Previously,
we successfully completed a drilling program and drilled six vertical wells. In addition, we have a working interest in three
horizontal wells, and an interest in an additional two wells that we acquired from an unrelated third party. Since then we have
been evaluating the options for production available to us to determine the preferable course of action. In August of 2013, we
received approval from the AER for our horizontal cyclic steam stimulation thermal recovery project application (“HCSS Project”).
It is anticipated that we will develop a thermal demonstration project on our properties followed by a commercial expansion project
on one half section of land located on section 10-92-13W5 of our Sawn Lake oil sands properties where we currently have a 90%
working interest. This application, submitted in early 2012, was an application to modify our previously approved in-situ demonstration
project for a well to test thermal production on our Sawn Lake oil sands leases. This modification changed the vertical cyclical
steam stimulation (“CSS”) well earlier approved, into a thermal recovery project to test two wells that use a horizontal
application of CSS. We are currently waiting on the production facility performance results from the
the SAGD Project in order to fine-tune our HCSS Project facility design before we initiate start-up operations
on the ½ section of land where we plan to drill two horizontal wells to test the use of HCSS technology.
Market
and Distribution of Product
Currently,
on lands where we have a 25% working interest, the operator of the SAGD Project markets and distributes all oil produced from
the SAGD Project facility. This production is currently being trucked to market.
On
lands where we are the operator, we intend to sell our oil and gas production under both short-term (less than one year) and long-term
(one year or more) agreements at prices negotiated with third parties. Under both short-term and long-term contracts, typically
either the entire contract (in the case of short-term contracts) or the price provisions of the contract (in the case of long-term
contracts) are renegotiated in intervals ranging in frequency from daily to annual. At this time, we have no production on any
of the lands where we are the operator and therefore we have no short-term or long-term contracts. We will adopt specific sales
and marketing plans once production is achieved on lands where we are designated as the operator.
Market
pricing for bitumen is seasonal, with lower prices in and around the calendar year-end being the norm due to lower demand for
asphalt and other bitumen-derived products. By necessity, bitumen is regularly blended with diluent in order to facilitate its
transportation through pipelines to North American markets. As such, the effective field price for bitumen is also directly impacted
by the input cost of the diluent required, the demand and price of which is also seasonal in nature (higher in winter as colder
temperatures necessitate more diluent for transportation). Consequently, bitumen pricing is usually weakest in and around December
and not reflective of the annual average realized price or the economics of the “business” overall. We have been advised
that, to price bitumen, marketers apply formulas that take as a reference point the prices published for crude oil of particular
qualities such as “Western Canadian Select”, “Brent Crude Oil”, “Crude Bitumen 9 API Plant Gate”,
“Edmonton light”, “Lloydminster blend”, or the more internationally known “West Texas Intermediate”
(“WTI”).
The
price of oil and natural gas sold is determined by negotiation between buyers and sellers. An order from the National Energy Board
(“NEB”) is required for oil and gas exports from Canada. The NEB is a federal agency which was formed in 1959 by the
Parliament of Canada to regulate oil, gas and electric utility industries. The
NEB monitors the supply and demand of oil, as it does with natural gas, to ensure quantities exported do not exceed the surplus
remaining after Canadian requirements have been met. Any oil export to be made pursuant to an export
contract that exceeds a certain duration or quantity requires an exporter to obtain authorization from the NEB. Natural gas exported
from Canada is also subject to similar regulation by the NEB. Exporters are free to negotiate prices and other terms with purchasers
provided that the export contracts meet certain criteria prescribed by the NEB. The government of Alberta also regulates the volume
of natural gas, which may be removed from the province for consumption elsewhere based on such factors as reserve availability,
transportation arrangements and market considerations.
Competitive
Business Conditions
We
operate in a highly competitive environment, competing with major integrated and independent energy companies for desirable oil
and natural gas properties as well as for the equipment, labour and materials required to develop and operate those properties.
Many of our competitors have longer operating histories and substantially greater financial and other resources. Many of these
companies not only explore for and produce crude oil and natural gas, but also carry on refining operations and market petroleum
and other products on a worldwide basis. Our larger competitors, by reason of their size and relative financial strength, can
more easily access capital markets than we can and may enjoy a competitive advantage, whereas we may incur higher costs or be
unable to acquire and develop desirable properties at costs we consider reasonable because of this competition. Larger competitors
may be able to absorb the burden of any changes in laws and regulation in the jurisdictions in which we do business and handle
longer periods of reduced prices of gas and oil more easily. Our competitors may also be able to pay more for productive oil and
natural gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects
than we can. Our ability to acquire additional properties in the future will depend upon our ability to conduct efficient operations,
evaluate and select suitable properties, implement advanced technologies and consummate transactions in a highly competitive environment.
Competitive
conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time
by the government of Canada and other countries as well as other factors beyond our control, including international political
stability, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources.
Customers
We
received our first oil sales revenue late in September of 2014. Currently the operator of the SAGD Project, markets and distributes
all of the oil being produced from the SAGD Project. This production is currently being trucked to market.
Royalty
Agreements
Through
the acquisition of Northern, we potentially became a party to the following:
On
December 12, 2003, Nearshore Petroleum Corporation (“Nearshore”)
entered into a purported royalty agreement with Mikwec Energy Canada, Ltd. (now known as Northern)
that potentially encumbers six oil sands leases covering 23,405 gross acres (9,472 gross hectares) located within our Sawn Lake
properties (the “Purported 6.5% Royalty”). Nearshore claimed a Purported 6.5% Royalty
from Northern on the leased substances on the land interests which Northern holds in the above six oil sands leases. Nearshore
was a private corporation incorporated in Alberta, Canada, and was owned and controlled by Mr. Steven P. Gawne and his wife, Mrs.
Rebekah J. Gawne, who each owned 50% of Nearshore. Mr. Steven P. Gawne was the President, Chief Executive Officer and a
director of Deep Well from February 6, 2004 to June 29, 2005. Nearshore has subsequently transferred part or all of this Purported
6.5% Royalty to other parties.
On
March 18, 2014 and June 27, 2014, through Northern, we entered into and subsequently closed two Acquisition of Royalty Interest
Agreements and General Indenture of Conveyance, Assignment and Transfer Agreements (collectively the “Agreements”),
with one of our joint venture partners (our “JV Partner”) and one related party, Mr. Malik Youyou, whereby we acquired
and cancelled 5.5% of the disputed Purported 6.5% Royalty claim on certain lands owned by us. Our counsel and the vendor’s
counsel negotiated the terms and conditions of the Agreements. Pursuant to the terms and conditions of the Agreements, we paid
the following consideration:
| a) | US$2,435,124
(Cdn$2,697,600) to our JV Partner for the purchase and transfer of an undivided 3% interest
out of the Purported 6.5% Royalty. The consideration paid was the original cost (in Canadian
dollars) that our JV Partner paid to acquire its 3% interest in the Purported 6.5% Royalty. |
| b) | US$1,007,000
to Mr. Malik Youyou, who is a director and majority shareholder of our Company, for the
purchase and transfer of an undivided 2.5% interest out of the Purported 6.5% Royalty.
The consideration paid was for the reimbursement of the original cost (in US dollars)
that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty from
an arm’s length third party. |
Although
we continue to deny the validity of the Purported 6.5% Royalty, we determined that it was in the best interests of our shareholders
to come to an arrangement to acquire and cancel most of the Purported 6.5% Royalty to prevent a potential encumbrance over our
land or the possibility of future litigation resulting from these alleged royalty claims.
Government
Approval and Crown Royalties
Exploration
and Production. Our operations are subject to Canadian federal and provincial governmental regulations. Such regulations
include: requiring approval and licenses for the drilling of wells, regulating the location of wells and the method and ability
to produce the wells, surface usage and the restoration of land upon which wells have been drilled, the plugging and abandoning
of wells and the transportation of production from our wells. Our operations are also subject to various conservation regulations,
including the regulation of in-situ recovery processes, the size of spacing units, the number of wells which may be drilled in
a unit, the unitization or pooling of oil and gas properties, the rate of production allowable from oil and gas wells and the
ability to produce oil and gas.
The
North American Free Trade Agreement. The North American Free Trade Agreement (“NAFTA”) grants Canada the freedom
to determine whether exports to the United States or Mexico will be allowed. In making this determination, Canada must ensure
that export restrictions do not (i) reduce the proportion of energy exported relative to the supply of the energy resource; (ii)
impose an export price higher than the domestic price; or (iii) disrupt normal channels of supply. All parties to NAFTA are also
prohibited from imposing minimum export or import price requirements.
Investment
Canada Act. The Investment Canada Act of 1985, as amended, requires notification and/or review by the government
of Canada in certain cases, including but not limited to, the acquisition of control of a Canadian Business by a non-Canadian.
In certain circumstances, the acquisition of a working interest in a property that contains recoverable reserves will be treated
as the acquisition of an interest in a “business” and may be subject to either notification or review, depending on
the size of the interest being acquired and the asset size of the business.
Crown
Royalties and Incentives. The governments of each province and the federal government of Canada have enacted legislation
and regulations governing land tenure, royalties, production rates and taxes, environmental protection and other matters under
their respective jurisdictions. The royalty regime is a significant factor in the profitability of oil and natural gas production.
Royalties payable on production from lands other than Crown lands are determined by negotiations between the parties. Crown royalties
are determined by provincial and federal government regulation and are generally calculated as a percentage of the value of the
gross production with the royalty rate dependent in part upon prescribed reference prices, well productivity, geographical location,
field discovery date and the type and quality of the petroleum product produced. From time to time, the governments of Canada
and Alberta have established incentive programs such as royalty rate reductions, royalty holidays, tax credits and drilling royalty
credits. These incentives are for the purpose of encouraging oil and natural gas exploration or enhanced recovery projects. These
incentives generally increase cash flow.
Effective
January 1, 2009, oil sands royalties in Alberta are calculated using a sliding scale for royalty rates ranging from 1% to 9% pre-payout
and 25% to 40% post-payout depending on the world oil price. Project “payout” refers to the point in which we earn
sufficient revenues to recover all of the allowed costs for the project plus a return allowance. The base royalty starts at 1%
and increases for every dollar the world oil price, as reflected by the WTI, is priced above $55 per barrel, to a maximum of 9%
when oil is priced at $120 per barrel or greater. The net royalty starts at 25% and increases for every dollar oil is priced above
$55 per barrel to 40% when oil is priced at $120 or higher.
