Anyone still here?
posted on Apr 01, 2010 03:22PM
Coal Gasification - Building a Clean Energy Company
Here is the latest MD&A from SEDAR (March 30. 2010) Is Groundhog lost now? What ever happened to the drilling results from last year?
Is there any hope still? http://www.sedar.com/CheckCode.do;jsessionid=0000MIVR3cGPz96Av2D1OWeXRqc:-1
Date of Report: March 31, 2010 Nature of the Business and Overall Performance Summary West Hawk is an energy company, the common shares of which are listed on the TSX Venture Exchange (the “Exchange”) under the symbol “WHD” and the Frankfurt Stock Exchange under the symbol “H5N”. The Company is incorporated in British Columbia, Canada and has two subsidiaries: WHE Holdings LLC (“WHE Holdings”), 100% owned and West Hawk Energy (USA) LLC (“WHE”), 75% owned. The Company, through its subsidiaries, is engaged in the development of a 5120 acre natural gas property located in the Piceance Basin, Western Colorado (the “Figure Four Property”). See “Projects – Figure Four Natural Gas Property” below. At present, the Company’s focus is to resolve the outstanding Chapter 11 bankruptcy proceedings, find a permanent and sustainable solution for the Company’s Figure Four Project, secure financing for its operations and significantly reduce its debt. The Company’s Groundhog Property has been dismissed due to poor results of the proxy ultimate analysis completed on the samples obtained in the Discovery Creek area, which results showed some coal seams with ash contents of up to 50%. Also during the summer 2008 drilling program, more coal seams than forecasted in previous studies were detected. Additional factors include the Company’s lack of funding and inability to successfully conclude its 2009 fourth quarter private placement. Historically, the Company has financed operations primarily through the sale of its securities. The Company’s ability to continue exploration and property development activities is highly dependent on obtaining additional financing from current investors, as well as attracting new investors. Recent months have witnessed the drastic decline and continued volatility of the global financial markets, which has had a significant impact on the Company’s operations and share price. Currently, equity financing, the Company’s primary source of capital, is very difficult to obtain without substantial dilution. WEST HAWK DEVELOPMENT CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the period ended January 31, 2010 Page | 3 The recent events in the global financial markets have had a profound impact on the global economy. Virtually all industries, including the petroleum and natural gas industry, have been impacted by these market conditions, which have included: a sharp contraction in the credit markets resulting in a widening of credit risk spreads and higher costs of funding; a deterioration in the credit ratings of numerous financial institutions; devaluations and high volatility in global equity, commodity and foreign exchange markets with a corresponding lack of market liquidity and a decline in the cycle that effects global activity. These events have had and may continue to have a significant impact on the Company. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has recorded net operating losses resulting in a deficit of $66,181,000 million through January 31, 2010 and expects losses to continue through 2010. The Company has not generated cash flow from operations and has primarily relied upon debt and issuance of stock to fund its operations. As of January 31, 2010 the Company has a working capital deficit of $16,557,000 and assets which may not be sufficient to operate over the next twelve months. The Company’s ability to continue as a going concern is dependent upon, among other matters, the successful completion of the proposed Offering and DIP loan and management’s ability to obtain further financing in the future to fund operations until the Company achieves profitability and positive cash flow from operating activities. Successful completion of the transactions is subject to a number of known and unknown risks and uncertainties beyond the control of the Company. Completion of the Offering is subject to, among other matters, the ability of the Agent to secure purchasers for the Offering, receipt of required regulatory approvals and satisfaction of all other conditions precedent to completion of the Offering, including completion of satisfactory due diligence by the Agent. Successful completion of the DIP loan is subject to, among other conditions, approval of the Bankruptcy Court and lender satisfaction with its due diligence review. See also “Risks and Uncertainties” below. There is no assurance that the Company will successfully complete these transactions or, if these transactions fail, obtain alternate financing on terms acceptable to the Company or at all. A failure to successfully complete these transactions or obtain alternate financing may result in the inability of the Company to continue as a going concern. Significant events impacting West Hawk during the nine months ending January 31, 2010 are as follows: a. Trading Suspension and Cease Trade Orders On February 8, 2010 the trading in the Company’s shares was halted by the Investment Industry Regulatory Organization of Canada (IIROC). On February 22, 2010 the trading was reinstated. Following completion of an Exchange compliance review, trading in the Company’s shares was reinstated on July 15, 2009 after eight months of suspension. Particulars of the compliance review are disclosed in the Company’s July 10, 2009 press release and the WEST HAWK DEVELOPMENT CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the