Niko Reports Results for the Year Ended March 31, 2013

Niko Reports Results for the Year Ended March 31, 2013 
CALGARY, ALBERTA -- (Marketwired) -- 07/09/13 -- 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 months and year ended March 31, 2013. 
The operating results are effective July 8, 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 
During fiscal 2013, the Company achieved significant growth in value.
Substantial additions to reserves were booked related to development
projects in India and in Trinidad and Tobago, contributing to a 166%
increase in the Company's total proved reserves to 564 Bcfe and a
118% increase in the Company's total proved plus probable reserves to
821 Bcfe.  Reflecting these significant additions, the estimated
aggregate after-tax net present value of future net revenue
attributable to the Company's estimated proved plus probable reserves
(discounted at 10 percent and estimated using forecast prices and
costs) increased by 93% to $1.3 Billion.  On top of the reserve
value, the Company's extensive exploration portfolio and discovered
resources, including the significant MJ gas and condensate discovery
in the D6 Block in India, provide substantial additional potential
value for shareholders.  
With a significant reserve write-down at the end of fiscal 2012 and
associated production declines in the Company's main producing asset,
fiscal 2013 was a very challenging year for Niko. This was coupled
with the maturity of Cdn$310 million of convertible debt and a
significant reduction in the availability under the Company's credit
facility, all occurring in a very challenging illiquid capital
market.  Through it all, Niko's people launched the largest
exploration program in the Company's history, achieving and exceeding
many performance metrics and resulting in three potential discoveries
in Indonesia. The ingenuity, planning and execution of Niko's
drilling team in Indonesia consistently resulted in reduced drilling
time and associated well costs,
 setting records for speed, cost and
efficiency of deepwater drilling in Indonesia in recent times.  Niko
has also achieved a safety performance record second to none with no
recordable injuries over the year, achieving a milestone of 8 million
man-hours without a recordable incident in our operated properties in
India!  Development activities commenced in the producing fields in
the D6 Block in India to bring on additional production, address the
decline in reservoir pressure and increase water handling capacity. 
The Company addressed its maturing convertible debenture by issuing
common shares and new unsecured convertible notes for combined gross
proceeds of Cdn$273 million, and raised $113 million from the
Company's program of asset sales, farm-outs and other arrangements
($70 million in fiscal 2013 and $43 million thus far in fiscal 2014),
with substantial additional proceeds targeted for the remainder of
fiscal 2014.   
Looking forward, the long-awaited approval by the Government of India
of a new pricing formula for domestic natural gas sales will double
the price for gas sales from the D6 Block from its current level of
$4.20/MMbtu to around $8.40/MMbtu, effective April 1, 2014.  Prices
are to be revised quarterly thereafter using the approved formula,
with further increases expected in the future, and the impact of the
increased prices will be reflected in the borrowing base of the
Company's credit facility by the end of July, 2013.  
The exploration program has been restarted in the D6 Block in India
with the drilling of the exciting MJ-1 gas and condensate discovery,
where initial evaluations of drilling results indicate significant
resource potential.  An initial appraisal program of up to three
wells is expected to commence in the current fiscal year. 
I would like to thank Niko's people and our shareholders who have
supported Niko through this very difficult past year.  With the
continued high impact deepwater exploration program, recent
discoveries and increased gas prices in India on the horizon, Niko
looks forward to fiscal 2014 as a major turnaround year for the
company. In the past year, the Company re-established itself as
capable of achieving significant growth in value. The highlights
included: 
Edward S. Sampson - President and Chief Executive Officer, Niko
Resources Ltd. 
REVIEW OF OPERATIONS AND GUIDANCE 
Sales Volumes 


 
----------------------------------------------------------------------------
                                      Three months ended                    
                                                 Mar 31,  Year ended Mar 31,
(MMcfe/d)                                 2013      2012      2013      2012
----------------------------------------------------------------------------
D6 Block, India                             71       135        96       159
Block 9, Bangladesh                         51        42        56        55
Other(1)                                     4         7         6         9
----------------------------------------------------------------------------
Total(2)                                   126       184       158       223
----------------------------------------------------------------------------
(1) Other includes Hazira and Surat in India, and Canada.                   
(2) Figures may not add up due to rounding.                                 

 
Total sales volumes for the fourth quarter averaged 126 MMcfe/d
compared to 145 MMcfe/d for the third quarter of fiscal 2013,
primarily due to anticipated natural declines and reservoir
management activities in the D6 Block in India. 
For fiscal 2014, an additional well in the MA field and workovers 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, will provide
additional volumes starting in the second quarter of the year,
contributing to an annual average sales volumes forecast between 112
and 116 MMcfe/d for the year.  For fiscal 2015, the Company is
targeting 133 MMcfe/d, benefiting from development activities in
fiscal 2014 and 2015.  
Funds from Operations 


 
----------------------------------------------------------------------------
                                      Three months ended                    
                                                 Mar 31,  Year ended Mar 31,
(millions of U.S. dollars)                2013      2012      2013      2012
----------------------------------------------------------------------------
Funds from operations                       30        53       132       234
----------------------------------------------------------------------------

 
Funds from operations for the fourth quarter were $30 million
compared to $27 million for the third quarter of fiscal 2013.   
For fiscal 2014, funds from operations are forecast to be
approximately $70 to $75 million.  For fiscal 2015, funds from
operations are forecast to increase by $100 million or more,
reflecting higher sales volume and the Company's estimate of the
projected benefit of improved pricing for natural gas sales in India. 
Capital Expenditures, net of Proceeds of Farm-outs and Other
Arrangements 


 
----------------------------------------------------------------------------
                                                 Three months     Year ended
                                                        ended   Mar 31, 2013
(millions of  U.S. dollars)                      Mar 31, 2013               
----------------------------------------------------------------------------
Capital expenditures, net of proceeds of farm-                              
outs and other arrangements                               32            206
----------------------------------------------------------------------------

 
Capital expenditures, net of proceeds of farm-outs and other
arrangements, totaled $32 million for the fourth quarter.  Spending
in the quarter related primarily to exploration activities in
Indonesia, Trinidad and Tobago, India and Brazil.  The Company also
received $25 million from a former partner in exchange for assuming
the partner's obligation for future drilling commitments. 
Exploration results for the year included potential discoveries of
hydrocarbons at Lebah-1, Ajek-1 and Cikar-1 in Indonesia, and the
Company is currently evaluating future plans for these three fields. 
Subsequent to year-end, the Company and its joint venture partners
announced the significant MJ-1 gas condensate discovery in the D6
Block in India.  These discoveries have the potential to increase the
Company's resource base by 50% or more over the currently booked
proved plus probable reserves. 
For fiscal 2014, the Company's minimum level of capital expenditures,
net of negotiated farm-outs and other arrangements, and workover
expenditures, is forecast to total approximately $130 million. 
Decisions about additional capital spending during the year will be
made as the year progresses, depending on the results of the
Company's program of asset sales, farm-outs and other arrangements,
and the Company's financing activities. 
Estimated Reserves  


 
----------------------------------------------------------------------------
                                                               As at Mar 31,
(Bcfe)                                                   2013           2012
----------------------------------------------------------------------------
Proved                                                    564            212
Proved plus Probable                                      821            377
----------------------------------------------------------------------------

 
The Company increased its proved reserves by 166%, a proved reserve
replacement ratio of over 700%, and increased its proved plus
probable reserves by 118%, a proved plus probable reserve replacement
ratio of nearly 900%.  
India 
For the D1 D3 and MA producing fields in the D6 Block, virtually no
revisions were reflected for combined proved reserves on a gas
equivalent basis, with small positive revisions reflected for
combined proved plus probable reserves.  A combined total of 165 Bcf
of proved and 270 Bcf of proved plus probable reserves additions were
booked for the R-Series and Satellite Area development projects in
the D6 Block and the J-Series development project in the NEC-25
Block.  
Bangladesh 
Positive revisions to proved reserves of 46 Bcfe were reflected for
Block 9, increasing proved reserves to 101 Bcfe even after production
of 20 Bcfe. 
Trinidad and Tobago 
Additions to proved reserves for the Endeavour/Bounty development
project in Block 5(c) were 197 Bcf (235 Bcf on a proved plus probable
basis). 
Estimated After-tax Net Present Value of Future Net Revenue 


 
----------------------------------------------------------------------------
                                                                          As
                                                                  at Mar 31,
(millions of U.S. dollars)                               2013           2012
----------------------------------------------------------------------------
Proved                                                    761            468
Proved plus Probable                                    1,299            674
----------------------------------------------------------------------------

 
The estimated aggregate after-tax net present value of future net
revenue attributable to the Company's estimated proved plus probable
reserves (discounted at 10 percent and estimated using forecast
prices and costs) increased by 93% to $1.3 Billion, reflecting the
significant increases in reserves, described above. 
Complete details of the Company's reserves and future net revenues
attributable thereto are contained in its Annual Information Form for
the year ended March 31, 2013 which is available on SEDAR at
www.sedar.com. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 
This Management's Discussion and Analysis (MD&A) of the financial
condition, results of operations and cash flows of Niko Resources
Ltd. ("Niko" or the "Company") for the year ended March 31, 2013
should be read in conjunction with the audited consolidated financial
statements for the year ended March 31, 2013. This MD&A is effective
July 08, 2013. Additional information relating to the Company,
including the Company's Annual Information Form (AIF), is available
on SEDAR at www.sedar.com. 
All financial information is presented in thousands of U.S. dollars
unless otherwise indicated. 
The term "the quarter" is used throughout the MD&A and in all cases
refers to the period from January 1, 2013 through March 31, 2013. The
term "prior year's quarter" is used throughout the MD&A for
comparative purposes and refers to the period from January 1, 2012
through March 31, 2012. 
The fiscal year for the Company 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; 
--  natural gas, crude oil, and condensate 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; 
--  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 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 utilizes 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 utilizes 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, the government share of profit petroleum and operating
expenses for a given reporting period, per thousand cubic feet
equivalent (Mcfe) of production for the same period, and represents
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, the government share of profit petroleum, 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. 
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. 
OVERALL PERFORMANCE 
Funds from Operations 


 
----------------------------------------------------------------------------
                                                       Year ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Oil and natural gas revenue                          199,364        321,311 
Production and operating expenses                    (35,523)       (38,641)
Other income                                             311          6,436 
General and administrative expenses                   (6,931)        (8,774)
Finance income                                         1,999          4,302 
Bank charges and other finance costs                  (3,285)        (5,464)
Realized foreign exchange loss                        (3,125)        (8,271)
----------------------------------------------------------------------------
EBITDAX                                              152,810        270,899 
Interest expense                                     (21,806)       (21,674)
Current income tax recovery / (expense)                  289         (5,920)
Minimum alternate tax expense                              -         (9,105)
----------------------------------------------------------------------------
Funds from operations (1)                            131,293        234,200 
----------------------------------------------------------------------------

 
(1) EBITDAX and Funds from operations are non-IFRS measures as
defined under "Non-IFRS measures" in this MD&A. 
Oil and natural gas revenue decreased in the year, primarily due to
lower sales of natural gas, crude oil and condensate from the D6
Block in India along with an adjustment to the government share of
profit petroleum for the Hazira Field recorded in the current year.  
Production and operating expenses have reduced in D6 mainly because
of reduction in logistics cost from last year due to reduced
operations. However some of this reduction is offset by increase in
operating expenses of Block 9 due to the well repair and workovers
during the period. 
Other income in the prior year includes proceeds from farm-outs in
excess of the recorded cost of the Company's interests in certain
properties in Indonesia. 
General and administrative expenses decreased primarily due to
reduced use of outside legal services.  
Bank charges and other finance costs decreased primarily due to lower
costs related to financing efforts. 
There were realized foreign exchange losses in the current and prior
years as a result of the weakening of the Indian-Rupee against the
U.S. dollar. 
Interest expense increased slightly primarily due to interest on
credit facility borrowing and the convertible notes in the current
year, offset by lower interest on the convertible debentures. 
Current income tax decreased compared to the prior year due to
reductions in income for Hazira (including the adjustment to the
government share of profit petroleum recorded in the current year)
and Surat. In the prior year, there was an adjustment related to
previous year tax provisions for Hazira. 
The Company currently pays minimum alternate tax based on Indian-GAAP
accounting income for the D6 block. For the current year, the D6
Block did not generate positive accounting income under Indian GAAP,
resulting in no minimum alternative tax expense. 
Net Income (Loss) 


 
----------------------------------------------------------------------------
                                                       Year ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Funds from operations (non-IFRS measure)             131,293        234,200 
Production and operating expenses                     (1,255)        (1,555)
Depletion and depreciation expenses                 (145,250)      (144,595)
Exploration and evaluation expenses                 (172,811)      (232,963)
Asset impairments                                    (67,831)      (133,415)
Reversal of asset impairment                         101,544              - 
Impairment of long-term receivable                         -        (22,996)
Share-based compensation expense                     (10,894)       (21,603)
Finance expense                                       (8,677)        (7,612)
Unrealized foreign exchange loss                         (75)        (6,095)
Loss on short-term investments                        (2,106)        (5,823)
Deferred income tax recovery                         (40,434)        91,607 
----------------------------------------------------------------------------
                                                    (216,496)      (250,850)
----------------------------------------------------------------------------
Change in accounting estimate-deferred taxes               -        (57,865)
Share-based compensation expense-impact of                                  
 option cancellation                                       -        (13,913)
----------------------------------------------------------------------------
Net loss                                            (216,496)      (322,628)
----------------------------------------------------------------------------

 
The decrease in funds from operations is described above. Other items
affecting net loss are described below. 
Depletion and depreciation expense for the current year was
consistent with the prior year as the impact of increased 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 was virtually offset by the impact of lower
production. 
Exploration and evaluation expense for the current year includes
costs associated with unsuccessful exploration wells, 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 specified in various production sharing contracts
("PSCs"), branch office costs for all exploration properties, and new
venture activities. 
In the current year, the Company recognized asset impairments for
exploration and evaluation assets in the Lhokseumawe block in
Indonesia, Block 2(ab) in Trinidad and Qara Dagh Block in Kurdistan.  
The Company recognized reversal of asset impairment for the D6 Block
in India.  
The impairment of long term receivables in the prior year related to
gas sales revenue receivables in Bangladesh.  
Share-based compensation expense decreased in the current year, as a
result of a decrease in the fair value per stock option granted as a
result of lower stock price during the year as compared to the prior
year and the reversal of share-based compensation expense due to
forfeitures of stock options.  
The Indian rupee weakened against the US dollar during the current
and prior years. As a result, unrealized foreign exchange losses were
recorded in the years.  
The loss on short term investments is a result of mark to market
valuation of these investments.  
The deferred tax recovery for the current year relates mainly to the
reversal of temporary differences during the tax holiday period which
mainly depends on the accounting depletion rate and capital spending
during the period. In the current year the amount of temporary
differences reversing during the tax holiday period came down
significantly resulting in deferred tax expenses which were partially
offset by deferred tax recovery recognized on issuance of convertible
notes in December 2012 and to a reduction in exploration and
evaluation assets related to the receipt of proceeds from a farm out
and from former partners in exchange for assuming the partners'
obligations for future drilling commitments. For the prior year, the
amounts of temporary differences reversing during the tax holiday
period were significantly higher resulting in deferred tax recovery. 
In the prior year, the change in accounting estimate is related to
deferred income tax resulting from 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 year ended March 31, 2013. 


 
                                                                            
----------------------------------------------------------------------------
                                                                            
                                 Additions to      Additions       Expensed 
                                  exploration     related to    exploration 
                               and evaluation         future and evaluation 
(thousands of U.S. dollars)       assets(1)(2)      drilling        costs(1)
----------------------------------------------------------------------------
Indonesia                             127,818         16,025         27,825 
Trinidad                               38,960         10,604         25,080 
All other                               1,261              -         19,586 
----------------------------------------------------------------------------
Total                                 168,039         26,629         72,491 
----------------------------------------------------------------------------
 
                                                                            
----------------------------------------------------------------------------
                                                                            
                                 Additions to  Proceeds from                
                                    property,  farm outs and                
                                    plant and          other                
(thousands of U.S. dollars)       equipment(1)  arrangements           Total
----------------------------------------------------------------------------
Indonesia                                 169        (70,203)        101,634
Trinidad                                  437              -          75,081
All other                               8,672              -          29,519
----------------------------------------------------------------------------
Total                                   9,278        (70,203)        206,234
----------------------------------------------------------------------------
 
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
current year include costs related to three wells in the Lhokseumawe
block, and one well in each of the North Ganal, Kofiau, and West
Papua IV blocks, 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
future 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 current year,
the Company also recorded proceeds of a farm-out of $9 million and
received $61 million from former partners in exchange for assuming
the partners' obligations for future drilling commitments.  
Trinidad and Tobago 
Additions to exploration and evaluation assets for Trinidad and
Tobago for the current year 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. 
All Other 
Exploration and evaluation costs expensed directly to income included
costs related to the acquisition of multi-beam data over various
blocks in Brazil. Additions of property, plant and equipment in the
year relate to development projects in India.  
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. In fiscal 2014, the joint venture plans to drill an
additional gas development well and convert of one of the two
suspended oil wells into a gas 
producing well 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. Nine of the
original 18 wells are currently shut-in and several others are
choked, primarily due to current constraints in water handling
capacity. Workovers are planned 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 PSC for the D6 Block states that natural gas must 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 GOI taking into
account the prevailing policy on natural gas. 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 2013, the Cabinet Committee of Economic Affairs of
the GOI approved a new pricing formula for domestic gas sales in
India, based on the recommendations of the Rangarajan Committee. The
pricing formula is based on the average of the prices of imported LNG
into India and the weighted average of gas prices in North America,
Europe and Japan, as follows: 


 
--  PAV = (PIAV + PWAV) / 2 
    --  PAV = Sales price for domestic natural gas sales in India 
    --  PIAV = Netback price of Indian LNG term imports (excluding spot
        imports) 
    --  PWAV = Weighted average of prevailing gas prices in global markets,
        based on: 
        --  Henry Hub gas price in U.S. and total volumes consumed in North
            America 
        --  National Balancing Point gas price in U.K. and total volume
            consumed in Europe and Eurasia 
        --  Netback price of Japanese LNG imports and total volume imported
            by Japan 

 
The pricing formula will be effective on April 1, 2014 for a period
of five years, with the price to be revised quarterly using the
approved formula. The price for each quarter will be calculated based
on the 12 month trailing average price with a lag of one quarter
(i.e., the price for April to June 2014 will be calculated based on
the averages for the 12 months ended December 31, 2013). At the
present time, the Indian LNG term imports relate primarily to the
Petronet contract with RasGas of Qatar. Per the Rangarajan Committee
Report, the pricing terms of this contract are as follows: 


