Latest Results
Final Results
International Oil and Gas Technology Limited (LSE:OGT), an authorised closed-ended investment company incorporated in Guernsey, today announces its final results for the year ended 31 December 2011.
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Highlights
- Net Asset Value ("NAV") increased by 16% to US$10.30 (2010: US$8.88)
- Financial performance of Strata has exceeded expectations
- SR2020 experiencing increased market demand and growth opportunity
- Crest has commenced revenue-generating operations in the Middle East with further operational opportunities now available
- Successful disposals of interests in WellPoint Systems and LxData for a total cash consideration of US$24.1 million
- Cash reserve primarily allocated to allow Strata, SR2020 and Crest to meet growth opportunities
Christopher Hill, Chairman of International Oil and Gas Technology Limited, said: "The past twelve months have seen your Company make considerable strides in restoring its own financial strength and in rebuilding value in its portfolio companies. The Board and the Investment Manager have worked together closely to create a platform from which the Company can grow again. I am confident that 2012 will see further significant progress."
David Sefton, Partner at Linton Capital, Investment Manager of IOGT, said: "Following the restructuring of the portfolio in 2012, the Company has emerged in a strong position with three investee companies that show considerable opportunity for growth and capital gain for shareholders. The Company has taken the prudent step of retaining sufficient cash to enable it to fund that growth. The Investment Manager continues to see highly attractive investment opportunities in the oil and gas technology and services sector. We believe that a disciplined focus on growth investing in companies that deliver a differentiated service at the wellhead will prove to be a profitable investment strategy for IOGT."
In this statement of Final Results, all references to currency are to lawful currency of the United States of America unless otherwise stated
Chairman's Statement
The past twelve months have seen your Company make considerable strides in restoring its own financial strength and in rebuilding value in its portfolio companies. The Board and the Investment Manager have worked together closely to create a platform from which the Company can grow again. I am confident that 2012 will see further significant progress.
The headline figure of net asset value (“NAV”) per preferred share has increased by 16 per cent since 31 December 2010 from US$8.88 to US$10.30. While valuations of private companies can only be estimates and are heavily dependent on future performance, the Board and the Investment Manager believe that this figure is conservative.
Our primary goal continues to be to increase the NAV of your Company by buying and building successful portfolio companies. The Investment Manager reports in detail on the business performance of each portfolio company later in this Report. I would summarise the portfolio performance by emphasising the progress made by each of the three companies in the investment portfolio (the “Investee Companies”). Although each company is at a different stage of development, 2012 will be an important year for all as they seek to capitalise on numerous organic growth opportunities in a relatively buoyant oil and gas service sector.
The transformation since the challenging times of 2010 has been marked: the financial performance of Strata Energy Services Inc (“Strata”) has exceeded expectations, the pioneering seismic services of SR2020 Inc (“SR2020”) are experiencing considerably increased market demand and the achievement of Crest Energy Services Ltd (“Crest”) in starting operations in Saudi Arabia should not be underestimated.
The Board was pleased to have been able to meet the management teams of Strata and Crest and, earlier last year, to have received a detailed presentation from SR2020. The relationships between the Investment Manager and the portfolio companies are strong and transparent, and I believe that this mutual trust and respect will play an important role in your Company's future success.
Much of the progress during the year has taken place out of the limelight. After WellPoint Systems Inc (“WellPoint”) and LxData Inc (“LxData”) were sold in May and August respectively, which released cash for re-investment, the complex SQFive group structure was liquidated. As a result, your Company now owns 100 per cent of SR2020 directly. The Investment Manager executed this complicated reorganisation with considerable skill and perseverance and the terms of the transaction were generally favourable to the Company. As a result, the portfolio structure has been simplified and the Company's ownership interest in each Investee Company is now transparent. At the year-end, the Board also took the decision to write off the Company's investments in Ambercore Software Inc (“Ambercore”) and 1482747 Alberta Ltd (“Alberta”).
As I reported at the interim stage, the Company initiated a share buyback programme with a view to addressing short-term supply/demand imbalances and to enhancing the NAV per preferred share. During the year under review, the Company bought back 845,982 preferred shares at an average cost of US$6.76. These share buybacks increased NAV per share by 3.5 per cent. In 2012, the Board will continue to make repurchase decisions on a case-by-case basis with these objectives in mind.
