Finance expenses. Finance expenses were $3.5 million for the fourth quarter of 2012, compared to $3.9 million in the third quarter of 2012 and $3.4 million in the fourth quarter of 2011. Finance expenses were $14.8 million for the year ended December 31, 2012, compared to $11.9 million in the comparable period of 2011. The increase in finance expenses from 2011 is the result of higher interest and accretion on the $96 million (principal) of convertible debentures issued on December 31, 2010 and June 8, 2011 at 7.5% and 7.25% respectively, partially offset by lower accretion on decommissioning obligations. The average effective interest rate on outstanding bank loans was 4.7% for the year ended December 31, 2012 compared to 5.3% for the comparable period in 2011.
Three months ended Year ended December 31 December 31(thousands of dollars) 2012 2011 2012 2011Interest and accretion on convertible debentures $ 2,277 $ 2,234 $ 9,042 $ 7,065Interest expense on credit facilities and other 1,017 853 4,662 3,247Accretion on decommissioning obligations 189 335 1,068 1,630 ----------------- -----------------Finance expenses $ 3,483 $ 3,422 $ 14,772 $ 11,942---------------------------------------------------------------------------
Decommissioning obligations. In the fourth quarter of 2012, the Company disposed of $9.7 million in decommissioning obligations related to property dispositions, and increased decommissioning obligations by $0.3 million primarily relating to drilling activity in the quarter. Accretion expense was $0.2 million for the fourth quarter of 2012 compared to $0.2 million in the third quarter of 2012 and $0.3 million in the fourth quarter of 2011 and was included in finance expenses. The decommissioning liability at December 31, 2012 decreased by $16.4 million compared to December 31, 2011, primarily due to the disposition of $20.9 million of provisions related to the sale of assets during the year. Provisions incurred were $1.2 million, down from the $4.9 million incurred during 2011 due to lower capital expenditures in 2012. Changes in estimates added $2.7 million ($2011 - $6.4 million) to the provision, and accretion expense added $1.1 million (2011 - $1.6 million).
The risk-free discount rates used by the Company to measure the obligations at December 31, 2012 were between 1.0% and 2.5% (December 31, 2011 - 0.9% to 3.1%) depending on the timelines to reclamation and decreased from the start of the year as a result of changes in the Canadian bond market.
Income taxes. Anderson is not currently taxable and has the following estimated tax pool balances at December 31, 2012. Non-capital losses are estimated assuming certain discretionary claims related to tax pools are made in the current year. Tax pool classifications are estimates as some new wells have not yet had their status as exploratory or development confirmed.
Canadian Exploration Expenses (CEE) $78 millionCanadian Development Expenses (CDE) 116 millionUndepreciated Capital Cost (UCC) 76 millionNon-Capital Losses 153 millionShare issue costs 5 million --------------Total $428 million----------------------------------------------------------------------------
