UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: September 30, 2008
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to ______
Commission File Number 000-26721
AUSTRALIAN OIL & GAS CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1379164
-------- ----------
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation of organization)
Level 21, 500 Collins Street
Melbourne, Victoria, 3000
Australia
Issuer's Telephone Number: (61-3) 8610 4701
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes [_] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
41,050,531 shares of common stock, $0.001 par value, as of November 11, 2008.
INDEX
AUSTRALIAN OIL & GAS CORPORATION
(an exploration stage enterprise)
For the Quarterly Period Ended: September 30, 2008
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements. (Unaudited)
Consolidated Balance Sheets as at September 30, 2008 (Unaudited) and
December 31, 2007 (Audited)
Consolidated Statements of Operations for the nine months ended
September 30, 2008 and 2007 (Unaudited), three months ended September
30, 2008 and 2007 (Unaudited) and for the cumulative period from
August 6, 2003 (Date of Inception) to September 30, 2008 (Unaudited)
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2008 and 2007 (Unaudited) and the cumulative period from
August 6, 2003 (Date of Inception) to September 30, 2007 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Item 4. Controls and Procedures.
Part 11. OTHER INFORMATION
Item 6. Exhibits.
Signatures
Item 1. Financial Statements (Unaudited)
Australian Oil & Gas Corporation
(an exploration stage enterprise)
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands) Sept. 30, Dec. 31,
2008 2007
(Unaudited) (Audited)
ASSETS $ $
---------- ----------
Current assets:
Cash and cash equivalents 64 484
---------- ----------
Total Current Assets 64 484
---------- ----------
Total Assets 64 484
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (Note 7) 187 574
Accounts payable to director related entities 11 2
Income tax expense payable -- 1
---------- ----------
Total Current Liabilities 198 577
---------- ----------
Non-current liabilities:
Convertible Notes -- 305
---------- ----------
Total Non-current Liabilities -- 305
---------- ----------
Total Liabilities 198 882
========== ==========
Stockholders' Equity
Common stock, $0.001 par value; 75,000,000 shares
authorized, Issued shares, 42,550,531 at
September 30, 2008 and 37, 400,531 at
December 31, 2007; Outstanding shares,
41,050,531 at September 30, 2008 and
December 31, 2007. (Note 5) 33 30
Capital in excess of par value 2,519 2,210
Accumulated other Comprehensive Income 239 224
Deficit accumulated during the exploration stage (2,925) (2,862)
---------- ----------
Total Stockholders' Equity (134) (398)
---------- ----------
Total Liabilities and Stockholders' Equity 64 484
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
2
Australian Oil & Gas Corporation
(an exploration stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
for nine months ended September 30, 2008 and 2007,
for the three months ended September 30, 2008 and
2007 and for the period from inception (August 6, 2003) to
September 30, 2008
(Dollar amounts in thousands)
Cumulative
period
For the For the For the For the from Aug.
nine nine three three 6, 2003
months months months months (Date of
ended ended ended ended Inception)
Sept. 30, Sept. 30, Sept. 30, Sept. 30, to Sept.
2008 2007 2008 2007 30, 2008
----------- ----------- ----------- ----------- -----------
Expenses
General and administrative 117 195 25 61 955
Merger and reorganisation -- -- -- -- 249
Exploration 299 154 91 34 1,610
----------- ----------- ----------- ----------- -----------
Total operating expenses 416 349 116 95 2,814
----------- ----------- ----------- ----------- -----------
Net Profit / (loss) before other income and income taxes (416) (349) (116) (95) (2,814)
----------- ----------- ----------- ----------- -----------
Other Income and Expense
Gain on transfer of interest in tenement (Note 7) 389 -- -- -- 1,650
Write down of investments -- -- -- -- (1,759)
Currency exchange gain /(loss) (29) 89 (55) 1 57
Interest income 8 21 1 7 64
Interest expense (15) (21) -- (7) (99)
----------- ----------- ----------- ----------- -----------
Profit / (Loss) before income tax (63) (260) (170) (94) (2,901)
Income tax provision -- -- -- -- 24
----------- ----------- ----------- ----------- -----------
Net Profit / (loss) (63) (260) (170) (94) (2,925)
=========== =========== =========== =========== ===========
Profit / (loss) per Common share:
Net Profit / (loss) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.09)
=========== =========== =========== =========== ===========
Weighted average common share used in calculation
39,216,282 36,279,677 42,056,026 36,654,652 31,885,530
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
3
Australian Oil & Gas Corporation
(an exploration stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS for the
nine months ended September 30, 2008 and 2007
(Unaudited),
and for the cumulative period from August 6, 2003 (Date of Inception)
to September 30, 2008 (Unaudited)
(Dollar amounts in thousands - except per share data)
Cumulative
period
For the For the from Aug.
nine nine 6, 2003
months months (Date of
ended ended Inception)
Sept. 30, Sept. 30, to Sept.
2008 2007 30, 2008
---------- ---------- ----------
Cash flows from operating activities:
Net profit / (loss) (63) (260) (2,925)
Adjustments to reconcile net profit/(loss) to net cash
used in operating activities:
Adjustments for non-cash items
Compensation expense 77 124 617
Currency exchange loss/(gain) 49 (153) (47)
Write down of investment -- -- 1,759
Issuance of Convertible Note in lieu of repayment of
advances from director related entity 7 21 100
Gain on transfer of interest in tenement (Note 7) (389) -- (1,650)
Change in assets and liabilities:
Increase/(decrease) in accounts payable (105) 99 471
Increase/(decrease) in income tax payable (1) (25) (9)
Decrease in exploration assets -- -- --
Decrease/(increase) in accounts receivable -- -- 83
---------- ---------- ----------
Net cash used in operating activities (425) (194) (1,601)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from advance from director-related entities 9 -- 84
Repayment of advance from director-related entities -- (28) 315
Proceeds from the sale of Common stock - net -- -- (73)
---------- ---------- ----------
Net cash (used in)/ provided by financing activities 9 (28) 326
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of tenement -- -- 1 ,261
---------- ---------- ----------
Net cash provided by investing activities -- -- 1,261
---------- ---------- ----------
Increase/ (decrease) in cash (416) (222) (14)
Cash at beginning of period 484 734 --
Effect of currency exchange rate fluctuations on cash held (4) 52 78
---------- ---------- ----------
Cash at end of period 64 564 64
========== ========== ==========
Supplemental disclosure of non-cash activities:
Administration Fees charged by Setright Oil & Gas Pty Ltd 42 38 205
Interest charged by Great Missenden Holdings Pty Ltd 14 21 102
Issuance of Stock for compensation and settlement of advances 312 -- 852
Gain on transfer of interest in tenement 389 -- 1,650
The accompanying notes are an integral part of these consolidated
financial statements
4
Australian Oil & Gas Corporation
(an exploration stage enterprise)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The accompanying interim consolidated financial statements of Australian Oil &
Gas Corporation are unaudited. However, in the opinion of management, the
interim data includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the results for the interim
period. The results of operations for the period ended September 30, 2008 are
not necessarily indicative of the operating results for the entire year. The
interim financial statements should be read in conjunction with our Annual
Report on Form 10-KSB for the year ended December 31, 2007.
