Niko Reports Results for the Quarter Ended December 31, 2012

Niko Reports Results for the Quarter Ended December 31, 2012 
CALGARY, ALBERTA -- (Marketwire) -- 02/14/13 -- Niko Resources Ltd.
(TSX:NKO) ("Niko" or the "Company") is pleased to report its
financial and operating results, including consolidated financial
statements and notes thereto, as well as its managements' discussion
and analysis, for the three and nine month periods ended December 31,
2012. The operating results are effective February 13, 2013. All
amounts are in U.S. dollars unless otherwise indicated and all
amounts are reported using International Financial Reporting
Standards unless otherwise indicated. 
PRESIDENT'S MESSAGE TO THE SHAREHOLDERS 
In the third quarter of fiscal 2013, the Company launched its
multi-year deepwater exploration drilling program in Indonesia and
repaid its Cdn$310 million convertible debentures due December 2012,
primarily using the net proceeds from successful offerings of common
shares and convertible notes. The business environment in India
appears to have improved significantly as evidenced by the release of
a government-appointed committee's report on domestic gas pricing and
the restart of planned development and exploration activities for the
D6 Block in India.  
In December 2012, the Rangarajan Committee provided its report to t
he
Government of India that included a recommendation on a pricing
mechanism for natural gas produced in India and this recommendation
is currently being reviewed by the Government for approval. Based on
current inputs into the pricing formula, the price for natural gas
sales from the Company's assets in India would increase to
approximately $8 - $8.50/MMBtu, compared to $4.20/MMBtu for current
natural gas sales from the D6 Block. The field development plan for
an additional development area in the D6 Block was submitted in
January 2013 and the plan for a development in the NEC-25 Block is to
be submitted by March 2013. With field development plans submitted
and increased clarity on future gas prices for the developments, the
Company expects to book a substantial portion of its approximately
600 bcf of estimated contingent resources as reserves, effective
March 31, 2013.  
The operational efficiency of Niko's drilling team in Indonesia has
continued to be outstanding, with the first two wells in the
multi-year program drilled safely, significantly under budget and
much faster than anticipated. Changes made by Niko for the Ocean
Monarch rig have resulted in significant reductions in time and costs
for wells drilled in this program. These improvements and the
Company's portfolio approach across its extensive portfolio of
exploration prospects in its significant acreage position in
Indonesia, will allow the Company to benefit from economies of scale,
increased flexibility to move between drilling locations at lower
cost, and increased statistical likelihood of success. 
The Company's planned capital spending is flexible and is focused on
development activities in India and exploration activities in
Indonesia and Trinidad. The Company is currently in negotiations with
various third parties regarding farm-outs, non-core asset
dispositions and other arrangements, and the Company is confident
that the combination of ongoing funds from operations from its
producing properties and the proceeds it expects to receive from some
or all of the farm-outs, asset dispositions and other arrangements
that the Company has been working on will provide appropriate funds
for the Company's capital spending plans.  
Edward S. Sampson - President and Chief Executive Officer, Niko
Resources Ltd. 
REVIEW OF OPERATIONS AND GUIDANCE 
Sales Volumes 


 
----------------------------------------------------------------------------
                              Three months ended Dec   Nine months ended Dec
                                                 31,                     31,
(MMcfe/d)                           2012        2011        2012        2011
----------------------------------------------------------------------------
D6 Block, India                       88         150         105         167
Block 9, Bangladesh                   51          60          57          60
Other(1)                               5           8           7           9
----------------------------------------------------------------------------
  Total(2)                           145         219         169         235
----------------------------------------------------------------------------
(1)Other includes Hazira and Surat in India, and Canada.                    
(2)Figures may not add up due to rounding.                                  

 
Total sales volumes for the third quarter averaged 145 MMcfe/d
compared to 173 MMcfe/d for the second quarter of fiscal 2013,
primarily due to anticipated natural declines and scheduled
maintenance in the D6 Block in India and temporary curtailment of
production from one well in Block 9 in Bangladesh. 
Sales volumes for the fourth quarter of fiscal 2013 are forecast to
be approximately 130 MMcfe/d. For fiscal 2014, the Company is
currently working with its partners to finalize workover and
development plans for the Dhirubhai 1 and 3 and MA fields in the D6
Block in India and the Bangora field in Block 9 in Bangladesh,
respectively, and will provide volume guidance once these plans have
been finalized.  
Funds from Operations 


 
----------------------------------------------------------------------------
                              Three months ended Dec   Nine months ended 
Dec
                                                 31,                     31,
(millions of U.S. dollars)          2012        2011        2012        2011
----------------------------------------------------------------------------
Funds from operations                 27          60         102         181
----------------------------------------------------------------------------

 
Funds from operations for the third quarter were $27 million compared
to $34 million for the second quarter of fiscal 2013, primarily due
to the variances in sales volumes described above. 
For the fourth quarter of fiscal 2013, funds from operations are
forecast to be approximately $25 million. Guidance for fiscal 2014
will be provided when workover and development plans for the
Company's producing assets have been finalized. 
Capital Expenditures, net of Proceeds of Farm-outs and Other
Arrangements 


 
----------------------------------------------------------------------------
                                              Three months       Nine months
                                             ended Dec 31,     ended Dec 31,
(millions of U.S. dollars)                            2012              2012
----------------------------------------------------------------------------
Capital expenditures, net of proceeds of                                    
 farm-outs and other arrangements                       78               174
----------------------------------------------------------------------------

 
Capital expenditures, net of proceeds of farm-outs and other
arrangements, totaled $78 million for the third quarter. Spending in
the quarter related primarily to exploration activities in Indonesia
and Trinidad and Tobago. 
For the fourth quarter of fiscal 2013, capital expenditures, net of
proceeds of farm-outs and other arrangements, are forecast to be
approximately $25 million, with spending focused primarily on
exploration activities in Indonesia. The level of capital spending
for fiscal 2014 is flexible and decisions on spending will be made as
the year progresses.  
MANAGEMENT'S DISCUSSION AND ANALYSIS 
The following discussion and analysis is a review of the Company's
financial condition and results of operations as at and for the three
and nine months ended December 31, 2012. The Company's financial
statements are prepared in accordance with International Reporting
Standards ("IFRS") and all amounts are in thousands of United States
dollars unless specified otherwise. This discussion should be read in
conjunction with the audited consolidated financial statements for
the year ended March 31, 2012. This MD&A is effective February 13,
2013. Additional information relating to the Company, including the
Company's Annual Information Form (AIF), is available on SEDAR at
www.sedar.com. 
The term "the quarter" used throughout this Management's Discussion
and Analysis (MD&A) of Financial Condition and Results of Operations
and in all cases refers to the period from October 1, 2012 through
December 31, 2012. The term "prior year's quarter" used throughout
this MD&A for comparative purposes and refers to the period from
October 1, 2011 through December 31, 2011. 
The term "the period" used throughout this Management's Discussion
and Analysis (MD&A) of Financial Condition and Results of Operations
and in all cases refers to the period from April 1, 2012 through
December 31, 2012. The term "prior year's period" used throughout
this MD&A for comparative purposes and refers to the period from
April 1, 2011 through December 31, 2011. 
The Company's fiscal year is the 12-month period ended March 31. The
terms "Fiscal 2012" and "prior year" is used throughout this MD&A and
in all cases refers to the period from April 1, 2011 through March
31, 2012. The terms "Fiscal 2013", "current year" and "the year" are
used throughout the MD&A and in all cases refer to the period from
April 1, 2012 through March 31, 2013. 
Mcfe (thousand cubic feet equivalent) is a measure used throughout
the MD&A. Mcfe is derived by converting oil and condensate to natural
gas in the ratio of 1 bbl: 6 Mcf. Mcfe may be misleading,
particularly if used in isolation. A Mcfe conversion ratio of 1 bbl:
6 Mcf is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value 
equivalency at the wellhead. MMBtu (million British thermal units) is
a measure used in the MD&A. It refers to the energy content of
natural gas (as well as other fuels) and is used for pricing
purposes. One MMBtu is equivalent to 1 Mcfe plus or minus up to 20
percent, depending on the composition and heating value of the
natural gas in question. 
Cautionary Statement Regarding Forward-Looking Statements and
Information 
Certain statements in this MD&A are "forward-looking statements" or
"forward-looking information" within the meaning of applicable
securities laws, herein "forward looking statements" or "forward
looking information". Forward-looking information is frequently
characterized by words such as "plan," "expect," "project," "intend,"
"believe," "anticipate," "estimate," "scheduled," "potential" or
other similar words, or statements that certain events or conditions
"may," "should" or "could" occur. Forward-looking information is
based on the Company's expectations regarding its future growth,
results of operations, production, future capital and other
expenditures (including the amount, nature and sources of funding
thereof), competitive advantages, plans for and results of drilling
activity, environmental matters, business prospects and
opportunities. Such forward-looking information reflects the
Company's current beliefs and assumptions and is based on information
currently available to it. Forward-looking information involves
significant known and unknown risks and uncertainties. A number of
factors could cause actual results to differ materially from the
results discussed in the forward-looking information including risks
associated with the impact of general economic conditions, industry
conditions, governmental regulation, volatility of commodity prices,
currency fluctuations, imprecision of reserve estimates,
environmental risks, competition from other industry participants,
the lack of availability of qualified personnel or management, stock
market volatility and the Company's ability to access sufficient
capital from internal and external sources, the risks discussed under
"Risk Factors" and elsewhere in this report and in the Company's
public disclosure documents, and other factors, many of which are
beyond its control. Although the forward-looking information
contained in this report is based upon assumptions which the Company
believes to be reasonable, it cannot assure investors that actual
results will be consistent with such forward-looking information.
Such forward-looking information is presented as of the date of this
MD&A, and the Company assumes no obligation to update or revise such
information to reflect new events or circumstances, except as
required by law. Because of the risks, uncertainties and assumptions
inherent in forward-looking information, you should not place undue
reliance on this forward-looking information. See also "Risk
Factors." 
Specific forward-looking information contained in this MD&A may
include, among others, statements regarding: 


 
--  the performance characteristics of the Company's oil, NGL and natural
    gas properties; 
--  oil, NGL and natural gas production levels, sales volumes and revenue; 
--  the size of the Company's oil, NGL and natural gas reserves; 
--  projections of market prices and costs; 
--  supply and demand for oil, NGL and natural gas; 
--  the Company's ability to raise capital and to continually add to
    reserves through acquisitions and development; 
--  future funds from operations; 
--  debt and liquidity levels; 
--  future royalty rates; 
--  future depletion, depreciation and accretion rates; 
--  treatment under governmental regulatory regimes and tax laws; 
--  work commitments and capital expenditure programs; 
--  the Company's future development and exploration activities and the
    timing of these activities; 
--  the Company's future ability to satisfy certain contractual obligations;
--  future economic conditions, including future interest rates;
 
--  the impact of governmental controls, regulations and applicable royalty
    rates on the Company's operations; 
--  the completion of the Offering and uses of proceeds to be received from
    the Offering; 
--  the Company's expectations regarding the development and production
    potential of its properties; 
--  the Company's expectations regarding the costs for development
    activities; 
--  the resolution of various legal claims raised against the Company; 
--  the potential for asset impairment and recoverable amounts of such
    assets; and 
--  changes to accounting estimates and accounting policies. 

 
The forward-looking statements contained in this MD&A are based on
certain key expectations and assumptions made by us, including
expectations and assumptions relating to prevailing commodity prices
and exchange rates, applicable royalty rates and tax laws, future
well production rates, the performance of existing wells, the success
of drilling new wells, the availability of capital to undertake
planned activities and the availability and cost of labor and
services. Although the Company believes that the expectations
reflected in the forward-looking statements in this MD&A are
reasonable, it can give no assurance that such expectations will
prove to be correct. Since forward-looking statements address future
events and conditions, by their very nature they involve inherent
risks 
and uncertainties. Actual results may differ materially from
those currently anticipated due to a number of factors and risks.
These include, but are not limited to, the risks associated with the
oil and natural gas industry in general, such as operational risks in
development, exploration and production, delays or changes in plans
with respect to exploration or development projects or capital
expenditures, the uncertainty of estimates and projections relating
to production rates, costs and expenses, commodity price and exchange
rate fluctuations, marketing and transportation, environmental risks,
competition, the ability to access sufficient capital from internal
and external sources and changes in tax, royalty and environmental
legislation, as well as the other risk factors identified under "Risk
Factors" herein. Statements relating to "reserves" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated, and can be
profitably produced in the future. You are cautioned that the
foregoing list of factors and risks is not exhaustive. 
The Company prepares production forecasts taking into account
historical and current production, and actual and planned events that
are expected to increase or decrease production and production levels
indicated in its reserve reports. 
The Company prepares capital spending forecasts based on internal
budgets for operated properties, budgets prepared by the Company's
joint venture partners, when available, for non-operated properties,
field development plans and actual and planned events that are
expected to affect the timing or amount of capital spending. 
The Company prepares operating expense forecasts based on historical
and current levels of expenses and actual and planned events that are
expected to increase or decrease production and/or the associated
expenses. 
The Company discloses the nature and timing of expected future events
based on budgets, plans, intentions and expected future events for
operated properties. The nature and timing of expected future events
for non-operated properties are based on budgets and other
communications received from joint venture partners. 
The Company updates forward-looking information related to
operations, production and capital spending on a quarterly basis when
the change is material and update reserve estimates on an annual
basis. See "Risk Factors" for discussion of uncertainties and risks
that may cause actual events to differ from forward-looking
information provided in this report. The information contained in
this report, including the information provided under the heading
"Risk Factors," identifies additional factors that could affect the
Company's operating results and performance. The Company urges you to
carefully consider those factors and the other information contained
in this report. 
The forward-looking statements contained in this report are made as
of the date hereof and, unless so required by applicable law. The
Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements contained
in this report are expressly qualified by this cautionary statement. 
Non-IFRS Measures 
The selected financial information presented throughout this MD&A is
prepared in accordance with IFRS, except for "funds from operations",
"operating netback", "funds from operations netback", "earnings
netback", "segment profit" and "working capital". These non-IFRS
financial measures, which have been derived from financial statements
and applied on a consistent basis, are used by management as measures
of performance of the Company. These non-IFRS measures should not be
viewed as substitutes for measures of financial performance presented
in accordance with IFRS or as a measure of a company's profitability
or liquidity. These non-IFRS measures do not have any standardized
meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other companies. 
The Company examined funds from operations to assess past performance
and to help determine its ability to fund future capital projects and
investments. Funds from operations is calculated as cash flows from
operating activities prior to the change in operating non-cash
working capital, the change in long-term accounts receivable and
exploration and evaluation costs expensed to the statement of
comprehensive income.  
The Company examined operating netback, funds from operations
netback, earnings netback and segment profit to evaluate past
performance by segment and overall. 


 
--  Operating netback is calculated as oil and natural gas revenues less
    royalties, profit petroleum expenses and operating expenses for a given
    reporting period, per thousand cubic feet equivalent (Mcfe) of
    production for the same period, and is a measure of the before-tax cash
    margin for every Mcfe sold. 
--  Funds from operations netback is calculated as the funds from operations
    per Mcfe and represents the cash margin for every Mcfe sold. Earnings
    netback is calculated as net income per Mcfe and represents net income
    for every Mcfe sold. 
--  Segment profit is defined as oil and natural gas revenues less
    royalties, profit petroleum expenses, production and operating expenses,
    depletion expense, exploration and evaluation expense and current and
    deferred income taxes related to each business segment. 
--  The Company defines working capital as current assets less current
    liabilities and uses working capital as a measure of the Company's
    ability to fulfill obligations with current assets. 