Research
and Development
We
had no material scientific research and development costs for the fiscal years ended September 30, 2014 and 2013.
Environmental
Laws and Regulations
The
oil and natural gas industry is subject to environmental laws and regulations pursuant to Canadian local, provincial and federal
legislation. Environmental legislation provides for restrictions and prohibitions on releases or emissions of various substances
produced or utilized in association with certain oil and gas industry operations. In addition, legislation requires that well
and facility sites be monitored, abandoned and reclaimed to the satisfaction of provincial authorities. A breach of such legislation
may result in the imposition of fines and penalties. Under these
laws and regulations, we could be liable for personal injury, clean-up costs and other environmental and property damages as well
as administrative, civil and criminal penalties. Accordingly, we could be liable or could be required to cease production on properties
if environmental damage occurs. Although we maintain insurance coverage, the costs of complying with environmental laws and regulations
in the future may harm our business. Furthermore, future changes in environmental laws and regulations could occur that result
in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, any
of which could have a material adverse effect on our financial condition or results of operations. We maintain commercial property
and general liability insurance coverage on the properties we operate. We also maintain operators extra expense insurance which
provides coverage for well control incidents specifically relating to regaining control of a well, seepage, pollution, clean-up
and containment. No coverage is maintained with respect to any fine or penalty required to be paid due to a violation of the regulations
set out by the federal and provincial regulatory authorities. We are committed to meeting our responsibilities
to protect the environment and anticipate making increased expenditures of both a capital and expense nature as a result of the
increasingly stringent laws relating to the protection of the environment.
Alberta’s
climate change regulation, effective July 1, 2007, requires Alberta facilities that emit more than 100,000 tons of greenhouse
gases a year to reduce emissions intensity by 12%. Companies have four choices to meet their reductions: (i) they can make operating
improvements to their operations that will result in greenhouse gas emission reductions; (ii) they can purchase Alberta based
offset credits; (iii) they can contribute to the Climate Change and Emissions Management Fund; or (iv) they can purchase or use
emission performance credits (“EPCs”). EPCs are generated by facilities that have gone beyond the 12% mandatory intensity
reduction and can be banked for future use or sold to other facilities that need to meet the reduction target.
On
June 18, 2009, the government of Canada passed an Environmental Enforcement Act (the “EEA”). The EEA was created to
strengthen and amend nine existing statutes that relate to the environment and to enact provisions in respect of the enforcement
of certain statutes that relate to the environment. The EEA amended various enforcement, offence, penalty and sentencing provisions
to discourage offences under the EEA by setting minimum and maximum fines, in particular for serious offences. The EEA also provided
enforcement officers new powers to investigate cases and grants courts new sentencing authorities that ensure penalties reflect
the seriousness of the pollution and wildlife offences. The EEA also expands the authority to deal
with environmental offenders by: (i) specifying aggravating factors such as causing damage to wildlife or wildlife habitat, or
causing damage that is extensive, persistent or irreparable; (ii) providing fine ranges that are higher for corporate offenders
than for individuals; (iii) doubling fine ranges for repeat offenders; (iv) authorizing the suspension and cancellation
of licenses, permits or other authorizations upon conviction; (v) requiring corporate offenders to report convictions to shareholders;
and (vi) mandating the reporting of corporate offences on a public registry.
Employees
Our
Company currently has two prime subcontractors and three full-time employees. For further information on our subcontractors see
“Compensation Arrangements for Executive Officers” under Item 11 “Executive Compensation” of this Annual
Report. We expect that, from time to time, we will hire more employees, independent consultants and contractors during the stages
of implementing our plans.
An
investment in our common stock is speculative and involves a high degree of risk and uncertainty. You should carefully consider
the risks described below, together with the other information contained in our reports filed with the SEC, including the consolidated
financial statements and notes thereto of our Company before deciding to invest in our common stock. The risks described below
are not the only ones facing our Company. Additional risks not presently known to us, or that we presently consider immaterial
may also adversely affect our Company. If any of the following risks occur, our business, financial condition and results of operations
and the value of our common stock could be materially and adversely affected.
Any
Development Of Our Resources Will Be Subject To Crown Royalties. The royalty regime of Alberta is a significant factor
in the profitability of oil and natural gas production in Alberta, Canada. Crown royalties are determined by government regulation
and are generally calculated as a percentage of the value of the gross production with the royalty rate dependent in part upon
prescribed reference prices, well productivity, geographical location, field discovery date and the type and quality of the petroleum
product produced. Penalties and interest may be charged to us if
we fail to remit royalties on our production to the Crown as prescribed in the regulation.
We
Have A History Of Losses And May Not Achieve Or Sustain Profitability In The Future. Since our inception, we have suffered
recurring losses from operations and have been dependent on new investment to sustain our operations. During the years ended September
30, 2014 and 2013 we reported net losses of $2,040,260 and $2,463,403 respectively. We may not achieve profitability in the foreseeable
future, if at all. In addition, our operating expenses may be more than our future revenue growth. We expect our cost of revenue
and operating expenses to continue to increase in the foreseeable future as we continue to expand on our thermal recovery operations
at Sawn Lake, Alberta.
The
Successful Implementation Of Our Business Plan Is Subject To Risks Inherent In The Oil Sands Business. Our oil sands operations
are subject to the economic risks typically associated with exploration, development and production activities, including the
necessity of significant expenditures to locate and acquire properties and to drill exploratory wells. In addition, the cost and
timing of drilling, completing, operating and acquiring regulatory approval for thermal recovery operations on our wells is often
uncertain. In conducting exploration and development activities, the presence of unanticipated pressure or irregularities in formations,
miscalculations or accidents may cause our exploration, development and production activities to be unsuccessful. This could result
in a total loss of our investment in a particular property. If exploration efforts are unsuccessful in establishing economically
proven reserves and exploration activities cease, the amounts accumulated as unproven costs will be charged against earnings as
impairments. Our exploitation and development of oil sands reserves depends upon access to the areas where our operations are
to be conducted. We conduct a portion of our operations in regions where we are only able to do so on a seasonal basis. Unless
the surface is sufficiently frozen, we are unable to access our properties, drill or otherwise conduct our operations as planned.
In addition, if the surface thaws earlier than expected, we must cease our operations for the season earlier than planned. Our
operations are affected by road bans imposed from time to time during the break-up and thaw period in the spring. Road bans are
also imposed due to spring-break up, heavy rain, mud, rock slides and periods of high water, which can restrict access to our
well sites and potential production facility sites. Our inability to access our properties or to conduct our operations as planned
would result in a shutdown or slowdown of our operations, which would adversely affect our business.
We
Rely On Independent Experts And Technical Or Operational Service Providers Over Whom We May Have Limited Control. The
success of our business is dependent upon the efforts of various third parties that we do not control. We rely upon various companies
to assist us in identifying desirable oil prospects to acquire and to provide us with technical assistance and services. We also
rely upon the services of geologists, geophysicists, chemists, engineers and other scientists to explore and analyze oil prospects
to determine a method in which the oil prospects may be developed in a cost-effective manner. In addition, we rely upon the owners
and operators of oil drilling equipment to drill and develop our prospects to production. Although we have developed relationships
with a number of third-party service providers, we cannot assure that we will be able to continue to rely on such persons. If
any of these relationships with third-party service providers are terminated or are unavailable on commercially acceptable terms,
we may not be able to execute our business plan. Our limited control over the activities and business practices of these third
parties, any inability on our part to maintain satisfactory commercial relationships with them or their failure to provide quality
services could materially and adversely affect our business, results of operations and financial condition.
Our
Interests Are Held In The Form Of Leases That We May Be Unable To Retain. Our Sawn Lake property is held under leases
and working interests in leases. These leases to which we are a party are for a fixed term of 15 years, but contain a provision
that allows us to extend the term of the lease so long as we meet the minimum level of evaluation as set out by the government
of Alberta tenure guidelines. If we or the holder of a lease fails to meet the specific requirements of the lease regarding delay
or non-payment of rental payments or we or the holder of the lease fail to meet the minimum level of evaluation, some or all of
our leases may terminate or expire. There can be no assurance that any of the obligations required to maintain each lease will
be met. The termination or expiration of our leases or the working interests relating to leases may reduce our opportunity to
exploit a given prospect for oil production and thus could have a material adverse effect on our business, results of operations
and financial condition.
We
Expect Our Operating Expenses To Increase Substantially In The Future And We May Need To Raise Additional Funds. We have
a history of net losses and expect that our operating expenses will increase substantially over the next 12 months as we continue
to develop our oil sands leases. In addition, we may experience a material decrease in liquidity due to unforeseen capital calls
or other events and uncertainties. As a result, we may need to raise additional funds, and such funds may not be available on
favourable terms, if at all. If we cannot raise funds on acceptable terms, we may not be able to execute our business plan, take
advantage of future opportunities or respond to competitive pressures or unanticipated requirements. This could have a material
adverse effect on our business, results of operations and financial condition.
Our
Ability To Produce Sufficient Quantities Of Oil From Our Properties May Be Adversely Affected By A Number Of Factors Outside Of
Our Control. The business of exploring for and producing oil and gas involves a substantial risk of investment loss. Drilling
oil wells involves the risk that the wells may be unproductive or that, although productive, the wells may not produce oil in
economic quantities. Other hazards such as unusual or unexpected geological formations, pressures, fires, blowouts, loss of circulation
of drilling fluids or other conditions may substantially delay or prevent completion of any well. Adverse weather conditions can
also hinder drilling operations. A productive well could become uneconomic due to, for example, pressure depletion, water encroachment
or mechanical difficulties, which could impair or prevent the production of oil and/or gas from the well. There can be no assurance
that oil will be produced from all of our properties in which we have interests. Marketability of any oil that we acquire or discover
may be influenced by numerous factors beyond our control. The marketability of our production will depend on the proximity of
our reserves to and the capacity of, third party facilities and services, including oil and natural gas gathering systems, pipelines,
trucking or terminal facilities, and processing facilities. The unavailability or insufficient capacity of these facilities and
services could force us to shut-in producing wells, delay the commencement of production, or discontinue development plans for
some of our properties, which would adversely affect our financial condition and performance. There may be periods of time when
pipeline capacity is inadequate to meet our oil transportation needs. During periods when pipeline capacity is inadequate, we
may be forced to reduce production or incur additional expense as existing production is compressed to fit into existing pipelines.
Other risk factors include availability of drilling and related equipment, market fluctuations of prices, taxes, royalties, land
tenure, allowable production and environmental protection. Our ability to manage these factors could have a material adverse effect
on our business, results of operations and financial condition.