Note 1: Organization
Australian Oil & Gas Corporation (the Company) was incorporated in Delaware on
August 6, 2003, and began operations on August 11, 2003 and is considered to be
a crude petroleum and natural gas company in the exploratory stage as defined by
SFAS No. 7. Since inception it has been engaged in the assessment of oil and gas
exploration properties.
The authorized capital stock of the AOGC consists of 75,000,000 shares of common
stock (AOG Common Stock), $0.001 par value
The Company has two wholly owned, Delaware-incorporated US subsidiaries;
Gascorp,Inc. and Nations LNG, inc.and two wholly owned Australian subsidiaries;
Alpha Oil & Natural Gas Pty Ltd and Nations Natural Gas Pty Ltd.
Per Note 8, Alpha Oil & Natural Gas Pty Ltd itself now has two wholly owned
Australian subsidiaries, Vulcan Australia Pty Ltd (which now holds the joint
venture interest in the Vulcan Joint Ventures) and Braveheart Oil & Gas Pty Ltd
(which now holds the joint venture interest in the Browse Joint Venture).
Note 2: Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and footnotes thereto. Actual results could differ from those
estimates.
Note 3: Related Party Transactions
Mr. E Geoffrey Albers, the Chairman and President of AOGC, is a director and
shareholder of each of Great Missenden Holdings Pty Ltd and of Setright Oil &
Gas Pty Ltd.
Effective from April 4, 2005, in return for the previous advances of $212,000,
the Company issued to Great Missenden Holdings Pty Ltd 212 Series I Convertible
Notes of $1,000 each, with an interest coupon of 10% per annum, convertible into
shares of Common Stock, originally at any time on or before December 31, 2007
but these were converted on June 24, 2008, on the basis of 12,500 shares of
Common Stock for every $1,000 Convertible Note or part thereof.
5
Effective from April 26, 2005, Great Missenden Holdings Pty Ltd approved a
further $100,000 Line of Credit to the Company in return for the issue to Great
Missenden Holdings of 100 Series II Convertible Notes of $1,000 each with an
interest rate of 10% per annum, convertible into shares of Common Stock at any
time on or before 31 December, 2008 on the basis of 10,000 shares of Common
Stock for every $1,000 Series II Convertible Notes or part thereof. As of March
30, 2008, the $100,000 Line of Credit, which had been fully drawn down, was
converted into these Series II Convertible Notes. On June 24, 2008, 2,650,000
shares of Common Stock were issued to Great Missenden Holdings Pty Ltd to settle
the Series I Convertible Notes. On the same date 1,000,000 of Common Stock were
issued to Great Missenden Holdings Pty Ltd to settle the Series II Convertible
Notes.
Great Missenden Holdings Pty Ltd charged $209 for interest on all advances
during the quarter. Setright Oil & Gas Pty Ltd charged the Company $5,550 during
the quarter for the provision of accounting and administrative services rendered
by third parties for the benefit of the Company, but not including services
rendered by Mr. E Geoffrey Albers, who is remunerated separately.
We also have the use of premises in Australia at Level 21, 500 Collins Street,
Melbourne, Victoria. The office space is taken on a nonexclusive basis, with no
rent payable, but the usage of the premises is included in the charges Setright
Oil & Gas Pty Ltd makes in respect to the administration of the Company.
Mr. Albers is a director and shareholder in the joint venture participants with
Alpha Oil & Natural Gas Pty Ltd (Alpha) with regard to exploration permits
ACP/33, ACP/35 and AC/P39; namely National Gas Australia Pty Ltd, Natural Gas
Corporation Pty Ltd and Auralandia N.L. Mr Muzzin is a shareholder in Auralandia
N.L. As a result of incurring expenditures, National Gas Australia Pty Ltd has
earned an aggregate 25% interest in each of AC/P33, AC/P35 and AC/P39 (Vulcan
Joint Venture), 5% of which was earned from AOGC subsidiary, Alpha.
With regard to the Browse Joint Venture, Mr. Albers is a director and
shareholder in each of Batavia Oil & Gas Pty Ltd and Exoil Limited, the parent
of Hawkestone Oil Pty Ltd. He is a major shareholder in the parent of
Goldsborough Energy Pty Ltd. All of these companies are the holders of the
Browse Joint Venture.
Mr. Mark A Muzzin, a director and Vice-President of AOGC, is a director of
Goldsborough Energy Pty Ltd, a subsidiary of Goldsborough Limited and is a
shareholder in Exoil Limited, the parent of Hawkestone Oil Pty Ltd.
With regard to the National Gas Consortium, Mr. Albers is a director and
shareholder in each of National Oil & Gas Pty Ltd, Australian Natural Gas Pty
Ltd and Natural Gas Australia Pty Ltd. Expenditure incurred by National Gas
Australia Pty Ltd has resulted in National Gas Australia Pty Ltd earning an
aggregate 30% interest in each of NT/P62, NT/P63, NT/P64, NT/P65, NT/P71 and
NT/P72, (National Gas Consortium), of which 9% was earned from Nations.
Note 4: Current Liabilities
At September 30, 2008 the accounts payable balance includes $77,000 for
remuneration due to Mr Albers for his services.
The Company has previously entered into an agreement with Mr. Albers to secure
his services on a part-time basis for a 3-year period, with a commencement date
effective from January 1, 2005 ending December 31, 2007. As the Company's cash
resources were limited, the board agreed to remunerate Mr. Albers by issuing
common stock in lieu of cash payments. Specifically, the Company issued
2,500,000 shares of Common Stock to Mr. Albers for his services in relation to
the period from January 1, 2005 to December 31, 2005. A further 2,000,000 shares
of Common Stock were issued to him for his services for the period from January
1, 2006 to December 31, 2006 A further 1,500,000 shares of Common Stock were
issued to him for his services for the period from January 1, 2007 to December
31, 2007.