 
OVERALL PERFORMANCE 
Funds from Operations 


 
----------------------------------------------------------------------------
                                   Three months ended     Nine months ended 
                                              Dec 31,               Dec 31, 
(thousands of U.S. dollars)           2012       2011       2012       2011 
----------------------------------------------------------------------------
Oil and natural gas revenue         46,515     74,789    159,694    249,877 
Other income                             -      6,453        311      6,453 
Production and operating                                                    
 expenses                           (7,846)    (9,632)   (25,419)   (27,720)
General and administrative                                                  
 expenses                             (668)    (1,529)    (4,990)    (5,544)
Net finance expense                 (6,938)    (3,957)   (19,102)   (15,346)
Realized foreign exchange loss      (1,515)    (1,035)    (3,997)    (4,403)
Current income tax recovery                                                 
 (expense)                            (792)     1,241      1,300     (3,048)
Minimum alternate tax expense       (1,839)    (6,221)    (6,249)   (19,019)
----------------------------------------------------------------------------
Funds from operations (1)           26,917     60,109    101,548    181,250 
----------------------------------------------------------------------------
 (1) Funds from operations is a non-IFRS measure as defined under "Non-IFRS
     measures" in this MD&A.                                               

 
Oil and natural gas revenue during the three months ended December
31, 2012 decreased $28 million compared to the prior year's quarter.
Oil and natural gas revenue during the nine months ended December 31,
2012 decreased $90 million compared to the prior year's period. These
decreases were primarily due to lower natural gas and crude oil sales
from the D6 Block along with an adjustment to profit petroleum
expense at the Hazira Field recorded in the first quarter of fiscal
2013. 
Sales volumes from the D6 Block were 88 MMcfe/d and 104 MMcfe/d in
the quarter and year-to-date period, respectively compared to 151
MMcfe/d and 167 MMcfe/d in the prior year's quarter and year-to-date
period, respectively. The Company expects decline in production from
the D6 Block to continue unless incremental production volume is
added from new fields in the D6 Block.  
An additional $6 million of profit petroleum expense for the Hazira
Field reduced oil and natural gas revenue in the first quarter of
fiscal 2013. The adjustment to profit petroleum expense was the
result of a court ruling finding that the 36-inch natural gas sales 
pipeline that Niko and GSPC constructed to connect the Hazira Field
to the local industrial area was not eligible for cost recovery.
There was a current income tax recovery of $2 million as a result of
this adjustment to profit petroleum expense, which is deductible for
tax purposes. 
Other income in prior year's quarter and period include proceeds from
the farm outs in excess of the recorded cost. 
Net finance expense reflects the impacts of repayment of Cdn$310
million of 5% convertible debentures and issue of Cdn$115 million of
7% senior secured notes in December 2012, the impact of borrowings
under the Company's credit facility, and costs related to pursuing
financing options. 
The Indian rupee weakened against the US dollar during the quarter
and year to date. As a result, there was a realized foreign exchange
loss during the quarter due to revaluing Indian rupee based accounts
receivables to US dollars, which were partly offset by gains arising
due to revaluing Indian rupee based accounts payable to US dollars.  
Minimum alternate tax expense is calculated on accounting income from
the D6 Block. Higher depletion rates reduced accounting income and
minimum alternate tax expense. 
Net Income (Loss) 


 
----------------------------------------------------------------------------
                                     Three months ended   Nine months ended 
                                                Dec 31,             Dec 31, 
(thousands of U.S. dollars)              2012      2011      2012      2011 
----------------------------------------------------------------------------
Funds from operations (non-IFRS                                             
 measure)                              27,917    60,109   101,548   181,250 
Production and operating expenses        (353)     (484)     (991)   (1,501)
Depletion and depreciation expense    (30,979)  (27,055) (112,597)  (86,018)
Exploration and evaluation expense    (61,933)  (57,340) (151,232) (116,610)
Asset impairment                      (28,911)     (143)  (67,830)      (74)
Gain / (loss) on short-term                                                 
 investments                             (282)    2,384      (558)   (6,184)
Share-based compensation expense       (1,109)   (5,161)   (8,011)  (17,865)
Finance expense                        (2,531)   (2,076)   (6,691)   (5,826)
Unrealized foreign exchange gain                                            
 (loss)                                   (87)   (3,752)    1,427    (7,627)
Deferred income tax recovery                                                
 (expense)                              5,559    (6,887)   30,531    (7,071)
----------------------------------------------------------------------------
                                      (93,709)  (40,405) (214,404)  (67,526)
----------------------------------------------------------------------------
Change in accounting estimate -                                             
 deferred taxes                             -         -         -   (57,865)
Share-based compensation - impact of                                        
 option cancellation                        -         -         -   (13,913)
----------------------------------------------------------------------------
Net loss                              (93,709)  (40,405) (214,404) (139,304)
----------------------------------------------------------------------------

 
The decrease in funds from operations is described above. Other items
affecting net loss are described below. 
Depletion and depreciation expense for the three and nine months
ended December 31, 2012 increased from the prior periods primarily as
a result of higher depletion rates for the D6 Block in India
resulting from the revision to the reserve volumes and future costs
included in the March 31, 2012 reserve report, partially offset by
the impact of lower production. 
Exploration and evaluation expense for the nine months ended December
31, 2012 includes 
costs associated with unsuccessful exploration
wells in Indonesia and Trinidad, including wells in the Lhokseumawe
block in Indonesia and Block 2(ab) in Trinidad, and directly expensed
costs of seismic and other exploration projects, payments that are
specified in various production sharing contracts ("PSCs"), branch
office costs for all exploration properties, and new venture
activities. 
In the current quarter, the Company recognized asset impairments for
the Lhokseumawe block in Indonesia and Block 2(ab) in Trinidad. In
the first quarter of fiscal 2013, the Company recognized an asset
impairment of $39 million when it reassessed the recoverable amount
of the Qara Dagh Block exploration and evaluation asset in Kurdistan.
In November 2012, the company signed an agreement to relinquish its
interest in the Qara Dagh block in exchange for proceeds equal to the
carrying amount of the asset. 
The loss on short term investments is a result of mark to market
valuation of these investments.  
Share-based compensation expense for the quarter and year-to-date
decreased by $4 million and $24 million respectively, as a result of
a decrease in the fair value per stock option granted as a result of
lower stock price during the quarter as compared to the prior year's
quarter and period and the reversal of share-based compensation
expense due to forfeitures of stock options.  
The Indian rupee weakened against the US dollar during the quarter
and year to date. As a result, there was a small unrealized foreign
exchange loss during the quarter mainly because the loss arising due
to revaluing Indian rupee based income tax receivable was offset by
the gains arising due to revaluing Indian rupee based income tax
payable.  
There was a deferred tax recovery for the quarter of $6 million
compared to a deferred tax expense in the prior year's quarter of $7
million. The primary reason for the change is a deferred tax recovery
relating to the issuance of convertible notes in December 2012. The
year-to-date deferred tax recovery was also a result of a reduction
in deferred tax liabilities resulting from a reduction in exploration
and evaluation assets related to proceeds from a farm out and from a
former partner in exchange for assuming the partner's obligation for
future drilling commitments. 
In the prior year to date period, the change in accounting estimate
is related to deferred income tax as a result of estimating the
amount of taxable temporary differences reversing during the tax
holiday period. 
Capital Expenditures, net of Proceeds of Farm-outs and Other
Arrangements 
The following table sets forth the capital additions and exploration
and evaluation costs expensed directly to income, net of proceeds of
farm-outs and other arrangements, for the nine months ended December
31, 2012. 


 
----------------------------------------------------------------------------
                     Nine months ended December 31, 2012                    
----------------------------------------------------------------------------
                                                                            
              Additions               Directly             Proceeds         
                     to               expensed                 from         
                explor-                explor-  Additions      farm         
                  ation  Additions       ation         to      outs         
                    and    related         and  property,       and         
(thousands   evaluation         to  evaluation  plant and     other         
 of U.S.         assets     future       costs  equipment  arrange-         
 dollars)        (1)(2)   drilling         (1)        (1)    
 ments    Total
----------------------------------------------------------------------------
Indonesia        86,424     25,160      20,552      4,234  (45,203)   91,167
Trinidad         34,175     11,042      21,137      2,400         -   68,754
All other           568          -      11,253      2,077         -   13,898
----------------------------------------------------------------------------
Total           121,167     36,202      52,942      8,711  (45,203)  173,819
----------------------------------------------------------------------------
(1)  Share-based compensation and other non-cash items are excluded.        
(2)  Includes additions in the year that were subsequently written off.     

 
Indonesia 
Additions to exploration and evaluation assets for Indonesia for the
nine months ended December 31, 2012 include costs related to three
wells in the Lhokseumawe block, one well in the North Ganal block and
one well in the Kofiau block, along with acquisition costs of the
Lhokseumawe block. The additions to future drilling in Indonesia
relate to the costs of drilling inventory and other activities
incurred to prepare for the current drilling campaign. These costs
will be allocated when wells are drilled. Exploration and evaluation
costs expensed directly to income include costs related to seismic
and other exploration projects and branch office costs. In the second
quarter of fiscal 2013, the Company recorded proceeds of a farm-out
of $9 million and received $36 million from a former partner in
exchange for assuming the partner's obligation for future drilling
commitments.  
Trinidad and Tobago 
Additions to exploration and evaluation assets for Trinidad and
Tobago for the nine months ended December 31, 2012 include costs
related to two wells drilled in Block 2(ab). Exploration and
evaluation costs expensed directly to income include costs related to
seismic and other exploration projects, payments that are specified
in various PSCs, and branch office costs. 
BACKGROUND ON PROPERTIES 
The Company's diversified portfolio of producing, development and
exploration assets is described below. 
Producing Assets 
The Company's principal producing natural gas and crude oil assets
are in the D6 Block in India and in Block 9 in Bangladesh. 
D6 Block, India 
The Company entered into the PSC for the D6 Block in India in 2000
and has a 10 percent working interest, with Reliance Industries
Limited ("Reliance"), the operator, holding a 60 percent interest and
BP holding the remaining 30 percent interest. The D6 Block is 7,645
square kilometers lying approximately 20 kilometers offshore of the
east coast of India. 
Successful exploration programs in the D6 Block led to the
discoveries of the Dhirubhai 1 and 3 natural gas fields in 2002 and
the MA crude oil and natural gas field in 2006. 
Production from the crude oil discovery in the MA field commenced in
September 2008 and commercial production commenced in May 2009. Six
wells are tied into a floating production storage offloading vessel
("FPSO"), which stores the crude oil until it is sold on the spot
market at a price based on the Bonny Light reference price and
adjusted for quality, and four of these wells are currently on
production. The Company expects to drill an additional gas
development well and convert the two suspended oil wells into gas
producing wells to accelerate the production of the reservoir's gas
reserves. 
Field development of the Dhirubhai 1 and 3 fields included the
drilling and tie-in of 18 wells, construction of an offshore platform
and onshore gas plant facilities. Production from the Dhirubhai 1 and
3 natural gas discoveries commenced in April 2009 and commercial
production commenced in May 2009. The natural gas produced from
offshore is being received at an onshore facility at Gadimoga and is
sold at the inlet to the East-West Pipeline owned by Reliance Gas
Transportation Infrastructure Limited. 
Production from the Dhirubhai 1 and 3 fields peaked in March 2010 and
has decreased since then, primarily due to natural declines of the
fields and greater than anticipated water production. Four additional
wells have been drilled in the post-production phase of drilling.
Based on the information obtained from three wells drilled within the
main channel fairway, the Company has determined that it is not
economic to tie-in any of these three wells at the present time. The
fourth well was drilled outside of the main channel fairway and did
not encounter economic quantities of natural gas. Eight of the
original 18 wells are currently shut-in and several others are
choked, primarily due to current constraints in water handling
capacity. Reliance and the joint venture partners are evaluating
workover scenarios to bring some of the shut-in wells back online
during fiscal 2014. Increased water handling capacity and additional
booster compression is expected to be installed over the next two
years to address the decline in reservoir pressure.  
The Company expects production to continue to decline until new field
production is added from identified development opportunities. See
"Background on Properties - Development Opportunities". 
The PSC for the D6 Block requires that natural gas be sold at arm's
length prices, with "arm's length" defined as sales made freely in
the open market between willing and unrelated sellers and buyers, and
that the pricing formula be approved by the government of India
("GOI"). In May 2007, Reliance, on behalf of the joint venture
partners, discovered an arm's length price for the sale of gas on a
transparent basis with a term of three years and, accordingly,
proposed a gas price formula to the GOI. In September 2007, the GOI
approved a pricing formula with some modification to the proposed
formula. As a result of these modifications, the gas price is capped
at $4.20/MMBtu and the formula was declared effective for a period of
five years rather than the three years proposed by Reliance. The
Company has signed numerous gas sales contracts with customers in the
fertilizer, power, steel, city gas distribution, liquefied petroleum
gas market and pipeline transportation industries, and all of these
contracts expire on March 31, 2014. In June 2012, Reliance submitted
to the GOI for approval a proposal for a new crude oil-linked pricing
formula to be used in new sales contracts for the period commencing
April 1, 2014. The proposed formula by Reliance was based on the
pricing formula und
er a contract for long-term import of LNG into
India and was universally accepted by arm's length buyers who bid in
large numbers in an open price discovery process. In December 2012,
the Rangarajan committee, a special committee appointed by the GOI,
submitted its report to the GOI which included a recommendation on a
domestic natural gas pricing mechanism. The recommended pricing
mechanism is based on the average of the import price for LNG into
India and a volume-weighted average of the prices of gas in North
America, Europe and Japan. Based on current inputs into the pricing
formula, the price for natural gas sales would be approximately $8 -
$8.50/MMBtu. The GOI is currently reviewing the recommended price
formula. 
The production and operating expenses for the D6 Block relate
primarily to the offshore wells and facilities, the onshore gas plant
facilities and the operating fee portion of the lease of the FPSO.
The majority of these expenses are fixed in nature with repairs and
maintenance expenditures incurred as required. 
The Company calculates and remits profit petroleum expense to the GOI
in accordance with the PSC for the D6 Block. The profit petroleum
calculation considers capital, operating and other expenditures made
by Reliance on behalf of the joint venture partners. Because there
are unrecovered costs to date, the GOI's share of profit petroleum
has amounted to the minimum level of one percent of gross revenue.
Profit petroleum expense will increase above the minimum level once
past unrecovered costs have been fully recovered. The Company has
included certain costs in the profit petroleum calculations that are
being contested by the GOI and has received notice from the GOI
making allegations in relation to the fulfillment of certain
obligations under the PSC for the D6 Block. Refer to note 14 to the
consolidated financial statements for nine months ended December 31,
2012 for a complete discussion of this contingency. 
The Company currently pays royalty expense of five percent of gross
revenue, increasing to ten percent of gross revenue in May 2016.
Royalty payments are deductible in calculating profit petroleum.  
The Company pays the greater of minimum alternate tax and regular
income taxes for the D6 Block. In the calculation of regular income
taxes, the Company believes it is entitled to a seven-year income tax
holiday commencing from the first year of commercial production and
has claimed the tax holiday in the filing of tax return for fiscal
2012. Minimum alternate tax is the amount of tax payable in respect
of accounting profits. Minimum alternate tax paid can be carried
forward for 10 years and deducted against regular income taxes in
future years.  
Block 9, Bangladesh 
In September 2003, the Company acquired a 60 percent working interest
in the PSC for Block 9. Tullow, the operator, holds a 30 percent
interest and the remaining 10 percent interest is held by BAPEX.
Block 9 covers approximately 1,770 square kilometers of land in the
central area of Bangladesh surrounding the capital city of Dhaka.
Natural gas and condensate production for the Bangora field in Block
9 commenced in May 2006 and gas is transported from four currently
producing wells to a gas plant in the block. 
The Company's share of production from the Bangora field reached a
sustained rate of production of 60 MMcf/d in 2009. The Company
expects to add compression at the gas processing plant in the fourth
quarter of Fiscal 2014 which will allow sustained production levels
through 2015. The Company has signed a GPSA including a price of
$2.34/MMBtu (or $2.32/Mcf), which expires at the earliest of the end
of commercial production, at expiry of the PSC (March 31, 2026) and
25 years after approval of the field development plan (May 15, 2032).
Petrobangla is the sole purchaser of the natural gas production from
this field. The sales delivery point is at facility and thereafter is
the responsibility of Petrobangla and is transported via Trunk
Pipeline. 
The production and operating expenses for Block 9 relate primarily to
the onshore wells and facilities, including a gas plant and pipeline.
The majority of these expenses are fixed in nature with repair and
maintenance expenditures incurred as required. 
The Company calculates and remits profit petroleum expense to the
government of Bangladesh ("GOB") in accordance with the PSC for Block
9. The profit petroleum calculation considers capital, operating and
other expenditures made by the joint venture, which reduces the
profit petroleum expense. To date, the GOB's share of profit
petroleum amounted to the minimum level of 34 percent of gross
revenue based on the profit petroleum provisions of the PSC. The
profit petroleum percentage of gross revenue will increase above the
minimum level of 34 percent of gross revenue once past unrecovered
allowable costs have been fully recovered. 
Under the terms of the Block 9 PSC the Company does not make payment
to the GOB with respect to income tax. 
Development Opportunities 
The Company has undeveloped discoveries in D6 and NEC 25 blocks in
India and in Block 5(c) in Trinidad and Tobago. Based on development
plan submissions, increased clarity on future gas prices and positive
project economics for the developments, the Company expects to book
significant proved and probable reserves for these projects,
effective March 31, 2013. The developments will provide the
opportunity for significant production growth for the Company in the
next three to six years. 
The following is a brief description of these opportunities and their
development plans. 
Additional Areas, D6 Block, India 
The Company's exploration program has identified three additional
areas in the D6 Block for potential future development. In January
2013, the G2 well on the D19 discovery, one of four satellite
discoveries approved for development by the GOI, was successfully
drilled and the development plan for the R-Series area was submitted
to the GOI for approval. The development of these areas is expected
to be completed within four years after the approval of the
development plans. The plans are likely to include the re-entry and
completion of certain existing wells and the drilling of new wells,
all connected with new flow-lines and other facilities into existing
D6 Block infrastructure.  
NEC-25 Block, India 
The Company has a 10 percent working interest in the NEC-25 Block,
with Reliance, the operator, holding a 60 percent interest and BP
holding the remaining 30 percent interest. The remaining contract
area comprises 9,461 square kilometres offshore adjacent to the east
coast of India. Exploration and appraisal drilling has been conducted
on the block and Reliance is working to finalize the development plan
for discovered natural gas fields for submission by March 2013. Based
on work done to date
, the development is expected to include the
re-entry and completion of certain existing wells and the drilling of
new wells, all connected via new flow-lines and other facilities into
a new offshore central processing platform. The produced natural gas
is expected to be transported onshore via a new pipeline.  
Block 5(c), Trinidad and Tobago 
The Company has a 25 percent working interest in Block 5(c) with the
BG Group plc ("BG Group"), the operator, holding the remaining 75
percent working interest in this offshore development area that
covers 241 square kilometres. In October 2011, the BG Group submitted
a development plan to the government of Trinidad and Tobago ("GTT")
for approval. Development of natural gas production from two
discovered fields in the block is expected to require the drilling of
new wells, construction of new flow-lines and other facilities, and
expansion of an existing platform in the adjacent Block 6(b) operated
by the BG Group. 
Exploration Opportunities 
The Company's business strategy is to commit resources to finding,
developing and producing exploration opportunities that have the
potential for a "high impact"' on the Company. Exploration acreage is
generally obtained by committing to acquire and process a specified
amount of seismic and in most cases, drill one or more exploration
wells. The Company generally uses advanced technology including high
resolution multi-beam data collection and analysis, sub-sea coring
and focused 3D seismic to reduce costs associated with selecting
prospects to drill and increase the probability of success. The
Company generally uses the information acquired to farm-out its
blocks to world-class industry partners under terms where the
partners fund their share of sunk costs and carry a disproportionate
share of drilling costs.  
The Company holds interests in contract areas covering 175,142 gross
square kilometers of undeveloped land, primarily in Indonesia and
Trinidad and Tobago. 
Indonesia 
The Company holds interests in 22 offshore exploration blocks in
Indonesia, covering 119,145 square kilometers. The Company has
successfully farmed out interests in several of its blocks and is
working with various parties on additional farm-outs to reduce its
share of future drilling costs. The table below indicates the
operator, the location of, the award date, working interest and the
size of the block, as at December 31, 2012. 


