COMPUTER MODELING GROUP LTD. TSX: CMG ANNUAL REPORT 2009

Transcription

1 COMPUTER MODELING GROUP LTD. TSX: CMG ANNUAL REPORT 2009

2 Our Visio CMG s visio is to become the leadig developer ad supplier of dyamic reservoir simulatio techologies i the world. Through CMG s ogoig commitmet to research ad developmet, we have bee workig with our idustry parters to esure that our software techologies are able to simulate the ew oil ad gas extractio processes beig developed. Our goal is to assist oil ad gas compaies i maximizig value by providig a cost effective meas of uderstadig the complex physics of their reservoirs ad how these reservoirs will react to difficult hydrocarbo recovery processes. CMG has over 360 cliets i 49 coutries. Cotets Highlights 1 Letter to Shareholders 2 A History of Cotiuous Iovatio 6 CMG s Software Suite 7 Maagemet s Discussio ad Aalysis 11 Maagemet s Statemet of Resposibility 27 Auditors Report to the Shareholders 27 Cosolidated Fiacial Statemets 28 Notes to Cosolidated Fiacial Statemets 31 Corporate Iformatio IBC Aual Geeral ad Special Meetig Computer Modellig Group Ltd. ivites all shareholders to atted the Aual Geeral ad Special Meetig of shareholders to be held o July 9, 2009 at 10:00 a.m. at the office of Computer Modellig Group Ltd., 150, Street N.W., Calgary, Alberta. Shareholders who are uable to atted the meetig are requested to complete ad retur their Form of Proxy to Computershare Trust Compay.

3 Highlights $ thousads, uless otherwise stated Software liceses reveues 9,471 11,508 13,617 19,056 22,607 38,406 Cosultig ad cotract research reveues 2,863 3,656 3,603 4,659 5,386 5,536 Total reveue 12,334 15,164 17,220 23,715 27,993 43,942 Gross profit 8,689 10,477 12,321 17,911 21,208 34,785 Gross profit (%) Earigs before icome ad other taxes 3,984 5,203 6,405 10,812 11,863 24,247 Icome ad other taxes 1,401 1,729 2,419 3,855 4,263 7,631 Earigs for the year 2,583 3,474 3,986 6,957 7,600 16,616 Weighted average shares outstadig (000s) 14,951 15,509 15,912 16,369 16,745 17,172 Earigs per share basic ($) Tradig price per share ($), at March $45,000 Total Reveue ($thousads) $18,000 Earigs ($thousads) $40,000 $35,000 $30,000 $25,000 $20,000 R&D Expeditures ($thousads) 29% Compoud Aual Growth Rate $16,000 $14,000 $12,000 $10,000 $8,000 45% Compoud Aual Growth Rate $15,000 $6,000 $10,000 $4,000 $5,000 $2, $35,000 Gross Profit ($thousads) $1.00 Earigs per Share (basic) $30,000 $25,000 $20,000 $15,000 32% Compoud Aual Growth Rate $0.90 $0.80 $0.70 $0.60 $0.50 $ % Compoud Aual Growth Rate $10,000 $5, $0.30 $0.20 $ Aual Report 1

4 To Our Shareholders I am oce agai pleased to report record fiacial results for Computer Modellig Group Ltd. For the fiscal year eded March 31, 2009, we achieved results which surpassed all previous records for CMG. I am especially proud of this accomplishmet i view of the ecoomic dowtur which bega durig our third quarter of fiscal Notably, i the six categories oted below, we have ow set records for six cosecutive years: Keeth M. Dedeluk Presidet ad Chief Executive Officer $ thousads, uless otherwise stated For the year eded March 31, Chage Auity/maiteace software liceses $ 18,033 $ 25,947* 44% Software licese reveue 22,607 38,406* 70% Total reveue 27,993 43,942* 57% Gross profit 21,208 34,785* 64% Earigs 7,600 16,616* 119% Earigs per share basic $ 0.45 $ 0.97* 116% * Record aual results Our sigificat accomplishmets i the year were: Auity/maiteace software licese reveue reached a Software Licese Reveue record level of $25.9 millio, up 44 percet from last year. ($thousads) Cotiuig growth i this area is a fudametal part of CMG s success, ad this reveue stream cotiues to demostrate a high degree of sustaiability year over year. Auity/maiteace software licese reveue has grow at a compoud aual rate of 32 percet sice Icreased perpetual software licese reveue by 172 percet over the prior year, to a record $12.5 millio. $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 32% Compoud Aual Growth Rate This uprecedeted growth proves that this reveue stream ca be more $10,000 Computer Modellig Group irregular tha auity/maiteace reveue, as it is highly depedet o the timig of a customer s decisio to purchase software liceses. While perpetual software licese sales ca make our reveue stream more lumpy, these sales provide a loger term commitmet by our customers to use our products ad most of these customers supplemet their purchase with aual maiteace liceses to keep the software up-to-date. $5,

5 Volume 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 CMG Tradig History (TSX: CMG) Volume High Low Close A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Share Price $12.00 $10.00 $8.00 $6.00 $4.00 $ Icreased quarterly divideds paid durig the year by 53 percet from $0.415 per share to $0.635 per share. This icrease i our divided is reflective of our cotiued strog fiacial performace ad the commitmet to share our success directly with our shareholders. Lauched a ew product, CMOST, i fourth quarter of fiscal I additio to cotiued ehacemets to our other products, CMG released its ew product, CMOST, late i fiscal CMOST assists customers with sesitivity aalysis, history matchig, optimizatio ad ucertaity assessmet. CMOST provides our customers with a tool to help them to more efficietly maage their hydrocarbo asset portfolio durig these tryig ecoomic times. $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 Total Retur (share price at fiscal year-ed, plus cumulative divideds paid) 49% Compoud Aual Growth Rate Cotiued commitmet to research ad developmet. CMG s existig product suite is the market leader i the simulatio of difficult hydrocarbo recovery techiques ad we are committed to beig the leadig edge techology supplier i this market place. Durig fiscal 2009, we icreased our overall spedig o research ad developmet by 24 percet ad expect a similar icrease i fiscal Cotiued marketig efforts i traditioal market places ad ew regios proved successful. Durig the year, CMG icreased its presece i the Easter Hemisphere with the opeig of a full service office i Dubai, U.A.E ad the relocatio of a seior executive to that office. O a geographic basis, 2009 Aual Report 3