6
The Company is currently negotiating with Mr. Albers with respect to the
continuation of his services for a further 3-year period effective from January
1, 2008.
Note 5: Issued Shares
At September 30, 2008, 1,500,000 shares included in issued and outstanding
shares of 42,550,531 disclosed in the balance sheet and used for the earnings
per common share calculation were reserved but not yet issued. These shares will
be used to compensate Mr Albers and will be issued in the quarter ending
December 31 2008. For this quarter the amount issued is an estimate as a new
contract with Mr Albers is being negotiated.
Note 6: Comprehensive Income
Comprehensive income is the change in equity during a period from transactions
and other events from non-owner sources. The Company is required to classify
items of other comprehensive income in financial statement to display the
accumulated balance of other comprehensive income separately in the equity
section of the Consolidated Balance Sheet.
The functional currency of Australian Oil & Gas Corporation's Australian
subsidiaries is the Australian dollar. The comprehensive income of $239,000
disclosed in the Consolidated Balance Sheet is the accumulation of all currency
exchange differences arising from translating the Australian subsidiaries'
financial statements from functional currency to presentation from the
acquisition date of these Australian subsidiaries to the current balance date.
Note 7: Gain on transfer of interest in exploration tenement
Through its subsidiary, Nations Natural Gas Pty Ltd and its interest in the
National Gas Consortium Joint Venture tenements, AOGC recorded exploration
expense of $353,272 in the month of December 2007. This was on the basis of
December 2007 invoices from National Gas Australia Pty Ltd (`NGA") for
additional costs incurred on behalf of the Joint Venture by NGA in the 2D
Seismic Sunshine and Kurrajong Surveys.
Subsequent to the invoices being booked into the Joint Venture accounts and the
exploration expense being recognized it was decided by the participant companies
to the Joint Venture that rather than pay the invoices from NGA an additional
farmout of a 10% interest in all tenements would be offered to NGA to settle the
debt. On June 16, 2008, farmout agreements were signed between the Joint Venture
participant companies, including Nations Natural Gas. The financial impact of
these agreements was the payable to NGA was settled, a gain on the transfer of
the tenement interest was recognized and a non-cash contribution to the Joint
Venture in the form of NGA's farmin contribution was recognized in the Joint
Venture accounts. In the AOGC Consolidated Balance Sheet for June 30, 2008, this
resulted in a decrease in accounts payable of $389,529 and in the AOGC
Consolidated Statement of Operations a $389,529 gain on the transfer of tenement
interests. The difference between the original Dec 2007 invoiced amount and the
amount reversed in June 2008 is due to an increase in the value of Australian
Dollar against the US Dollar.
7
Note 8: Rearrangement of Joint Ventures
Vulcan Joint Venture
--------------------
AOGC's wholly owned subsidiary, Alpha Oil & Natural Gas Pty Ltd, has formed a
wholly owned subsidiary named Vulcan Australia Pty Ltd (Vulcan) and has
transferred its 15% interests in each of AC/P33, AC/P35 and AC/P39 to Vulcan. In
addition, the Vulcan Joint Venture Operating Agreement, which previously
governed joint venture operations in the three permits, has been replaced by
separate joint venture Agreements for each permit. The new joint ventures are
known as Oliver Joint Venture (AC/P33), Vulcan Joint Venture (AC/P35) and NOME
Joint Venture (AC/P39).
Following these rearrangements of interests, the participants in the newly
constituted Oliver Joint Venture have entered into a farmout agreement with
South Australian based oil explorer and producer, Stuart Petroleum Limited
("Stuart"), who is now the Operator and 50% interest holder in permit AC/P33,
host to the Oliver oil and gas accumulation. Our interest will, as a result,
reduce to 7.5%. Permit AC/P33 is located approximately 700 kilometres west of
Darwin in the Australian-administered section of the Timor Sea. The transaction
was approved by the Designated Authority (Commonwealth of Australia) October 9,
2008.
Browse Joint Venture
--------------------
AOGC's wholly owned subsidiary, Alpha Oil & Natural Gas Pty Ltd ("Alpha")
together with its joint venturers, has entered into a farmout agreement with
respect to WA-332-P, WA-333-P and WA-342-P ("Permits") with Gascorp Australia
Pty Ltd ("Gascorp") whereby Gascorp has agreed to earn a 15% interest in each of
the Permits in return for the obligation of Gascorp to expend $1,120,000 in
acquiring approximately 490 line kilometres of new 2D seismic data in the
Permits and in acquiring a drill site survey over a possible location to test
the Braveheart prospect. The seismic survey is planned to provide coverage of
leads within WA-332-P as well as assist in the determination of the location of
a Braveheart 1 well, which is expected to be drilled in WA-333-P in late 2009.
As a result of this farmout, Alpha's interest in each of the three permits has
reduced from 20% to 17%.
In addition to this farmout, the participants in each of the Permits have
elected to form new 100% owned subsidiary companies and have agreed to transfer
their respective interests to such wholly owned subsidiaries. Alpha has
incorporated Braveheart Oil & Gas Pty Ltd as a wholly owned subsidiary to which
it has assigned its residual 17% interest in each of the Permits. These
transactions have been submitted to the Designated Authority (Commonwealth of
Australia) for approval.
The participants in the Browse Joint Venture have contracted to engage the
services of Australian Drilling Associates Pty Ltd to provide project management
services to support the conduct of drilling operations and to gain access to one
drilling slot in a group sponsored multi-well program utilising the
semi-submersible drilling rig, the Songa Venus. The drilling slot, in late 2009,
is to be used for the drilling of the Braveheart 1.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-looking statements
References in this report to "the Company", "we", "us", or "our" are intended to
refer to Australian Oil & Gas Corporation. This quarterly report contains
certain statements that may be deemed forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the United Stated Securities Exchange Act of 1934, as amended. Readers of
this quarterly report are cautioned that such forward-looking statements are not
guarantees of future performance and that actual results, developments and
business decisions may differ from those envisaged by such forward-looking
statements.
All statements, other than statements of historical facts, so included in this
quarterly report that address activities, events or developments that the
Company intends, expects, projects, believes or anticipates will or may occur in
the future, including, without limitation: statements regarding our business
strategy, plans and objectives and statements expressing beliefs and
expectations regarding our ability to successfully raise the additional capital
necessary to meet our obligations, our ability to secure the permits necessary
to facilitate anticipated seismic and drilling activities and our ability to
attract additional working interest owners to participate in the exploration for
and development of oil and gas resources, are forward-looking statements within
the meaning of the Act. These forward-looking statements are and will be based
on management's then-current views and assumptions regarding future events.