We
Do Not Control All Of Our Operations. We do not operate all of our properties and we therefore have limited influence
over the testing, drilling and production operations of those properties. Currently, we have a 90% working interest in 51 sections
on six oil sands leases, a 100% working interest in five sections on one oil sands lease, where we are the operator of the 90%
and 100% leases. We also have a 25% working interest in an additional 12 sections on two oil sands leases where one of our joint
venture partners is the operator. These nine oil sands leases, which are all contiguous, cover 43,015 gross acres (17,408 gross
hectares) where we currently have 34,096 net acres (13,798 net hectares). All nine oil sands leases are located in the Peace River
oil sands area of Alberta, Canada. Our lack of operational control of the 12 sections currently not operated by us means we are
exposed to the following possibilities:
| ● | the
operator might initiate exploration or development on a faster or slower pace than we
prefer; |
| ● | the
operator might propose to drill more wells or build more facilities on a project than
we have funds for or that we deem appropriate, which could mean that we are unable or
decline to participate in the project or share in the revenues generated by the project;
or |
| ● | if
the operator does not initiate a joint operation proposal to conduct further operations
on these 12 sections, the non-operators are entitled to propose a joint operation that
is separate from any already existing project. As a non-operator on those 12 sections,
we might be unable to pursue further operations on those sections unless we and possibly
other joint participating non-operators directly pay the entire cost thereof. In such
a scenario, the Joint Operating Agreement governing the relationship of the joint interest
owners in these 12 sections allow a party to recoup the costs which are paid on behalf
of other non-participating joint owners in addition to penalties because of their non-participation. |
Any
of these events could materially reduce the value of those properties affected.
Aboriginal
Peoples May Make Claims Regarding The Lands On Which Our Operations Are Conducted. Aboriginal peoples have claimed aboriginal
title and rights to a substantial portion of western Canada. Since aboriginal peoples have filed a claim claiming aboriginal title
or rights to the lands on which some of our properties are located, and if such a claim is successful, it could have a material
adverse effect on our operations.
The
AER governs our operations in Alberta, Canada and they have implemented a new directive (“Directive 056”) through
which the government of Alberta has issued its First Nations Consultation Policy on Land Management and Resource Development on
May 16, 2005. The AER expects that all industry applicants must adhere to this policy and the consultation guidelines. These requirements
and expectations apply to the licensing of all new energy developments and all modifications to existing energy developments,
as covered in Directive 056. In the policy, the government of Alberta has developed consultation guidelines to address specific
questions about how consultation for land management and resource development should occur in relation to specific activities.
Prior to filing an application, the applicant must address all questions, objections, and concerns regarding the proposed development
project and attempt to resolve them. This includes concerns and objections raised by members of the public, industry, government
representatives, First Nations, Métis, and other interested parties. This process can cause significant delays in obtaining
a drilling permit for exploration and/or a production well license for both oil and gas.
Our
Operations Are Subject To A Wide Range of Environmental Legislation and Regulation From All Levels Of Government Of Which We Have
No Control. Environmental legislation imposes, among other things, restrictions, liabilities and obligations in connection
with the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste and in connection
with spills, releases and emissions of various substances into the environment. As well, environmental regulations are imposed
on the qualities and compositions of the products sold and imported. Environmental legislation also requires that wells, facility
sites and other properties associated with our operations be operated, maintained, abandoned and reclaimed to the satisfaction
of applicable regulatory authorities. In addition, certain types of operations, including exploration and development projects
and significant changes to certain existing projects, may require the submission and approval of environmental impact assessments.
Compliance with environmental legislation can require significant expenditures, and failure to comply with environmental legislation
may result in the imposition of fines and penalties and liability for cleanup costs and damages. The costs of complying with environmental
legislation in the future could have a material adverse effect on our business, results of operations and financial condition.
We anticipate that changes in environmental legislation may require, among other things, reductions in emissions to the air from
its operations and result in increased capital expenditures. Future changes in environmental legislation could occur and result
in stricter standards and enforcement, larger fines and liability, and increased capital expenditures and operating costs, which
could have a material adverse effect on our business, results of operations and financial condition.
Market
Fluctuations In The Prices Of Oil Could Adversely Affect Our Business. Prices for oil tend to fluctuate significantly
in response to factors beyond our control. These factors include, but are not limited to, the ongoing wars in the Middle East
and actions of the Organization of Petroleum Exporting Countries and its maintenance of production constraints, the U.S. economic
environment, weather conditions, the availability of alternate fuel sources, transportation interruption, the impact of drilling
levels on crude oil and natural gas supply, and the environmental and access issues that could limit future drilling activities
for the industry.
Changes
in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes directly
affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration
and development activities. Reductions in oil could not only reduce revenues and profits, but could also reduce the quantities
of reserves that are commercially recoverable. Significant declines in oil prices could result in non-cash charges to earnings
due to impairment.
Changes
in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and
divestiture and often cause disruption in the market for oil producing properties, as buyers and sellers have difficulty agreeing
on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions
and development and exploitation of projects. We expect that commodity prices will continue to fluctuate significantly in the
future.
Our
Stock Price Could Decline. Our common stock is traded on the OTCQB marketplace. There can be no assurance that an active
public market will continue for our common stock or that the market price for our common stock will not decline below its current
price. Such price may be influenced by many factors, including but not limited to, investor perception of us and our industry
and general economic and market conditions. The trading price of our common stock could be subject to wide fluctuations in response
to announcements of our business developments or our competitors, quarterly variations in operating results, and other events
or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial
effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations
may adversely affect the price of our common stock. Our stock price may decline as a result of future sales of our shares or the
perception that such sales may occur.
We
Could Be Subject To SEC Penalties If We Do Not File All Of Our SEC Reports. Although we are presently up to date in our
filings, in the past we have not timely filed all of our annual and quarterly reports required to be filed by us with the SEC,
in a timely manner. It is possible that the SEC could take enforcement action against us, including potentially the de-registration
of our securities, if we fail to file our annual and quarterly reports in a timely manner as required by the SEC. If the SEC were
to take any such actions, it could adversely affect the liquidity of trading in our common stock and the amount of information
about our Company that is publicly available.
Broker-Dealers
Are Not Permitted To Solicit Trades In Our Common Stock. Our common stock is considered to be a “penny stock”
because it meets one or more of the definitions of “penny stock” in Rule 3a51-1 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). The principal result or effect of being designated a “penny stock”
is that securities broker-dealers cannot recommend the stock and may only trade in it on an unsolicited basis. The continued inability
of brokers to recommend our stock could have a material adverse effect on our business, results of operations and financial condition.
Risks
Related To Broker-Dealer Requirements Involving Penny Stocks / Risks Affecting Trading and Liquidity. Section 15(g) of
the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investor’s account. These rules may have the effect of
reducing the level of trading activity in the secondary market, if and when one develops.
Potential
investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed
to be “penny stock.” Moreover, SEC Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any
investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer
to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that
the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination
in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects
the investor’s financial situation, investment experience and investment objectives. Pursuant to the Penny Stock Reform
Act of 1990, broker-dealers are further obligated to provide customers with monthly account statements. Compliance with the foregoing
requirements may make it more difficult for investors in our stock to resell their shares to third parties or to alternatively
dispose of them in the market or otherwise.
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
None.
Office
Leases
We
lease and maintain office space in Edmonton, Alberta for corporate and administrative operations. This lease will expire on June
30, 2015.
Oil
and Gas Properties
Acreage
Currently,
we have a 90% working interest in 51 sections on six oil sands leases, a 100% working interest in five sections on one oil sands
lease, and a 25% working interest in an additional 12 sections on two oil sands leases in the Peace River oil sands area of Alberta,
all of these sections are contiguous. These nine oil sands leases cover 43,015 gross acres (17,408 gross hectares). Of the 68
contiguous sections on nine oil sands leases, one of our joint venture partners is the operator of 12 sections on two oil sands
leases where we have a 25% working interest since the execution of the Farmout Agreement, and we are the operator on 56 sections
on seven oil sands leases where we have working interests of either 90% or 100%.
For
further information, see Oil and Gas Properties on our Balance Sheet and Note 3 and Note 4 in the notes to our consolidated financial
statements contained herein.
The
following table summarizes, by geographic area, our gross and net developed and undeveloped Peace River oil sands rights under
lease as of September 30, 2014:
Peace
River Oil Sands Rights as
of September 30, 2014 |
| |
Gross
Hectares | | |
Net
Hectares | | |
Gross
Acres | | |
Net
Acres | |
Developed Acreage | |
| | |
| | |
| | |
| |
Alberta, Canada | |
| 8 | | |
| 2 | | |
| 20 | | |
| 5 | |
Total | |
| 8 | | |
| 2 | | |
| 20 | | |
| 5 | |
| |
| | | |
| | | |
| | | |
| | |
Undeveloped Acreage | |
| | | |
| | | |
| | | |
| | |
Alberta, Canada | |
| 17,400 | | |
| 13,796 | | |
| 42,995 | | |
| 34,091 | |
Total | |
| 17,400 | | |
| 13,796 | | |
| 42,995 | | |
| 34,091 | |
| |
| | | |
| | | |
| | | |
| | |
TOTAL Developed and Undeveloped | |
| 17,408 | | |
| 13,798 | | |
| 43,015 | | |
| 34,096 | |
A
developed acre is considered to mean those acres spaced or assignable to productive wells, a gross acre is an acre in which a
working interest is owned, and a net acre is the result that is obtained when the fractional ownership working interest of a lease
is multiplied by gross acres of that lease. The number of net acres is the sum of the fractional working interests owned in gross
acres expressed as whole numbers and fractions thereof.
Undeveloped
acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the
production of commercial quantities of oil or natural gas, regardless of whether or not that acreage contains proven reserves,
but does not include undrilled acreage held by production under the terms of a lease. As is customary in the oil and gas industry,
we can generally retain our interest in undeveloped acreage by engaging in drilling activity that establishes commercial production
sufficient to maintain the leases, or by paying delay rentals during the remaining primary term of such a lease. The oil sands
leases in which we have an interest are for a primary term of 15 years, and if we meet the Minimum Level of Evaluation (“MLE”)
as set out by the government of Alberta oil sands tenure guidelines we can continue these leases beyond their primary term for
an indefinite period.