6 software licese sales i CMG s two most sizeable markets Caada ad the Uited States have cotiued to icrease year over year. We are also very pleased with our growig market peetratio i the rest of the world, where total reveues have grow by 73 percet compared to fiscal CMG Employee Statistics (# of employees) Expaded our staff complemet to 117 employees worldwide by cotiuig to attract quality professioals. I order to support the growth i size ad scope of CMG s worldwide operatios, we have more tha doubled our staff levels sice Durig 2009, CMG added 17 highly qualified staff who were attracted to CMG because of the opportuity to work with a outstadig team of log-term, dedicated idividuals who provide a rewardig, stimulatig work eviromet. CMG s greatest stregth is its employees. Achieved sigificat advacemet i the developmet of the DRMS project. Professioal Desigatios Ph.D. 26 Masters 32 Bachelors 38 Other 18 CMG s joit project to develop the ewest geeratio of dyamic reservoir modellig system progressed durig the year. The majority of the software architecture ad high-level desig issues were resolved ad the framework code is ow i place. The 32 member DRMS team of CMG employees ad parter-secoded staff cotiue to work diligetly towards the target of a first commercial release of the software late i As the world s hydrocarbo productio by covetioal meas declies, oil ad gas compaies must employ more complex ad costly recovery methods, uder icreasigly strict regulatios. Added to a eviromet of low commodity prices ad credit costraits, it is more importat tha ever for petroleum producers to icrease the cost-effectiveess ad overall efficiecy of their operatios. CMG s products focus o advaced-process simulatio ad employ leadig edge techologies to help these compaies to get the most out of every dollar spet. Our loyal ad diverse customer base (over 360 customers i 49 coutries) further helps to provide stability to our software licese reveues. Years of Service Less tha 1 26 Computer Modellig Group I am excited about the lauch of our ew product, CMOST, ad by the progress we are makig o our DRMS project. Our commitmet to ogoig research ad product developmet will secure CMG a pricipal role as a supplier of reservoir simulatio techologies to the petroleum idustry ito the future. 4

7 Divided History ($) Special divided Regular divided Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 CMG s history of strog fiacial results has allowed us to pay regular quarterly divideds to our shareholders sice March Give our exceptioal performace this year, CMG s Board of Directors has declared a special divided of $0.22 per share i additio to a icreased quarterly divided of $0.18 per share, to be paid o Jue 15, I closig, I wish to thak CMG s executives ad employees for their tremedous work ad dedicatio durig fiscal 2009 ad for their commitmet goig forward. Our Board of Directors has also bee crucial i supportig our goals. With this icredible group of people, I believe that we have the skills, techology ad tools to build o CMG s success ad deliver cotiued returs for our shareholders. This model, geerated by our STARS software, provided the basis for the patter iside the globe o the frot cover of this report. Keeth M. Dedeluk Presidet ad Chief Executive Officer May 21, Aual Report 5

8 A History of Cotiuous Iovatio Clockwise, from left: Log Nghiem, Vice Presidet, Research & Developmet; Joh Kalma, Vice Presidet, Fiace & CFO; Keeth Dedeluk, Presidet & CEO; Jim Erdle, Vice Presidet, USA & Lati America; Alla Hiebert, Vice Presidet, DRMS Developmet; Roald Kutey, Vice Presidet, Easter Hemisphere; Daiel Dexter, Vice Presidet, Caada & Marketig. There have bee sigificat chages i the petroleum idustry over the last 30 plus years. Covetioal petroleum productio has bee i declie i most areas of the world ad o-covetioal sources ad advaced recovery processes have gaied promiece. The petroleum idustry has had to develop ew methods ad techologies to icrease recoveries from existig covetioal reservoirs ad to tap the potetial of ucovetioal reservoirs. Computer Modellig Group 6 Sice CMG s iceptio, we have bee at the leadig edge of these techological developmets, workig alogside the petroleum idustry i the area of reservoir egieerig sciece. Our geesis, 32 years ago, was buildig a reservoir simulator for thermal heavy oil recovery processes that were more theory tha practical applicatio. Today, our simulator STARS is used i virtually all major heavy oil producig areas i the world. CMG will cotiue o this path of iovatio, strivig to cotiuously add the ability to simulate experimetal ad ewly commercialized recovery methods for the hydrocarbo resources of today ad tomorrow. Over the past six years, CMG has icreased its spedig o research ad developmet at a compoud aual rate of 25 percet. $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 0 Ivestmet i R&D ($thousads) 25% Compoud Aual Growth Rate

9 CMG s Software Suite CMOST History Matchig ad Optimizatio Tool STARS 4 Phase Advaced Thermal Simulator GEM Equatio of State Compositioal Simulator IMEX 3 Phase Black Oil/Codesate Simulator Builder 2D & 3D Graphical Simulatio Model Builder WiProp PVT Fluid Property Modellig Results 3D & 4D Results Visualizatio & Aimatio Tool CMOST: Computer Assisted History Matchig, Optimizatio, ad Ucertaity Assessmet Tool CMOST is the latest product offerig i the CMG software suite. It is a state-of-the-art reservoir egieerig optimizatio tool, employig iovative experimetal desig techiques to efficietly determie the reservoir parameters which defie the productio ad ultimate recovery of oil ad gas fields. CMG s missio has cosistetly bee to develop the most persoel-friedly ad hardware-efficiet software to improve the maer i which oil ad gas compaies recover hydrocarbos from every asset. The first step i the process is creatig the base-case reservoir model i CMG s Builder applicatio. From this base model, CMOST automatically geerates ad rus scearios for every possible combiatio of values for each specified rage of reservoir properties. This is the fastest techique for a accurate history match ad a reliable productio forecast. CMOST improves the effectiveess of each reservoir egieer by elimiatig the tedious labor of idividual case geeratio for hudreds of scearios. It allows them to focus o the highvalue iterpretatio ad evaluatio of results. The power of CMOST lies i moder experimetal desig algorithms which vary multiple parameters simultaeously to fid the optimal solutio somethig a huma caot do. Whe ru o a cluster of computers, CMOST dispatches ad iterprets the results of umerous rus, termiates o-physical solutios ad arrows the search space rapidly to reach ot just local maximums or miimums, but the ultimate best case. Solutios to reservoir models with trillios of possible combiatios ad permutatios ca ofte be foud i fewer tha 1000 rus. I this fashio, CMOST helps egieers to create more accurate models i a shorter period of time ad allows asset maagers to have a greater degree of cofidece i the forecasts, multiplyig the team s effectiveess may fold Aual Report 7