 
--  FOB = Po x JCCt / $15 
    --  Po = $1.90 / MMBTU (therefore, FOB = 12.67% x JCCt) 
    --  JCCt = 12 trailing month average JCC price, subject to a floor and
        ceiling: 
        --  Floor = ((60 - N) x $20 + (N x A60)) / 60 - $4 
        --  Ceiling = ((60 - N) x $20 + (N x A60)) / 60 + $4 
            --  N = 1 for January 2009, increasing by 1 every month until
                December 2013 after which it remains at 60 
            --  A60 = 60 trailing month average price of JCC 

 
In the future, the Indian LNG term imports are expected to include
imports related to the Petronet contract with ExxonMobil for import
of LNG from the Gorgon venture in Australia. Per the Rangarajan
Committee Report, the terms of this contract are as follows: 


 
--  FOB = 14.5% x JCC 

 
Estimated liquefaction and transportation costs of $3.00/MMbtu for
older LNG facilities (pre-2010) or $4.00/MMbtu for newer LNG
facilities are to be deducted to arrive at the netback price for
Indian LNG term imports. 
Using the approved price formula, the price effective for April 1,
2014 is estimated at around $8.40/MMbtu, double the price of
$4.20/MMbtu for current gas sales from the D6 Block. The pricing
terms of the Petronet contracts are expected to result in further
increases in the gas prices in future quarters, assuming current
pricing levels of JCC, U.S. Henry Hub, U.K. National Balancing Point
and Japan LNG imports. 
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 the government share of profit
petroleum to the GOI in accordance with the PSC for the D6 Block. The
profit petroleum calculation considers capital, operating and other
expenditures made by the joint venture. 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. The government
share of profit petroleum 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 30 to the
consolidated financial statements for nine months ended March 31,
2013 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 pro
duction 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 the outlet of the gas
plant 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 the government share of profit
petroleum 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.
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. 
Planned Developments 
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 booked
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 four to six years. 
The following is a brief description of these 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 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 the development plan for certain discovered natural
gas fields was submitted in March 2013. The development plans 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 Discoveries 
Discovery: MJ-1, D6 Block, India 
In March 2013, after a multi-year hiatus, exploration drilling
recommenced in the D6 Block in India with the drilling of the MJ-1
exploration well. In May 2013, the joint venture partners announced a
significant gas and condensate discovery. The MJ-1 well was drilled
in a water depth of 1,024 metres - and to a total depth of 4,509
metres - to explore the prospectivity of a Mesozoic Synrift Clastic
reservoir lying over 2,000 metres below the already producing
reservoirs in the Dhirubhai 1 and 3 gas fields. Formation evaluation
indicates a gross gas and condensate column in the well of about 155
metres in the Mesozoic reservoirs. In the drill stem test, the well
flowed 30.6 MMcf/d of natural gas and 2,121 b/d of liquids though a
choke of 36/64", with a flowing bottom hole pressure of 8461 psia
suggesting good flow potential. Well flow rates during such tests are
limited by the rig and well test equipment configuration. The
discovery, named 'D-55', has been notified to the GOI and the
Management Committee of the block.  
Subsequent to the completion of drilling operations, a preliminary
technical evaluation has been conducted that has incorporated all
seismic and new well data. Principal findings demonstrate that most
parameters for the MJ reservoir exceed the high end pre-drill
estimates. In particular, MJ-1 has considerable thicker reservoir pay
than the best case pre-drill assessment. The fully cored MJ-1 pay
interval was found to be 95% sand bearing with net pay averaging 125
metres. In addition, the MJ-1 gas water contact, as confirmed by
wireline log and MDT data, is at the equivalent depth of a mapped
seismic flat spot and a northern structural spill point. This
validates that MJ is filled fully to structural spill and accordingly
aligns the MJ field nearer the maximum case pre-drill field size
estimates of 65 square kilometres. In comparison, the producing MA
field covers a reservoir area of 11 square kilometres. 
The MJ field discovery is well positioned to take advantage of the
existing D6 Block infrastructure. Conceptual planning has been
initiated to maximize MJ gas and condensate recovery which has a
measured compositional ratio of approximately 62 bbls/MMcf. 
An initial appraisal program of up to three wells should commence
within 6 to 8 months pending government approvals and equipment
availability. 
Potential Discoveries: Lebah-1, Ajek-1 and Cikar-1 wells, various
blocks, Indonesia 
The Lebah-1 well, drilled by the operator, ENI, in the North Ganal
block, located offshore Kalimantan in the Makassar Strait of
Indonesia, penetrated 12 feet of net pay at the top of a 41 foot
gross sand Upper Miocene sand interval, a secondary target zone of
the well. The joint venture partners have evaluated the potential of
this zone and are finalizing plans to drill the Lebah-2 appraisal
well in an area of the structure where the zone is believed to be
thicker.  
The Ajek-1 well, drilled in the Kofiau block, located offshore Papua
province in eastern Indonesia, encountered 23 feet of pay over two
target Pliocene clastic intervals, with additional thin bedded pay
potential. Drilling confirmed the presence of reservoir and
hydrocarbon charge, the primary pre-drill concerns in this previously
undrilled sub-basin. All sands encountered were hydrocarbon filled
with no water leg and C5+ gas composition indicated liquid
hydrocarbons. The well has been assessed as a sub-commercial oil and
gas discovery. The Company is evaluating the potential of drilling of
an appraisal well or one of the other prospects on the block that it
believes could contain thicker Pliocene clastic sands.  
The Cikar-1 well, drilled in the West Papua IV block, located
offshore Papua province in eastern Indonesia, encountered a 700 foot
thick section of the targeted New Guinea Limestone primary objective
and was still in the porous zone when well conditions forced
suspension of drilling operations. The well encountered gas in the
drilling of the deeper section and the temporary suspension of the
well will allow Niko to return to the well for future deepening and
testing. The Company is also evaluating the potential of drilling of
an appraisal well or one of the other prospects on the block that it
believes could also contain thick sections of New Guinea Limestone.  
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 173,922 gross
square kilometers of undeveloped land, primarily in Indonesia and
Trinidad and Tobago. 
Indonesia 
As at March 31, 2013, the Company held interests in 22 offshore
exploration blocks in Indonesia, covering 117,925 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 March 31, 2013. 


 
----------------------------------------------------------------------------
Block Name                                                             Area 
                                                        Working     (Square 
                 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 
South East Ganal                                                            
 I                   Niko  Makassar Strait  Nov. 2008       100%      3,648 
Seram                Niko         Seram NE  Nov. 2008        55%      4,991 
South Matindok       Niko      Sulawesi NE  Nov. 2008       100%      5,182 
West Sageri          Niko  Makassar Strait  Nov. 2008       100%      4,977 
Cendrawasih          Niko         Papua NW   May 2009       100%      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 
North Makassar       Niko  Makassar Strait  Nov. 2009        30%      1,787 
West Papua IV        Niko         Papua SW  Nov. 2009      49.9%      6,389 
Cendrawasih Bay                                                             
 II                Repsol         Papua NW   May 2010        50%      5,073 
C
endrawasih 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 
North Ganal           Eni  Makassar 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 
----------------------------------------------------------------------------
 
1.  The Company has signed various agreements that, subject to government
    approval, will change the working interests in several of its blocks in
    Indonesia. 
2.  In April 2013, the government approved the Company's relinquishment of
    its interest in the Lhokseumawe block. 

 
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 March 31, 2013, the Company had remaining minimum
work commitments to drill a total of ten wells. As at March 31, 2013,
the Company's share of the remaining minimum work commitments as
specified in the PSCs for the exploration period was $112 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 for or has
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 
As at March 31, 2013, the Company held 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 
Exploration                                             Working     (Square 
 Area           Operator         Location  Award Date  interest  Kilometres)
----------------------------------------------------------------------------
Block 2(ab) (1)     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      32.5%        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)(2)   BG Group         Offshore   July 2005        25%        241 
MG Block            Niko         Offshore   July 2007        70%        223 
----------------------------------------------------------------------------
 
1.  The Company has applied to relinquish Block 2(ab).  
2.  Block 5(c) contains discoveries that are included in a field development
    plan submitted to the GTT for approval. 

 
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 March 31, 2013, the Company had remaining minimum work commitments
to drill a total of ten wells. As at March 31, 2013, the minimum
remaining work commitments under the PSCs were $167 million, to be
spent at various dates through April 2016 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 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 and holds a 33.33 percent interest in the
Hazira Field, located about 25 kilometers southwest of the city of
Surat and covering an area of 50 square kilometers on and offshore.
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 at a price of $4.86/Mcf, expiring April 30, 2016, and the
commitment for future physical deliveries under this contract exceeds
the expected future production from the Hazira Field. Refer to note
30 to the consolidated financial statements for year ended March 31,
2013 for a complete discussion of this contingency. 
Surat Block 
The Company holds and is the operator of the 24 square kilometer
Surat Block located onshore adjacent to the Hazira Field. The natural
gas production from the Surat Block commenced in April 2004 and
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 into a PSC for a property located
off the west coast of Madagascar covering approximately 16,845 square
kilometers. The Company will earn a 75 percent participating interest
in the Madagascar block and is 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 to be drilled prior to September
2015 and its share of the costs of the remaining commitments pursuant
to the PSC is $10 million. The actual cost of fulfilling work
commitments may exceed the amount estimated in the PSC. The Company
is working with various parties on farm-outs to reduce its share of
future drilling costs.  
Pakistan 
The Company holds and operates the four blocks comprising the
Pakistan Blocks, located in the Arabian Sea near the city of Karachi
and covering an area of 9,921 square kilometers. The Company has
applied for relinquishment of all of the Pakistan Blocks. 
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 recovered a net amount
of approximately $15 million in June 2013.  
SEGMENT PROFIT 
INDIA 


 
----------------------------------------------------------------------------
                                              
         Year ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Natural gas revenue                                  144,070        236,363 
Oil and condensate revenue (1)                        38,372         68,149 
Royalties                                             (9,255)       (15,456)
Government share of profit petroleum                  (9,552)        (6,414)
Production and operating expenses                    (26,042)       (31,795)
Depletion and depreciation expenses                 (131,480)      (130,514)
Asset impairment                                     101,544       (133,578)
Exploration and evaluation expenses                   (1,300)       (12,233)
Current income tax recovery / (expense)                  298         (6,926)
Minimum alternate tax expense                              -         (9,107)
Deferred income tax recovery / (expense)             (82,579)        59,376 
Change in accounting estimate - deferred taxes             -        (57,865)
----------------------------------------------------------------------------
Segment profit / (loss)(2)                            24,076        (40,000)
----------------------------------------------------------------------------
Daily natural gas sales (Mcf/d)                       96,089        157,719 
Daily oil and condensate sales (bbls/d) (1)            1,024          1,706 
Operating costs ($/Mcfe)                                0.70           0.52 
Depletion rate ($/Mcfe)                                 3.47           2.09 
----------------------------------------------------------------------------
(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. 
The Company's oil and gas revenues for the year-to-date decreased
from the prior year's periods, primarily due to natural production
declines and reservoir management activities in the D6 Block.
Production from the Surat block ceased in November 2012 as the cap on
cumulative production in the approved field development plan was
reached.  
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. 
Pursuant to the terms of the Indian 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 the government share of profit petroleum 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. The
government share of profit petroleum 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. 
Operating costs at the D6 Blo
ck decreased mainly because of
significant reduction in logistics costs due to reduced movement of
material and inventory as compared to the prior year.  
Depletion and depreciation expense for the current year was
consistent with the prior year as the impact of increased 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 was virtually offset by the impact of lower
production. 
In the current year, as a result of increased reserves volumes
assigned to the D6 Block in the March 31, 2013 reserve report, the
Company recognized a $102 million reversal of the asset impairment
recorded in the prior year related to the D6 Block in India. In the
prior year, as a result of reduced reserves volumes assigned to the
D6 Block in the March 31, 2012 reserve report, the Company had
recognized a $133 million impairment related to the Company's
producing assets in the D6 Block.   
There was a current income tax recovery in the current year,
primarily as a result of the adjustment to the government share of
profit petroleum described above, which is deductible for tax
purposes. 
The Company currently pays minimum alternate tax based on Indian-GAAP
accounting income for the D6 block. For the current year, the D6
Block did not generate positive accounting income under Indian GAAP,
resulting in a no minimum alternative tax expense in the current
year. 
The deferred tax expense for the current year relates mainly to the
reversal of temporary differences during the tax holiday period which
mainly depends on the accounting depletion rate and capital spending
during the period. In the current year the amount of temporary
differences reversing during the tax holiday period came down
significantly resulting in deferred tax expenses. For the prior year,
the amounts of temporary differences reversing during the tax holiday
period were significantly higher resulting in deferred tax recovery. 
In the prior year, the change in accounting estimate is related to
deferred income taxes as a result of estimating the amount of taxable
temporary differences reversing during the tax holiday period.  
Contingencies 
The Company has contingencies related to natural gas sales contracts
for the Hazira Field, the profit petroleum calculations for the
Hazira Field and the D6 Block, and income taxes for the Hazira Field
and the Surat Block. Refer to note 30 to the consolidated financial
statements for year ended March 31, 2013 for a complete discussion of
these contingencies. 
BANGLADESH 


 
----------------------------------------------------------------------------
                                                       Year ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Natural gas revenue                                   46,444         49,714 
Condensate revenue                                     6,891          8,141 
Government share of profit petroleum                 (18,049)       (19,589)
Production and operating expenses                    (10,278)        (7,377)
Depletion and depreciation expenses                  (12,441)       (13,055)
Exploration and evaluation expenses                     (361)          (933)
Impairment of long-term receivable                         -        (22,996)
----------------------------------------------------------------------------
Segment profit / (loss)(1)                            12,206         (6,095)
----------------------------------------------------------------------------
Daily natural gas sales (Mcf/d)                       54,936         58,962 
Daily condensate sales (bbls/d)                          175            191 
Operating costs ($/Mcfe)                                0.47           0.29 
Depletion rate ($/Mcfe)                                 0.61           0.59 
----------------------------------------------------------------------------
 
1.  Segment profit is a non-IFRS measure as calculated above. 

 
The Company's oil and gas revenues for the year decreased from the
prior year, primarily due to the curtailment of production from one
of the four wells in the Bangora field due to operational issues.
Repairs to this well should be completed by the end of the second
quarter and production restored to previous levels in the third
quarter. 
Pursuant to the terms of the PSC for Block 9, the Government of
Bangladesh was entitled to 61 percent of profit gas in the current
and prior years, which equates to 34 percent of revenues while the
Company is recovering historical capital costs. Overall, the
government share of profit petroleum decreased due to decreased
revenues from Block 9. 
Production and operating expense increased due to the well repair and
commencement of facilities expansion work during the period. 
The impairment of long term receivables in the prior year related to
a receivable for natural gas sales to the Bangladesh Oil, Gas and
Mineral Corporation (Petrobangla) from the Feni field in Bangladesh.
The Company has filed for arbitration to settle this receivable. Due
to the uncertainty with respect to the timing of resolution of this
claim and various claims against the Company (as described below), a
provision has recorded against the full amount of the receivable.  
Contingencies 
The Company has contingencies related to various claims filed against
it with respect to the Feni property in Bangladesh as at March 31,
2013. Refer to note 30 to the consolidated financial statements for
the year ended March 31, 2013 for a complete discussion of these
contingencies. 
Indonesia, Trinidad and Tobago, Kurdistan and Brazil 


 
----------------------------------------------------------------------------
(thousands of     Exploration and                                           
 U.S. dollars)  evaluation expenses   Asset impairment  Income tax recovery 
                ------------------------------------------------------------
                                    Year ended March 31,                    
                ------------------------------------------------------------
                     2013      2012      2013      2012      2013      2012 
----------------------------------------------------------------------------
Indonesia         (92,206)  (61,717)  (16,281)        -    34,671     9,319 
Trinidad          (58,445) (111,996)  (12,631)        -         -    22,913 
Kurdistan          (1,851)  (40,455)  (38,919)        -         -         - 
Brazil            (13,956)        -         -         -         -         - 
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
(thousands of                         Depreciation and                      
 U.S. dollars)                             other           Segment Profit   
                ------------------------------------------------------------
                                    Year ended March 31,                    
                ------------------------------------------------------------
                                         2013      2012      2013      2012 
----------------------------------------------------------------------------
Indonesia                                 116     6,256   (73,700)  (46,142)
Trinidad                                 (128)      (85)  (71,204)  (89,168)
Kurdistan                                   -       (25)  (40,770)  (40,480)
Brazil                                      -         -   (13,956)        - 
----------------------------------------------------------------------------

 
Indonesia 
During the current year, the Company expensed exploration and
evaluation costs of $60 million related to unsuccessful wells drilled
in Indonesia in the year, including three wells in the Lhokseumawe
block, and recognized an asset impair
ment of $16 million related to
the Lhokseumawe block as the Company had given notice to surrender
its interest to the operator of the block. In addition, exploration
and evaluation costs expensed directly to income in the current year
included $17 million for seismic and other exploration projects, $8
million for branch office costs, $4 million for share-based
compensation costs, and $3 million for new ventures costs. For the
prior year, the exploration and evaluation expenses related primarily
to costs expensed directly to income in the year.  
Trinidad and Tobago 
During the current year, the Company expensed exploration and
evaluation costs of $34 million related to unsuccessful wells drilled
in Block 2(ab) and recognized an asset impairment of $13 million for
Block 2(ab). In addition, exploration and evaluation costs expensed
directly to income in the current year included $10 million for
seismic and other exploration projects, $9 million for payments
specified in various PSCs, and $5 million for branch office costs.
For the prior year, the exploration and evaluation expenses included
costs of $24 million related to unsuccessful wells and costs of $88
million expensed directly to income in the year.  
Kurdistan 
In the current year, the Company recognized an asset impairment of
$39 million when it wrote down the carrying value of the Qara Dagh
Block exploration and evaluation asset to the expected net proceeds
to be received after relinquishment of the block. 
Brazil 
In the current year, the Company incurred $14 million of costs
related to the acquisition of multi beam data over various blocks in
Brazil. In May 2013, the Company and its joint venture partner were
awarded two blocks offshore the north eastern coast of Brazil. The
Company plans to market the multi-beam data to other successful
bidders of blocks in the Brazil bid round. 
Corporate 


