OMB APPROVAL
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OMB Number: 3235-0288
Expires: May 31, 2014
Estimated average burden
hours per response.. 2645.00
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(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report: _______________
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000-17729
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Commission File Number
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FEC RESOURCES INC.
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(Exact name of registrant as specified in its charter)
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n/a
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(Translation of Registrant’s name into English)
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Canada
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(Jurisdiction of incorporation or organization)
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46 Royal Ridge Rise NW, Calgary, AB, T3G 4V2
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(Address of principal executive offices)
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Carlo Pablo, (403) 290-1676, Fax (403) 770-8060, 46 Royal Ridge Rise NW Calgary, AB, T3G 4V2
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
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Securities registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class
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Name of each exchange on which registered
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n/a
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n/a
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Securities registered pursuant to Section 12(g) of the Exchange Act:
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Title of class
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Common Shares, without par value
Common Stock Purchase Warrants
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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Exchange Act:
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Title of class
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None
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439,143,765 Common Stock
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Yes
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[ ]
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No
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[X]
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Yes
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[ ]
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No
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[X]
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Yes
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[X]
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No
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[ ]
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Yes
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[ ]
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No
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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[X]
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U.S. GAAP
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Other
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International Financial Reporting Standards as issued by the International Accounting Standards Board
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[ X ]
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Item 17
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Item 18
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[ ]
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Yes
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[ ]
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No
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[X]
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1.1
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Certificate of Continuance of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form F-1, File No. 33-81290 (the “Registration”); *
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1.2
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By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registration Statement); *
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4.1
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Consulting Agreement dated March 1, 2004 between the Company and David Robinson *;
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4.2
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Consulting Agreement dated March 1, 2004 between the Company and Barry Stansfield *;
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4.3
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Consulting Agreement dated November 23, 2003 between the Company and Larry Youell *;
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4.4
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Consulting Agreement dated March 1, 2004 between the Company and David Wilson *
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4.5
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Consulting Agreement dated March 1, 2004 between the Company and David *;
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4.6
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Exchange and Release Agreement between Tracer Petroleum Corporation and Transmeridian Exploration, Inc., dated March 16, 2001; *
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4.7
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Share Purchase Agreement dated March 11, 2003, as amended by agreements dated March 21, and April 2, 2003; *
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4.8
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Amendment dated March 21, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by an agreement dated April 2, 2003; *
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4.9
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Amendment dated April 2, 2003 to Share Purchase Agreement dated March 11, 2003 as amended by agreement dated March 21, 2003; *
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11.
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Code of Ethics *;
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12.1
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Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith);
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13.1
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Certification by the Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith);
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101.INS
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XBRL Instance Document (filed herewith);
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101.SCH
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XBRL Taxonomy Extension Schema Document (filed herewith);
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith);
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document (filed herewith);
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith);
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
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FEC Resources Inc.
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("Registrant")
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Date: June 15, 2012
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By:
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/s/Jose Ernesto Villaluna
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Name: Jose Ernesto Villaluna
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Title: President and Chief Executive Officer
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
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Inventories (Forum Energy PLC)
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Dec. 31, 2011
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Forum Energy PLC
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Inventories |
12 INVENTORIES
Inventory write off US$Nil (2010: US$8,000) during the year. Cost of inventory expensed in the year totalled US$Nil (2010: US$8,000).
There is no material difference between the carrying values of inventories and their fair value less costs to sell. |
Contingent Liabilities (Forum Energy PLC)
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12 Months Ended | ||
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Dec. 31, 2011
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Forum Energy PLC
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Contingent Liabilities |
Further to the announcement of 10 May 2011, the Group remains in an arbitration process with Basic Energy Corporation ("BEC") in relation to certain assets acquired from BEC.
Although the Group had signed a conditional settlement agreement with BEC which would have concluded the arbitration process this settlement agreement was not completed because certain third party consents could not be obtained.
Out of the US$12 million of potential additional consideration, the Directors have assessed that US$10 million would be payable (approximately US$9 million net of the US$650,000 payment made, as announced on 10 May 2011).
However, of this total US$10 million, US$6.7 million has been paid up to the end of 2011, and the balance of U$3.3 million is accrued within current liabilities (2010: US$1.2 million).
The Directors consider that a potential additional liability of US$2 million is dependent upon net future field production levels from the acquired assets and will not become payable due to the current and forecast levels of production of these assets. |
Financial Instruments (Forum Energy PLC)
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Dec. 31, 2011
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Forum Energy PLC
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Financial Instruments |
Significant accounting policies Details of the significant accounting policies in respect of financial instruments are disclosed in Note 1 to the financial statements.
