nexstar energy ltd.

NEXSTAR ENERGY LTD.
Third Quarter Report
For the Period Ending
September 30, 2006
MESSAGE TO SHAREHOLDERS
November 20, 2006
In August 2006, Nexstar Energy closed a $12 million Initial Public Offering and started trading on the TSX Venture
Exchange. Since the beginning of the year, we’ve assembled an experienced and motivated management team,
finalized several farm-ins and joint ventures and made significant progress leading to the drilling of our initial
exploration projects in west central Alberta.
During the third quarter of 2006, we finalized a suspended well workover at Pembina that is expected to result in
our first production before the end of 2006. This would be a meaningful milestone. We’ve also launched a 3-D
seismic program to evaluate lands offsetting this well.
After securing a joint venture partner for the Bigoray area, we recently drilled and cased our first operated well.
Completion of the well is expected to occur before year end. We’ve selected additional drilling locations in the
area that are currently being surveyed for drilling this winter.
In the Swan Hills area, a large airborne reconnaissance survey is underway with a joint venture partner. This
regional survey is expected to assist with the identification and development of high-impact drilling prospects for
2007.
As we look to the future, a number of factors will help us achieve success. First of all, our management team has
a track record of growth through the drill bit and through strategic acquisitions. Second, our strong and diverse
Board of Directors includes individuals with technical, capital market and legal expertise. Third, our strategic
alliances are expected to provide us with access to drilling equipment and high-impact prospecting opportunities.
We have a strong balance sheet and a solid inventory of drilling prospects. With the people, capital and projects
in place, we are well positioned to execute our growth plan.
Respectfully submitted on behalf of the Board,
Peter A. Carwardine
President and CEO
Nexstar Energy Ltd.
2
November 20, 2006
MANAGEMENT DISCUSSION AND ANALYSIS
Nexstar Energy Ltd. (“Nexstar Energy” or the “Company”) is a Calgary, Alberta-based emerging junior oil and gas
exploration and production company actively engaged in the exploration for, development and production of
natural gas and crude oil reserves in the Western Canadian Sedimentary Basin. Nexstar Energy is incorporated
under the laws of the Province of Alberta and its common shares are publicly traded on the TSX Venture
Exchange under the trading symbols “NXE.A” and “NXE.B” for the Class A and Class B shares respectively.
The following Management Discussion and Analysis (MD&A) should be read in conjunction with the interim
unaudited September 30, 2006 financial statements and the notes thereto, prepared by management and not
reviewed by the Company’s Auditors and the audited December 31, 2005 financial statements and the notes for a
full understanding of the financial position and results of operations of Nexstar Energy.
Nexstar Energy had no operations in 2005 and thus comparative data has not been included. In the third quarter
of 2006, the Company successfully closed its Initial Public Offering in August, resulting in gross proceeds of $12
million. Field operations commenced in the Company’s core area of west central Alberta, including the reworking
of a 100% working interest well in the Pembina area. During the quarter, Nexstar Energy also initiated
geophysical data acquisition in the Pembina, Swan Hills and Bigoray project areas.
No production statistics are included in this MD&A as the Company has not yet produced crude oil or natural gas.
As an indicator of the Company’s performance, the term cash flow from operations or operating cash flow
contained within the MD&A should not be considered as an alternative to, or more meaningful than, cash flow
from operating activities as determined in accordance with Canadian generally accepted accounting principles
(“GAAP”). This term does not have a standardized meaning under GAAP and may not be comparable to other
companies. Nexstar Energy believes that cash flow from operations is a useful supplementary measure as
investors may use this information to analyze operating performance, leverage and liquidity. Cash flow from
operations, as disclosed within this MD&A, represents funds from operations before any asset retirement
obligation cash expenditures and is expressed before changes in non-cash working capital. The Company
presents cash flow from operations per share whereby per share amounts are calculated consistent with the
calculation of earnings per share.
Certain information regarding the Company contained herein may constitute forward-looking statements within the
meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations,
opinions, forecasts, projections, guidance or other similar statements that are not statements of fact. Although the
Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give
no assurance that such expectations will prove to be correct. These statements are subject to certain risks and
uncertainties and may be based on assumptions that could cause actual results to differ materially from those
anticipated or implied in the forward-looking statements. The Company’s forward-looking statements are
expressly qualified in their entirety by this cautionary statement.