10 STARS: Steam, Thermal ad Advaced processes Reservoir Simulator STARS is the idustry stadard for thermal, K-value compositioal, chemical reactio ad coupled geomechaical reservoir simulatio. STARS is ideally suited for advaced modellig of recovery processes ivolvig the ijectio of steam, solvets, air ad chemicals. STARS is equipped with robust reactio kietics ad geomechaics capabilities to make it the most complete ad flexible reservoir simulator available for modellig the complex oil ad gas recovery processes beig studied ad implemeted, today ad i the future. Iovative processes such as isitu-combustio for heavy oils are developed, evaluated ad optimized usig STARS. Tools for the modellig of complex wellbores, microemulsios, electrical heatig ad sad trasportatio roud out some of the features of the most powerful simulator for advaced processes curretly available. GEM: Geeralized Equatio-of State Model Reservoir Simulator GEM is a full EoS compositioal reservoir simulator with advaced features for modellig recovery processes where the fluid compositio affects recovery. GEM ca be used durig field developmet plaig to reduce the risk of asphaltee precipitatio, optimize the productio of coal bed methae ( CBM ) deposits ad reduce risk i acid gas ad CO2 sequestratio projects. Computer Modellig Group GEM provides reservoir simulatio capabilities that go beyod the abilities of covetioal black oil ad K-value compositioal simulators, icludig the effects of asphaltee precipitatio ad pluggig durig water, methae or CO2 ijectio. It is the idustry s leadig CBM simulator, providig accurate early-time water ad methae productio predictios as well as multi-compoet productio predictios for ehaced CBM ( ECBM ) recovery. The ECBM features iclude exteded Lagmuir Isotherms to model the preferetial adsorptio of CO2 ad other gases ad models for coal shrikage ad swellig. Additioal extesive capabilities for represetig geochemical reactios ad geomechaical effects durig CO2 sequestratio make GEM the most robust compositioal simulator available today. 8

11 IMEX: Implicit-Explicit Black Oil Simulator IMEX is a full-featured three-phase, fourcompoet black oil reservoir simulator for modellig primary depletio ad secodary recovery processes i covetioal oil ad gas reservoirs. IMEX also models pseudomiscible ad polymer ijectio i covetioal oil reservoirs ad primary depletio of gas codesate reservoirs, as well as the behaviour of aturally or hydraulically fractured reservoirs. IMEX provides the capabilities ad features required for small to massive (100+ millio grid block) simulatios for screeig prospects, settig up pilot desigs, moitorig ad optimizig field operatios ad complex full-field reservoir studies, all with the objective of improvig productio rates, ultimate recovery ad value. The couplig of IMEX to surface pipelie etwork simulators provides a very effective solutio for optimizig productio from multi-field offshore developmets or from large gas fields i which surface flowlie costraits ca affect reservoir performace ad project ecoomics. Builder: Pre-Processig Applicatios Builder is a applicatio used i the preparatio of reservoir simulatio models. It represets the stadard i model preparatio, reducig time, cost ad the frustratio of covetioal model-buildig methods. Developed by CMG s idustry-leadig team of scietists, egieers ad programmers, Builder was coceived i respose to requests from egieers ad maagers aroud the world. Whether used aloe or i combiatio with other static models, the Builder applicatio helps to quickly build a reservoir simulatio model. Builder provides a Widows iterface which orgaizes data the way a egieer sees it, with logical workflow ucostraied by old-style simulator keywords. For ew egieers, Builder ca be a ivaluable traiig tool, guidig them through the process of preparig a simulatio model ad eablig them to cocetrate o the reservoir recovery process. Builder makes the desig ad preparatio of reservoir models faster ad more efficiet tha ever before by helpig egieers avigate the ofte complex processes ivolved i preparig a model. As a result, Builder i cojuctio with CMG s lie of reservoir simulators makes simulatio techologies more accessible to all orgaizatios Aual Report 9

12 WINPROP: Phase-Behaviour ad Fluid Property Program WiProp is a Microsoft Widows based software applicatio desiged for modellig the phase behaviour ad properties of reservoir fluids. This comprehesive Equatio-of-State ( EoS ) egieerig tool assists egieers i uderstadig the distributio of properties withi their reservoir fluid system uder various depletio scearios ad the iteractio with ijected fluids, from small scale lab experimetatio to large scale field effects. The iformatio ucovered ca the be directly imported ito CMG s reservoir simulators for a more precise uderstadig of the reservoir exploitatio process. WiProp ca be used to accurately characterize reservoir fluid systems through PVT matchig, i laboratory experimets, miscibility studies ad for the predictio of waxig ad asphaltee depositio i the reservoir ad i surface separatio facilities. This iformatio provides petroleum egieers with a better uderstadig of the fluid iteractios that impact productio as they develop the reservoir. Results: Post-Processig Applicatios Results is a Widows based program that is used to evaluate the output for each of CMG s simulatio products. It provides easy visualizatio of the results of the simulator calculatios. With Results, oe ca visualize iput data ad output model results i a variety of graphs, tabular reports, 2D aerial map views, 2D cross sectio views, 3D perspective views ad 3D stereographic views. Simulatio output ca be aimated with time to highlight importat recovery processes ad observe treds withi the reservoir. Displayed images ca also be traslated ito bitmaps, JPEG files, or AVI movies ad imported ito the most popular presetatio ad word processig software applicatios. Computer Modellig Group The CMG Suite: A dyamic reservoir simulatio based o a detailed geologic model is a cost-effective egieerig ad maagemet tool which improves recovery from developed ad udeveloped oil, gas ad geothermal reserves. Properly built reservoir simulatios help make the most of exploratio ad productio ivestmets. 10

