Exhibit 99.3
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2023 AND 2022
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Management’s Report
The accompanying consolidated financial statements and related financial information are the responsibility of management, and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board. They include certain amounts that are based on estimates and judgments relating. Financial information presented elsewhere in this document is consistent with that contained in the consolidated financial statements.
In management’s opinion, the consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies adopted by management. If alternate accounting methods exist, management has chosen those policies it deems the most appropriate in the circumstances. Management has established systems of accounting and internal controls that provide reasonable assurance that assets are safeguarded from loss or unauthorized use, and produce reliable accounting records for the preparation of financial information. Policies and procedures are maintained to support the accounting and internal control systems.
The Company retains independent petroleum consultants, Netherland, Sewell & Associates, Inc. to conduct independent evaluations of the Company’s oil, natural gas and natural reserves. The independent external auditors, KPMG LLP, have conducted an examination of the consolidated financial statements on behalf of shareholders. The auditors have unrestricted access to the Company and the Audit Committee.
The Board of Directors, currently composed of three independent directors and one officer/director, carries out its responsibility for the consolidated financial statements principally through its Audit Committee, consisting of three members, all of whom are independent directors. This committee reviews the consolidated financial statements with management and the auditors, as well as recommends to the Board of Directors the external auditors to be appointed by the shareholders at each annual meeting. The audit committee meets at least quarterly to review and approves financial statements prior to their release, and recommends their approval to the Board of Directors.
| /s/ Wolf Regener | /s/ Gary Johnson | |
| Wolf Regener | Gary Johnson | |
| President & Chief Executive Officer | Chief Financial Officer & Vice President | |
| May 2, 2024 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Kolibri Global Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated financial position of Kolibri Global Energy Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit[s]. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum llp
We have served as the Company’s auditor since 2023.
May 2, 2024
PCAOB
ID#
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KOLIBRI GLOBAL ENERGY INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands of United States dollars)
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable and other receivables (Note 6) | ||||||||
| Deposits and prepaid expenses | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment (Note 9) | ||||||||
| Right-of-use assets (Note 10) | ||||||||
| Fair value of commodity contracts (Note 6) | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities | ||||||||
| Accounts Payable and other payables (Note 6) | $ | $ | ||||||
| Current lease liabilities (Note 10) | ||||||||
| Fair value of commodity contracts (Note 6) | ||||||||
| Total Current Liabilities | ||||||||
| Non-current liabilities | ||||||||
| Loans and borrowings (Note 14) | ||||||||
| Asset retirement obligations (Note 16) | ||||||||
| Deferred taxes (Note 11) | ||||||||
| Fair value of commodity contracts (Note 6) | ||||||||
| Lease liabilities (Note 10) | ||||||||
| Total Liabilities | ||||||||
| Equity | ||||||||
| Shareholders’ capital (Note 12) | ||||||||
| Contributed surplus | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Total Equity and Liabilities | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| Approved by: | ||
| /s/ David Neuhauser | /s/ Eric Brown | |
| David Neuhauser | Eric Brown | |
| Director | Director |
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KOLIBRI GLOBAL ENERGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31
(Expressed in thousands of United States dollars, except per share amounts)
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Oil and natural gas revenues, net of royalties (Note 7) | $ | $ | ||||||
| Other income | ||||||||
| Total revenue | ||||||||
| Expenses | ||||||||
| Production and operating expenses | ||||||||
| Depletion, depreciation and amortization (Notes 9,10) | ||||||||
| General and administrative expenses | ||||||||
| Stock based compensation (Note 15) | ||||||||
| Finance income | ||||||||
| Unrealized gain on risk management contracts (Note 6) | ||||||||
| Interest income | ||||||||
| Finance expense | ||||||||
| Interest on loans and borrowings | ||||||||
| Realized loss on risk management contracts (Note 6) | ||||||||
| Accretion | ||||||||
| Interest on lease liability | ||||||||
| Foreign exchange loss | ||||||||
| Net income before income taxes | ||||||||
| Income tax expense | ( | ) | ||||||
| Net income and comprehensive income | ||||||||
| Basic net income per share (Note 13) | $ | $ | ||||||
| Diluted net income per share (Note 13) | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
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KOLIBRI GLOBAL ENERGY INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in thousands of United States dollars, except number of common shares)
Number of common shares | Share capital | Contributed Surplus | Deficit | Total Equity | ||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Rights offering (Note 12) | ||||||||||||||||||||