For additional information on Nexstar Energy, please refer to the Company’s filings on SEDAR at www.sedar.com
or on the Company’s web site at www.nexstar-energy.com. All amounts are reported in Canadian dollars, unless
otherwise stated. This MD&A includes information up to and including November 16, 2006.
3
Liquidity and Capital Resources
In the third quarter of 2006, the resources utilized to implement the Company’s business strategy were sourced
as follows:
$
Issuance of common shares
Cash used in start-up operations & investments
Changes in non-cash working capital
Restricted cash securing demand loan
Total
Three months ended
September 30, 2006
11,039,251
(787,833)
389,601
10,641,019
Nine months ended
September 30, 2006
11,992,778
(984,768)
346,516
(300,000)
11,054,526
Nexstar Energy raised gross proceeds of $13,099,000 in the first nine months of 2006 under private placements
and an Initial Public Offering by issuing 9,196,000 Class A shares at $0.25 per share and 1,080,000 Class B
shares at $10.00 per share. Previously, at incorporation on June 22, 2005, Nexstar Energy raised gross
proceeds of $1,000 and issued 4,000 Class A shares at $0.25 per share.
Capital Expenditures
Capital expenditures during the quarter consisted primarily of initial costs associated with a re-working of a
suspended natural gas well in the Pembina area of west central Alberta and acquiring office furniture and
equipment required to set up the Company’s offices:
$
Land
Intangible drilling
Geological and geophysical
Property acquisitions
Office furniture and equipment
Leasehold Improvements
Total
Three months ended
September 30, 2006
432,926
184,499
10,031
17,103
644,559
Nine months ended
September 30, 2006
439,901
237,839
67,583
17,103
762,426
General and Administrative Expenses
General and administrative expenses in the nine months ended September 30, 2006 were $298,471. These
costs were related primarily to the start-up of the Company’s offices, including salaries of employees and
consultants’ costs. General and administrative expenses increased by $149,933 in the third quarter of 2006 to
$216,754 from $66,821 recorded in the second quarter of 2006, as many one time start-up costs plus increased
staff levels were incurred in the third quarter. None of these expenses were capitalized.
Interest Expenses and Income
As at September 30, 2006, the Company had cash and cash equivalents of $11,114,392 and no bank debt.
Nexstar Energy earned interest income of $71,089 in the third quarter.
Stock-Based Compensation
Stock-based compensation is a non-cash based expense of $23,428 for the nine months ended September 30,
2006. On August 1, 2006, 811,998 stock options were granted at an exercise price of $0.35 representing a 40%
premium over the Initial Public Offering purchase price of $0.25 per share.
4
Depreciation, Depletion and Accretion
Depreciation, depletion and accretion are calculated based upon capital expenditures, production rates and
reserve size. Depreciation expense for the quarter ended September 30, 2006 of $4,961 consisted of
depreciation of office furniture, computers and software. Accretion expense for the quarter was $740.
Net Earnings and Cash Flow
Due to the inclusion of all the general and administrative costs associated with the start-up of the Company and
no production, Nexstar Energy generated negative cash flow from operations of $143,274 and $222,342 for the
three and nine month periods ended September 30, 2006, respectively, and recorded a net loss of $172,403, or
$0.02 per share, and $256,569, or $0.07 per share, for the three and nine month periods ended September 30,
2006, respectively.
Common Share Information
The Company’s articles were amended to reorganize its authorized share capital on June 14, 2006. Specifically,
a resolution was approved to redesignate the existing outstanding common shares as Class A shares.
On August 10, 2006 and August 25, 2006, Nexstar Energy closed its Initial Public Offering for the maximum
financing of $11 million and full over-allotment of $1 million, resulting in the issuance of an additional 4,800,000
Class A shares and 1,080,000 Class B shares.
As at September 30, 2006, there were 9,200,000 Class A shares, 1,080,000 Class B shares and 811,998 stock
options outstanding to employees, consultants, officers and directors, with an exercise price of $0.35 per share.
All options are granted for a maximum term of five years and vest one-third upon issue, one-third after one year
and one-third after two years. Refer to Note 8 to the unaudited financial statements for the nine month period
ended September 30, 2006 for additional details.
In accordance with the policies of the TSX Venture Exchange, a total of 3,960,000 of the Company’s issued Class
A shares were held pursuant to escrow agreements. Of this number, 396,000 were released on August 10, 2006
and 594,000 shares will be released in equal instalments over a 36 month period commencing February 10, 2007
and every six months thereafter. As at September 30, 2006, 3,564,000 shares remain in escrow December 31,
2005 – nil).