 
----------------------------------------------------------------------------
                                                        Working Area (Square
Block Name         Operator Offshore Area  Award Date  Interest  Kilometres)
----------------------------------------------------------------------------
Lhokseumawe         Zaratex          Aceh   Oct. 2005       30%        4,431
Bone Bay               Niko    Sulawesi S   Nov. 2008      100%        4,969
                                 Makassar                                   
South East Ganal       Niko        Strait   Nov. 2008      100%        4,868
Seram                  Niko      Seram NE   Nov. 2008       55%        4,991
South Matindok         Niko   Sulawesi NE   Nov. 2008      100%        5,182
                                 Makassar                                   
West Sageri            Niko        Strait   Nov. 2008      100%        4,977
Cendrawasih           Exxon      Papua NW    May 2009       45%        4,991
Kofiau                 Niko       Papua W    May 2009     57.5%        5,000
Kumawa                 Niko      Papua SW    May 2009      100%        5,004
East Bula              Niko      Seram NE   Nov. 2009       55%        6,029
Halmahera-Kofiau       Niko       Papua W   Nov. 2009       51%        4,926
                                 Makassar                                   
North Makassar         Niko        Strait   Nov. 2009       30%        1,787
West Papua IV          Niko      Papua SW   Nov. 2009       51%        6,389
Cendrawasih Bay II   Repsol      Papua NW    May 2010       50%        5,073
Cendrawasih Bay                                                             
 III                   Niko      Papua NW    May 2010       50%        4,689
Cendrawasih Bay IV     Niko      Papua NW    May 2010       50%        3,904
Sunda Strait I         Niko  Sunda Strait    May 2010      100%        6,960
Obi                    Niko       Papua W   Nov. 2011       51%        8,057
                                 Makassar                                   
North Ganal             Eni        Strait   Nov. 2011       31%        2,432
Halmahera II        Statoil       Papua W   Dec. 2011       20%        8,215
South East Seram       Niko      Papua SW   Dec. 2011      100%        8,217
Aru                    Niko      Papua SW   July 2012       60%        8,054
----------------------------------------------------------------------------

 
The Company has signed various agreements that, subject to government
approval, will change the working interests in several of its blocks
in Indonesia. 
All of the Indonesian blocks are in their initial three year
exploration period with the exception of the Lhokseumawe block. The
seismic work commitments on the majority of the blocks have been
fulfilled and as at December 31, 2012, the Company had remaining
minimum work commitments to drill a total of ten wells. As at
December 31, 2012, the Company's share of the remaining minimum work
commitments as specified in the PSCs for the exploration period was
$118 million to be spent at various dates through June 2015. The
minimum work commitments are based on the Company's share of the
estimated cost included in the PSCs and represent the amounts the
host government may claim if the Company does not perform the work
commitments. The actual cost of fulfilling work commitments may
materially exceed the amount estimated in the PSCs. The Company has
applied or have plans to apply for extensions where drilling activity
is planned. The Company is required to relinquish a portion of the
exploration acreage after the first exploration period; however, the
Company has received extensions in order to fulfill the well
commitments on certain blocks.  
Trinidad and Tobago 
The Company holds interests in ten contract areas in Trinidad and
Tobago, covering 9,862 square kilometers. The table below indicates
the operator, the location of, the award date, the working interest
and the size of the block. 


 
----------------------------------------------------------------------------
                                                                        Area
                                                         Working     (Square
Exploration Area  Operator         Location Award Date  interest Kilometres)
----------------------------------------------------------------------------
Block 2(ab)           Niko         Offshore  July 2009    35.75%       1,606
Guayaguayare -                                                              
 Shallow Horizon      Niko Onshore/Offshore  July 2009       65%       1,134
Guayaguayare -                                                              
 Deep Horizon         Niko Onshore/Offshore  July 2009       80%       1,190
Central Range -                                                             
 Shallow Horizon     Parex          Onshore Sept. 2008    32.50%         734
Central Range -                                                             
 Deep Horizon        Parex          Onshore Sept. 2008       40%         856
Block 4(b)            Niko         Offshore April 2011      100%         753
NCMA2                 Niko         Offshore April 2011       56%       1,019
NCMA3                 Niko         Offshore April 2011       80%       2,106
Block 5(c)        BG Group         Offshore  July 2005       25%         241
MG Block                                                                    
 (License)            Niko         Offshore  July 2007       70%         223
-----------------------------------------------------
-----------------------

 
The seismic work commitments on the majority of the blocks and the
drilling work commitments on Block 2(ab) have been fulfilled, and as
at December 31, 2012, the Company had remaining minimum work
commitments to drill a total of ten wells. As at December 31, 2012,
the minimum remaining work commitments under the PSCs were $167
million, to be spent at various dates through April 2016. The actual
cost of fulfilling work commitments may materially exceed the amount
estimated in the PSCs. The Company is working with various parties on
farm-outs to reduce its share of future drilling costs.  
Other Properties  
India  
Hazira Field 
Niko is the operator of the Hazira Field and holds a 33.33 percent
interest in this field. The field is located close to several large
industries about 25 kilometers southwest of the city of Surat and
covers an area of approximately 50 square kilometers on and offshore.
In addition, Niko and GSPC have constructed a 36-inch gas sales
pipeline to the local industrial area. The Company has constructed an
offshore platform, an LBDP, a gas plant and an oil facility at the
Hazira Field. The Company has one significant contract for the sale
of natural gas from the Hazira Field at a price of $4.86/Mcf expiring
April 30, 2016, which accounted for five percent of total revenues
during the quarter. The commitment for future physical deliveries of
natural gas under this contract exceeds the expected related future
production from total proved reserves from the Hazira Field estimated
using forecast prices and costs. Refer to note 14(c) to the
consolidated financial statements for nine months ended December 31,
2012 for a complete discussion of this contingency. 
Surat Block 
The Company holds and is the operator of a development area in the 24
square kilometer Surat Block located onshore adjacent to the Hazira
Field in Gujarat State, India. The natural gas production from the
Surat Block commenced in April 2004 and is transferred to the
customer via 6-inch pipeline to the customer's facility. The Company
has a gas plant at Surat Block and all the production from the Surat
Block was sold to one customer with a price of $6.00/Mcf. Sales of
natural gas to this customer accounted for one percent of the
Company's total revenues during the quarter. Production from the
block ceased in November 2012 as the cap on cumulative production in
the approved field development plan was reached. The Company plans to
relinquish the block.  
Madagascar 
In October 2008, the Company farmed in on a PSC for a property
located off the west coast of Madagascar covering an area of
approximately 16,845 square kilometers. The Company will earn a 75
percent participating interest in the Madagascar block and any
extension or renewal thereof or amendment thereto and are the
operator of this block. The Company has completed a multi-beam sea
bed coring and 3,200 square kilometers of 3D seismic on the block.
The Company has work commitments for an exploration well and its
share of the remaining costs pursuant to the PSC is $10 million prior
to September 2015. The actual cost of fulfilling work commitments may
exceed the amount estimated in the PSC. 
Pakistan 
The Company holds and operates the four blocks comprising the
Pakistan Blocks, which are located in the Arabian Sea near the city
of Karachi and cover an area of 9,921 square kilometers. The Company
has acquired 2,142 square kilometers of 3D seismic data on the
blocks. The Company has received a one-year extension to the Phase I
exploration period through seismic exploration activity. 
Kurdistan 
The Company held a 49% working interest in the Qara Dagh Block in
Kurdistan and in November 2012, the Company and its consortium
partners entered into an agreement with the Kurdistan Regional
Government to surrender their collective interests in the block.
Pursuant to the agreement, none of the consortium partners will have
any future obligations or liabilities with regard to the original
production sharing agreement, and the Company expects to recover a
net amount of approximately $15 million.  
SEGMENT PROFIT 
India 


 
----------------------------------------------------------------------------
                                     Three months ended   Nine months ended 
                                                Dec 31,             Dec 31, 
(thousands of U.S. dollars)              2012      2011      2012      2011 
----------------------------------------------------------------------------
Natural gas revenue                    33,158    56,884   118,277   187,242 
Oil and condensate revenue (1)          7,893    13,813    30,351    51,466 
Royalties                              (2,093)   (3,650)   (7,554)  (12,191)
Profit petroleum                         (745)   (1,899)   (9,083)   (5,136)
Production and operating expenses      (5,900)   (7,641)  (19,304)  (22,981)
Depletion and depreciation expense    (27,410)  (23,473) (100,877)  (76,215)
Exploration and evaluation expenses       (87)     (604)     (441)   (1,146)
Current income tax recovery                                                 
 (expense)                               (795)      233     1,304    (4,060)
Minimum alternate tax expense          (1,839)   (6,221)   (6,249)  (19,019)
Deferred income tax reduction            (245)   (6,887)    3,667    (7,071)
Change in accounting estimate -                                             
 deferred taxes                             -         -         -   (57,865)
----------------------------------------------------------------------------
Segment profit (loss)(2)                1,937    20,555    10,091    33,024 
----------------------------------------------------------------------------
Daily natural gas sales (Mcf/d)        88,268   150,701   104,676   165,839 
Daily oil and condensate sales                                              
 (bbls/d) (1)                             818     1,478     1,085     1,728 
Operating costs ($/Mcfe)                 0.63      0.52      0.63      0.47 
Depletion rate ($/Mcfe)                  3.14      1.54      3.25      1.54 
----------------------------------------------------------------------------
(1)  Production that is in inventory has not been included in the revenue or
     cost amounts indicated.                                                
(2)  Segment profit / (loss) is a non-IFRS measure as calculated above.     

 
Segment profit from India includes the results from the Dhirubhai 1
and 3 natural gas fields and the MA crude oil and natural gas field
in the D6 Block, the Hazira crude oil and natural gas field and the
Surat gas field. 
Revenue and Royalties 
The Company's oil and gas revenues for the quarter and year-to-date
decreased from the prior year's periods, primarily due to natural
production declines and greater than anticipated water production at
the D6 Block along with the impact of a six day scheduled maintenance
shutdown in November 2012 of the FPSO servicing the MA field.
Declines are expected to continue unless production volumes are added
from new fields in the D6 Block. 
The decrease in royalties is a result of the decreased revenues
described above. Royalties applicable to production from the D6 Block
are five percent for the first seven years of commercial production
and gas royalties applicable to the Hazira Field and Surat Block are
currently 10 percent of the sales price. 
Profit Petroleum 
Pursuant to the terms of the PSCs the Government of India is entitled
to a sliding scale share in the profits once the Company has
recovered its investment. Profits are defined as revenue less
royalties, operating expenses and capital expenditures. An additional
$6 million of profit petroleum expense for the Hazira Field was
recognized and reduced crude oil and natural gas revenue in the
period. The adjustment, related to crude oil and natural gas revenues
earned in prior years, was the result of a court ruling finding that
the 36-inch natural gas
 pipeline that Niko and GSPC constructed to
connect the Hazira Field to the local industrial area was not
eligible for cost recovery. 
For the D6 Block, the Company is able to use up to 90 percent of
revenue to recover costs. The Government of India was entitled to 10
percent of the profits not used to recover costs during the year.
Profit petroleum expense will continue at this level until the
Company has recovered its costs. 
The Government of India was entitled to 25 percent and 20 percent of
the profits from the Hazira Field and the Surat Block, respectively. 
Production and Operating Expenses 
Operating costs at the D6 Block decreased as less maintenance was
conducted during the period compared to the prior year's period.  
Depletion Expense 
The depletion rate for the D6 Block increased compared to prior
periods as a result of the revision to the reserve volumes and future
costs included in the March 31, 2012 reserve report. The effect of
the increased depletion rate on the depletion expense was partially
offset by decreased production. 
Income Taxes 
There was a current income tax recovery on year to date basis as a
result of the adjustment to profit petroleum described above, which
is deductible for tax purposes. 
Minimum alternate tax expense is calculated on accounting income from
the D6 Block. Higher depletion rates reduced accounting income and
minimum alternate tax expense. 
Contingencies 
The Company has contingencies related to natural gas sales contracts
and the profit petroleum calculation for the Hazira Field and related
to income taxes for the Hazira Field and the Surat Block as at
December 31, 2012. Refer to note 14 to the consolidated financial
statements for nine months ended December 31, 2012 for a complete
discussion of these contingencies. 
Bangladesh 


 
----------------------------------------------------------------------------
                                   Three months ended Nine months ended Dec 
                                              Dec 31,                    31 
(thousands of U.S. dollars)           2012       2011       2012       2011 
----------------------------------------------------------------------------
Natural gas revenue                 10,755     12,453     35,898     36,775 
Condensate revenue                   1,591      1,970      5,375      5,934 
Profit petroleum                    (4,177)    (4,882)   (13,969)   (14,459)
Production and operating                                                    
 expenses                           (2,204)    (2,277)    (6,853)    (5,998)
Depletion and depreciation                                                  
 expense                            (3,215)    (3,267)   (10,724)    (9,190)
Exploration and evaluation                                                  
 expenses                                -       (541)      (180)      (933)
Asset Impairment                         -       (143)         -        (74)
----------------------------------------------------------------------------
Segment profit (loss)(1)             2,750      3,313      9,547     12,055 
----------------------------------------------------------------------------
Daily natural gas sales (Mcf/d)     50,498     58,428     56,352     57,952 
Daily condensate sales (bbls/d)        160        189        179        187 
Operating costs ($/Mcfe)              0.38       0.34       0.40       0.32 
Depletion rate ($/Mcfe)               0.68       0.61       0.68       0.57 
----------------------------------------------------------------------------
 (1) Segment profit is a non-IFRS measure as calculated above.              