Plan of Operation
-----------------
General Australian Oil & Gas Corporation is an independent energy company
focused on the acquisition of petroleum exploration permits in the offshore
areas adjacent to Australia and exploration for oil and natural gas resources
within the area of those permits. We rely on the considerable experience in the
oil and gas industry of our President, Mr. E. Geoffrey Albers, together with our
consultants, in order to identify and conduct initial analyses of permits in
which we may acquire an interest.
Strategy We devote essentially all of our resources to the identification of
large-tract exploration permits in their early stages of exploration. We attempt
to focus on areas where we consider that there is the potential for a high
impact outcome for the Company, in the event of exploration success. We plan to
advance the prospectivity of these acreages largely through the application of
geological and geophysical expertise and through the provision of new 2D and 3D
seismic surveys. We seek to keep our capital outlays and overheads at a minimum
level by farming out exploration costs and by retaining selected consultants,
contractors and service companies. We generally use proven technologies in
evaluating the prospectivity of our oil and gas properties. We expect to invest
in projects at different percentage levels of participation, including up to
100% ownership. We plan to maintain as high a participation as can be prudently
managed in the early stages of a project. We focus on areas considered to have
speculative near term potential for oil discovery or medium term potential for
gas discovery. An important part of our strategy is to select prospective
acreage which, at the seismic or drilling stage, can be farmed out and/or
developed in conjunction with other, preferably larger more financially robust
petroleum industry participants, so as to reduce exploration risk (which is
high) and minimize our financial outlay requirements. We attempt to do so,
wherever possible, through promoted transactions. Our overall intention is to
provide maximum leverage for shareholders at minimal cost, in return for the
extremely high risk activities that we undertake. The funding of our exploration
programs is an on-going challenge.
9
Since August 2003, when the Company began operations, we have not conducted any
business which generates revenue from the sale of hydrocarbons. Accordingly, we
have no results of such operations to report. We are actively pursuing our long
term strategy of maintaining our oil and gas exploration projects which, in the
long-term and given success, may have the future potential to generate
substantial revenue.
Permitting It should be noted that Australian offshore petroleum permits are
initially granted for a term of 6 years, pursuant to the Offshore Petroleum Act,
2006 (Commonwealth). Provided all exploration commitments are met, petroleum
exploration permits may be renewed for two consecutive 5-year terms, with
relinquishment of 50% of the area of a permit at the end of the first 6-year
term, and again at the end of the second 5-year permit term. Any Retention Lease
or Production License is excluded from the calculation of the area to be
relinquished. Permits therefore, have a potential 16-year life, subject to these
requirements and to the fulfillment of exploration commitments.
Management The Company relies upon its Chairman and President, who also holds
the position of Chief Executive Officer and Chief Financial Officer, Mr. E
Geoffrey Albers, to manage the Company's operations and to identify and acquire
interests in oil and gas prospects. The Company previously entered into an
agreement with Mr. Albers to secure his services on a part-time basis for a
3-year period, with a commencement date effective from January 1, 2005. As the
Company's cash resources are limited, the board agreed to remunerate Mr. Albers
by issuing common stock in lieu of cash payments. The Company has recently
agreed to implement (subject to documentation) a 4-year contract with Mr. Albers
("the Director") with respect to the continuation of his services for a further
period effective from January 1, 2008 to 31 December 2011, on terms which
include the following:
(i) by the Company issuing to the Director or, at the election of the
Director, to the Trustee of his superannuation fund, Common Stock in
lieu of cash payments. Specifically, during each of the second quarter
and the fourth quarter of 2008, the Company will on each occasion
issue 1,200,000 shares of Common Stock for his services in relation to
the period from 1 January 2008 to 31 December 2008.
(ii) by the Company issuing to the Director or, at the election of the
Director, to the Trustee of his superannuation fund, Common Stock in
lieu of cash payments. Specifically, during each of the second quarter
and the fourth quarter of 2009, the Company will on each occasion
issue 1,100,000 shares of Common Stock for his services in relation to
the period from 1 January 2009 to 31 December 2009.
10
(iii) by the Company issuing to the Director or, at the election of the
Director, to the Trustee of his superannuation fund, Common Stock in
lieu of cash payments. Specifically, during each of the second quarter
and the fourth quarter of 2010, the Company will on each occasion
issue 1,000,000 shares of Common Stock for his services in relation to
the period from 1 January 2010 to 31 December 2010.
(iv) by the Company issuing to the Director or, at the election of the
Director, to the Trustee of his superannuation fund, Common Stock in
lieu of cash payments. Specifically, during each of the second quarter
and the fourth quarter of 2011, the Company will on each occasion
issue 900,000 shares of Common Stock for his services in relation to
the period from 1 January 2011 to 31 December 2011.
Working Capital Funding As an exploration stage enterprise, the Company has
and continues to rely on capital infusions through the advances of Great
Missenden Holdings Pty Ltd. The Company has accepted advances and in the future
anticipates that it will draw down further advances to enable it to meet its
administrative costs and expenditure requirements in developing its portfolio of
oil and gas interests.
Funding for Exploration Programs
--------------------------------
When the Company requires further significant funds for its exploration
programs, then it is the Company's intention that the additional funds would be
raised in a manner deemed most expedient by the Board of Directors at the time,
taking into account budgets, share market conditions and the interest of
industry in co-participation in the Company's programs.
It is the Company's intention to meet its obligations by either partial sale of
the Company's interests or farm out, the latter course of action being a
fundamental part of the Company's overall strategy. Should funds be required for
appraisal or development purposes the Company would, in addition, look to
project loan finance.
Should these methods considered not to be viable, or in the best interests of
stockholders, then it is the Company's plan that they could be raised by any one
or a combination of the following manners: stock placements, pro-rata issue to
stockholders, and/or an issue of stock to eligible parties.
Following implementation of our acquisition strategy, we now hold interests in
14 Petroleum Exploration Permits granted by the Commonwealth of Australia. With
one exception, they are held in joint venture with other parties. We are now
intent on exploring, farming-out and generally up-grading these interests. A
summary of the permits and the current activities in each permit is set out
below.