13 Maagemet s Discussio ad Aalysis This Maagemet s Discussio ad Aalysis ( MD&A ) for Computer Modellig Group Ltd. ( CMG, the Compay, we or our ), preseted as at May 21, 2009, should be read with the audited cosolidated fiacial statemets ad related otes of the Compay for the years eded March 31, 2009 ad Readers should also read the Forward Lookig Iformatio advisory cotaied at the ed of this MD&A. Additioal iformatio relatig to CMG, icludig our Aual Iformatio Form, ca be foud at The fiacial data cotaied herei have bee prepared i accordace with Caadia Geerally Accepted Accoutig Priciples ( GAAP ), ad uless otherwise idicated, all amouts i this report are expressed i Caadia dollars. Visio, Busiess ad Strategy CMG s visio is to become the leadig developer ad supplier of dyamic reservoir modellig systems i the world. Early i its life CMG made the strategic decisio to focus its research ad developmet efforts o providig solutios for the simulatio of difficult hydrocarbo recovery techiques, a decisio that created the foudatio to CMG s domiat market presece today i the simulatio of advaced hydrocarbo recovery processes. CMG has cotiued this commitmet by icreasig spedig o research ad developmet ad workig closely with its customers to develop simulatio tools relevat to the challeges they face today. This icludes the DRMS project, a collaborative effort with our parters Shell Iteratioal Exploratio ad Productio BV ( Shell ) ad Petroleo Brasileiro S.A. ( Petrobras ) to joitly develop the ewest geeratio of reservoir simulatio software. Our target is to develop a dyamic system that does more tha optimize reservoir recovery; it will model the etire hydrocarbo reservoir system, icludig productio modellig systems. From day oe of its iceptio over thirty years ago, CMG has remaied focused o assistig our customers to ulock the value of their hydrocarbo reservoirs. With petroleum productio usig covetioal methods o the declie, the petroleum idustry must use more difficult ad costly advaced process extractio methods, while beig faced with more govermetal ad regulatory requiremets related to evirometal cocers. CMG s success ca, i tur, be correlated to the oil idustry becomig more reliat o the use of simulatio techology due to the maturity of covetioal petroleum reservoirs ad the complexities of both curret ad emergig productio processes. CMG s success ca specifically be attributed to a umber of factors: advaced physics, ogoig ehacemets to the Compay s already robust product lie, improved computatioal speed, parallel computig ability, ease of use capabilities of the pre- ad post-processor applicatios, cost effectiveess of the CMG solutio for customers ad the kowledge base of CMG persoel to support ad advace its software. CMG curretly provides reservoir simulatio software liceses to over 360 oil compaies, cosultig firms ad research istitutios i 49 coutries. I combiatio with its pricipal busiess of sellig software liceses, CMG also performs cosultig services ad fuded research for its cliets. While the geeratio of cosultig service reveue is ot regarded as a core part of CMG s fiacial strategy, offerig this type of service is importat to CMG operatioally. CMG performs a limited amout of specialized cosultig services, which are typically of a highly complex ad/or experimetal ature. These studies provide hads-o practical kowledge, allowig CMG staff to test the boudaries of our software, ad provide us the opportuity to icrease software licese sales to both ew ad existig cliets. The fuded research reveues represet both situatios whereby cliets parter with CMG to assist i the developmet, testig ad refiemet of ew simulatio techologies ad research grats provided by CMG Reservoir Simulatio Foudatio (the Foudatio ), the sole holder of CMG s No-Votig Shares, i the Foudatio s support of research activities i the advacemet of reservoir simulatio techology Aual Report 11

14 CMG remais true to its strategy of growig its reveue base while advacig its techological superiority over its competitio. CMG firmly believes that, to become the domiat supplier of dyamic reservoir modellig systems i the world, it must be resposive to cliets eeds today ad accurately predict their eeds i the future. CMG ivests a sigificat amout of resources each year towards maitaiig its techological superiority. Durig fiscal 2009, CMG icreased its overall spedig o research ad developmet by 24 percet ad expects a similar icrease i fiscal The icreasig level of ivestmet by CMG i its curret product suite offerig helps to esure that its existig prove techology cotiues to be idustry-leadig. These sigificat levels of ivestmet, i combiatio with parterig with Shell ad Petrobras i the DRMS project to joitly develop the ewest geeratio of reservoir simulatio software, are targeted strategies to achieve our visio to become the leadig developer ad supplier of dyamic reservoir modellig systems i the world. Overall Performace Key Performace Drivers ad Capability to Deliver Results Oe of the challeges the petroleum idustry faces i tryig to overcome barriers to keep productio growig is the cotiuig eed for breakthrough techologies. The facts facig the petroleum idustry today are that brad ew fields are icreasigly difficult to fid, especially o a large scale, ad that there are a large umber of mature fields ad ucovetioal prospects where kow petroleum reserves exist, the questio is how to ecoomically extract the petroleum reserves i place while utilizig evirometally coscious processes. These challeges have bee made eve more formidable give the curret eviromet of low commodity prices, credit costraits ad geeral ecoomic ucertaity. The petroleum idustry utilizes reservoir simulatio to provide both vital iformatio ad a visual iterpretatio o how reservoirs will behave uder various recovery techiques. Uderstadig the sciece of how a petroleum reservoir will react to difficult hydrocarbo recovery processes through simulatio prior to spedig capital o drillig wells ad ijectig expesive chemicals ad steam, for istace, is far less costly ad risky tha tryig the various techiques o real wells. CMG s existig product suite of software is the market leader i the simulatio of difficult hydrocarbo recovery techiques. To maitai this domiat market positio, CMG actively participates i research cosortia that experimet with ew petroleum extractio processes ad techologies, icorporates the simulatio of ew recovery methods ito its product suite ad focuses o overcomig existig techological barriers to advace speed ad ease of use, amogst other beefits, of its software. Computer Modellig Group CMG recetly lauched CMOST, our ewest product that will ehace our existig suite of software offerigs. This ew additio will allow our customers to perform stochastic simulatio ad risk evaluatio of ucertai reservoir parameters coupled with capital ivestmets. It focuses o assessig the implicatios of variability of reservoir properties such as porosity, permeability ad major busiess decisio parameters such as optimum well locatios. I summary, this ew product allows our customers to more effectively uderstad their reservoir assets ad, i tur, optimize their productio ad capital expeditures to yield the highest et preset value. While this has always bee key to ay ivestmet decisio made by our customers, give the curret ecoomic climate it has take o a heighteed importace. We expect CMG s market share of all petroleum recovery simulatio to icrease as the amout of easy-to-extract oil declies ad as productio from ucovetioal sources icreases. The speed ad the magitude of growth i liceses sold i CMG s advaced recovery process simulators is drive by the shift i productio from covetioal meas to more complex recovery methods. 12