Currently, the Board and the Investment Manager consider that the best use of the Company's investment capital will be to make follow-on investments in our existing portfolio companies, as they have strong growth potential. We do not expect the Company to make a new stand-alone investment during 2012 unless we find a particularly compelling opportunity.
As indicated at the interim stage, the Board is pleased to confirm the payment of a dividend of US$0.10 per share in respect of the half-year to 31 December 2011. The record and payment dates will be confirmed in an announcement to be issued shortly.
Going forward, the Board is conscious of two emerging constraints on its use of income and capital. First, over recent months, steadily improving growth opportunities have become available to the Investee Companies, and potential capital gains to investors have therefore increased considerably, but such opportunities do require the near-term injection of growth capital into these companies. Second, while we are robust in our view of the merits of the Company's case in the litigation described below, we need to retain sufficient funds to meet the legal costs of our defence through to trial and will not be able to recover any of the costs until we are successful at trial.
The Board will continue to consider, at each meeting, future payment of dividends and return of capital (upon sales of current or future assets) on the basis of developments in the businesses and the status of the litigation and will act in the best interests of shareholders in this regard. We shall continue active discussions with shareholders on these matters.
As I reported in my half-year statement, the Company signed a new Investment Management Agreement with Linton Capital LLP (“Linton” or the “Investment Manager”), which had previously been operating under interim arrangements. The main features of this agreement are described in note 3 to the Financial Statements. The Board is of the view that the new agreement carefully balances the important incentive to create and realise value in portfolio companies with the protections to the Company of a considerably shorter notice period and a management fee designed only to cover running costs.
As previously announced, a claim was issued by one of the Company's former investment managers, QOGT Inc (“Quorum”), claiming breach of contract and seeking US$15.8 million as compensation for loss. In the Company's trading update of 19 January 2012, we wrote, “The statement of claim does not contain any allegations or facts of which the Board was not previously aware. The Board repeats that in terminating Quorum's engagement it acted at all times properly and in accordance with legal advice, including from leading counsel. The claim made is entirely without foundation and the basis for calculation of damages speculative and far-fetched. The Board will vigorously defend the claim and is considering the counterclaims that can be made against Quorum and its principals.” This remains the position. On 26 March 2012, the Company served a defence, guided by advice from Queen's Counsel and a leading firm of lawyers, as well as a counterclaim against Quorum. Details of the litigation are provided in notes 1 and 17.
I am confident that Quorum's legal action will be shown to be without any merit, although the preparation of the Company's defence and counterclaim has absorbed management time. I am not in a position to forecast how long the case will take to be resolved but the Board is unanimously of the view that the Company's case is a strong one. As noted in the Financial Statements, the Company will have to pick up a proportion of the legal costs even after a successful outcome. We will continue to update shareholders as matters progress.
As reported at the interim stage, Tom Price resigned from the Board in June 2011. I want again to express my thanks to him for his contribution to the Company since 2008 and to my fellow Board members for their dedication and enthusiasm at this exciting time for the Company.
The Company's corporate governance procedures follow the principles of the UK Corporate Governance Code (“the Code”) as they relate to the role and effectiveness of the Board and the performance and re-election of the directors. The Board regularly evaluates the performance, skills and commitment of the directors and reviews the Company's succession plans. As noted in the directors' report, the Company has a nominations committee, of which I am the chairman. The committee has decided to follow best practice in corporate governance and require every director to be re-elected at every Annual General Meeting (“AGM”). All the directors submit themselves for re-election and I strongly recommend that you support the resolutions for their reappointment.
The Board looks forward to meeting shareholders at the AGM, to be held at 10.30 am on Friday, 25 May 2012 at Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 1WW.
Christopher Hill
Chairman
International Oil and Gas Technology Limited
Guernsey, Channel Islands
4 April 2012
Investment Manager's Report
Introduction
We are pleased to present our report on the performance of the Company's portfolio of investments for the year ended 31 December 2011.
This year has seen the entire portfolio of the Company restructured: we have focused time and capital on the three investments, Strata, Crest and SR2020, where we saw, and continue to see, the largest potential capital gains for the Company.