11
VULCAN SUB-BASIN INTERESTS, TERRITORY of ASHMORE and CARTIER ISLANDS, AUSTRALIA
(AC/P33, AC/P35 and AC/P39)
Geologically, AC/P33, AC/P35 and AC/P39 are located on the eastern margin of the
Vulcan Sub-basin, a broad, deep and proven hydrocarbon-generative basin, one of
a number of proven petroliferous sub-basins which together comprise the North
West Shelf hydrocarbon province of Australia. The permits are within the
Territory of Ashmore and Cartier Islands, an Australian offshore territory.
The Territory of the Ashmore and Cartier Islands ("the Territory") was ceded
from Britain and accepted by the Commonwealth of Australia ("Commonwealth") in
1933. The responsibility for the administration of the Territory was transferred
from the Northern Territory of Australia ("Northern Territory") to the
Commonwealth when a level of self-government was instituted in the Northern
Territory in 1978.
Petroleum extraction activities in the area within the Territory are
administered on behalf of the Commonwealth by the Northern Territory Department
of Mines and Energy through the Designated Authority protocol operating pursuant
to the Offshore Petroleum Act 2006 (Commonwealth).
Commonwealth laws, laws of the Northern Territory and Ordinances made by the
Governor-General make up the body of law generally applicable in the Territory.
The Territory comprises West, Middle and East Islands of Ashmore Reef, Cartier
Island and the territorial sea generated by those islands. The islands are
uninhabited, small, low and composed of coral and sand, with some grass cover.
The Territory is located on the outer edge of the continental shelf in the
Indian Ocean approximately 320 km off Australia's north-west coast and 144
kilometres south of the Indonesian Island of Roti. The Jabiru and Challis oil
fields are located within the Territory, as are numerous other oil and gas
accumulations and occurrences.
We acquired our initial 20% interest in the Vulcan Sub-basin permits as a result
of the acquisition of Alpha Oil & Natural Gas Pty Ltd ("Alpha") in 2006.
On May 15, 2006 Alpha agreed to farmout 5% of its 20% interest in each of the
Vulcan Sub-basin Permits to National Gas Australia Pty Ltd ("NGA") (leaving
Alpha with a 15% interest) in return for the acquisition and funding of Alpha's
20% share of the new Oliver 3D seismic survey of approximately 124 km(2) and the
funding of the cost of reprocessing of approximately 2,800 km(2) of the existing
Onnia 3D Seismic Survey data, relevant to all of AC/P33, AC/P38 and AC/P39. The
cost of the Company's share of the Oliver survey and the Onnia reprocessing has
thus been met entirely by NGA.
We have subsequently farmed out our interest in AC/P33 to Stuart Petroleum
Limited ("Stuart") (see Oliver Joint Venture below).
12
Our wholly owned subsidiary, Alpha, has established a wholly owned subsidiary
named Vulcan Australia Pty Ltd ("Vulcan") and has transferred its interests in
each of its Timor Sea permits, AC/P33, AC/P35 and AC/P39 to Vulcan. In addition,
the joint venture operating agreement, which previously governed joint venture
operations in all three of the permits, has been replaced by new separate joint
venture agreements for each permit. The new joint ventures are known as Oliver
Joint Venture (AC/P33), Vulcan Joint Venture (AC/P35) and Nome Joint Venture
(AC/P39).
OLIVER JOINT VENTURE (AC/P33)
Our wholly owned subsidiary, Vulcan, following farmout of drilling and
development commitments to Stuart, (see below) now holds a 7.5% interest in the
Oliver Joint Venture permit, AC/P33, in joint venture with Stuart (50%) now the
designated operator, and our joint venture affiliates; Petrocorp Australia Pty
Ltd ("Petrocorp") (12.5%), Natural Gas Corporation Pty Ltd (NGC) (15%) and
Auralandia N.L. (Auralandia) (30%).
AC/P33 (granted July 6, 2004) includes the undeveloped Oliver oil and gas
accumulation, drilled by the now plugged and abandoned Oliver-1 well. AC/P33
comprises five graticular blocks, totalling approximately 400 km(2) (98,800
acres). During the first three years of the initial 6-year term of permit
AC/P33, the joint venture participants obtained a range of existing reports and
open file seismic data and have mapped, interpreted and revised analyses and
concepts for the area. The joint venture has carried out enhancement of existing
seismic data around the Oliver feature and examined various techniques for
potential to provide direct hydrocarbon indicators. As a result of the farmout
to NGA, the joint venture has acquired 124 km(2) (acres) of new high quality
enhanced parameter 3D seismic survey, known as the Oliver 3D Seismic Survey. The
survey was conducted over the Oliver feature and part of its extension to the
east. Processing of the new Oliver Seismic Survey and reprocessing of part of
the immediately adjacent Onnia 3D Seismic Survey in the vicinity of the Oliver-1
well, in preparation for the proposed Oliver 2 exploration/appraisal well, has
been concluded. The joint venture has elected to enter the second three years of
the initial permit and plans to drill one exploration well prior to the end of
2009, and to perform further interpretational work. Active geological and
geophysical evaluation of the permit continues.
Stuart's earn-in obligations will be satisfied by sole funding the drilling of
an appraisal well on the Oliver feature, completion of engineering studies up to
Final Investment Decision for development of an oilfield and sole funding the
first $25 million of development expenditure. The first phase of development of
the Oliver field - drilling the appraisal well, Oliver 2, and completing
engineering studies - is expected cost $60 million and to be complete late in
2010.
The Oliver field, containing a column of oil, gas and condensate, was discovered
by a BHP Petroleum operated consortium in 1988. The Oliver 1 well was drilled in
305 metres of water to a depth of 3,500 metres. The well encountered the column
in the Plover Formation between 2,927 metres and 3,097 metres.
13
Stuart's interpretation of the recently acquired Oliver 3D seismic data over the
Oliver field resulted in Stuart's estimated potential recoverable liquids in the
range of 9.9 million barrels to 33 million barrels of oil and condensate with a
mean joint venture volume of 19.3 million barrels. According to Stuart, these
estimates have been independently reviewed and confirmed. They are not
independently verified reserves, but are estimates only provided to the joint
venture participants for preliminary planning and feasibility purposes.
Studies to identify economic development alternatives and to determine viability
have been commenced by Stuart and are expected to be followed by the Oliver 2
appraisal well to confirm the size of the field. The semi-submersible drilling
rig, Songa Venus, has been contracted by Stuart to drill this well at Stuart's
cost in mid-2009. In the event of a successful outcome, further economic
viability and development studies will then determine whether and how to best
develop the field.