| Net income for the year | - | |||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||
| Net income for the year | - | |||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
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KOLIBRI GLOBAL ENERGY INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31
(Expressed in thousands of United States dollars)
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments for: | ||||||||
| Depletion, depreciation and amortization | ||||||||
| Accretion | ||||||||
| Unrealized (gain) loss on risk management contracts | ( | ) | ( | ) | ||||
| Stock based compensation (Note 15) | ||||||||
| Deferred taxes expense | ||||||||
| Unrealized foreign exchange (gain) loss | ( | ) | ||||||
| Amortization of loan acquisition costs | ||||||||
| Gain on sale of assets | ( | ) | ||||||
| Changes in non-cash working capital (Note 8) | ( | ) | ||||||
| Net cash from operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Additions to property, plant and equipment (Note 9) | ( | ) | ( | ) | ||||
| Proceeds from sale of assets | ||||||||
| Change in non-cash working capital (Note 8) | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from loans and borrowings | ||||||||
| Repayment of loans and borrowings | ( | ) | ( | ) | ||||
| Payments on lease liabilities | ( | ) | ( | ) | ||||
| Proceeds from stock option exercises | ||||||||
| Proceeds from rights offering, net | ||||||||
| Net cash from financing activities | ||||||||
| Foreign exchange effect on cash and cash equivalents | ( | ) | ||||||
| Change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | $ | ||||||
| Supplementary information for cash flows from operating activities | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
1. NATURE OF OPERATIONS
Kolibri Global Energy Inc. (the “Company” or “KEI”), was incorporated under the Business Corporations Act (British Columbia) on May 6, 2008. KEI is a North American energy company focused on finding and exploiting energy projects in oil, gas and clean and sustainable energy. Through various subsidiaries, the Company owns and operates energy properties in the United States. The Company continues to utilize its technical and operational expertise to identify and acquire additional projects. The head office of the Company is located at Suite 220, 925 Broadbeck Drive, Thousand Oaks, CA USA 91320. The Company’s shares are traded on the Toronto Stock Exchange under the stock symbol KEI and on the NASDAQ under the stock symbol KGEI.
These consolidated financial statements were authorized for issuance by the Board of Directors on May 2, 2024.
2. BASIS OF PREPARATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
New Standards and Interpretations adopted
IFRS 17 – Insurance Contracts. This standard introduces a general measurement model which is based on a risk-adjusted present value of future cash flows as an insurance contract is fulfilled. The Company adopted this standard on January 1, 2023 and it did not have a significant impact to the Company.
New Standards and Interpretations not yet adopted
The following future IFRS standards have not yet been adopted by the Company:
Amendment to IFRS 16 – Leases on sale and leaseback. This amendment specifies how an entity accounts for a sale and leaseback after the date of the transaction. This is effective for annual periods beginning on or after January 1, 2024 and is not expected to have a significant impact on the Company.
Amendment to IFRS 1 – Non-current liabilities with covenants. This amendment specifies how an entity must comply within twelve months after the reporting period affecting the classification of a liability. This is effective for annual periods beginning on or after January 1, 2024 and is not expected to have a significant impact on the Company.
Amendment to IAS 7 and IFRS 7 – Supplier finance. This amendment requires disclosures of supplier finance arrangements and their impact to a company’s liquidity risk. This is effective for annual periods beginning on or after January 1, 2024 and is not expected to have a significant impact on the Company.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Amendments to IAS 21 – Lack of Exchangeability. These amendments specify accounting for transactions in foreign currency that are not exchangeable into another currency at their measurement date. These amendments are effective for annual periods beginning on or after January 1, 2025 and are not expected to have a significant impact on the Company.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for certain items which are measured at fair value.
The methods used to measure fair values are discussed in Note 5.
Operating segments
The Company sells crude oil, natural gas and natural gas liquids that is extracted from its Tishomingo field in Oklahoma under its wholly-owned subsidiary, BNK Petroleum (US) Inc. The Company has chosen its reportable segment by geographical area with the United States being its only reportable segment.
Functional and presentation currency
These consolidated financial statements are presented in US dollars, which is the Company’s functional and reporting currency.
3. MANAGEMENT ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make estimates and use judgment regarding the reported amounts of assets and liabilities, the disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. By their nature, estimates are subject to measurement uncertainty and changes in such estimates in future years could require a material change in the financial statements. Accordingly, actual results may differ from the estimated amounts.