Concurrently, we effected exits from two other investments, WellPoint and LxData. While these were interesting companies, we considered that the amount of capital, including working capital, that they required, when considered against a reasonable assessment of the potential upside, made it better to end the Company's involvement with them. The exit from the former provided a positive return on investment and the latter returned capital in line with net asset value. The Company's other investment, Ambercore, which entered administration in 2010, was written off at the interim stage.
In addition to the Company updates found elsewhere in this Report, we add the following observations and comments.
Current Investments
Strata
Strata had an excellent year, with revenues of over US$29 million and EBITDA of US$8.9 million. Its core provision of under-balanced (“UBD”) and managed-pressure (“MPD”) drilling services continues to grow at approximately 50 per cent per year. There is significant excess demand for the company's services, their list of customers is impressive and the restructuring of the balance sheet carried out during the year has freed up sufficient capital to enable 2012 to be a year of further growth. Your Company owns 43 per cent of Strata, making it both the largest single shareholder and the only non-internal investor in the company.
We continue to see the potential for significant upside in respect of this investment, as its performance should enable a highly profitable exit through either a trade sale or an IPO. Growth is being well managed, with particular attention paid to the need to maintain excellent service quality. International expansion into the Middle East has been generally trouble-free, providing a useful entry into one of the most important regions in the industry. In addition, Strata has recently increased its spending on research and development. Should third-party tests of its new offshore drilling head match early results, it will possess technology of great importance and value to the industry in a segment where there is no competing offering. We are working closely with Strata's management team, particularly in areas such as corporate finance and capital markets where we can add particular value, to help them achieve their goals.
The demand for and deployment of MPD services in North America is expanding rapidly. This demand has arisen for a number of reasons: cost, speed of drilling, MPD's impact on increasing or maintaining production in mature fields but, most of all, enhanced safety. The technical elements of this service are explained in detail in the Strata company update found elsewhere in this Report but the level of demand for MPD could have interesting long-term consequences. Historically, UBD has encountered some resistance from certain elements within the industry as its rationale runs counter to older understandings of the safe method of drilling, namely to maintain the drilling-fluid pressure at a much higher level than the pressure in the reservoir, thus keeping oil safely underground until production can begin. UBD takes the opposite approach: working with the pressure of the reservoir, which allows oil to flow at all times while controlling the effects of that flow.
In some respects, MPD sits between the two approaches. Both Linton and Strata believe that MPD could create a shift in understanding and appreciation of the techniques of working with pressure. Such a shift could cause a significant increase in the usage of UBD and MPD across the industry. Looking further ahead, Strata's management believes that, once the techniques are properly understood, MPD will be seen as a much safer way to drill and could be highly effective in the early detection of well kicks, which in turn may prevent blowouts. If this fundamental shift in the appetite of the industry for UBD and MPD were to take place, even our most optimistic hopes for Strata could prove to have been too conservative.
Crest
Crest is an investment that is still at a very early stage. However, during 2011, it achieved the principal objective that we set for management: start revenue-generating operations in the Middle East. While the overall revenues for 2011 were small, at less than US$1 million, they nevertheless represented a significant improvement on previous performance. In addition, the market that Crest has penetrated, Saudi Arabia, is considered generally to be the most lucrative, yet most difficult to access, in the world. This is no small achievement. The Company currently owns 100 per cent of Crest, subject to an ESOP that could vest up to 25 per cent of the equity with staff.
Crest's recent performance shows it to be increasing the size and importance of the nitrogen-purging contracts that the company has undertaken, with operations currently taking place on one of Saudi Arabia's larger and more significant pipelines. The challenges for 2012 are for Crest to consolidate nitrogen-purging operations in Saudi Arabia while broadening the range of product offerings, to include services such as well intervention and its international reach. We will also seek to increase Crest's operating asset base, as this is often a significant factor affecting valuations at exit.
All of the above will require considerable time and effort by the management teams of Crest and Linton, combined with the targeted investment of further capital. We do not expect progress to be risk-free, smooth or easy, but we believe that an operating service business in the Middle East with a blue-chip client base has significant potential for value creation. We are also looking at possible joint ventures and alliances that could increase the scope of Crest's activities.