Financial risk management The Board seeks to minimise its exposure to financial risk by reviewing and agreeing policies for managing each financial risk and monitoring them on a regular basis. No formal policies have been put in place in order to hedge the Group activities to the exposure to currency risk or interest risk, however as the Group enters commercial production this may be considered. No derivatives or hedges were entered into during the year.
The Group is exposed through its operations to the following financial risks:
The policy for each of the above risks is described in more detail below.
The principal instruments used by the Group, from which financial instruments risk arises are as follow:
The fair value of all the Group financial assets and liabilities is approximate to their carrying values.
Cash flow interest rate risk The Group manage the interest rate risk associated with the Group’s cash assets by ensuring that interest rates are as favourable as possible, through the use of bank treasury deposits, whilst managing the access the Group requires to the funds for working capital purposes.
At the year end the Group had a cash balance of US$2,761,000 (2010: US$2,464,000) which was made up as follows:
Foreign currency risk The Group has six overseas subsidiaries, two of which operate in the Philippines and whose expenses are mainly denominated in US Dollars. The other overseas subsidiaries transactions are also mainly denominated in US Dollars. Foreign exchange risk is inherent in the Group’s activities and is accepted as such. The Group keeps small balances in Philippine Peso to operate the local payroll and office expenses.
At
31 December 2011 and 2010, the currency exposure of the Group was as follows:
The effect of a 10% strengthening of the US Dollar against Sterling at the reporting date on the Sterling denominated balances would, all other variables held constant, have resulted in a loss, decreasing post tax profits by US$6,100 (2010: US$89,800). Conversely the effect of a 10% weakening of the US Dollar against Sterling at the reporting date would, on the same basis, have resulted in a gain increasing post tax profits by US$6,100 (2010: US$89,800).
The effect of a 10% strengthening of the US Dollar against the Philippine Peso at the reporting date on the Philippine Peso denominated balances would, all other variables held constant, have resulted in a gain increasing post tax profits by US$25,400 (2010: US$6,300). Conversely the effect of a 10% weakening of the US Dollar against Philippine Peso at the reporting date would, on the same basis, have resulted in a loss decreasing post tax profits by US$24,400 (2010: US$6,300).
Liquidity risk Liquidity risk arises from the Group’s management of working capital.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due to achieve this, the Group has arranged a US$10 million facility to continue to achieve this policy, as at the end of the year US$6 million has been drawn down to meet the Group’s commitments, the remaining US$4 million is available on request.
It seeks to maintain readily available cash balances to meet expected requirements, all bank balances are currently held on an instant access basis.
The liquidity risk of each Group entity is managed centrally by the Group treasury function. The investment budgets and work plans are set locally and agreed by the Board annually in advance, enabling the Group’s cash requirements to be anticipated.
Credit risk Credit risk is the risk of financial loss to the Group if a customer or a counter-party of a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales.
The Group currently has only two customers which are both Philippine based oil Companies, costs of production are deducted prior to payment of the Groups share, therefore any losses would be limited to the net share of revenues. The two customers which account for 100% of the Company’s revenues are Galoc Production Company and The Philodrill Corporation.
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. The majority of the Group’s deposits are held with two different International banks in the UK and in the Philippines. The Group’s deposits are held with an international bank, in which the UK government holds a majority shareholding, which the Board considers gives a high level of security.
Price risk The Group’s oil and gas sale revenue is subject to energy market price risk. The Group does not intend to hedge the oil price risk in the short-term.
Capital The overall objective of the Directors is to maximise shareholder returns and minimise risks by keeping a reasonable balance between debt and equity.
On a regular basis, the Board of Directors receive financial and operational performance reports that enable continuous management of assets, liabilities and liquidity.
Up to 2010 the Group had minimised risk by being purely equity financed, or by agreeing partnerships for the development of its portfolio of hydrocarbon assets. In 2011 the Group borrowed US$6 million of its US$10 million loan facility (Note 20) to redress the reasonable balance between debt and equity.
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Finance Expenses (Forum Energy PLC)
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Dec. 31, 2011
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Forum Energy PLC
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Finance Expenses |
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Earnings Loss per Share FEC Resources Inc. (FEC Resources Inc.)
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Dec. 31, 2011
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FEC Resources Inc.
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Earnings Loss per Share |
Note 16 Earnings (Loss) Per Share
Weighted Average Number of Common Shares
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Share Capital Forum Energy Plc (Forum Energy PLC)
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Dec. 31, 2011
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Forum Energy PLC
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Share Capital |
All of the shares in issue have equal voting rights.