 
Revenue, Profit Petroleum, Depletion and Operating Expenses 
The Company's oil and gas revenues for the quarter decreased from the
prior year's quarter, primarily due to the curtailment of production
from one of the three wells in the Bangora field due to operational
issues. Production from this well is expected to be restored in the
first quarter of fiscal 2014. 
Pursuant to the terms of the PSC for Block 9, the Government of
Bangladesh was entitled to 61 percent of profit gas in the year and
prior year, which equates to 34 percent of revenues while the Company
is recovering historical capital costs. Overall, profit petroleum
expense decreased due to decreased revenues from Block 9. 
Production and operating expense increased due to the higher level of
maintenance activity during the period. 
Depletion expense increased on a unit-of-production basis as a result
of the addition of a dew-point control unit. 
Contingencies 
The Company has contingencies related to various claims filed against
it with respect to the Feni property in Bangladesh as at December 31,
2012. Refer to note 14 to the consolidated financial statements for
the nine months ended December 31, 2012 for a complete discussion of
these contingencies. 
Indonesia, Kurdistan and Trinidad and Tobago 


 
----------------------------------------------------------------------------
                                                                            
(thousands of U.S.        Exploration and                       Income tax  
 dollars)                evaluation expense   Asset impairment   recovery   
                       -----------------------------------------------------
                                   Nine months ended December 31,           
                       -----------------------------------------------------
                             2012       2011       2012   2011    2012  2011
----------------------------------------------------------------------------
Indonesia                 (82,208)   (47,575)   (16,281)     -  19,387     -
Trinidad                  (55,633)   (59,641)   (12,630)     -       -     -
Kurdistan                  (2,185)    (2,206)   (38,919)     -       -     -
----------------------------------------------------------------------------
 
----------------------------------------------------------------------
------
                                                                            
(thousands of U.S.            Depreciation                                  
 dollars)                       and other              Segment Profit       
                       -----------------------------------------------------
                                  Nine months ended December 31,            
                       -----------------------------------------------------
                               2012         2011          2012         2011 
----------------------------------------------------------------------------
Indonesia                       163        6,305       (78,939)     (41,270)
Trinidad                        (96)         (61)      (68,359)     (59,702)
Kurdistan                         -          (18)      (41,104)      (2,224)
----------------------------------------------------------------------------

 
Indonesia 
Costs of $58 million related to unsuccessful wells, costs $13 million
relating to seismic and other exploration projects totaling were
incurred for various blocks, $3 million was spent on new ventures, $5
million was incurred to operate the branch office and $3 million for
share based compensation expense. The prior year expense relates
primarily to seismic exploration programs. In the current quarter the
Company recognized an asset impairment of $16 million for the
Lhokseumawe block. In January 2013, the Company gave notice to the
operator to surrender its interest in Lhokseumawe block. 
Trinidad and Tobago 
Costs of $34 million related to unsuccessful wells in Block 2(ab)
were expensed during the nine month period ended December 31, 2012
and the Company recognized an asset impairment of $13 million for
Block 2(ab) in the current quarter. Exploration and evaluation costs
expensed directly to income include $9 million of seismic costs, $8
million payments that are specified in various PSCs, and $3 million
was incurred to operate the branch office. 
Kurdistan 
In the first quarter of fiscal 2013, the Company recognized an asset
impairment of $39 million when it reassessed the recoverable amount
of the Qara Dagh Block exploration and evaluation asset. 
Corporate 


 
----------------------------------------------------------------------------
                                    Three months ended     Nine months ended
                                               Dec 31,               Dec 31,
(thousands of U.S. dollars)            2012       2011       2012       2011
----------------------------------------------------------------------------
Share-based compensation              1,109      5,158      8,011     31,778
Finance expense                       9,636      8,135     26,812     23,876
Foreign exchange loss (gain)          1,602      4,787      2,570     12,030
Loss on short-term investments          282     (2,384)       558      6,184
Deferred tax (recovery)              (7,476)         -     (7,476)         -
----------------------------------------------------------------------------

 
Share-based compensation 
The fair value per stock option granted decreased in the periods due
to decreased stock price in the period. Share-based compensation
expense also decreased during the period due to the reversal of
share-based compensation expense resulting from the forfeiture of
stock options. 
Finance expense 


 
----------------------------------------------------------------------------
                                      Three months ended   Nine months ended
                                                 Dec 31,             Dec 31,
(thousands of U.S. dollars)               2012      2011      2012      2011
----------------------------------------------------------------------------
Interest expense                         5,323     5,330    17,593    16,203
Accretion expense                        2,531     2,077     6,691     5,818
Other                                    1,782       728     2,528     1,855
----------------------------------------------------------------------------
Finance expense                          9,636     8,135    26,812    23,876
----------------------------------------------------------------------------

 
Interest expense includes interest on the Company's finance lease
obligation, interest on borrowings on the Company's credit facility
since March 2012, interest on the 5% Cdn$310 million of convertible
debentures repaid in December 2012, and interest on the 7% Cdn$115
million of convertible notes issued in December 2012. Accretion
expense is on convertible notes, convertible debentures and
decommissioning obligations. The recorded liability for the
convertible notes and formerly for the convertible debenture
increases as time progresses to the maturity date resulting in a
higher accretion expense than in the prior period. Other finance
expenses include costs related to pursuing financing options. 
Foreign Exchange 


 
----------------------------------------------------------------------------
                                      Three months ended   Nine months ended
                                                 Dec 31,             Dec 31,
(thousands of U.S. dollars)               2012      2011     2012       2011
----------------------------------------------------------------------------
Realized foreign exchange loss           1,515     1,035    3,997      4,403
Unrealized foreign exchange loss                                            
 (gain)                                     87     3,752   (1,427)     7,627
----------------------------------------------------------------------------
Total foreign exchange loss              1,602     4,787    2,570     12,030
----------------------------------------------------------------------------

 
The realized foreign exchange losses arise primarily because of the
difference between the Indian rupee and U.S. dollar exchange rate at
the time of recording individual accounts 
receivable and accounts
payable compared to the exchange rate at the time of receipt of funds
to settle recorded accounts receivable and payment to settle recorded
accounts payable. 
The unrealized foreign exchange gain in the year to date period arose
primarily on the revaluing of the Indian-rupee denominated income tax
receivable and site restoration deposit to U.S. dollars and the
weakening of the Indian-rupee versus the U.S. dollar. There was an
unrealized foreign exchange loss during the current quarter as the
Indian-Rupee strengthened slightly versus the U.S. dollar when
comparing the quarterly average for the current quarter to the
quarter ended September 30, 2012. 
There were additional foreign exchange gains in the period on U.S.
dollar cash held by the parent whose functional currency is the
Canadian dollar. An offsetting entry increases the accumulated other
comprehensive income but does not flow through the income statement. 
Short-Term Investments 
The loss on short-term investments for the year was a result of
marking the short-term investments to market value. 
Deferred Tax Recovery 
As a result of the issuance of convertible notes in December 2012,
the Company recognized a deferred tax recovery as an unrecognized
deferred tax asset was recognized to offset the deferred tax
liability associated with the convertible notes. 
Netbacks 
The following tables outline operating, funds from operations and
earnings netbacks (all of which are non-IFRS measures): 


 
----------------------------------------------------------------------------
                          Three months ended         Three months ended     
                              Dec 31, 2012               Dec 31, 2011       
($/Mcfe)                India Bangladesh   Total   India Bangladesh   Total 
----------------------------------------------------------------------------
Oil and natural gas                                                         
 revenue                 4.79       2.61    4.02    4.82       2.63    4.23 
Royalties               (0.24)         -   (0.16)  (0.25)         -   (0.18)
Profit petroleum        (0.09)     (0.88)  (0.37)  (0.13)     (0.89)  (0.34)
Production and                                                              
 operating expense      (0.63)     (0.38)  (0.55)  (0.52)     (0.34)  (0.48)
----------------------------------------------------------------------------
Operating netback        3.83       1.35    2.94    3.92       1.40    3.23 
----------------------------------------------------------------------------
General and                                                                 
 administrative                            (0.05)                     (0.08)
Other income                                   -                       0.33 
Net finance expense                        (0.63)                     (0.22)
Current income tax                                                          
 expense                                   (0.06)                      0.06 
Minimum alternate tax                      (0.14)                     (0.31)
----------------------------------------------------------------------------
Funds from operations                                                       
 netback                                    2.06                       3.01 
----------------------------------------------------------------------------
Share-based operating                                                       
 expense                                   (0.05)                         - 
Depletion and                                                               
 depreciation expense                      (2.33)                     (1.34)
Exploration and                                                             
 evaluation costs                          (4.65)                     (2.84)
Other expenses                             (2.25)                     (0.29)
Gain (loss) on short-                                            
           
 term investment                           (0.02)                      0.12 
Net finance expense                        (0.20)                     (0.32)
Deferred income tax                                                         
 reduction (expense)                        0.42                      (0.34)
----------------------------------------------------------------------------
Earnings netback                           (7.02)                     (2.00)
----------------------------------------------------------------------------

 
Netbacks for India, Bangladesh and in total are calculated by
dividing the revenue and costs for each country and in total by the
total sales volume for each country and in total measured in Mcfe. 


 
----------------------------------------------------------------------------
                           Nine months ended          Nine months ended     
                              Dec 31, 2012               Dec 31, 2011       
($/Mcfe)                India Bangladesh   Total   India Bangladesh   Total 
----------------------------------------------------------------------------
Oil and natural gas                                                         
 revenue                 4.86       2.61    4.10    4.93       2.63    4.35 
Royalties               (0.25)         -   (0.16)  (0.25)         -   (0.19)
Profit petroleum        (0.30)     (0.88)  (0.50)  (0.11)     (0.89)  (0.30)
Production and                                                              
 operating expense      (0.63)     (0.40)  (0.56)  (0.47)     (0.32)  (0.44)
----------------------------------------------------------------------------
Operating netback        3.68       1.33    2.88    4.10       1.42    3.42 
----------------------------------------------------------------------------
General and                                                                 
 administrative                            (0.11)                     (0.09)
Other income                                0.01                       0.10 
Net finance expense                        (0.50)                     (0.28)
Current income tax                                                          
 reduction / (expense)                      0.03                      (0.05)
Minimum alternate tax                      (0.13)                     (0.29)
----------------------------------------------------------------------------
Funds from operations                                                       
 netback                                    2.18                       2.81 
----------------------------------------------------------------------------
Share-based operating                                                       
 expenses                                  (0.02)                         - 
Exploration and                                                             
 evaluation costs                          (3.26)                     (1.80)
Other expenses                             (1.63)                     (0.50)
Loss on short-term                                                          
 investment                                (0.01)                     (0.10)
Deferred income tax                                                         
 reduction (expense)                        0.66                      (0.11)
Change in accounting                                                        
 estimate - deferred                                                        
 taxes                                         -                      (0.89)
Net finance expense                        (0.11)                     (0.23)
Depletion and                                                               
 depreciation expense                      (2.43)                     (1.33)
----------------------------------------------------------------------------
Earnings netback                           (4.62)                     (2.15)
----------------------------------------------------------------------------

 
Netbacks for India, Bangladesh and in total are calculated by
dividing the revenue and costs for each country and in total by the
total sales volume for each country and in total measured in Mcfe. 
RELATED PARTIES 
The Company has a 45 percent interest in a Canadian property that is
operated by a related party, a Company owned by the President and CEO
of the Company. This joint interest originated as a result of the
related party buying the interest of the third-party operator of the
property in 2002. The transactions with the related party are not
significant to operations or consolidated financial statements. The
transactions with the related party are measured at fair value. 
FINANCIAL INSTRUMENTS 
The Company's financial instruments consist of short and long-term
investments, accounts receivable, long-term accounts receivable,
accounts payable and accrued liabilities, borrowings, convertible
notes and convertible debentures. 
The Company is exposed to fluctuations in the value of cash, accounts
receivable, short-term investments, accounts payable and accrued
liabilities due to changes in foreign exchange rates as these
financial instruments are partially or wholly denominated in Canadian
dollars and the local currencies of the countries in which it
operate. The Company manages the risk by converting cash held in
foreign currencies to U.S. dollars as required to fund forecasted
expenditures. The Company is exposed to changes in foreign exchange
rates as the future interest and principal amounts on the convertible
notes are in Canadian dollars. 
The Company is exposed to changes in the market value of the
short-term investments. 
The Company is exposed to credit risk with respect to all of its
financial instruments if a customer or counterparty fails to meet its
contractual obligations. The Company has deposited cash and
restricted cash with reputable financial institutions, for which
management believes the risk of loss to be remote. The Company takes
measures in order to mitigate any risk of loss with respect to the
accounts receivable, which may include obtaining guarantees. 
The Company is exposed to the risk of changes in market prices of
commodities. The Company enters into physical commodity contracts for
the sale of natural gas, which partially mitigates this risk. The
Company does so in the normal course of business by entering into
contracts with fixed natural gas prices. The contracts are not
classified as financial instruments because the Company expects to
deliver all required volumes under the contracts. No amounts are
recognized in the consolidated financial statements related to the
contracts until such time as the associated volumes are delivered.
The Company is exposed to the changes in the Brent crude price as the
average Brent crude price from the preceding year (to a defined
maximum) is a variable in the natural gas price for the current year,
calculated annually, for the D6 Block natural gas contracts. 
The fair values of accounts receivable, accounts payable and accrued
liabilities approximate their carrying values due to their short
periods to maturity. The fair value of the short-term investments is
based on publicly quoted market values.  The fair value of the
long-term investments is based on their historical cost as they are
not traded on publicly quoted markets. 
The fair value of the borrowings approximates its carrying value due
to the nature of the borrowings. Interest expense on the borrowings
of $1 million and $3 million was recorded for the three and nine
months ended December 31, 2012. 
The debt component of the convertible notes has been recorded net of
the fair value of the conversion feature. The fair value of the
conversion feature of the notes included in shareholders' equity at
the date of issue was $31 million ($24 million net of a deferred tax
recovery). The fair value of the conversion feature of the debentures
was determined based on the discounted future payme
nts using a
discount rate of a similar financial instrument without a conversion
feature compared to the fixed rate of interest on the notes. Interest
and financing expense of $5 million and $16 million for the three and
nine months ended December 31, 2012 were recorded for interest
expense and accretion of the discount on the convertible notes and
debentures. 
LIQUIDITY AND CAPITAL RESOURCES  
In January 2012, the Company entered into a three-year facility
agreement for a $225 million revolving credit facility and a $25
million operating facility for general corporate purposes. The
maximum available credit under this agreement is subject to review
based on, among other things, updates to the Company's reserves. In
September, 2012, the syndicate of lenders confirmed a revised
borrowing base amount under the facility to an aggregate of $100
million. The Company understands that the revised borrowing base was
determined assuming that the price for gas sales from the D6 Block in
India would remain unchanged at $4.20 per MMBtu for the life of the
gas reserves. The Government of India is currently reviewing a new
pricing mechanism for domestic gas produced in India that, if
approved, would result in a significant increase in the price for the
D6 Block natural gas sales contracts that expire on March 31, 2014.
When a new price formula is approved, the Company will exercise its
contractual right to have the borrowing base of the facility
reviewed. Further, if contingent resources are converted to reserves,
the Company will exercise its right to request a further borrowing
base review. The Company has borrowed $90 million against this
facility as of December 31, 2012. 
In September 2012, Niko's board of directors decided to suspend the
Company's quarterly dividend in connection with the commencement of
the Company's significant exploration drilling program. The timing
and level of future dividends, if any, will be reviewed periodically
by the board of directors. 
In December 2012, the Company repaid its Cdn$310 million convertible
debentures due December 30, 2012 at par plus accrued interest, using
the net proceeds of $273 million of offerings of common shares and
convertible notes, along with cash on hand and advances under the
Company's credit facility. The Cdn$115 million principal amount of
convertible senior unsecured notes issued in December 2012 mature on
December 31, 2017 and bear interest at a rate of seven percent, with
interest payable semi-annually in arrears on June 30 and December 31
of each year, commencing June 30, 2013. The notes are convertible at
the option of each holder into common shares at a conversion price of
Cdn$11.30 per share. After December 31, 2015, the notes are
redeemable by the Company, in whole or in part from time to time,
provided that the market price of the Company's common shares
(defined as the weighted average trading price of the common shares
for the twenty consecutive trading days ending five trading days
prior to the issue of the notice of redemption) is at least 130% of
the conversion price. The Company has the right to use common shares
to satisfy some or all of its obligations for the notes. 
At December 31, 2012, the Company had unrestricted cash of $44
million and working capital deficit (current assets less current
liabilities) of $19 million.  
For the quarter ended March 31, 2013, funds from operations are
forecast to be approximately $25 million and capital expenditures,
net of proceeds of farm-outs and other arrangements, are forecast to
be approximately $25 million.  
For fiscal 2014, the Company's planned capital spending will be
focused on development activities in India and exploration activities
in Indonesia and Trinidad. The level of capital spending is flexible
with decisions about capital spending to be made throughout the year.
The Company is currently in negotiations with various third parties
regarding farm-outs, non-core asset dispositions and other
arrangements and the Company is confident th
at the combination of
ongoing funds from operations from its producing properties and the
proceeds it expects to receive from some or all of the farm-outs,
asset dispositions and other arrangements that the Company has been
working on will provide appropriate funds for the Company's capital
spending plans.  
The Company has a number of contingencies as at December 31, 2012
that could significantly impact liquidity. Refer to note 14 to the
consolidated financial statements for the nine months ended December
31, 2012 for a complete discussion of these contingencies. 
SUMMARY OF QUARTERLY RESULTS 
The following tables set forth selected financial information, in
thousands of U.S. dollars unless otherwise indicated, for the eight
most recently completed quarters to December 31, 2012: 


 
----------------------------------------------------------------------------
                                  Mar. 31,   June 30,  Sept. 30,   Dec. 31, 
Three months ended                    2012       2012       2012       2012 
----------------------------------------------------------------------------
Oil and natural gas revenue (1)     71,434     55,099     58,080     46,515 
Net income (loss)                 (183,324)   (92,121)   (28,573)   (93,709)
Per share                                                                   
  Basic and diluted($)               (3.55)     (1.78)     (0.55)     (1.64)
                                                                            
