of this agreement.
RGB
was
also reimbursed for medical insurance and expenses, travel, hotel, meals
and
entertainment expenses, computer costs, and amounts billed to third parties
incurred by Mr. Roy during 2006 totaling $134,637. At December 31, 2006,
the
Company owed RGB $29,976 for services provided and expenses incurred pursuant
to
the TSA which amount bears no interest and has no set terms of
repayment.
During
the year ended December 31, 2006, D.I. Investments Ltd. a company controlled
by
Mr. Kent, was paid $185,000 ($120,000 plus a bonus of $30,000 in 2005, $120,000
in 2004 and $61,715 in 2003) by us for consulting services of Mr. Kent which
are
provided to us pursuant to an oral arrangement amended effective January
1,
2006. D.I. Investments Ltd. was also reimbursed $38,442 for office costs,
including rent, parking, office supplies and telephone as well as travel,
hotel,
meals and entertainment expenses incurred throughout 2006. At December 31,
2006,
the Company owed D.I. Investments Ltd. $nil as a result of services provided
and
expensed incurred on behalf of the Company.
During
the year ended December 31, 2006, Amicus Services Inc. a company controlled
by
Mr. Vincent Roy, a brother of Mr. Jean Roy, received from us $56,257 as
consulting fees for services rendered. Amicus Services Inc. was also reimbursed
$5,379 for office costs, including parking, office supplies and telephone
as
well as travel and hotel incurred throughout 2006.
Item
13. Exhibits
Exhibit
|
|
Description
|
3.1
|
|
Certificate
of Incorporation of the Registrant, as amended.
(1)
|
3.2
|
|
Bylaws
of the Registrant, as amended. (4)
|
3.3
|
|
Certificate
of Amendment filed with the State of Delaware on November 25, 1998.
(2)
|
3.4
|
|
Certificate
of Amendment filed with the State of Delaware on December 4, 1998.
(2)
|
3.5
|
|
Certificate
of Amendment filed with the State of Delaware on March 18, 2003.
(5)
|
3.6
|
|
Certificate
of Amendment filed with the State of Delaware on January 8, 2004.
(5)
|
4.1
|
|
Specimen
stock certificate of the Registrant. (5)
|
10.1
|
|
Restated
1993 Stock Incentive Plan. (1)
|
10.2
|
|
1994
Directors Stock Option Plan. (1)
|
10.3
|
|
1994
Stock Option Plan. (1)
|
10.4
|
|
1993
Stock Incentive Plan. (1)
|
10.5
|
|
1998
Stock Incentive Plan. (2)
|
10.6
|
|
Stock
Purchase Agreement dated April 4, 2003 by and among Suite101.com,
Inc.,
Jean Paul Roy and GeoGlobal Resources (India) Inc. (3)
|
Exhibit
|
|
Description
|
10.7
|
|
Amendment
dated August 29, 2003 to Stock Purchase Agreement dated April 4,
2003.
(4)
|
10.8
|
|
Technical
Services Agreement dated August 29, 2003 between Suite101.com,
Inc. and
Roy Group (Barbados) Inc. (4)
|
10.8.1
|
|
Amendment
to Technical Services Agreement dated January 31, 2006 between
GeoGlobal
Resources Inc. and Roy Group (Barbados) Inc. (8)
|
10.9
|
|
Participating
Interest Agreement dated March 27, 2003 between GeoGlobal Resources
(India) Inc. and Roy Group (Mauritius) Inc. (4)
|
10.10
|
|
Escrow
Agreement dated August 29, 2003 among Registrant, Jean Paul Roy
and
Computershare Trust Company of Canada. (4)
|
10.11
|
|
Promissory
Note dated August 29, 2003 payable to Jean Paul Roy. (4)
|
10.12
|
|
Production
Sharing Contract dated February 4, 2003, among The Government of
India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Limited
and
GeoGlobal Resources (India) Inc. (6)
|
10.13
|
|
Production
Sharing Contract dated February 6, 2004 among The Government of
India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited and GeoGlobal Resources (Barbados) Inc. (6)
|
10.14
|
|
Production
Sharing Contract dated February 6, 2004 among The Government of
India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited, Prize Petroleum Company Limited and GeoGlobal Resources
(Barbados) Inc. (6)
|
10.15
|
|
Carried
Interest Agreement dated August 27, 2002 between Gujarat State
Petroleum
Corporation Limited and GeoGlobal Resources (India) Inc. (5)
|
10.16
|
|
Agency
Agreement dated September 9, 2005 between the Company and Jones,
Gable
& Company Limited.
(7)
|
10.17
|
|
Form
of Subscription Agreement entered into by subscribers relating
to offers
and sales of Units by Jones, Gable & Company Limited.
(7)
|
|
|
Form
of Subscription Agreement with respect to sales of an aggregate
of
1,000,000 of the Units.
(7)
|
10.18
|
|
Registration
Rights Agreement dated September 9, 2005 between the Company and
Jones, Gable & Company Limited.
(7)
|
10.19
|
|
Production
Sharing Contract dated September 23, 2005, between the Government of
India and GeoGlobal Resources (Barbados) Inc.
(7)
|
10.20
|
|
Production
Sharing Contract dated September 23, 2005, between the Government of
India, Gujarat State Petroleum Corporation Limited, GAIL (India)
Ltd.,
Jubilant Capital Pvt. Ltd. and GeoGlobal Resources (Barbados)
Inc.
(7)
|
10.21
|
|
Production
Sharing Contract dated March 2, 2007, between the Government of
India, Oil
India Limited and GeoGlobal Resources (Barbados) Inc.
(9)
|
10.22
|
|
Production
Sharing Contract dated March 2, 2007, between the Government of
India, Oil
India Limited and GeoGlobal Resources (Barbados) Inc.
(9)
|
10.23
|
|
Production
Sharing Contract dated March 2, 2007, between the Government of
India, Oil
India Limited, Hindustan Petroleum Corpn. Ltd. and GeoGlobal Resources
(Barbados) Inc.
(9)
|
10.24
|
|
Production
Sharing Contract dated March 2, 2007, between the Government of
India and
GeoGlobal Resources (Barbados) Inc.
(9)
|
|
|
|
14
|
|
Code
of Ethics. (5)
|
21
|
|
Subsidiaries
of the Registrant:
|
|
|
Name
|
State
or Jurisdiction of Incorporation
|
|
|
GeoGlobal
Resources (India) Inc.
|
Barbados
|
|
|
GeoGlobal
Resources (Canada) Inc.
|
Alberta
|
|
|
GeoGlobal
Resources (Barbados) Inc.
|
Barbados
|
23
|
|
Consent
of experts and counsel:
|
|
|
Consent
of Ernst & Young LLP. (10)
|
|
|
Certification
of President and Chief Executive Officer Pursuant to Rule 13a-14(a).
(10)
|
|
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a). (10)
|
|
|
Certification
of President and Chief Executive Officer Pursuant to Section 1350
(furnished, not filed). (10)
|
|
|
Certification
of Chief Financial Officer Pursuant to Section 1350 (furnished,
not
filed). (10)
|
(1)
|
Filed
as an Exhibit to Neuro Navigational Corporation Form 10-KSB No.
0-25136
dated September 30, 1994.
|
(2)
|
Filed
as an Exhibit to our Current Report on Form 8-K dated December
10,
1998.
|
(3)
|
Filed
as exhibit 10.1 to our Quarterly Report on Form 10-QSB for the
quarter
ended March 31, 2003.
|
(4)
|
Filed
as an exhibit to our Current Report on Form 8-K for August 29,
2003.
|
(5)
|
Filed
as an Exhibit to our Form 10-KSB dated April 1,
2004.
|
(6)
|
Filed
as an Exhibit to our Form 10-KSB/A dated April 28,
2004.
|
(7)
|
Filed
as an Exhibit to our Quarterly Report on Form 10-QSB for the quarter
ended
September 30, 2005.
|
(8)
|
Filed
as an Exhibit to our Current Report on Form 8-K dated January 31,
2006.
|
(9)
|
To
be filed as an Exhibit to our Quarterly Report on Form 10Q for
the quarter
ending March 31, 2007.
|
Item
14. Principal Accountant Fees and Services
The
following sets forth fees we incurred for services provided by Ernst & Young
LLP for accounting services rendered during the years ended December 31,
2006
and December 31, 2005.
|
|
Audit
Fees
|
|
Audit
Related Fees
|
|
Tax
Fees
|
|
All
Other Fees
|
|
2006
|
|
|
88,281
|
|
|
26,452
|
|
|
--
|
|
|
37,425
|
|
2005
|
|
|
70,815
|
|
|
32,300
|
|
|
--
|
|
|
9,271
|
|
Our
Board
of Directors believes that the provision of the services during the years
ended
December 31, 2006 and December 31, 2005 is compatible with maintaining the
independence of Ernst & Young LLP. Our Audit Committee approves before the
engagement the rendering of all audit and non-audit services provided to
our
company by our independent auditor. Engagements to render services are not
entered into pursuant to any pre-approval policies and procedures adopted
by the
Audit Committee. The services provided by Ernst & Young LLP included under
the caption Audit
Fees
include
services rendered for the audit of our annual financial statements and the
review of our quarterly financial reports filed with the Securities and Exchange
Commission. Audit
Related Fees
include
services rendered in connection with a follow-up the review of other filings
with the Securities and Exchange Commission. Tax
Fees
include
services rendered relating primarily to tax compliance, consulting, customs
and
duties. All
Other Fees
include
administration fees to cover various expenses and SOX related work performed
to
date.
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
FINANCIAL STATEMENTS
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2006 AND DECEMBER 31, 2005
(in
United States dollars)
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Index
to Consolidated Financial Statements
December
31, 2006 and December 31, 2005
Report
of Independent Registered Public Accounting Firm
|
|
F-3
|
|
|
|
Financial
Statements
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
F-4
|
Consolidated
Statements of Operations
|
|
F-5
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
|
F-6
|
Consolidated
Statements of Cash Flows
|
|
F-7
|
Notes
to the Consolidated Financial Statements
|
|
F-8
to F-29
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Stockholders Of
GeoGlobal
Resources Inc.
We
have
audited the accompanying consolidated balance sheets of GeoGlobal Resources
Inc., a development stage enterprise, as of December 31, 2006 and 2005 and
the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2006, 2005 and 2004, and for the
cumulative period from inception on August 21, 2002 to December 31, 2006.
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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to
perform an audit of the Company's internal control over financial reporting.
Our
audits included consideration of internal control over financial reporting
as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of
the
Company's internal control over financial reporting. Accordingly, we express
no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of GeoGlobal Resources
Inc. as at December 31, 2006 and 2005 and the consolidated results of its
operations and its cash flows for the years ended December 31, 2006, 2005,
and
2004, and for the cumulative period from inception on August 21, 2002 to
December 31, 2006 in conformity with United States generally accepted accounting
principles.