Significant estimates and judgments made by management in the preparation of these consolidated financial statements are as follows:
Judgments
Cash generating units
Development and production assets are assessed for recoverability at a cash generating unit (“CGU”) level. The determination of CGUs is subject to management judgments relating to geographical proximity.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Impairment indicators
Significant judgment is required to assess indicators of impairment or impairment reversal which would require an impairment test. Management considers internal and external sources of information including forecasted oil and gas commodity prices, forecasted production volumes and estimates of recoverable proved and probable oil and gas reserves to estimate future cash flows. Judgment is required to assess these factors when determining whether an asset has been impaired or needs to be reversed.
Income taxes
Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed by management at the end of the reporting period to determine the likelihood that they will be recovered from future taxable earnings. This requires making assumptions regarding future profitability which impacts the amounts recognized for deferred tax assets.
Significant Estimates
Reserves
The Company uses estimated proved and probable oil and gas reserves to deplete development and production assets included in property, plant and equipment (“PP&E”), to assess for indicators of impairment or impairment reversal on the Company’s cash generating unit (“CGU”) and if any such indicators exist, to perform an impairment test to estimate the recoverable amount of the CGU. Estimates of economically recoverable proved and probable oil and gas reserves are based upon a number of significant assumptions, such as forecasted production, oil and gas commodity prices, operating costs, royalty costs, and future development costs. Changes in forecasted oil and gas commodity price assumptions, production costs or recovery rates may change the economic status of reserves and may ultimately result in a revision of oil and gas reserves. The discount rate used to calculate the net present value of cash flows may be influenced by changes in the general economic environment which could result in significant changes to the estimated recoverable value.
Independent third-party reserve evaluators are engaged at least annually to estimate proved and probable oil and gas reserves and the related cash flows from the Company’s interest in oil and gas properties.
Assumptions that are valid at the time of reserve estimation may change significantly when additional information becomes available.
Asset retirement obligations
The provisions for site restoration and abandonment is based on current legal requirements, technology, price levels and expected plans and are based on significant assumptions such as inflation rate, discount rate and costs to abandon and reclaim. Actual costs and cash outflows can differ from estimates because of changes in laws or regulations, market conditions and changes in technology.
| 10 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, and have been applied consistently by the Company and its subsidiaries.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The Company has the following wholly owned subsidiaries:
Name of company | Ownership Percentage | Country of operation | ||||
| % | ||||||
| % | ||||||
| % | ||||||
| % | ||||||
Jointly controlled operations and jointly controlled assets
Many of the Company’s oil and natural gas activities involve jointly controlled assets. The consolidated financial statements include the Company’s share of these jointly controlled assets and a proportionate share of the relevant revenue and related costs.
Transactions eliminated on consolidation
Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.
Foreign currency
Transactions in foreign currencies are translated to United States dollars at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars at the period end exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on translation are recognized in finance income or expense in the statement of operations.
| 11 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognized when the Company becomes a party to the contractual provisions of the instruments. The Company uses three measurement categories to value these instruments: amortized cost, fair value through other comprehensive income or fair value through profit or loss. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
Cash and cash equivalents
Cash
and cash equivalents comprise cash on hand, term deposits with banks, other short-term highly liquid investments with original maturities
of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management,
whereby management has the ability and intent to net bank overdrafts against cash, are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows. There were
Financial assets at fair value through profit or loss
The Company has the option to record financial instruments at fair value and recognize the change in fair value subsequent to initial recognition into the statement of operations. This option must be designated at the time that the financial asset is initially recognized by the Company. The Company only makes this designation if it has a documented risk management and investment strategy that it uses to make purchase and sale decisions regarding the financial assets. If the Company chooses this option, attributable transaction costs related to the financial instruments are recognized in the statement of operations when incurred. The Company has designated cash and cash equivalents at amortized cost.
Other
Other non-derivative financial instruments, such as trade and other receivables, loans and borrowings, and trade and other payables, are measured at amortized cost using the effective interest method, less any impairment losses.
Derivative financial instruments
The Company has entered into certain financial derivative contracts in order to reduce its exposure to market risks from fluctuations in commodity prices. These instruments are not used for trading or speculative purposes. The Company has not designated its financial derivative contracts as accounting hedges, and thus has not applied hedge accounting, even though the Company considers all commodity contracts to be economic hedges. As a result, all financial derivative contracts are classified at fair value through profit or loss and are recorded on the statement of financial position at fair value. Transaction costs are recognized in profit or loss when incurred.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.
Property, plant and equipment
Recognition and measurement
Development and production assets
Items of property, plant and equipment, which include development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment write-offs. Development and production assets are grouped into CGUs for impairment testing, net of reversals. The Company has grouped its development and production assets into a single CGU. When significant parts of an item of property, plant and equipment, which included development and production assets, have different useful lives, they are accounted for as separate items (major components).