Contractual Obligations
Nexstar Energy is committed to the following future payments under an operating lease for head office space,
exclusive of occupancy costs.
$
2006
2007
2008
2009
2010
2011
20,976
83,904
88,376
90,612
90,612
30,204
In addition, the Company has committed to a $600,000 (net) exploration survey in northwestern Alberta as a 50%
joint venture participant. A $150,000 non-refundable deposit was paid by the Company, reducing the Company’s
commitment to $450,000.
5
Also, the Company has a joint venture agreement with an Alberta-based drilling equipment and services provider.
Under the terms of the agreement, the Company will receive access to drilling equipment and associated services
in exchange for granting the right to the drilling company to participate for up to 15% of the Company’s share of
selected drilling projects.
Further, Nexstar Energy is committed to spend $12 million on expenditures qualifying as Canadian exploration
expenses prior to December 31, 2007.
Off-Balance Sheet Arrangements
The Company did not enter into any off-balance sheet transactions during the three and nine month periods
ended September 30, 2006.
Related Party Transactions
For the three and nine months ended September 30, 2006, general and administrative expenses included
consulting fees of $Nil and $22,000 respectively for services provided by officers of the Company prior to the
closing of the Initial Public Offering.
For the three and nine months ended September 30, 2006, general and administrative expenses and share issue
costs of $62,861.56 and $66,720.52 respectively for legal services provided to the Company by a law firm with
which a director and the corporate secretary are associated.
At September 30, 2006 an employee had an outstanding loan of $26,060 from the Company for the purchase of
common shares. The loan was repaid in early October 2006.
Hedging
Management of cash flow variability is an integral component of Nexstar Energy’s business strategy. Changing
business conditions are monitored and reviewed with the Board of Directors to establish hedging guidelines used
by management in carrying out the Company’s strategic hedging program. The risk exposure inherent in
movement in the crude oil and natural gas, fluctuations in the US/Canadian dollar exchange rate, and interest rate
movements on long-term debt levels are all proactively managed by the Company through the use of forward sale
financial transactions with reputable counterparties.
The Company has no hedges in place as at September 30, 2006.
Business Risks and Prospects
The Company is exposed to several operational risks inherent in exploring, developing, producing, and marketing
crude oil and natural gas. These risks include:
- economic risk of finding and producing reserves at a reasonable cost;
- financial risk of marketing production at an acceptable price given market conditions;
- cost of capital risk associated with securing the needed capital to carry out the Company’s
operations; and
- the risk of carrying out operations with minimal environmental impact.
The Company strives to manage or minimize these risks in a number of ways, including:
- employing and retaining qualified professional and technical staff;
- concentrating in areas known to management which provide multi-zone exploration and development
potential;
6
-
reducing high risk exploration exposure through joint venture relationships;
utilizing the latest technology for finding and developing reserves;
constructing quality, environmentally sensitive, safe production facilities;
conducting operations in a safe, professional and responsible manner;
maximizing operational control of drilling and producing operations;
mitigating price risk through strategic hedging; and
adhering to conservative borrowing guidelines.
Health Safety and Environmental Policy
The health and safety of employees, contractors, visitors, and the public, as well as the protection of the
environment, is of utmost importance to the Company. Nexstar Energy endeavours to conduct its operations in a
manner that will minimize both adverse effects and consequences of emergency situations by:
- complying with government regulations and standards;
- conducting its operations consistent with industry codes, practices, and guidelines;
- ensuring prompt effective response and repair to emergency situations and environmental incidents;
- providing training to employees and contractors to ensure compliance with the Company’s safety and
environmental rules and procedures;
- promoting the aspects of careful planning, good judgement, implementation of the Company’s
procedures and monitoring the Company’s activities;
- communicating openly with members of the public regarding the Company’s activities; and
- amending the Company’s policies and procedures as may be required from time to time.
Nexstar Energy believes that all employees have a vital role in achieving excellence in environmental, health and
safety performance. This is best achieved through careful planning and through the support and active
participation of everyone involved.
Outlook
Nexstar Energy is entering the 2006-2007 winter drilling season with a healthy balance sheet and a solid
inventory of drilling prospects.