Crest also acts as a regional sales accelerator for other portfolio companies. In particular, the management teams of Crest and SR2020 co-operate closely to enable SR2020 to stay abreast of opportunities to tender for processing work in the Middle East (acquisition work in the region would require too high a level of capital investment at this stage). SR2020 has recently received several tender requests as a result. There are also on-going discussions about areas in which Strata and Crest can co-operate.
SR2020
SR2020 is a seismic-survey acquisition and processing company with differentiated and proprietary technology and services. Seismic surveying has become an increasingly important segment of the oil and gas service industry and is explained elsewhere in this Report. The management teams of both SR2020 and Linton believe that the company's particular expertise and service packages have tremendous potential appeal to the industry. The Company owns 70 per cent of SR2020, with the balance owned by the employees through an employee share-option scheme (“ESOP”).
The challenge with SR2020 has been to understand why its services were not more widely used by the industry and to address that situation. Revenues in 2011 of just over US$1.2 million underscored the issue of industry take-up and sales focus, even though the client list was blue chip. Following a re-analysis of the company's technology and the state of the market generally, SR2020 reconfigured its services into product offerings that targeted the specific needs of potential customers and enabled clients to understand the financial and operational benefits of using SR2020's distinct proprietary technologies.
During 2011, we worked closely with the management team who, using a focused injection of capital, revamped the product integration and offering process, as well as putting in place a new professional sales and marketing function. The sales plan has also broadened the target audience from just in-house geophysicists to asset and project managers, as the economic advantages of using SR2020's technologies, both in reduced costs and enhanced production, most directly benefit the latter group.
The results have, so far, exceeded expectations. SR2020 has obtained several new clients (principally among the mid-size E&P operators, both conventional and unconventional (for example, shale), in the US and is in discussions with many more. These clients show a real appreciation of, and need for, what SR2020 can offer and until this point were not aware of SR2020, its superior product solutions or its differentiated technical solutions. By late March, invoiced revenues for 2012 already exceeded those for the whole of 2011.
SR2020 is now focused on successful execution of the new business plan. Meeting customer expectations on the newly won work will be a key to the company having stable, regular repeat customers who will form a solid foundation for growth. There are always risks with a growing company, but we have great confidence in the technology and the employees to deliver. While SR2020's expansion can be funded in part through cash flow, it will also require further capital from the Company. We have put in place a plan with management to provide capital against the achievement of defined targets relating to customer demand and revenue that enables SR2020 to complete the transition from almost pure research and development (“R&D”) to a successful, profitable operating company.
We expect 2012 to be an interesting and productive, certainly stressful and hopefully lucrative year for SR2020 and we are confident about increasing the value of the Company's investment.
Leverage
These investments are largely un-leveraged. Strata has third-party debt at a level (approximately C$191 million) that is appropriate for a capital-intensive business of its size, while neither Crest nor SR2020 has any external debt, other than specific equipment financing.
1 Except where specifically noted otherwise, the average value during 2011 of one Canadian dollar was approximately equal to one US dollar.
Realised investments
Since 1 January 2011, the Company has realised two investments:
WellPoint
In May 2011, the Company successfully disposed of its interest in WellPoint for a cash consideration of US$19.8 million, including accrued debenture interest. The overall return on our investment, including all interest received during the term, was 27 per cent and the IRR was 8.85 per cent. The cost of the investment in WellPoint totalled US$17.5 million.
The exit followed a lengthy process, which we initiated on behalf of the company, to force the sale. WellPoint, although an interesting business, did not fit within the Company's focus of technology-driven service businesses addressing the upstream oil and gas sector. The exit process was undertaken with the full support of WellPoint's management team and represents the early fulfilment, on better than expected terms, of one of the key parts of the strategy outlined to shareholders during the summer of 2010.
LxData
On 25 August 2011, as already reported to shareholders, the Company sold its interest in LxData for a consideration receivable by the Company of US$4.41 million. This was equal to the valuation of this investment as most recently used to calculate the Company's NAV. The Company received US$3.22 million on closing. The balance (reduced to just over US$1.0 million following post-sale adjustments) is held in escrow, half for 12 months and half for 18 months post-completion, to provide security against the warranties that were given to the purchaser. There is no earn-out clause in the sale agreement.