----------------------------------------------------------------------------
                                   Mar. 31,  June 30,  Sept. 30,   Dec. 31, 
Three months ended                     2011      2011       2011       2011 
----------------------------------------------------------------------------
Oil and natural gas revenue (1)      94,168    88,277     86,810     74,789 
Net income (loss)                     6,234   (54,983)   (43,916)   (40,405)
Per share                                                                   
  Basic and diluted($)                 0.12     (1.07)     (0.85)     (0.78)
 (1) Oil and natural gas revenue is oil and natural gas sales less royalties
     and profit petroleum expense.                                          

 
Net income in the quarters was affected by:  


 
--  Over the quarters, oil and natural gas revenue from the D6 Block has
    declined due to reservoir performance. 
--  In the quarter ended June 30, 2012, the Company recorded an additional
    $6 million of profit petroleum expense for the Hazira Field, reducing
    oil and natural gas revenue. The adjustment to profit petroleum expense
    was the result of a court ruling finding that the 36-inch natural gas
    sales pipeline that Niko and GSPC constructed to connect the Hazira
    Field to the local industrial area was not eligible for cost recovery. 
--  In the quarter ended March 31, 2011 and again in the quarter ended March
    31, 2012, depletion expense increased as a result of revisions to the
    reserves and estimated future costs to develop the reserves. 
--  In each quarter, the Company expenses a portion of its exploration and
    evaluation costs and the level of activity has varied over the periods. 
--  In the quarter ended March 31, 2012, the Company impaired assets of $133
    million and long term receivables of $23 million, in the quarter ended
    June 30, 2012, the Company impaired assets of $39 million, and in the
    quarter ended December 31, 2012, the Company impaired assets of $29
    million. 
--  In each quarter, gains and losses are recognized based on fluctuations
    in the market prices of the Company's short-term investments that are
    valued at fair value. 
--  In the quarter ended December 31, 2011, there was a $14 million expense
    upon cancellation of stock options to recognize the remainder of the
    expense associated with the options. 
--  In the quarter ended March 31, 2011, there was a $9.7 million fine
    recorded related to the 
Company's guilty plea to one count of bribery
    under the Corruption of Foreign Public Officials Act relating to two
    specific instances that occurred in 2005. 
--  In the quarter ended June 30, 2011, there was a change in accounting
    estimate related to deferred income tax expense. There was a revision in
    the method of estimating the amount of taxable temporary differences
    reversing during the tax holiday period. 
--  In the quarter ended March 31, 2012, there was a deferred income tax
    recovery related to the revision of the reserve estimate, which
    increased the value of the tax holiday for the D6 Block. There were
    deferred income tax recoveries related to spending in Indonesia and
    Trinidad applied against the deferred income tax liabilities recorded
    upon the acquisitions of Voyager Energy Ltd. and Black Gold Energy LLC. 
--  In the quarter ended September 30, 2012, there was a deferred tax
    recovery of $22 million, due to a reduction in exploration and
    evaluation assets related to proceeds from a farm out and from a former
    partner in exchange for assuming the partner's obligation for future
    drilling commitments. 
--  In the quarter ended December 31, 2012, there was a deferred tax
    recovery of $7 million due to the issuance of the convertible notes. 

 
CRITICAL ACCOUNTING ESTIMATES 
The Company makes assumptions in applying certain critical accounting
estimates that are uncertain at the time the accounting estimate is
made and may have a significant effect on the consolidated financial
statements of the Company. 
The critical accounting estimates include oil and natural gas
reserves, depletion, depreciation and amortization expense, asset
impairment, decommissioning obligations, the amount and likelihood of
contingent liabilities and income taxes. The critical accounting
estimates are based on variable inputs including:  


 
--  estimation of recoverable oil and natural gas reserves and future cash
    flows from the reserves; 
--  geological interpretations, exploration activities and success or
    failure, and the Company's plans with respect to the property and
    financial ability to hold the property; 
--  risk-free interest rates; 
--  estimation of future abandonment costs; 
--  facts and circumstances supporting the likelihood and amount of
    contingent liabilities; and 
--  interpretation of income tax laws. 

 
A change in a critical accounting estimate can have a significant
effect on net earnings as a result of their impact on the depletion
rate, decommissioning obligations, asset impairments, losses and
income taxes. A change in a critical accounting estimate can have a
significant effect on the value of property, plant and equipment,
decommissioning obligations and accounts payable. 
For a complete discussion of the critical accounting estimates,
please refer to the MD&A for the Company's fiscal year ended March
31, 2012, available at www.sedar.com. 
ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED 
The International Accounting Standards Board (IASB) has issued IFRS 9
"Financial Instruments" to replace IAS 39 "Financial Instruments:
Recognition and Measurement". The new standard reduces the
classification and measurement categories for financial assets and
liabilities to two categories: amortized cost and fair value through
profit and loss. Under IFRS 9, fair value changes due to credit risk
for liabilities designated at fair value through profit and loss
would generally be recorded in other comprehensive income. The
Company is assessing the impact of the new standard on its
consolidated financial statements. 
In May 2011, the IASB issued or amended a number of standards that
will be effective for annual periods beginning on or after January 1,
2013.  
Three new standards are IFRS 10 "Consolidated Financial Statements",
IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests in
Other Entities". IFRS 10 establishes a single control model that
applies to all entities and will require management to exercise
judgment to determine which entities are controlled and need to be
consolidated by the parent. The Company will continue to consolidate
all of its wholly-owned subsidiaries and are currently assessing the
accounting impact of its investments in other companies. IFRS 11
replaces IAS 31 "Interest in Joint Ventures" and SIC-13
"Jointly-controlled Entities - Non-monetary Contributions by
Venturers". IFRS 11 identifies two forms of joint ventures when there
is joint control: joint operations and joint ventures. Joint
operations are accounted for using proportionate consolidation and
joint ventures are accounted for using the equity method. IFRS 11
focuses on the nature of the rights and obligations associated with
the joint arrangements and the Company is currently evaluating the
effect of this standard on its joint arrangements. IFRS 12 introduces
a number of new disclosures related to consolidated financial
statements and interests in subsidiaries, joint arrangements,
associates and structured entities.  
As a result of the new standards described above, the IASB has
amended IAS 28 "Investments in Associates and Joint Ventures" to
prescribe the accounting for investments in associates and to set out
the requirements for the application of the equity method when
accounting for investments in associates and joint ventures. 
The IASB published IFRS 13 "Fair Value Measurement" which provides a
precise definition of fair value and a single source of fair value
measurement disclosures requirements for use across IFRSs. 
The IASB issued amendments to IAS 1 Presentation of Financial
Statements requiring companies preparing financial statements in
accordance with IFRS to group together items within other
comprehensive income (OCI) that may be reclassified to the profit or
loss section of the income statement. The amendments apply to annual
periods beginning on or after July 1, 2012. 
The IASB reissued IAS 27 "Separate Financial Statements" to focus
solely on accounting and disclosure requirements when an entity
presents separate financial statements that are not consolidated
financial statements. 
The Company is currently assessing the disclosure impact of the
standards listed above on its consolidated financial statements. 
DISCLOSURE CONTROLS AND PROCEDURES 
The Company's Chief Executive Officer and Chief Financial Officer are
responsible for designing disclosure controls and procedures or
causing them to be designed under their supervision and evaluating
the effectiveness of disclosure controls and procedures. The
Company's Chief Executive Officer and Chief Financial Officer oversee
the design and evaluation process and have concluded that the design
and operation of these disclosure controls and procedures were
effective in ensuring material information required to be disclosed
in quarterly filings or other reports filed or submitted under
applicable Canadian securities laws is made known to management on a
timely basis to allow decisions regarding required disclosure.  
INTERNAL CONTROLS OVER FINANCIAL REPORTING 
The Company's Chief Executive Officer and Chief Financial Officer are
responsible for designing internal controls over financial reporting
or causing them to be designed under their supervision and evaluating
the effectiveness of internal controls over financial reporting. The
Company's Chief Executive Officer and Chief Financial Officer have
overseen the design and evaluation of internal controls over
financial reporting and have concluded that the design and operation
of these internal controls over financial reporting were effective in
providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS. 
Because of their inherent limitations, disclosure controls and
procedures and internal controls over financial reporting may not
prevent or detect misstatements, errors or fraud. Control syst
ems, no
matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met. There were no changes in internal controls over financial
reporting during the period ended December 31, 2012. In August 2011,
the Company hired a dedicated employee to function as the Chief
Compliance Officer and perform the duties previously fulfilled by an
existing officer. The Chief Compliance Officer reports to the Audit
Committee. 
RISK FACTORS 
In the normal course of business the Company is exposed to a variety
of actual and potential events, uncertainties, trends and risks. In
addition to the risks associated with the use of assumptions in the
critical accounting estimates, financial instruments, the Company's
commitments and actual and expected operating events, all of which
are discussed above, the Company has identified the following events,
uncertainties, trends and risks that could have material adverse
impact:  


 
--  The Company may not be able to find reserves at a reasonable cost,
    develop reserves within required time-frames or at a reasonable cost, or
    sell these reserves for a reasonable profit; 
--  Reserves may be revised due to economic and technical factors; 
--  The Company may not be able to obtain approval, or obtain approval on a
    timely basis for exploration and development activities; 
--  Changing governmental policies, social instability and other political,
    economic or diplomatic developments in the countries in which the
    Company operates; 
--  Changing taxation policies, taxation laws and interpretations thereof; 
--  Adverse factors including climate and geographical conditions, weather
    conditions and labour disputes; 
--  Changes in foreign exchange rates that impact the Company's non-U.S.
    dollar transactions; and 
--  Changes in future oil and natural gas prices. 

 
For a comprehensive discussion of all identified risks, refer to the
Company's Annual Information Form, which can be found at
www.sedar.com. 
The Company has a number of contingencies as at December 31, 2012.
Refer to the notes to the Company's consolidated financial statements
for a complete list of the contingencies and any potential effects on
the Company. 
OUTSTANDING SHARE DATA 
At February 13, 2013, the Company had the following outstanding
shares: 


 
----------------------------------------------------------------------------
                                                  Number     Cdn$ Amount (1)
----------------------------------------------------------------------------
Common shares                                 70,215,911       1,477,589,000
Preferred shares                                     Nil                 Nil
Stock options                                  4,951,751                   -
----------------------------------------------------------------------------
  (1) This is the dollar amount received for common shares issued excluding 
      share issue costs and is presented in Canadian dollars. The U.S.      
      dollar equivalent at February 13, 2013 is $1,324,234,000.             

 
ABBREVIATIONS 


 
Bcfe                     billion cubic feet equivalent                      
Bbl                      barrel                                             
BG Group                 BG Group plc                                       
CEO                      Chief Executive Officer                            
CICA                     Canadian Institute of Chartered Accountants        
FPSO                     floating production, storage and off-loading vessel
GPSA                     gas purchase and sale agreement                    
GSPC                     Gujarat State Petroleum Corporation Ltd.           
GOB                      Government of Bangladesh                           
GOI                      Government of India                                
GRI                      Government of the Republic of Indonesia            
GTT                      Government of Trinidad and Tobago                  
IASB                     International Accounting Standards Board           
IFRS                     International Financial Reporting Standards        
LNG                      Liquefied Natural Gas                              
Mcf                      thousand cubic feet                                
Mcfe                     thousand cubic feet equivalent                     
MD&A                     management's discussion and analysis               
MMBtu                    million British thermal units                      
MMcfe                    million cubic feet equivalent                      
MMcf                     million cubic feet                                 
PSC                      production sharing contract                        
Reliance                 Reliance Industries Limited                        
/d                       per day                                            
                                                                            
All amounts are in thousands of U.S. dollars unless otherwise stated.       
All thousand cubic feet equivalent (Mcfe) figures are based on the ratio of 
1bbl:6Mcf.                                                                  

 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 


 
----------------------------------------------------------------------------
(unaudited)                                            As at          As at 
(thousands of U.S. dollars)                     Dec 31, 2012   Mar 31, 2012 
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                           43,928         64,495 
  Restricted cash                                      1,337          6,790 
  Accounts receivable (note 3)                        85,212         61,247 
  Short-term investment                                  188            748 
  Inventories                                         11,375          9,961 
----------------------------------------------------------------------------
                                                     142,040        143,241 
----------------------------------------------------------------------------
Restricted cash                                       13,270         11,283 
Long-term accounts receivable                          1,294          2,202 
Long-term investment                                   2,764          2,752 
Exploration and evaluation assets (note 4)           801,856        856,880 
Property, plant and equipment (note 5)               412,253        509,091 
Income tax receivable (note 14e)                      26,203         34,724 
Deferred tax asset                                    61,981         58,314 
----------------------------------------------------------------------------
                                                   1,461,661      1,618,487 
----------------------------------------------------------------------------
Liabilities                                                                 
Current liabilities                                                         
    Accounts payable and accrued liabilities         154,602        101,660 
    Current tax payable                                1,283          1,220 
    Finance lease obligation                           4,804          4,804 
    Convertible debentures (note 6)                        -        306,052 
----------------------------------------------------------------------------
                                                     160,689        413,736 
----------------------------------------------------------------------------
Decommissioning obligation                            41,944         40,017 
Finance lease obligation                              39,648         43,671 
Borrowings                                            90,000         25,000 
Convertible notes (note 6)                            80,730              - 
Deferred tax liability                               176,127        195,515 
----------------------------------------------------------------------------
                                                     589,138        717,939 
----------------------------------------------------------------------------
Shareholders' Equity                                                        
Share capital (note 7)                             1,324,234      1,171,439 
Contributed surplus                                  134,384        104,964 
Equity component of convertible debentures                                  
 and notes                                            23,232         14,765 
Currency translation reserve                          (3,380)        (2,094)
Deficit                                             (605,947)      (388,526)
----------------------------------------------------------------------------
                                                     872,523        900,548 
----------------------------------------------------------------------------
                                                   1,461,661      1,618,487 
----------------------------------------------------------------------------
                                                                            
The accompanying notes are an integral part of these financial statements.  

 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS) 


 
----------------------------------------------------------------------------
                                   Three months ended     Nine months ended 
(unaudited)                                   Dec 31,               Dec 31, 
(thousands of U.S. dollars,                                                 
 except per share amounts)            2012       2011       2012       2011 
----------------------------------------------------------------------------
                                                                            
Oil and natural gas revenue                              159,694    249,877 
 (note 8)                           46,515     74,789                       
Production and operating                                 (26,410)   (29,221)
 expenses                           (8,199)   (10,116)                      
Depletion and depreciation                              (112,597)   (86,026)
 expense (note 5)                  (30,979)   (27,055)                      
Exploration and evaluation                              (151,232)  (116,383)
 expenses (note 9)                 (61,932)   (57,112)                      
Gain (loss) on short-term                                   (558)    (6,184)
 investments                          (282)     2,384                       
Asset impairment (note 4)          (28,911)      (143)   (67,830)       (74)
Other income (expenses)                  -      6,453        311      6,453 
Share-based compensation expense                          (8,011)   (31,778)
 (note 7)                           (1,109)    (5,158)                      
General and administrative                                (4,990)    (5,763)
 expenses (note 10)                   (668)    (1,760)                      
----------------------------------------------------------------------------
                                   (85,565)   (17,718)  (211,623)   (19,099)
----------------------------------------------------------------------------
                                                                            
Finance income                         166      2,102      1,019      2,704 
Finance expense (note 11)           (9,636)    (8,135)   (26,812)   (23,876)
Foreign exchange gain (loss)        (1,602)    (4,787)    (2,570)   (12,030)
----------------------------------------------------------------------------
Net finance expense                (11,072)   (10,820)   (28,363)   (33,202)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Loss before income taxes           (96,637)   (28,538)  (239,986)   (52,301)
----------------------------------------------------------------------------
                                                                            
Current income tax reduction /                             1,300     (3,048)
 (expense)                            (792)     1,241                       
Minimum alternate tax (expense)     (1,839)    (6,221)    (6,249)   (19,019)
Deferred income tax reduction /                           30,531    (64,936)
 (expense)                           5,559     (6,887)                      
----------------------------------------------------------------------------
Income tax reduction (expense)       2,928    (11,867)    25,582    (87,003)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net loss                           (93,709)   (40,405)  (214,404)  (139,304)
----------------------------------------------------------------------------
                                                                            
Foreign currency translation                              (1,286)     9,953 
 gain / (loss)                       3,197     (4,479)                      
----------------------------------------------------------------------------
Comprehensive loss for the                              (215,690)  (129,351)
 period                            (90,512)   (44,884)                      
----------------------------------------------------------------------------
                                                                            
Loss per share: (note 12)                                                   
 Basic and diluted                   (1.64)     (0.78)     (4.01)     (2.70)
                                                                            
The accompanying notes are an integral part of these financial statements.  