The
government of Alberta owns the land and we have acquired the rights to perform oil and gas activities on these lands. If we meet
the conditions of the 15-year leases we will be permitted to drill on and produce oil from the land into perpetuity. These conditions
give us until the expiration of the leases to meet the following requirements on our primary oil sands leases:
(i)
drill 68 wells throughout the 68 sections; or
(ii)
drill 44 wells within the 68 sections and acquire and process two miles of seismic on each other undrilled section.
We
plan to meet the second of these conditions. As at December 31, 2014, we have an interest in ten wells, which can be counted toward
these requirements. We have acquired and processed 25 miles of seismic on the leases, some which can be counted toward the MLE
requirements. Our joint venture partner and operator of the SAGD Project has also acquired additional seismic that can be used
towards our MLE requirements.
We
have also identified two other wells drilled on these leases, which may be included in the satisfaction of the MLE requirements.
Our
developed and undeveloped oil sands acreage as of December 31, 2014, covers 43,015 gross acres (34,096 net acres) on 68 sections
of land under nine oil sands leases. Until we extend the leases “into perpetuity” based on the government of Alberta
regulations, the lease expiration dates of our nine oil sands leases are as follows:
| (i) | 32
sections of land or 20,242 gross acres (13,284 net acres) under five oil sands leases
are set to expire on July 10, 2018; |
| (ii) | 31
sections of land or 19,610 gross acres (17,649 net acres) under three oil sands leases
are set to expire on August 19, 2019; and |
| (iii) | five
sections of land or 3,163 gross acres (3,163 net acres) under one oil sands lease are
set expire on April 9, 2024. It is the Company’s opinion that the Company has already
met the governmental requirements for this lease and it will be applying to continue
this lease into perpetuity. |
Delivery
Commitments
We
are not subject to any obligations under existing delivery commitment contracts or agreements calling for the provision of fixed
and determinable quantities of oil and gas.
Disclosure
of Reserves
Our
oil reserves are attributable solely to properties within Alberta, Canada. The following table discloses, in the aggregate, the
Company’s estimated reserves on the Company’s Sawn Lake oil sands properties located in the Peace River oil sands
area of Alberta, Canada, as of September 30, 2014, based on estimated constant prices and cost assumptions. We reported no proved,
probable or possible reserves based on Petroleum Resources Management System (“PRMS”) standards as at September 30,
2013.
Summary of Oil and Gas Reserves as of September 30, 2014 (Constant Prices and Costs) |
| |
RESERVES | |
| |
Light and Medium Oil | | |
Heavy Oil | | |
Oil | | |
Natural Gas | | |
Natural Gas Liquids | |
Reserves Category | |
| Gross (Mbbl) | | |
| Net (Mbbl) | | |
| Gross (Mbbl) | | |
| Net (Mbbl) | | |
| Gross (1) (Mbbl) | | |
| Net (2) (Mbbl) | | |
| Gross (Mmcf) | | |
| Net (Mmcf) | | |
| Gross (Mbbl) | | |
| Net (Mbbl) | |
Proved | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Developed Producing | |
| – | | |
| – | | |
| – | | |
| – | | |
| 281 | | |
| 257 | | |
| – | | |
| – | | |
| – | | |
| – | |
Developed Non-producing | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Undeveloped | |
| – | | |
| – | | |
| – | | |
| – | | |
| 290 | | |
| 266 | | |
| – | | |
| – | | |
| – | | |
| – | |
Total Proved | |
| – | | |
| – | | |
| – | | |
| – | | |
| 571 | | |
| 523 | | |
| – | | |
| – | | |
| – | | |
| – | |
Probable | |
| – | | |
| – | | |
| – | | |
| – | | |
| 1,793 | | |
| 1,475 | | |
| – | | |
| – | | |
| – | | |
| – | |
Total Proved plus Probable | |
| – | | |
| – | | |
| – | | |
| – | | |
| 2,364 | | |
| 1,998 | | |
| – | | |
| – | | |
| – | | |
| – | |
Possible | |
| – | | |
| – | | |
| – | | |
| – | | |
| 2,320 | | |
| 1,900 | | |
| – | | |
| – | | |
| – | | |
| – | |
Total Proved plus Probable plus Possible | |
| – | | |
| – | | |
| – | | |
| – | | |
| 4,684 | | |
| 3,898 | | |
| – | | |
| – | | |
| – | | |
| – | |
(1)Gross
Reserves – are defined as the Company’s working interest reserves (operating or non-operating) before deduction of
royalties.
(2)Net
Reserves – are defined as the Company’s working interest reserves (operating or non-operating) after deduction of
royalties.
Note:
The numbers in this table may not add exactly due to rounding.
Under
current SEC standards, “Proved Reserves” are those quantities of oil and gas, which, by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known
reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which
contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether
deterministic or probabilistic methods are used for the estimation.
Under
current SEC standards, the term “Reasonable Certainty” if deterministic methods are used, implies a high degree of
confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability
that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is
much more likely to be achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical,
and geochemical), engineering, and economic data are made to estimated ultimate recovery (“EUR”) with time, reasonably
certain EUR is much more likely to increase or remain constant than to decrease.
Reasonable
certainty can be established using techniques that have been proved effective by actual production from projects in the same reservoir
or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty.
Under
current SEC standards, “Reliable Technology” is a grouping of one or more technologies (including computational methods)
that have been field tested and have demonstrated to provide reasonably certain results with consistency and repeatability in
the formation being evaluated or in an analogous formation.
In
order to establish reasonable certainty with respect to our estimated proved reserves, we employ in-situ technologies that have
been demonstrated to yield results in the oil sands with consistency and repeatability. The technical data used in the estimation
of our proved reserves include, but are not limited to, electrical logs, core analyses, geologic maps and available downhole and
production data, seismic data and well test data. Reserves attributable to our producing wells which have limited production history
and for undeveloped locations are estimated using performance from analogous wells in the surrounding area and technical data
to assess the reservoir continuity.
The
accuracy of any reserve estimate is a function of the quality of available geological, geophysical, engineering and economic data,
the precision of the engineering and geological interpretation and judgment. The estimates of reserves and future cash flows are
based on various assumptions and are inherently imprecise. Although we believe these estimates are reasonable, actual future production,
cash flows, taxes, development expenditures, operating expenses and quantities of recoverable oil reserves may vary substantially
from these estimates. Also, the use of a 10% discount factor for reporting purposes may not necessarily represent the most appropriate
discount factor, given actual interest rates and risks to which our business or the oil and natural gas industry in general are
subject.
There
are numerous uncertainties inherent in estimating quantities of proved reserves and estimates of reserves quantities and values
must be viewed as being subject to significant change as more data about our properties becomes available.
Estimates
of probable and possible reserves are inherently imprecise. When producing an estimate of the amount of oil that is recoverable
from a particular reservoir, probable reserves are those additional reserves that are less certain to be recovered than proved
reserves but which, together with proved reserves, are as likely as not to be recovered. Possible reserves are even less certain
and generally require only a 10% or greater probability of being recovered. All categories of reserves are continually subject
to revisions based on production history, results of additional exploration and development, price changes and other factors.
Estimates of probable and possible reserves are by their nature much more speculative than estimates of proved reserves and are
subject to greater uncertainties, and accordingly the likelihood of recovering those reserves is subject to substantially greater
risk.
Third
Party Reports
Our
estimates of proved, probable and possible reserves were based on an independent third party report prepared and evaluated by
DeGolyer and MacNaughton Canada Limited (“DeGolyer”) an independent qualified reserves evaluator. DeGolyer is an Alberta
Corporation with offices in Calgary, Alberta. DeGolyer is a subsidiary of DeGolyer and MacNaughton which has been providing petroleum
consulting services throughout the world since 1936. DeGolyer was engaged by our Company to evaluate our Company’s Sawn
Lake oil sands properties located in Northern Alberta and prepare an independent assessment and evaluation of our Company’s
reserves as at September 30, 2014. Included herein, as Exhibit 23.1, is a consent report from DeGolyer.
Preparation
of Reserves Estimates and Reserves Evaluation
Our
reserves data and estimates were prepared and evaluated by DeGolyer in compliance with SEC definitions and guidance and in accordance
with generally accepted petroleum engineering principles. The technical persons employed by DeGolyer met the requirements regarding
qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing
of Oil and Natural Gas Reserves Information promulgated by the Society of Petroleum Engineers.
Our
reserves estimates are prepared by independent examination and evaluation of our production data, reservoir pressure data, logs,
geological data, and offset analogies. DeGolyer is provided full access to complete and accurate information pertaining to our
properties, and to all applicable personnel of our Company. DeGolyer’s independent evaluation of our reserves was supervised
by Mr. Douglas S. Christie, Vice President of DeGolyer. Mr. Christie is a registered professional geologist in Alberta, Canada
and has over 33 years of oil and gas industry experience and 22 years of application evaluation experience. Our Board recently
appointed a reserves and resources committee consisting of four Board members. The reserves and resources committee members are
Mr. Said Arrata, Mr. David Roff, Mr. Colin Outtrim and Mr. Curtis James Sparrow. Our reserves estimates and process for developing
such estimates are reviewed by our current reserves and resources committee and approved by our management. Our management on
behalf of our Board ensures compliance with SEC disclosure and internal control requirements along with verifying the independence
of all third-party consultants. Our management is ultimately responsible for reserve estimates and reserve disclosures and ensuring
that they are in accordance with the applicable regulatory requirements and industry standards and practices.
Estimates
of oil and natural gas reserves are projections based on a process involving an independent third party engineering firm’s
collection of all required geologic, geophysical, engineering and economic data, and such firm’s complete external preparation
of all required estimates are forward-looking in nature. These reports rely upon various assumptions, including assumptions required
by the SEC, such as constant oil and natural gas prices, operating expenses and future capital costs. The process also requires
assumptions relating to availability of funds and timing of capital expenditures for development of our proven undeveloped reserves.
These reports should not be construed as the current market value of our reserves. Because of the uncertainties inherent in the
interpretation of this data, we cannot be certain that the reserves will ultimately be realized. Our actual results could differ
materially.
Proved
Undeveloped Reserves
Our
independent reserves report, prepared by DeGolyer, estimates that we have 290 thousand barrels proved undeveloped reserves, before
deduction of royalties as at September 30, 2014, on our Sawn Lake oil sands properties located in the Peace River oil sands area
of Alberta, Canada. We have no material changes in our proved undeveloped reserves that occurred during the year to be reported,
for the reason that this is the first time we have reported proved undeveloped reserves in any of our SEC filings.