Restructuring of SQFive Intelligent Oilfields Solutions Ltd (“SQFive”)
The Company had held its investments in SR2020 and LxData mainly through a complex holding structure involving SQFive. The principal reason for SQFive's existence was so that investments in these companies could be owned jointly with an unrelated party, Quorum Investment Pool LP (“QIP”). As the Company no longer wished to continue holding any investments jointly, and as the structure obscured the ultimate interests of the Company, we carried out a restructuring and eventual liquidation of SQFive in 2011. As a result, the remaining elements of these investments, namely the ownership of SR2020 and the deferred consideration due from the sale of LxData, are now held directly by the Company. Following this realignment, there are no equity co-investors in any of the Investee Companies.
Availability of new investments
The oil and gas services and technology sector is growing in importance and, in particular, new technologies are seeing increasing demand from the wider industry. Yet the sources of capital available to small growing companies in this sector are few. For this reason, we are often approached by companies seeking investment or we come into contact with companies that have excellent products and services but cannot access capital. The prospects for making further successful and profitable investments are, we believe, very strong.
However, the Company has limited capital available. At present, we consider that the prospects of the current portfolio companies are sufficiently positive that the Company's investment capital should be reserved for them. While we consider it unlikely that the entirety of the funds available will be needed for our existing portfolio companies, we want to be sure that we retain the necessary financing to support them as they develop their businesses. On a profitable realisation of part of the existing portfolio, or if new capital for investment otherwise becomes available, we have an outstanding pipeline of potential investee companies in which we believe the Company could invest profitably.
Mechanism of investing
We explained at the interim stage that the Company historically made the majority of its investments through a convertible secured debenture, with the expressed intention to convert to equity only at the time of exit. However, while we recognise that these debentures do have some advantages, such as security over the assets of a business ahead of the shareholders, they also have drawbacks. In particular, withdrawing cash from growing but invariably capital-hungry companies and artificially skewing their debt-to-equity ratios act as hindrances to growth and thereby reduce the ultimate capital gain to shareholders. Furthermore, many of the perceived advantages, such as a running yield and strong covenants, can be largely illusory.
The debenture instrument, in an amended form, will sometimes have a role to play, particularly at an early stage. However, our experience has shown that, in particular when a portfolio company grows in scale, the better instrument for making a long-term investment for capital growth is to hold equity alongside the other shareholders. Equity can also provide income in the form of dividends.
Conclusion
The current portfolio, while concentrated, has had a good 2011, with real revenue growth, a clear focus on profitability and a simplified and transparent investment structure. The prospects for further growth in the value of these investments during 2012 are favourable. The Company has exited from non-core investments and has sufficient cash on its balance sheet.
The Company is now in a stronger place from which to move forward. We look forward to creating significant value and capital gains for the Company's investors.
Linton Capital LLP
4 April 2012
| David Sefton Investment Manager |
Michael Goffin Investment Manager |
Roland Wessel Investment Manager |
Statement of Operations
For the year ended 31 December 2011
| Note | 2011 | 2010 | ||
| US$ | US$ | |||
| Investment Income | ||||
| Portfolio interest income | 2 | 2,209,729 | 4,911,596 | |
| Non-portfolio interest income | 2,293 | 1,451 | ||
| (Loss)/gain on foreign exchange | (33,158) | 14,173 | ||
| 2,178,864 | 4,927,220 | |||
| Expenses | ||||
| Administrative expenses | 6 | 3,696,020 | 3,960,991 | |
| 3,696,020 | 3,960,991 | |||
| Net investment/(deficit) income | (1,517,156) | 966,229 | ||
| Gains/(losses) on investments | ||||
| Unrealised change in value of investments | 11,871,679 | (22,206,233) | ||
| Contingent investment management fee | 3 | (1,783,214) | ||
| 10,088,465 | (22,206,233) | |||
| Net income/(loss) | 8,571,309 | (21,240,004) | ||
| Average number of preferred shares | 7,809,446 | 7,960,416 | ||
| Basic earnings/(loss) per share | 9 | 1.10 | (2.67) | |
| Average number of diluted preferred shares | 7,809,446 | 7,960,416 | ||
| Diluted earnings/(loss) per share | 9 | 1.10 | (2.67) | |
| Dividends paid per preferred share | 8 | - | 0.30 |
The accompanying notes are integral to these Financial Statements.