 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY 


 
----------------------------------------------------------------------------
(unaudited)                                                                 
(thousands of U.S.                                                          
 dollars, except                                                   Currency 
 number of common     Common shares        Share  Contributed   translation 
 shares)                        (#)      capital      surplus       reserve 
----------------------------------------------------------------------------
Balance, March 31,                                                          
 2011                    51,526,901    1,162,319       63,037        (8,344)
Options exercised           114,694        9,106       (2,284)            - 
Share-based                                                                 
 compensation expense                                                       
 (note 7)                         -            -       38,885             - 
Net loss for the                                                            
 period                           -            -            -             - 
Payment of                                                                  
 dividends(1)                     -            -            -             - 
Foreign currency                                                            
 translation                      -            -            -         9,953 
----------------------------------------------------------------------------
B
alance, December 31,                                                       
 2011                    51,641,595    1,171,425       99,638         1,609 
----------------------------------------------------------------------------
Options exercised               250           14           (4)            - 
Share-based                                                                 
 compensation expense             -            -        5,330             - 
Net loss for the                                                            
 period                           -            -            -             - 
Payment of                                                                  
 dividends(1)                     -            -            -             - 
Foreign currency                                                            
 translation                      -            -            -        (3,703)
----------------------------------------------------------------------------
Balance, March 31,                                                          
 2012                    51,641,845    1,171,439      104,964        (2,094)
----------------------------------------------------------------------------
Share-based                                                                 
 compensation expense                                                       
 (note 7)                         -            -       14,655             - 
Issuance of shares       18,570,350      152,752            -             - 
Issuance of                                                                 
 convertible notes                -            -            -             - 
Deferred tax                      -            -            -             - 
Conversion of                                                               
 convertible notes            3,716           43            -             - 
Repayment of                                                                
 convertible                                                                
 debentures                       -            -       14,765             - 
Net loss for the                                                            
 period                           -            -            -             - 
Payment of                                                                  
 dividends(1)                     -            -            -             - 
Foreign currency                                                            
 translation                      -            -            -        (1,286)
----------------------------------------------------------------------------
Balance, December 31,                                                       
 2012                    70,215,911    1,324,234      134,384        (3,380)
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
(unaudited)                                                                 
(thousands of U.S.                                                          
 dollars, except       Equity component                                     
 number of common        of convertible                                     
 shares)                     debentures           Deficit             Total 
----------------------------------------------------------------------------
Balance, March 31,                                                          
 2011                            14,765           (53,392)        1,178,385 
Options exercised                     -                 -             6,822 
Share-based                                                                 
 compensation expense                                                       
 (note 7)                             -                 -            38,885 
Net loss for the                                                            
 period                               -          (139,304)         (139,304)
Payment of                                                                  
 dividends(1)                         -            (9,360)           (9,360)
Foreign currency                                                            
 translation                          -                 -             9,953 
----------------------------------------------------------------------------
Balance, December 31,                                                       
 2011                            14,765          (202,056)        1,085,381 
----------------------------------------------------------------------------
Options exercised                     -                 -                10 
Share-based                                                                 
 compensation expense                 -                 -             5,330 
Net loss for the                                                            
 period                               -          (183,324)         (183,324)
Payment of                                                                  
 dividends(1)                         -            (3,146)           (3,146)
Foreign currency                                                            
 translation                          -                 -            (3,703)
----------------------------------------------------------------------------
Balance, March 31,                                                          
 2012                            14,765          (388,526)          900,548 
----------------------------------------------------------------------------
Share-based                                                                 
 compensation expense                                                       
 (note 7)                             -                 -            14,655 
Issuance of shares                    -                 -           152,752 
Issuance of                                                
                 
 convertible notes               30,724                 -            30,724 
Deferred tax                     (7,492)                -            (7,492)
Conversion of                                                               
 convertible notes                    -                 -                43 
Repayment of                                                                
 convertible                                                                
 debentures                     (14,765)                -                 - 
Net loss for the                                                            
 period                               -          (214,404)         (214,404)
Payment of                                                                  
 dividends(1)                         -            (3,017)           (3,017)
Foreign currency                                                            
 translation                          -                 -            (1,286)
----------------------------------------------------------------------------
Balance, December 31,                                                       
 2012                            23,232          (605,947)         (872,523)
----------------------------------------------------------------------------
(1) The Company paid dividends of $0.18 per share in the nine months ended  
December 31, 2011 and $0.06 per share in the nine months ended December 31, 
2012.                                                                       
                                                                            
The accompanying notes are an integral part of these financial statements.  

 
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 


 
----------------------------------------------------------------------------
                                   Three months ended     Nine months ended 
(unaudited)                                   Dec 31,               Dec 31, 
(thous
ands of U.S. dollars)           2012       2011       2012       2011 
----------------------------------------------------------------------------
                                                                            
Cash flows from operating                                                   
 activities:                                                                
                                                                            
Net loss                           (93,709)   (40,405)  (214,404)  (139,304)
                                                                            
Adjustments for:                                                            
  Depletion and depreciation                                                
   expense                          30,979     27,057    112,597     86,026 
  Accretion expense                  2,531      2,077      6,689      5,818 
  Deferred income tax                                                       
   (reduction) expense              (5,559)     6,887    (30,531)    64,936 
  Unrealized foreign exchange                                               
   loss (gain)                          87      3,752     (1,427)     7,627 
  Gain (loss) on short-term                                                 
   investment                          282     (2,384)       558      6,184 
  Asset impairment                  28,911        143     67,830         74 
  Exploration and evaluation                                                
   write-off                        44,085     55,498     93,567    111,544 
  Share-based compensation                                                  
   expense                           2,925      5,642     13,861     33,279 
Change in non-cash working                                                  
 capital                            (8,925)    (7,417)    (4,621)     5,768 
Change in long-term receivables      2,387     (1,964)    11,006     23,177 
----------------------------------------------------------------------------
Net cash from operating                                                     
 activities                          3,994     48,886     55,125    205,129 
----------------------------------------------------------------------------
                                                                            
Cash flows from investing                                                   
 activities:                                                                
  Exploration and evaluation                                                
   expenditures                    (56,921)   (71,848)  (149,975)  (246,958)
  Property, plant and equipment                                             
   expenditures                     (5,060)      (415)   (16,120)    (9,219)
  Proceeds from other                                                       
   arrangements (note 4)                 -          -     36,000          - 
  Farm-out proceeds (note 4)             -          -      9,203          - 
  Restricted cash contributions       (186)    (3,630)    (3,288)    (6,230)
  Release of restricted cash         3,000         (8)     6,319      4,450 
  Disposition of investments             -          -          -      1,106 
  Change in non-cash working                                                
   capital                           1,851     12,635     32,663     16,919 
----------------------------------------------------------------------------
Net cash used in investing                                                  
 activities                        (57,316)   (63,266)   (85,198)  (239,932)
----------------------------------------------------------------------------
                                                                            
Cash flows from financing                                                   
 activities:                                                                
  Proceeds from issuance of                                                 
   share capital, net of                                                    
   issuance costs                  152,752      1,970    152,752      6,822 
  Repayment of debentures (note                                             
   6)                             (312,106)         -   (312,106)         - 
  Proceeds from issuance of                                                 
   convertible notes, net of                                                
   notes issued and issuance                                                
   costs (note 6)                  110,892          -    110,892          - 
  Change in loans and borrowings    49,000          -     65,000          - 
  Reduction in finance lease                                                
   liability                        (1,390)    (1,240)    (4,023)    (3,587)
  Dividends paid                         -     (2,969)    (3,017)    (9,360)
----------------------------------------------------------------------------
Net cash from financing                                                     
 activities                           (852)    (2,239)     9,498     (6,125)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Change in cash and cash                                                     
 equivalents                       (54,174)   (16,619)   (20,575)   (40,928)
----------------------------------------------------------------------------
                                                                            
Effect of translation on foreign                                            
 currency cash                          42        194          8       (414)
Cash and cash equivalents,                                                  
 beginning of period                98,060     83,425     64,495    108,342 
----------------------------------------------------------------------------
Cash and cash equivalents, end                                              
 of period                          43,928     67,000     43,928     67,000 
----------------------------------------------------------------------------
                                                                            
The accompanying notes are an integral part of these financial statements.  

 
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 
1. General Information 
Niko Resources Ltd. (the "Company") is a limited liability company
incorporated in Alberta, Canada. The addresses of its registered
office and principal place of business is 4600, 400 - 3 Avenue SW,
Calgary, AB, T2P4H2. The Company is engaged in the exploration for
and development and production of oil and natural gas in the
countries listed in note 13. The Company's common shares are traded
on the Toronto Stock Exchange. 
2. Basis of Presentation 
The condensed interim consolidated financial statements include the
accounts of Niko Resources Ltd. (the "Company") and all of its
subsidiaries. The majority of the exploration, development and
production activities of the Company are conducted jointly with
others and, accordingly, these financial statements reflect only the
Company's proportionate interest in such activities. The condensed
interim consolidated financial statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting using accounting
policies consistent with International Financial Reporting Standards
("IFRS").  
The interim consolidated financial statements have been prepared
following the same accounting policies and methods of application as
the audited consolidated financial statements for the fiscal year
ended March 31, 2012. The disclosures provided herein are incremental
to those included with the annual consolidated financial statements
and the notes thereto for t
he year ended March 31, 2012. The interim
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto for the year
ended March 31, 2012. 
The consolidated financial statements are presented in US dollars and
all values are rounded to the nearest thousand dollars ($000), except
where otherwise indicated. 
These financial statements were authorized for issue by the Board of
Directors on February 13, 2013. 
3. Accounts receivable 


 
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars)                            As at           As at
                                                Dec 31, 2012  March 31, 2012
----------------------------------------------------------------------------
Oil and gas revenues receivable                       17,779          28,033
Receivable from joint venture partners                42,994          13,004
Advances to vendors                                    1,563           1,751
Prepaid expenses and deposits                          3,898           4,816
VAT receivable                                        13,952           9,405
Other receivables                                      5,026           4,238
----------------------------------------------------------------------------
                                                      85,212          61,247
----------------------------------------------------------------------------

 
4. Exploration and evaluation assets 


 
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars)               Nine months ended      Year ended 
                                               Dec 31, 2012  March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                     856,880         762,221 
Additions (note 13)                                 150,756         164,976 
Transfers                                                12           5,354 
Expensed                                            (93,567)        (71,500)
Impairments                                         (67,295)              - 
Disposals and other arrangements                    (45,203)         (2,355)
Foreign currency translation                            273          (1,816)
----------------------------------------------------------------------------
Closing balance                                     801,856         856,880 
----------------------------------------------------------------------------

 
The Company expensed $94 million of exploration costs related to four
unsuccessful exploration wells in Indonesia and two unsuccessful
exploration wells in Trinidad. The Company also estimated the
recoverable amount of Kurdistan exploration and evaluation assets and
certain exploration and evaluation assets in Indonesian and Trinidad
associated with unsuccessful wells and recognized impairments of $67
million. In addition, the Company recorded proceeds of a farm-out of
$9 million and received $36 million from a former partner in exchange
for assuming the partner's obligations for future drilling
commitments. 
5. Property, plant and equipment 


 
                                                                            
a. Development assets                                                       
----------------------------------------------------------------------------
(thousands of U.S. dollars)                Nine months ended     Year ended 
                                                Dec 31, 2012 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                       16,988         18,421 
Additions                                              7,514          7,447 
Transfers to other asset categories                        -         (8,880)
----------------------------------------------------------------------------
Closing balance                                       24,502         16,988 
----------------------------------------------------------------------------
                                                                            
b. Producing assets                                                         
----------------------------------------------------------------------------
(thousands of U.S. dollars)               Nine months ended      Year ended 
                                               Dec 31, 2012  March 31, 2012 
----------------------------------------------------------------------------
Cost                                                                        
Opening balance                                   1,042,869       1,019,696 
Additions                                                 -          16,458 
Transfers from other asset                                                  
 categories/adjustments(1)                           (3,711)          6,791 
Foreign currency translation                             11             (76)
----------------------------------------------------------------------------
Closing balance                                   1,039,169       1,042,869 
----------------------------------------------------------------------------
Accumulated depletion                                                       
Opening balance                                    (587,372)       (312,767)
Additions                                          (110,211)       (141,266)
Foreign currency translation                            (10)             76 
----------------------------------------------------------------------------
Impairment                                                -        (133,415)
----------------------------------------------------------------------------
Closing balance                                    (697,593)       (587,372)
----------------------------------------------------------------------------
Net producing assets                                341,576         455,497 
----------------------------------------------------------------------------

 
1-The Company realized a settlement of liquidated damages of $3.7
million related to its producing asset in India and reduced the cost
base of the asset accordingly. 


 
                                                                            
c. Other Property, plant and equipment                                      
----------------------------------------------------------------------------
                                                 Office                     
                                             equipment,                     
(thousands of   Land and  Transportation  furniture and                     
 U.S. dollars) buildings        vehicles       fittings  Pipelines    Total 
----------------------------------------------------------------------------
Cost                                                                        
Balance, March                                                              
 31, 2012         18,346           2,376          8,754     10,772   40,248 
Additions /                                                                 
 Transfers             3               -            901          3      907 
Disposals                                                                   
 /Impairment                         (27)          (136)         -     (163)
Foreign                                                                     
 currency                                                                   
 translation           -               -             16          -       16 
----------------------------------------------------------------------------
Balance, Dec                                      
                          
 31, 2012         18,349           2,349          9,535     10,775   41,008 
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance, March                                                              
 31, 2012         (6,127)         (1,482)        (4,449)    (7,341) (19,399)
Additions           (763)           (131)        (1,121)      (371)  (2,386)
Foreign                                                                     
 currency                                                                   
 translation           -               -            (16)         -      (16)
----------------------------------------------------------------------------
Balance, Dec                                                                
 31, 2012         (6,890)         (1,613)        (5,586)    (7,712) (21,801)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net book value,                                                             
 Dec 31, 2012     11,459             736          3,949      3,063   19,207 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
                                                 Office                     
                                             equipment,                     
(thousands of   Land and  Transportation  furniture and                     
 U.S. dollars) buildings        vehicles       fittings  Pipelines    Total 
----------------------------------------------------------------------------
Cost                                                                        
Balance, March                                                              
 31, 2011         18,108           2,395          5,978     10,752   37,233 
Additions            238               -          2,907         20    3,165 
Disposals              -             (19)           (89)         -     (108)
Foreign                                                                     
 currency                                                                   
 translation                                                                
 loss                  -               -            (42)         -      (42)
----------------------------------------------------------------------------
Balance, March                                                              
 31, 2012         18,346           2,376          8,754     10,772   40,248 
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance, March                                                              
 31, 2011         (4,880)         (1,148)        (3,390)    (6,738) (16,156)
Additions         (1,247)           (352)        (1,126)      (603)  (3,328)
Disposals              -              18             34          -       52 
Foreign                                                                     
 currency                                                                   
 translation                                                                
 gain                  -               -             33          -       33 
----------------------------------------------------------------------------
Balance, March                                                              
 31, 2012         (6,127)         (1,482)        (4,449)    (7,341) (19,399)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net book value,                                                             
 March 31, 2012   12,219             894          4,305      3,431   20,849 
----------------------------------------------------------------------------
 

 
                                                                            
d. Capital work-in-progress                                                 
----------------------------------------------------------------------------
                                                       As at          As at 
(thousands of U.S. dollars)                      Dec 31, 2012 March 31, 2012
----------------------------------------------------------------------------
Capital work-in-progress                               26,968         15,757
----------------------------------------------------------------------------

 
6. Convertible debentures and convertible notes 
The Company issued Cdn$310 million, 5 percent convertible debentures
(the "Debentures") on December 30, 2009. The Debentures were repaid
in full during December 2012. 
In December 2012, the Company issued Cdn$115 million principal amount
of convertible senior unsecured notes (the "Notes") of which Cdn$32
million (less issuance costs of Cdn$1 million) was allocated to the
conversion option and classified in the equity section on the
Statement of Financial Position. The equity portion is recorded net
of a Cdn$7 million deferred tax liability which results from the
temporary difference between the carrying amount and the tax value of
the Notes. The liability portion of the Notes is carried net of
issuance costs of Cdn$4 million. The issuance costs were allocated
pro-rata based on the valuation of the gross proceeds.  
The Notes mature on December 31, 2017 and bear interest at a rate of
seven percent, with interest payable semi-annually in arrears on June
30 and December 31 of each year, commencing June 30, 2013. The Notes
are convertible at the option of the holders into common shares at a
conversion price of Cdn$11.30 per share. After December 31, 2015, the
Notes are redeemable by the Company, in whole or in part from time to
time, provided that the market price of the Company's common shares
(defined as the weighted average trading price of the common shares
for the twenty consecutive trading days ending five trading days
prior to the issue of the notice of redemption) is at least 130% of
the conversion price. The Company has the right to use common shares
to satisfy some or all of its obligations for the Notes. 
7. Share capital 
a. Fully paid ordinary shares 
The Company has authorized for issue an unlimited number of common
shares and an unlimited number of preferred shares. The common shares
issued are fully paid and the shares have no par value. No preferred
shares have been issued. 
b. Share options granted under the employee share option plan 
The Company has reserved for issue 7,021,591 common shares for
granting under stock options to directors, officers, and employees.
The options become vested immediately to five years after the date of
grant and expire one to six years after the date of grant. The stock
options are settled in equity. 
Stock option transactions for the respective periods were as follows: 