Field activity at Pembina is expected to result in the Company’s first production prior to year end. A new 3-D
seismic program will help the Company evaluate lands offsetting this well.
In Bigoray, completion of Nexstar Energy’s first operated well is expected to occur before the end of 2006.
Additional drilling locations have been selected in the area and are currently being surveyed for drilling this winter.
A regional survey in the Swan Hills area is expected to assist with the identification and development of highimpact drilling prospects for 2007 activity.
Nexstar Energy’s focused exploration package in central and northwestern Alberta is expected to lead to the
establishment of a production base by the end of 2006 and range of drilling prospects for 2007 and beyond.
7
Notice of No Auditor Review of Interim Financial Statements
In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the
Company discloses that its auditors have not reviewed the unaudited financial statements as at and for
the three and nine months ended September 30, 2006.
Nexstar Energy Ltd.
Balance Sheets
(unaudited)
September 30,
2006
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Due from shareholder (note 7 )
Prepaid expenses and deposits
$
Restricted cash (note 3)
Property and equipment (note 4)
Liabilities and Shareholder’s Equity
Current liabilities
Accounts payable and accrued liabilities
Due to shareholders (note 7)
11,114,392
83,171
26,060
23,684
11,247,307
December 31,
2005
$
59,866
5,820
65,686
300,000
790,449
-
12,337,756
65,686
464,166
464,166
16,616
70,000
86,616
38,823
-
502,989
86,616
Asset retirement obligations (note 6)
Commitments (note 12)
Shareholders' Equity
Share capital (note 8)
Contributed surplus (note 9)
Deficit
$
12,089,838
23,428
(278,499)
1,000
(21,930)
11,834,767
(20,930)
12,337,756
Approved by the Board
(Signed) “Brian J. Mellum”
(Signed) “Peter A. Carwardine”
Brian J. Mellum
Peter A. Carwardine
Director
Director
See accompanying notes
2
$
65,686
Nexstar Energy Ltd.
Statements of Loss and Deficit
(unaudited)
Three months
ended
September 30,
2006
Revenue
$
Expenses
Operating expenses
71,089
Stock-based compensation (note 9)
Depreciation
Deficit, beginning of period
$
Loss per share
$
See accompanying notes
-
216,754
298,471
21,930
609
1,984
-
23,428
23,428
-
4,961
9,333
-
740
1,466
-
243,492
334,682
21,930
172,403
$
106,096
Deficit, end of period
$
-
Accretion
$
78,113
From incorporation
on June 22 to
December 31,
2005
-
Interest
Weighted average number of
shares – basic and diluted
$
(3,000)
General and administrative (note 11 )
Loss for the period
Nine months
ended
September 30,
2006
278,499
(0.02)
7,627,609
3
256,569
$
21,930
$
$
278,499
(0.07)
3,865,641
21,930
-
$
$
21,930
(5.48)
4,000
Nexstar Energy Ltd.
Statements of Cash Flows
(unaudited)
Three months
ended
September 30,
2006
Operating activities
Loss for the period
Add items not affecting cash
Depreciation
Accretion
$
Stock-based compensation
Changes in non-cash working
capital (note 10)
(172,403)
Nine months
ended
September 30,
2005
$
4,961
740
9,333
1,466
23,428
23,428
(143,274)
(222,342)
33,161
Financing activities
Proceeds from share issue, net of
issue costs (note 8)
Advance (to) from shareholders
Restricted cash (note 3)
Investing activities
Property and equipment
expenditures
Changes in non-cash working
capital (note 10)
Increase in cash and cash
equivalents
Cash and cash equivalents,
beginning of period
(256,569)
From incorporation
on June 22 to
December 31,
2005
$
(21,930)
10,796
(5,144)
(110,113)
(227,486)
11,109,687
(70,436)
-
12,088,838
(96,060)
(300,000)
70,000
-
11,039,251
11,692,778
71,000
(644,559)
(762,426)
356,440
351,660
(288,119)
(410,766)
10,641,019
11,054,526
473,373
59,866
(11,134)
1,000
59,866
-
Cash and cash equivalents, end of
period
$
11,114,392
$
11,114,392
$
Supplemental cash flow information:
Interest paid
$
609
$
1,984
$
See accompanying notes
(21,930)
4
59,866
-
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
1.
Incorporation and nature of operations
Nexstar Energy Ltd. (the “Company”) was incorporated under the Business Corporations Act
(Alberta) on June 22, 2005. The Company’s principal business activity is the exploration,
exploitation, development and production of petroleum and natural gas reserves in the Provinces of
Alberta and British Columbia.