 
----------------------------------------------------------------------------
                                                       Year ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Share-based compensation expense                      10,894         35,516 
Finance income                                        (1,999)        (4,302)
Finance expense                                       33,768         34,970 
Foreign exchange loss                                  3,200         14,366 
Loss on short-term investments                         2,106          5,823 
Deferred tax recovery                                  7,476              - 
----------------------------------------------------------------------------

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


 
----------------------------------------------------------------------------
                                                        Year ended March 31,
(thousands of U.S. dollars)                              2013           2012
----------------------------------------------------------------------------
Interest expense                                       21,806         21,674
Accretion expense                                       8,677          7,612
Other                                                   3,285          5,464
----------------------------------------------------------------------------
Finance expense                                        33,768         34,750
----------------------------------------------------------------------------

 
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 relates to the recorded liabilities for the convertible
notes, the convertible debentures and decommissioning obligations.
The recorded liabilities increase as time progresses to the final
settlement date, resulting in increased accretion expenses each year.
Other finance expenses include costs related to pursuing financing
options. 
Foreign Exchange 


 
----------------------------------------------------------------------------
                                                        Year ended March 31,
(thousands of U.S. dollars)                              2013           2012
----------------------------------------------------------------------------
Realized foreign exchange loss                          3,123          8,271
Unrealized foreign exchange loss                           77          6,095
----------------------------------------------------------------------------
Total foreign exchange loss                             3,200         14,366
----------------------------------------------------------------------------

 
Due to the weakening of the Indian rupee versus the U.S. dollar in
the current and prior years, the Company has realized foreign
exchange losses primarily related to the differences in the Indian
rupee to U.S. dollar exchange rate at the time of recording versus
the time of settlement of individual accounts receivable and accounts
payable. Unrealized foreign exchange losses have arisen on the
translation of the Indian-rupee denominated income tax receivable and
site restoration deposits. 
Foreign exchange gains in the year on U.S. dollar cash held by a
company whose functional currency is the Canadian dollar have
increased accumulated other comprehensive income but do 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 the Company's operating, funds from
operations and earnings netbacks (all of which are non-IFRS
measures): 


 
----------------------------------------------------------------------------
                              Year ended March 31,     Year ended March 31, 
                                              2013                     2012 
($/Mcfe)                   India Bangladesh  Total  India Bangladesh  Total 
----------------------------------------------------------------------------
Oil and natural gas                                                         
 revenue                    4.89       2.61   4.09   4.97       2.64   4.36 
Royalties                  (0.25)         -  (0.16) (0.25)         -  (0.19)
Government share of profit                                                  
 petroleum                 (0.26)     (0.88) (0.48) (0.10)     (0.89) (0.31)
Production and operating                                                    
 expenses                  (0.70)     (0.47)  (0.6) (0.52)     (0.29) (0.46)
----------------------------------------------------------------------------
Operating netback           3.68       1.26   2.84   4.10       1.46   3.40 
----------------------------------------------------------------------------
G&A                                          (0.12)                   (0.11)
Farm out recovery income                      0.01                     0.08 
Net finance expense                          (0.45)                   (0.35)
Current income tax expense                    0.01                    (0.07)
Minimum alternate tax                            -                    (0.11)
----------------------------------------------------------------------------
Funds from operations                                                       
 netback                                      2.27                     2.84 
----------------------------------------------------------------------------
Production and operating                                                    
 expenses                                    (0.02)                   (0.02)
Depletion and depreciation                                                  
 expense                                     (2.51)                   (1.74)
Exploration and evaluation                                                  
 expenses                                    (2.99)                   (2.80)
Asset Impairment                             (1.17)                   (1.60)
Reversal of asset                                                           
 impairment                                   1.76                        - 
Impairment of long-term                                                     
 receivable                                      -                    (0.30)
Share based compensation                                                    
 expense                                     (0.19)                   (0.26)
Net finance expense                          (0.15)                   (0.09)
Unrealized foreign                                                          
 exchange loss                               (0.04)                   (0.07)
(Loss) / gain on short-                                                     
 term investment                                                            
Deferred income tax                                                         
 (expense) / reduction                       (0.70)                    1.10 
Change in accounting                                                        
 estimate - deferred taxes                       -                    (0.69)
Share-based compensation                                                    
 expense - impact of                                                        
 option cancellation                             -                    (0.17)
----------------------------------------------------------------------------
Earnings netback                             (3.74)                   (3.87)
----------------------------------------------------------------------------

 
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. 
LIQUIDITY AND CAPITAL RESOURCES 
The Company's funding strategy is to use funds from operations from
its producing properties, proceeds from non-core asset dispositions,
farm-outs and other arrangements, and equity financing to fund its
exploration programs and use funds from operations from its producing
properties, and debt and equity financing to fund its development
programs. Due to the timing and availability of the funding from
various sources, the Company may, on occasion, utilize debt financing
to fund its exploration programs and repay the debt with funds from
operations, proceeds from non-core asset dispositions, farm-outs and
other arrangements, and/or equity financing. If excess funds are
available after funding the Company's planned capital programs for
the foreseeable future, then the Company's Board of Directors would
evaluate the option of paying dividends to its shareholders. 
Credit Facility 
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 financial covenants of the credit facilities, calculated at the end of  
each fiscal quarter, are as follows:                                        
 
i.   Senior Debt to EBITDAX ratio not greater than 3:1; 
ii.  Debt to EBITDAX ratio not greater than 3.75:1; 
iii. EBITDAX to Interest Expense ratio greater than 3:1; and 
iv.  Debt to Capitalization ratio not greater than 50%. 
 
As at March 31, 2013, as defined in the Credit Agreement:                   
 
i.   Senior Debt includes the Company's a) borrowings under credit
     facilities and b) finance lease obligation; 
ii.  Debt includes the Company's a) Senior Debt and b) senior unsecured
     convertible notes, less c) unrestricted cash and cash equivalents;  
iii. EBITDAX (for the trailing 12 months ending at the end of each fiscal
     quarter) includes the Company's net income less a) Interest Expense, b)
     income taxes, c) depletion and depreciation expense, d) exploration and
     evaluation expenses, and e) other non-cash items; 
iv.  Interest Expense includes the Company's a) interest expense and b)
     standby and other fees in respect of Debt; and 
v.    Capitalization includes the Company's a) Debt and b) Shareholders'
     Equity (adjusted for the impact of conversion to IFRS). 

 
As at March 31, 2013, the Senior Debt to EBITDAX ratio was 0.9:1, the
Debt to EBITDAX ratio was 1.0:1, the EDITDAX to Interest Expense
ratio was 7.0:1, and the Debt to Capitalization ratio was 14%, well
within the specified financial covenants. Based on the Company's
financial forecasts for fiscal 2014 and fiscal 2015, the Company
expects to remain in compliance with the financial covenants of the
credit facility throughout fiscal 2014 and fiscal 2015. 
The maximum available credit under the credit 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, based on the evaluation of the Company's reserves as at
March 31, 2012 and based on an assumption that the pricing for gas
sales from the D6 Block in India would remain unchanged at US$4.20
per MMBtu for the life of the D6 gas fields. As at March 31, 2013,
the Company had borrowed $90 million under the credit facilities.
Upon closing of the Company's private placement of the senior
unsecured notes in June 2013, the amounts outstanding and the
availability under the credit facility were reduced to $80 million.
In connection with the completion of the Company's annual independent
reserves evaluation as at March 31, 2013, the borrowing base of the
facility will be re-determined by the syndicate banks on or before
July 31, 2013, using the new pricing mechanism for domestic gas
produced in India that was recently approved by the Government of
India and will result in a significant increase in the price for the
D6 Block natural gas sales contracts that expire on March 31, 2014.  
Suspension of Quarterly Dividends 
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. 
Repayment of Convertible Debentures  
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 Cdn$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 comm
on 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. 
Non-core Asset Dispositions, Farm-outs and Other Arrangements 
Executed transactions resulting from the Company's program of
farm-outs and other arrangements raised $70 million in fiscal 2013
and will provide an additional $44 million in fiscal 2014. The
Company is also currently in negotiations with various third parties
regarding non-core asset dispositions, further farm-outs, and other
arrangements that are expected to provide significant liquidity for
the Company in the future. 
Contractual Obligations 
The Company has various contractual obligations, as follows: 


 
----------------------------------------------------------------------------
As at March 31, 2013                          Obligations by Period         
                                                                     greater
                                    less than   1 to 3    3 to 5   than  5
(thousands of U.S. dollars)    Total    1 year     years     years     years
----------------------------------------------------------------------------
Guarantees                     7,991     1,416     6,575         -         -
Finance lease obligations                                                   
 (1)                          58,292    10,757    21,513    21,513     4,509
Convertible notes payable                                                   
 (2)                         153,396     8,510    15,847   129,039         -
Decommissioning obligations                                                 
 (3)                          84,258     1,796     6,626         -    75,836
Exploration work                                                            
 commitments (4)             289,000    88,000   201,000         -         -
Operating lease obligation                                                  
 (5)                         492,000   141,000   281,000    70,000         -
----------------------------------------------------------------------------
Total contractual                                                           
 obligations               1,084,937   251,479   532,561   220,552    80,345
----------------------------------------------------------------------------
 
1.  The finance lease obligation relates to the charter of the FPSO used in
    the MA field in the D6 Block and includes both the current and long-term
    portions. 
2.  The convertible notes are recorded in the consolidated financial
    statements at $80 million, which is a discounted value to reflect the
    fact that the interest rate is lower than the market interest rate on
    similar notes without a conversion feature. The convertible notes are
    included in the table based on the sum of principal amount that would be
    required to be repay the Cdn$115 million convertible debentures plus
    quarterly interest payments, converted at the year-end exchange rate. 
3.  Decommissioning obligations are based on the undiscounted estimated
    future liability of the Company as disclosed in the notes of the
    financial statements for the year ended March 31, 2013. They do not
    include costs related to wells or facilities that were not complete as
    at March 31, 2013. 
4.  Details of the exploration work commitments by country are included in
    the Background of Properties section of this MD&A. The majority of the
    exploration work commitments relate to production sharing contracts
    where the Company is working on farm-outs to joint venture partners in
    exchange for a re-imbursement a portion of the sunk costs, funding of a
    disproportionate share of future costs, and/or future payments related
    to commencement of production or other milestones. Completion of these
    farm-outs could significantly reduce the Company's share of the future
    commitment costs. The Company has in the past and may in the future
    receive extensions to the periods required to complete the work
    commitments. 
5.  The operating lease obligation relates to the multi-year drilling rig
    contract for the Ocean Monarch that commenced on October 2, 2012 and
    runs for a term of four years, with a fifth year at the Company's
    option. The obligations shown in the table above reflect the gross
    minimum commitment amounts, before re-imbursement from partners in
    future wells and before potential assignment of the rig contract to
    third parties. The Company plans to use the drilling rig to fulfill its
    exploration drilling work commitments in Indonesia (included in the
    Exploration Work Commitments line item). The Company expects that a
    significant portion of the obligation will be funded by joint venture
    partners or by third parties who utilize the rig upon assignment of the
    rig contract. The table does not include costs related to the service
    contracts for the Indonesian drilling program as these contracts are
    generally based on usage and can be terminated with one week's notice. 

 
Cash and Working Capital Deficit as at March 31, 2013 
As at March 31, 2013, the Company had unrestricted cash of $56
million and a working capital deficit (current assets less current
liabilities) of $32 million.  
Issuance of Senior Unsecured Notes Subsequent to Year-end 
In June 2013, the Company issued $63.5 million of senior unsecured
notes. The notes bear interest at 7.00% per annum, payable monthly,
and will be repaid through twelve equal monthly principal payments
commencing August 13, 2013. Principal and interest payments are
payable in cash or, at the Company's option, in common shares of the
Company. If the Company elects to make any portion of a payment in
common shares of the Company, the number of shares to be issued will
be determined by dividing the amount to be paid in stock by 94.5% of
the lower of the volume weighted average price of the shares for the
fifteen day period prior to the payment date and the volume weighted
average price of the shares for the five day period prior to the
payment date, subject to certain restrictions. The notes are ranked
equally with the Company's Cdn$115 million senior unsecured
convertible notes issued in December, 2012.  The net proceeds from
the issue of the notes were approximately US$58.5 million, after
deducting the initial purchasers' discount and the estimated related
expenses payable by Niko. Under the terms of the notes, the net
proceeds are available for general corporate purposes.  
Funding of Working Capital Deficit, Planned Capital Spending and
Repayment of Senior Unsecured Notes 
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.
Funding for the Company's capital spending and repayment of the
senior unsecured notes is expected to be provided by a combination of
ongoing funds from operations from its producing properties, proceeds
from non-core asset dispositions, farm-outs, and other arrangements,
potential increases in the availability under its current credit
facility or a replacement credit facility, additional debt financing,
or issuance of equity.  
Contingencies 
The Company has a number of contingencies as at March 31, 2013 that
could significantly impact liquidity. Refer to note 14 to the
consolidated financial statements for the year ended March 31, 2013
for a complete discussion of these contingencies. 
SUMMARY OF QUARTERLY RESULTS 
The following tables set forth selected financial information of the
Company, in thousands of U.S. dollars unless otherwise indicated, for
the eight most recently completed quarters to March 31, 2013: 


 
----------------------------------------------------------------------------
Three months ended                   June 30, Sept. 30,  Dec. 31,  Mar. 31, 
                                         2012      2012      2012      2013 
----------------------------------------------------------------------------
Oil and natural gas revenue (1)        55,099    58,080    46,515    39,670 
Net income (loss)                     (92,121)  (28,573)  (93,709)   (2,092)
Per share                                                                   
  Basic and diluted ($)                 (1.78)    (0.55)    (1.64)    (0.03)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Three months ended                   June 30, Sept. 30,  Dec. 31,  Mar. 31, 
                                         2011      2011      2011      2012 
----------------------------------------------------------------------------
Oil and natural gas revenue (1)        88,277    86,810    74,789    71,434 
Net income (loss)                     (54,983)  (43,916)  (40,405) (183,324)
Per share                                                                   
  Basic ($)                             (1.07)    (0.85)    (0.78)    (3.55)
----------------------------------------------------------------------------
(1) Oil and natural gas revenue is oil and natural gas sales less royalties 
    and the government share of profit petroleum.                           
                                                                            
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 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, 2013, the Company recognized a $102
    million reversal of asset impairment related to the D6 Block in India.
    The reversal of the impairment resulted from the impact of increased
    reserves volumes assigned to the D6 Block as at March 31, 2013 by
    Deloitte AJM. Management's estimate of value in use for the block was
    determined using forecasted cash flows using escalated prices and
    estimates of future production, capital and operating expenses. The
    prices used were based on gas pricing formula approved by the Government
    of India in June 2013, which is expected to increase natural gas sales
    price from the current price of $4.20/MMBtu to an estimated $8.40/MMbtu,
    effective April 1, 2014.  
--  In the quarter ended March 31, 2013, the Company recorded a minimum
    alternate tax recovery of $6 million due to adjustment of D6 reserves in
    March 2013 reserve report, calculated according to Indian GAAP. 
--  In the quarter ended December 31, 2012, there was a deferred tax
    recovery of $7 million due to the issuance of the convertible notes. 
--  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 June 30, 2012, the Company recorded an additional
    $6 million of the government share of profit petroleum for the Hazira
    Field, reducing oil and natural gas revenue. The adjustment to the
    government share of profit petroleum 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, 2012, depletion expense increased as a
    result of revisions to the reserves and estimated future costs to
    develop the reserves. 
--  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 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 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 September 30, 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 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. 
 
FOURTH QUARTER                                                              
                                                                            
Funds from Operations                                                       
                                                                            
----------------------------------------------------------------------------
                                                    Quarter ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Oil and natural gas revenue                           39,670         71,434 
Production and operating expenses                    (10,104)       (10,920)
General and administrative expenses                   (1,942)        (3,429)
Finance income                                           980          1,598 
Bank charges and other finance income                   (756)        (3,378)
Realized foreign exchange loss                           861         (3,868)
----------------------------------------------------------------------------
EBITDAX(1)                                            28,709         51,437 
Interest expense                                      (4,200)        (5,527)
Current income tax expense                            (1,010)        (2,872)
Minimum alternate tax recovery                         6,249          9,914 
----------------------------------------------------------------------------
Funds from operations (1)                             29,748         52,952 
----------------------------------------------------------------------------
(1) Funds from operations is a non-IFRS measure as defined under "Non-IFRS  
    measures" in this MD&A.                                                 

 
The explanations provided in "Overall Performance" apply to the
changes in the quarter ended March 31, 2013 compared to the quarter
ended March 31, 2012 except as follows: 
There was minimum alternate tax (MAT) expense in the current year
quarter and prior year's quarter on Indian GAAP accounting profits
from the D6 block. There was an adjustment to MAT expense in the
current year's quarter as a result of the change in Indian GAAP
accounting profits as due to the change in estimate of reserves and
its effect on depletion expense. 
Net Income (Loss) 


 
----------------------------------------------------------------------------
                                                   Quarters ended March 31, 
(thousands of U.S. dollars)                             2013           2012 
----------------------------------------------------------------------------
Funds from operations (non-IFRS measure)              29,748         52,952 
Production and operating expenses                       (264)           (55)
Depletion and depreciation expense                   (32,654)       (58,569)
Exploration and evaluation expense                   (21,579)      (116,015)
Gain on short-term investments                        (1,547)           360 
Asset impairment                                           -       (133,504)
Reversal of asset impairment                         101,544              - 
Share-based compensation expense                      (2,883)        (3,738)
Other expenses                                             -              - 
Finance expense                                       (1,982)        (1,970)
Impairment of long-term receivable                         -        (22,996)
Unrealized foreign exchange (loss) / gain             (1,512)         1,531 
Deferred income tax (expense) / reduction            (70,963)        98,679 
----------------------------------------------------------------------------
Net income (loss)                                     (2,092)      (183,325)
----------------------------------------------------------------------------

 
The explanations provided in "Overall Performance" applies to the
changes in the quarter ended March 31, 2013 compared to the quarter
ended March 31, 2012 except as follows: 
Exploration expense in the prior year quarter is comprised primarily
of the costs to exit the D4 block in India, seismic in Trinidad,
unsuccessful exploration wells in in Trinidad and India, branch
operating costs and annual payments specified in the various PSCs.  
SELECTED ANNUAL INFORMATION 


 
----------------------------------------------------------------------------
                                                       Years ended March 31,
(thousands of U.S. dollars)               2013           2012           2011
----------------------------------------------------------------------------
Oil and natural gas revenue(1)         199,364        321,311        403,856
Net income (loss)                     (216,496)      (322,628)        69,897
Per share basic ($)                      (3.76)         (6.25)          1.37
Per share diluted ($)                    (3.76)         (6.25)          1.36
Total assets                         1,493,807      1,618,487      1,889,741
Total long-term financial                                                   
 liabilities                           169,785         25,000        309,221
Dividends per share (Cdn$)                0.06           0.24           0.21
----------------------------------------------------------------------------
(1) Oil and natural gas revenue is oil and natural gas sales less royalties 
    and the government share of profit petroleum.                           