15 CMG is i a very strog fiacial positio with $26.5 millio i workig capital, o bak debt ad a log history of geeratig earigs ad cash from operatig activities. I additio to its fiacial resources, CMG s real stregth lies i the outstadig quality ad dedicatio of its employees i all areas of the Compay. It has ever bee easy to fid qualified staff as CMG has grow through the years. I the past couple of years, CMG has had to deal with uprecedeted competitive pressures i the labour force. Despite these challeges, CMG added 17 ew staff members to its employee complemet i fiscal 2009 ad is plaig for a potetial icrease i its staff complemet by a similar amout by the ed of fiscal 2010, depedig upo prevailig busiess opportuities. The developmet of our DRMS system, the ewest geeratio reservoir simulatio software system, is a sigificat project for CMG ad its parters; a project that we estimate will represet over 125 ma-years of developmet. The DRMS team has grow to 32 persos cosistig of 25 CMG employees ad seve parter-secoded staff members. CMG, through its participatio i this joit project, will have full commercializatio rights to the developed techology ad curretly targets the first commercial release versio i late CMG s fiacial commitmet to the DRMS joit project approximates $10.6 millio for its 37 percet of the aggregate project costs ad the Foudatio agreed, subject to certai termiatio rights, to fud up to a maximum of $5.2 millio to cover 50 percet of CMG s estimated share of the aggregate project costs. As project operator, CMG receives a fee for operator services, which is reflected i cotract research reveues ad goes to offset the cost of services that CMG provides i additio to direct project expeditures. Aual Performace $ thousads, uless otherwise stated March 31, 2007 March 31, 2008 March 31, 2009 Auity/maiteace liceses 12,794 18,033 25,947 Perpetual liceses 6,262 4,574 12,459 Software liceses 19,056 22,607 38,406 Cosultig ad cotract research 4,659 5,386 5,536 Reveues 23,715 27,993 43,942 Gross profit 17,911 21,208 34,785 Gross profit (%) Earigs for the year 6,957 7,600 16,616 Cash divideds declared ad paid 4,345 6,952 10,926 Total assets 30,414 33,339 48,044 Total shares outstadig 16,558 16,866 17,260 Tradig price per share, at March Market capitalizatio at March , , ,651 Per share amouts $ Earigs per share basic Earigs per share diluted Cash divideds declared per Commo Share Results of Operatios Aual CMG achieved aother record year with reveues ad profits for its fiscal year eded March 31, 2009 exceedig all previous results. For the year eded March 31, 2009, CMG reported reveues of $43.9 millio, up 57 percet over the prior year reveues of $28.0 millio, ad et earigs of $16.6 millio ($0.97 per share), a icrease of 118 percet over the $7.6 millio ($0.45 per share) recorded for the year eded March 31, Aual Report 13

16 Reveues CMG s reveues are comprised of software licese sales, which provide the majority of the Compay s reveues, ad cosultig ad cotract research fees. CMG s reveues of $43.9 millio for its 2009 fiscal year reflect a icrease of $15.9 millio, a 57 percet icrease from the $28.0 millio recorded i its 2008 fiscal year. This growth is due to icreased software licese sales i both the auity/maiteace ad perpetual reveue streams. Software Liceses CMG geerated aother record year i its software licese sales, with $38.4 millio i software licese reveues recorded i the year eded March 31, This reflects a growth rate of 70 percet from prior year software licese reveues of $22.6 millio. Total Aual Reveue ($thousads) $50,000 $40,000 $30,000 $20,000 $10, CMG s software licese reveues ca be categorized betwee auity/maiteace software licesig, which is geerally for a term of oe year or less, ad perpetual software licesig, whereby the customer purchases the the curret versio of the software ad has the right to use that versio i perpetuity. CMG has foud that a large percetage of its customers who have acquired perpetual software liceses subsequetly purchase maiteace liceses to esure they have access to curret versios of CMG software. CMG s auity/maiteace licesig for the year eded March 31, 2009 was $25.9 millio, represetig 68 percet of fiscal 2009 total software licese reveues. This reflects a icrease of 44 percet from the $18.0 millio (80 percet of fiscal 2008 total software licese reveues) i auity/maiteace software licese reveues geerated last year. Software licese reveues uder perpetual sales for the year eded March 31, 2009 were $12.5 millio, up $7.9 millio from the $4.6 millio recorded i fiscal Software licesig uder perpetual sales is a sigificat part of CMG s busiess but is more variable ad upredictable i ature as the purchase decisio ad its timig fluctuates with cliets eeds ad budgets. This uprecedeted growth i the sales of perpetual liceses was twice the previous record. The growth i CMG s software licese reveues i fiscal 2009 compared to fiscal 2008 is equally attributable to the sales of perpetual ad auity/maiteace liceses to ew customers ad additioal liceses ad/or additioal products sold to existig customers. The growig utilizatio by the oil ad gas idustry of ehaced recovery processes ad productio from ucovetioal sources of hydrocarbos have geerated icreased demad for CMG s advaced physics reservoir simulators. I additio, demad for CMG s parallel computig optio to eable cliets to ru large highly complex models with reduced computatioal time has grow. Computer Modellig Group O a geographic basis, software licese sales to CMG s two most sizeable markets, Caada ad the Uited States, cotiued to demostrate strog reveue growth of 77 percet ad 37 percet respectively. The Compay s software licese reveue i the rest of the world icreased by 80 percet as CMG cotiues to icrease its market presece throughout the world. CMG has historically maitaied a sigificat percetage of repeat customers ad expects that this will cotiue. At March 31, 2009, CMG has pre-sold $11.4 millio (2008 $8.6 millio) of auity/maiteace software licese reveue, the majority of which relates to its ext fiscal year edig March 31,