The
operator of the SAGD Project has indicated spending plans related to development of some of our proved undeveloped reserves over
the next year, which includes the drilling of an additional SAGD well pair and potentially the expansion of our joint SAGD plant
facility.
Reserves
Reported to Other Agencies
The Company has
filed a Statement of Reserves Data and Other Oil and Gas Information on Form 51-101F1 with the Alberta Securities Commission pursuant
to National Instrument 51-101 – Standard of Disclosure for Oil and Gas Activities, which included estimates of total proved,
probable and possible (developed and or undeveloped) net oil reserves prepared in accordance with the Canadian Oil and Gas Evaluation
Handbook (“COGEH”).
Oil
and Gas Production, Production Prices and Production Costs
On
September 16, 2014, the first SAGD well pair started producing oil from our joint Sawn Lake oil sands properties. We received
our first revenue late in September of 2014 from the sales of our produced oil. The following table discloses our Company’s
share of production and average sales price for the last three fiscal years:
| |
Oil | |
| |
Production(2) | | |
Average Sales Price per Unit | | |
Average Production Costs per Unit | |
Fiscal Year | |
(bbls) | | |
($/bbl) | | |
($/bbl) | |
Peace River Oil Sands, Alberta, Canada: | |
| | |
| | |
| |
2014(1) | |
$ | 818.6 | | |
$ | 61.77 | | |
$ | (3 | ) |
2013 | |
$ | – | | |
$ | – | | |
$ | – | |
2012 | |
$ | – | | |
$ | – | | |
$ | – | |
(1)
First production began September 16, 2014.
(2)
Our Company’s working interest share before royalties.
(3)
Currently all of our operating costs from the SAGD Project are being paid by the Farmee under the terms of the Farmout Agreement
Productive
Wells
The
following table sets forth our gross and net productive oil wells as of September 30, 2014:
| |
Producing Oil Wells | | |
Producing
Gas Wells | | |
Total | |
| |
Gross | | |
Net | | |
Gross | | |
Net | | |
Gross | | |
Net | |
Gas | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Oil | |
| 1 | (1) | |
| 0.25 | (1) | |
| – | | |
| – | | |
| 1 | | |
| 0.25 | |
(1)
SAGD producer well
Drilling
and Other Exploratory and Development Activities
The
following table summarizes the results of our drilling activities in the Peace River oil sands area of Alberta during the fiscal
years ended September 30, 2014, 2013 and 2012.
| |
Development (Net Wells) | | |
Exploratory (Net Wells) | | |
Total | |
| |
Oil | | |
Gas | | |
Service
Well | | |
Dry | | |
Oil | | |
Gas | | |
Service
Well | | |
Dry | | |
Net
wells | |
2014 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Alberta, Canada | |
| 0.25 | (1) | |
| – | | |
| 0.75 | (2) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Alberta, Canada | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2012 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Alberta, Canada | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
(1)
Our 25% working interest in one SAGD producer well.
(2)
Our 25% working interest in one SAGD steam injection well, one water source well and one disposal well.
Present
Activities – Peace River Oil Sands, Alberta Canada (Sawn Lake Properties)
Currently
we have no wells in the process of being drilled. However, we have nine wells on our Sawn Lake oil sands properties that we previously
drilled and completed which are currently suspended.
On
July 30, 2013, we entered into the SAGD Project Agreement. Our Company’s participation in the SAGD Project is well underway.
For Phase 1 of the SAGD Project, one SAGD well pair was drilled in the fourth quarter of 2013 to a depth of 650 meters and a horizontal
length of 780 meters. After the construction of the SAGD facility for steam generation, water handling and oil treating was completed
in 2014, and steam injection commenced on May 21, 2014. The first oil production commenced on September 16, 2014. Results to date
indicate that the SAGD production process is effective in this Bluesky formation reservoir. Oil sales averaged 221 barrels of
oil per day, half way through the 3rd thirty day period since the start-up of production. Over the next several months the SAGD
well pair is expected to have increased steam injection and oil production as the steam chamber develops. The objective of this
initial SAGD well pair was to establish that SAGD technology is effective in producing oil from the Bluesky reservoir, and results
to date support this. Production is anticipated to peak around September 2015 corresponding to the end of the first year of production.
On
July 31, 2013, we entered into the Farmout Agreement. In accordance with the Farmout Agreement, the Farmee has agreed to provide
up to $40,000,000 in funding for our portion of the costs for the SAGD Project, in return for a net 25% working interest in 12
sections where we had a working interest of 50% before the execution of the Farmout Agreement. The Farmee will also provide funding
to cover monthly operating expenses of our Company, not to exceed $30,000 per month. In addition, and as recently amended, the
Farmee has the option to elect, prior to December 31, 2015,by committing an additional $110,000,000 of financing to the development
of our Company’s Sawn Lake oil sands properties, to obtain an additional working interest of 45% to 50% in the remaining
56 sections of land where we have working interests ranging from 90% to 100%. As required by the Farmout Agreement, as of December
15, 2014, the Farmee has currently paid Cdn$19,355,129 to the operator of the SAGD Project for the Farmee’s share and our
share of the costs of the SAGD Project.
Currently,
we have in place joint operating agreements (our “Joint Operating Agreements”) with our joint venture partners to
manage the operations of our joint oil sands leases. Under these agreements our joint oil sands leases were evaluated seismically,
geologically and by drilling to establish the continuity and the distribution of the crude bituminous-bearing Bluesky reservoir
zone across our joint lands. The development progress of our properties is governed by several factors such as federal and provincial
governmental regulations. Long lead times in getting regulatory approval for thermal recovery projects are commonplace in our
industry. Road bans, winter access only roads and environmental regulations can and often do delay development of similar projects.
Because of these and other factors, our oil sands project can take significantly longer to complete than regular conventional
drilling programs for lighter oil. To date, our geological, engineering and economic studies lead us to believe that our working
interest can support full profitable commercial production.
In
August 2013, we received approval from the AER for our HCSS Project application. It is anticipated that we will develop a thermal
demonstration project on our properties followed by a commercial expansion project on one half section of land located on section
10-92-13W5 of our Sawn Lake oil sands properties where we currently have a 90% working interest. This application, submitted in
early 2012, was an application to modify our previously approved in-situ demonstration project for a well to test thermal production
on our Sawn Lake oil sands leases. This modification changed the vertical CSS well earlier approved, into a thermal recovery project
to test two wells that use a horizontal application of CSS. We are currently waiting on the production
facility performance results from the SAGD Project in order to fine-tune our HCSS Project facility design before we initiate
start-up operations on the ½ section of land where we plan to drill two horizontal wells to
test the use of HCSS technology.
ITEM 3. |
LEGAL PROCEEDINGS |
DISMISSED
- I.G.M. Resources Corp. vs. Deep Well Oil & Gas, Inc., et al
On
February 11, 2014, the Court dismissed, without any costs to the Company, the Plaintiff’s claims against Deep Well Oil &
Gas, Inc. and its subsidiary Northern Alberta Oil Ltd.
Previously
on March 10, 2005, I.G.M. Resources Corp. (the“Plaintiff”) filed against Classic, 979708 Alberta Ltd. (“979708”),
Deep Well Oil & Gas, Inc., Nearshore, Steven P. Gawne, Rebekah Gawne, Gawne Family Trust, 1089144 Alberta Ltd., John F. Brown,
Diane Lynn McClaflin, Cassandra Doreen Brown, Elissa Alexandra Brown, Brown Family Trust, Priority Exploration Ltd., Northern
and Gordon Skulmoski (the “IGM Defendants”), a Statement of Claim in the Court of Queen’s Bench of Alberta Judicial
District of Calgary. This suit was part of a series of lawsuits or actions undertaken by the Plaintiff against some of the other
above-named IGM Defendants. The Plaintiff claimed the value of the assets sold was far in excess of the value paid for those assets.
On April 23, 2004, Northern purchased some of Classic’s assets, including some of which are under dispute by the Plaintiff.
On June 7, 2005, Deep Well acquired all of the common shares of Northern thereby giving Deep Well an indirect beneficial interest
in the assets in which the Plaintiff had claimed an interest. The Plaintiff had sought an order setting aside the transaction
between 979708, compensation in the amount of Cdn $15,000,000 and a declaration of trust declaring that Northern and Deep Well
hold all of the assets acquired from 979708 and any property acquired by use of such assets or confidential information of 979708,
in trust for the Plaintiff.
ITEM 4. |
MINE SAFETY DISCLOSURES |
Not
applicable.
PART
II
ITEM 5. |
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market
Information
Deep
Well’s stock is currently quoted on the OTCQB marketplace under the trading symbol DWOG. The
following table sets forth the high and low sales prices for Deep Well common stock as reported on the OTCQB marketplace for the
two most recent fiscal years indicated below. These over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual transactions:
| |
High | | |
Low | |
| |
| | |
| |
Fiscal September 30, 2013 | |
| | | |
| | |
First Quarter | |
$ | 0.08 | | |
$ | 0.05 | |
Second Quarter | |
$ | 0.08 | | |
$ | 0.05 | |
Third Quarter | |
$ | 0.09 | | |
$ | 0.03 | |
Fourth Quarter | |
$ | 0.50 | | |
$ | 0.03 | |
Fiscal September 30, 2014 | |
| | | |
| | |
First Quarter | |
$ | 0.60 | | |
$ | 0.27 | |
Second Quarter | |
$ | 0.43 | | |
$ | 0.27 | |
Third Quarter | |
$ | 0.42 | | |
$ | 0.15 | |
Fourth Quarter | |
$ | 0.41 | | |
$ | 0.27 | |
Holders
of Record
As
of October 31, 2014, we had approximately 164 holders of record of our shares of common stock. Our Company estimates that investment
dealers and other nominees are the record holders for approximately 2,200 beneficial holders.
Dividends
We
have not paid cash dividends since inception. We intend to retain all of our earnings, if any, for use in our business and do
not anticipate paying any cash dividends in the foreseeable future. The payment of any future dividends will be at the discretion
of the Board of Directors (our “Board”) and will depend upon a number of factors, including future earnings, the success
of our business activities, capital requirements, the general financial condition and our future prospects, general business conditions
and such other factors as our Board may deem relevant.