Gains and losses on disposal of an item of property, plant and equipment, including development and production assets, are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net in the statement of operations.
Subsequent costs
Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property, plant and equipment are recognized as development and production assets only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized development and production assets generally represent costs incurred in developing proved and probable oil and gas reserves and bringing in or enhancing production from such proved and probable oil and gas reserves, and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Depletion and depreciation
The Company depletes its net carrying value of development and production assets using the unit-of-production method by reference to the ratio of production in the period to the related proved and probable oil and gas reserves, taking into account estimated forecasted future development costs necessary to bring those reserves into production. Forecasted future development costs are determined taking into account the level of development required to produce the proved and probable oil and gas reserves and are estimated by independent third-party reserve evaluators at least annually.
Proved and probable oil and gas reserves are estimated using independent third-party reserve evaluators reports and represent the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible.
For other assets, depreciation is recognized in the statement of operations on a declining balance basis over the estimated useful lives of each part of an item of property, plant and equipment.
The estimated useful lives for other assets for the current and comparative years are as follows:
| ● | Office
equipment - | |
| ● | Furniture
and fixtures - |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Leases
Leases are recognized as a right of use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company. The cost of right of use assets includes the amount of lease liabilities recognized and initial direct costs incurred less any lease incentives received. The right of use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
The lease liability is measured at the present value of lease payments to be made over the lease term, discounted using the Company’s incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily available. Each lease payment is allocated between the repayment of the principal portion of lease liability and the interest portion, which is recorded in accretion expense. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the income statement.
Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
The Company recognizes loss allowances for expected credit losses on its financial assets measured at amortized cost. The loss allowance is calculated at an amount equal to expected lifetime expected credit losses.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognized in the statement of operations.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in the statement of operations.
Non-financial assets
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there are any external or internal indicators of impairment or impairment reversal. If any such indicators of impairment or impairment reversal exist, the Company performs an impairment test to estimate the asset’s or CGU’s recoverable amount.
For the purpose of impairment testing, development and production assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGUs). The estimated recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. At December 31, 2023 and December 31, 2022, the Company has only one CGU, the Tishomingo field in Oklahoma.
In assessing value in use, the estimated recoverable amount is determined based on estimated proved and probable oil and gas reserves and the related cash flows that are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The estimated proved and probable oil and gas reserves and the related cash flows are estimated by the Company’s independent third-party reserve evaluators.
Fair value less cost to sell is determined as the amount that would be obtained from the sale of a CGU in an arm’s length transaction between knowledgeable and willing parties. The fair value less cost to sell of oil and gas assets is generally determined as the net present value of the estimated future cash flows expected to arise from the continued use of the CGU, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted by an appropriate discount rate which would be applied by such a market participant to arrive at a net present value of the CGU.
An impairment charge is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment charges, if any, are recognized on the statement of operations.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Impairment charges, other than those related to goodwill, recognized in prior years are assessed at each reporting date for any indications that the historic charge has decreased or no longer exists. An impairment charge is reversed if there has been a change in the estimates used to determine the estimated recoverable amount. An impairment charge is reversed when the recoverable amount exceeds the carrying amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortization, if no impairment charge had been recognized.
The grant date fair value of options and restricted stock units (RSUs) granted to employees are recognized as compensation expense with a corresponding increase in contributed surplus over the vesting period. The Company capitalizes a portion of share based compensation that is directly attributable to development activities When share options are exercised, the previously recognized value in contributed surplus is recorded as an increase to share capital. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are not recognized for future operating losses.
Asset retirement obligations (ARO)
The Company’s activities give rise to dismantling, decommissioning and site disturbance re-mediation activities. Provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.
Asset retirement obligations are measured at the present value, using a risk free rate, of management’s best estimate of expenditure required to settle the present obligation at the balance sheet date. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as finance costs in the statement of operations whereas increases/decreases due to changes in the estimated future cash flows are capitalized. Actual costs incurred upon settlement of the asset retirement obligations are charged against the provision to the extent the provision was established.
Revenue
Revenue is recognized when the performance obligations are satisfied and revenue can be reliably measured. Revenue is measured at the consideration specified in the contracts and represents amounts receivable for goods or services provided in the normal course of business, net of discounts, customs duties and sales taxes. All revenue is based on variable prices. Performance obligations associated with the sale of crude oil, natural gas, and natural gas liquids are satisfied at the point in time when the products are delivered to and title passes to the customer. Performance obligations associated with processing services, transportation, and marketing services are satisfied at the point in time when the services are provided.