As
discussed in note 6b to the consolidated financial statements, the 2005 and
2004
stock-based compensation disclosures have been restated.
|
|
"Ernst
& Young LLP" (signed)
|
|
|
|
CALGARY,
ALBERTA
|
|
CHARTERED
ACCOUNTANTS
|
March
23, 2007
|
|
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
December
31, 2006
US
$
|
|
December
31, 2005
US
$
|
|
Assets
|
|
|
|
|
|
Current
|
|
|
|
|
|
Cash
and cash equivalents (note 2i)
|
|
|
32,362,978
|
|
|
36,037,388
|
|
Accounts
receivable
|
|
|
202,821
|
|
|
139,035
|
|
Prepaids
and deposits
|
|
|
31,232
|
|
|
5,718
|
|
Cash
call receivable
|
|
|
--
|
|
|
49,947
|
|
|
|
|
32,597,031
|
|
|
36,232,088
|
|
|
|
|
|
|
|
|
|
Restricted
cash (note11a)
|
|
|
3,590,769
|
|
|
392,485
|
|
Property
and equipment (note 3)
|
|
|
183,427
|
|
|
89,826
|
|
Oil
and gas interests, not subject to depletion (note 4)
|
|
|
9,722,738
|
|
|
2,216,663
|
|
|
|
|
|
|
|
|
|
|
|
|
46,093,965
|
|
|
38,931,062
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
1,888,103
|
|
|
159,145
|
|
Accrued
liabilities
|
|
|
33,487
|
|
|
43,500
|
|
Due
to related companies (notes 8c, 8d and 8e)
|
|
|
33,605
|
|
|
244,452
|
|
|
|
|
1,955,195
|
|
|
447,097
|
|
Stockholders'
Equity (note 5)
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
|
|
100,000,000
common shares with a par value of US$0.001 each
|
|
|
|
|
|
|
|
1,000,000
preferred shares with a par value of US$0.01 each
|
|
|
|
|
|
|
|
Issued
|
|
|
|
|
|
|
|
66,208,255
common shares (December 31, 2005 - 62,954,255)
|
|
|
51,617
|
|
|
48,361
|
|
Additional
paid-in capital
|
|
|
47,077,827
|
|
|
40,275,588
|
|
Deficit
accumulated during the development stage
|
|
|
(2,990,674
|
)
|
|
(1,839,984
|
)
|
|
|
|
44,138,770
|
|
|
38,483,965
|
|
|
|
|
|
|
|
|
|
|
|
|
46,093,965
|
|
|
38,931,062
|
|
See
Commitments, Contingencies and Guarantees (note 11)
The
accompanying notes are an integral part of these Consolidated Financial
Statements
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Year
ended
Dec
31, 2006
US
$
|
|
Year
ended
Dec
31, 2005
US
$
|
|
Year
ended
Dec
31, 2004
US
$
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
US
$
|
|
|
|
|
|
|
|
|
|
(note
12a)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
(notes 8c, 8d, 8e and 6b)
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,406,000
|
|
|
495,326
|
|
|
451,788
|
|
|
2,510,716
|
|
Consulting
fees
|
|
|
1,190,919
|
|
|
265,446
|
|
|
237,615
|
|
|
1,864,251
|
|
Professional
fees
|
|
|
251,261
|
|
|
201,298
|
|
|
161,381
|
|
|
752,676
|
|
Depreciation
|
|
|
49,323
|
|
|
49,531
|
|
|
61,308
|
|
|
211,310
|
|
|
|
|
2,897,503
|
|
|
1,011,601
|
|
|
912,092
|
|
|
5,338,953
|
|
Other
expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees recovered
|
|
|
--
|
|
|
(12,950
|
)
|
|
(14,300
|
)
|
|
(66,025
|
)
|
Equipment
costs recovered
|
|
|
--
|
|
|
(12,950
|
)
|
|
(2,200
|
)
|
|
(19,395
|
)
|
Gain
on sale of equipment
|
|
|
--
|
|
|
(42,228
|
)
|
|
--
|
|
|
(42,228
|
)
|
Foreign
exchange (gain) loss
|
|
|
4,737
|
|
|
(319
|
)
|
|
3,495
|
|
|
26,547
|
|
Interest
income
|
|
|
(1,751,550
|
)
|
|
(462,174
|
)
|
|
(31,591
|
)
|
|
(2,247,178
|
)
|
|
|
|
(1,746,813
|
)
|
|
(530,621
|
)
|
|
(44,596
|
)
|
|
(2,348,279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the period (note
9)
|
|
|
(1,150,690
|
)
|
|
(480,980
|
)
|
|
(867,496
|
)
|
|
(2,990,674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted (note 5f)
|
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
|
|
The
accompanying notes are an integral part of these Consolidated Financial
Statements
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
|
|
|
|
Capital
Stock
US
$
|
|
Additional
paid-in
capital
US
$
|
|
Accumulated
Deficit
US
$
|
|
Stockholders'
Equity
US
$
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued on incorporation on August 21, 2002
|
|
|
64
|
|
|
--
|
|
|
--
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the period
|
|
|
--
|
|
|
--
|
|
|
(13,813
|
)
|
|
(13,813
|
)
|
Balance
at December 31, 2002
|
|
|
64
|
|
|
--
|
|
|
(13,813
|
)
|
|
(13,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
acquisition (note 7)
|
|
|
34,000
|
|
|
1,072,960
|
|
|
--
|
|
|
1,106,960
|
|
Options
exercised for cash
|
|
|
397
|
|
|
101,253
|
|
|
--
|
|
|
101,650
|
|
December
2003 private placement financing (note 5c)
|
|
|
6,000
|
|
|
5,994,000
|
|
|
--
|
|
|
6,000,000
|
|
Share
issuance costs on private placement
|
|
|
--
|
|
|
(550,175
|
)
|
|
--
|
|
|
(550,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the year
|
|
|
--
|
|
|
--
|
|
|
(477,695
|
)
|
|
(477,695
|
)
|
Balance
at December 31, 2003
|
|
|
40,461
|
|
|
6,618,038
|
|
|
(491,508
|
)
|
|
6,166,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash
|
|
|
115
|
|
|
154,785
|
|
|
--
|
|
|
154,900
|
|
Broker
Warrants exercised for cash (note 5c)
|
|
|
39
|
|
|
58,611
|
|
|
--
|
|
|
58,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the year
|
|
|
--
|
|
|
--
|
|
|
(867,496
|
)
|
|
(867,496
|
)
|
Balance
at December 31, 2004
|
|
|
40,615
|
|
|
6,831,434
|
|
|
(1,359,004
|
)
|
|
5,513,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash (note 5e(i))
|
|
|
739
|
|
|
1,004,647
|
|
|
--
|
|
|
1,005,386
|
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
|
|
2,214
|
|
|
5,534,036
|
|
|
--
|
|
|
5,536,250
|
|
Broker
Warrants exercised for cash (note 5c)
|
|
|
541
|
|
|
810,809
|
|
|
--
|
|
|
811,350
|
|
September
2005 private placement financing (note 5b)
|
|
|
4,252
|
|
|
27,636,348
|
|
|
--
|
|
|
27,640,600
|
|
Share
issuance costs on private placement (note 5b)
|
|
|
--
|
|
|
(1,541,686
|
)
|
|
--
|
|
|
(1,541,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the year
|
|
|
--
|
|
|
--
|
|
|
(480,980
|
)
|
|
(480,980
|
)
|
Balance
at December 31, 2005
|
|
|
48,361
|
|
|
40,275,588
|
|
|
(1,839,984
|
)
|
|
38,483,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash (note 5e(i))
|
|
|
2,285
|
|
|
2,706,895
|
|
|
--
|
|
|
2,709,180
|
|
Options
exercised for notes receivable (note 6e)
|
|
|
185
|
|
|
249,525
|
|
|
--
|
|
|
249,710
|
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
|
|
786
|
|
|
1,962,964
|
|
|
--
|
|
|
1,963,750
|
|
Share
issuance costs
|
|
|
--
|
|
|
(74,010
|
)
|
|
--
|
|
|
(74,010
|
)
|
Stock-based
compensation (note 6b)
|
|
|
--
|
|
|
1,956,865
|
|
|
--
|
|
|
1,956,865
|
|
Net
loss and comprehensive loss for the year
|
|
|
--
|
|
|
--
|
|
|
(1,150,690
|
)
|
|
(1,150,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
51,617
|
|
|
47,077,827
|
|
|
(2,990,674
|
)
|
|
44,138,770
|
|
See
note
5 for further information
The
accompanying notes are an integral part of these Consolidated Financial
Statements
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Year
ended
Dec
31, 2006
US
$
|
|
Year
ended
Dec
31, 2005
US
$
|
|
Year
ended
Dec
31, 2004
US
$
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
US
$
|
|
|
|
|
|
|
|
|
|
(note
12a)
|
|
Cash
flows provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,150,690
|
)
|
|
(480,980
|
)
|
|
(867,496
|
)
|
|
(2,990,674
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
49,323
|
|
|
49,531
|
|
|
61,308
|
|
|
211,310
|
|
Gain
on sale of equipment
|
|
|
--
|
|
|
(42,228
|
)
|
|
--
|
|
|
(42,228
|
)
|
Stock-based
compensation (note 6b)
|
|
|
1,190,176
|
|
|
--
|
|
|
--
|
|
|
1,190,176
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(63,786
|
)
|
|
42,202
|
|
|
(99,750
|
)
|
|
(127,821
|
)
|
Prepaids
and deposits
|
|
|
(25,514
|
)
|
|
(5,718
|
)
|
|
--
|
|
|
(31,232
|
)
|
Accounts
payable
|
|
|
(23,720
|
)
|
|
24,307
|
|
|
(147,060
|
)
|
|
34,651
|
|
Accrued
liabilities
|
|
|
(10,013
|
)
|
|
22,500
|
|
|
4,600
|
|
|
33,487
|
|
Due
to related companies
|
|
|
(210,847
|
)
|
|
224,828
|
|
|
(27,239
|
)
|
|
(8,151
|
)
|
|
|
|
(245,071
|
)
|
|
(165,558
|
)
|
|
(1,075,637
|
)
|
|
(1,730,482
|
)
|
Cash
flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas interests
|
|
|
(6,739,386
|
)
|
|
(1,578,124
|
)
|
|
(460,016
|
)
|
|
(8,956,049
|
)
|
Property
and equipment
|
|
|
(142,924
|
)
|
|
(36,876
|
)
|
|
(87,341
|
)
|
|
(435,309
|
)
|
Proceeds
on sale of equipment
|
|
|
--
|
|
|
82,800
|
|
|
--
|
|
|
82,800
|
|
Cash
acquired on acquisition (note 7)
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
3,034,666
|
|
Restricted
cash (note 11a)
|
|
|
(3,198,284
|
)
|
|
(185,689
|
)
|
|
(206,796
|
)
|
|
(3,590,769
|
)
|
Changes
in investing assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
call receivable
|
|
|
49,947
|
|
|
(22,436
|
)
|
|
(27,511
|
)
|
|
--
|
|
Accounts
payable
|
|
|
1,763,478
|
|
|
94,415
|
|
|
--
|
|
|
1,804,444
|
|
Accrued
liabilities
|
|
|
--
|
|
|
(33,442
|
)
|
|
33,442
|
|
|
--
|
|
|
|
|
(8,267,169
|
)
|
|
(1,679,352
|
)
|
|
(748,222
|
)
|
|
(8,060,217
|
)
|
Cash
flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common shares
|
|
|
4,922,640
|
|
|
34,993,586
|
|
|
213,550
|
|
|
46,231,490
|
|
Share
issuance costs
|
|
|
(74,010
|
)
|
|
(1,541,686
|
)
|
|
--
|
|
|
(2,165,871
|
)
|
Changes
in financing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable (note 8a)
|
|
|
--
|
|
|
--
|
|
|
(1,000,000
|
)
|
|
(2,000,000
|
)
|
Accounts
payable
|
|
|
(10,800
|
)
|
|
10,800
|
|
|
--
|
|
|
61,078
|
|
Due
to shareholder
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Due
to related companies
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
26,980
|
|
|
|
|
4,837,830
|
|
|
33,462,700
|
|
|
(786,450
|
)
|
|
42,153,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(3,674,410
|
)
|
|
31,617,790
|
|
|
(2,610,309
|
)
|
|
32,362,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
36,037,388
|
|
|
4,419,598
|
|
|
7,029,907
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
|
32,362,978
|
|
|
36,037,388
|
|
|
4,419,598
|
|
|
32,362,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
bank accounts
|
|
|
316,329
|
|
|
127,803
|
|
|
90,670
|
|
|
316,329
|
|
Term
deposits
|
|
|
32,046,649
|
|
|
35,909,585
|
|
|
4,328,928
|
|
|
32,046,649
|
|
|
|
|
32,362,978
|
|
|
36,037,388
|
|
|
4,419,598
|
|
|
32,362,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
taxes paid during the period
|
|
|
17,775
|
|
|
15,500
|
|
|
2,750
|
|
|
39,463
|
|
The
accompanying notes are an integral part of these Consolidated Financial
Statements
The
Company is engaged primarily in the pursuit of petroleum and natural gas
through
exploration and development in India. Since inception, the efforts of GeoGlobal
have been devoted to the pursuit of Production Sharing Contracts (“PSC”) with
the Gujarat State Petroleum Corporation ("GSPC"), Oil India Limited ("OIL")
and
the Government of India ("GOI") and the development thereof. To date, the
Company has not earned revenue from these operations and is considered to
be in
the development stage. The recoverability of the costs incurred to date is
uncertain and dependent upon achieving commercial production or sale, the
ability of the Company to obtain sufficient financing to fulfill its obligations
under the PSC’s in India and upon future profitable operations and upon
finalizing agreements with GSPC and OIL.