 
The decrease in revenue and changes in net income is described above
in the Overall Performance section. Some of the major changes in
Assets and Liabilities are described below: 


 
--  Total assets decreased each year primarily due to depletion and asset
    impairments. 
--  Total long term financial liabilities in fiscal 2011 included the
    Cdn$310 million convertible debentures that moved to current liabilities
    in fiscal 2012. These debentures were repaid in fiscal 2013 using
    proceeds from issuance of Cdn$115 million senior unsecured convertible
    notes and Cdn$158 million of common shares, along with borrowings on the
    Company's credit facility and cash on hand. 

 
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 estimated 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 $4 million was recorded for the three and twelve
months ended March 31, 2013. 
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 payments 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 $3 million and $19 million for the three and
twelve months ended March 31, 2013 were recorded for interest expense
and accretion of the discount on the convertible notes and
debentures. 
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. 
Oil and Natural Gas Reserves 
Reserves estimated can have a significant effect on net earnings as a
result of their impact on the depletion rate, provisions for
decommissioning obligations and asset impairments. Independent
qualified engineers in conjunction with the Company's reserve
engineer estimate the value of oil and natural gas reserves on an
annual basis. The estimation of reserves is an inherently complex
process requiring significant judgment. Estimates of economically
recoverable oil and gas reserves and future cash flows from those
reserves are based upon a number of variables and assumptions such as
geological interpretation, commodity prices, operation and capital
costs and production forecasts, all of which may vary considerable
from actual results. These estimates are expected to revised upward
or downward over time, as additional information such as reservoir
performance becomes available, or as economic conditions change. 
Depletion and Impairment of Producing Assets 
The net carrying value of producing asset is depleted using the
unit-of-production method by reference to the ratio of production in
the year to the related total proved reserves of oil and natural gas,
taking into account estimated future development costs necessary to
bring those reserves into production. Revisions to reserve estimates
and the associated future cash flows could significantly increase or
decrease depletion expense charged to net income and could result in
an impairment of property, plant and equipment charged as an expense
to net income. 
Impairment of Tangible and Intangible Assets 
At the end of each reporting period, the Company assesses whether
there is any indication that an asset may be impaired. If any such
indication exists, the Company estimates the recoverable amount of
the asset. Indications include: a significant decline in market value
of the asset; significant changes have taken or will take place in
the technological; market, economic or legal environment in which the
Company operates or in the market to which an asset is dedicated; a
significant increase in market interest rates that would affect the
discount rate and value of the asset; and the carrying amount of the
net assets of the entity is more than its market capitalization.
Irrespective of whether there is any indication of impairment, the
Company tests intangible assets with an indefinite useful life and
intangible assets not yet available for use for impairment annually
by comparing its carrying amount with its recoverable amount. The
recoverable amount requires the use of assumptions and estimates
including quantities of recoverable resources, estimated production
quantities, future commodity prices and further exploration,
development and production costs. Changes in any of these assumptions
could impact the estimated recoverable amount and result in an
impairment of exploration and evaluation assets, development assets,
capital work-in-progress and other property, plant and equipment. 
Decommissioning Obligations 
Production sharing contracts that the Company has entered into
indicate an obligation for abandonment of wells and facilities
including removal of all equipment and installations and site
restoration, collectively termed decommissioning obligations.
Provision is made for the estimated cost of decommissioning
obligations for a well that has been drilled and for equipment or
installations upon completion. The provision is capitalized in the
relevant asset category and a corresponding liability is recognized. 
The provision for decommissioning obligations is calculated as the
present value of the expenditures expected to be required to settle
the obligation in the future. The present value is based on the best
estimate of future costs and the economic lives of the wells,
facilities and pipelines. There is uncertainty regarding both the
amount and timing of incurring these costs and a change in either
could result in an adjustment to the relevant capital asset and the
decommissioning obligation. 
Income Taxes 
The Company estimates current and future income taxes based on its
interpretation of tax laws in the various jurisdictions in which it
operates and pays income taxes. The Company recorded its income tax
expense including provisions that provide for a tax holiday deduction
for various undertakings related to the Hazira and Surat properties
for the taxation years 1998 to 2008. Should the tax authorities
determine that the tax holiday deduction does not apply to natural
gas, the Company would pay additional cash taxes, write-off the net
income tax receivable on the statement of financial position and
recognize additional income tax expense as a charge to net income.
This may also impact the oil and natural gas reserves and asset
impairment related to these properties. See note 31 to the
consolidated financial statements for further discussion. 
Share-Based Compensation 
Compensation expense associated with the Company's share-based
compensation plan is calculated and, recognized in net income or
capitalized, over the vesting period of the stock option with a
corresponding increase in contributed surplus. A forfeiture rate used
in the calculation of compensation expense is estimated on the grant
date and is adjusted to reflect the actual number of options that
vest. 
ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED 
As of January 1, 2013, Niko will be required to adopt amendments to
IAS 1 "Presentation of Financial Statements" which will require
companies to group together items within other comprehensive income
that may be reclassified to the net earnings section of the
comprehensive income statement. Niko does not expect a material
impact as a result of the amendments. Each of the additional new
standards outlined below is effective for annual periods beginning on
or after January 1, 2013 with early adoption permitted, except for
IFRS 9 "Financial Instruments" which is effective for annual periods
beginning on or after January 1, 2015. The Company has not yet
assessed the impact, if any, that the new amended standards will have
on its financial statements or whether to early adopt any of the new
requirements.  
IFRS 9 - Financial Instruments 
The result of the first phase of the IASB's project to replace IAS
39, "Financial Instruments: Recognition and Measurement". The new
standard replaces the current multiple classification and measurement
models for financial assets and liabilities with a single model that
has only two classification categories: amortized cost and fair
value. 
IFRS 10 - Consolidated Financial Statements 
Replaces Standing Interpretations Committee 12, "Consolidation -
Special Purpose Entities" and the consolidation requirements of IAS
27 "Consolidated and Separate Financial Statements". The new standard
replaces the existing risk and rewards based approaches and establish
control as the determining factor when determining whether an
interest in another entity should be included in the consolidated
financial statements. 
IFRS 11 - Joint Arrangements 
Replaces IAS 31 "Interests in Joint Ventures" and IAS 28 "Investment
in Associates". IFRS 11, "Joint Arrangements", requires a venturer to
classify its interest in a joint arrangement as a joint venture or
joint operation. Joint ventures will be accounted for using the
equity method of accounting whereas for a joint operation the
venturer will recognize its share of the assets, liabilities, revenue
and expenses of the joint operation. Under existing IFRS, entities
have the choice to proportionately consolidate or equity account for
interests in joint ventures. 
IFRS 12 - Disclosure of Interests in Other Entities 
Provides comprehensive disclosure requirements on interests in other
entities, including joint arrangements, associates, and special
purpose vehicles. The new disclosure requires information that will
assist financial statement users in evaluating the nature, risks and
financial effects of an entity's interest in subsidiaries and joint
arrangements.  
IFRS 13 - Fair Value Measurement 
Provides a common definition of fair value within IFRS. The new
standard provides measurement and disclosure guidance and applies
when IFRS requires or permits the item to be measured at fair value,
with limited exceptions. This standard does not determine when an
item is measured at fair value and as such does not require new fair
value measurements.  
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.  
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 a material adverse
impact on the Company:  


 
--  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 March 31, 2013. 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 July 8, 2013, the Company had the following amounts outstanding: 


 
----------------------------------------------------------------------------
                                                      Number Cdn$ Amount (1)
----------------------------------------------------------------------------
Common shares                                     70,215,911  1,477,585,000 
Preferred shares                                         Nil            Nil 
Stock options                                      4,866,936              - 
----------------------------------------------------------------------------
 
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 July 8, 2013 is $1,324,234,000.  

 
MANAGEMENT'S REPORT 
The accompanying consolidated financial statements and all other
information contained elsewhere in this report is the responsibility
of the management of Niko Resources Ltd. The consolidated financial
statements necessarily include amounts that are based on estimates,
which have been objectively developed by management using all
relevant information. The financial information contained elsewhere
in this report has been reviewed to ensure consistency with the
consolidated financial statements. 
Management maintains and evaluates the effectiveness of disclosure
controls and procedures and internal control over financial reporting
for Niko Resources Ltd. Disclosure controls and procedures are
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with International
Financial Reporting Standards. The Company evaluates the
effectiveness of internal controls over financial reporting at the
financial year end and discloses its conclusions about the
effectiveness in the Company's annual Management's Discussion and
Analysis. 
The Audit Committee of the Board of Directors, comprised of
non-management directors, has reviewed the consolidated financial
statements with management and the auditors. The consolidated
financial statements have been approved by the Board of Directors on
recommendation of the Audit Committee. 
The consolidated financial statements have been audited by KPMG LLP,
the external auditors, in accordance with auditing standards
generally accepted in Canada on behalf of the shareholders. 


 
(signed) "Edward S. Sampson"          (signed) "Glen R. Valk"               
Edward S. Sampson                     Glen R. Valk                          
President and CEO                     Vice President, Finance and CFO       
July 8, 2013                                                                

 
INDEPENDENT AUDITORS' REPORT 
To the Shareholders of Niko Resources Ltd. 
We have audited the accompanying consolidated financial statements of
Niko Resources Ltd., which comprise the consolidated statements of
financial position as at March 31, 2013 and March 31, 2012, the
consolidated statements of comprehensive income (loss), changes in
shareholders' equity and cash flows for the years ended March 31,
2013 and 2012, and notes, comprising a summary of significant
accounting policies and other explanatory information. 
Management's responsibility for the consolidated financial statements 
Management is responsible for the preparation and fair presentation
of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error. 
Auditors' responsibility 
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material
misstatement. 
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant
to the entity's preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. 
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion. 
Opinion 
In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Niko
Resources Ltd. as at March 31, 2013 and March 31, 2012, and its
consolidated financial performance and its consolidated cash flows
for the years ended March 31, 2013 and 2012 in accordance with
International Financial Reporting Standards. 


 
(signed) "KPMG LLP"                                                         
Chartered Accountants                                                       
Calgary, Canada                                                             
July 8, 2013                                                                
                                                                            
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                               
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars)                            As at          As at 
                                              March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                           56,393         64,495 
  Restricted cash (note 5)                             1,416          6,790 
  Accounts receivable (note 6)                        84,834         61,247 
  Inventories (note 7)                                10,100          9,961 
  Short-term investment (note 8)                          92            748 
----------------------------------------------------------------------------
                                                     152,835        143,241 
----------------------------------------------------------------------------
Restricted cash (note 5)                              14,029         11,283 
Long-term investment (note 9)                          1,270          2,752 
Long-term accounts receivable (note 10)                1,528          2,202 
Exploration and evaluation assets (note 11)          695,624        856,880 
Property, plant and equipment (note 12)              594,166        509,091 
Income tax receivable (note 30e)                      34,355         34,724 
Deferred tax asset (note 24)                               -         58,314 
----------------------------------------------------------------------------
                                                   1,493,807      1,618,487 
----------------------------------------------------------------------------
Liabilities                                                                 
Current liabilities                                                         
  Accounts payable and accrued liabilities                                  
   (note 13)                                         177,576        101,660 
  Current tax payable                                  1,272          1,220 
  Current portion of finance lease obligation                               
   (note 15)                                           6,057          4,804 
  Convertible debentures (note 16)                         -        306,052 
----------------------------------------------------------------------------
                                                     184,905        413,736 
----------------------------------------------------------------------------
Credit facility borrowings (note 14)                  90,000         25,000 
Finance lease obligation (note 15)                    37,024         43,671 
Convertible notes payable (note 16)                   79,785              - 
Decommissioning obligation (note 17)                  41,177         40,017 
Deferred tax liabilities (note 24)                   185,109        195,515 
----------------------------------------------------------------------------
                                                     618,000        717,939 
----------------------------------------------------------------------------
Shareholders' Equity                                                        
Share capital (note 19)                            1,324,234      1,171,439 
Contributed surplus                                  139,137        104,964 
Equity component of convertible debentures            23,232         14,765 
Currency translation reserve                          (2,757)        (2,094)
Deficit                                             (608,039)      (388,526)
----------------------------------------------------------------------------
                                                     875,807        900,548 
----------------------------------------------------------------------------
                                                   1,493,807      1,618,487 
----------------------------------------------------------------------------

 
The accompanying notes are an integral part of these financial
statements.  
Approved on behalf of the Board 
(signed) "Wendell W. Robinson" 
Wendell W. Robinson
Chairman of the Audit Committee, Director  
(signed) "William T. Hornday" 
William T. Hornday 
Chief Operating Officer, Director 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) 


 
----------------------------------------------------------------------------
                                                       Year ended March 31, 
(thousands of U.S. dollars, except per share                                
 amounts)                                               2013           2012 
----------------------------------------------------------------------------
                                                                            
Oil and natural gas revenue (note 20)                199,364        321,311 
Production and operating expenses                    (36,778)       (40,196)
Depletion and depreciation expenses (note 12)       (145,250)      (144,595)
Exploration and evaluation expenses (note 21)       (172,811)      (232,692)
Loss on investments (note 8 & 9)                      (2,106)        (5,823)
Asset impairment (note 11 & 12)                      (67,831)      (133,578)
Reversal of asset impairment (note 12)               101,544              - 
Other income                                             311          6,440 
Share-based compensation expense                     (10,894)       (35,516)
General and administrative expenses                   (6,931)        (8,776)
----------------------------------------------------------------------------
                                                    (141,382)      (273,425)
----------------------------------------------------------------------------
                                                                            
Finance income                                         1,999          4,302 
Finance expense (note 23)                            (33,768)       (57,856)
Foreign exchange loss                                 (3,200)       (14,366)
----------------------------------------------------------------------------
                                                     (34,969)       (67,920)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Loss before income tax           
                   (176,351)      (341,345)
----------------------------------------------------------------------------
                                                                            
Current income tax reduction/(expense)                   289         (5,920)
Minimum alternate tax expense                              -         (9,105)
Deferred income tax (expense)/reduction              (40,434)        33,742 
----------------------------------------------------------------------------
Income tax (expense)/reduction (note 24)             (40,145)        18,717 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net loss                                            (216,496)      (322,628)
----------------------------------------------------------------------------
                                                                            
Foreign currency translation gain/(loss)                (663)         6,250 
----------------------------------------------------------------------------
Comprehensive loss for the year                     (217,159)      (316,378)
----------------------------------------------------------------------------
                                                                            
Loss per share: (note 25)                                                   
  Basic and diluted                                  $ (3.76)       $ (6.25)
----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.  
                                                                            
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                  
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars,                                        Currency 
 except number of common           Common     Share Contributed translation 
 shares)                        shares (#)  capital     surplus     reserve 
----------------------------------------------------------------------------
Balance, March 31, 2011        51,526,901 1,162,319      63,037      (8,344)
Options exercised                 114,944     9,120      (2,288)          - 
Share-based compensation                                                    
 expense                                -         -      44,215           - 
Net income for the year                 -         -           -           - 
Payment of dividends(1)                 -         -           -           - 
Foreign currency translation            -         -           -       6,250 
----------------------------------------------------------------------------
Balance, March 31, 2012        51,641,845 1,171,439     104,964      (2,094)
----------------------------------------------------------------------------
Options exercised                       -         -           -           - 
Share-based compensation                                                    
 expense                                -         -      19,408           - 
Issuance of common shares      18,570,350   152,752           -           - 
Issuance of convertible notes           -         -           -           - 
Deferred tax                            -         -           -           - 
Repayment of convertible                                                    
 debentures                         3,716        43      14,765           - 
Net loss for the year                   -         -           -           - 
Payment of dividends(1)                 -         -           -           - 
Foreign currency translation            -         -           -        (663)
----------------------------------------------------------------------------
Balance, March 31, 2013        70,215,911 1,324,234     139,137      (2,757)
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
                                       Equity                               
(thousands of U.S. dollars,      component of                               
 except number of common          convertible                               
 shares)                           debentures        Deficit          Total 
----------------------------------------------------------------------------
Balance, March 31, 2011                14,765        (53,392)     1,178,385 
Options exercised                           -              -          6,832 
Share-based compensation                                                    
 expense                                    -              -         44,215 
Net income for the year                     -       (322,628)      (322,628)
Payment of dividends(1)                     -        (12,506)       (12,506)
Foreign currency translation                -              -          6,250 
----------------------------------------------------------------------------
Balance, March 31, 2012                14,765       (388,526)       900,548 
----------------------------------------------------------------------------
Options exercised                           -              -              - 
Share-based compensation                                                    
 expense                                    -              -         19,408 
Issuance of common shares                   -              -        152,752 
Issuance of convertible notes          30,724              -         30,724 
Deferred tax                           (7,492)             -         (7,492)
Repayment of convertible                                                    
 debentures                           (14,765)             -             43 
Net loss for the year                       -       (216,496)      (216,496)
Payment of dividends(1)                     -         (3,017)        (3,017)
Foreign currency translation                -              -           (663)
----------------------------------------------------------------------------
Balance, March 31, 2013                23,232       (608,039)       875,807 
----------------------------------------------------------------------------
(1) The Company paid dividends of $0.24 per share and $0.06 per share in the
    years ended March 31, 2012 and 2013, respectively.                      
                                                                            
The accompanying notes are an integral part of these financial statements.  
                                                                            
CONSOLIDATED STATEMENTS OF CASHFLOWS                                        
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars, except per share                                
 amounts)                                              Year ended March 31, 
                                                        2013           2012 
----------------------------------------------------------------------------
                                                                            
Cash flows from operating activities:                                       
Net (loss) / income                                 (216,496)      (322,628)
                                                                            
Adjustments for:                                                            
  Depletion and depreciation expense                 145,250        144,595 
  Accretion expense                                    8,678          7,612 
  Deferred income tax expense (reduction)             40,434        (33,742)
  Unrealized foreign exchange loss                        76          6,095 
  Loss on short-term investment                        2,106          5,823 
  Asset impairment                                    67,831        133,415 
  Reversal of asset impairment                      (101,544)             - 
  Exploration and evaluation write-off                94,089         71,816 
  Share-based compensation expense                    18,378         43,358 
  Impairment of long-term receivable                       -         22,996 
Change in non-cash working capital                    (1,734)        11,744 
Change in long-term accounts receivable                2,446         16,550 
----------------------------------------------------------------------------
Net cash from operating activities                    59,514        107,634 
----------------------------------------------------------------------------
                                                                            
Cash flows from investing activities:                                       
  Exploration and evaluation expenditures           (173,212)      (162,901)
  Disposition of exploration and evaluation                                 
   assets                                                  -          2,355 
  Property, plant and equipment expenditures         (30,542)       (25,089)
  Proceeds from farm-outs and other                                         
   arrangements (note 11)                             70,203              - 
  Restricted cash contributions                       (4,835)        (9,500)
  Release of restricted cash                           7,089          8,550 
  Disposition of investments                               -          7,970 
  Change in non-cash working capital                  55,536         13,009 
----------------------------------------------------------------------------
Net cash used in investing activities                (75,761)      (165,606)
----------------------------------------------------------------------------
                                                                            
Cash flows from financing activities:                                       
  Proceeds from issuance of common shares, net                              
   of issuance costs                                 152,752          6,832 
  Proceeds from issuance of convertible notes,                              
   net of issuance costs (note 16)                   110,892              - 
  Repayment of convertible debentures (note                                 
   16)                                              (312,106)             - 
  Change in borrowings                                65,000         25,000 
  Reduction in finance lease obligation               (5,394)        (4,804)
  Dividends paid                                      (3,017)       (12,506)
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Net cash from financing activities                     8,127         14,522 
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Change in cash and cash equivalents                   (8,120)       (43,450)
----------------------------------------------------------------------------
                                                                            
Effect of translation on foreign currency cash            18           (397)
Cash and cash equivalents, beginning of year          64,495        108,342 
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Cash and cash equivalents, end of year                56,393         64,495 
----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.  