2.
Basis of presentation
These unaudited interim financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles and on a basis consistent with the audited
December 31, 2005 financial statements except that certain disclosures have been condensed or
omitted. Accordingly, these interim financial statements should be read in conjunction with the notes
contained in the Company’s audited December 31, 2005 financial statements. Because a precise
determination of many assets and liabilities is dependent upon future events, the preparation of
periodic financial statements necessarily involves the use of estimates and approximations.
Accordingly, actual results could differ from those estimates. The financial statements have, in
management’s opinion, been properly prepared using careful judgment within reasonable limits of
materiality and within the framework of the significant accounting policies.
The operating results for the three and nine months ended September 30, 2006 may not be indicative
of the results for the year ended December 31, 2006.
3.
Cash and cash equivalents
September 30, 2006
Cash in bank
Term deposits
$
155,752
10,958,640
$
11,114,392
The term deposit outstanding as at September 30, 2006 had a term of 90 days or less at the date of
inception, bears interest at 4.31 % and matures in October 2006.
4.
Property and equipment
September 30, 2006
Accumulated
depletion and
depreciation
Cost
Petroleum and natural gas properties
Office equipment
Net
$
715,096
84,686
$
9,333
$
715,096
75,353
$
799,782
$
9,333
$
790,449
At September 30, 2006 the Company has just commenced operations and has no reserves or
production. Accordingly no provision for depletion expense has been made.
5.
Credit facility
At September 30, 2006 the Company has available a revolving operating demand loan to a maximum
of $300,000, bearing interest at the bank’s prime rate per annum and secured by deposits in the face
amount of $300,000. Letters of credit totaling $118,985 are drawn against the credit facility.
4
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
6.
Asset retirement obligations
The following table presents the reconciliation of the carrying amount of the obligation associated with
the retirement of the Company’s property and equipment:
Asset retirement obligations, December 31, 2005
Liabilities incurred
Accretion
$
37,357
1,466
Asset retirement obligations, September 30, 2006
$
38,823
The following significant assumptions were used to estimate the asset retirement obligations:
Undiscounted cash flows
Risk-free discount rate, adjusted for inflation
Weighted average expected timing of cash flows
7.
$
43,500
8%
3 years
Due to/from shareholders
During 2005, an officer of the Company advanced funds pursuant to a demand note, in the amount of
$70,000 on an interest free basis. In February 2006, the demand note was converted into 280,000
common shares at a price of $0.25 per share.
In February 2006, the Company loaned $25,000 to a corporation owned by an officer of the Company,
for the purpose of purchasing 100,000 common shares of the Company at $0.25 per share. The loan
was secured by a promissory note bearing interest at the National Bank of Canada’s prime lending rate
plus 1%, and due in full by February 14, 2007. The $26,060 balance was paid in full in October, 2006.
8.
Share capital
a) Authorized
Unlimited number of Class A Common shares
Unlimited number of Class B Common shares
Unlimited number of Preferred shares, issuable in series
b) Issued
Class A Common shares
Number
of Shares
Balance – December 31, 2005
Private placement (i)
Private placement (ii)
Flow-through shares – A issued (iii)
Share issue costs
4,000
2,436,000
1,960,000
4,800,000
-
$
1,000
609,000
490,000
1,200,000
(135,080)
9,200,000
$
2,164,920
5
Amount
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
8.
Share capital (continued)
b) Issued (continued)
Class B Common shares
Flow-through shares – B issued (iii)
Share issue costs
Balance – September 30, 2006
1,080,000
-
10,800,000
(875,082)
1,080,000
9,924,918
10,280,000
$
12,089,838
i)
On February 14, 2006 the Company issued 2,436,000 common shares at a price of $0.25 per
share for gross proceeds of $609,000. Included in this amount was the conversion of a $70,000
demand note due to a shareholder into 280,000 common shares at $0.25 per share.
ii)
On June 19, 2006 the Company issued 1,960,000 common shares at a price of $0.25 per
share for gross proceeds of $490,000.
On June 14, 2006, the Company filed Articles of Amendment to amend its share structure. As a
result, all of the Company’s issued and outstanding common shares were redesignated as Class A
Shares and the Company is authorized to issue an unlimited number of Class A Shares, an
unlimited number of Class B Shares and an unlimited number of preferred shares, issuable in
series.