On
August
29, 2003, all of the issued and outstanding shares of GeoGlobal Resources
(India) Inc. ("GeoGlobal India") were acquired by GeoGlobal Resources Inc.,
formerly Suite101.com, Inc. As a result of the transaction, the former
shareholder of GeoGlobal India held approximately 69.3% of the issued and
outstanding shares of GeoGlobal Resources Inc. This transaction is considered
an
acquisition of GeoGlobal Resources Inc. (the accounting subsidiary and legal
parent) by GeoGlobal India (the accounting parent and legal subsidiary) and
has
been accounted for as a purchase of the net assets of GeoGlobal Resources
Inc.
by GeoGlobal India. Accordingly, this transaction represents a recapitalization
of GeoGlobal India, the legal subsidiary, effective August 29, 2003. These
consolidated financial statements are issued under the name of GeoGlobal
Resources Inc. but are a continuation of the financial statements of the
accounting acquirer, GeoGlobal India. The assets and liabilities of GeoGlobal
India are included in the consolidated financial statements at their historical
carrying amounts. As a result, the stockholders' equity of GeoGlobal Resources
Inc. is eliminated and these consolidated financial statements reflect the
results of operations of GeoGlobal Resources Inc. only from the date of the
acquisition.
GeoGlobal
Resources Inc. changed its name from Suite101.com, Inc. after receiving
shareholder approval at the Annual Shareholders Meeting held on January 8,
2004.
Collectively, GeoGlobal Resources Inc., GeoGlobal India and its other
wholly-owned direct and indirect subsidiaries, are referred to as the "Company"
or “GeoGlobal”.
2.
|
Significant
Accounting Policies
|
These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States within the
framework of the accounting policies summarized below.
These
consolidated financial statements include the accounts of (i) GeoGlobal
Resources Inc., from the date of acquisition, being August 29, 2003, (ii)
GeoGlobal Resources (India) Inc., incorporated under the Business
Corporations Act (Alberta),
Canada on August 21, 2002 and continued under the Companies
Act of Barbados,
West
Indies on June 27, 2003, which is a wholly-owned subsidiary of GeoGlobal
Resources Inc., (iii) GeoGlobal Resources (Canada) Inc., incorporated under
the
Business
Corporations Act (Alberta),
Canada on September 4, 2003, which is a wholly-owned subsidiary of GeoGlobal
Resources Inc., and (iv) GeoGlobal Resources (Barbados) Inc. incorporated
under
the Companies
Act of Barbados,
West
Indies on September 24, 2003, which is the wholly-owned subsidiary of GeoGlobal
Resources (Canada) Inc.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
2.
|
Significant
Accounting Policies
(continued)
|
The
Company follows the full cost method of accounting for its petroleum and
natural
gas operations. Under this method all costs related to the exploration for
and
development of petroleum and natural gas reserves are capitalized. Costs
include
land acquisition costs, geological and geophysical expenditures, costs of
drilling both productive and non-productive wells and related overhead costs.
Proceeds from the sale of properties will be applied against capitalized
costs,
without any gain or loss being realized, unless such sale would significantly
alter the relationship between capital costs and proven reserves of petroleum
and natural gas attributable to the cost center.
Upon
the
commencement of production of economic quantities of oil and gas, depletion
of
exploration and development costs and depreciation of production equipment
will
be provided on a country-by-country basis using the unit-of-production method
based upon estimated proven petroleum and natural gas reserves. The costs
of
acquiring and evaluating unproven properties and major development projects
will
be excluded from costs subject to depletion until it is determined whether
or
not proven reserves are attributable to the properties, the major development
projects are completed, or impairment occurs. For depletion and depreciation
purposes, relative volumes of petroleum and natural gas production and reserves
will be converted into equivalent units based upon estimated relative energy
content.
In
applying the full cost method, the Company will be calculating a ceiling
test
whereby the carrying value of petroleum and natural gas properties and
production equipment, net of recorded deferred income taxes is limited to
the
present value of after-tax future net revenues from proven reserves, discounted
at 10% (based on prices and costs at the balance sheet date calculated
quarterly), plus the lower of cost and fair value of unproven properties.
Should
this comparison indicate an excess carrying value, the excess will be charged
against earnings as additional depletion and depreciation. Unproven properties
are assessed quarterly for possible impairments or reductions in
value.
|
iv)
|
Asset
retirement obligations
|
The
Company recognizes the fair value of a liability for an asset retirement
obligation in the period in which it is incurred and a corresponding increase
in
the carrying value of the related long-lived asset. The fair value is determined
through a review of engineering and environmental studies, industry guidelines,
and management’s estimate on a site by site basis. The liability is subsequently
adjusted for the passage of time, and is recognized as accretion expense
in the
consolidated statement of operations. The liability is also adjusted due
to
revisions in either the timing or the amount of the original estimated cash
flows associated with the liability. The increase in the carrying value of
the
asset is amortized over the useful life of the related productive assets.
Revenue
associated with the production and sales of crude oil, natural gas and natural
gas liquids owned by the Company will be recognized when production is sold
to a
purchaser at a fixed or determinable price, and when delivery has occurred
and
title passes from the Company to its customer, and if the collectibility
of the
revenue is probable.
c) |
Property
and Equipment
|
Computer
and office equipment are recorded at cost, with depreciation provided for
on a
declining-balance basis at 30% per annum.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
2.
|
Significant
Accounting Policies
(continued)
|
All
of
the Company's petroleum and natural gas activities are conducted jointly
with
others. The Company’s undivided interests in joint ventures are consolidated on
a proportionate basis.
Net
loss
per share is calculated based upon the weighted-average number of shares
outstanding during the period. The treasury stock method is used to determine
the dilutive effect of the stock options. The treasury stock method assumes
any
proceeds obtained upon exercise of options would be used to purchase common
shares at the average market price during the period. There are no differences
between net loss and the weighted-average number of shares used in the
calculation of the basic net loss per share and those used in the calculation
of
diluted net loss per share as the effect of the options and warrants on the
diluted net loss per share calculations is anti-dilutive for all periods
presented.
Comprehensive
loss includes all changes in equity except those resulting from investments
made
by owners and distributions to owners. Comprehensive loss consists only of
net
loss for all periods presented.
The
preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities at the date of the consolidated financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from these estimated amounts.
The
Company has estimated the fair value of its financial instruments which include
cash and cash equivalents, restricted cash, accounts receivable, accounts
payable and due to related companies. The Company used valuation methodologies
and market information available as at period end to determine that the carrying
amounts of such financial instruments approximate fair value in all cases.
It is
management’s opinion that the Company
is not exposed to significant interest, currency or credit risks arising
from
its financial instruments.
i)
|
Cash
and cash equivalents
|
Cash
and
cash equivalents include cash on hand, balances with banks and short-term
deposits with original maturities of three months or less, earning interest
based upon the US prime rate. Interest earned during the year ended December
31,
2006 was US$1,751,550 (December 31, 2005 - US$462,174) which included
US$1,744,697 (December 31, 2005 - US$454,887) of interest earned on our cash
and
cash equivalents held in term deposits representing an average rate of 4.81%
(December 31, 2005 - 2.57%).
j)
|
Foreign
currency translation
|
The
Company translates integrated foreign operations into the functional currency
of
the parent. Monetary assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at rates of exchange in effect at the date
of
the balance sheet. Non-monetary items are translated at the rate of exchange
in
effect when the assets are acquired or obligations incurred. Revenues and
expenses are translated at average rates in effect during the period, with
the
exception of depreciation which is translated at historic rates. Exchange
gains
and losses are charged to operations.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
2.
|
Significant
Accounting Policies
(continued)
|
The
Company follows the liability method of tax allocation. Under this method,
assets and liabilities are determined based on differences between the tax
basis
of an asset or liability and its carrying value using enacted tax rates
anticipated to apply in the periods when the temporary differences are expected
to reverse.
The
effect on deferred income tax assets and liabilities of changes in tax rates
is
recognized in income or loss in the period in which the change is
enacted.
l)
|
Stock-based
compensation plan
|
In
prior
years, reporting of the impact of stock-based compensation, such as employee
stock options, on the Company's net loss and net loss per share was required
only on a pro-forma basis.
In
December, 2004, the Financial Accounting Standards Board issued a revision
to
Standard 123, Accounting
for Stock-Based Compensation. The
Statement of Financial Accounting Standards 123(R), Share-Based
Payment ("FAS
123(R)"), requires the recognition of compensation cost for stock-based
compensation arrangements with employees, consultants and directors based
on
their grant date fair value using the Modified Black-Scholes option-pricing
model. Compensation expense is recorded over the awards' respective requisite
service, with corresponding entries to paid-in capital.
The
Company adopted FAS 123(R) using the modified-prospective-transition method
on
January 1, 2006. The impact of this adoption required the Company to recognize
a
charge for past stock-based compensation options granted of US$367,596 over
the
subsequent 3 years in accordance with their respective vesting
periods.
In
accordance with EITF 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock", the warrants
were reported as equity instruments and recorded at fair market value on
the
date of issuance.
