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The fair value of derivative contracts at December 31, 2012 would have been impacted as follows had the oil prices used to estimate the fair value changed by:
Effect of an Effect of a increase in decrease in price on price on after-tax after-tax earnings earningsCanadian $1.00 per barrel change in the oil prices $ (273) $ 273----------------------------------------------------------------------------
In July 2012, the Company entered into physical sales contracts to sell 7,000 GJ per day of natural gas between August 1, 2012 and September 30, 2012 at a weighted average AECO price of $2.45 per GJ. The Company realized $0.1 million of gains associated with these contracts.
(e) Capital management. Anderson's capital management objective is to maintain a flexible capital structure that optimizes the cost of capital and maintains investor, creditor and market confidence while sustaining the 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 petroleum and natural gas assets. The Company's capital structure includes shareholders' equity of $133.0 million, bank loans of $48.1 million, convertible debentures with a face value of $96.0 million and the cash working capital deficiency of $16.4 million, which excludes the current portion of unrealized losses on derivative contracts. In order to maintain or adjust the capital structure, the Company may from time to time issue shares, seek additional debt financing and adjust its capital spending to manage current and projected debt levels.
Consistent with other companies in the oil and gas sector, Anderson monitors capital based on the ratio of total debt to funds from operations. This ratio is calculated by dividing total debt at the end of the period (comprised of the cash working capital deficiency, the liability component of convertible debentures and outstanding bank loans) by either the annualized current quarter funds from operations or the twelve-month trailing funds from operations (cash flow from operating activities before changes in non-cash working capital including decommissioning expenditures). This ratio may increase at certain times as a result of acquisitions, the timing of capital expenditures and market conditions. 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 crude oil and natural gas prices, capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. Funds from operations in the quarter, annualized current quarter funds from operations, twelve-month trailing funds from operations and total net debt to funds from operations are not defined by IFRS and therefore are referred to as additional GAAP measures.
December December 31, 2012 31, 2011Bank loans $ 48,094 $ 88,682Current liabilities(1) 28,107 60,573Current assets(1) (11,670) (16,599)----------------------------------------------------------------------------Net debt before convertible debentures $ 64,531 $ 132,656Convertible debentures (liability component) 86,753 84,796---------------------------------------------------------------------------Total net debt $ 151,284 $ 217,452Cash from operating activities in the quarter $ 6,976 $ 16,462Decommissioning expenditures in the quarter 114 146Changes in non-cash working capital in the quarter (1,396) 389----------------------------------------------------------------------------Funds from operations in the quarter $ 5,694 $ 16,997Annualized current quarter funds from operations $ 22,776 $ 67,988Twelve-month trailing funds from operations $ 29,641 $ 54,464----------------------------------------------------------------------------Net debt before convertible debentures to funds from operations - Annualized current quarter funds from operations 2.8 2.0 - Twelve-month trailing funds from operations 2.2 2.4Total net debt to funds from operations - Annualized current quarter funds from operations 6.6 3.2 - Twelve-month trailing funds from operations 5.1 4.0----------------------------------------------------------------------------
