UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13a-16 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November 2002
Commission File Number: 0-28466
HURRICANE HYDROCARBONS LTD.
(Exact name of registrant as specified in its charter)
Suite 1460, Sun Life Plaza, North Tower, 140-4th Avenue S.W.,
CALGARY, ALBERTA T2P 3N3
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F ___ Form 40-F X
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Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1). ____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in
paper of a Form 6-K if submitted solely to provide an attached annual report to
security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): ____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in
paper of a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes ____ No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HURRICANE HYDROCARBONS LTD.
(Registrant)
Date: November 27, 2002 By: /s/ IHOR P. WASYLKIW
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Ihor P. Wasylkiw
Vice President - Investor Relations
HURRICANE HYDROCARBONS LTD.
RECONCILIATION OF RESULTS
FROM CANADIAN GAAP TO U.S. GAAP
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(ALL FIGURES ARE IN THOUSANDS OF UNITED STATES DOLLARS)
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP")
which conform in all material respects with those applicable in the United
States ("U.S. GAAP"), except as set forth below:
INCOME TAXES
Effective January 1, 2000 the Corporation adopted the recommendations of
the Canadian Institute of Chartered Accountants with respect to accounting
for future income taxes and applied this policy retroactively without
restatement of prior period financial statements. Please refer to Note 1
of the Consolidated Financial Statements for the year ended December 31,
2000. This new method differs from United States GAAP due to the
application of transitional provisions and the accounting for certain tax
incentives. In prior years a valuation allowance had been made against the
deferred tax asset for U.S. GAAP purposes. This valuation allowance was
released in 2000.
FOREIGN CURRENCY TRANSLATION
Hurricane's principal operating subsidiaries are HKM and HOP and for
Canadian GAAP are classified as integrated which leads to the use of the
temporal method of translation Please refer to Note 1 of the Consolidated
Financial Statements for the year ended December 31, 2000. Under United
States GAAP, the Corporation, on a consolidated basis, is required to
translate the accounts of its principal operating subsidiaries using the
current rate method. The significant changes which result from this
difference are a reduction in the carrying value of capital assets and the
creation of a cumulative translation account within the equity section of
the balance sheet, which reduces total equity.
ACCOUNTING FOR OIL AND GAS PROPERTIES
There are certain differences between the full cost method of accounting
for oil and gas assets as applied in Canada and as applied in the United
States. The Corporation has reviewed such differences and determined that
no variances in financial statement balances would have resulted from the
application of full cost accounting in accordance with United States GAAP.
CONSOLIDATED STATEMENTS OF INCOME
The application of United States GAAP would have the following effects on
net income as reported:
NINE MONTHS ENDED SEPTEMBER 30
2002 2001
Net income as reported in accordance
with Canadian GAAP 117,430 146,296
Amortization of debt issue costs (29) -
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NET INCOME UNDER UNITED STATES GAAP 117,401 146,296
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COMPREHENSIVE INCOME
Foreign exchange translation adjustment (8,064) (600)
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TOTAL COMPREHENSIVE INCOME 109,337 145,696
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Basic income per share under United States GAAP 1.45 1.83
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Diluted income per share under United States GAAP 1.39 1.73
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STOCK BASED COMPENSATION
The Corporation has a stock-based compensation plan as more fully
described in Note 13 to the Consolidated Financial Statements for the year
ended December 31, 2001. With regard to its stock option plan, the
Corporation applies APB Opinion No. 25 in accounting for this plan and
accordingly no compensation cost has been recognized. Had compensation
expense been determined based on fair value at the grant dates for the
stock option grants consistent with the method of SFAS No. 123, the
Corporation's net income and net income per share would have been reduced
to the pro forma amounts as indicated below:
NINE MONTHS ENDED SEPTEMBER 30
2002 2001
Net income under U.S. GAAP:
As reported 117,401 146,296
Pro forma 115,882 144,735
.