3.
|
Property
and Equipment
|
|
|
December
31, 2006
US$
|
|
December
31, 2005
US$
|
|
|
|
|
|
|
|
Computer
and office equipment
|
|
|
324,419
|
|
|
209,585
|
|
Accumulated
depreciation
|
|
|
(169,082
|
)
|
|
(119,759
|
)
|
|
|
|
155,337
|
|
|
89,826
|
|
|
|
|
|
|
|
|
|
Office
condominium deposit (note 13b)
|
|
|
28,090
|
|
|
--
|
|
|
|
|
183,427
|
|
|
89,826
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
|
|
December
31, 2006
US$
|
|
December
31, 2005
US$
|
|
Exploration
- India
|
|
|
|
|
|
Exploration
costs incurred in:
|
|
|
|
|
|
2002
|
|
|
21,925
|
|
|
21,925
|
|
2003
|
|
|
156,598
|
|
|
156,598
|
|
2004
|
|
|
460,016
|
|
|
460,016
|
|
2005
|
|
|
1,578,124
|
|
|
1,578,124
|
|
|
|
|
2,216,663
|
|
|
2,216,663
|
|
2006
|
|
|
7,506,075
|
|
|
--
|
|
|
|
|
9,722,738
|
|
|
2,216,663
|
|
a)
|
Exploration
costs - India
|
The
exploration costs incurred to date are not subject to depletion and cover
six
exploration blocks, known as the KG Offshore Block, the Mehsana Block, the
Sanand/Miroli Block, the Ankleshwar Block, the DS 03 Block and the Tarapur
Block. It is anticipated that all or certain of these exploration costs may
be
subject to depletion commencing in the year 2007.
b)
|
Capitalized
overhead costs
|
Included
in the US$7,506,075 of exploration cost additions during the year ended December
31, 2006 (year ended December 31, 2005 - US$1,578,124) are certain overhead
costs capitalized by the Company in the amount of US$2,133,984 (year ended
December 31, 2005 - US$469,268) directly related to the exploration activities
in India. The capitalized overhead amount includes capitalized stock-based
compensation of US$766,689 (year ended December 31, 2005 - US$nil) (see note
6b)
of which US$323,283 (year ended December 31, 2005 - US$nil) was for the account
of a related party (see note 8c). Further, the capitalized overhead amount
includes US$1,000,705 (year ended December 31, 2005 - US$145,773) which was
paid
to third parties and US$nil (year ended December 31, 2005 - US$51,800) was
recovered from third parties. The balance of US$366,590 was paid to and on
behalf of a related party (year ended December 31, 2005 - US$375,295) (see
note
8c). These costs are incurred solely by and on behalf of the Company in
providing its services under the Carried Interest Agreement (“CIA”) and are
therefore not reimbursable under the CIA (see note 4c).
c) |
Carried
Interest Agreement
|
On
August
27, 2002, GeoGlobal entered into a CIA with GSPC, which grants the Company
a 10%
Carried Interest (“CI”) (net 5% - see note 4d) in the KG Offshore Block. The CIA
provides that GSPC is responsible for GeoGlobal's entire share of any and
all
costs incurred during the Exploration Phase prior to the date of initial
commercial production.
Under
the
terms of the CIA, all of GeoGlobal's and Roy Group (Mauritius) Inc.'s (“RGM”), a
related party (note 8b) proportionate share of capital costs for exploration
and
development activities will be recovered by GSPC without interest over the
projected production life or ten years, whichever is less, from oil and natural
gas produced on the Exploration Block. GeoGlobal is not entitled to any share
of
production until GSPC has recovered the Company's share of the costs and
expenses that were paid by GSPC on behalf of the Company and RGM.
As
at
December 31, 2006, GSPC has incurred costs of Rs 114.96 crore (approximately
US$26.1 million) (December 31, 2005 - Rs 63.31 crore (approximately US$14.1
million)) attributable to GeoGlobal under the CIA of which 50% is for the
account of RGM.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
4. |
Oil
and Gas Interests (continued)
|
d) |
Participating
Interest Agreement
|
On
March
27, 2003, GeoGlobal entered into a Participating Interest Agreement (“PIA”) with
RGM, whereby GeoGlobal assigned and holds in trust for RGM subject to GOI
consent, 50% of the benefits and obligations of the PSC covering the Exploration
Block KG-OSN-2001/3 ("PSC-KG") and the CIA leaving GeoGlobal with a net 5%
participating interest in the PSC-KG and a net 5% carried interest in the
CIA.
Under the terms of the PIA, until the GOI consent is obtained, GeoGlobal
retains
the exclusive right to deal with the other parties to the PSC-KG and the
CIA and
is entitled to make all decisions regarding the interest assigned to RGM,
RGM
has agreed to be bound by and be responsible for the actions taken by,
obligations undertaken and costs incurred by GeoGlobal in regard to RGM's
interest and to be liable to GeoGlobal for its share of all costs, interests,
liabilities and obligations arising out of or relating to the RGM interest.
RGM
has agreed to indemnify GeoGlobal against any and all costs, expenses, losses,
damages or liabilities incurred by reason of RGM's failure to pay the same.
Subject to obtaining the government consent to the assignment, RGM is entitled
to all income, receipts, credits, reimbursements, monies receivable, rebates
and
other benefits in respect of its 5% interest which relate to the PSC-KG.
GeoGlobal
has a right of set-off against sums owing to GeoGlobal by RGM. In the event
that
the Indian government consent is delayed or denied, resulting in either RGM
or
GeoGlobal being denied an economic benefit it would have realized under the
PIA,
the parties agreed to amend the PIA or take other reasonable steps to assure
that an equitable result is achieved consistent with the parties' intentions
contained in the PIA. As a consequence of this transaction the Company reports
its holdings under the PSC-KG and CIA as a net 5% participating interest
("PI").
e) |
Deed
of Assignment and
Assumption
|
On
April
7, 2005, the Company entered into a Deed of Assignment and Assumption with
GSPC
whereby, subject to the terms of the agreement, the Company agreed to acquire
and assume and GSPC agreed to assign a 20% PI in the onshore Tarapur exploration
block (CB-ON/2). The assignment of the 20% PI was subject to obtaining the
consent of the GOI to the assignment, which consent was received effective
August 24, 2006. As a condition to receiving the GOI consent, the Company
provided to the GOI an irrevocable letter of credit in the amount of
US$1,200,000 secured by a term deposit of the Company in the same amount
(see
note 11a). This amount represents the Company’s performance guarantee for its
20% PI share (Rs. 5.3 crore) of the estimated exploration costs budgeted
for the
period April 1, 2006 through March 31, 2007.
Under
the
terms of the Company's agreement with GSPC, the Company is to fund its 20%
PI
share of all past exploration costs incurred on the Tarapur exploration block.
As at December 31, 2006, the amount of US$3,972,765 has been included in
oil and
gas interests for our PI share of costs incurred in the previous drilling
of
eight exploration wells and a recently completed 500 sq. km. 3D seismic
acquisition.
f) |
Production
Sharing Contracts
|
|
i)
|
Exploration
Block KG-OSN-2001/3 (also referred to as “KG Offshore
Block”)
|
On
February 4, 2003, GeoGlobal, as to a 10% PI (net 5% - see note 4d) together
with
its joint venture participants, Jubilant Enpro Limited ("Enpro") and GSPC,
as to
their 10% and 80% PI respectively, entered into a PSC with respect to the
KG
Offshore Block ("PSC-KG") with the GOI. The KG Offshore Block is located
offshore on the east coast of India in the Krishna Godavari Basin. See also
Carried Interest Agreement note 4c.
The
PSC-KG allows the joint venture participants to explore for petroleum and
natural gas over a 6.5 year period commencing March 12, 2003 on the KG Offshore
Block subject to the work commitment as outlined in note 11c.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
4. |
Oil
and Gas Interests
(continued)
|
|
ii)
|
Exploration
Block CB-ONN-2002/2 (also
referred to as “Mehsana
Block”)
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro and GSPC as to their 30% and 60% PI respectively, entered
into a PSC with respect to the Mehsana Block ("PSC-Mehsana") with the GOI.
The
Mehsana Block covers an area of approximately 125 square kilometers ("sq.
kms.")
in the Cambay Basin, located in the province of Gujarat in Northwest
India.
The
PSC-Mehsana allows the joint venture participants to explore for petroleum
and
natural gas over a 6 year period commencing May 31, 2004 on the Exploration
Block subject to the work commitment as outlined in note 11b.
|
iii)
|
Exploration
Block CB-ONN-2002/3 (also
referred to as “Sanand/Miroli
Block”)
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro, GSPC, and Prize Petroleum Company Limited as to their
20%,
55% and 15% PI respectively, entered into a PSC with respect to the
Sanand/Miroli Block ("PSC-Sanand/Miroli") with the GOI. The Sanand/Miroli
Block
covers an area of approximately 285 sq. kms. in the Cambay Basin, located
in the
province of Gujarat in Northwest India.
The
PSC-Sanand/Miroli allows the joint venture participants to explore for petroleum
and natural gas over a 6 year period commencing July 29, 2004 on the Exploration
Block subject to the work commitment as outlined in note 11b.
|
iv)
|
Exploration
Block CB-ONN-2003/2 (also
referred to as “Ankleshwar
Block”)
|
On
September 28, 2005, GeoGlobal as to its 10% PI, along with its joint venture
participants, Gail (India) Ltd., Jubilant Capital Pvt. Ltd. and GSPC as to
their
20%, 20% and 50% PI respectively, entered into a PSC with respect to the
Ankleshwar Block ("PSC-Ankleshwar") with the GOI. The Ankleshwar Block covers
an
area of approximately 448 sq. kms. in the Cambay Basin, located in the province
of Gujarat in Northwest India.
The
PSC-Ankleshwar allows the joint venture participants to explore for petroleum
and natural gas over
a 7
year period commencing April 1, 2006 on the Exploration Block subject to
the
work commitment as outlined in note 11b.
|
v)
|
Exploration
Block DS-ONN-2003/1 (also
referred to as “DS 03
Block”)
|
On
September 28, 2005, GeoGlobal as to its 100% PI entered into a PSC with respect
to the DS 03 Block ("PSC-DS") with the GOI. The DS 03 Block covers an area
of
approximately 3,155 sq. kms. in the Deccan Syneclise Basin, located in the
northern portion of the State of Maharashtra in West Central India.