17 Software Licese, Cosultig ad Cotract Research Reveue (% of total reveue) Year eded March 31, 2008 Year eded March 31, 2009 Software Liceses Cosultig Cotract Research 81% 10% 9% Software Liceses Cosultig Cotract Research 88% 7% 5% Cosultig ad Cotract Research Reveues CMG recorded cosultig ad cotract research reveues of $5.5 millio for the year eded March 31, 2009, up $0.1 millio from the $5.4 millio recorded for the same period last year. CMG performs cosultig ad cotract research activities o a ogoig basis but such activities are ot cosidered to be a core part of our busiess ad are primarily udertake to icrease our kowledge base ad hece expad the techological abilities of our simulators i a fuded maer, combied with servicig our customers eeds. I additio, these activities are udertake to market the capabilities of our suite of software products with the ultimate objective to icrease software licese sales. Our experiece is that cosultig activities are variable i ature as both the timig ad dollar magitude of work are depedet o activities ad budgets withi cliet compaies. At March 31, 2009, CMG has recorded approximately $0.4 millio ( $0.2 millio) of pre-sold reveue relatig to cosultig ad cotract research reveues. Expeses CMG realized a gross profit of $34.8 millio (79 percet) for the year eded March 31, 2009, up $13.6 millio from the $21.2 millio (76 percet) recorded last year. This icrease i gross profit resulted from growth i our software licese reveues. CMG s total expeses, excludig depreciatio ad icome ad other taxes, amouted to $20.7 millio for the year eded March 31, 2009, up $4.8 millio or 30 percet from the $15.9 millio expeded last year. This icrease i total expeses betwee the two years is primarily due to growth i CMG s staff base; performacebased compesatio plas; ad icreased use of professioal advisors i both the legal ad taxatio areas due to our growig iteratioal customer base. Offsettig these icreased expeditures has bee a reductio i our third party cotract costs ad greater beefits recorded i respect of the scietific research ad experimetal developmet ivestmet tax credit program. The fiacial results for the year eded March 31, 2009 iclude $0.2 millio i scietific research ad experimetal developmet ivestmet tax credits pertaiig to expeditures o our DRMS project for CMG s fiscal years eded March 31, 2007 ad As a techology compay, CMG s largest area of expediture is its people. Approximately $15.7 millio or 76 percet of the total expeses i the year eded March 31, 2009 relate to staff costs. This compares to $12.0 millio or Aual Report 15

18 percet of the total expeses i the comparative period last year. Durig the year eded March 31, 2009, our staff complemet grew by 17 employees ad CMG could potetially add a similar umber by the ed of fiscal 2010, depedig upo prevailig busiess opportuities. Ivestmet i Research ad Developmet CMG maitais its belief that its strategy of growig log-term value for shareholders ca oly be achieved through cotiued ivestmet i research ad developmet. Alog with its leadership positio i the simulatio of prove advaced recovery processes, CMG has positioed itself to play a importat role i experimetig with ew petroleum extractio processes ad techology. CMG works closely with its customers to provide solutios to complex problems. Durig the year eded March 31, 2009, CMG recorded a ivestmet of $8.0 millio (2008 $6.4 millio) i research ad developmet, which icludes its share of the research ad developmet costs o the DRMS system developmet, all of which is expesed to earigs. CMG has recorded a reductio of $1.0 millio (2008 $0.3 millio) i the year eded March 31, 2009 to its product research ad developmet expeses for ivestmet tax credits o scietific research ad experimetal developmet expeditures. The beefit of the scietific research ad experimetal developmet ivestmet tax credits is utilized by CMG to reduce its Caadia federal icome taxes otherwise payable. Iterest Icome ad Foreig Exchage Iterest icome decreased to $0.6 millio i the year eded March 31, 2009 from the $0.8 millio recorded last year due to lower prevailig iterest rates, despite ivestig larger cash balaces. CMG is impacted by the movemet of the US dollar agaist the Caadia dollar as approximately 68 percet ( percet) of CMG s reveues for the year eded March 31, 2009 are deomiated i US dollars, whereas oly approximately 18 to 20 percet of CMG s total costs are deomiated i US dollars. CDN$ to US$ At March 31 Yearly average Give the sigificat portio of our busiess that is coducted i US dollars, the weakeig of the Caadia dollar agaist the US dollar i the later half of fiscal 2009 has positively impacted our fiacial results i both the valuatio of our US dollar et workig capital positio ad curret period sales. CMG recorded a foreig exchage gai of $1.2 millio for the year eded March 31, 2009 compared to $0.4 millio loss recorded last year. Computer Modellig Group Icome ad Other Taxes CMG s effective tax rate for the year eded March 31, 2009 is reflected as 31.5 percet ( percet), whereas the prevailig Caadia statutory tax rate is ow percet. This is primarily due to a combiatio of the otax deductibility of stock-based compesatio expese ad the beefit of foreig withholdig taxes oly beig realized as a tax deductio as opposed to a tax credit. The beefit recorded i CMG s books o the federal scietific research ad experimetal developmet ivestmet tax credit program impacts future icome taxes. The ivestmet tax credit eared i the curret fiscal year is utilized by CMG to reduce federal icome taxes otherwise payable for the curret fiscal year ad this beefit bears a iheret tax liability as the amout of the credit is icluded i the subsequet year s taxable icome for both federal ad provicial purposes. The iheret tax liability o these ivestmet tax credits is reflected i the year 16