Share-based payments On 1 August 2005, the Company implemented a Share Option Plan (the Plan) with three sub-plans (the sub-plan). Under the terms of the Plan the Company can issue up to 16% of the outstanding issued stock of the Company.
At
31 December 2011, the following share options were outstanding in respect of the Ordinary Shares:
All of the 2,195,000 outstanding options are exercisable at a price higher than the current share price.
At 31 December 2010, the following share options were outstanding in respect of the Ordinary Shares:
The weighted average exercise price of share options was US$0.48 at 31 December 2011 and US$0.48 at 31 December 2010. The weighted average remaining contractual life of options outstanding at the end of the year was seven years (2010: eight years).
During the year no options were exercised.
As at 31 December 2011, there are 2,195,000 options in issue representing 41% of the total permissible options in issue per the terms of the option plan.
All of the 2,195,000 outstanding options are exercisable at a price higher than the current share price.
Fair value of options
The fair values of awards granted under the Share Option Plan have been calculated using the Black Scholes pricing model that takes into account factors specific to share incentive plans such as the vesting periods of the Plan, the expected dividend yield on the Company’s shares and expected early exercise of share options
Expense arising from share-based payments Based on the above fair values and prior year awards and the Company’s expectations of employee turnover, the 2011 expense arising from equity-settled share options and share awards made to employees was US$Nil (2010: US$Nil). There were no other share-based payment transactions. |
Intangible Assets (Forum Energy PLC)
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Dec. 31, 2011
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Forum Energy PLC
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Intangible Assets |
The unevaluated oil, gas and mining costs relate to the acquisition of the Group’s assets in the Philippines.
The net book value of assets included within intangible fixed assets are as follows: SC40 – US$29,024,000 (2010: US$28,689,000) SC72 – US$21,474,000 (2010: US$13,720,000) Others – US$232,000 (2010: US$221,000).
The Group have considered the intangible assets for indications of impairment and have concluded that the recoverable amount of assets is considered higher than the current book values therefore, an impairment provision is not required |
Related Party Transactions (Forum Energy PLC)
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12 Months Ended | ||
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Dec. 31, 2011
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Forum Energy PLC
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Related Party Transactions |
During the year the following related party transactions occurred within the Group:
Philex Mining Corporation is the majority shareholder and ultimate controlling party of the Group.
Forum Philippines Holdings Ltd, a wholly-owned subsidiary of the Company, entered into a US$10 million Facility Agreement (“the Facility”) with Philex Mining Corporation on 24 November 2010.
The Facility will be available for a three year period from the 24 November 2010 and funds can be borrowed at an interest rate of US LIBOR + 4.5%. During 2011 US$6 million was drawdown to enable the Company to fund its 70% share of a first sub-phase work programme over Service Contract 72 (“SC72”) which has now been completed. Obligations arising from funds drawn under this Facility are not convertible into the Company’s or Forum Philippines’ Ordinary Shares.
Amounts due to Philex Mining Corporation in respect of this facility agreement as at 31 December 2011 amounted to US$6,000,000 (2010: US$Nil). Arrangement fees paid to Philex Mining Corporation during the year for the facility were US$Nil (2010: US$200,000). Interest charged for use of the facility during the year was US$261,952 (2010: US$Nil). |
Statement of Changes in Equity - Forum Energy Plc (Forum Energy PLC, USD $)
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Share Capital
USD ($)
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Share Premium $000
USD ($)
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Share Option Reserve $000
USD ($)
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Deficit
USD ($)
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Total
USD ($)
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Noncontrolling Interest
USD ($)
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Beginning balance, amount at Dec. 31, 2009 | $ 5,941 | $ 50,869 | $ 493 | $ (14,326) | $ 42,977 | $ 1,454 |
ComprehensiveIncomeNetOfTax | (438) | (438) | (120) | |||
Transfer to retained deficit | (55) | 55 | ||||
Issue of shares, net issuance costs | 41 | 95 | 136 | |||
Ending balance, amount at Dec. 31, 2010 | 5,982 | 50,964 | 438 | (14,709) | 42,675 | 1,334 |
Beginning balance, amount at Dec. 31, 2010 | ||||||
ComprehensiveIncomeNetOfTax | 3,457 | 3,457 | (37) | |||
Ending balance, amount at Dec. 31, 2011 | $ 5,982 | $ 50,964 | $ 438 | $ (11,252) | $ 46,132 | $ 1,297 |