The
PSC-DS allows GeoGlobal to explore for petroleum and natural gas over a 7
year
period commencing September 4, 2006 on the Exploration Block subject to the
work
commitment as outlined in note 11b.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
|
|
Number
of
shares
|
|
Capital
stock
US
$
|
|
Additional
paid-in
capital
US
$
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2002
|
|
|
1,000
|
|
|
64
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
Transactions
|
|
|
|
|
|
|
|
|
|
|
Capital
stock of GeoGlobal at August 29, 2003
|
|
|
14,656,687
|
|
|
14,657
|
|
|
10,914,545
|
|
Common
shares issued by GeoGlobal to acquire GeoGlobal India
|
|
|
34,000,000
|
|
|
34,000
|
|
|
1,072,960
|
|
Share
issuance costs on acquisition
|
|
|
--
|
|
|
--
|
|
|
(66,850
|
)
|
Elimination
of GeoGlobal capital stock in recognition of reverse takeover (note
7)
|
|
|
(1,000
|
)
|
|
(14,657
|
)
|
|
(10,914,545
|
)
|
Options
exercised for cash
|
|
|
396,668
|
|
|
397
|
|
|
101,253
|
|
December
2003 private placement financing (note 5c)
|
|
|
6,000,000
|
|
|
6,000
|
|
|
5,994,000
|
|
Share
issuance costs on private placement
|
|
|
--
|
|
|
--
|
|
|
(483,325
|
)
|
|
|
|
55,052,355
|
|
|
40,397
|
|
|
6,618,038
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2003
|
|
|
55,053,355
|
|
|
40,461
|
|
|
6,618,038
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
Transactions
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash
|
|
|
115,000
|
|
|
115
|
|
|
154,785
|
|
Broker
Warrants exercised for cash (note 5c)
|
|
|
39,100
|
|
|
39
|
|
|
58,611
|
|
|
|
|
154,100
|
|
|
154
|
|
|
213,396
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2004
|
|
|
55,207,455
|
|
|
40,615
|
|
|
6,831,434
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
Transactions
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash (note 5e(i)
|
|
|
739,000
|
|
|
739
|
|
|
1,004,647
|
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
|
|
2,214,500
|
|
|
2,214
|
|
|
5,534,036
|
|
Broker
Warrants exercised for cash (note 5c)
|
|
|
540,900
|
|
|
541
|
|
|
810,809
|
|
September
2005 private placement financing (note 5b)
|
|
|
4,252,400
|
|
|
4,252
|
|
|
27,636,348
|
|
Share
issuance costs on private placement (note 5b)
|
|
|
--
|
|
|
--
|
|
|
(1,541,686
|
)
|
|
|
|
7,746,800
|
|
|
7,746
|
|
|
33,444,154
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2005
|
|
|
62,954,255
|
|
|
48,361
|
|
|
40,275,588
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Transactions
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash (note 5e(i))
|
|
|
2,284,000
|
|
|
2,285
|
|
|
2,706,895
|
|
Options
exercised for notes receivable (note 6e)
|
|
|
184,500
|
|
|
185
|
|
|
249,525
|
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
|
|
785,500
|
|
|
786
|
|
|
1,962,964
|
|
Share
issuance costs
|
|
|
--
|
|
|
--
|
|
|
(74,010
|
)
|
Stock-based
compensation (note 6b)
|
|
|
--
|
|
|
--
|
|
|
1,956,865
|
|
|
|
|
3,254,000
|
|
|
3,256
|
|
|
6,802,239
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2006
|
|
|
66,208,255
|
|
|
51,617
|
|
|
47,077,827
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
5. |
Capital
Stock (continued)
|
b) |
September
2005 Financing
|
During
September 2005, GeoGlobal completed the sale of 3,252,400 Units of its
securities at US$6.50 per Unit, together with a concurrent sale of an additional
1,000,000 Units on the same terms, for aggregate gross cash total proceeds
of
US$27,640,600.
Each
Unit
is comprised of one common share and one half of one warrant. One full warrant
("2005 Purchase Warrant") entitles the holder to purchase one additional
common
share for US$9.00, for a term of two years expiring September 2007. The 2005
Purchase Warrants are subject to accelerated expiration in the event that
the
price of the Company's common shares on the American Stock Exchange is US$12.00
or more for 20 consecutive trading days, the resale of the shares included
in
the Units and issuable on exercise of the 2005 Purchase Warrants has been
registered under the US Securities Act of 1933, as amended (the “Act”), and the
hold period for Canadian subscribers has expired. In such events, the warrant
term will be reduced to 30 days from the date of issuance of a news release
announcing such accelerated expiration of the warrant term. At March 23,
2007
since not all such events have occurred, the accelerated expiration of the
warrant term was not triggered.
Costs
of
US$1,541,686 were incurred in issuing shares in these transactions which
included a
fee of
US$1,268,436 paid to Jones Gable & Company Limited with respect to the sale
of the 3,252,400 Units, and, in addition, Compensation Options were issued
to
Jones Gable & Company Limited entitling it to purchase an additional 195,144
Units at an exercise price of US$6.50 per Unit through their expiration in
September
2007. Compensation Options are also subject to accelerated expiration on
the
same terms and conditions as the warrants issued in the transaction.
c)
|
December
2003 Financing
|
On
December 23, 2003, GeoGlobal completed a brokered private placement of 5,800,000
units at US$1.00 each, together with a concurrent private placement of an
additional 200,000 units on the same terms, for aggregate gross cash total
proceeds of US$6,000,000.
Each
unit
is comprised of one common share and one half of one warrant. One full warrant
("2003 Purchase Warrant"), entitles the holder to purchase one additional
common
share for US$2.50, for a term of two years from date of closing. The 2003
Purchase Warrants are subject to accelerated expiration 30 days after issuance
of a news release to that effect in the event that the common shares trade
at
US$4.00 or more for 20 consecutive trading days and if the resale of the
shares
has been registered under the 1933 Act and the hold period for Canadian
subscribers has expired. Also issued as additional consideration for this
transaction were 580,000 Broker Warrants.
The
580,000 Broker Warrants described above entitled the holder to purchase 580,000
common shares at an exercise price of US$1.50 per share which were fully
exercised before they expired on December 23, 2005 for gross proceeds of
US$870,000.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
5.
|
Capital
Stock (continued)
|
|
i)
|
2003
Purchase Warrants
|
During
the year ended December 31, 2006, 785,500 (December 31, 2005 - 2,214,500)
2003
Purchase Warrants were exercised for gross proceeds of US$1,963,750 (December
31, 2005 - US$5,536,250). As at December 31, 2006, there were no 2003 Purchase
Warrants remaining to be exercised.
|
ii)
|
2005
Purchase Warrants
|
As
at
December 31, 2006, all of the 2005 Purchase Warrants remained outstanding,
which
if exercised, would result in the issuance of 2,126,200 common shares for
gross
proceeds of US$19,135,800.
|
iii)
|
Compensation
Option Warrants
|
As
at
December 31, 2006, none of the 97,572 Compensation Option Warrants have been
issued as a result of the Compensation Options not being exercised. If the
Compensation Options are exercised and the Compensation Option Warrants issued,
if exercised, would result in gross proceeds of US$878,148.
During
the year ended December 31, 2006, 2,468,500 (December 31, 2005 - 739,000)
options were exercised at various prices between US$1.01 and US$1.50 for
gross
proceeds of US$2,709,180 (December 31, 2005 - US$1,005,386) and notes receivable
for US$249,710 (see note 6e).
As
at
December 31, 2006, none of the 195,144 Compensation Options were exercised.
If
fully exercised, the Compensation Options would result in gross proceeds
of
US$1,268,436.
f)
|
Weighted-average
number of shares
|
For
purposes of the determination of net loss per share, the basic and diluted
weighted-average number of shares outstanding for the year ended December
31,
2006 was 59,763,629 (December 31, 2005 - 53,058,660 and December 31, 2004
-
41,671,136). The numbers exclude the 5,000,000 shares currently held in escrow
(see note 7).
a)
|
The
Company’s 1998 Stock Incentive
Plan
|
Under
the
terms of the 1998 Stock Incentive Plan (the "Plan"), as amended, 12,000,000
common shares have been reserved for issuance on exercise of options granted
under the Plan. As at December 31, 2006, the Company had 3,650,697 (December
31,
2005 - 1,875,697) common shares remaining for issuance under the Plan. The
Board
of Directors of the Company may amend or modify the Plan at any time, subject
to
any required stockholder approval. The Plan will terminate on the earliest
of:
(i) 10 years after the Plan Effective Date, being December 2008; (ii) the
date
on which all shares available for issuance under the Plan have been issued
as
fully-vested shares; or, (iii) the termination of all outstanding options
in
connection with certain changes in control or ownership of the
Company.
At
the
annual stockholder meeting held on June 14, 2006, shareholder approval was
obtained to amend the Plan to increase the shares reserved for grant of options
from 8,000,000 to 12,000,000.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
6.
|
Stock
Options (continued)
|
b)
|
Stock-based
compensation
|
The
Company adopted FAS 123(R), Accounting
for Stock-Based Compensation,
using
the modified-prospective-transition method on January 1, 2006. Under this
method, the Company is required to recognize compensation cost for stock-based
compensation arrangements with employees, consultants and directors based
on
their grant date fair value using the Black-Scholes option-pricing model,
such
cost to be expensed over the compensations’ respective vesting
periods.
|
|
Year
ended
Dec
31, 2006
US
$
|
|
Year
ended
Dec
31, 2005
US
$
|
|
Year
ended
Dec
31, 2004
US
$
|
|
Period
from
Inception
Aug
21, 2002 to Dec 31, 2005
US
$
|
|
|
|
|
|
Restated
note
6b(iii)
|
|
Restated
note
6b(iii)
|
|
Restated
note
6b(iii)
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
563,551
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Consulting
fees
|
|
|
626,625
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
1,190,176
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India
|
|
|
766,689
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
1,956,865
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
--
|
|
|
(480,980
|
)
|
|
(867,496
|
)
|
|
(1,839,984
|
)
|
Pro-forma
|
|
|
--
|
|
|
(1,080,303
|
)
|
|
(1,094,259
|
)
|
|
(2,787,949
|
)
|
Net
loss per share - basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
|
|
Pro-forma
|
|
|
|
|
|
(0.02
|
)
|
|
(0.03
|
)
|
|
|
|
|
i)
|
At
January 1, 2006, the impact of the adoption of FAS123(R) required
the
Company to recognize a charge for past stock-based compensation
options
granted of US$367,596 over the next 3 years in accordance with
their
respective vesting periods. In the year ended December 31, 2006,
US$301,028 of this charge was recognized in the Consolidated Statements
of
Operations as general and administrative expense resulting in an
increase
in the net loss and comprehensive loss for the period in the same
amount
and no impact on the net loss per share - basic and diluted for
the
period.
|
|
ii)
|
At
December 31, 2006, the total compensation cost related to non-vested
awards not yet recognized was US$1,577,286 (December 31, 2005 -
US$367,596) which will be recognized over the remaining vesting
period of
the options. The total fair value of all options vested during
the year
December 31, 2006 was $1,046,490.
|
|
iii)
|
In
prior years, the Company was required only to disclose the impact
on net
loss and net loss per share on a pro-forma basis. The prior periods
have
been restated due to an error in the classification and calculation
for
modification of stock-based compensation. The impact of this restatement
in the year ended December 31, 2005 was a reduction of the net
loss
pro-forma from US$2,452,180 to US$1,080,303 (year ended December
31, 2004
- US$1,182,030 to US$1,094,259) and a reduction of the net loss
per share
- basic and diluted pro-forma from US$0.05 to US$0.02 (year ended
December
31, 2004 - no impact and remained at US$0.02). In addition, in
December
31, 2005, $183,581 of stock based compensation was reclassified
from
operating expenses to capital expenditures (December 31, 2004 -
$87,771 -
From inception of August 21, 2002 to December 31, 2003 -
$53,354).
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
6.
|
Stock
Options (continued)
|
c)
|
Black-Scholes
Assumptions
|
During
the years ended December 31, 2006, 2005 and 2004, options of 2,255,000,
1,760,000 and nil respectively were granted to the Company's directors,
employees and consultants under the terms of the 1998 Stock Incentive Plan.