Equity participants in permit AC/P33 presently are:
%
Stuart Petroleum Limited (Operator) 50.0
Natural Gas Corporation Pty Ltd 15.0
Auralandia NL 15.0
Petrocorp Australia Pty Ltd 12.5
Vulcan Australia Pty Ltd (AOGC subsidiary) 7.5
The Company is considering how it might meet future funding requirements of its
subsidiary Vulcan, with respect to funding of any Oliver development.
Discussions amongst the non-Stuart joint venture participants has focused on the
concept of each of the participants, other than the operator Stuart and other
than Auralandia, selling their interest in each of the Vulcan Sub-basin permits
to Auralandia in return for an appropriate pro rate issue of shares in
Auralandia. Auralandia has signified that it is open to proposals which would
see it as the corporate vehicle for unifying 50% of the interests in this
manner. The Company is investigating this concept and plans to participate,
pending further investigations and finalisation of an appropriate commercial
arrangement. Capital would thus be required by Auralandia for further appraisal
and development drilling and development of Oliver and would relieve the Company
of any direct cost commitment to any of the Vulcan Sub-basin permits (AC/P33,
AC/P35 and AC/P39).
VULCAN JOINT VENTURE (AC/P35)
AC/P35 (granted October 18, 2005) is located immediately to the north of AC/P33.
It comprises 46 graticular blocks, totalling approximately 3,410 km(2) (842,645
acres). There have been five wells drilled in the area, with two having oil and
gas indications, all of which were plugged and abandoned. During the first three
years of the initial 6-year term of the AC/P35 permit, we have obtained a range
of pertinent existing reports and open file seismic data. On October 16, 2007,
we applied for a suspension and extension of the permit for a period of twelve
months. In the third permit year, we presently plan to shoot up to 250 km(2) of
new 3D seismic survey. Should we so decide, we can elect to enter the second
stage of three permit years of the initial permit term and, if warranted, drill
one exploration well and perform further interpretational work. Geological
evaluation of the permit is continuing. 1,750 km(2) of the previously acquired
proprietary 3D seismic over AC/P35 known as the Onnia 3D Seismic Survey has been
reprocessed. We are assessing the need for and possible location of a further 3D
seismic survey.
14
The participants in the Vulcan Joint Venture are:
%
Auralandia NL (Operator) 30.0
Natural Gas Corporation Pty Ltd 30.0
Petrocorp Australia Pty Ltd 25.0
Vulcan Australia Pty Ltd 15.0
NOME JOINT VENTURE (AC/P39)
AC/P39 (granted April 7, 2006) is located 600 km west of Darwin, immediately to
the east of AC/P33 and AC/P35. It comprises 11 graticular blocks, totalling
approximately 920 km(2) (2,273 acres). AC/P39 lies within 100 km of existing
petroleum production facilities and along the eastern elevated flank of the
Vulcan Sub-basin. There have been five wells drilled in the area, with two
having oil and gas indications. In the first three years of the initial 6-year
term of the AC/P39 permit, we have obtained a range of existing reports and open
file seismic data. We have requested a 12 month suspension and extension of Year
2 in order to complete the reprocessing of 920 km(2) Onnia 3D seismic survey
within the permit. The re-processing has now been completed, but was delayed
because of the manpower constraints of the contractor, PGS. If granted the
second permit year will end on April 6, 2009. In the third permit year, we
presently plan to drill one exploration well. Geological evaluation of the
permit is continuing, including the assessment of risk as to whether any leads
are of sufficient quality to warrant the risk and cost of drilling.
The participants in the Nome Joint Venture are:
%
Auralandia NL (Operator) 30.0
Natural Gas Corporation Pty Ltd 30.0
Petrocorp Australia Pty Ltd 25.0
Vulcan Australia Pty Ltd 15.0
15
BROWSE BASIN INTERESTS, OFFSHORE FROM WESTERN AUSTRALIA
- WA-332-P, WA-333-P and WA-342-P
Browse Joint Venture
On April 12, 2006, we completed the acquisition of Alpha Oil & Natural Gas Pty
Ltd ("Alpha"), a transaction entered into on July 1, 2004. The acquisition of
Alpha was made in order to acquire a 20% interest in the Browse Joint Venture,
being permits, WA-332-P, WA-333-P, WA-341-P and WA-342-P.
Following the entering into of the transaction but prior to the agreement
between being finalized, Alpha (with the approval of AOGC) sold its 20% interest
in WA-341-P to a third party for an amount in excess of book value. The
settlement funds received by Alpha were incorporated in funds available to AOGC,
through this wholly owned subsidiary, following completion of the Alpha
purchase.
The now remaining three permits of the Browse Joint Venture, WA-332-P, WA-333-P
and WA-342-P are contiguous and are located offshore in the eastern Browse
Basin. They cover a total area of 9,460 km(2) (2,336,620 acres).
The Browse Basin region is a major proven hydrocarbon area and it forms a part
of the extensive series of continental margin sedimentary basins that, together,
comprise the North West Shelf hydrocarbon province of Australia. The Browse
Basin has been host to a series of major gas, gas condensate and oil discoveries
which began with the 1971 discovery at Scott Reef-1. The Browse Basin is
currently the focus for two proposals to establish new LNG export facilities;
one by Woodside Energy Ltd in relation to the Torosa/Brecknock/Calliance complex
and the other by Inpex Corporation in relation to the Ichthys complex. Two of
the Browse Joint Venture permits are presently lightly explored. There is one
well on the boundary of WA-332-P (Prudhoe-1), one well in WA-333-P (Rob Roy-1),
and a total of fourteen wells in WA-342-P, mostly associated with the
undeveloped Cornea oil and gas accumulation.
In the first three year term of the Permits, the Browse Joint Venture has
obtained available open file reports and basic 2D and 3D seismic data acquired
by the earlier efforts of previous explorers. This included approximately 1,100
km(2) of high quality 3D seismic known as the Cornea 3D survey which is held by
the Browse Joint Venture. Approximately 1,000 km(2) of this 3D data set was
reprocessed by the joint venture during the 2007 year. The 3D data set has been
integrated with the acquisition and processing of the Braveheart 2D seismic
survey. The Browse Joint Venture previously acquired the Braveheart seismic
survey of approximately 1,949 line km of new 2D seismic survey over these Browse
Joint venture permits. The Browse Joint Venture has elected to enter a second
three year permit term in which it presently is planning for the drilling of
Braveheart 1 in WA-333-P. Active geological and geophysical evaluation of all of
the Browse Joint Venture Permits is continuing, with special studies having been
carried out in respect to the undeveloped Cornea oil and gas accumulation (in
WA-342-P) and the Braveheart project, which straddles both WA-332-P and
WA-333-P.