19 the credit is eared as a curret future icome tax liability ad the, i the followig fiscal year, is trasferred to icome taxes payable. Quarterly Performace Fiscal 2008 Fiscal 2009 $ thousads, uless otherwise stated Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Auity/maiteace liceses 3,954 4,042 4,450 5,587 5,618* 5,350 6,937 8,042 Perpetual liceses ,449 2,230 1,171 2,882 3,383 5,023 Software liceses 4,167 4,724 5,899 7,817 6,789 8,232 10,320 13,065 Cosultig ad cotract research 1,387 1,376 1,441 1,181 1,479 1,353 1,340 1,364 Reveues 5,554 6,100 7,340 8,998 8,268 9,585 11,660 14,429 Gross Profit 3,918 4,458 5,640 7,192 6,314 7,157 9,525 11,789 Gross Profit (%) Earigs before icome ad other taxes 1,660 2,247 3,291 4,665 3,814 4,414 7,254 8,765 Icome ad other taxes ,180 1,657 1,187 1,446 2,350 2,648 Earigs for the quarter 1,038 1,443 2,111 3,008 2,627 2,968 4,904 6,117 Cash divideds declared ad paid 2,745 1,264 1,260 1,684 3,843 2,073 2,422 2,588 Per share amouts $ Earigs per share basic & diluted Cash divideds declared per share Icludes $0.8 millio i reveue that pertais to usage of CMG s products i prior quarters * Icludes $0.7 millio i reveue that pertais to usage of CMG s products i prior quarters Icludes $0.7 millio i reveue that pertais to usage of CMG s products i prior quarters Icludes $1.1 millio i reveue that pertais to usage of CMG s products i prior quarters Results of Operatios Fourth Quarter CMG reported reveues of $14.4 millio ad earigs of $6.1 millio ($0.35 per share) for the three moths eded March 31, 2009, up from reveues of $9.0 millio ad earigs of $3.0 millio ($0.18 per share) for the comparable period last year. 15,000 12,000 9,000 Quarterly Software Licese Reveue ($thousads) Perpetual Prior Quarters Auity Maiteace Auity 6,000 3,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Q4 of fiscal 2008 icludes $0.8 millio i reveue that pertais to usage of CMG s products i prior quarters. * Q1, Q3 ad Q4 of fiscal 2009 iclude $0.7 millio, $0.7 millio ad $1.1 millio, respectively, i reveue that pertais to usage of CMG s products i prior quarters. Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2 Q3* Q4* 2009 Aual Report 17

20 Reveues Software licese reveues were $13.1 millio i the three moths eded March 31, 2009 compared to $7.8 millio recorded i the fourth quarter of fiscal Growth i software licese reveues comes as a result of both icreased sales to existig customers ad sales to ew customers. It should be oted that durig the fourth quarter of fiscal 2009, CMG completed the egotiatio of certai auity/ maiteace cotracts ad/or fulfilled reveue recogitio requiremets that icluded usage of CMG s products i prior quarters. As a result, CMG recogized $1.1 millio i reveue i the fourth quarter of fiscal 2009 that pertaied to usage of CMG s products i prior quarters. While these situatios regularly occur, the dollar magitude of the resolutio of the cotracts that impacted our fourth quarter of fiscal 2009 was sigificat to the quarterly comparatives of our auity/maiteace reveue stream. Cosultig ad cotract research reveues were $1.4 millio i the three moths eded March 31, 2009 compared to $1.2 millio recorded i the fourth quarter of fiscal Expeses CMG realized a gross profit of $11.8 millio i the three moths eded March 31, 2009, up $4.6 millio from the $7.2 millio recorded i the fourth quarter of fiscal CMG s total expeses, excludig depreciatio ad icome ad other taxes, amouted to $6.0 millio for the fourth quarter eded March 31, 2009, up $1.6 millio from the $4.4 millio recorded i the fourth quarter of fiscal This icrease i total expeses is primarily due to higher staff costs as a result of staff additios, variable compesatio that is depedet o growth i CMG s reveue base ad earigs ad stock-based compesatio expese. Liquidity ad Capital Resources Operatig Activities CMG geerated $21.6 millio from operatig activities i the year eded March 31, 2009, a icrease of $11.5 millio from the $10.1 millio geerated i the year eded March 31, The chages i CMG s o-cash workig capital for the year eded March 31, 2009 are reflective of the growth i operatios ad the timig of customer purchases. Fiacig Activities Durig the year eded March 31, 2009, CMG employees ad directors exercised optios to purchase 468,726 Commo Shares, which resulted i $1.7 millio i cash proceeds. Effective o the close of busiess o August 1, 2008, CMG s Commo ad No-Votig Shares were split o a two-foroe basis. Accordigly, all comparative umber of shares ad per share amouts have bee retroactively adjusted to reflect the two-for-oe split. Computer Modellig Group I the year eded March 31, 2009, CMG paid $11.0 millio i divideds, represetig four quarterly divideds of $0.10, $0.12, $0.14 ad $0.15 respectively per share ad a special divided of $0.125 per share. O May 21, 2009, CMG aouced the paymet of a quarterly divided of $0.18 per share ad a special divided of $0.22 per share o CMG s Commo ad No-Votig Shares. The divided will be paid o Jue 15, 2009 to shareholders of record at the close of busiess o Jue 5, O February 27, 2009, the Compay aouced a Normal Course Issuer Bid ( NCIB ) commecig March 3, 2009 to purchase for cacellatio up to 1,114,791 of its Commo Shares. No shares have bee purchased pursuat to this NCIB through March 31,