The
fair value of each option granted was estimated on the date of grant using
the
Black-Scholes option-pricing model. Weighted average assumptions used in
the
valuation are disclosed in the following table:
|
|
Year
ended
Dec
31, 2006
US
$
|
|
Year
ended
Dec
31, 2005
US
$
|
|
Year
ended
Dec
31, 2004
US
$
|
|
|
|
|
|
|
|
|
|
Fair
value of stock options granted (per option)
|
|
$
|
1.21
|
|
$
|
0.33
|
|
$
|
0.00
|
|
Risk-free
interest rate
|
|
|
4.15
|
%
|
|
2.75
|
%
|
|
0.00
|
%
|
Volatility
|
|
|
70
|
%
|
|
95
|
%
|
|
0
|
%
|
Expected
life
|
|
|
1.3
years
|
|
|
1.1
years
|
|
|
0.0
years
|
|
Dividend
yield
|
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
i)
|
The
risk-free rate is based on the U.S. Treasury yield curve in effect
at the
time of grant.
|
|
ii)
|
Expected
volatilities are based on, historical volatility of the Company's
stock,
and other factors.
|
|
iii) |
The
expected life of options granted represents the period of time
that the
options are expected to be outstanding and is derived from historical
exercise behavior and current
trends.
|
These
options were granted for services provided to the Company:
Grant
date
|
|
Option
exercise price
|
|
Fair
Value at Original Grant Date
|
|
Expiry
date
|
|
Vesting
date
|
|
Balance
Dec 31/05
|
|
Granted
during the year
|
|
Cancelled
(c)
Expired
(x)
Exercised
(e)
during
the year
|
|
Balance
Dec 31/06
|
|
Balance
Dec 31/06
|
|
(mm/dd/yy)
|
|
US
$
|
|
US$
|
|
(mm/dd/yy)
|
|
(mm/dd/yy)
|
|
#
|
|
#
|
|
#
|
|
#
|
|
#
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/09/03
|
|
|
1.18
|
|
|
.241
|
|
|
08/31/06
|
|
|
Vested
|
|
|
1,751,500
|
|
|
--
|
|
|
1,721,500
(e
|
)
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
(x
|
)
|
|
--
|
|
|
--
|
|
12/30/03
|
|
|
1.50
|
|
|
.317
|
|
|
08/31/06
|
|
|
Vested
|
|
|
345,000
|
|
|
--
|
|
|
345,000
(e
|
)
|
|
--
|
|
|
--
|
|
01/17/05
|
|
|
1.01
|
|
|
.380
|
|
|
(i)
06/30/07
|
|
|
Vested
|
|
|
579,500
|
|
|
--
|
|
|
377,000
(e
|
)
|
|
202,500
|
|
|
202,500
|
|
01/17/05
|
|
|
1.01
|
|
|
.380
|
|
|
(i)
06/30/07
|
|
|
05/31/07
|
|
|
150,000
|
|
|
--
|
|
|
--
|
|
|
150,000
|
|
|
--
|
|
01/18/05
|
|
|
1.10
|
|
|
.622
|
|
|
08/31/08
|
|
|
Vested
|
|
|
600,000
|
|
|
--
|
|
|
--
|
|
|
600,000
|
|
|
600,000
|
|
01/25/05
|
|
|
1.17
|
|
|
.434
|
|
|
08/31/06
|
|
|
Vested
|
|
|
25,000
|
|
|
--
|
|
|
25,000
(e
|
)
|
|
--
|
|
|
--
|
|
06/14/05
|
|
|
3.49
|
|
|
1.553
|
|
|
06/14/15
|
|
|
Vested
|
|
|
150,000
|
|
|
--
|
|
|
--
|
|
|
150,000
|
|
|
150,000
|
|
08/24/05
|
|
|
6.50
|
|
|
2.380
|
|
|
08/24/08
|
|
|
Vested
|
|
|
110,000
|
|
|
--
|
|
|
--
|
|
|
110,000
|
|
|
110,000
|
|
10/03/05
|
|
|
6.81
|
|
|
3.070
|
|
|
10/03/15
|
|
|
Vested
|
|
|
16,666
|
|
|
--
|
|
|
-
|
|
|
16,666
|
|
|
16,666
|
|
10/03/05
|
|
|
6.81
|
|
|
3.833
|
|
|
10/03/15
|
|
|
10/03/07
|
|
|
16,667
|
|
|
--
|
|
|
--
|
|
|
16,667
|
|
|
--
|
|
10/03/05
|
|
|
6.81
|
|
|
4.383
|
|
|
10/03/15
|
|
|
10/03/08
|
|
|
16,667
|
|
|
--
|
|
|
--
|
|
|
16,667
|
|
|
--
|
|
06/14/06
|
|
|
5.09
|
|
|
2.057
|
|
|
06/14/16
|
|
|
06/14/07
|
|
|
--
|
|
|
200,000
|
|
|
--
|
|
|
200,000
|
|
|
--
|
|
07/25/06
|
|
|
3.95
|
|
|
1.141
|
|
|
12/31/09
|
|
|
Vested
|
|
|
--
|
|
|
100,000
|
|
|
--
|
|
|
100,000
|
|
|
100,000
|
|
07/25/06
|
|
|
3.95
|
|
|
1.393
|
|
|
12/31/09
|
|
|
07/25/07
|
|
|
--
|
|
|
660,000
|
|
|
--
|
|
|
660,000
|
|
|
--
|
|
07/25/06
|
|
|
3.95
|
|
|
1.601
|
|
|
12/31/09
|
|
|
12/31/07
|
|
|
--
|
|
|
50,000
|
|
|
--
|
|
|
50,000
|
|
|
--
|
|
07/25/06
|
|
|
3.95
|
|
|
1.779
|
|
|
12/31/09
|
|
|
07/25/08
|
|
|
--
|
|
|
145,000
|
|
|
--
|
|
|
145,000
|
|
|
--
|
|
07/25/06
|
|
|
3.95
|
|
|
2.006
|
|
|
12/31/09
|
|
|
07/25/09
|
|
|
--
|
|
|
70,000
|
|
|
--
|
|
|
70,000
|
|
|
--
|
|
07/25/06
|
|
|
3.95
|
|
|
1.141
|
|
|
07/25/16
|
|
|
Vested
|
|
|
--
|
|
|
500,000
|
|
|
--
|
|
|
500,000
|
|
|
500,000
|
|
07/25/06
|
|
|
3.95
|
|
|
1.141
|
|
|
07/25/16
|
|
|
07/25/07
|
|
|
--
|
|
|
500,000
|
|
|
--
|
|
|
500,000
|
|
|
--
|
|
11/24/06
|
|
|
7.52
|
|
|
2.467
|
|
|
11/24/09
|
|
|
06/30/07
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
11/24/06
|
|
|
7.52
|
|
|
2.919
|
|
|
11/24/09
|
|
|
12/31/07
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
11/24/06
|
|
|
7.52
|
|
|
3.695
|
|
|
11/24/09
|
|
|
12/31/08
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
|
10,000
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,761,000
|
|
|
2,255,000
|
|
|
2,498,500
|
|
|
3,517,500
|
|
|
1,679,166
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
6.
|
Stock
Options (continued)
|
|
i)
|
On
August 30, 2006, the Board of Directors of the Company passed a
resolution
with respect to the remaining stock options issued
on January 17, 2005 to (a) extend the expiry date of all then outstanding
options from August 31, 2006 to the
earlier of June 30, 2007 or 60 days following the date of a “Commercial
Discovery” as defined under the terms of the PSC on Block KG-OSN-2001/3
and (b) to extend the vesting date of certain of these options
to the
earlier of the date of a “Commercial Discovery” as defined under the terms
of the PSC on Block KG-OSN-2001/3 or May 31, 2007, as long as drilling
operations are continuing on the KG Offshore Block. This resolution
resulted in an added incremental stock-based compensation cost
of $11,440
with respect to the seven
employees.
|
|
ii)
|
During
the year ended December 31, 2006, the Company granted options to
purchase
2,255,000 shares exercisable at various prices and expiry dates,
which
vest in their entirety on the vesting
date.
|
|
iii)
|
As
at December 31, 2006, there were 3,517,500 options outstanding
at various
prices which, if exercised, would result in total proceeds of
US$11,837,375.
|
|
iv)
|
Of
the 2,498,500 options exercised or expired during the year, 195,000,
415,000, 1,853,000 and 5,000 were exercised during the three months
ending
March 31, June 30, September 30 and December 31, respectively for
gross
cash proceeds of US$206,050, US$548,100, US$1,949,980 and US$5,050
respectively, and the remaining 30,000 expired during the three
months
ended September 30, 2006.
|
|
v)
|
At
the annual stockholder meeting held on June 14, 2006, the stockholders
of
the Company approved amendments to the Plan to increase the shares
of
Common Stock reserved for issuance under the Plan from 8,000,000
shares to
12,000,000.
|
Pursuant
to the terms of the Company's 1998 Stock Incentive Plan, during the third
quarter of 2006, certain employees and consultants to the Company exercised
184,500 options to purchase shares of common stock of the Company and delivered
to the Company their promissory notes in the aggregate principal amount of
US$249,710 in payment of the exercise price. The promissory notes were due
December 31, 2006 and bore interest at 8.25% per annum. All promissory notes
were repaid on or before December 31, 2006.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
On
August
29, 2003, pursuant to an agreement dated April 4, 2003 and amended August
29,
2003, the Company completed a transaction with Mr. Roy and GeoGlobal Resources
(India) Inc. ("GeoGlobal India"), a corporation then wholly-owned by Mr.
Roy,
whereby the Company acquired from Mr. Roy all of the outstanding capital
stock
of GeoGlobal India. In exchange for the outstanding capital stock of GeoGlobal
India, the Company issued 34.0 million shares of its Common Stock. Of the
34.0
million shares, 14.5 million shares were delivered to Mr. Roy at the closing of
the transaction on August 29, 2003 and an aggregate of 19.5 million shares
were
held in escrow by an escrow agent. The terms of the escrow provide for the
release of the shares upon the occurrence of certain developments relating
to
the outcome of oil and natural gas exploration and development activities
conducted on the KG Offshore Block. On August 27, 2004, 14.5 million shares
were
released to Mr. Roy from escrow upon the commencement of a drilling program
on
the KG Offshore Block. The final 5.0 million shares remaining in escrow will
be
released only if a commercial discovery as defined under the PSC is declared
on
the KG Offshore Block. In addition to the shares of Common Stock, the Company
delivered to Mr. Roy a US$2.0 million promissory note, of which US$500,000
was
paid on the closing of the transaction on August 29, 2003, US$500,000 was
paid
on October 15, 2003, US$500,000 was paid on January 15, 2004 and US$500,000
was
paid on June 30, 2004. The note did not accrue interest. The note was secured
by
the outstanding stock of GeoGlobal India which has subsequently been released.
As a consequence of the transaction, Mr. Roy held as of the closing of the
transaction an aggregate of 34.0 million shares of our outstanding Common
Stock,
or approximately 69.3% of the shares outstanding, assuming all shares held
in
escrow are released to him. The terms of the transaction provide that Mr.
Roy
has the right to vote all 34.0 million shares following the closing, including
the shares during the period they are held in escrow. Shares not released
from
the escrow will be surrendered back to GeoGlobal.