16
The Browse Joint Venture, on March 19, 2008, applied for an 18-months suspension
and extension of Year 5 of permit WA-332-P in order to acquire further new
infill 2D seismic survey over potential leads in WA-332-P and to secure a
drilling vessel, which have been in short supply in Australian waters. If
granted, Year 5 of WA-332-P will end September 30, 2009.
On March 19, 2008, the Browse Joint Venture applied for a 12-month suspension
and extension of Year 5 of the WA-333-P permit in order to allow additional time
for the drilling of the Braveheart-1 well in WA-333-P. The Joint Venture has
entered into a letter of intent with a drilling vessel management company, as a
result of which a well is expected to be drilled on the Braveheart feature in
2009. If granted, Year-5 of WA-333-P will end on March 31, 2009. Further
extensions may be necessary.
On October 22, 2007, the Browse Joint Venture lodged a request for a variation
of the permit WA-342-P so that instead of drilling a well in Year-5 the permit
would require geotechnical studies, while Year-6 of the permit would require the
drilling of a well. If such variation of the permit is granted, then Year-6 of
the permit would commence on November 28, 2008.
The joint venture continues to carry out extensive studies as to prospectivity
of the known Cornea gas/oil accumulation.
Our wholly owned subsidiary, Alpha, together with its joint venturers, has
recently entered into a farmout agreement with respect to WA-332-P, WA-333-P and
WA-342-P ("Permits") with Gascorp Australia Pty Ltd ("Gascorp") whereby Gascorp
has agreed to earn a 15% interest in each of the Permits in return for the
obligation of Gascorp to expend $1,120,000 in acquiring approximately 490 line
kilometres of new 2D seismic data in the Permits and in acquiring a drill site
survey in order to determine a specific location to test the Braveheart
prospect. The surveys, which have commenced, are planned to provide coverage of
leads within WA-332-P as well as assist in the determination of the location of
the Braveheart 1 well. As a result of this farmout, Alpha's interest in each of
the three permits has reduced from 20% to 17%.
In addition to this farmout, the participants in each of the Permits have
elected to form new 100% owned subsidiary companies and have agreed to transfer
their respective interests to such wholly owned subsidiaries. Alpha has
incorporated Braveheart Oil & Gas Pty Ltd as a wholly owned subsidiary to which
it has assigned its residual 17% interest in each of the Permits. These
transactions have been submitted to the Designated Authority (Commonwealth of
Australia) for approval.
Participants in the Browse Joint Venture presently are:
Braveheart Resources Pty Ltd (subsidiary of Exoil Limited) (Operator) 29.75%
Braveheart Petroleum Pty Ltd (subsidiary of Batavia Oil & Gas Pty Ltd) 29.75%
Browse Petroleum Pty Ltd (subsidiary of Gascorp Australia Pty Ltd) 15.00%
Braveheart Oil & Gas Pty Ltd (subsidiary of Alpha) 17.00%
Braveheart Energy Pty Ltd (subsidiary of Goldsborough Limited) 8.50%
17
The participants in the Browse Joint Venture have contracted to engage the
services of Australian Drilling Associates Pty Ltd to provide project management
services to support the conduct of drilling operations and to gain access to one
drilling slot in a group sponsored multi-well program utilising the
semi-submersible drilling rig, the Songa Venus. The drilling slot is to be used
for the drilling of the Braveheart 1 well.
While each of the three permits of the Browse Joint Venture have been offered
for farmout, alternatively, the participants are considering how they might meet
the funding requirements for the drilling of a well or wells, should these
farmout efforts not be successful. Discussions amongst the joint venture
participants have focused on the formation of a special purpose Australian
company to acquire the Browse Joint Venture permits in return for a pro rata
issue of shares to each of the Browse Joint Venture participants. The concept is
for this special purpose company to seek equity funding in Australia in order to
meet the significant cost of any well or wells to be drilled in each of the
Browse permits
BONAPARTE BASIN INTERESTS, OFFSHORE FROM THE NORTHERN TERRITORY -
NT/P62, NT/P63, NT/P64, NT/P65, NT/P71 and NT/P72
National Gas Consortium
On April 12, 2006, we completed the acquisition of 100% of Nations Natural Gas
Pty Ltd (Nations). The acquisition of Nations was entered into on September 10,
2004 and made in order to acquire a 30% interest in the initial four permits of
the National Gas Consortium, being permits, NT/P62, NT/P63, NT/P64 and NT/P65
("Timor Sea Permits"), located in the Australian sector of the Timor Sea,
offshore from the Northern Territory.
The Timor Sea covers a huge area underlain by sedimentary basins with potential
for new hydrocarbon discoveries. The region has a long history of exploration
activity and discovery and has now become the focus for domestic and
international petroleum exploration and development activities. There have been
numerous oil, gas/condensate and gas discoveries to the north west in the region
of the permits, including the Laminaria, Corallina and Bayu-Undan fields. The
giant gas fields of Greater Sunrise, Evans Shoal, Caldita and Barossa are to the
north and east of the permits. Recent Plover Formation discoveries have been
made in the Heron-2 well and the Blackwood-1 well, in permit NT/P68 immediately
north of NT/P63 and immediately south of NT/P65.
The Timor Sea is a major emerging petroleum province, with a developing emphasis
in gas processing for the export market. Discoveries made over the past few
years are expected to lead to the area providing substantial gas production and
revenue, through value-added gas projects covering a range of gas to liquids
processes and technologies.
On August 8, 2006, Nations, together with the other joint venturers in the
National Gas Consortium were granted petroleum exploration permits NT/P71 and
NT/P72 for an initial 6-year term. Permits NT/P71 and NT/P72, which cover a
total area of approximately 17,380 km(2) (4,294,772 acres), are located in the
Australian sector of the Timor Sea, and are held by the National Gas Consortium,
which holds the contiguous NT/P62, NT/P63 and NT/P64 permits to the immediate
west.
18
The National Gas Consortium now holds six permits aggregating approximately
32,255 km(2) (7,970,533 acres) namely, NT/P62, NT/P63, NT/P64, NT/P65, NT/ P71
and NT/P72, all within jurisdiction of Australia.
Nations on June 15, 2006, agreed to farmout 6% of its 30% interest in each of
the Timor Sea Permits to NGA (leaving Nations with a net 24% interest) in return
for the acquisition and funding of Nations 30% share of the new Sunshine 2D
seismic survey (887 kms) and Kurrajong 2D seismic survey (3,291 km) which were
acquired in November 2006.