 
SUBSEQUENT EVENTS 
Issuance of unsecured notes 
On June 13, 2013, the Company issued US$63.5 million principal amount
of Unsecured Notes for aggregate net proceeds of approximately
US$58.5 million, after deducting the initial purchasers' discount and
the estimated related expenses payable by the Company. The Unsecured
Notes bear interest at the rate of 7 percent per annum, payable
monthly, and will be repaid through twelve equal monthly principal
payments commencing August 13, 2013. The Company may repay some or
all of the Unsecured Notes, plus any accrued and unpaid interest, by
issuing Common Shares of the Company, rather than repaying the
Unsecured Notes in money. If the Company elects to make any portion
of a payment in Common Shares, the number of Common Shares to be
issued will be determined by dividing the amount to be paid in Common
Shares by 94.5 percent of the lower of the volume weighted average
price of the shares for the 15 day period prior to the payment date
and the volume weighted average price of the Common Shares for the
five day period prior to the payment date, subject to certain
restrictions. To the extent that the applicable price determined
under the above formula is less than 85 percent of the volume
weighted average price of the Common Shares for the five day period
prior to the payment date then, in lieu of delivering Common Shares,
the Company will make a cash payment to the holders of the Unsecured
Notes. Additional details regarding the terms of the Unsecured Notes
are contained in the material change report of the Company dated June
24, 2013, a copy of which is available at www.sedar.com. 
Kurdistan block 
In June 2013, the Company recovered a net amount of approximately $15
million related to its Company 49% working interest in the Qara Dagh
Block in Kurdistan. In November 2012, the Company and its consortium
partners had 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. .  
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
1. General information 
Niko Resources Ltd. (the "Company") is a limited 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
26. The Company's common shares and convertible notes are traded on
the Toronto Stock Exchange. 
2. Basis of presentation and significant accounting policies 
a. Statement of compliance 
The financial statements have been prepared by management in
accordance with International Financial Reporting Standards (IFRS).
Issued by the International Accounting Standards Board (IASB). 
The financial statements were approved by the board of directors and
authorized for issue on July 8, 2013. 
b. Basis of preparation and presentation 
The financial statements have been prepared on the historical cost
basis except for the revaluation of certain financial instruments as
described in sections g. and o. of this note. 
The consolidated financial statements are presented in US dollars and
all values are rounded to the nearest thousand dollars ($000), except
where otherwise indicated. 
c. Basis of consolidation 
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities. 
The results of subsidiaries acquired or disposed of during the year
are included in the consolidated statement of comprehensive income
(loss) from the effective date of acquisition and up to the effective
date of disposal, as appropriate. 
Where necessary, adjustments are
 made to the financial statements of
subsidiaries to bring their accounting policies in line with those
used by the Company. 
All significant intra-group transactions, balances, income and
expenses are eliminated in full on consolidation. 
d. Cash and cash equivalents 
Cash and cash equivalents consist of cash and demand deposits. 
e. Business combinations 
The purchase method of accounting is used to account for acquisitions
of subsidiaries and assets that meet the definition of a business
under IFRS. The cost of an acquisition is measured as the fair value
of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange. Costs incurred by the
Company related to the acquisition are expensed in the periods they
are incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The excess of
the cost of acquisition over the fair value of identifiable assets,
liabilities and contingent liabilities acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of
the net assets acquired, the difference is recognized immediately in
earnings. 
If the initial accounting for a business combination is incomplete by
the end of the reporting period in which the combination occurs, the
Company reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted when
the Company obtains complete information about facts and
circumstances that existed as of the acquisition date that, if known,
would have affected the amounts recognized as of that date. 
f. Interests in joint ventures 
The Company is engaged in oil and gas exploration, development and
production through unincorporated joint ventures. The consolidated
financial statements include the Company's share of the assets,
liabilities and cash flows of the joint venture. The Company combines
its share of the joint ventures' individual income and expenses,
assets and liabilities and cash flows on a line-by-line basis with
similar items in the Company's financial statements. Income taxes are
recorded based on the Company's share of the joint venture's
activities. 
The following table sets out a listing and description of the
Company's interests in joint ventures:(1) 


 
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                         Working                                Working     
Block        Country     interest %   Block          Country    interest %  
----------------------------------------------------------------------------
Block 9      Bangladesh  60           Obi            Indonesia  51          
----------------------------------------------------------------------------
Feni/Chattak Bangladesh  100          Seram          Indonesia  55          
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D6           India       10           South East     Indonesia  100         
                                      Ganal I                               
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Hazira Field India       33           South East     Indonesia  100         
                                      Seram                                 
----------------------------------------------------------------------------
NEC          India       10           South Matindok Indonesia  100         
----------------------------------------------------------------------------
Aru          Indonesia   60           Sunda Strait I Indonesia  100         
----------------------------------------------------------------------------
Bone Bay     Indonesia   100          West Papua IV  Indonesia  49.90       
----------------------------------------------------------------------------
Cendrawasih  Indonesia   100          West Sageri    Indonesia  100         
----------------------------------------------------------------------------
Cendrawasih  Indonesia   50           Grand Prix     Madagascar 75          
 Bay II                                                                     
----------------------------------------------------------------------------
Cendrawasih  Indonesia   50           Central Range, Trinidad   32.50       
 Bay III                              Shallow Horizon                       
----------------------------------------------------------------------------
Cendrawasih  Indonesia   50           Central Range, Trinidad   40          
 Bay IV                               Deep Horizon                          
----------------------------------------------------------------------------
East Bula    Indonesia   55           Guayaguayare,  Trinidad   65          
                                      Shallow Horizon                       
----------------------------------------------------------------------------
Halmahera-   Indonesia   51           Guayaguayare,  Trinidad   80          
 Kofiau                               Deep Horizon                          
----------------------------------------------------------------------------
Halmahera II Indonesia   20           Block 4(b)     Trinidad   100         
----------------------------------------------------------------------------
Kofiau       Indonesia   57.50        NCMA2          Trinidad   56          
----------------------------------------------------------------------------
Kumawa       Indonesia   100          NCMA3          Trinidad   80          
----------------------------------------------------------------------------
North Ganal  Indonesia   31           Block 5(c)     Trinidad   25          
----------------------------------------------------------------------------
North        Indonesia   30           MG Block       Trinidad   70          
 Makassar                                                                   
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(1) Excludes properties that the Company intends to relinquish. Working     
    interest is as at March 31, 2013 and does not reflect farm-outs or farm-
    in transactions that are awaiting government approval.                  

 
g. Financial assets 
Financial assets are initially measured at fair value, plus
transaction costs, except for those financial assets classified as
fair value through profit or loss, which are initially measured at
fair value.  
All recognized financial assets are subsequently measured in their
entirety at either amortized cost or fair value depending on their
classification. The Company classifies financial assets into the
following categories: financial assets at fair value through profit
or loss; loans and receivables; held-to-maturity investments and
available-for-sale financial assets. 
Financial assets at fair value through profit or loss are measured at
fair value with the corresponding gains or losses recognized in
profit or loss. The Company classifies cash and cash equivalents,
restricted cash, short-term investments and long-term investments as
held-for-trading financial assets. 
Loans and receivables and held-to-maturity investments are measured
at amortized cost using the effective interest method. The Company
classifies accounts receivable and long-term accounts receivables as
loans and receivables. The Company does not have any financial
instruments classified as held-to-maturity. 
Available-for-sale financial assets are recognized at fair value with
the gains and losses, except for impairment losses and foreign
exchange gains and losses, being recognized in other comprehensive
income (loss) and transferred to profit or loss when the asset is
derecognized or impaired. The Company does not have any financial
assets classified as held-for-sale. 
The Company assesses whether there is any objective evidence that a
financial asset or group of financial assets is impaired at the end
of each reporting period. Any loss determined is recognized in
earnings. 
h. Inventories 
Inventories of stock, spares and consumables are purchased for use in
oil and gas operations and are valued at the lesser of cost and fair
value less cost to sell. The costs of purchase of inventories
comprise the purchase price, import duties and other taxes, and
transport, handling and other costs directly attributable to the
acquisition of finished goods, materials and services. 
Inventory of oil and condensate is valued at the lower of the
weighted average cost and net realizable value. Cost is comprised of
operating expenses that have been incurred in bringing inventories to
their present location and condition and the portion of depletion
expense associated with the oil and condensate production. The cost
of inventories is assigned using the weighted average cost formula,
whereby the cost of each barrel of oil or condensate is determined
from the weighted average of the cost of each barrel at the beginning
of a period and the cost of barrels produced during the period. Net
realizable value is the estimated selling price in the ordinary
course of business less the estimated costs necessary to make the
sale. 
i. Oil and natural gas exploration and development expenditure 
Oil and natural gas exploration and development expenditure is
accounted for using the method described below. 
(i) Pre-license costs - Pre-licence costs are charged against income
as incurred. 
(ii) Licence and property acquisition costs - Exploration licence and
property acquisition costs are capitalized as exploration and
evaluation assets pending drilling results on the licence. 
(iii) Exploration expenditure - Geological and geophysical
exploration costs are charged against income as incurred. 
Costs directly attributable to an exploration well are initially
capitalized as exploration and evaluation assets. If hydrocarbons are
not found, the exploration expenditure is written off as a dry hole.
If hydrocarbons are found and, subject to further appraisal activity,
which may include the drilling of further wells, may be capable of
commercial development, the costs continue to be carried as an asset.
All such carried costs are subject to regular technical, commercial
and management review to confirm the continued intent to develop or
otherwise extract value from the discovery. When this is no longer
the case, the costs are written off. When proved reserves of oil and
natural gas are determined and development is sanctioned, the
relevant expenditure is transferred to development assets. 
All other exploration costs are expensed when incurred. 
(iv) Development and production expenditure 
Expenditure for development and production assets including the costs
of drilling development wells and the construction of production
facilities are capitalized under development assets and transferred
to producing assets when they are put in use. After recognition as an
asset, development and producing assets are carried at cost less any
accumulated depletion and impairment losses. 
(v) Farm-outs 
The Company enters into agreements to transfer a portion of its
interests in oil and gas properties (farm-outs) to third parties.
Proceeds from these arrangements are first deducted from any
exploration and evaluation and development assets recorded for the
property and any excess is recognized as other income. 
j. Other property, plant and equipment 
Items of property, plant and equipment are initially recorded at cost
and subsequently measured at cost less accumulated depreciation and
impairment losses. Initial costs include expenditure that is directly
attributable to the acquisition of the asset. The costs of the
day-to-day servicing of items of property, plant and equipment are
recognized in income as incurred. 
k. Intangible assets 
Intangible assets acquired separately and with finite useful lives
are carried at cost less accumulated amortization and impairment
losses. Amortization of intangible assets with finite useful lives is
provided on a straight-line basis over their estimated useful lives.
Alternatively, intangible assets with indefinite useful lives are
carried at cost less any subsequent accumulated impairment losses. 
Gains or losses arising from derecognition of an intangible asset are
measured at the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in income when the
asset is derecognized. 
l. Depletion and depreciation 
Exploration and evaluation assets and development assets are not
depreciated. 
The net carrying value of producing assets is depleted using the
unit-of-production method by reference to the ratio of production in
the year to the related total proved reserves of oil and natural gas,
taking into account estimated future development costs necessary to
bring those reserves into production. 
Depreciation for finance lease assets is consistent with that for
depreciable assets that are owned. Depreciation for finance lease
assets is charged based on the unit-of-production method over the
life of the total proved reserves. 
For other assets, depreciation is recognized in profit or loss on a
diminishing balance or straight-line basis depending on the nature of
the asset over the estimated useful lives of each group of property,
plant and equipment. Land is not depreciated. 
The estimated useful lives of other property, plant and equipment
are: 


 
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Buildings                                                      27 - 30 years
Plant and machinery                                              7 - 9 years
Office equipment/furniture and fittings                         3 - 10 years
Computers                                                        3 - 5 years
Vehicles and aircraft                                            4 - 7 years
Pipeline                                                            20 years
----------------------------------------------------------------------------

 
m. Borrowing costs 
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use. 
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalization. 
All other borrowing costs are recognized in income in the period in
which they are incurred. 
n. Impairment of tangible and intangible assets 
At the end of each reporting period, the Company assesses whether
there is any indication that an asset may be impaired or may require
a reversal of impairment. Impairment is assessed at the CGU level and
the determination of CGUs is an area of judgment. If any such
indication exists, the Company estimates the recoverable amount of
the asset. Indications include: a significant decline in market value
of the asset; significant changes have taken or will take place in
the technological market, economic or legal environment in which the
Company operates or in the market to which an asset is dedicated; a
significant increase in market interest rates that would affect the
discount rate and value of the asset; and the carrying amount of the
net assets of the entity is more than its market capitalization. The
recoverable amount is defined as the greater of the asset's fair
value less cost to sell and its value in use. 
Irrespective of whether there is any indication of impairment, the
Company tests intangible assets with an indefinite useful life and
intangible assets not yet available for use
 for impairment annually
by comparing its carrying amount with its recoverable amount.  
o. Financial liabilities and equity instruments issued by the Company 
Financial liabilities are initially measured at fair value, plus
transaction costs, except for those financial liabilities classified
as at fair value through profit or loss, which are initially measured
at fair value. All recognized financial liabilities are subsequently
measured in their entirety at either amortized cost or fair value
depending on their nature. 
Financial liabilities at fair value through profit or loss are
measured at fair value with the corresponding gains or losses
recognized in profit or loss. The Company does not have any financial
liabilities at fair value through profit or loss. 
All other financial liabilities are measured at amortized cost using
the effective interest method. The Company classified accounts
payable and provisions, long-term debt, convertible debentures and
convertible notes as other financial liabilities. 
p. Derivative financial instruments 
A derivative liability that is linked to and must be settled by
delivery of an unquoted equity instrument whose fair value cannot be
reliably measured is measured at cost. The Company does not have any
derivative liabilities. 
Derivative financial instruments are measured at fair value through
profit or loss. The Company does not currently have any derivative
financial instruments. 
q. Leasing 
A lease is classified as a finance lease whenever the terms of the
lease transfer substantially all the risks and rewards incidental to
ownership to the lessee. At the commencement of the lease term, the
Company recognizes the finance lease as assets and liabilities in the
statements of financial position at the lesser of the fair value of
the leased property and the present value of the minimum lease
payments. Any initial direct costs of the lessee are added to the
amount recognised as an asset. 
Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset. 
Minimum lease payments are apportioned between the finance charge and
the reduction of the outstanding liability. The finance charge is
allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the
liability. Finance charges are charged directly against income,
unless they are directly attributable to qualifying assets, in which
case they are capitalized in accordance with the Group's policy on
borrowing costs. Contingent rents are charged as expenses in the
periods in which they are incurred. 
An operating lease is a lease other than a finance lease. 
Lease payments under an operating lease are generally recognised as
an expense on a straight-line basis over the lease term. 
r. Decommissioning obligations 
Certain production sharing contracts that the Company has entered
into indicate an obligation for abandonment of wells and facilities
including removal of all equipment and installations and site
restoration, collectively termed decommissioning obligations.
Provision is made for the estimated cost of decommissioning
obligations for a well that has been drilled and for equipment or
installations upon completion. The provision is capitalized in the
relevant asset category. 
The provision for decommissioning obligations is management's best
estimate of the expenditure required to settle the present obligation
at the end of the reporting period. The provision is calculated as
the present value of the expenditures expected to be required to
settle the obligation in the future, discounted using a risk-free
rate. Subsequent to the initial measurement, the obligation is
adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation.
The increase in the provision due to the passage of time is
recognized as finance costs whereas increases/decreases due 
to
changes in the estimated future cash flows are capitalized. Actual
costs incurred upon settlement of the decommissioning obligations are
charged against the provision to the extent the provision was
established. 
s. Revenue recognition 
Revenue resulting from the sale of oil, condensate and natural gas
from properties in which the Company has an interest with other
producers is recognized on the basis of the Company's working
interest. 
Revenue from the sale of oil, condensate and natural gas is recorded
when the significant risks and rewards of ownership of the product is
transferred to the buyer, which is at the delivery point as defined
in the various sales contracts. Revenue is measured at the fair value
of the consideration received or receivable. Revenue recorded is net
of VAT, other sales-related taxes, royalties and the profit oil and
gas sold and paid to the various governments as profit sharing. 
t. Finance income and finance expense 
Finance income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable. 
Finance expense comprises i) interest expense on borrowings,
convertible debentures and notes payable, ii) accretion on
decommissioning obligations and convertible debentures and notes,
iii) bank charges and other finance costs and iv) impairment losses
recognized on financial assets.  
u. Foreign currencies 
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency), which is U.S.
dollars for the foreign entities and Canadian dollars for Canadian
entities. For the purpose of the consolidated financial statements,
the results and financial position of each group entity are expressed
in U.S. dollars, which is the presentation currency for the
consolidated financial statements. 
In preparing financial statements of the individual entities,
transactions in currencies other than the entity's functional
currency (foreign currencies) are recognized at the rates of exchange
prevailing at the date of the transactions. At the end of each
reporting period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not
retranslated. Exchange differences are recognized in the statement of
comprehensive income (loss) in the period in which they arise. 
For the purpose of presenting consolidated financial statements, the
assets and liabilities of the Canadian entities with the Canadian
dollar as their functional currency are expressed in U.S. dollars
using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates
for the period. Exchange differences arising, if any, are recognized
in other comprehensive income (loss) and accumulated in equity. 
v. Share-based payments 
The Company has a share-based compensation plan as described in note
18(b). All share-based awards of the Company are equity settled.
Compensation expense associated with the plan is calculated and,
recognized in income or capitalized, over the vesting period of the
stock option with a corresponding increase in contributed surplus.
The consideration received upon exercise of the stock options,
together with the amount previously recognized in contributed
surplus, is recorded as an increase to share capital. A forfeiture
rate is estimated on the grant date and is adjusted to reflect the
actual number of options that vest. 
w. Taxation 
Income tax expense is the sum of current tax, minimum alternate tax
and deferred tax. 
Current tax is the amount of income taxes payable in respect of the
taxable profit for the period. Taxable profit differs from profit as
reported in the consolidated statement of comprehensive income
because of items of income or expense that are taxable or deductible
in other years and items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the end of the
reporting period. 
Minimum alternate tax is the amount of tax payable in respect of
accounting profits. The Company pays the greater of minimum alternate
tax and current tax for blocks in India. 
Deferred tax is recognized on temporary differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the calculation of
taxable profit. Deferred tax liabilities are the amounts of income
taxes payable in future periods in respect of taxable temporary
differences. Deferred tax assets are the amounts of income taxes
recoverable in future periods in respect of deductible temporary
differences and the carry-forward of unused tax losses and unused tax
credits. 
Deferred tax liabilities are recognized for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Company
is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests
are only recognized to the extent that it is probable there will be
sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the
foreseeable future.  
The carrying amount of deferred tax assets is reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. 
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realized, based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the end of the reporting
period, to recover or settle the carrying amount of its assets and
liabilities. 
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis. 
Current and deferred tax are recognized as an expense or income in
net income, except when they relate to items that are recognized
outside profit or loss (whether in other comprehensive income or
directly in equity), in which case the tax is also recognized outside
profit or loss, or where they arise from the initial accounting for a
business combination. In the case of a business combination, the tax
effect is included in the accounting for the business combination. 
x. Earnings per share 
Basic earnings per share is calculated by dividing the income or loss
attributable to common shareholders of the Company by the weighted
average number of common shares outstanding during the period.
Diluted earnings per share is determined by adjusting the income or
loss attributable to common shareholders and the weighted average
number of common shares outstanding, for the effects of all dilutive
potential common shares, which comprise convertible notes and share
options granted to employees. 
3. Future accounting changes 
The International Accounting Standards Board (IASB) has issued IFRS 9
"Financial Instruments" to replace IAS 39 "Financial Instruments:
Recognition and Measurement". The new standard replaces the multiple
classification and measurement models for financial assets and
liabilities with a new model that has only 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 new standard is effective for annual
periods beginning on or after January 1, 2015. The Company is
currently assessing the impact of the new standard on its
consolidated financial statements. 
In May 2012, 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 is 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 IAS 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 IFRSs 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, 2013. 
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 plans to adopt these standards when they become effective
and is currently assessing the impact of the standards listed above
on its consolidated financial statements. 
4. Management's judgements and estimation uncertainty 
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the dates of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
periods. By their nature, these estimates are subject to measurement
uncertainty and actual results may differ from those estimated. 
Significant estimates and judgement made by management in the
preparation of these consolidated f
inancial statements are as
follows: 