Return
of Capital Distribution
On
August 9, 2013, our Company approved a distribution to our shareholders in the amount of $0.07 per share of common stock
to be payable on September 20, 2013 (the “Payment Date”) to the holders of record of all the issued and outstanding
shares of common stock of the Company as of the close of business on August 16, 2013, (the “Record Date”). This
cash distribution to our Company’s shareholders was not a dividend paid out of the earnings and profits, but was a non-dividend
distribution characterized as a “return of capital”.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table provides information as of September 30, 2014 with respect to shares of Deep Well’s common stock that may
be issued under our existing equity compensation plans.
| |
Equity Compensation Plan as of
September 30, 2014 |
| |
(a) | |
(b) | |
(c) |
Plan Category | |
Number of securities to be issued upon exercise of outstanding options, warrants and rights | |
Weighted-average exercise price of outstanding options, warrants and rights | |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| |
| |
| |
|
Equity compensation plans approved by security holders | |
| 11,830,000 | (1) | |
$ | 0.26 | | |
| 11,102,699 | (2) |
| |
| | | |
| | | |
| | |
Equity compensation plans not approved by security holders | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | |
Total | |
| 11,830,000 | | |
$ | 0.26 | | |
| 11,102,699 | (2) |
(1)
On March 23, 2011, our Board granted our directors, Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. David Roff,
Mr. Curtis James Sparrow and Mr. Malik Youyou, options to purchase 450,000 shares each of common stock at an exercise price of
$0.14 per share of common stock, with one-third vesting immediately, one-third vesting on March 23, 2012, and one-third vesting
on March 23, 2013, each with a five-year life from the original grant date. On June 20, 2013, our Board granted our directors
Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. David Roff, Mr. Curtis James Sparrow and Mr. Malik Youyou, options to
purchase 450,000 shares each of common stock at an exercise price of $0.05 per share of common stock, with one-third vesting immediately,
one-third vesting on June 20, 2014, and one-third vesting on June 20, 2015, each with a five-year life from the original grant
date. And on June 20, 2013, our Board also granted two consultants, Portwest Investments Ltd. and Concorde Consulting, options
to purchase 1,000,000 shares each of common stock at an exercise price of $0.05 per share of common stock, with one-half vesting
immediately and one-half vesting on June 20, 2014, each with a five-year life from the original grant date. And on June 20, 2013,
our Board also granted one employee of our Company, options to purchase 150,000 shares of common stock at an exercise price of
$0.05 per share of common stock, with one-third vesting immediately, one-third vesting on June 20, 2014, and one-third vesting
on June 20, 2015, with a five-year life from the original grant date. From August 12 to 15, 2013, six of our directors and one
consultant exercised a total of 3,200,000 stock options. On October 28, 2013, the our Board granted a contractor an option to
purchase 250,000 shares of common stock at an exercise price of $0.30 per share of common stock, all vesting immediately, with
a five-year life, for his services in connection with the Farmout Agreement. On December 4, 2013, the Board appointed Mr. Pascal
Nodé-Langlois to its Board and in connection with this appointment the Board granted Mr. Nodé-Langlois an option
to purchase 450,000 shares each of common stock at an exercise price of $0.34 per share of common stock, 150,000 vesting immediately
and the remaining vesting one-third on December 4, 2014, and one-third on December 4, 2015, with a five-year life. On September
19, 2014, the Board granted Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. Pascal Node-Langlois, Mr. David Roff, Mr.
Curtis James Sparrow and Mr. Malik Youyou options to purchase 600,000 shares each of common stock at an exercise price of $0.38
per share of common stock, 200,000 vesting immediately and the remaining vesting one-third on September 19, 2015, and one-third
on September 19, 2016, with a five-year life. On September 19, 2014, the Board granted two consultants, Portwest Investments Ltd.
and Concorde Consulting, an option to purchase each 1,200,000 shares each of common stock at an exercise price of $0.38 per share
of common stock, 600,000 vesting immediately and remaining vesting on September 19, 2015. On September 19, 2014, the Board granted
one employee an option to purchase 180,000 shares each of common stock at an exercise price of $0.38 per share of common stock,
60,000 vesting immediately and the remaining vesting one-third on September 19, 2015, and one-third on September 19, 2016, with
a five-year life.
(2)
Based on 229,326,987 issued and outstanding shares as at September 30, 2014. The maximum number of common shares that may
be reserved for issuance under the Stock Option Plan (as defined below), as amended, may not exceed 10% of our Company’s
issued and outstanding common shares.
Stock
Option Plan
On
November 28, 2005 and as amended on December 4, 2013, our Board adopted the Deep Well Oil & Gas, Inc. stock option plan (the
“Stock Option Plan”). The Stock Option Plan was approved by a majority of our shareholders at the February 24, 2010
general meeting of shareholders. The Stock Option Plan, which is administered by our Board, permits options to acquire shares
of Deep Well’s common stock to be granted to our directors, senior officers and employees of the Company and its subsidiaries,
as well as certain consultants and other persons providing services to our Company. This Stock Option Plan was adopted to provide
an incentive to the retention of our directors, officers and employees as well as consultants that we may wish to retain in the
future. The maximum number of shares of common stock, which may be reserved for issuance under the Stock Option Plan may not exceed
10% of our issued and outstanding common stock, subject to adjustment as contemplated by the Stock Option Plan. For further information
see Note 12 in the notes to our consolidated financial statements contained herein.
On
November 17, 2014, our Board appointed Mr. Colin P. Outtrim to serve on our Board and in connection with Mr. Outtrim’s appointment
our Board granted Mr. Outtrim an option to purchase 600,000 shares each of common stock at an exercise price of $0.23 per common
share, 200,000 vesting immediately and the remaining vesting one-third on November 17, 2015, and one-third on November 17, 2016,
with a five-year life.
Performance
Graph
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and therefore are not required to provide the information
required under this item.
Recent
Sales of Unregistered Securities
Effective
November 23, 2012, pursuant to a subscription agreement, our Company completed a private placement with Mr. Malik Youyou of an
aggregate of 42,857,142 units at a price of $0.07 per unit, for total gross proceeds of $3,000,000. Each unit is comprised of
one share of common stock and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common
stock at a price of $0.105 for a period of three years from the date of closing, provided that if the closing price of the common
shares of our Company on the principal market on which our common shares trade is equal to or exceeds $1.00 for thirty consecutive
trading days, the warrant term will automatically accelerate to the date that is thirty calendar days following the date that
written notice has been given to the warrant holder. No commission or finder’s fees were payable in connection with this
private placement. The units were issued pursuant to Regulation S (“Regulation S”) under the Securities Act of 1933,
as amended (the “Securities Act”). The warrants will expire on November 23, 2015 unless expiration is automatically
accelerated.
On
July 10, 2013, pursuant to a subscription agreement, our Company closed a private placement with Portwest Investments Ltd. (“Portwest”)
a company 100% owned by Dr. Horst A. Schmid, of an aggregate of 850,000 units at a price of $0.05 per unit, for total gross proceeds
of $42,500. Each unit is comprised of one share of common stock and one common share purchase warrant. Each warrant entitles the
holder to purchase one share of common stock at a price of $0.075 for a period of three years from the closing date, provided
that if the closing price of the common stock of our Company on the principal market on which our shares trade is equal to or
exceeds $1.00 for thirty consecutive trading days, the warrant term shall automatically accelerate to the date which is thirty
calendar days following the date that written notice has been given to the warrant holder. No commission or finder’s fees
were payable in connection with this private placement. The units were issued pursuant to Regulation S. The warrants will expire
on July 10, 2018 unless expiration is automatically accelerated.
On
July 31, 2013, pursuant to a subscription agreement, our Company closed a private placement to one investor, our current Farmee,
of an aggregate of 45,111,778 shares of common stock for total gross proceeds of $22,000,000. As per the private placement documents,
the common stock were to be issued to the investor after September 20, 2013 but before November 30, 2013. And on October 16, 2014,
we issued out of treasury 45,111,778 shares of our common stock to the Farmee. No commission or finder’s fees were payable
in connection with this private placement. The shares of common stock were issued pursuant to Regulation S.
Between
August 12 and August 15, 2013, six directors and two consultants of our Company acquired a combined total of 3,768,096 common
shares of our common stock, upon exercising stock options and warrants, at exercise prices ranging from $0.05 to $0.14 per common
share for total combined gross proceeds to our Company of $372,000. The shares of common stock were issued pursuant to Section
4(2) of the Securities Act.
On
October 3, 2014, a warrant holder of our Company acquired 47,618 common shares of our Company, upon exercising warrants, at an
exercise price of $0.105 per share of common stock for gross proceeds to our Company of $4,999.90.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
There
were no repurchases of equity securities by our Company or affiliated purchasers during the fourth quarter of the fiscal year
ended September 30, 2014.
ITEM 6. |
SELECTED FINANCIAL DATA |
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and therefore are not required to provide the information
required under this item.
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |
The
following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes.
This discussion includes forward-looking statements that reflect our current views with respect to future events and financial
performance that involve risks and uncertainties. Our actual results, performance or achievements could differ materially from
those anticipated in the forward-looking statements as a result of certain factors including risks discussed in “Cautionary
Note Regarding – Forward-Looking Statements” below and elsewhere in this report, and under the heading “Risk
Factors” and “Environmental Laws and Regulations”
disclosed in this Annual Report.
Our
consolidated financial statements and information are reported in US dollars and are prepared based upon US generally accepted
accounting principles (“US GAAP”). On January 6, 2015, the noon rate of exchange for Canadian dollars expressed in
US$ was Cdn$1.00 = US$0.8472 as reported by the Bank of Canada.
General
Overview
Deep
Well Oil & Gas, Inc., along with its subsidiaries through which it conducts business, is an emerging independent junior oil
and gas exploration and development company headquartered in Edmonton, Alberta, Canada. Our immediate corporate focus is to develop
the existing land base that we presently control in the Peace River oil sands area in Alberta, Canada. Our principal office is
located at Suite 700, 10150 - 100 Street NW, Edmonton, Alberta, Canada T5J 0P6, our telephone number is (780) 409-8144, and our
fax number is (780) 409-8146. Deep Well Oil & Gas, Inc. is a Nevada corporation and trades on the OTCQB marketplace under
the symbol DWOG. We maintain a web site at www.deepwelloil.com. The OTCQB marketplace requires
companies to be fully compliant in their filing requirements under the Exchange Act.