Balance Sheet
At 31 December 2011
| Note | 2011 | 2010 | ||
| US$ | US$ | |||
| Assets | ||||
| Cash and cash equivalents | 12,851,711 | 764,446 | ||
| Accounts receivable and prepaid expenses | 10 | 1,101,726 | 1,962,278 | |
| Investments | 2,11 | 63,471,383 | 70,865,527 | |
| 77,424,820 | 73,592,251 | |||
| Liabilities | ||||
| Accounts payable and accrued liabilities | 12 | 363,227 | 1,084,660 | |
| Deferred interest income | 12 | - | 51,176 | |
| Performance fee accrual | 12 | 1,783,214 | - | |
| 2,146,441 | 1,135,836 | |||
| Shareholders' equity | ||||
| Common (founder) shares of US$1 par. | ||||
| Authorised 2 shares: issued 2 shares | 13 | 2 | 2 | |
| Participating redeemable preferred shares. | ||||
| Authorised 50,000,000 shares; issued 8,156,348 | ||||
| (2010: 8,156,348) shares | 13 | 8,156,348 | 8,156,348 | |
| Contributed surplus | 2 | 67,565,301 | 67,565,301 | |
| Treasury shares | 13 | (5,749,345) | - | |
| Retained earnings/(deficit) | 5,306,073 | (3,265,236) | ||
| 75,278,379 | 72,456,415 | |||
77,424,820 |
74,592,251 |
The accompanying notes are integral to these Financial Statements.
| Net asset value per preferred share | 10.30 | 8.88 |
Approved by the Board of Directors and signed on its behalf by:
Christopher Hill
Chairman
4 April 2012
Statement of Cash Flows
For the year ended 31 December 2011
| Note | 2011 | 2010 | |||
| US$ | US$ | ||||
| Net inflow/(outflow) of cash related to the following activities: |
|||||
| Operating | |||||
| Net investment/(deficit) income | (3,300,370) | (3,300,370) | |||
| Capitalisation of interest | (403,183) | (1,322,345) | |||
| Net change in non-cash working capital | 10,12 | 2,911,165 | (1,153,320) | ||
| (792,388) | (1,509,436) | ||||
| Investing | |||||
| Purchase of investments | (3,430,265) | (9,800,290) | |||
| Disposals of investments | 22,059,263 | - | |||
| 18,628,998 | (9,800,290) | ||||
| Financing | |||||
| Issuance of share capital | 13 | - | 9,753,555 | ||
| Share issuance costs | 13 | - | (403,079) | ||
| Purchase of own shares | 13 | (5,749,345) | - | ||
| Dividends paid | 8 | - | (2,300,622) | ||
| (5,749,345) | 7,049,854 | ||||
| Net increase/(decrease) in cash during the year |
12,087,265 | (4,259,872) | |||
| Cash balance at the beginning of the year | 764,446 | 5,024,318 | |||
| Cash balance at the end of the year | 12,851,711 | 764,446 | |||
The accompanying notes are integral to these Financial Statements.
Statement of Changes in Shareholders' Equity
For the year ended 31 December 2011
| Notes | Share capital US$ |
Warrants US$ |
Treasury shares US$ |
Contributed surplus US$ |
Retained earnings US$ |
Total US$ |
|
| At 1 January 2011 | 8,156,350 | - | - | 67,565,301 | (3,265,236) | 72,456,415 | |
| Purchase of own shares | 13 | - | - | (5,749,345) | - | - | (5,749,345) |
| Net income | - | - | - | - | 8,571,309 | 8,571,309 | |
| At 31 December 2011 | 8,156,350 | - | (5,749,345) | 67,565,301 | 5,306,073 | 75,278,379 | |
| At 1 January 2010 | 7,186,709 | 987,822 | - | 60,497,266 | 17,974,768 | 86,646,565 | |
| Issuance of shares | 13 | 969,641 | - | - | 8,783,914 | - | 9,753,555 |
| Expiry of warrants | 13 | - | (987,822) | - | 987,822 | - | - |
| Share issuance costs | - | - | - | (403,079) | - | (403,079) | |
| Net deficit | - | - | - | - | (21,240,004) | (21,240,004) | |
| Dividends paid | 8 | - | - | - | (2,300,622) | - | (2,300,622) |
| At 31 December 2010 | 8,156,350 | - | - | 67,565,301 | (3,265,236) | 72,456,415 |
The accompanying notes are integral to these Financial Statements.