 
                                                                            
----------------------------------------------------------------------------
                Nine months ended Dec 31, 2012   Year ended March 31, 2012  
----------------------------------------------------------------------------
                              Weighted average              Weighted average
                  Number of     exercise price   Number of    exercise price
                    options             (Cdn$)     options            (Cdn$)
----------------------------------------------------------------------------
Opening balance   3,978,003              75.62   4,243,897             85.37
Granted           2,169,034              10.72   1,160,750             55.70
Forfeited          (253,625)             77.21    (155,750)            86.43
Cancelled                 -                  -    (587,500)           102.13
Expired            (538,811)             80.01    (568,450)            80.97
Exercised                 -                  -    (114,944)            58.01
----------------------------------------------------------------------------
Closing balance   5,354,601              48.81   3,978,003             75.62
----------------------------------------------------------------------------
Exercisable         933,380              83.47     952,624             85.19
----------------------------------------------------------------------------

 
The following table summarizes stock options outstanding and
exercisable under the plan at Dec 31, 2012: 


 
                                                                            
----------------------------------------------------------------------------
                         Outstanding Options           Exercisable Options  
----------------------------------------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                               Remaining    exercise                exercise
Exercise                            life       price                   price
Price                Options     (years)      (Cdn$)     Options      (Cdn$)
----------------------------------------------------------------------------
8.24 - 9.99        1,921,409         2.4
        8.73           -           -
10.00 - 19.99        113,000         4.2       13.93           -           -
30.00 - 39.99         85,500         3.3       36.91           -           -
40.00 - 49.99      1,014,130         2.0       47.46     175,692       49.05
50.00 - 59.99        243,625         3.1       51.97       3,500       53.05
60.00 - 69.99        201,625         2.5       63.25      43,500       63.35
70.00 - 79.99         66,750         2.1       73.41       6,750       76.87
80.00 - 89.99        579,688         0.9       86.43     306,438       89.12
90.00 - 99.99        813,125         1.3       96.47     370,875       96.26
100.00 - 109.00      291,249         2.4      103.55      22,250      104.92
110.00 - 112.64       24,500         1.9      111.09       4,375      111.30
----------------------------------------------------------------------------
                   5,354,601         2.1       48.81     933,380       83.47
----------------------------------------------------------------------------
                                                                            
The weighted average share price during the nine months ended December 31,  
2012 was $17.25 (2011 - $58.66).                                            

 
c. Fair value measure of equity instruments granted 
The fair value of each option granted was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted average inputs: 


 
                                                                            
----------------------------------------------------------------------------
                  Three months   Three months    Nine months    Nine months 
                 ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31, 
                          2012           2011           2012           2011 
----------------------------------------------------------------------------
Grant-date fair                                                             
 value               Cdn $3.33     Cdn $15.83      Cdn $3.92     Cdn $19.94 
Market price per                                                            
 share               Cdn $8.66     Cdn $49.31     Cdn $10.66     Cdn $60.74 
Exercise price                                                              
 per option          Cdn $8.73     Cdn $49.31     Cdn $10.72     Cdn $60.74 
Expected                                                                    
 volatility                 74%            44%            71%            42%
Expected life                                                               
 (years)                   1.9            3.5            2.2            3.8 
Expected                                                                    
 dividend rate               0%           0.5%           0.1%           0.4%
Risk-free                                                                   
 interest rate             1.1%           1.1%          1.11%           1.6%
Expected                                                                    
 forfeiture rate             8%             6%             8%             6%
----------------------------------------------------------------------------

 
Expected volatility was determined based on the historical movements
in the closing price of the Company's stock for a length of time
equal to the expected life of each option. See note d. below for
categorization of share-based compensation expense during the period. 
d. Share-based compensation disclosure 
The Company prepares its statement of comprehensive income (loss)
classifying costs according to function as opposed to the nature of
the costs. As a result, share-based compensation expense is charged
to various other headings in the statement of comprehensive income
(loss). 


 
                                                                            
----------------------------------------------------------------------------
                                                                            
                      Three months  Three months   Nine months   Nine months
(thousands of U.S.   ended Dec 31, ended Dec 31, ended Dec 31, ended Dec 31,
 dollars)                     2012          2011          2012          2011
----------------------------------------------------------------------------
Share-based                                                                 
 compensation                                                               
 expense included                                                           
 in:                                                                        
 Exploration and                                                            
  evaluation assets            260           292           794           767
 Operating expense             353           484           991         1,501
 Exploration and                                                            
  evaluation expense         1,463         1,614         4,859         4,839
 Share-based                                                                
  compensation                                                              
  expense                    1,109         5,158         8,011        31,778
----------------------------------------------------------------------------
Total                        3,185         7,548        14,655        38,885
----------------------------------------------------------------------------

 
8. Revenue 


 
                                                                            
----------------------------------------------------------------------------
                                                                            
                    Three months   Three months   Nine months   Nine months 
(thousands of U.S. ended Dec 31,  ended Dec 31, ended Dec 31, ended Dec 31, 
dollars)                    2012           2011          2012          2011 
----------------------------------------------------------------------------
Natural gas sales         43,913         69,337       154,175       224,016 
Oil and condensate                                                          
sales                      9,616         15,888        36,113        57,653 
Less:                                                                       
  Royalties               (2,093)        (3,655)       (7,543)      (12,198)
  Government's                                                              
  share of profit                                                           
  petroleum               (4,921)        (6,781)      (23,051)      (19,594)
----------------------------------------------------------------------------
Oil and natural                                                             
gas revenue               46,515         74,789       159,694       249,877 
----------------------------------------------------------------------------

 
Revenues from oil and gas sales to Petrobangla comprised 22 percent
of natural gas, oil and condensate sales for the nine months ended
December 31, 2012 (2011 - 15 percent). 
In June 2012, the Company recorded a $6 million increase in profit
petroleum expense due to a court ruling indicating the 36-inch
pipeline is not eligible for cost recovery. The Company has appealed
the decision with division bench of Delhi High Court. 
9.  Exploration and evaluation expenses 


 
                                                                            
----------------------------------------------------------------------------
                                                                            
                   Three months   Three months    Nine months    Nine months
(thousands of     ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31,
U.S. dollars)              2012           2011           2012           2011
----------------------------------------------------------------------------
Geological and                                                              
geophysical               4,983         49,716         23,257         88,708
Exploration and                                                             
evaluation (well                                                            
cost)                    43,954            361         93,567            376
General and                                                                 
administrative            1,487          3,947         10,160         11,673
Production                                                                  
sharing contract                                                            
annual payments           2,417          1,895          8,909          9,328
New ventures              7,628            144         10,480          1,459
Share-based                                                                 
compensation              1,463          1,049          4,859          4,839
----------------------------------------------------------------------------
Exploration and                                                             
evaluation               61,932         57,112        151,232        116,383
----------------------------------------------------------------------------

 
10. General and administrative expenses 


 
                                                                            
----------------------------------------------------------------------------
                                                                            
                  Three months   Three months    Nine months    Nine months 
(thousands of    ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31, 
 U.S. dollars)            2012           2011           2012           2011 
----------------------------------------------------------------------------
Salaries                   947          1,084          3,001          2,276 
Legal fees                  81            654            268          3,508 
Consultants                393            633          1,100          1,052 
Rent                       155            183            441            565 
Management fees            161            162            426            488 
Audit fees                 144             89            357            339 
Insurance                  285            242            296            242 
Others                     363            466          1,386            239 
Overhead                                                                    
 recoveries from                                                            
 partners               (1,861)        (1,753)        (2,285)        (2,946)
----------------------------------------------------------------------------
General and                                                                 
 administrative                                                             
 expense                   668          1,760          4,990          5,763 
----------------------------------------------------------------------------

 
The Company prepares its statement of comprehensive income (loss)
classifying costs according to function as opposed to the nature of
the costs. As a result, general and administrative expenses are
charged to various other headings in the statement of comprehensive
income (loss). General and administrative expenses of $1 million and
$10 million for the three and nine months ended December 31, 2012
(2011 - $4 million and $12 million) are categorized as exploration
and evaluation expenses and $2 million and $7 million for the three
and nine months ended December 31, 2012, (2011 - $3 million and $8
million) are categorized as production and operating expenses. 


 
----------------------------------------------------------------------------
                   Three months   Three months    Nine months    Nine months
(thousands of     ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31,
 U.S. dollars)             2012           2011           2012           2011
----------------------------------------------------------------------------
Audit fees                  178            132            420            457
Management fees             164            165            434            497
Legal fees                  219          1,047            679          3,467
Salary                    3,188          2,588         10,175          7,962
Insurance                 1,866          1,779          5,199          4,935
Security                      6            241            431            688
Rent                        526            370          1,534          1,146
Travel                      152            315            510            752
Consultants                 500            686          1,564            331
Non-operating                                                               
 and other                5,029            (61)         9,693          2,612
Office costs                424            802          1,003          2,453
----------------------------------------------------------------------------
Total                    12,252          8,064         31,642         25,300
----------------------------------------------------------------------------

 
11.  Finance expense 


 
----------------------------------------------------------------------------
                   Three months   Three months    Nine months    Nine months
(thousands of     ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31,
 U.S. dollars)             2012           2011           2012           2011
----------------------------------------------------------------------------
Interest expense                                                            
 related to                                                                 
 capital lease            1,133          1,488          3,892          4,500
Interest expense                                                            
 on long-term                                                               
 debt                       841              -          2,622              -
Interest expense                                                            
 on convertible                                                             
 debentures               3,349          3,842         11,079         11,703
Accretion                                                                   
 expense on                                                                 
 convertible                                                                
 debentures               1,814          1,503          4,581          4,127
Accretion                                                                   
 expense on                                                                 
 decommissioning                                                            
 obligations                717            574          2,110          1,691
Bank fees and                                                               
 charges and                                                                
 other finance                                                              
 costs                    1,782            728          2,528          1,855
----------------------------------------------------------------------------
Finance expense           9,636          8,135         26,812         23,876
----------------------------------------------------------------------------

 
12. Earnings per share 
The calculation of basic and diluted per share amounts is as follows: 


 
----------------------------------------------------------------------------
                  Three months   Three months    Nine months    Nine months 
(thousands of    ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31, 
 U.S. dollars)            2012           2011           2012           2011 
--------------------------------
--------------------------------------------
Net loss               (93,709)       (40,405)      (214,404)      (139,304)
----------------------------------------------------------------------------

 
A reconciliation of the weighted average number of ordinary shares
for the purpose of calculating basic earnings per share to the
weighted average number of ordinary shares for the purpose of
calculating diluted earnings per share is as follows:  


 
----------------------------------------------------------------------------
                   Three months   Three months    Nine months    Nine months
(thousands of     ended Dec 31,  ended Dec 31,  ended Dec 31,  ended Dec 31,
 U.S. dollars)             2012           2011           2012           2011
----------------------------------------------------------------------------
Weighted average                                                            
 number of                                                                  
 common shares                                                              
 used in the                                                                
 calculation of                                                             
 basic and                                                                  
 diluted per                                                                
 share amounts       57,040,057     51,603,054     53,454,383     51,569,074
----------------------------------------------------------------------------

 
As a result of the net loss in the periods ended December 31, 2012
and 2011, the outstanding stock options of 5,354,601 and 3,792,253,
respectively, and shares issuable upon conversion of the outstanding
notes and debentures of 10,173,724 and nil respectively as at
December 31, 2012 (2011 - nil and 2,805,430) were considered
anti-dilutive to the loss per share and were excluded from the
weighted average number of common shares for the purposes of diluted
earnings per share.  
13. Segmented Information 
a. Products and services from which reportable segments derive their
revenues 
The Company's operations are conducted in one business sector, the
oil and natural gas industry. All revenues are from external
customers. All of Bangladesh sales are received from one customer and
this customer accounted for 22 percent of sales during the nine
months ended December 31, 2012. 
b. Determination of reportable segments 
Geographical areas are used to identify the Company's reportable
segments. A geographic segment is considered a reportable segment
once its activities are regularly reviewed by the Company's
management. The accounting policies of the information of the
reportable segments are the same as those described in the summary of
significant accounting policies. 
c. Segment assets and liabilities, revenues and results 


 
----------------------------------------------------------------------------
(thousands of U.S.        Nine months ended December   Year ended March 31, 
 dollars)                          31, 2012                    2012         
----------------------------------------------------------------------------
                                             Additions to:                  
----------------------------------------------------------------------------
                              Exploration  Property,  Exploration           
                                      and  plant and          and  Property,
                               evaluation  equipment   evaluation  plant and
Segment                      assets (E&E)     (PP&E)       assets  equipment
----------------------------------------------------------------------------
Bangladesh                              -      1,337           63      3,004
India                                 195      4,745        2,432     18,599
Indonesia                         110,998      5,614       16,676          -
Kurdistan                             373       (565)      24,795          -
Madagascar                              -          -            9          -
Pakistan                                -          -          248          -
Trinidad                           39,190      8,421      120,753      1,466
All other                               -         80            -      3,165
----------------------------------------------------------------------------
Total                             150,756     19,632      164,976     26,234
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)            As at December 31, 2012        As at March 31, 2012    
----------------------------------------------------------------------------
                      Total    Total      Total    Total    Total      Total
Segment                 E&E     PP&E     assets      E&E     PP&E     assets
----------------------------------------------------------------------------
Bangladesh            4,737   23,743     36,887    4,737   31,605     46,617
India               136,307  369,940    634,563  136,104  454,421    730,134
Indonesia           501,260    7,577    568,796  510,161        -    534,923
Kurdistan            11,532        -     14,702   50,519      749     54,573
Madagascar            1,200       37      1,592    1,209        -      1,377
Pakistan                248       13        327      248        -        310
Trinidad            146,572   10,039    170,436  153,902    1,467    190,617
All other                 -      904     34,358        -   20,849     59,936
----------------------------------------------------------------------------
Total               801,856  412,253  1,461,661  856,880  509,091  1,618,487
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
(thousands                                                                  
of U.S.                                                                     
dollars)                    Three months ended Dec 31, 2012                 
----------------------------------------------------------------------------
                                                                      Other 
            Natural                                                income / 
               gas,                    Produc-    Deple-    Explo-   (loss) 
            conden-                       tion      tion    ration       on 
               sate   Profit               and       and       and    short 
                and   petro-            opera-    depre-   evalua-    -term 
                oil     leum  Royalty     ting   ciation      tion  invest- 
Segment       sales  expense  expense  expense   expense   expense    ments 
----------------------------------------------------------------------------
Bangladesh   12,346   (4,177)       -   (2,204)   (3,215)        -        - 
Brazil            -        -        -        -         -    (7,292)       - 
India        41,051     (745)  (2,093)  (5,900)  (27,410)      (87)       - 
Indonesia         -        -        -        -       (44)  (33,782)       - 
Kurdistan         -        -        -        -         -         -        - 
Madagascar        -        -        -        -        (7)     (324)       - 
Pakistan          -        -        -        -        (1)     (438)       - 
Trinidad          -        -        -        -       (49)  (19,581)       - 
Canada          133        -        -      (95)     (253)     (428)       - 
All other         -        -        -        -         -         -     (282)
----------------------------------------------------------------------------
Total        53,530   (4,922)  (2,093)  (8,199)  (30,979)  (61,932)    (282)
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands                                                                  
of U.S.                                                                     
dollars)                    Three months ended Dec 31, 2012                 
----------------------------------------------------------------------------
               Share-               General                                 
                based                   and                Income           
              compen-      Asset   adminis-       Net         tax   Segment 
               sation    impair-    trative   finance (reduction)    profit 
Segment       expense       ment    expense   expense   / expense    (loss) 
----------------------------------------------------------------------------
Bangladesh          -          -          -         -           -     2,750 
Brazil              -          -          -         -           -    (7,292)
India               -          -          -         -      (2,879)    1,937 
Indonesia           -    (16,281)         -         -      (1,673)  (51,780)
Kurdistan           -          -          -         -           -         - 
Madagascar          -          -          -         -           -      (331)
Pakistan            -          -          -         -           -      (439)
Trinidad            -    (12,630)         -         -           -   (32,260)
Canada              -          -          -         -       7,480     6,837 
All other      (1,109)         -       (668)  (11,072)          -   (13,131)
----------------------------------------------------------------------------
Total          (1,109)   (28,911)      (668)  (11,072)      2,928   (93,709)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                   Three months ended Dec 31, 2011                 
----------------------------------------------------------------------------
                                                                       Other
            Natural                                                 income /
               gas,                    Produc-    Deple-    Explo-    (loss)
            conden-                       tion      tion    ration        on
               sate   Profit               and       and       and     short
                and   petro-            opera-    depre-   evalua-     -term
                oil     leum  Royalty     ting   ciation      tion   invest-
Segment       sales  expense  expense  expense   expense   expense     ments
----------------------------------------------------------------------------
Bangladesh   14,423   (4,882)       -   (2,277)   (3,267)     (541)        -
Brazil            -        -        -        -         -         -         -
India        70,697   (1,899)  (3,650)  (7,641)  (23,473)     (604)        -
Indonesia         -        -        -        -       (92)  (20,144)    6,453
Kurdistan         -        -        -        -        (6)     (607)        -
Madagascar        -        -        -        -        (7)     (292)        -
Pakistan          -        -        -        -        (2)   (1,026)        -
Trinidad          -        -        -        -       (21)  (33,326)        -
Canada          105        -       (5)    (198)     (187)     (572)        -
All other         -        -        -        -         -         -     2,384
----------------------------------------------------------------------------
Total        85,225   (6,781)  (3,655) (10,116)  (27,055)  (57,112)    8,837
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                   Three months ended Dec 31, 2011                 
----------------------------------------------------------------------------
               Share-               General                                 
                based                   and                Income           
              compen-      Asset   adminis-       Net         tax   Segment 
               sation    impair-    trative   finance (reduction)    profit 
Segment       expense       ment    expense   expense   / expense    (loss) 
----------------------------------------------------------------------------
Bangladesh          -       (143)         -         -           -     3,313 
Brazil              -          -          -         -           -         - 
India               -          -          -         -     (12,874)   20,556 
Indonesia           -          -          -         -           -   (13,783)
Kurdistan           -          -          -         -           -      (613)
Madagascar          -          -          -         -           -      (299)
Pakistan            -          -          -         -           -    (1,028)
Trinidad            -          -          -         -           -   (33,347)
Canada              -          -          -         -       1,007       150 
All other      (5,158)         -     (1,760)  (10,820)          -   (15,354)
----------------------------------------------------------------------------
Total          (5,158)      (143)    (1,760)  (10,820)    (11,867)  (40,405)
----------------------------------------------------------------------------
 