Nations on June 16, 2008, agreed to a further farmout of a further 3% of its 24%
interest in each of the Timor Sea Permits to NGA (leaving Nations with a net 21%
interest) in return for further expenditure of AUD$1.6 million by NGA on Joint
Venture exploration costs. The cost of the Company's share of the Sunshine and
Kurrajong surveys has been met entirely by NGA.
The participants in the National Gas Consortium now are:
%
National Oil & Gas Pty Ltd (Operator) 24.5
Australian Natural Gas Pty Ltd 24.5
National Gas Australia Pty Ltd 30.0
Nations Natural Gas Pty Ltd 21.0
On November 16, 2007, the members of the National Gas Consortium applied for a
12-month extension of Year 4 of each of the permits NT/P62, NT/P63, NT/P64 and
NT/P65 in order to complete the interpretation of the new Sunshine and Kurrajong
2D seismic data sets, in conjunction with interpretation of pre-existing 1,349
line km Jacaranda 2D seismic data set and 1,377 line km Halimeda 2D seismic
survey data set, both of which have been reprocessed. If granted, then Year-4 of
each of these permits would end on December 31, 2008.
The Timor Sea permits have been offered for farmout, with a number of
international companies presently considering parts of or the whole of the
acreage. In the meantime, the National Gas Consortium Joint Venture participants
are considering methods of meeting the funding requirements for the drilling of
a well or wells, should these farmout efforts not be successful. Discussions
amongst the joint venture participants have focused on the formation or
acquisition of a special purpose company to acquire the National Gas Consortium
Joint Venture permits interests in return for a pro rata issue of shares to each
of the joint venture participants. This special purpose public company would
then seek equity funding in Australia in order to meet the significant cost of
any well or wells to be drilled in the permits.
19
NT/P70 NT/P70 JOINT VENTURE - Eastern Bonaparte Basin
On October 10, 2005, the Australian Government granted petroleum exploration
permit NT/P70, for a 6-year term. The Company initially held a 100% interest in
the permit and now holds an 80% interest as the result of farmout (see below).
NT/P70 covers an area of 7,370 km(2) (1,821,200 acres) and is located in the
eastern Timor Sea, about 300 km north of Darwin, and 250 km northeast of the
proposed Darwin to Bayu-Undan gas pipeline. The Greater Sunrise, Evans Shoal,
Barossa and Caldita gas accumulations are located to the west and southwest of
the NT/P70 permit area.
AOGC agreed on June 15, 2006, to farmout 20% of its 100% interest in NT/P70 to
NGA in return for the acquisition and funding by NGA of the cost of a new 800
line km Crocodile 2D seismic survey, subsequently acquired in the NT/P70 permit.
Subsequently AOGC agreed to transfer it's 80% interest to it's wholly owned
subsidiary Alpha Oil & Natural Gas Pty Ltd.
The equity participants in the NT/P70 Joint Venture are:
%
Alpha Oil & Natural Gas Pty Ltd (Operator) 80.0
National Gas Australia Pty Ltd 20.0
The permit was designated as a "frontier area" by the Australian Government
attracting an exploration incentive which allows immediate uplift to 150% tax
deductibility on Australian Petroleum Resource Rent Tax ("PRRT") which is only
payable provided certain levels of return from subsequent production are
achieved.
We have obtained a range of pertinent existing reports and open file seismic
data and, together with the newly acquired Crocodile 2D seismic data, have
mapped, interpreted and revised analyses and concepts for the area. We are
presently assessing a plan to shoot 300 km(2) of 3D seismic survey. Should we so
decide, we can elect to enter the second three years of the initial permit term
and drill one exploration well and perform further interpretational work. There
have been no wells drilled in the permit.
The Warawi prospect and the Crocodile prospect are the major focus of our work
in NT/P70.
The NT/P70 permit has been offered for farmout, with a number of international
companies considering the acreage
NT/P73 - STILLWATER PROJECT
On March 27, 2007, the Australian Government granted to our subsidiary, Alpha, a
petroleum exploration permit, NT/P73, for an initial 6-year term. Alpha holds a
100% interest in the permit. NT/P73 is located to the immediate south west of
NT/P70 and covers an area of 6,815 km(2) (1,683,300 acres). The Barossa and
Caldita gas accumulations are located to the west of the NT/P73 permit area.
20
In the first three years of the initial 6-year term of the NT/P73 permit we plan
to obtain existing reports and open file seismic data and, with this data, to
map, interpret and revise analyses and concepts for the area. We are
contemplating the acquisition of up to 2,000 line km of 2D in the third year of
the permit. Should we so decide, we can elect to enter the second three years of
the initial permit term and drill one exploration well and perform further
interpretational work. There have been no wells drilled in the permit area.
Our work to date has focused on the Stillwater feature of the NW corner of
NT/P73. We have recently reached agreement with ConocoPhillips to acquire
approximately 200 kms(2) of existing 3D data in the NW corner of NT/P73, most of
which covers the highly interesting Stillwater feature, which sits en enchelon
alongside the Caldita feature which is located in the adjacent permit held by
ConocoPhillips and Santos.
The NT/P73 permit has been offered for farmout, with a number of international
companies considering the acreage.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We do not engage in transactions in derivative financial instruments or
derivative commodity instruments. As of September 30, 2008, our financial
instruments were not exposed to significant market risk due to interest rate
risk, foreign currency exchange risk, commodity price risk or equity price risk.
21
Item 4. Controls and Procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of September 30,
2008. This evaluation was carried out under the supervision and with the
participation of our President and Chief Financial Officer. Based upon that
evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective as of such date.
As used herein, "disclosure controls and procedures" means controls and other
procedures of ours that are designed to ensure that information required to be
disclosed by us in the reports we file or submit under the Securities Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
the reports we file under the Securities Exchange Act is accumulated and
communicated to our management, including our President and Chief Financial
Officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Internal Controls
-----------------
Since the date of the evaluation described above, there were no significant
changes in our internal control or in other factors that could significantly
affect these controls, and there were no corrective actions with regard to
significant deficiencies and material weaknesses.
22
Part 11. OTHER INFORMATION
Item 6. Exhibits
List of Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AUSTRALIAN OIL & GAS CORPORATION
By: /s/ E. Geoffrey Albers
---------------------------
E. Geoffrey Albers,
Chief Executive Officer and
Chief Financial Officer
November 13, 2008