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## 7. BANK INDEBTEDNESS 

As at December 31, 2014, the Company had an extendible syndicated revolving bank facility in the amount of $130.0 million (December 31, 2013 –$65.0 million) based on the Company’ s producing reserves. The revolving facility is available to the Company until April 30, 2015. At that time the Company has the option to extend the facility for an additional year. If the revolving facility is not extended, the facility moves into a term phase whereby the loan is to be retired with one payment one year later, in an amount equal to the outstanding principal. Interest is paid on the revolving facility at bankers acceptance rates, plus a stamping fee. Collateral comprises a floating charge demand debenture on the assets of the Company. At December 31, 2014, the Company is in compliance with all covenants under the credit facility. The only financial covenant is that net debt including working capital deficiency not exceed the facility amount. 

## 8 . DECOMMISSIONING LIABILITY 

The Company provides for the future cost of decommissioning oil and gas production assets, including well sites, gathering systems and facilities. The total decommissioning obligation is estimated based on the Company’ s net ownership interest in wells and facilities, the estimated costs to abandon and reclaim the wells, gathering systems and facilities and the estimated timing of future costs. The total estimated undiscounted amount required to settle the Company’ s decommissioning obligation is approximately $37.3 million, which is expected to be paid over the next 25 years. A risk-free discount rate of 2.3% (2013 –3.0%) and an inflation rate of 2.0% (2013 –1.2%) was used to calculate the present value of the decommissioning obligation, amounting to $23.6 million. 

The following table provides a reconciliation of the carrying amount of the obligation associated with the decommissioning of oil and gas properties: 

<img src='content_image/269308.jpg'>

(1) Relates to changes in the inflation rate and discount rate in 2014 and a change in the discount rate in 2013. 

(2) Cost estimates were adjusted based on actual costs for abandonments and reclamations. 

## $^{ }$9. DEFERRED INCOME TAXES 

Deferred income tax assets and liabilities are based on the differences between the accounting amounts and the related tax bases of the Company's property and equipment assets, exploration and evaluation assets, commodity price contracts, decommissioning liability, share issue costs and unrealized gains and losses on investments. 

The Company has tax pools associated with exploration and evaluation and property and equipment assets of approximately $261.0 million as well as non-capital losses of approximately $136.0 million. The non-capital losses begin to expire in 2023. A deferred tax asset has not been recognized due to uncertainty as to future realization. 

The provision for deferred income taxes is different from the amount computed by applying the combined statutory Canadian federal and provincial tax rates to pre-tax income for the year. 