 
Critical accounting estimates                                               
 
--  Amounts recorded for depletion and amounts used for impairment
    calculations are based on estimates of petroleum and natural gas
    reserves. By their nature, the estimates of reserves, including the
    estimates of future prices, costs, discount rates and the related future
    cash flows, are subject to measurement uncertainty. Accordingly, the
    impact to the consolidated financial statements in future periods could
    be material. 
--  Amounts recorded for decommissioning obligations and the related
    accretion expense requires the use of estimates with respect to the
    amount and timing of decommissioning expenditures. Other provisions are
    recognized in the period when it becomes probable that there will be a
    future cash outflow. 
--  Compensation costs recognized for the share-based compensation plan are
    subject to the estimate of what the ultimate payout will be using the
    Black-Scholes-Merton model, which is based on significant assumptions
    such as volatility, expected life, expected dividends and expected
    forfeiture rates. 
--  Tax interpretations, regulations and legislation in the various
    jurisdictions in which the Company operates are subject to change. As
    such, income taxes are subject to measurement uncertainty. Management
    makes certain judgements in estimating the timing of temporary
    difference reversals and the likelihood that deferred tax assets will be
    realized from future taxable earnings. Deferred income tax assets are
    assessed by management at the end of the reporting period to determine
    the likelihood that they will be realized from future taxable earnings. 
 
Critical accounting judgements                                              
 
--  At the end of each reporting period, the Company assesses whether there
    is any indication that an asset may be impaired. If any such indication
    exists, the Company estimates the recoverable amount of the asset.
    Events and circumstances may change resulting in indicators of
    impairment in future periods that could result in a material impairment.
    
    The recoverability of production asset carrying values is assessed at
    the cash generating unit (CGU) level. Determination of what constitutes
    a CGU is subject to management judgements and the circumstances, but
    generally, each production sharing contract (PSC) constitutes a CGU. The
    composition of a CGU can impact the recoverability of the assets
    included therein. In assessing the recoverability of oil and gas
    properties, each CGU's carrying value is compared to its recoverable
    amount, defined as the greater of its fair value less cost to sell and
    value in use. At March 31, 2013, the recoverable amounts of the
    Company's CGUs for producing assets were estimated as the value in use
    based on the net present value of the cash flows from oil and gas
    reserves for the CGU for the D6 Block based on reserves estimated by the
    Company's independent reserve evaluator and for the Hazira and Surat
    Blocks based on reserves estimated by the Company. By their nature, the
    estimates of reserves, including the estimates of future prices, costs,
    discount rates and the related future cash flows, are subject to
    measurement uncertainty. Accordingly, the impact to the consolidated
    financial statements in future periods could be material. 
    
    The following commodity price estimates were used in the calculation of
    net present value of the cash flows from oil and gas reserves: 
 
----------------------------------------------------------------------------
Year ending March 31,           India Natural    India Crude   India MA NGL 
                                 Gas ($/MMbtu)    Oil ($/bbl)        ($/bbl)
----------------------------------------------------------------------------
2014                                     4.21         107.63          88.53 
2015                                    10.45         101.36          82.26 
2016                                    12.13          94.09          74.99 
2017                                    13.67          95.23          76.13 
2018                                    13.95          94.74          75.64 
Thereafter                                 +2%            +2%            +2%
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
Year ending March 31,            Trinidad and                               
                                 Tobago Local        Block 9        Block 9 
                                       Market      gas price     condensate 
                                     ($/MMbtu)        ($/Mcf)  price ($/bbl)
----------------------------------------------------------------------------
2014                                     4.85           2.31         103.59 
2015                                     4.55           2.31          99.84 
2016                                     4.80           2.31          99.36 
2017                                     5.00           2.31          98.74 
2018                                     5.35           2.31          97.95 
Thereafter                                 +2%          2.31          99.47 
----------------------------------------------------------------------------
 
--  Tax interpretations, regulations and legislation in the various
    jurisdictions in which the Company operates are subject to change. As
    such, income taxes are subject to measurement uncertainty. Management
    makes certain judgements in estimating the timing of temporary
    difference reversals and the likelihood that deferred tax assets will be
    realized from future taxable earnings. Deferred income tax assets are
    assessed by management at the end of the reporting period to determine
    the likelihood that they will be realized from future taxable earnings. 
 
5. Restricted cash                                                          
                                                                            
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Current portion of restricted cash                                          
Guarantees (1)                                          1,416          6,790
----------------------------------------------------------------------------
                                                        1,416          6,790
----------------------------------------------------------------------------
                                                                            
Non-current portion of restricted cash                                      
Guarantees (1)                                          6,575          4,540
Site restoration funds (2)                              7,454          6,743
----------------------------------------------------------------------------
                                                       14,029         11,283
----------------------------------------------------------------------------
(1) The Company has performance security guarantees related to the work     
    commitments for exploration blocks. The Company is required to provide  
    funds to support the guarantees in the amounts indicated above. See note
    27 for details of the guarantees.                                       
(2) In accordance with the Site Restoration Fund Scheme, 1999 in India, the 
    Company is required to accumulate funds in a separate restricted account
    related to future decommissioning obligations. The funds may be used for
    sit
e restoration on the expiry or termination of an agreement or        
    relinquishment of part of the contract area.                            
                                                                            
6. Accounts receivable                                                      
                                                                            
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Oil and gas revenues receivable                        17,804         28,033
Receivable from joint venture partners                 39,170         13,004
Advances to vendors                                     1,618          1,751
Prepaid expenses and deposits                           3,860          4,816
VAT receivable                                         18,505          9,405
Other receivables                                       3,877          4,238
----------------------------------------------------------------------------
                                                       84,834         61,247
----------------------------------------------------------------------------
                                                                            
7. Inventories                                                              
 

 
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Stock, spares and consumables                           9,617          9,596
Oil and condensate inventories                            483            365
----------------------------------------------------------------------------
                                                       10,100          9,961
----------------------------------------------------------------------------
                                                                            
8. Short-term investments                                                   
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars)                       Year ended     Year ended 
                                              March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                          748         14,922 
Disposals                                                  -         (7,970)
Loss on short-term investments                          (653)        (5,823)
Foreign exchange                                          (3)          (381)
----------------------------------------------------------------------------
Closing balance                                           92            748 
----------------------------------------------------------------------------
                                                                            
9. Long-term investments                                                    
                                                                            
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                        2,752          2,830 
Loss on long-term investments                         (1,453)             - 
Foreign exchange                 
                        (29)           (78)
----------------------------------------------------------------------------
Closing balance                                        1,270          2,752 
----------------------------------------------------------------------------

 
Long-term investments consist of shares in a Canadian company that
were not traded on an active market during 2012 and as such were
carried at cost and adjusted for changes in the USD-CAD exchange
rate. In February 2013 the shares began trading on the Canadian
Venture Stock Exchange, at which point the Company began carrying the
shares at fair value based on the quoted market price. The shares
owned by the Company comprise approximately 25% of the issued and
outstanding shares of the company but does not control the company.
In addition, the Company's holdings exceed the average daily
transaction volume. As such management has determined that it has no
intention of disposing the shares within the next twelve months.  
10. Long-term accounts receivable 


 
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Joint venture receivable - 36-inch pipeline             1,528          2,202
----------------------------------------------------------------------------

 
Joint venture receivable - 36-inch pipeline: The Company has
recognized a receivable for a refund of previously paid profit
petroleum and a receivable from its joint venture partner as a result
of the award of ownership of a 36-inch pipeline that is connected to
the Hazira facilities.  
11. Exploration and evaluation assets 


 
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                      856,880        762,221 
Additions (note 26)                                  174,242        164,976 
Transfers                                           (102,766)         5,354 
Expensed                                             (94,089)       (71,500)
Impairment                                           (66,896)             - 
Disposals and other arrangements                     (70,697)        (2,355)
Foreign currency translation                          (1,050)        (1,816)
----------------------------------------------------------------------------
Closing balance                                      695,624        856,880 
----------------------------------------------------------------------------

 
During the year, the Company expensed $94 million of exploration
costs primarily related to unsuccessful exploration wells in
Indonesia and 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 $61 million from two former partners in
exchange for assuming the partners' obligations for future drilling
commitments  


 
12. Property, plant and equipment                                           
                                                                            
a. Development assets                                                       
                                                                            
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. d
ollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                       16,988         18,421 
Additions                                             10,044          7,447 
Transfers from/to other asset categories             102,790         (8,880)
----------------------------------------------------------------------------
Closing balance                                      129,822         16,988 
----------------------------------------------------------------------------
                                                                            
b. Producing assets                                                         
                                                                            
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Cost                                                                        
Opening balance                                    1,042,869      1,019,696 
Additions                                                134         16,458 
Transfers from other asset                                                  
 categories/adjustments                                  (40)         6,791 
Disposals                                             (3,711)             - 
Foreign currency translation                             (44)           (76)
----------------------------------------------------------------------------
Closing balance                                    1,039,208      1,042,869 
----------------------------------------------------------------------------
Accumulated depletion                                                       
Opening balance                                     (587,372)      (312,767)
Additions                                           (142,099)      (141,266)
Foreign currency translation                              45             76 
----------------------------------------------------------------------------
Closing balance                                     (729,426)      (587,372)
----------------------------------------------------------------------------
Impairment                                           101,544       (133,415)
----------------------------------------------------------------------------
Net producing assets                                 411,325        455,497 
----------------------------------------------------------------------------

 
For the year ended March 31, 2012, the Company recognized a $133
million impairment related to the producing assets in the D6 Block in
India as a result of reduced reserves volumes assigned to the D6
Block as at March 31, 2012. The producing assets were written down to
management's estimate of value in use and determined using proved
reserves and forecast cash flows using escalated prices and estimates
of future production, capital and operating expenses, discounted at
10 percent, obtained from the reserve report. The prices used were
those forecast by management and included in the company's
independent reserve report for that year.  
For the year ended March 31, 2013, the Company recognized a $102
million reversal of asset impairment related to the D6 Block in
India. The reversal of the impairment resulted from the impact of
increased reserves volumes assigned to the D6 Block as at March 31,
2013 by Deloitte AJM. Management's estimate of value in use for the
block was determined using forecasted cash flows using escalated
prices and estimates of future production, capital and operating
expenses. The prices used were based on gas pricing formula approved
by the Government of India in June 2013, which is expected to
increase natural gas sales price from the current price of
$4.20/MMBtu to an estimated $8.42/MMbtu, effective April 1, 2014.  
c. Other property, plant and equipment  


 
----------------------------------------------------------------------------
                                                  Office                    
                                    Vehicles, equipment,                    
                                  helicopters  furniture                    
(thousands of U.S.       Land and         and        and                    
 dollars)               buildings    aircraft   fittings Pipelines    Total 
----------------------------------------------------------------------------
Cost                                                                        
Balance, April 1, 2012     18,346       2,376      8,754    10,772   40,248 
Additions / Transfers        (112)         (3)     1,196       (10)   1,071 
Disposals                       -         (27)      (535)        -     (562)
Foreign currency                                                            
 translation                    -           -        (62)        -      (62)
----------------------------------------------------------------------------
Balance, March 31, 2013    18,234       2,346      9,353    10,762   40,695 
----------------------------------------------------------------------------
                                                                            
Accumulated depreciation                                                    
Balance, April 1, 2012     (6,127)     (1,482)    (4,449)   (7,341) (19,399)
Additions                  (1,034)       (172)    (1,344)     (511)  (3,061)
Foreign currency                                                            
 translation                    -           -         38         -       38 
----------------------------------------------------------------------------
Balance, March 31, 2013    (7,161)     (1,654)    (5,755)   (7,852) (22,422)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net book value, March                                                       
 31, 2013                  11,073         692      3,598     2,910   18,273 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                  Office                    
                                    Vehicles, equipment,                    
                                  helicopters  furniture                    
(thousands of U.S.       Land and         and        and                    
 dollars)               buildings    aircraft   fittings Pipelines    Total 
----------------------------------------------------------------------------
Cost                                                                        
Balance, April 1, 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, April 1, 2011     (4,880)     (1,148)    (3,390)   (6,738) (16,156)
Additions / Transfers      (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)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Capital work-in-progress                               34,746         15,757
----------------------------------------------------------------------------
                                                                            
13. Trade and other payables                                                
                                                                            
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Joint venture payables (operated)                      50,621         12,810
Joint venture payables (non-operated)                  11,422          8,642
Accruals                                              115,535         80,208
----------------------------------------------------------------------------
Closing balance                                       177,578        101,660
----------------------------------------------------------------------------

 
14. Credit facility borrowings 
The Company has a $225 million three year, extendible, revolving
credit facility and a $25 million three year, extendible, operating
facility pursuant to a credit agreement with a syndicate of banks and
financial institutions 
The maximum available credit under the credit 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, based on the evaluation of the Company's reserves as at
March 31, 2012 and based on an assumption that the pricing for gas
sales from the D6 Block in India would remain unchanged at US$4.20
per MMBtu for the life of the D6 gas fields. As at March 31, 2013,
the Company had borrowed $90 million under the credit facilities.
Upon closing of the Company's private placement of the senior
unsecured notes in June 2013, the amounts outstanding and the
availability under the credit facility were reduced to $80 million.
In connection with the completion of the Company's annual independent
reserves evaluation as at March 31, 2013, the borrowing base of the
facility will be re-determined by the syndicate banks on or before
July 31, 2013, using the new pricing mechanism for domestic gas
produced in India that was recently approved by the Government of
India and will result in a significant increase in the price for the
D6 Block natural gas sales contracts that expire on March 31, 2014.  
15. Finance lease o
bligation 
The Company has recognized a finance lease for the floating,
production, storage and offloading vessel (FPSO) used in the D6 Block
in India. The fair value of $43 million for the finance lease is
calculated based on future lease payments discounted at a rate of
11.65 percent. The finance lease asset is included in producing
properties within property, plant and equipment and the net carrying
amount is $32 million. The future minimum lease payments as at the
end of the reporting period and their net present value are: 


 
----------------------------------------------------------------------------
                                                              Lease payments
----------------------------------------------------------------------------
less than 1 year                                                      10,757
1-5 years                                                             43,026
greater than 5 years                                                  4,509
----------------------------------------------------------------------------
Subtotal                                                              58,292
----------------------------------------------------------------------------
Imputed interest                                                    (15,211)
Carrying value                                                        43,081
----------------------------------------------------------------------------

 
The lease has an initial charter period of 3,650 days maturing in
2018, which is cancellable by paying exit costs. The Company has an
option to purchase the leased asset. 
16. Convertible debentures and notes payable 
a. Convertible debentures 


 
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Opening balance                                      306,052        309,221 
Accretion expense                                      4,242          5,336 
Foreign currency translation                           1,854         (8,505)
Repaid                                              (312,148)             - 
----------------------------------------------------------------------------
Closing balance                                            -        306,052 
----------------------------------------------------------------------------

 
On December 30, 2009, the Company issued Cdn$310 million, five
percent convertible debentures (the "Debentures"), with a maturity
date of December 30, 2012. The convertible debentures were repaid in
full in December, 2012. 
b. Notes payable 


 
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Opening balance                                             -              -
Additions                                              80,168              -
Accretion expense                                       1,527              -
Foreign currency translation                           (1,868)             -
Repaid                                                    (42)             -
----------------------------------------------------------------------------
Closing balance                                        79,785              -
----------------------------------------------------------------------------

 
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
between the debt and equity portion of the notes pro-rata based on
the valuation of the gross proceeds.  
The Notes mature on December 31, 2017 and bear interest at a rate of
7 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.  
17. Decommissioning obligations 


 
----------------------------------------------------------------------------
(thousands of U.S. dollars)                        Year ended     Year ended
                                               March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Opening balance                                        40,017         31,454
Provisions made during the year                        (1,563)           537
Change in estimate during the year                       (185)         5,750
Accretion                                               2,908          2,276
----------------------------------------------------------------------------
Closing balance                                        41,177         40,017
----------------------------------------------------------------------------

 
The Company's decommissioning obligations result from its ownership
interest in oil and natural gas assets including well sites and
facilities. The total decommissioning obligation is estimated based
on the Company's net ownership interest in wells and facilities,
estimated costs of removal of all equipment and installations and
site restoration and the estimated timing of the costs to be incurred
in future years. The Company has estimated the net present value of
the decommissioning obligations to be $41 million as at March 31,
2013 (March 31, 2012 - $40 million) based on an undiscounted total
future liability of $84 million (March 31, 2012 - $67 million). These
costs are expected to be incurred over the next two to 13 years. The
discount rate used to calculate the net present value of the future
decommissioning obligations is the pre-tax rate reflecting current
market assessments of the time value of money. Amounts totalling Rs.
406 million (US$ 7.5 million) have been deposited with State Bank of
India for decommissioning obligations. These amounts have been
treated as restricted cash included in non-current assets. 
18. Financial instruments 
a. Capital risk management 
The Company's policy is to maintain a strong capital base and related
capital structure. The objectives of this policy are: 


 
i.   To promote confidence in the Company by the capital markets, by
     investors, by creditors and by government agencies in the countries in
     which the Company bids for concessions and/or operates; 
ii.  To maintain resources required to withstand financial difficulties due
     to exogenous influences such as financial, political, economic, social
     or market uncertainties and events; and 
iii. To facilitate the Company's ability to fulfill exploration and
     development commitments, and to seek and execute growth opportunities. 
 