As
discussed in note 1, the acquisition of GeoGlobal India by GeoGlobal was
accounted for as a reverse takeover transaction. As a result, the cost of
the
transaction was determined based upon the net assets of GeoGlobal deemed
to have
been acquired. These consolidated financial statements include the results
of
operations of GeoGlobal from the date of acquisition. The net identifiable
assets acquired of GeoGlobal were as follows:
|
|
US
$
|
|
Net
assets acquired
|
|
|
|
Cash
|
|
|
3,034,666
|
|
Other
current assets
|
|
|
75,000
|
|
Current
liabilities
|
|
|
(2,706
|
)
|
|
|
|
|
|
Net
book value of identifiable assets acquired
|
|
|
3,106,960
|
|
|
|
|
|
|
Consideration
paid
|
|
|
|
|
Promissory
note issued
|
|
|
2,000,000
|
|
34,000,000
common shares issued par value $0.001
|
|
|
34,000
|
|
Additional
paid-in capital
|
|
|
1,072,960
|
|
|
|
|
|
|
|
|
|
3,106,960
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
8.
|
Related
Party Transactions
|
Related
party transactions are measured at the exchange amount which is the amount
of
consideration established and agreed by the related parties.
On
August
29, 2003, as part of the Acquisition (note 7), a US$2,000,000 promissory
note
was issued to the sole shareholder of GeoGlobal India. On each of August
29,
2003, October 15, 2003, January 15, 2004 and June 30, 2004, US$500,000 of
the
note was repaid. The promissory note was non-interest bearing and the capital
stock of GeoGlobal India collateralized the repayment of the note. The
collateral has been released.
b)
|
Roy
Group (Mauritius) Inc.
|
Roy
Group
(Mauritius) Inc. is related to the Company by common management and is
controlled by a director of the Company who is also a principal shareholder
of
the Company. On March 27, 2003, the Company entered into a Participating
Interest Agreement (note 4d) with the related party.
c)
|
Roy
Group (Barbados) Inc. (“Roy
Group”)
|
Roy
Group
is related to the Company by common management and is controlled by a director
of the Company who is also a principal shareholder of the Company. On August
29,
2003, the Company entered into a Technical Services Agreement ("TSA") with
Roy
Group to provide services to the Company as assigned by the Company and to
bring
new oil and gas opportunities to the Company. On January 31, 2006, the terms
of
the agreement were amended to extend the term of the agreement from August
31,
2006 to December 31, 2007. Roy Group receives consideration of US$350,000
per
year, as outlined and recorded below:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
|
|
US
$
|
|
US
$
|
|
US
$
|
|
US$
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
70,000
|
|
|
62,000
|
|
|
50,000
|
|
|
198,667
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
& gas interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India (note 4b)
|
|
|
280,000
|
|
|
248,000
|
|
|
200,000
|
|
|
794,666
|
|
|
|
|
350,000
|
|
|
310,000
|
|
|
250,000
|
|
|
993,333
|
|
During
the year, the Company recognized compensation cost for stock-based compensation
arrangements with the principal of Roy Group as outlined and recorded
below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
80,821
|
|
|
--
|
|
|
--
|
|
|
80,821
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
& gas interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India (note 4b)
|
|
|
323,283
|
|
|
--
|
|
|
--
|
|
|
323,283
|
|
|
|
|
404,104
|
|
|
--
|
|
|
--
|
|
|
404,104
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
8.
|
Related
Party Transactions
(continued)
|
Roy
Group
was also reimbursed on a cost recovery basis, for medical insurance and
expenses; travel, hotel, meals and entertainment expenses; computer costs;
and
amounts billed by third parties incurred during the periods as outlined and
recorded below:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
47,820
|
|
|
45,430
|
|
|
19,640
|
|
|
153,539
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
227
|
|
|
1,020
|
|
|
20,350
|
|
|
21,597
|
|
Oil
& gas interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India (note 4b)
|
|
|
86,590
|
|
|
127,295
|
|
|
87,165
|
|
|
384,387
|
|
Property
and equipment
|
|
|
--
|
|
|
1,610
|
|
|
8,064
|
|
|
37,595
|
|
|
|
|
134,637
|
|
|
175,355
|
|
|
135,219
|
|
|
597,118
|
|
At
December 31, 2006, the Company owed Roy Group (Barbados) Inc.
US$29,976 (December
31, 2005 - US$169,181) for services provided and expenses incurred on behalf
of
the Company and pursuant to the TSA. These amounts bear no interest and have
no
set terms of repayment.
d)
|
D.I.
Investments Ltd. (“D.I.”)
|
D.I.
is
related to the Company by common management and is controlled by a director
of
the Company. DI charged consulting fees for management, financial and accounting
services rendered, as outlined and recorded below:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
|
|
US
$
|
|
US
$
|
|
US
$
|
|
US$
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
185,000
|
|
|
150,000
|
|
|
120,000
|
|
|
516,715
|
|
During
the year, the Company recognized compensation cost for stock-based compensation
arrangements with the principal of the related party as outlined and recorded
below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
404,104
|
|
|
--
|
|
|
--
|
|
|
404,104
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
8.
|
Related
Party Transactions
(continued)
|
DI
was
also reimbursed on a cost recovery basis, for office costs, including rent,
parking, office supplies and telephone as well as travel, hotel, meals and
entertainment expenses incurred during the periods as outlined and recorded
below:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
Office
costs
|
|
|
19,935
|
|
|
54,062
|
|
|
65,073
|
|
|
179,070
|
|
Travel,
hotel, meals and entertainment
|
|
|
1,176
|
|
|
5,121
|
|
|
3,344
|
|
|
48,686
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
13,224
|
|
|
14,165
|
|
|
--
|
|
|
27,389
|
|
Property
and equipment
|
|
|
4,107
|
|
|
--
|
|
|
--
|
|
|
4,107
|
|
|
|
|
38,442
|
|
|
73,348
|
|
|
68,417
|
|
|
259,252
|
|
At
December 31, 2006, the Company owed D.I. US$nil (December
31, 2005 - US$70,309) as a result of services provided and expenses incurred
on
behalf of the Company. These amounts bear no interest and have no set terms
of
repayment.
e)
|
Amicus
Services Inc. (“Amicus”)
|
Amicus
is
related to the Company by virtue of being controlled by the brother of a
director of the Company. Amicus charged consulting fees for IT and computer
related services rendered, as outlined below:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
56,257
|
|
|
35,713
|
|
|
33,921
|
|
|
140,360
|
|
Amicus
was also reimbursed on a cost recovery basis, for office costs, including
parking, office supplies and telephone as well as travel and hotel expenses
incurred during the periods as outlined and recorded below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,654
|
|
|
685
|
|
|
1,961
|
|
|
4,468
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
3,725
|
|
|
2,530
|
|
|
967
|
|
|
10,274
|
|
Property
and equipment
|
|
|
--
|
|
|
--
|
|
|
1,599
|
|
|
1,599
|
|
|
|
|
5,379
|
|
|
3,215
|
|
|
4,527
|
|
|
16,341
|
|
At
December 31, 2006, the Company owed Amicus Services Inc. US$3,629 (December
31,
2005 - US$4,962) as a result of services provided and expenses incurred on
behalf of the Company. These amounts bear no interest and have no set terms
of
repayment.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
The
provision for income taxes in the consolidated financial statements differs
from
the result which would have been obtained by applying the combined Federal,
State and Provincial tax rates to the loss before income taxes. This difference
results from the following items:
|
|
Year
ended
Dec
31, 2006
|
|
Year
ended
Dec
31, 2005
|
|
Year
ended
Dec
31, 2004
|
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|
|
|
US
$
|
|
US
$
|
|
US
$
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before income taxes
|
|
|
(1,150,690
|
)
|
|
(480,980
|
)
|
|
(867,496
|
)
|
|
(2,990,674
|
)
|
Expected
US tax rate
|
|
|
35.00
|
%
|
|
35.00
|
%
|
|
35.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
income tax recovery
|
|
|
(402,742
|
)
|
|
(168,343
|
)
|
|
(303,624
|
)
|
|
(1,047,720
|
)
|
Excess
of expected tax rate over tax rate of foreign affiliates
|
|
|
380,444
|
|
|
55,062
|
|
|
43,281
|
|
|
527,401
|
|
|
|
|
(22,298
|
)
|
|
(113,281
|
)
|
|
(260,343
|
)
|
|
(520,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
20,856
|
|
|
110,566
|
|
|
255,794
|
|
|
510,629
|
|
Other
|
|
|
1,442
|
|
|
2,715
|
|
|
4,549
|
|
|
9,690
|
|
Income
tax recovery
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
The
Company has not recognized the deferred income tax asset because the benefit
is
not more likely than not to be realized. The components of the net deferred
income tax asset consist of the following temporary differences:
|
|
Dec
31, 2006
US
$
|
|
Dec
31, 2005
US
$
|
|
Difference
between tax base and reported amounts of depreciable
assets
|
|
|
25,873
|
|
|
25,871
|
|
Non-capital
loss carry forwards
|
|
|
2,525,363
|
|
|
2,645,060
|
|
|
|
|
2,551,236
|
|
|
2,670,931
|
|
Valuation
allowance
|
|
|
(2,551,236
|
)
|
|
(2,670,931
|
)
|
Deferred
income tax asset
|
|
|
--
|
|
|
--
|
|
At
December 31, 2006, the Company has US$7,820,966 of available loss carry forwards
to reduce taxable income for income tax purposes in the various jurisdictions
as
outlined below which have not been reflected in these consolidated financial
statements.
Tax
Jurisdiction
|
|
Amount
US
$
|
|
Expiry
Dates
Commence
|
|
United
States
|
|
|
7,168,590
|
|
|
2023
|
|
Canada
|
|
|
152
|
|
|
2010
|
|
Barbados
|
|
|
652,224
|
|
|
2012
|
|
|
|
|
7,820,966
|
|
|
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
10. |
Segmented
Information
|
The
Company’s petroleum and natural gas exploration activities are conducted in
India. Management of the Company considers the operations of the Company
as one
operating segment. The following information relates to the Company’s geographic
areas of operation.
|
|
Dec
31, 2006
US
$
|
|
Dec
31, 2005
US
$
|
|
Oil
& gas interests
|
|
|
|
|
|
|
|
India
|
|
|
9,722,738
|
|
|
2,216,663
|
|
11.
|
Commitments,
Contingencies and
Guarantees
|
|
i)
|
The
PSC's contain provisions whereby the joint venture participants
must
provide the GOI a bank guarantee in the amount of 35% of the participant's
share of the minimum work program for a particular phase, to be
undertaken
annually during the budget period April 1 to March 31. These bank
guarantees have been provided to the GOI and serve as guarantees
for the
performance of such minimum work program and are in the form of
irrevocable letters of credit which are secured by restricted cash
term
deposits of the Company in the same amount.