Results
of Operations
Since
the inception of our current business plan, our operations have consisted of various exploration and start-up activities relating
to our properties, which included acquiring lease holdings by acquisitions and public offerings, seeking investors, locating joint
venture partners, acquiring and analyzing seismic data, environmental regulations, as well as providing project management, drilling,
testing and analysis of wells to define our oil sands reservoir, and development planning of our AER approved thermal recovery
projects, including the recent start-up of the SAGD Project which began producing oil on September 16, 2014. The following table
sets forth certain financial information along with our first revenue with respect to our operations:
| |
Fiscal Year Ended | | |
Fiscal Year Ended | |
| |
September 30, 2014 | | |
September 30, 2013 | |
| |
| | |
| |
Revenue | |
$ | 50,570 | | |
$ | – | |
Royalty expenses | |
| (3,454 | ) | |
| – | |
Revenue, net of royalty | |
| 47,116 | | |
| – | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Operating expenses | |
$ | 239,820 | | |
$ | – | |
Operating expenses covered by Farmout | |
| (192,705 | ) | |
| – | |
General and administrative | |
| 1,970,824 | | |
| 854,358 | |
Cost related to Farmout | |
| – | | |
| 1,790,684 | |
Depreciation, accretion and depletion | |
| 100,610 | | |
| 112,192 | |
| |
| | | |
| | |
Net loss from operations | |
| (2,071,433 | ) | |
| (2,757,234 | ) |
| |
| | | |
| | |
Other income and expenses | |
| | | |
| | |
Rental and other income | |
| 19,675 | | |
| 272,339 | |
Interest income | |
| 11,112 | | |
| 21,492 | |
(Gain) Loss on disposal of assets | |
| 386 | | |
| – | |
| |
| | | |
| | |
Net loss and comprehensive loss | |
$ | (2,040,260 | ) | |
$ | (2,463,403 | ) |
Our
Company reported its first oil revenue in the amount of $47,116 after deduction of
royalties. Given that our first oil production began close to our year end on September 16, 2014, we produced oil for
only 14 days during the year ending September 30, 2014, therefore the volumes of oil delivered were only 818.6 barrels net to
us, before royalties, for an average oil price of $61.77 per barrel. Transportation costs are included in operating expenses
which are covered by our Farmout Agreement. Our total share of the material costs and operating expenses of the SAGD Project,
as disclosed below, has been funded in accordance with the Farmout Agreement, at a net cost to us of $Nil. As
required by the Farmout Agreement, as disclosed below, the Farmee during our September 20, 2014 fiscal year paid
Cdn$16,677,530 to the operator of the SAGD Project for the Farmee’s share and our share of the costs of the SAGD
Project up to September 30, 2014. These costs included the drilling of the SAGD well pair; the purchase and
transportation of equipment; installation and construction of the steam plant facility; testing and commissioning; the
purchase of the water source and disposal wells and expenditures to connect these water wells to the steam plant facility
along with a fuel source tie-in; and the monthly operating expenses associated with the steaming and production of the SAGD
well pair up to September 30, 2014. The total SAGD Project capital costs for Phase 1 plus additions have been estimated by
the operator to be Cdn$32.6 million.
For
the year ended September 30, 2014, our general and administrative expenses increased by $1,116,466 compared to the year ended
September 30, 2013, which was a 130.7% increase from the prior year primarily due to (i) an increase of $962,257 in non-cash share-based
compensation charged to expenses, which was due to vested stock options we granted on October 28, 2013, December 4, 2013 and September
19, 2014 to contractors and directors; (ii) an increase of foreign exchange loss of $274,624, due to the currency depreciation
of the Canadian dollar conversion to U.S. dollars; and (iii) an increase in engineering fees for the preparation of a mandatory
independent reserves evaluation of our Sawn Lake properties.
We
also received $360,000 during the current fiscal year from the Farmee in accordance with a Farmout Agreement to offset some of
our monthly operational expenses. After adjusting for the non-cash items and operational expenses reimbursed in accordance with
the Farmout Agreement, our general and administrative expenses were $675,498 for the year ended September 30, 2014 compared to
$795,913 for the year ended September 30, 2013.
For
the year ended September 30, 2013, we charged to expense $1,790,684 for costs relating to the Farmout Agreement, which included
a one-time agency fee of $1,500,000.
For
the year ended September 30, 2014, our depreciation and accretion expense decreased by $11,582 compared to the year ended September
30, 2013, which was primarily due to the depreciating value of our assets. Depreciation expense is computed using the declining
balance method over the estimated useful life of the asset. Effective December 3, 2012, we entered into and closed upon a Purchase
and Sale agreement with 1132559 Alberta Ltd. (“113”), one of our former joint venture partners, pursuant to which
we acquired 113’s 10% working interest in most of the Sawn Lake oil sands properties where we already own working interests,
in exchange for cash and the discontinuance of claims. In compliance with our accounting policy, only half of the depreciation
is taken in the year of acquisition.
For
the year ended September 30, 2014, our rental and other income was $19,675 compared to $272,339 for the year ended September 30,
2013, this decreased by $252,664 compared to the year ended September 30, 2013, was primarily due to the recovery of expenses
in fiscal 2013, arising from the reversal of part of the receivables and bad debts previously written-off in the amount of $239,459
which was paid to us in connection with a Purchase and Sale agreement, whereby our Company acquired an additional 10% working
interest in most of the Sawn Lake oil sands properties where our Company already owns working interests.
As
a result of the above transactions, our net loss and comprehensive loss from operations for the year ended September 30, 2014
decreased by $423,143 compared to the year ended September 30, 2012. As discussed above this increase was primarily due to $1,790,684
charged to expense for costs in connection with the Farmout Agreement and offset by the reversal of part of the receivables and
bad debts previously written-off.
Operations
As previously disclosed by us, on July 31, 2013 we entered into the Farmout Agreement with our new joint venture partner (the “Farmee”), to fund our share of the SAGD Project. The SAGD Project is located on our Sawn Lake properties in the Peace River oil sands region of Alberta. In accordance with the Farmout Agreement, the Farmee has agreed to provide up to $40,000,000 in funding for our portion of the costs for the SAGD Project, in return for a net 25% working interest in 12 sections where we had a working interest of 50% before the execution of the Farmout Agreement. Also, the Farmee is required to provide funding to cover our monthly operating expenses not to exceed $30,000 per month. In addition, as amended on November 17, 2014, the Farmee has the option to elect to obtain additional working interests ranging from 45% to 50% in the remaining 56 sections of land where we have working interests ranging from 90% to 100%, by committing an additional $110,000,000 of financing for the development of our Sawn Lake oil sands properties. |
|
SAGD
Steam Plant Facility May 2014 – Startup of first steam.
|
Installation of the water treatment plant at our joint SAGD Project. |
|
Since
entering into the Farmout Agreement and the SAGD Project Agreement with our joint venture partners we can report that the first
oil production commenced on September 16, 2014 from the first SAGD well pair. The SAGD well pair was drilled to a vertical depth
of approximately 650 meters with a horizontal length of 780 meters each. Steam injection began in May of 2014 and circulated for
up to four months with production commencing in mid-September 2014 from the Bluesky oil sands reservoir. The operator along with
its joint venture partners will evaluate the production levels and steam to oil ratios over the next few months to determine and
verify the use of SAGD technology in the Bluesky reservoir. After the production facility performance evaluation period, the operator
of the SAGD Project is expecting to proceed with Phase 2, which includes work on preliminary engineering design, regulatory approval,
environmental approval work, determining regulatory requirements sufficient to define the work program, and the drilling of an
additional SAGD well pair and the associated expansion of the current SAGD plant facility. |
Results
to date indicate that the use of SAGD technology is successful in producing oil in the bitumen form from the Bluesky formation
reservoir. Oil sales averaged 221 barrels of oil per day, half way through the 3rd thirty day period since the start-up of production.
Over the next several months the SAGD well pair is expected to have increased steam injection and oil production as the steam
chamber develops. The objective of this initial SAGD well pair was to establish that SAGD technology works in the Bluesky formation
reservoir, and results to date support this. We are now focused on achieving commercial rates. We expect to achieve these results
about March 2015 when reservoir modelling indicates that the steam chamber will have reached the top of the Bluesky formation
sandstone reservoir. Peak production is anticipated to occur in the fourth quarter corresponding to the end of our first fiscal
year of production.
On
March 18, 2014 and June 27, 2014, through our subsidiary company, Northern, we entered into and subsequently closed two Acquisition
of Royalty Interest Agreements and General Indenture of Conveyance, Assignment and Transfer Agreements (collectively “the
Agreements”), with one of our joint venture partners (“JV Partner”) and one related party (Mr. Malik Youyou),
whereby we acquired and cancelled 5.5% of the disputed 6.5% overriding royalty claim (the “Purported 6.5% Royalty”)
on certain lands owned by us. Our counsel and the vendor’s counsel negotiated the terms and conditions of Agreements. Pursuant
to the terms and conditions of the Agreements to acquire the purported overriding royalty interest claims, we paid the following
consideration:
| (i) | US$2,435,124
dollars (Cdn$2,697,600) to our JV Partner for the purchase and transfer of an undivided
3% interest out of the Purported 6.5% Royalty. The consideration paid was the original
cost (in Canadian dollars) that our JV Partner paid to acquire its 3% interest in the
Purported 6.5% Royalty. |
| (ii) | US$1,007,000
dollars to Mr. Malik Youyou, who is a director and majority shareholder of our Company,
for the purchase and transfer of an undivided 2.5% interest out of the Purported 6.5%
Royalty. The consideration paid was for the reimbursement of the original cost (in US
dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty
from an arm’s length third party. |
Although
we continue to deny the validity of the Purported 6.5% Royalty, we determined that it was in the best interests of our shareholders
to come to an arrangement to acquire and cancel most of the Purported 6.5% Royalty to prevent a potential encumbrance over our
land or the possibility of future litigation resulting from these alleged royalty claims.
In
August 2013, we received approval from the AER for our HCSS Project application. It is anticipated that we will develop a thermal
demonstration project on our properties followed by a commercial expansion project on one half section of land located on section
10-92-13W5 of our Sawn Lake oil sands properties where we currently have a 90% working interest. This application, submitted in
early 2012, was an application to modify our previously approved in-situ demonstration project for a well to test thermal production
on our Sawn Lake oil sands leases. This modification changed the vertical CSS well earlier approved, into a thermal recovery project
to test two wells that use a horizontal application of CSS. We are currently waiting on the production
facility performance results from the SAGD Project in order to fine-tune our HCSS project facility design, before we initiate
start-up operations on the ½ section of land where we plan to drill two horizontal wells to test the use of HCSS technology.