 
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                    Nine months ended Dec 31, 2012                 
----------------------------------------------------------------------------
                                                                      Other 
            Natural                                                 income/ 
               gas,                    Produc-    Deple-    Explo-   (loss) 
            conden-                       tion      tion    ration       on 
               sate   Profit               and       and       and    short 
                and   petro-            opera-    depre-   evalua-    -term 
                oil     leum  Royalty     ting   ciation      tion  invest- 
Segment       sales  expense  expense  expense   expense   expense    ments 
----------------------------------------------------------------------------
Bangladesh   41,273  (13,969)       -   (6,853)  (10,724)     (180)       - 
Brazil            -        -        -        -         -    (7,292)       - 
India       148,628   (9,083)  (7,554) (19,304) (100,877)     (441)       - 
Indonesia         -        -        -        -      (148)  (82,208)     311 
Kurdistan         -        -        -        -         -    (2,185)       - 
Madagascar        -        -        -        -       (21)   (1,025)       - 
Pakistan          -        -        -        -        (4)     (629)       - 
Trinidad          -        -        -        -       (96)  (55,633)       - 
Canada          388        -       11     (253)     (727)   (1,639)       - 
All other         -        -        -        -         -         -     (558)
-------
---------------------------------------------------------------------
Total       190,289  (23,052)  (7,543) (26,410) (112,597) (151,232)    (247)
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                   Nine months ended Dec 31, 2012                  
----------------------------------------------------------------------------
               Share-               General                                 
                based                   and                Income           
              compen-      Asset   adminis-       Net         tax   Segment 
               sation    impair-    trative   finance (reduction)    profit 
Segment       expense       ment    expense   expense   / expense    (loss) 
----------------------------------------------------------------------------
Bangladesh          -          -          -         -           -     9,547 
Brazil              -          -          -         -           -    (7,292)
India               -          -          -         -      (1,278)   10,091 
Indonesia           -    (16,281)         -         -      19,387   (78,939)
Kurdistan           -    (38,919)         -         -           -   (41,104)
Madagascar          -          -          -         -           -    (1,046)
Pakistan            -          -          -         -           -      (633)
Trinidad            -    (12,630)         -         -           -   (68,359)
Canada              -          -          -         -       7,473     5,253 
All other      (8,011)         -     (4,990)  (28,363)          -   (41,922)
----------------------------------------------------------------------------
Total          (8,011)   (67,830)    (4,990)  (28,363)     25,582  (214,404)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                    Nine months ended Dec 31, 2011                 
----------------------------------------------------------------------------
                                                                      Other 
                                                                    income/ 
            Natural                    Produc-    Deple-    Explo-   (loss) 
               gas,                       tion      tion    ration       on 
            conden-   Profit               and       and       and    short 
               sate   petro-            opera-    depre-   evalua-    -term 
            and oil     leum  Royalty     ting   ciation      tion  invest- 
Segment       sales  expense  expense  expense   expense   expense    ments 
----------------------------------------------------------------------------
Bangladesh   42,708  (14,459)       -   (5,998)   (9,190)     (933)       - 
Brazil            -        -        -        -         -         -        - 
India       238,708   (5,136) (12,191) (22,981)  (76,215)   (1,146)       - 
Indonesia         -        -        -        -      (148)  (47,575)   6,453 
Kurdistan         -        -        -        -       (18)   (2,206)       - 
Madagascar        -        -        -        -       (20)     (822)       - 
Pakistan          -        -        -        -        (5)   (1,820)       - 
Trinidad          -        -        -        -       (61)  (59,641)       - 
Canada          254        -       (7)    (242)     (368)     (572)       - 
All other         -        -        -        -        (1)   (1,668)  (6,184)
----------------------------------------------------------------------------
Total       281,670  (19,595) (12,198) (29,221)  (86,026) (116,383)     269 
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands                                                                  
 of U.S.                                                                    
 dollars)                   Nine months ended Dec 31, 2011                  
----------------------------------------------------------------------------
               Share-               General                                 
                based                   and                Income           
              compen-      Asset   adminis-       Net         tax   Segment 
               sation    impair-    trative   finance (reduction)    profit 
Segment       expense       ment    expense   expense   / expense    (loss) 
----------------------------------------------------------------------------
Bangladesh          -        (74)         -         -           -    12,054 
Brazil              -          -          -         -           -         - 
India               -          -          -         -     (88,015)   33,024 
Indonesia           -          -          -         -           -   (41,270)
Kurdistan           -          -          -         -           -    (2,224)
Madagascar          -          -          -         -           -      (842)
Pakistan            -          -          -         -           -    (1,825)
Trinidad            -          -          -         -           -   (59,702)
Canada              -          -          -         -       1,012        77 
All other     (31,778)         -     (5,763)  (33,202)          -   (78,596)
----------------------------------------------------------------------------
Total         (31,778)       (74)    (5,763)  (33,202)    (87,003) (139,304)
----------------------------------------------------------------------------

 
14. Contingent Liabilities 
a. During the year ended March 31, 2006, a group of petitioners in
Bangladesh (the petitioners) filed a writ with the High Court
Division of the Supreme Court of Bangladesh (the High Court) against
various parties including Niko Resources (Bangladesh) Ltd. (NRBL), a
subsidiary of the Company. 
In November 2009, the High Court ruled on the writ. Both the Company
and the petitioners have the right to appeal the ruling to the
Supreme Court. The ruling can be summarized as follows: 


 
----------------------------------------------------------------------------
Petitioner Request                     High Court Ruling                    
----------------------------------------------------------------------------
That the Joint Venture Agreement for   The Joint Venture Agreement for Feni 
 the Feni and Chattak fields be        and Chattak fields is valid.         
 declared null and illegal.                                                 
----------------------------------------------------------------------------
That the government realize from the   The compensation claims should be    
 Company compensation for the natural  decided by the lawsuit described in  
 gas lost as a result of the           note (b) below or by mutual          
 uncontrolled flow problems as well    agreement.                           
 as for damage to the surrounding                                           
 area.                                                                      
----------------------------------------------------------------------------
That Petrobangla withhold future       Petrobangla to withhold future       
 payments to the Company relating to   payments to the Company related to   
 production from the Feni field        production from the Feni field until 
 ($27.9 million as at December 31,     the lawsuit described in note (b)    
 2012).                                below is resolved or both parties    
                                       agree to a settlement.               
----------------------------------------------------------------------------
That all bank accounts of the Company  The ruling did not address this      
 maintained in Bangladesh be frozen.   issue, therefore the previous ruling 
                                       stands. Funds in the Company's bank  
                                       accounts maintained in Bangladesh    
                                       cannot be repatriated pending        
                                       resolution of the lawsuit described  
                                       in note (b) below.                   
----------------------------------------------------------------------------

 
On January 7, 2010, NRBL requested an arbitration proceeding with the
International Centre for the Settlement of Investment disputes
(ICSID). The arbitration is between NRBL and three respondents: The
People's Republic of Bangladesh; Bangladesh Oil, Gas & Mineral
Corporation (Petrobangla); and Bangladesh Petroleum Exploration &
Production Company Limited (Bapex). The arbitration hearing will
attempt to settle all compensation claims described in this note and
note (b). ICSID registered the request on May 24, 2010. 
In June 2010, the Company filed an additional proceeding with ICSID
to resolve its claims for payment from Petrobangla in accordance with
the Gas Purchase and Sale Agreement with Petrobangla to receive all
amounts for previously delivered gas. 
b. During the year ended March 31, 2006, Niko Resources (Bangladesh)
Ltd. received a letter from Petrobangla demanding compensation
related to the uncontrolled flow problems that occurred in the
Chattak field in January and June 2005. Subsequent to March 31, 2008,
Niko Resources (Bangladesh) Ltd. was named as a defendant in a
lawsuit that was filed in Bangladesh by Petrobangla and the Republic
of Bangladesh demanding compensation as follows:  


 
  (i)   taka 422,026,000 ($5.17 million) for 3 Bcf of free natural gas      
        delivered from the Feni field as compensation for the burnt natural 
        gas;                                                                
                                                                            
  (ii)  taka 828,579,000 ($10.15 million) for 5.89 Bcf of free natural gas  
        delivered from the Feni field as compensation for the subsurface    
        loss;                                                               
                                                                            
  (iii) taka 845,560,000 ($10.36 million) for environmental damages, an     
        amount subject to be increased upon further assessment;             
                                                                            
  (iv)  taka 6,330,398,000 ($77.53 million) for 45 Bcf of natural gas as    
        compensation for further subsurface loss; and                       
                                                                            
  (v)   any other claims that arise from time to time.                      

 
ICSID has registered the request for arbitration of the issues
indicated above as discussed in note 14(a). In addition, the Company
will actively defend itself against the lawsuit, which may take an
extended period of time to settle. Alternatively, the Company may
attempt to receive a stay order on the lawsuit pending either a
settlement and/or results of ICSID arbitration. The Company believes
that the outcome of the lawsuit and/or ICSID arbitration and the
associated cost to the Company, if any, are not determinable. As
such, no amounts have been recorded in these consolidated financial
statements. Settlement costs, if any, will be recorded in the period
of determination. 
c. In accordance with natural gas sales contracts to customers of
production from the Hazira field in India, the Company had committed
to deliver certain minimum quantities and was unable to deliver the
minimum quantities for a period ending December 31, 2007. The
Company's partner in the Hazira field delivered the shortfall volumes
in return for either: (a) delivery of replacement volumes five times
greater than the shortfall; (b) a cash payment; or (c) a combination
of (a) and (b). The Company's partner has served a notice of
arbitration as the Company is unable to supply gas from the D6 block
to the partner and the arbitration process has commenced. The Company
estimates the cash amount to settle the contingency at US$11.6
million. The Company believes that the agreement with its partner is
not effective as the Government of India's gas utilization policy
prevents the Company from supplying the gas to the partner. The
Company believes that the outcome is not determinable. 
The Company may not be able to supply gas to a customer in Hazira
whose contract runs until mid-2016. The Company had previously
planned to supply gas from the D6 Block to the customer. Due to a
change in the gas allocation policy by the Government of India, the
Company may not be able to fulfill the contract with gas supply from
the D6 Block. The Company has notified the customer that the
underperformance of reservoir is a force majeure event. The customer
does not agree with this position and has served a notice of
arbitration on the Company. The matter is subjudice in a court of
law. The Company believes that the outcome is not determinable. 
d. In a May 2012 letter, the GOI alleged that the joint venture
partners in the D6 Block are in breach of the PSC for the D6 Block as
they failed to drill all of the wells and attain production levels
contemplated in the Addendum to the Initial Development Plan for the
Dhirubhai 1 and 3 fields. The GOI has further asserted that joint
venture costs totaling $1.462 billion (the Company's share totaling
$146.2 million) are therefore disallowed for cost recovery. The joint
venture partners are of the view that the disallowance of recovery of
costs incurred by the joint venture has no basis in the terms of the
PSC and that there are strong grounds to challenge the action of the
GOI. Reliance Industries Ltd. (Reliance) has commenced arbitration
proceedings against the GOI challenging the allegations and the
disallowance of cost recovery on behalf of the partners. To the
extent that any amount of joint venture costs are disallowed, such
amount would be treated as profit petroleum in the future, a portion
of which would be payable to the GOI under the PSC. Because profit
petroleum percentages for the joint venture partners and the GOI
change as the joint venture partners recover specified percentages of
their investments, the potential impact on the Company's future
profit petroleum expense (which represents the GOI's share of profit
petroleum) is dependent on the future revenue and expenditures in the
block and cannot be precisely determined at this time. Based on the
economic inputs used for the proved and proved plus probable reserves
in the March 31, 2012 Ryder Scott Report, the Company has estimated
the potential undiscounted before tax impact to be between $25 to $46
million. The arbitral tribunal is in the process of being constituted
with Reliance and the GOI having nominated two of the three
arbitrators. The outcome of these proceedings is not determinable at
December 31, 2012 
e. The Company has filed its income tax returns in India for the
taxation years 1998 through 2008 under provisions that provide for a
tax holiday deduction for eligible undertakings related to the Hazira
and Surat fields. 
The Company has received unfavorable tax assessments related to
taxation years 1998 through 2008. The assessments contend that the
Company is not eligible for the requested tax holiday because: a) the
holiday only applies to "mineral oil" which excludes natural gas;
and/or b) the Company has inappropriately defined undertakings. The
taxation years 2009 and later have not yet been assessed by the tax
authorities. The Company has appealed the tax assessments and has
received favorable rulings at the second level of four possible
levels of appeals, the Tribunal Court. This decision has been
appealed by the Indian tax department to the third level of appeals,
the High Court. The fourth level of appeals is the Supreme Court. 
In August 2009, the Government of India through the Finance (No.2)
Act 2009 amended the tax holiday provisions in the Income Tax Act
(Act). The amended Act provides that the blocks licensed under the
NELP-VIII round of bidding and starting commercial production on or
after April 1, 2009 are eligible for the tax holiday on production of
natural gas. However, the budget did not address the issue of whether
the tax holiday is applicable to natural gas production from blocks
that have been awarded under previous rounds of bidding, which
includes all of the Company's Indian blocks. The Company has
previously filed and recorded its income taxes on the basis that
natural gas will be eligible for the tax holiday. 
With respect to undertakings eligible for the tax holiday deduction,
the Act was amended to include an "explanation" on how to determine
undertakings. The Act now states that all blocks licensed under a
single contract shall be treated as a single undertaking. The Company
was granted an interim relief by the High Court on instructing the
tax Department to not give effect to the "explanation" referred to
above retrospectively until the matter is clarified in the courts. 
The decision regarding retrospective application of the definition of
undertaking and whether or not mineral oil includes natural gas for
purposes of tax holiday claim is currently pending with the High
Court. 
Based on the circumstances described above, the Company continued to
calculate its income tax provision in accordance with its earlier
practice of treating a single well / cluster of wells as a single
undertaking and considering the production of natural gas as eligible
for the tax holiday claim. However, to avoid interest and penalties,
the Company post amendment of the Income tax act has paid its income
tax excluding the tax holiday deduction and has filed its income tax
return without tax holiday deduction so as not deemed to be in
violation of the current legislation.  
Should the High Court overturn the rulings previously awarded in
favour of the Company by the Tribunal court, and the Company either
decides not to appeal to the Supreme Court or appeals to the Supreme
Court and is unsuccessful, the Company would have to accordingly
change its tax position and record a tax expense of approximately $56
million (comprised of additional taxes of $34 million and write off
of approximately $22 million of the net income tax receivable). In
addition, the Company could be obligated to pay interest on taxes for
the past periods. 
f. The Cauvery and D4 Blocks in India are under relinquishment. The
Company believes it has fulfilled all commitments for the Cauvery
block while the Government of India contends that the Company has
unfulfilled commitments of up to approximately $2 million. The
Company believes the outcome is currently not determinable.  
g. Various lawsuits have been filed against the Company for incidents
arising in the ordinary course of business. In the opinion of
management, the outcome of the lawsuits, now pending, is not
determinable or not material to the Company's operations. Should any
loss result from the resolution of these claims, such loss will be
charged to operations in the year of resolution.
Contacts:
Niko Resources Ltd.
Edward Sampson
Chairman of the Board, President & CEO
(403) 262-1020 
Niko Resources Ltd.
Glen Valk
VP Finance & CFO
(403) 262-1020
www.nikoresources.com