|
The
restricted cash term deposits securing these bank guarantees are as
follows:
|
|
December
31, 2006
|
|
December
31, 2005
|
|
|
|
US
$
|
|
US
$
|
|
Exploration
Block
|
|
|
|
|
|
Mehsana
|
|
|
711,445
|
|
|
195,055
|
|
Sanand/Miroli
|
|
|
905,000
|
|
|
197,430
|
|
Ankleshwar
|
|
|
600,000
|
|
|
--
|
|
Tarapur
|
|
|
1,200,000
|
|
|
--
|
|
DS
|
|
|
110,000
|
|
|
--
|
|
|
|
|
3,526,445
|
|
|
392,485
|
|
|
ii)
|
The
Company has provided to its bankers as security for credit cards
issued to
employees for business purposes two restricted cash term deposits,
one in
the amount of US$30,000 and the other in the amount of US$34,324
(Cdn$40,000).
|
b)
|
Production
Sharing Contracts
|
The
Company is required to expend funds on the exploration activities to fulfill
the
terms of the minimum work commitment based on our participating interest
for
Phase I pursuant to the PSC’s in respect of each of our exploration blocks as
follows:
|
i)
|
Mehsana
Block - Acquire, process and interpret 75 sq kms of 3D seismic
and drill 7
exploratory wells between 1,000 and 2,200
meters.
|
|
ii)
|
Sanand/Miroli
Block - Acquire, process and interpret 200 sq kms of 3D seismic
and drill
12 exploratory wells between 1,500 and 3,000
meters.
|
|
iii)
|
Ankleshwar
Block - Acquire, process and interpret 448 sq kms of 3D seismic
and drill
14 exploratory wells between 1,500 and 2,500
meters.
|
|
iv)
|
DS
03 Block - Gravity and geochemical surveys and a 12,000 LKM aero
magnetic
survey.
|
Under
the
terms of all the PSC's, the Company is required to keep in force a financial
and
performance guarantee.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
11.
|
Commitments,
Contingencies and Guarantees
(continued)
|
The
first
phase of the exploration period relating to the PSC for the KG Offshore Block
has expired, as extended on August 29, 2005 through March 11, 2006, without
the
required minimum of at least fourteen wells being drilled during the first
phase. On February 24, 2006, the management committee for the KG Offshore
Block
recommended a further extension of the first phase of twelve months to March
11,
2007. On February 9 2007 the parties to the PSC, through GSPC as operator,
gave
notice under Article 3 of the PSC to the Directorate General of Hydrocarbons,
a
body under the Ministry of Petroleum & Natural Gas (“DGH”) and to the GOI to
proceed to the next exploration phase (Phase II) upon completion of Phase
I
which was expiring on March 11, 2007. It was also requested to not relinquish
any of the contract area at the end of Phase I. On March 12, 2007 DGH issued
its
approval to enter into Phase II of the exploration program with an effective
date of March 12, 2007 subject to the following conditions: (1) Any decision
by
the GOI on the substitution of the Work Program of Phase I will be binding
on
the contractor; and (2) Any decision by the GOI on relinquishment of the
25% of
Original Contract Area (ie. 462 sq. kms.) as per Article 4.1 of the PSC would
be
binding on the contractor. The extension of the first phase for the 18 months
to
March 11, 2007 would be deducted from the next succeeding exploration phase.
As
such the second phase would have a term of one year and expire March 11,
2008.
As at March 23, 2007, five exploratory wells have been drilled and one
exploratory well, the KG#16 well, is currently being drilled on the exploration
block leaving eight exploration wells to be drilled. A seventh well, the
KG#28
is also being drilled on the exploration block, but currently as an appraisal
well and not as an exploration well. Approval of entering into the second
phase
of exploration under the PSC from the GOI is currently outstanding. Unless
this
approval is granted, the Company may be liable for consequences of
non-fulfillment of the minimum work commitment in a given time frame under
the
PSC. The PSC has provisions for termination of the PSC on account of various
reasons specified therein including material breach of the contract. Termination
rights can be exercised after giving ninety days written notice. This failure
to
timely complete the minimum work commitment, though there is no
precedence, may
be
deemed by the GOI to be a failure to comply with the provisions of the contract
in a material particular. The Company has been advised by GSPC, the operator,
that it is unaware of any precedent for such an occurrence.
The
termination of the PSC by
the
GOI would result in the loss of the Company’s interest in the KG Offshore Block
other than areas determined to encompass "commercial discoveries". The PSC
sets
forth procedures whereby the operator can obtain the review of the management
committee under the PSC as to whether a discovery on the exploration block
should be declared a commercial discovery under the PSC. Those procedures
have
not been completed at present with respect to the discovery on the KG Offshore
Block and, accordingly, as of March 23, 2007, no areas on the KG Offshore
Block
have been determined formally to encompass "commercial discoveries"
as
that
term is defined under the PSC.
In
the
event the PSC is terminated by the GOI, or in the event the work program
is not
fulfilled by the end of the relevant exploration phase, each party to the
PSC is
to pay to the GOI its participating interest share of an amount which is
equal
to the amount that would be required to complete the minimum work program
for
that phase.
Certain
exploration costs related to the KG Offshore Block are incurred solely by
and on
behalf of the Company in providing its services under the CIA and are therefore
not reimbursable under the CIA. As such, these costs have been capitalized
in
the Company's accounts under Oil and gas interests and at December 31, 2006
amount to US$3,111,676.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
11.
|
Commitments,
Contingencies and Guarantees
(continued)
|
As
the
holder of a participating interest in the Tarapur Block, the Company is required
to fund its 20% share of all exploration and development costs incurred on
the
exploration block. To December 31, 2006, US$3,972,765 has been incurred under
the terms of the Company's agreement with GSPC. Of this amount, US$3,017,646
has
been paid to GSPC and US$955,119 is in accounts payable at December 31, 2006.
The Company has budgeted to expend approximately US$2.7 million for exploration
activities under the terms of the agreement over the period April 1, 2007
to
November 22, 2007. These activities include the drilling of 3 exploration
wells
and the acquisition of 90 sq kms of 3-D seismic. Under the terms of the
agreement, the Company is required to keep in force a financial and performance
guarantee securing its performance under the Tarapur PSC.
Our
corporate head office is located at Suite #310, 605 - 1 Street SW, Calgary,
Alberta, T2P 3S9 Canada. These premises are leased for a term of one year
ending
April 30, 2007 at an annual rental of $56,261 for base rent and operating
costs.
These premises include approximately 2,927 square feet which we consider
adequate for our present activities. We are currently in negotiations to
renew
this lease at market prices for a further two year term to April 30,
2009.
a) |
As
the Company is in its development stage, these figures represent
the
accumulated amounts of the continuing entity for the period from
inception, being August 21, 2002 to December 31,
2006.
|
b)
|
Certain
comparative figures have been reclassified to conform with the
presentation adopted in the current
year.
|
On
March
2, 2007, the Company along with its joint venture partners executed PSC's
with
the GOI covering four new exploration blocks awarded under the sixth round
of
the New Exploration Licensing Policy (NELP-VI).
The
Company is required to fund its participating interest for Phase I exploration
and development costs incurred in fulfilling the minimum work commitments
under
these PSC's as outlined below. The Company's share of these costs is estimated
to total approximately US$28.0 million for all four blocks over the four
years
of Phase I.
|
i)
|
Exploration
Block KG-ONN-2004/1 (KG Onshore Block) - Reprocess 564 LKM of 2-D
seismic;
conduct a gravity and magnetic and geochemical survey; acquire,
process
and interpret 548 sq kms of 3-D seismic; and drill 12 exploratory
wells
between 2,000 and 5,000 meters.
|
|
ii)
|
Exploration
Block RJ-ONN-2004/2 (RJ Block 20) - Reprocess 463 LKM of 2-D seismic;
conduct a gravity and magnetic and geochemical survey; acquire,
process
and interpret 250 LKM of 2-D seismic and 700 sq kms of 3-D seismic;
and
drill a total of 12 exploratory wells between 2,000 and 2,500
meters.
|
|
iii)
|
Exploration
Block RJ-ONN-2004/3 (RJ Block 21) - Reprocess 463 LKM of 2-D seismic;
conduct a gravity and magnetic and geochemical survey; acquire,
process
and interpret 310 LKM of 2-D seismic and 611 sq kms of 3-D seismic;
and
drill a total of 8 exploratory wells between 2,000 and 2,500
meters.
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2005
|
iv) |
Exploration
Block DS-ONN-2004/1 (DS 04 Block) - Gravity and magnetic and geochemical
surveys; acquire, process and interpret 325 LKM of 2-D seismic;
and drill
10 core holes to a depth of approximately 500
meters.
|
Under
the
terms of all the PSC's, the Company will be required to keep in force a
financial and performance guarantee.
b)
|
India
office condominium
|
On
November 21, 2006 the Company entered into a Memorandum of Understanding
with
Creative InfoCity Ltd of Gandhinagar, India to acquire an office condominium
of
approximately 11,203 sq. ft. A deposit of US$28,090 was paid which is reflected
in the financial statements in Property and Equipment (note 3). As a formal
agreement has not yet been executed, the preliminary costs and resulting
liability in the amount of $365,880 is not yet reflected in these financial
statements.
14.
|
Recent
Accounting Standards
|
a)
|
Accounting
for Uncertainty in Income
Taxes
|
In
June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109,
“Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of
a tax position taken or expected to be taken in a tax return. The Interpretation
requires that the Corporation recognize in the financial statements, the
impact
of a tax position, if that position is more likely than not of being sustained
on audit, based on the technical merits of the position. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods and disclosure. The provisions of FIN 48 are effective beginning
January 1, 2007 with the cumulative effect of the change in accounting principle
recorded as an adjustment to the opening balance of deficit. The Corporation
is
currently evaluating the impact FIN 48 will have on its consolidated financial
statements.
b)
|
Fair
Value Measurements
|
In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS
157”), which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The Company is currently
evaluating the impact that FAS 157 will have on its consolidated financial
statements.
c)
|
The
Fair Value Option for Financial Assets and Financial
Liabilities
|
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities - Including an amendment of FASB Statement
No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates.
A
business entity is required to report unrealized gains and losses on items
for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those
fiscal
years, and is applicable beginning in the first quarter of 2008. The Company
is
currently evaluating the impact that FAS 159 will have on its consolidated
financial statements.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities and Exchange
Act of
1934, the Registrant has duly caused this Report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
GeoGlobal
Resources Inc.
By:
|
/s/
Allan J. Kent
|
|
|
|
Allan
J. Kent
|
|
|
|
Executive
Vice President and CFO
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
/s/
Jean Paul Roy
|
|
President,
Chief Executive Officer and
|
|
April
16, 2007
|
Jean
Paul Roy
|
|
Director
|
|
|
|
|
|
|
|
/s/
Allan J. Kent
|
|
Executive
Vice President, Chief
|
|
April
16, 2007
|
Allan
J. Kent
|
|
Financial
Officer and Director
|
|
|
|
|
|
|
|
/s/
Brent J. Peters
|
|
Director
|
|
April
16, 2007
|
Brent
J. Peters
|
|
|
|
|
|
|
|
|
|
/s/
Peter R. Smith
|
|
Chairman
of the Board and Director
|
|
April
16, 2007
|
Peter
R. Smith
|
|
|
|
|
|
|
|
|
|
/s/
Michael J. Hudson
|
|
Director
|
|
April
16, 2007
|
Michael
J. Hudson
|
|
|
|
|
|
|
|
|
|
/s/
Dr. Avinash Chandra
|
|
Director
|
|
April
16, 2007
|
Dr.
Avinash Chandra
|
|
|
|
|