The Company's c
apital base includes shareholders' equity and outstanding    
borrowings as follows:                                                      
                                                                            
----------------------------------------------------------------------------
                                                       As at          As at 
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Borrowings                                             90,000         25,000
Convertible debentures / notes payable                 79,785        306,052
Shareholders' equity                                  875,807        900,548
----------------------------------------------------------------------------

 
The Company's objective in capital management is to have the
flexibility to alter the capital structure to take advantage of
capital-raising opportunities in the capital markets, whether they
are equity or debt-related. 
To manage capital, the Company uses a rolling three-year projection.
The projection provides details for the major components of sources
and uses of cash for operations, financing and development and
exploration expenditure commitments. Management and the Board of
Directors review the projection annually and when contemplating
interim financing or expenditure alternatives. As part of the review
process, the Company also contemplates using farm-outs to reduce its
expenditure commitments. The periodic reviews help ensure that the
Company has the ability to fulfill its obligations and to fund
ongoing operations. There were no changes in the Company's approach
to capital management during the period. 
b. Categories and fair value of financial instruments 
Financial instruments are recognized under the following categories
and have the following carrying values(1): 


 
----------------------------------------------------------------------------
                                                       As at          As at 
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Financial assets and financial liabilities at                               
 fair value through profit and loss: financial                              
 assets classified as held-for-trading                                      
- Restricted cash, current                              1,416          6,790
- Short-term investments                                   92            748
- Restricted cash, non-current                         14,029         11,283
- Long-term investments                                 1,270          2,752
Loans and receivables                                                       
- Accounts receivable                                  84,834         61,247
- Long-term accounts receivable                         1,528          2,202
Financial liabilities measured at amortized                                 
 cost                                                                       
- Accounts payable                                    177,576        101,660
- Borrowings                                           90,000         25,000
- Convertible debentures and notes payable             79,785        306,052
----------------------------------------------------------------------------
(1) The fair values approximate the carrying values as described below.     

 
The Company's short-term investments are classified as
held-for-trading, which is a financial asset at fair value through
profit or loss. The Company classifies fair value measurements using
the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements:  
- Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities;  
- Level 2: Inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and  
- Level 3: Inputs for the asset or liability that are not based on
observable market date (unobservable inputs). 
Short-term investments as at March 31, 2012 and March 31, 2013 and
long-term investments as at March 31, 2013 have been assessed on the
fair value hierarchy describe above and have been classified as Level
1. The fair value of the short and long-term investments was based on
publicly quoted market values. There was a loss of $0.7 million in
the year (2012 - $5.8 million) on recognizing the short-term
investments at their fair value. There was a loss of $1.5 million in
the year (2012 - nil) on recognizing the long-term investments at
their fair value. The fair values of short and long-term investments
approximate their carrying amounts as they are recognized at fair
value. Long-term investments were recognised at cost of $2.8 million
in 2012 as at the time these securities were not traded on an active
market. 
Cash and cash equivalents and restricted cash are classified as
held-for-trading and measured at fair value through profit and loss.
Accounts receivable are classified as loans and receivables. The fair
values of accounts receivable approximate their carrying value due to
their short periods to maturity.  
Long-term accounts receivable are classified as loans and
receivables. In the prior year the fair value of the long-term
account receivable for gas revenue receivable from Petrobangla was
determined to be nil. Although the Company has a valid claim to
receive payment for gas delivered to Petrobangla and the Company will
continue to pursue collection of the receivable, due to the continued
uncertainty with respect to timing of resolution of the various
claims raised (see notes 30(a) and (b)) against the Company, a
provision has been recorded against the full amount of the receivable
as at March 31, 2013. 
Accounts payable and accrued liabilities, borrowings and convertible
debentures are classified as other financial liabilities that are not
held for trading. The fair values of accounts payable and accrued
liabilities approximate their carrying values due to their short
periods to maturity. The fair values of borrowings approximate their
carrying values as they are the amounts owing. Interest and accretion
expense for the convertible debentures of $15 million (2012 - $21
million) and for the convertible notes of $4 million (2012 - nil) was
recognized in profit and loss during the year. The carrying value of
the Company's convertible debentures and notes approximates the fair
value. 
c. Credit risk management 
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Company's
receivables from customers. The carrying amounts of the cash and cash
equivalents, restricted cash, accounts receivable and the
undiscounted amount of the long-term account receivable reflect
management's assessment of the maximum credit exposure. The Company
takes measures in order to mitigate any risk of loss, which may
include obtaining guarantees. There were no changes in the Company's
exposure to credit risks or any changes to the Company's processes
for managing the risks from the previous period. 
The aging of the accounts receivable as at March 31, 2013 was: 


 
----------------------------------------------------------------------------
0-30 days                                                             53,960
30-90 days (1)                                                         2,503
90-365 days (1)                                                       28,371
----------------------------------------------------------------------------
                                                                      84,834
----------------------------------------------------------------------------
(1) Acc
ounts receivable are past due as at March 31, 2013, but not impaired.

 
The accounts receivable that are not past due are receivable from
counterparties with whom the Company has a history of collection and
the Company considers the accounts receivable collectible. The
Company has assessed the receivables that have been outstanding for
more than 90 days and has determined that they are not impaired. 
d. Liquidity risk management 
Liquidity risk is the risk that the Company will not be able to meet
its financial obligations as they fall due. The Company has future
commitments as described in note 29 in addition to financial
liabilities. The Company manages its exposure to this risk by
preparing cash flow forecasts to assess whether additional funds are
required.  
The Company has the following financial liabilities and due dates as
at March 31, 2013: 


 
----------------------------------------------------------------------------
                                      Carrying  less than 1 greater than 
(thousands of U.S. dollars)             amount           year         1 year
----------------------------------------------------------------------------
Accounts payable and accrued                                                
 liabilities                           177,576        177,576              -
Capital lease obligations (1)           43,081          6,057         37,024
Repayment of notes payable(2)           79,785              -         79,785
----------------------------------------------------------------------------
(1) The amount of lease payments is $10.8 million per year until August     
    2018. The above $43 million represents the carrying value of the        
    liability.                                                              
(2) The carrying amount of the notes payable is the fair value of $80       
    million. The amount that will be required to be repaid assuming that the
    debentures are not converted is Cdn$115 million ($113 million as at     
    March 31, 2013).                                                        

 
e. Market risk 
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will affect
the Company's income or the value of its financial instruments. There
were no changes in the Company's exposure to market risks or the
Company's processes for managing the risks from the previous period. 
(i) Currency risk 
The majority of the Company's revenues and expenses are denominated
in U.S. dollars and the Company holds the majority of its funds in
U.S. dollars, except as required to fund dividends and make interest
payments on the convertible notes. As a result, the Company has
limited its cash exposure to fluctuations in the value of the U.S.
dollar versus other currencies. However, the Company is exposed to
changes in the value of the Indian rupee versus the U.S. dollar as
they are applied to the Company's working capital, income tax
receivable and deferred tax liability of its subsidiaries in India.
The Company does not have any foreign exchange contracts in place to
mitigate currency risk. 
A 5 percent strengthening or a 5 percent weakening of the Indian
rupee against the U.S. dollar at March 31, 2013, which is based on
historical movements in the foreign exchange rates, would have
respectively decreased or increased the net loss by $5 million. This
analysis assumes that all other variables remained constant.  
The financial instruments are exposed to fluctuations in foreign
exchange rates, which are used in the translation of the financial
statements of the Canadian and corporate operations to U.S. dollars.
The reported U.S. dollar value of the cash and cash equivalents,
accounts receivable, short-term investment and accounts payable of
the Canadian and corporate operations is exposed to fluctuations in
the value of the Canadian dollar versus the U.S. dollar. A 3 percent
strengthening or a 3 percent weakening of the Canad
ian dollar against
the U.S. dollar at March 31, 2013, which is based on historical
movement in foreign exchange rates, would have respectively increased
or decreased other comprehensive loss by $2 million. This analysis
assumes that all other variables remained constant. 
(ii) Commodity price risk 
The Company is exposed to the risk of changes in market prices of
commodities. The Company enters into natural gas contracts, which
manages this risk. Because the Company has long-term fixed price gas
contracts, a change in natural gas market prices would not have
impacted the net loss for the period ended March 31, 2013. The
Company is exposed to changes in the market price of oil and
condensate. In addition, the Company will be exposed to the change in
the Brent crude price as the average Brent crude price from the
preceding year is a variable in the gas price for the following year,
calculated annually, for the D6 gas contracts. 
(iii) Other price risk 
The Company has deposited the cash equivalents with reputable
financial institutions, for which management believes the risk of
loss to be remote. 
19. 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: 


 
----------------------------------------------------------------------------
                                  Year ended March 31, Year ended March 31, 
                                                  2013                 2012 
----------------------------------------------------------------------------
                                              Weighted             Weighted 
                                               average              average 
                                              exercise             exercise 
                                   Number of     price  Number of     price 
                                     options     (Cdn$)   options     (Cdn$)
----------------------------------------------------------------------------
Opening balance                    3,978,003     75.62  4,243,897     85.37 
Granted                            2,193,622     10.70  1,160,750     55.70 
Forfeited                           (282,481)    76.12   (155,750)    86.43 
Cancelled                                  -         -   (587,500)   102.13 
Expired                             (935,999)    85.14   (568,450)    80.97 
Exercised                                  -         -   (114,944)    58.01 
----------------------------------------------------------------------------
Closing balance                    4,953,145     45.04  3,978,003     75.62 
----------------------------------------------------------------------------
Exercisable                        1,029,945     68.20    952,624     85.19 
----------------------------------------------------------------------------
                                                                            
The following table summarizes stock options outstanding and exercisable    
under the plan at March 31, 2013:                                           
                                                                            
----------------------------------------------------------------------------
                               Outstanding options      Exercisable options 
----------------------------------------------------------------------------
                                               Weighted            Weighted 
                                                average             average 
                                    Remaining  exercise            exercise 
                                         life     price               price 
Exercise price              Options    (years)    (Cdn$)  Options     (Cdn$)
----------------------------------------------------------------------------
7.65 - 9.99               1,927,992       2.1      8.73         -         - 
10.00 - 19.99               125,588       3.7     13.48         -         - 
20.00 - 39.99                85,250       3.0     36.91         -         - 
40.00 - 49.99             1,009,941       1.7     47.46   569,945     63.71 
50.00 - 59.99               240,125       2.9     51.94     2,250     52.92 
60.00 - 69.99               200,125       2.2     63.24    43,500     63.35 
70.00 - 79.99                65,500       1.8     73.33     6,750     76.87 
80.00 - 89.99               302,375       1.5     83.26    33,500     82.14 
90.00 - 99.99               693,500       1.3     96.42   347,875     96.64 
100.00 - 109.99             278,499       2.2    103.56    21,750    105.03 
110.00 - 112.64              24,250       1.6    111.10     4,375    111.30 
----------------------------------------------------------------------------
                          4,953,145       2.0     45.04 1,029,945     68.20 
----------------------------------------------------------------------------

 
The weighted average share price during the year ended March 31, 2013
was $14.91 (2012 - $54.24). 
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: 


 
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Grant-date fair value                               Cdn$3.92      Cdn$17.49 
Market price per share                             Cdn$10.64      Cdn$55.70 
Exercise price per option                          Cdn$10.70      Cdn$55.70 
Expected volatility                                       71%            42%
Expected life (years)                                    2.2            3.5 
Expected dividend rate                                   0.1%           0.5%
Risk-free interest rate                                  1.1%           1.4%
Expected forfeiture rate                                   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 22 for
categorization of share-based compensation expense during the period. 
20. Revenue 


 
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Natural gas sales                                    190,513        286,077 
Oil and condensate sales                              45,690         76,707 
Less:                                                                       
  Royalties                                           (9,239)       (15,470)
  Government share of profit petroleum               (27,600)       (26,003)
----------------------------------------------------------------------------
Oil and natural gas revenue                          199,364        321,311 
----------------------------------------------------------------------------

 
Revenues from oil and gas sales to Petrobangla comprised 23 percent
of natural gas, oil and condensate sales for the year ended March 31,
2013 (2012 - 16 percent). 
21. Exploration and evaluation expenses 


 
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Geological and geophysical                             34,078        114,811
Exploration and evaluation                             95,192         71,319
General and administrative                             15,552         15,817
Production sharing contract annual payments            10,509         10,805
New ventures                                           11,250         16,081
Share-based compensation                                6,230          3,859
----------------------------------------------------------------------------
Exploration and evaluation expenses                   172,811        232,692
----------------------------------------------------------------------------

 
22. Expense disclosure 
The Company prepares its statement of comprehensive income (loss)
classifying costs according to function as opposed to the nature of
the costs.  
Share-based compensation expense is charged to various other headings
in the statement of comprehensive income (loss). 


 
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Share-based compensation expense included in:                               
  Exploration and evaluation assets                     1,030            857
  Operating expense                                     1,255          1,555
  Exploration and evaluation expense                    6,230          6,287
  Share-based compensation expense(1)                  10,894         35,516
----------------------------------------------------------------------------
Total                                                  19,409         44,215
----------------------------------------------------------------------------
(1) Share-based compensation expense includes $14 million with respect to   
    the cancellation of options during the year ended March 31, 2012.       
                                                                            
General and administrative expenses are charged to various other headings in
the statement of comprehensive income (loss).                               
                                                                            
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
General and administrative expenses categorized                             
 as:                                                                        
  Exploration and evaluation expense                   15,552         11,673
  Production and operating expense                     11,871         11,979
----------------------------------------------------------------------------
Total                                                  27,423         23,652
----------------------------------------------------------------------------
                                                                            
23. Finance expense                                                         
                                                                            
---------------------------
-------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Interest expense on financing lease obligation          5,172          5,952
Interest expense on credit facility borrowings          3,610              -
Interest expense on convertible debentures and                              
 notes payable                                         13,024         15,722
Accretion expense on convertible debentures and                             
 notes payable                                          5,769          5,336
Accretion expense on decommissioning                                        
 obligations                                            2,908          2,276
Bank charges and other finance costs                    3,285          5,464
Impairment of financial assets                              -         23,106
----------------------------------------------------------------------------
Finance expense                                        33,768         57,856
----------------------------------------------------------------------------

 
24. Income taxes  
(a) Income tax expense 
The Company pays income tax in India for the Hazira, Surat and D6
Blocks. India's federal tax law contains a tax holiday deduction for
seven years for profits from the commercial production of mineral
oil. As a result of the tax holiday provision in India, the Company
pays the greater of 42.04 percent of taxable income in India after a
deduction for the tax holiday or a minimum alternate tax of 19.44
percent of Indian income. Indian income is calculated in accordance
with Indian generally accepted accounting principles. See discussion
of the application of the tax holiday provisions in contingency note
31(e). 
The Company does not make payments to the Government of Bangladesh
for Block 9 with respect to income tax. 
The Company is subject to tax on income earned in the other
jurisdictions in which it operates, however, the Company does not
have significant oil and gas revenues in these jurisdictions. Income
items taxed include interest income and capital gains. Income tax on
these items was not significant during the period. 