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Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Finance income and expense
Finance expense comprises interest expense on borrowings, accretion of the discount on ARO, foreign exchange losses and unrealized losses on financial assets. Finance income comprises interest income, realized and unrealized gains on financial assets and foreign exchange gains.
Interest income is recognized as it accrues in the statement of operations, using the effective interest method.
Foreign currency gains and losses, change in the value of financial commodity contracts reported under finance income and expenses, are reported on a net basis.
Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of operations except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Basic earnings per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of dilutive instruments such as options granted to employees.
| 17 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Government Assistance and Grants
The Company may receive government assistance in the form of business loans that could be forgiven and converted into government grants if the Company meets certain conditions. When the amounts are received, the Company initially accounts for this assistance as loans and borrowings until it has received forgiveness notification from the government. At that time, the amounts are recognized into other income.
5. DETERMINATION OF FAIR VALUES
A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognized in a business combination and related decommissioning obligation is based on market values. The market value of property, plant and equipment is the estimated amount for which property, plant and equipment could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of oil and gas properties (included in property, plant and equipment) and exploration and evaluation assets is estimated with reference to discounted proved and probable oil and gas reserves and the related cash flows based on independent third-party reserve evaluators reports. The risk-adjusted discount rate is specific to the asset with reference to general market conditions.
Cash and cash equivalents, trade and other receivables, trade and other payables and loans and borrowings
The fair value of cash and cash equivalents, trade and other receivables, trade and other payables and loans and borrowings is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value of these balances approximate their carrying value due to their short term to maturity or in the case of loans and borrowings, the fair value approximates its carrying value as it bears interest at floating rates and the premium charged was indicative of the Company’s current credit premium.
Derivatives
The fair value of forward contracts is derived from quoted prices received from financial institutions and is based on published forward price curves as at the measurement date, using the remaining contracted oil and natural gas volumes.
| 18 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Stock options
The fair value of stock options is measured using a Black Scholes option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), forfeiture rate, weighted average expected life of the instruments (based on historical experience and general option holder behavior) and the risk-free interest rate (based on government bonds).
The Company classifies fair value measurements according to the following hierarchy based on the amount of observable inputs used to value the instrument:
Level 1 fair value measurements are based on unadjusted quoted market prices.
Level 2 fair value measurements are based on valuation models and techniques where the significant inputs are derived from quoted indices.
Level 3 fair value measurements are based on unobservable information. The level 3 fair value measurements pertain to the fair value assigned to property, plant and equipment, intangible exploration assets and other intangible assets acquired in business combinations.
The Company’s cash and cash equivalents are classified as Level 1 and the commodity derivative contracts are classified as Level 2.
6. FINANCIAL RISK MANAGEMENT
Overview
The Company’s activities expose it to a variety of financial risks that arise as a result of its exploration, development, production, and financing activities such as:
| ○ | credit risk | |
| ○ | liquidity risk | |
| ○ | market risk |
This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.
The Board of Directors oversees management’s establishment and execution of the Company’s risk management framework. Management has implemented and monitors compliance with risk management policies. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities.
Credit risk
The Company’s accounts receivable are with customers and joint interest partners in the petroleum and natural gas business and are subject to normal credit risks. Concentration of credit risk is mitigated by marketing to numerous purchasers under normal industry sale and payment terms. The Company routinely assesses the financial strength of its customers.
| 19 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
The Company is exposed to certain losses in the event of non-performance by counterparties to commodity price contracts. The Company mitigates this risk by entering into transactions with highly rated financial institutions. At December 31, 2023 and December 31, 2022, financial assets on the statement of financial position are comprised of cash and cash equivalents and trade and other receivables.
The
maximum credit exposure at December 31, 2023 is the net carrying amount of cash and cash equivalents and trade and other receivables
of $
The components of the trade receivables aging at December 31, 2023 are as follows:
| Current | 30 – 60 days | 60 – 90 days | More than 90 days | Total | ||||||||||||||||
| Trade and other receivables | $ | $ | $ | $ | $ | |||||||||||||||
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Typically the Company ensures that it has sufficient cash on demand and cash flow from operations to meet expected operational expenses for a one-year period, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. To achieve this objective, the Company prepares annual capital expenditure budgets, which are regularly monitored and updated as considered necessary. Further, the Company utilizes authorizations for expenditures on both operated and non-operated projects to further manage capital expenditure. The Company also attempts to match its payment cycle with collection of oil revenue on the 20th of each month.
| 20 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
The Company monitors its expected cash inflows from trade and other receivables and its expected cash outflows on trade and other payables and principal debt payments. The Company plans to utilize its cash on hand and cash inflows to fund any principal payments as well as its trade payables.