Basic earnings per share:
As reported 1.45 1.83
Pro forma 1.43 1.81
Stock options vested during period (thousands) 1,225 1,312
Weighted average exercise price 3.05 2.62
Weighted average fair value of options granted
during the period 1.24 1.19
The foregoing information is calculated in accordance with the
Black-Scholes option pricing model, using the following data and
assumptions: volatility, as of the date of grant, computed using the prior
one to three-year weekly average prices of the Corporation's Common
Shares, which ranged from 52% to 124%; expected dividend yield - 0%;
option terms to expiry - 4 to 5 years as defined by the option contracts;
risk-free rate of return as of the date of grant - 4.86% to 5.96%, based
on five year Government of Canada Bond yields.
CONSOLIDATED BALANCE SHEETS
The application of United States GAAP would have the following effects on
balance sheet items as reported:
AS REPORTED INCREASE UNITED STATES
(DECREASE) GAAP
SEPTEMBER 30, 2002
Current assets 333,554 333,554
Capital assets 382,939 (54,473) 328,466
Future income tax assets 20,891 (6,157) 14,734
Current liabilities 164,792 164,792
Long term debt 293,197 293,197
Future income tax liability 17,826 17,826
Provision for future site restoration costs 3,904 3,904
Minority interest 10,357 10,357
Preferred shares of subsidiary 85 85
Shareholders' equity 247,223 (60,630) 186,593
SEPTEMBER 30, 2001
Current assets 206,911 206,911
Capital assets 292,660 (45,411) 247,249
Future income tax assets 27,582 27,582
Current liabilities 117,170 117,170
Long term debt 249,125 249,125
Future income tax liability 24,341 24,341
Provision for future site restoration costs 2,800 2,800
Minority interest 24,825 24,825
Preferred shares of subsidiary 93 93
Shareholders' equity 108,799 (45,411) 63,387
IMPACT OF NEW AND IMPENDING U.S. GAAP ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 141 ("FAS 141") - BUSINESS
COMBINATIONS
In June 2001, the Financial Accounting Standards Board ("FASB") approved
SFAS No 141 "Business Combinations" and issued this statement in July
2001. FAS 141 establishes new standards for accounting and reporting
requirements for business combinations and will require that the purchase
method of accounting be used for all business combinations initiated after
June 30, 2001. Use of the pooling of interest method will be prohibited.
Management does not believe that FAS 141 will have a material impact on
the Company's financial statements.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142 ("FAS 142") - GOODWILL
AND OTHER INTANGIBLE ASSETS
In June 2001, the FASB approved SFAS No 142 "Goodwill and Other Intangible
Assets", which supercedes APB Opinion No 17 "Intangible Assets". The FASB
issued this statement in July 2001. FAS 142 establishes new standards for
goodwill acquired in a business combination and eliminates amortization of
goodwill and instead sets forth the method to periodically evaluate
goodwill for impairment. Management does not believe that FAS 142 will
have a material impact on the Company's financial statements.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 143 ("FAS 143") -
ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
FAS 143, Accounting for Asset Retirement Obligations, is effective for
financial statements issued for fiscal years beginning after June 15,
2002. FAS 143 applies to the legal obligations associated with the
retirement of a tangible long-lived asset that result from the
acquisition, construction, development and/or the normal operation of a
long- lived asset, except for certain obligations of lessees. The
Corporation has not yet evaluated the effect that FAS No 143 will have on
financial reporting.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 144 ("FAS 144") -
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
FAS 144, Accounting for the Impairment or Disposal of Long Lived Assets,
supersedes both FAS No. 121 and the accounting and reporting provisions of
APB Opinion No.30. FAS 144 retains the fundamental provisions of FAS121
for recognizing and measuring impairment losses on long-lived assets. FAS
144 retains the basic provisions of Opinion 30 on how to present
discontinued operations in the income statement but broadens that
presentation to include a component of an entity rather than a segment of
a business. FAS 144 is effective for all fiscal years beginning after
December 15, 2001. Adoption of FAS 144 on January 2002 will not have a
material impact on the Corporation's financial position or net income.
CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT RECLASSIFICATIONS
Interest and other income is presented within revenue under Canadian GAAP,
under the United States GAAP this would be presented as a separate line
item after operating income.
Interest and financing costs is presented within expenses under Canadian
GAAP, under United States GAAP this would be presented as a separate line
item after operating income.
Unusual items as presented under Canadian GAAP would be included within
expenses under United States GAAP.