21 O February 26, 2008, the Compay aouced a NCIB commecig February 28, 2008 to purchase for cacellatio up to 970,000 of its Commo Shares. This NCIB eded o February 27, 2009 ad a total of 75,120 shares were repurchased at market price for a total cost of $598,564. O December 14, 2006, the Compay aouced a NCIB commecig December 20, 2006 to purchase for cacellatio up to 670,000 of its Commo Shares. This NCIB eded o December 19, 2007 ad a total of 164,800 Commo Shares were repurchased at market price for a total cost of $1,187,686 Ivestig Activities CMG s curret eeds for capital asset ivestmet relate equally to computer equipmet ad office ifrastructure costs. Durig fiscal 2009, CMG expeded $0.6 millio o property ad equipmet additios ad has a capital budget of $2.2 millio for fiscal 2010, all of which will be fuded iterally. Liquidity ad Capital Resources At March 31, 2009, CMG has $34.7 millio i cash, o debt ad has access to a $1.0 millio lie of credit with its pricipal baker. Durig the year eded March 31, 2009, 3,359,904 shares of CMG s public float were traded o the TSX Stock Exchage. CMG s share prices raged from $5.71 to $11.75 per share ad last traded o March 31, 2009 at $9.25 for a March 31, 2009 market capitalizatio of $159.7 millio. Commitmets, Off Balace Sheet Items ad Trasactios with Related Parties CMG committed approximately $10.6 millio to the five year DRMS research ad developmet project with its idustry parters Shell ad Petrobras, of which $4.8 millio has bee icurred from iceptio to March 31, I cojuctio with eterig ito this project, the Foudatio agreed, subject to certai termiatio rights, to provide up to a maximum of $5.2 millio i research grat fudig to cover 50 percet of the Compay s estimated share of project costs over the duratio of the project. Durig the year eded March 31, 2009, CMG has reflected $1.0 millio (2008 $0.9 millio) i research grats from the Foudatio i reveue with respect to this project. From commecemet of the project to March 31, 2009, these research grats aggregate to $2.4 millio. CMG plas to fud its share of the project costs associated with the developmet of the ewest geeratio reservoir simulatio software system from iteral cash ad fudig from the Foudatio. CMG has very little i the way of other ogoig material cotractual obligatios other tha for pre-sold reveues which are reflected as deferred reveue o its balace sheet. Cotractual obligatios for office leases are ot cosidered to be sigificat ad are estimated as follows: 2010 $0.7 millio; 2011 through 2014 $0.1 millio. CMG is curretly i discussios regardig ew office leases for its Caadia-based operatios as the curret leases expire durig fiscal Critical Accoutig Estimates The preparatio of fiacial statemets requires maagemet to make estimates ad assumptios that affect the reported amouts of assets ad liabilities ad the disclosure of cotiget assets ad liabilities at the dates of the fiacial statemets ad the reported amouts of reveues ad expeses durig the reportig periods. By their ature, these estimates are subject to measuremet ucertaity. The effect o the fiacial statemets of chages i such estimates i future periods could be material ad would be accouted for i the period a chage occurs. Reveue cosists primarily of software licese fees ad cosultig ad cotract research fees. We recogize reveue i accordace with the curret rules of Caadia GAAP. We follow specific ad detailed guidelies i measurig reveue; however, certai judgmets affect the applicatio of our reveue recogitio policies Aual Report 19

22 Software licese reveue is comprised of auity/maiteace licese fees charged for the use of our software products which is geerally for a term of oe year or less, ad perpetual software licesig, whereby the customer purchases the the curret versio of the software ad has the right to use that versio i perpetuity. We recogize software licese reveue whe persuasive evidece of a arragemet exists, the product has bee delivered, the fee is fixed or determiable, ad collectio of the resultig receivable is probable. I cases where collectability is ot deemed probable, reveue is recogized upo receipt of cash, assumig all other criteria have bee met. Auity/maiteace reveue is deferred ad recogized o a straight-lie basis over the life of the related licese period, which is geerally oe year or less. Licese fees for perpetual liceses are recogized fully i reveue whe all recogitio coditios are satisfied. Cosultig ad cotract research reveues are recorded o a percetage-completio basis whereby reveues ad costs are recorded i operatios based o work completed. Recogized reveues ad profits are subject to revisios as the cotract progresses to completio. Revisios i profit estimates are charged to earigs i the period i which the facts that give rise to the revisio become kow. Other sigificat accoutig estimates deal with the accrual of expeses to the appropriate reportig period, stock-based compesatio ad the measuremet of the Compay s icome ad other tax liabilities ad assets, icludig the eligibility of expeditures for the scietific research ad experimetal developmet ivestmet tax credit. All tax filigs ad compliace with tax regulatios are subject to audit ad reassessmet, potetially several years after the iitial filig. Chages i Accoutig Policies Capital Disclosures Effective April 1, 2008, CMG adopted the recommedatios icluded i the Caadia Istitute of Chartered Accoutats ( CICA ) Hadbook, Sectio 1535, Capital Disclosures. The ew stadard requires disclosure of qualitative ad quatitative iformatio that eables users of fiacial statemets to evaluate the Compay s objectives, policies ad processes for maagig capital. The adoptio of this stadard did ot have a material impact o the Compay s fiacial statemets. Fiacial Istrumets O April 1, 2008, CMG adopted CICA Hadbook Sectio 3862, Fiacial Istrumets Disclosures ad Sectio 3863, Fiacial Istrumets Presetatio. Sectio 3862 requires disclosure about the sigificace of fiacial istrumets for a etity s fiacial positio, the ature ad extet of risks arisig from fiacial istrumets to which the etity is exposed ad how the etity maages those risks. The stadards o the presetatio of fiacial istrumets carries forward previous guidace uchaged. Sectio 3863 ehaces fiacial statemet users uderstadig of the sigificace of fiacial istrumets to a etity s fiacial positio, performace ad cash flows. Sectios 3862 ad 3863 replace Sectio 3861, Fiacial Istrumets Disclosure ad Presetatio. The adoptio of these stadards did ot have a material impact o the Compay s fiacial statemets Recet Accoutig Prooucemets Computer Modellig Group Cosolidated Fiacial Statemets I Jauary 2009, the Accoutig Stadards Board ( AcSB ) issued Cosolidated Fiacial Statemets, Sectio 1601, which establishes stadards for the preparatio of cosolidated fiacial statemets. This stadard is effective o or after the begiig of the first aual reportig period begiig o or after Jauary 1, 2011, with earlier adoptio permitted. The Compay is assessig the impact of the adoptio of this ew sectio o the cosolidated fiacial statemets. 20