The following are the contractual maturities of financial liabilities, including estimated interest payments at December 31, 2023:
| Carrying amount | 2024 | 2025 | Thereafter | |||||||||||||
| Liabilities | ||||||||||||||||
| Fair value of commodity contracts | $ | $ | $ | $ | ||||||||||||
| Lease payable | ||||||||||||||||
| Loans and borrowings | ||||||||||||||||
| Trade and other payables | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates will affect the Company’s income or the value of the financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Company uses financial derivatives contracts to manage market risks. All such transactions are conducted within risk management tolerances that are reviewed by the Board of Directors.
Expenditures
for corporate general and administrative expenses and professional fees are denominated in Canadian dollars. The average exchange rate
during the year was
A
Commodity price risk
Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for oil and natural gas are impacted by general market conditions in the United States as well as world economic events that dictate the levels of supply and demand.
| 21 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
It is the Company’s policy to economically hedge some oil and natural gas sales through the use of various financial derivative forward sales contracts and physical sales contracts. In addition, BOK Financial may require the Company to hedge oil sales as part of the redetermination process. The Company does not apply hedge accounting for these contracts. The Company’s production is usually sold using “spot” or near term contracts, with prices fixed at the time of transfer of custody or on the basis of a monthly average market price. The Company, however, may give consideration in certain circumstances to the appropriateness of entering into long term, fixed price marketing contracts. The Company does not enter into commodity contracts other than to meet the Company’s expected sale requirements.
The Company has entered into financial commodity contracts which are summarized in the table below. Total volume hedged in the table is the annual volumes and price is the fixed price specified in the financial commodity contracts.
At December 31, 2023, the following financial commodity contracts were outstanding and recorded at estimated fair value:
| Total Volume Hedged | Price | |||||||||
| Commodity | Period | (BBLS) | ($/BBL) | |||||||
| Oil – WTI Put | $ | |||||||||
| Oil – WTI Swap | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Put | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
The
estimated fair value results is a $
| 22 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
| Total Volume Hedged | Price | |||||||||
| Commodity Contract | Period | (BBLS) | ($/BBL) | |||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Swap | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
| Oil – WTI Costless Collars | $ | |||||||||
The realized and unrealized gains/losses from the financial commodity contracts are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Realized loss on financial commodity contracts | $ | ( | ) | ( | ) | |||
| Unrealized gain on financial commodity contracts | $ | |||||||
| 23 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Capital management
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying oil and natural gas assets. The Company considers its capital structure to include shareholders’ equity, loans and borrowings and working capital. In order to maintain or adjust the capital structure, the Company may from time to time issue shares, enter into farm-out agreements and adjust its capital spending to manage current and projected debt levels.
In order to facilitate the management of this ratio, the Company prepares annual capital expenditure budgets, which are updated as necessary depending on varying factors including current and forecast prices, successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company generally acts as the operator of its wells and therefore can monitor and control the amount of capital expenditures it incurs. For non-operated wells, the Company could opt out of participating in its share of the well.
There were no changes in the Company’s approach to capital management during the year.
The credit facilities are subject to a semi-annual review of the borrowing base.
7. REVENUES
Oil,
natural gas liquids and natural gas are mostly sold under contracts of varying price and volume terms. Revenues for oil are typically
collected on the 20th day of the month following production, while natural gas and NGL revenues are collected by the 45th day of the
month following production. The amount of accrued accounts receivable at December 31, 2023 was $
The following table presents the Company’s gross oil and gas revenue disaggregated by revenue source:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Oil revenue | $ | $ | ||||||
| Natural gas revenue | ||||||||
| NGL revenue | ||||||||
| Total oil and natural gas revenues | ||||||||
| Less: Royalties | ( | ) | ( | ) | ||||
| Oil and natural gas revenues, net of royalties | $ | $ | ||||||
8. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in non-cash flow working capital is comprised of:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Trade and other receivables | $ | $ | ( | ) | ||||
| Deposits and prepaid expenses | ( | ) | ( | ) | ||||
| Trade and other payables | ||||||||
| Foreign currency | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Related to operating activities | $ | $ | ( | ) | ||||
| Related to investing activities | $ | $ | ||||||
| 24 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
9. PROPERTY, PLANT AND EQUIPMENT
| Development
and Production Assets | Processing and Other Equipment | Total | ||||||||||
| Cost or deemed cost | ||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | |||||||||
| Additions (a) | ||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||
| Balance at December 31, 2022 | $ | $ | $ | |||||||||
| Additions (b) | ||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Accumulated depletion and depreciation | ||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | |||||||||
| Depletion and depreciation | ||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | |||||||||
| Depletion and depreciation | ||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Net book value | ||||||||||||
| At December 31, 2022 | $ | $ | $ | |||||||||
| At December 31, 2023 | $ | $ | $ | |||||||||
| (a) | ||
| (b) |
Impairment
There
were
10. LEASES AND RIGHT OF USE ASSETS
The Company records right of use assets for its corporate headquarters and, starting in 2023, compressors that are used for its field operations.
