Peyto Exploration & Development Corp.
Notes to Consolidated Financial Statements
As at December 31, 2012 and 2011
(Amount in $ thousands, except as otherwise noted)
1. Nature of operations
Peyto Exploration & Development Corp. and its wholly owned subsidiary Open Range Energy Corp. ("Open Range"), (collectively "Peyto" or the "Company") are Calgary based oil and natural gas companies. Peyto and Open Range amalgamated on January 1, 2013. Peyto conducts exploration, development and production activities in Canada. Peyto is incorporated and domiciled in the Province of Alberta, Canada. The address of its registered office is 1500, 250 - 2nd Street SW, Calgary, Alberta, Canada, T2P 0C1.
These financial statements were approved and authorized for issuance by the Board of Directors of Peyto on March 5, 2013.
2. Basis of presentation
These consolidated financial statements ("financial statements") for the years ended December 31, 2012 and December 31, 2011 represent the Company's results and financial position in accordance with International Financial Reporting Standards ("IFRS"). The consolidated financial statements include the accounts of Peyto Exploration & Development Corp. and its subsidiary. Subsidiaries are defined as any entities, including unincorporated entities such as partnerships, for which the Company has the power to govern their financial and operating policies to obtain benefits from their activities. Intercompany balances, net earnings and unrealized gains and losses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.
a) Summary of significant accounting policies
The precise determination of many assets and liabilities is dependent upon future events and 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 within reasonable limits of materiality and within the framework of the Company's basis of presentation as disclosed.
b) Significant accounting estimates and judgements
The timely preparation of the financial statements in conformity with IFRS requires that management make estimates and assumptions and use judgment regarding the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts as future confirming events occur.
Amounts recorded for depreciation, depletion and amortization, decommissioning costs and obligations and amounts used for impairment calculations are based on estimates of gross proved plus probable reserves and future costs required to develop those reserves. By their nature, these estimates of reserves, including the estimates of future prices and costs, and the related future cash flows are subject to measurement uncertainty, and the impact in the financial statements of future periods could be material.
The amount of compensation expense accrued for future performance based compensation arrangements are subject to management's best estimate of whether or not the performance criteria will be met and what the ultimate payout will be.
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