 
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Current year                                           2,377          1,216 
Adjustment for prior years                            (2,666)         4,704 
----------------------------------------------------------------------------
Current tax expense                                     (289)         5,920 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Minimum alternate tax expense                              -          9,105 
----------------------------------------------------------------------------
                                                                            
Origination and reversal of temporary                                       
 differences                                          47,234        (14,484)
Recognition of previously unrecognized tax                                  
 losses                                                  675        (19,259)
Recognition of equity portion in convertible                                
 notes payable                                        (7,475)             - 
----------------------------------------------------------------------------
Deferred income tax expense / (reduction)             40,434        (33,743)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Total tax expense / (reduction)                       40,145        (18,718)
----------------------------------------------------------------------------
                                                                            
(b) Reconciliation of effective tax rate                                    
                                                                            
----------------------------------------------------------------------------
                                                  Year ended     Year ended 
(thousands of U.S. dollars)                   March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
(Loss) / Income for the year                        (216,496)      (322,628)
Total tax recovery / (expense)                       (40,143)        18,717 
----------------------------------------------------------------------------
(Loss) / Income excluding tax                       (176,353)      (341,345)
----------------------------------------------------------------------------
Tax using the Company's domestic tax rate                   )              )
 (25%)                                               (44,088        (89,176 
Share-based compensation expensed                      2,724          9,174 
Income subject to tax holiday                        (42,310)        15,460 
Income exempt from tax                                 7,332         12,681 
Adjustment to foreign statutory tax rates            (20,090)      (47,520) 
Capital gains rate difference                            376            234 
Foreign tax credits                                    7,005         (6,894)
Foreign exchange                                           -              - 
Other non-deductible expenses                          4,882         10,512 
Difference between current and future income                                
 tax rates                                            78,195          1,590 
Unrecognized deferred tax asset                       42,738         70,754 
Prior year adjustments                                     -          4,702 
Other                                                  3,381              - 
----------------------------------------------------------------------------
Total tax expense / (reduction)                       40,145        (18,717)
----------------------------------------------------------------------------
                                                                            
(c) Unrecognized deferred tax assets                                        
                                                                            
Deferred tax assets have not been recognized in respect of the following    
temporary differences:                                                      
                                                                            
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Deductible temporary differences                      264,967        231,202
Capital tax losses                                     29,968         27,499
Non-capital tax losses                                213,037        173,099
----------------------------------------------------------------------------
                                                      507,972        431,800
----------------------------------------------------------------------------

 
The deductible temporary differences do not expire. Deferred tax
as
sets have not been recognized in respect of these items because it
is not probable that future taxable profit will be available against
which the Company can utilize the benefits therefrom. The Canadian
capital tax losses expire in fiscal 2029 ($2 million), fiscal 2030
($1.3 million), fiscal 2031 ($13 million), fiscal 2032 ($14 million).
The Canadian non-capital tax losses expire in fiscal 2029 ($1.2
million), fiscal 2030 ($13 million), fiscal 2031 ($34 million) and
fiscal 2032 ($29 million). The remaining tax losses are in foreign
countries and do not expire. The Company recognized $79 million of
previously unrecognized tax losses in the year. 
The Company has temporary differences associated with its investments
in its foreign subsidiaries, branches and interests in joint
ventures. At March 31, 2013, the Company has no deferred tax
liabilities in respect of these temporary differences. 
(d) Recognized deferred tax assets and liabilities 
Deferred tax assets and liabilities are attributable to the
following: 


 
----------------------------------------------------------------------------
                          Assets         Liabilities            Net         
(thousands of U.S.                                                          
 dollars)                2013   2012     2013      2012      2013      2012 
----------------------------------------------------------------------------
Exploration and                                                             
 evaluation assets          -      - (181,092) (196,088) (181,092) (196,088)
Property, plant and                                                         
 equipment                  -  1,057  (24,119)  (28,227)  (24,119)  (27,170)
Decommissioning                                                             
 obligations           11,354 10,341                  -    11,354    10,341 
Capital lease                                                               
 obligation            12,766 17,885                  -    12,766    17,885 
Convertible debentures      -      -   (7,110)   (1,057)   (7,110)   (1,057)
Minimum alternate tax                                                       
 credit (1)            54,605 58,314  (78,195)        -   (23,590)   58,314 
Unused losses          26,863    573                  -    26,683       573 
----------------------------------------------------------------------------
Tax assets /                                                                
 (liabilities)        105,408 88,170 (290,516) (225,372) (185,109) (137,201)
----------------------------------------------------------------------------
 
1.  The utilization of the minimum alternate tax credit is dependent on
    future taxable profits from the D6 Block. MAT paid can be carried
    forward for 10 years and deducted against regular income taxes in future
    years. As a result, the Company also recognizes the MAT tax as a
    deferred tax asset on the statement of financial position and a deferred
    income tax recovery in the statement of comprehensive income. Based on
    cashflow projections from the reserve report for the D6 Block, the
    Company expects to realize the benefit of the tax credit. 
 
Movements in deferred tax balances during the year are as follows:          
                                                                            
----------------------------------------------------------------------------
                                      As at Recognized                As at 
                                  March 31,  in profit Recognized March 31, 
(thousands of U.S. dollars)            2012    or loss  in Equity      2013 
----------------------------------------------------------------------------
Exploration and evaluation assets  (196,087)    14,996          -  (181,091)
Property, plant and equipment       (27,170)     3,051          -   (24,119)
Decommissioning obligations          10,341      1,012          -    11,353 
Capital lease obligation             17
,885     (5,119)         -    12,765 
Convertible debentures               (1,057)     1,421     (7,475)   (7,110)
Minimum alternate tax credit (1)     58,314    (81,904)         -   (23,590)
Unused losses                           573     26,109          -    26,683 
----------------------------------------------------------------------------
Tax assets / (liabilities)         (137,201)   (40,434)            (185,109)
----------------------------------------------------------------------------
                                                                            
25. Earnings per share                                                      
                                                                            
The earnings used in the calculation of basic and diluted per share amounts 
are as follows:                                                             
                                                                            
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Net loss                                              216,496        322,628
----------------------------------------------------------------------------
                                                                            
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:                                                    
                                                                            
----------------------------------------------------------------------------
(thousands of U.S. dollars)                        Year ended     Year ended
                                               March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Weighted average number of common shares used                               
 in the calculation of basic earnings per share    57,633,285     51,587,246
Shares deemed to be issued for no consideration                             
 in respect of employee options                             -              -
----------------------------------------------------------------------------
Weighted average number of ordinary shares used                             
 in the calculation of diluted earnings per                                 
 share                                             57,633,285     51,587,246
----------------------------------------------------------------------------

 
As a result of the net loss in the year ended March 31, 2013, the
outstanding stock options of 4,953,145 and shares issuable upon
conversion of the outstanding notes of 114,958 as at March 31, 2013
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. The average market value of the Company's
common shares for purposes of calculating the dilutive effect of
stock options for the year ended March 31, 2012 was based on quoted
market prices for the period that the options were outstanding. The
number of shares issuable upon conversion of the outstanding
convertible notes payable is based on the conversion price of
Cdn$11.30 per common share. See note 14 for details of conversion of
the convertible notes payable. 
26. 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 23 percent of sales during the year ended
March 31, 2013. 
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. dollars)      Year ended March 31,   Year ended March 31,
                                                 2013                   2012
----------------------------------------------------------------------------
                                                               Additions to:
----------------------------------------------------------------------------
                               Exploration  Property, Exploration           
                                       and  plant and         and  Property,
                                evaluation  equipment  evaluation  plant and
Segment                        assets (E&E)  (PP&E(1))     assets  equipment
----------------------------------------------------------------------------
Bangladesh                               -      2,231          63        755
Brazil                                   -         90           -          -
India                                  723      7,952       2,432     23,144
Indonesia                          133,980     11,021      16,676          -
Kurdistan                              537       (184)     24,795          -
Madagascar                               -          -           9          -
Pakistan                                 -          -         248          -
Trinidad                            39,002     11,041     120,753          6
All other                                -        597           -      3,165
----------------------------------------------------------------------------
Total                              174,242     32,748     164,976     27,070
----------------------------------------------------------------------------
(1) Excludes changes in capital work-in-progress.                           
----------------------------------------------------------------------------
(thousands of                                                               
 U.S. dollars)            As at March 31, 2013          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    22,916    35,918     4,737    31,605    46,617
Brazil                   -        67       661         -         -         -
India               86,997   492,073   653,584   136,104   454,421   730,134
Indonesia          497,579    12,741   577,311   510,161         -   534,923
Kurdistan           11,866         -    15,024    50,519       749    54,573
Madagascar           1,200        30     1,412     1,209         -     1,377
Pakistan                 -        12        87       248         -       310
Trinidad            93,245    65,377   169,591   153,902     1,467   190,617
All other                -       951    40,219         -    20,849    59,936
----------------------------------------------------------------------------
Total              695,624   594,166 1,493,807   856,880   509,091 1,618,487
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                                      Year ended March 31, 2013    
----------------------------------------------------------------------------
                       Natural                                              
                          gas, Government           Production    Depletion 
                    condensate   share of                  and          and 
                       and oil     profit   Royalty  operating depreciation 
Segment                  sales  petroleum   expense    expense      expense 
----------------------------------------------------------------------------
Bangladesh              53,335    (18,049)        -    (10,278)     (12,441)
Brazil                       -          -         -          -            - 
India                  182,442     (9,552)   (9,255)   (26,042)    (131,480)
Indonesia                    -          -         -          -         (195)
Kurdistan                    -          -         -          -            - 
Madagascar                   -          -         -          -          (28)
Pakistan                     -          -         -          -           (6)
Trinidad                     -          -         -          -         (128)
Canada                     427          -        16       (458)        (972)
All other                    -          -         -          -            - 
----------------------------------------------------------------------------
Total                  236,204    (27,601)   (9,239)   (36,778)    (145,250)
----------------------------------------------------------------------------
                                                                            
 
                                                                            
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                           Year ended March 31, 2013               
----------------------------------------------------------------------------
                          Exploration         Other                         
                                  and income/(loss)              Reversal/( 
                           evaluation on short-term  Share-based      Asset 
Segment                       expense   investments compensation impairment)
----------------------------------------------------------------------------
Bangladesh                       (361)            -            -          - 
Brazil                        (13,956)            -            -          - 
India                          (1,300)            -            -    101,544 
Indonesia                     (92,206)          311            -    (16,281)
Kurdistan                      (1,851)            -            -    (38,919)
Madagascar                     (1,258)            -            -          - 
Pakistan                       (1,254)            -            -          - 
Trinidad                      (58,445)            -            -    (12,631)
Canada                         (2,180)            -            -          - 
All other                           -        (2,106)     (10,894)         - 
----------------------------------------------------------------------------
Total                        (172,810)       (1,795)     (10,894)    33,713 
----------------------------------------------------------------------------
                                                                            
 
                                                                            
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                          Year ended March 31, 2013                
----------------------------------------------------------------------------
                                                                
            
                       General and                     Income tax   Segment 
                    administrative   Finance   Finance  reduction    profit 
Segment                    expense    income   expense / (expense)    (loss)
----------------------------------------------------------------------------
Bangladesh                       -         -         -          -    12,206 
Brazil                           -         -         -          -   (13,956)
India                            -         -         -    (82,282)   24,075 
Indonesia                        -         -         -     34,671   (73,700)
Kurdistan                        -         -         -          -   (40,770)
Madagascar                       -         -         -          -    (1,286)
Pakistan                         -         -         -          -    (1,260)
Trinidad                         -         -         -          -   (71,204)
Canada                           -         -         -      7,466     4,299 
All other                   (6,931)    1,999   (36,968)         -   (54,900)
----------------------------------------------------------------------------
Total                       (6,931)    1,999   (36,968)   (40,154) (216,496)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                                      Year ended March 31, 2012    
----------------------------------------------------------------------------
Segment                Natural                                              
                          gas, Government           Production    Depletion 
                    condensate   share of                  and          and 
                       and oil     profit   Royalty  operating depreciation 
                         sales  petroleum   expense    expense      expense 
----------------------------------------------------------------------------
Bangladesh              57,855    (19,589)        -     (7,377)     (13,055)
Brazil                       -          -         -          -            - 
India                  304,512     (6,414)  (15,456)   (31,795)    (130,514)
Indonesia                    -          -         -          -         (184)
Kurdistan                    -          -         -          -          (25)
Madagascar                   -          -         -          -          (27)
Pakistan                     -          -         -          -           (7)
Trinidad                     -          -         -          -          (85)
Canada                     417          -       (14)      (291)        (697)
All other                    -          -         -          -           (1)
----------------------------------------------------------------------------
Total                  362,784    (26,003)  (15,470)   (39,463)    (144,595)
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                           Year ended March 31, 2012               
----------------------------------------------------------------------------
Segment                   Exploration         Other                         
                                  and income/(loss)                         
                           evaluation on short-term  Share-based      Asset 
                              expense   investments compensation impairment 
----------------------------------------------------------------------------
Bangladesh                       (933)            -            -          - 
Brazil                  
            -             -            -          - 
India                         (12,233)            -            -   (133,578)
Indonesia                     (61,717)        6,440            -          - 
Kurdistan                     (40,455)            -            -          - 
Madagascar                     (1,132)            -            -          - 
Pakistan                       (1,978)            -            -          - 
Trinidad                     (111,996)            -            -          - 
Canada                         (1,315)            -            -          - 
All other                      (1,666)       (5,823)     (35,516)         - 
----------------------------------------------------------------------------
Total                        (233,426)          617      (35,516)  (133,578)
----------------------------------------------------------------------------
                                                                            
 
----------------------------------------------------------------------------
(thousands of U.S.                                                          
 dollars)                          Year ended March 31, 2012                
----------------------------------------------------------------------------
Segment                                                                     
                       General and                     Income tax   Segment 
                    administrative   Finance   Finance  reduction    profit 
                           expense    income   expense / (expense)    (loss)
----------------------------------------------------------------------------
Bangladesh                       -         -   (22,996)         -    (6,095)
Brazil                           -         -         -          -         - 
India                            -         -         -    (14,522)  (40,000)
Indonesia                        -         -         -      9,319   (46,142)
Kurdistan                        -         -         -          -   (40,480)
Madagascar                       -         -         -          -    (1,159)
Pakistan                         -         -         -          -    (1,985)
Trinidad                         -         -         -     22,913   (89,168)
Canada                           -         -         -      1,007      (893)
All other                   (8,776)    4,302   (49,226)         -   (96,707)
----------------------------------------------------------------------------
Total                       (8,776)    4,302   (72,222)    18,717  (322,629)
----------------------------------------------------------------------------
                                                                            
27. Guarantees                                                              
 

 
----------------------------------------------------------------------------
                                                        As at          As at
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Performance security guarantees included in                                 
 restricted cash (1)                                                        
D4-India                                                  331          1,474
Indonesia                                               7,660          9,857
Performance security guarantees not included in                             
 restricted cash (2)                                                        
Indonesia                                                   -          2,454
----------------------------------------------------------------------------
Total guarantees                                        7,991         13,785
----------------------------------------------------------------------------
(1) The Company is required to provide funds to support the guarantees in   
    the amounts indicated above.                                            
(2) These performance security guarantees were not reflected on the balance 
    sheet as they were supported by Export Development Canada. The          
    performance security guarantee outstanding at March 31, 2012 expired on 
    May 5, 2012.                                                            

 
The Company has performance security guarantees related to the
capital commitments for exploration blocks. The guarantees are
cancelled when the Company completes the work required under the
exploration period. 
28. Related-party transactions 
(a) Oil and gas property 
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 Niko Resources Ltd. 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
measured at the exchange amount, which is the amount agreed to
between the related parties. The Company records its share of
revenues, royalty expense and production and operating expense as
indicated in note 26(c) in the Canada segment. 
(b) Key management personnel  
Key management personnel of the Company include directors and
executive officers. Non-management directors receive an annual fee
and participate in the Company's stock option program. Executive
officers (Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer) receive a salary, are eligible for an annual bonus
and participate in the Company's stock option program. The Company
does not have other short-term benefits, defined contribution plans
or defined benefit plans and does not provide post-employment
benefits. 
Key management personnel compensation comprised the following: 


 
----------------------------------------------------------------------------
                                                   Year ended     Year ended
(thousands of U.S. dollars)                    March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Annual fee for non-management directors                   150             95
Executive officers - salary                             1,822          1,670
Executive officers - bonus                                  -            996
Share-based payments (1)                                4,771          7,955
----------------------------------------------------------------------------
                                                        6,743         10,716
----------------------------------------------------------------------------
(1) The value of share-based payments related to stock options granted      
    during the year is estimated using the Black-Scholes option-pricing     
    model. See note 18 for further details.                                 

 
29. Commitments and contractual obligations 
(a) Exploration commitments 
The Company has minimum work commitments as specified in the PSCs for
its exploration properties. The Company may apply for extensions to
commitment deadline if it is unable to fulfill the commitment by the
deadline or may relinquish the property. The estimated cost of the
minimum work commitments is as follows: 


 
----------------------------------------------------------------------------
Property                             Estimated Spending                     
                             (thousands of U.S. dollars)  Exploration period
----------------------------------------------------------------------------
Indonesia                                       112,000           Various(1)
Madagascar                                       10,000       September 2015
Trinidad and Tobago                             167,000           Various(2)
----------------------------------------------------------------------------
Total                                           289,000                     
------------
----------------------------------------------------------------
 
1.  The deadlines for fulfilling the work commitments in Indonesia are: $59
    million by November 2013; $39 million by May 2014; $11 million by
    November 2014; and $3 million by December 2014. The Company has applied
    or plans to apply for extensions to commitment deadlines if it is unable
    to fulfill the commitment by the deadline. 
2.  The deadlines for fulfilling the work commitments in Trinidad and Tobago
    are: $11 million by July 2013; $18 million by September 2013, $64
    million by April 2014, $20 million by July 2014 and $54 million by April
    2016. 

 
(b) Finance lease obligation 
Refer to note 15 for contractual obligations related to the finance
lease. 
(c) Operating lease 
The Company has a contract for a drilling rig for a four-year term,
with an additional year at the option of the Company. The contract
commenced on October 2, 2012 and based on the daily operating rate of
$385,000 per day specified in the contract, the Company expects gross
future minimum lease payments, before reimbursement from partners, to
be as follows: 


 
----------------------------------------------------------------------------
(thousands of U.S. dollars)                                   Lease payments
----------------------------------------------------------------------------
less than 1 year                                                     141,000
1-5 years                                                            351,000
greater than 5 years                                                    Nil
----------------------------------------------------------------------------
Total                                                                492,000
----------------------------------------------------------------------------

 
Under the terms of the contract, the Company has the right to assign
the rig contract to third parties  
30. 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     
 ($27.9 million as at December 31,       until the lawsuit described in note
 2012).                                  (b) 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 422,800,000 ($5.4 million) for 3 Bcf of free natural gas delivered
    from the Feni field as compensation for the burnt natural gas; 
ii. taka 826,900,000 ($10.6 million) for 5.89 Bcf of free natural gas
    delivered from the Feni field as compensation for the subsurface loss; 
iii.taka 845,600,000 ($10.9 million) for environmental damages, an amount
    subject to be increased upon further assessment; 
iv. taka 6,340,000,000 ($81.4 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 sub judice 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. 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 March 31, 2013. 
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 $59
million (comprised of additional taxes of $36 million and write off
of approximately $23 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 S. Sampson
Chairman of the Board, President & CEO
(403) 262-1020 
Niko Resources Ltd.
Glen Valk
VP Finance & CFO
(403) 262-1020
www.nikoresources.com