| Right of Use Assets | ||||
| Balance at January 1, 2022 | $ | |||
| Additions | ||||
| Depreciation | ( | ) | ||
| Balance at December 31, 2022 | $ | |||
| Additions | ||||
| Depreciation | ( | ) | ||
| Balance at December 31, 2023 | $ | |||
| 25 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
The
amount of interest accretion recorded in the statement of operations totaled $
11. INCOME TAXES
The provision for income taxes reported differs from the amounts computed by applying the cumulative US federal and state income tax rates to the net loss before tax provision due to the following:
| 2023 | 2022 | |||||||
| Net income | $ | $ | ||||||
| Statutory tax rate | % | % | ||||||
| Add (deduct): | ||||||||
| Return to provision | ( | ) | ||||||
| Depletion | ( | ) | ||||||
| Prior period state deferred adjustments | ||||||||
| Change in unrecognized tax benefit | ( | ) | ( | ) | ||||
| Change in enacted tax rate | ||||||||
| Other | ||||||||
| Income tax expense | $ | $ | ||||||
Deferred tax liabilities and assets are attributable to the following:
| 2023 | 2022 | |||||||
| Deferred income tax liabilities: | ||||||||
| Property, plant and equipment/exploration and evaluation assets | $ | ( | ) | $ | ( | ) | ||
| Commodity contracts | ( | ) | ||||||
| Leases | ( | ) | ||||||
| Deferred tax assets: | ||||||||
| Stock based compensation | ||||||||
| Asset retirement obligations | ||||||||
| Commodity contracts | ||||||||
| Other | ||||||||
| Loss carry-forward | ||||||||
| $ | ( | ) | $ | |||||
| 26 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
Unrecognized deferred tax assets
Deferred tax assets have not been recognized for the following deductible temporary differences:
| 2023 | 2022 | |||||||
| Property, plant and equipment/exploration and evaluation assets | $ | $ | ||||||
| Loss carry-forward | ||||||||
| Capital losses | ||||||||
| $ | $ | |||||||
Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profits will be available against which they can be utilized.
The
Company has non-operating losses carried forward which may be available to offset future income for income tax purposes expiring over
the periods 2028 to 2037. The Company has non-operating losses of approximately $
The Company has temporary differences associated with its investments in its foreign subsidiaries. The Company has no deferred tax liabilities in respect of these temporary differences.
At December 31, 2023 and 2022, the Company was authorized to issue an number of common shares. The common shares have no par value. The holders of common shares are entitled to receive dividends if they are declared by the Company and are entitled to per share at meetings of the Company.
On May 16, 2022, a share consolidation was completed on the . The consolidation reduced the number of common shares issued and outstanding from common shares to common shares. The common shares commenced trading on the Toronto Stock Exchange on a post-consolidation basis on the opening of trading May 19, 2022. The exercise price and the number of shares issuable under the Company’s outstanding stock options were proportionately adjusted upon the completion of the consolidation. All information related to earnings per share, issued and outstanding common shares, stock options and per share amounts in the financial statements have been retrospectively adjusted to reflect the share consolidation.
| 27 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
| 2023 | 2022 | |||||||
| Basic earnings per share | ||||||||
| Net income | $ | $ | ||||||
| Weighted average number of common shares - basic | ||||||||
| Net income per share – basic | $ | $ | ||||||
| Diluted earnings per share | ||||||||
| Net income | $ | $ | ||||||
| Effect of outstanding options | ||||||||
| Weighted average number of common shares - diluted | ||||||||
| Net income per share – diluted | $ | $ | ||||||
14. LOANS AND BORROWINGS
In May 2022, the Company’s US subsidiary amended the credit facility, which originated in 2017, from BOK Financial, which is secured by the US subsidiary’s interests in the Tishomingo Field. The credit facility expires in June 2026 and is intended to fund the drilling of the Caney wells in the Tishomingo Field.