Class A Shares and Class B Shares are voting on the basis of one vote per share, with no fixed
dividends payable on either. Class B Shares are convertible, at the option of the Company, at any
time after July 1, 2009 and before close of business June 30, 2011, into Class A Shares upon five
days prior notice to holders of Class B Shares. The number of Class A Shares obtained upon
conversion of each Class B Share will be equal to $10.00 divided by the greater of $1.00 and then
Current Market Price of the Class A Shares. If the Company fails to exercise the conversion option
by the close of business on June 30, 2011, then the Class B Shares shall be convertible at the
option of the shareholder, at any time after July 4, 2011, and before August 3, 2011 into Class A
Shares pursuant to the conversion formula described above. Any Class B Shares not converted by
the close of business on August 3, 2011 will be automatically converted into Class A Shares
pursuant to the conversion formula described above.
iii)
On August 10 and August 25, 2006, the Company closed its initial public offering of 12,000
units at a price of $1,000 per unit for gross proceeds of $12,000,000. Each unit consists of 400
flow-through Class A Shares at a price of $0.25 per share and 90 flow-through Class B Shares at a
price of $10.00 per share. The Company expects to renounce the related tax benefits of the flowthrough shares to investors in February 2007, with an effective date of December 31, 2006.
Approximately $175,000 of the expenditures related to the flow-through shares have been incurred
as at September 30, 2006.
c)
Escrowed shares
In accordance with the policies of the TSX Venture Exchange, a total of 3,960,000 of the
Company’s issued Class A shares were held pursuant to escrow agreements. Of this number,
396,000 were released on August 10, 2006 and 594,000 shares will be released in equal
6
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
8.
Share capital (continued)
instalments over a 36 month period commencing February 10, 2007 and every six months
thereafter. As at September 30, 2006, 3,564,000 shares remain in escrow (December 31, 2005 –
nil).
d) Per share amounts
Basic per share calculations are based on the weighted average number of common shares
outstanding of 7,627,609 and 3,865,641 respectively, for the three and nine months ended
September 30, 2006 (4,000 for the period ended December 31, 2005).
e) Stock options outstanding
The Company has a stock option plan for its directors, officers, employees and consultants, which
permits the granting of options up to 10% of the issued and outstanding shares of the Company at
the date of grant. The number of options and the exercise price thereof is set by the Board of
Directors at the time of grant provided that such exercise price shall not be less than that from time
to time permitted under the rules of any stock exchange on which the Company’s shares may be
listed. The maximum number of options that may be granted to any one individual shall not exceed
5% of the Company’s issued and outstanding common shares. The options granted under the plan
may be exercisable for a period not exceeding five years and may vest at such times as the Board
of Directors may determine at the time of grant.
On August 1, 2006, 811,998 options to purchase shares were granted to directors, officers and
employees of the Company at an exercise price of $0.35 per Class A share. The options vest as to
one-third on the date of grant and one-third on each of the first and second anniversaries of the date of
grant.
The following significant assumptions were used in the Black-Scholes Option Pricing Model to
estimate the fair value of the above options:
Risk-free interest rate
Expected volatility
Expected life
Dividend yield
4.17%
40%
5 years
Nil
A continuity of the Company’s stock options is summarized in the following table:
Number of
Options
Weighted average
exercise price
Balance – December 31, 2005
Granted
811,998
$ 0.35
Balance – September 30, 2006
811,998
$ 0.35
Stock options outstanding and exercisable as at September 30, 2006 are as follows:
Exercise
Price
$
Number
Outstanding
Weighted Average
Remaining
Contractual Life
(years)
0.35
811,998
4.8
7
Number
Exercisable
270,666
Weighted
Average
Exercise Price
$
0.35
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
9.
Contributed surplus
Balance – December 31, 2005
$
Stock-based compensation
Options granted in 2006
23,428
Balance – September 30, 2006
10.
-
$
23,428
Changes in non-cash working capital
Three months
ended September
30, 2006
Accounts receivable
Prepaid expenses and
deposits
Accounts payable and accrued
liabilities
$
(71,747)
$
472
$
460,876
389,601
From incorporation
on June 22 to
December 31,
2005
Nine months ended
September 30,
2006
$
(83,170)
-
$
(17,864)
(5,820)
447,550
346,516
16,616
$
10,796
The changes in non-cash working capital have been allocated to the following activities:
Three months
ended September
30, 2006
Operating
Investing
11.