period ended January 31, 2010 Page | 4 Company’s MD&A for the year ended April 30, 2009, available on the SEDAR website at www.sedar.com. b. Arbitration and Litigation Proceedings During most of the 2008 calendar year West Hawk worked diligently to consummate an agreement with Petrobras – Petroleo Brasileiro S.A. (“Petrobras”), a Brazilian oil company, to divest a signification portion of its interest in the Figure Four Property. In August 2008, Petrobras started to work with West Hawk and Encana Oil & Gas (USA) Inc. (“Encana”) to consummate an agreement for the Figure Four Property. During the first week of November 2008, Petrobras advised the Company that EnCana was attempting to circumvent the Company and were making offers directly to Petrobras that were lower than the offer that had been agreed upon between the Company and Petrobras. There was a “no circumvent” clause in the memorandum of understanding between Encana and the Company. As a result, the Company, through WHE, filed a law suit against EnCana in the District Court for the City and County of Denver, Colorado in December 2008 for tortuous interference and other claims. The Company, through WHE, also filed a demand for arbitration with the American Arbitration Association in December 2008. On June 22 2009, the Company and EnCana filed a stipulated motion to terminate their arbitration without prejudice. West Hawk management is considering re-filing the request for arbitration. On June 25, 2009, the judge order the tort claims dismissed, but allowed for the contract and fraud claims against EnCana to proceed. A hearing is scheduled regarding the fraud claims for December 7, 2009 in the State District Court. c. Bankruptcy Filings On December 18, 2008, following termination of the Debt Assignment Agreement, WHE elected to file for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Colorado in order to implement the restructuring of its indebtedness and permanently improve its capital structure. On April 7, 2009, WHE Holdings also elected to file for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Colorado in order to implement the restructuring of its indebtedness and permanently improve its capital structure. In April 2009, the debtors filed to consolidate the two Chapter 11 proceedings. The motion for substantive consolidation is pending. On August 12, 2009, WHE, WHE Holdings and EnCana agreed on a 30 day stay of all pending Bankruptcy Court issues. 2010 Objectives The Company’s management, led by Mr. Torres-Macchiavello, is committed to creating a sustainable business model and maximizing value for the Company’s shareholders. The team’s immediate priorities are to complete a plan of reorganization of the WHE assets and resolve the outstanding Chapter 11 bankruptcy proceedings of WHE and WHE Holdings, find a permanent and sustainable solution for the Company’s Figure Four Property, secure financing for its operations, including in particular the continued exploration of its Groundhog Property, and significantly reduce its debt. WEST HAWK DEVELOPMENT CORP. MANAGEMENT DISCUSSION AND ANALYSIS For the period ended January 31, 2010 Page | 5 Results of Operations Three and nine months ended January 31, 2010 and 2009 The Company continues to be in the exploration and development stage of its Figure Four Property and is in the exploration stage with respect to its Groundhog Property. As of January 31, 2010, production was suspended on the Figure Four Property. The Company has determined to not continue with its Groundhog Property. Three wells were producing at the Figure Four Property from May to December 2008. In December 2008, due to the severe drop in gas prices, the gathering system was shut-in and production was stopped. Production had not been reinstated as of March 31, 2010. As such, the Company generated no commercial revenues during the first three quarters of the 2009 fiscal year from the Figure Four Property. The Company recognized a net loss of $108,000 and $986,000 for the three and nine months ended January 31, 2010 respectively, compared with a loss of $1,122,000 and $6,373,000 for the prior comparable periods. This decrease is attributable to fact the Company spent no money on exploration or development during the nine months ended January 31, 2010 as the Company focused its resources and attention on bankruptcy filings and litigation issues as well as completion of the annual audit. The Company incurred no expenditures during the nine months ended January 31, 2010 relating to the Company’s operations on the Figure Four Property, compared to $5,596,000 for the same period in 2009. During the three and nine months ended January 31, 2010, we incurred $2,000 and $41,000 in expenditures on the Groundhog Property respectively, compared to $38,000 and $2,869,000 made in the same periods in 2009. The Company’s general and administrative expenses during the three and nine months ended January 31, 2010 totaled $138,000 and 1,544,000 respectively, representing decreases of $639,000 and $4,734,000 over the comparable periods in 2008. More detail on the general and administrative expenditures is provided below. Cash and cash equivalents for the period ended January 31, 2010 decreased by $240,000. For the nine months ended January 31, 2010, the decrease in cash is a net result of: • Cash used in operating activities of $281,000 mainly associated to general and administrative expenses. • Cash used in investing activites during the period in connection with additions of $41,000 on the Groundhog Property which was offset by a refund of $22,000. • Cash provided by financing activities of $60,000 from the non-brokered private placement.