The
borrowing base of the credit facility was increased to $
The credit facility has two primary debt covenants. One covenant requires the US subsidiary to maintain a positive working capital balance which includes any unused excess borrowing capacity and excludes the fair value of commodity contracts, the current portion of long-term debt (the “Current Ratio”). The second covenant ensures the ratio of outstanding debt and long-term liabilities to a trailing twelve month adjusted EBITDA amount (the “Maximum Leverage Ratio”) be no greater than 3 to 1 at any quarter end. Adjusted EBITDA is defined as net income excluding interest expense, depreciation, depletion and amortization expense, and other non-cash and non-recurring charges including severance, share based compensation expense and unrealized gains or losses on commodity contracts.
At
December 31, 2023, the Current Ratio of the US Subsidiary was
| 28 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
The
Company was in compliance with both covenants for the three months ended December 31, 2022. At December 31, 2022, the Current Ratio of
the US Subsidiary was
At
December 31, 2023, loans and borrowings of $
Stock Options
The Company has an option program that entitles officers, directors, employees and certain consultants to purchase common shares in the Company. Options are granted at the market price of the shares at the date of grant, have a .
| December 31, 2023 | December 31, 2022 | |||||||||||||||
Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||||||
| Outstanding at January 1 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Expired/cancelled | ( | ) | ( | ) | ||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding at December 31 | $ | $ | ||||||||||||||
| Exercisable at December 31 | $ | $ | ||||||||||||||
Range of exercise prices | Number
of outstanding stock options | Weighted
average exercise price | Weighted
average contractual life ( years) | |||||||||||
| $ | to $ | |||||||||||||
| $ | to $ | |||||||||||||
| $ | to $ | |||||||||||||
| $ | ||||||||||||||
| 29 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
The range of exercise prices of the outstanding stock options for December 31, 2022 is as follows:
Range of exercise prices | Number of outstanding stock options | Weighted average exercise price | Weighted average contractual life ( years) | |||||||||||
| $ | to $ | |||||||||||||
| $ | to $ | |||||||||||||
| $ | to $ | |||||||||||||
| $ | ||||||||||||||
| 2023 | 2022 | |||||||
| Fair value at grant date (per option) | $ | |||||||
| Volatility (%) | ||||||||
| Forfeiture rate (%) | % | % | ||||||
| Option life (years) | ||||||||
| Risk-free interest rate (%) | ||||||||
Restricted Stock Units
The Company has a restricted stock unit (“RSU”) program that entitles officers, directors and employees to obtain RSUs that are issuable as shares in the Company as they are vested. . The Company granted RSUs in the second quarter of 2023 to directors, officers and employees. The fair value at grant date for the RSUs was $ per RSU which was the closing share price on the date of grant.
RSUs are valued using the fair-value method where compensation cost attributable to all share units granted are measured at fair value at the grant date and expensed over the vesting period with a corresponding increase to contributed surplus. The Company capitalizes a portion of share based compensation that is directly attributable to development activities. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of units that vest.
| December 31 | ||||||||
| 2023 | 2022 | |||||||
| Expensed | $ | $ | ||||||
| Capitalized | $ | $ | ||||||
| 30 |
Kolibri Global Energy Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2023 and 2022
(Audited, expressed in thousands of United States dollars)
16. ASSET RETIREMENT OBLIGATIONS (ARO)
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Balance at January 1 | $ | $ | ||||||
| Additional obligations recognized | ||||||||
| Change in discount rates | ( | ) | ( | ) | ||||
| Accretion | ||||||||
| Balance at December 31 | $ | $ | ||||||
The
Company’s asset retirement obligation results from its ownership interest in oil and natural gas assets including well sites and
gathering systems. The total future site restoration obligation is estimated based on the Company’s net ownership interest in all
wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred
in future years. The Company has estimated the net present value of ARO to be $
17. RELATED PARTIES
Key management personnel includes the Board of Directors and executive officers of the Company. Key management personnel compensation is comprised of the following:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | $ | ||||||
| Share-based payments | ||||||||
| $ | $ | |||||||
The
Company purchased $
18. EXPENSE CLASSIFICATION
The Company’s consolidated statements of operations is prepared primarily by nature of expense with the exception of employee compensation costs, which are included in both production and operating expenses and general and administrative expenses. The compensation costs include employees’ salary and benefit costs.
The following table details the amount of total compensation costs included in production and operating expenses and general and administrative expenses on the statements of operations:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Production and operating expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Total employee compensation costs | $ | $ | ||||||
| 31 |