JPMorgan - KASE

Hurricane Hydrocarbons Ltd.
Notes to consolidated financial statements
(expressed in United States dollars, tabular amounts in thousands of dollars)
1 Significant Accounting Policies
Principles of consolidation
Hurricane Hydrocarbons Ltd. (“Hurricane”, the “Corporation” or the “Company”) is an
independent integrated oil and gas corporation, operating in the Republic of Kazakhstan,
engaged in the acquisition, exploration, development and production of oil and gas, refining of
oil, and the sale of oil and oil products.
The consolidated financial statements of Hurricane have been prepared in accordance with
generally accepted accounting principles in Canada and include the accounts of the Corporation,
which is incorporated under the laws of Alberta, together with the accounts of its subsidiaries
which are incorporated under the laws of Canada, Cyprus, England, Netherlands and Kazakhstan.
These financial statements have been reconciled to U.S. GAAP in Note 21.
On August 28, 1996, the Corporation entered into a Share Sale-Purchase Agreement (the
“Agreement”) with the Republic of Kazakhstan for the purchase of 100% of the issued common
shares of OJSC Hurricane Kumkol Munai (“HKM”), a state owned joint stock company, operating
in the South Turgai Basin, located in South Central Kazakhstan.
As more fully explained in Note 3, effective March 31, 2000, the Corporation acquired 88.36% of
the common shares of OJSC Shymkentnefteorgsyntez (“ShNOS”). Accordingly, the consolidated
financial statements for the year ended December 31, 2000, as presented, include the operations
of ShNOS as at and for the nine months ended December 31, 2000.
Joint ventures
As more fully explained in Note 6, certain of Hurricane’s activities are conducted jointly with
others through incorporated joint ventures. Accordingly, these consolidated financial statements
reflect Hurricane’s proportionate interest in such activities.
Foreign currency translation
Foreign currency amounts, including those of foreign subsidiaries, are expressed in United States
dollars using the temporal method as follows:
(a) Monetary assets and liabilities—at the rate in effect at year end;
(b) Other assets and liabilities—at historical rates; and
(c) Revenues and expenses—at the average exchange rates during the period, except for
provisions for depletion and depreciation, which are translated on the same basis as the
related assets.
Gains or losses resulting from such conversions are charged to operations, except that gains or
losses on conversion to United States Dollars of long-term monetary assets and liabilities are
deferred and amortized over the remaining useful lives of the assets or liabilities.
Cash and cash equivalents
Cash and cash equivalents include term deposits with original maturity terms not exceeding 90
days.
Inventories
Inventories of crude oil, oil products and other inventories are recorded at the lower of cost and
net realizable value. Cost comprises direct materials and, where applicable, direct labour costs
and those overheads, which have been incurred in bringing the inventories to their present
F-24