JPMorgan - KASE

Selling
Selling expenses are comprised of the costs of operating the seven distribution centres of our
Downstream operations that sell refined products, and certain costs associated with the sale and
export of crude oil. Selling expenses increased $3.6 million from $15.1 million for the nine
months ended September 30, 2001 to $18.7 million for the nine months ended September 30,
2002, as a result of the significant increase in sales volumes. Upstream selling expenses for the
nine months ended September 30, 2002 were $7.4 million as compared to $4.3 million in the
comparable period in 2001. Downstream selling expenses were $11.3 million in the nine month
period ended September 30, 2002 compared to $10.7 million in the comparable period of 2001.
General and Administrative
Total general and administrative expenses were $42.3 million for the nine months ended
September 30, 2002 and $35.4 million for the comparable period in 2001. The following table sets
out the breakdown of these costs between activities and, in the case of Upstream and
Downstream activities, reflects them on a per barrel basis.
Nine Months Ended September 30, 2002 Nine Months Ended September 30, 2001
General and
Administrative
Per Barrel of Oil
Produced or Processed*
General and
Administrative
Per Barrel of Oil
Produced or Processed*
($000’s) ($/Bbl) ($000’s) ($/Bbl)
Upstream ........ 24,985 0.71 17,501 0.66
Downstream...... 11,815 0.59 14,792 0.73
Corporate ........ 5,470 3,062
Total ............ 42,270 35,355
* Downstream includes toller’s volumes.
The $6.9 million absolute increase in general and administrative expenses related to the increase
in activity in Upstream operations. There was also a change in the method of allocating centrally
incurred general and administrative costs, with a higher percentage allocated to Upstream
operations.
Interest and Financing Costs
Interest and financing costs increased to $26.1 million in the nine months ended September 30,
2002 from $12.1 million for the comparable period in 2001. This $14.0 million increase was mainly
attributable to the interest related to the Senior Notes issued in August 2001.
Depletion and Depreciation
Depletion and depreciation increased by $4.4 million in the nine months ended September 30,
2002 compared to the same period in 2001. This increase was mainly due to the increase in
production as compared to the same period in 2001 and the capital additions in 2002. The effect
of these increases was partly offset by the increase in proved producing reserves over the same
period. The following table sets out our depreciation and depletion on an aggregate and per
barrel basis:
Nine Months Ended
September 30, 2002
Nine Months Ended
September 30, 2001
($000’s) ($/Bbl*) ($000’s) ($/Bbl*)
Upstream .......................................... 20,163 0.58 17,167 0.64
Downstream ....................................... 8,831 0.44 7,171 0.35
Corporate ......................................... 70 280
Total .............................................. 29,064 24,618
* Downstream includes toller’s volumes
In accordance with Canadian and United States accounting standards, and to provide comfort
that anticipated future revenues are sufficient to cover the capitalised costs of properties, we
40