Statement of Investment Portfolio
At 31 December 2011
| 2011 | 2010 | |||||||||
| Security held | Par value (US$)/ Number of securities |
Cost US$ |
Estimated fair value US$ |
Cost US$ |
Estimated fair value US$ |
|||||
| CURRENT INVESTMENTS | ||||||||||
| Crest Energy Services Ltd | Convertible secured debentures | 6,996,499 | 7,399,683 | 6,996,499 | ||||||
| Promissory notes | 1,055,000 | 1,055,000 | 1,800,000 | 955,000 | 3,767,232 | |||||
| SR2020(1) | ||||||||||
| SR2020 Inc | Convertible and non-convertible secured debentures | 5,161,821 | 5,161,821 | 5,161,821 | ||||||
| Promissory notes | 4,090,456 | 4,090,456 | 1,230,000 | |||||||
| 1474559 Alberta Ltd | Secured promissory note | 3,444,443 | 3,444,443 | 7,946,193 | 3,444,443 | 4,985,737 | ||||
| Strata Energy Services Inc | Common shares | 840,890 | 22,879,668 | 51,725,190 | - | - | ||||
| Promissory note | 2,000,000 | 2,000,000 | 2,000,000 | 4,850,000 | 4,850,000 | |||||
| Convertible secured debentures | - | - | - | 20,000,000 | 33,972,012 | |||||
| Sub-total | 46,031,071 | 63,471,383 | 42,637,763 | 47,574,981 | ||||||
| INVESTMENTS REALISED | ||||||||||
| LX Data Inc | Secured convertible promissory note | 551,318 | ||||||||
| Common and class A preferred shares | - | - | 5,477,700 | 4,412,303 | ||||||
| WellPoint Systems Inc | Convertible secured debentures | 18,823,078 | ||||||||
| Promissory note | - | - | 55,165 | 18,878,243 | ||||||
| Sub-total | - | - | 24,907,261 | 23,290,546 | ||||||
| INVESTMENTS WRITTEN DOWN | ||||||||||
| AMBERCORE | ||||||||||
| 1482747 Alberta Ltd(3) | Convertible secured debentures | 3,150,000 | 3,150,000 | 3,150,000 | ||||||
| Loan and promissory note | 535,167 | 535,167 | 535,167 | |||||||
| Ambercore Software Inc | Convertible loan and loan | 1,900,000 | 1,900,000 | - | 1,900,000 | - | ||||
| SQFive Intelligent Oilfield Solutions Ltd(4) | Convertible secured debentures | 1,881,268 | 1,881,268 | 1,441,129 | ||||||
| Redeemable convertible preferred shares | 327,128 | 327,128 | - | 327,128 | - | |||||
| Sub-total | 7,793,563 | - | 7,353,424 | - | ||||||
| TOTAL | 53,824,634 | 63,471,383 | 74,898,448 | 70,865,527 | ||||||
1) The investment in SR2020 is held both directly and through 1474559 Alberta Ltd, a wholly owned subsidiary of the Company. The investment was previously held through an intermediate holding company, SQFive Intelligent Oilfield Solutions Ltd (note (4) below).
2) At 31 December 2010, the investment in Strata Energy Services Inc was held through convertible secured debentures. In 2011, the debentures were converted to ordinary shares.
3) 1482747 Alberta Ltd, which is in receivership, was the intermediate holding company that owned Ambercore Software Inc, which is also in receivership. The value of both investments has been written down to zero.
4) SQFive Intelligent Oilfield Solutions Ltd previously owned investment positions in both LxData and SR2020.
5) Comparative cost and valuation figures have been adjusted following the reorganisation involving SQFive to assist clarity.
Notes
Notes to the Financial Statements are available in the printable PDF version