From incorporation
on June 22 to
December 31,
2005
Nine months
ended September
3, 2006
$
33,161
356,440
$
(5,144)
351,660
$
10,796
-
$
389,601
$
346,516
$
10,796
Related party transactions
Included in general and administrative expenses for the three and nine months ended September 30,
2006 is $Nil and $22,000, respectively, (December 31, 2005 - $Nil) charged to the Company for
consulting services provided by officers and directors of the Company. At September 30, 2006 $Nil
are included in accounts payable and accrued liabilities.
Included in general and administrative expenses for the three and nine months ended September
30, 2006 is $3,879 and $7,578 (December 31, 2005 - $6,760), and included in share issue costs for
the three and nine months ended September 30, 2006 is $55,448 (December 31, 2005 - $Nil)
charged to the Company for legal services provided by a law firm with which a director and an
officer of the Company are associated. As at September 30, 2006 and December 31, 2005,
$62,862 and $6,000, respectively, is included in accounts payable and accrued liabilities.
At September 30, 2006 an employee had an outstanding loan of $26,060 (December 31, 2005 - $Nil)
from the Company for the purchase of shares. This amount was paid in full in early October, 2006.
Related party transactions are in the normal course of operations and are measured at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
8
Nexstar Energy Ltd.
Notes to the Financial Statements
September 30, 2006
(unaudited)
12.
Commitments
a) The Company is committed under an operating lease commencing May 1, 2006 on its office
premises for future rental payments exclusive of occupancy costs as follows:
2006
2007
2008
2009
2010
2011
$
20,976
83,904
88,376
90,612
90,612
30,204
$
404,684
A letter of credit in the amount of $75,485 has been provided for this lease.
9
CORPORATE INFORMATION
BOARD OF DIRECTORS
SENIOR MANAGEMENT
HEAD OFFICE
Peter A. Carwardine ³
President & CEO
Nexstar Energy Ltd.
Peter A. Carwardine
President & CEO
603 – 7 Avenue SW, Suite 525
Calgary, Alberta T2P 2T5
Phone:
(403) 263-6133
Facsimile: (403) 263-3629
Ross O. Drysdale, LLB ¹ ²
Lawyer and Counsel
Burstall Winger LLP
Daryl H. Gilbert, P.Eng. ¹ ² ³
Independent businessman
Brian J. Mellum, CFA ¹ ²
Chairman, Nexstar Energy Ltd.
Managing Director & Principal
Toscana Capital Corporation
Ken K.W. Pyo, P.Eng
VP Engineering & Operations
AUDITOR
Steve J. Smith, P.Land
Manager, Land
Brian J. Spilchen, CMA
VP Finance & CFO
Kenway Mack Slusarchuk Stewart LLP
Chartered Accountants
Calgary, Alberta
BANKER
Christian L. Viau, Ph.D., P.Geol.
VP Exploration
Brian J. Spilchen, CMA
VP Finance & CFO
Nexstar Energy Ltd.
¹ Member of the Audit & Reserves Committee
² Member of the Compensation & Governance Committee
³ Member of the Environmental, Health & Safety Committee
National Bank of Canada
Calgary, Alberta
SOLICITORS
Burstall Winger LLP
Calgary, Alberta
ENGINEERING CONSULTANTS
GLJ Petroleum Consultants Ltd.
Calgary, Alberta
OFFICERS
Peter A. Carwardine, BBA
President & CEO
Ken K.W. Pyo, P.Eng
VP Engineering & Operations
TRANSFER AGENTS
Olympia Trust Company
Calgary, Alberta
STOCK EXCHANGE LISTING
Brian J. Spilchen, CMA
VP Finance & CFO
Christian L. Viau, Ph.D., P.Geol.
VP Exploration
The TSX Venture Exchange
TRADING SYMBOLS
NXE.A & NXE.B
Stacey L. Holliday, LLB
Corporate Secretary
Associate, Burstall Winger LLP
For further information please contact:
Peter A. Carwardine
President and CEO
Brian J. Spilchen
VP Finance and CFO
Telephone: (403) 263-6133 ext.201
Facsimile: (403) 263-3629
Telephone: (403) 263-6133 ext.202
Facsimile: (403) 263-3629
Website:
Email:
www.nexstar-energy.com
[email protected]