Currently
we have a 90% working interest in 51 sections on six oil sands leases and a 100% working interest in five sections on one oil
sands lease in the Peace River oil sands area of Alberta, where we are the operator. In addition, we have a 25% working interest
in another 12 sections on two oil sands leases in the Peace River oil sands area of Alberta. These nine oil sands leases are contiguous
and cover 43,015 gross acres (17,408 gross hectares). The development progress of our properties is governed by several factors
such as federal and provincial governmental regulations. Long lead times in getting regulatory approval for thermal recovery projects
are commonplace in our industry. Road bans, winter access only roads and environmental regulations can and often do delay development
of similar projects. Because of these and other factors, our oil sands project can take significantly longer to complete than
regular conventional drilling programs for lighter oil. To date; our geological, engineering and economic studies affirm that
our working interest can support full profitable commercial production.
Liquidity
and Capital Resources
As
of September 30, 2014, our total assets were $23,691,595 compared to $24,366,368 as of September 30, 2013. In comparison to the
prior year, we had a decrease of $674,773 in our total assets, which was primarily due to (i) an increase in general and administrative
expenses due to an increase in engineering fees; (ii) $250,000 paid for legal costs related to the Farmout Agreement; and (iii)
$189,500 paid to one of our directors for an outstanding loan payable.
As
of September 30, 2014, our total liabilities were $1,200,188 compared to $922,057 as of September 30, 2013. In comparison to the
prior year, we had an increase of $278,131 in our total liabilities. This increase was the result of $692,124 ($772,288 Cdn) owed
to the operator of the SAGD Project for our share of the cost overruns, operating expenses, including the Phase 2 front end costs
for the SAGD Project, of which costs were subsequently paid by the Farmee after September 30, 2014, in accordance with the Farmout
Agreement, and offset by (i) the payout of a $189,500 loan payable owed to one of our directors; and (ii) $250,000 paid for legal
costs related to the Farmout Agreement.
Our
working capital (current liabilities subtracted from current assets) is as follows.
| |
September 30, 2014 | | |
September 30, 2013 | |
Current Assets | |
$ | 3,418,729 | | |
$ | 7,770,925 | |
Current Liabilities | |
| 731,175 | | |
| 475,902 | |
Working Capital | |
$ | 2,687,554 | | |
$ | 7,295,023 | |
As
of September 30, 2014, our Company had working capital of $2,687,554 compared to our working capital of $7,295,023 as of September
30, 2013. This decrease was primarily the result of the purchase and cancellation of 5.5% of the disputeda Purported 6.5% Royalty
on certain lands owned by us, as further described below in our “Investing Activities”. Currently we have no long-term
debt other than our estimated asset retirement obligations on oil and gas properties. Effective November 23, 2012, we completed
a private placement financing with one investor for aggregate gross cash proceeds of $3,000,000. Also, on July 31, 2013, we completed
another private placement financing with one investor for aggregate gross cash proceeds of $22,000,000. Also as disclosed above,
on July 30, 2013 our Company entered into the Farmout Agreement to fund our Company’s share of the SAGD Project.
As
reported on our Consolidated Statement of Cash Flows under “Operating Activities”, for the year ending September 30,
2014, we had a decrease of $1,007,570 compared to September 30, 2013 year end, which was primarily due to a decrease of a one-time
agency fee in the amount of $1,500,000 that was paid out in our 2013 fiscal year end, that was related to the Farmout Agreement
and offset by an increase of $381,280 in non-cash working capital. As of December 31, 2012, we reversed part of the receivables
and bad debts for one former joint venture partner in the amount of $267,962, which was related to a purchase agreement whereby
we acquired an additional 10% working interest in most of the Sawn Lake oil sands properties where we already own working interests.
As
reported on our Consolidated Statement of Cash Flows under “Investing Activities”, we had an increase of $1,148,707
in cash flows from investing activities for the year ended September 30, 2014 compared to the year ended September 30, 2013. As
previously described under “Operations” above, we acquired and cancelled 5.5% of the Purported 6.5% Royalty from two
separate parties for a total cost of $3,442,124. We also had an increase in our Company’s security deposits held in trust
with the AER for our asset retirement obligations for future abandonment and reclamation of our Company’s well sites. In
December 2012 we closed a purchase and sale agreement with a former joint venture partner, whereby we acquired an additional 10%
working interest in our joint properties along with a 10% working interest increase in the equipment purchased for the wells drilled
within those joint properties, in exchange for $2,412,960 cash and the discontinuance of legal actions against our former joint
venture partner to collect amounts owed to us for past operations conducted on our joint properties.
As
reported on our Consolidated Statement of Cash Flows under “Financing Activities”, for the year ended September 30,
2014, we had a decrease of $12,555,936 in net cash provided in financing activities. This decrease of net cash used in Financing
Activities was primarily due to us completing (i) a private placement with one investor in November 2012 for total gross proceeds
of $3,000,000; (ii) a private placement with one investor in July 2013 for total gross proceeds of $22,000,000; and (iii) a return
of capital paid out to our shareholders in September of 2013 in the amount of $12,895,065.
In October 2013, we paid $189,500 for the remaining outstanding loan payable owed to one of our directors.
Our
cash and cash equivalents for the year ending September 30, 2014 were $2,324,755 compared to $7,633,009 for the prior year ended
September 30, 2013, this decrease in cash and cash equivalents was primarily due to the acquisition of 5.5% of the Purported 6.5%
Royalty from two separate parties at a total cost of $3,442,124; and (ii) a Cdn$1,200,000 cash call that we paid to the Operator
of the SAGD Project for the winterization program in September 2014, which we subsequently collected from our Farmout partner
in October 2014.
For
our long-term operations, we anticipate that, among other alternatives, we may raise funds during the next twenty-four months
through sales of our equity securities. We also note that if we issue more shares of our common stock, our stockholders will experience
dilution in the percentage of their ownership of common stock. We may not be able to raise sufficient funding from stock sales
for long-term operations and if so, we may be forced to delay our business plans until adequate funding is obtained.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements.
Cautionary
Note Regarding Forward-Looking Statements
This
Annual Report, including all referenced Exhibits, contains “forward-looking statements” within the meaning of the
US federal securities laws. All statements other than statements of historical facts included or incorporated by reference in
this report, including, without limitation, statements regarding our future financial position, business strategy, projected costs
and plans and objectives of management for future operations, are forward-looking statements. The words “may,” “believe,”
“intend,” “will,” “anticipate,” “expect,” “estimate,” “project,”
“future,” “plan,” “strategy,” “probable,” “possible,” or “continue,”
and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters,
often identify forward-looking statements. For these statements, Deep Well claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this Annual Report
include, among others, statements with respect to:
● | our
current business strategy; |
● | our
future financial position and projected costs; |
● | our
projected sources and uses of cash; |
● | our
plan for future development and operations, including the building of all-weather roads; |
● | our
drilling and testing plans; |
● | our
proposed thermal in-situ project or projects; |
● | the
sufficiency of our capital in order to execute our business plan; |
● | our
resource estimates; |
● | the
timing and sources of our future funding; |
● | the
quantity of our reserves; |
● | the
value of our reserves; |
● | the
intent to issue any distributions to our shareholders; |
● | our plans for development of our Sawn Lake properties; |
● | funding
from the Farmee to pay our costs for the SAGD Project in connection to the Farmout Agreement; |
● | additional
sources of funding from the Farmout Agreement; |
● | funding
from the Farmee to cover our monthly operating expenses; |
● | present
and future production of our properties; and |
● | expectations
regarding the ability of our Company and its subsidiaries to raise capital and to continually
add to reserves through acquisitions and development. |
These
forward-looking statements are based on the beliefs and expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ
materially from current expectations and projections. Factors that could cause actual results to differ materially from those
set forward in the forward-looking statements include, but are not limited to:
● | changes
in general business or economic conditions; |
● | changes
in legislation or regulation that affect our business; |
● | our
ability to obtain necessary regulatory approvals and permits for the development of our
properties; |
● | our
ability to receive approvals from the AER for additional tests to further evaluate the
wells on our lands; |
● | our
Farmout Agreement and Joint Operating Agreements; |
● | opposition
to our regulatory requests by various third parties; |
● | actions
of aboriginals, environmental activists and other industrial disturbances; |
● | the
costs of environmental reclamation of our lands; |
● | availability
of labor or materials or increases in their costs; |
● | the
availability of sufficient capital to finance our business and or development plans on
terms satisfactory to us; |
● | adverse
weather conditions and natural disasters affecting access to our properties and well
sites; |
● | risks
associated with increased insurance costs or unavailability of adequate coverage; |
● | volatility
in market prices for oil, natural gas prices, diluent, and natural gas liquids; |
● | competition; |
● | changes
in labor, equipment and capital costs; |
● | future
acquisitions or strategic partnerships; |
● | the
risks and costs inherent in litigation; |
● | imprecision
in estimates of reserves, resources and recoverable quantities of oil (bitumen) and natural
gas; |
● | product
supply and demand; |
● | changes
and amendments in the Canadian Oil and Gas Evaluation Handbook and or the Petroleum Resources
Management System to general disclosure of reserves and resources standards and specific
annual reserves and resources disclosure requirements for reporting issuers with oil
and gas activities; |
● | future
appraisal of potential oil (bitumen) and gas properties may involve unprofitable efforts; |
● | the
ability to meet minimum level of evaluation requirements to continue our oil sands leases
beyond their expiry dates; |
● | changes
in general business or economic conditions; |
● | risks
associated with the finding, determination, evaluation, assessment and measurement of
oil (bitumen) and gas deposits or reserves; |
● | geological,
technical, drilling and processing problems; |
● | third
party performance of obligations under contractual arrangements; |
● | failure
to obtain industry partner and other third party consents and approvals, when required; |
● | changes under governmental regulatory regimes and tax laws; |
● | royalties
payable in respect of oil (bitumen) and gas production; |
● | unanticipated
operating events which can reduce production or cause production to be shut-in or be
delayed; |
● | incorrect
assessments of the value of acquisitions, and exploration and development programs; |
● | stock
market volatility and market valuation of the common stock of our Company; |
● | fluctuations
in currency and interest rates; and |
● | the
additional risks and uncertainties, many of which are beyond our control, referred to
elsewhere in this Annual Report and in our other SEC filings. |
The
preceding bullets outline some of the risks and uncertainties that may affect our forward-looking statements. For a full description
of risks and uncertainties, see the sections elsewhere in this Annual entitled “Risk Factors” and “Environmental
Laws and Regulations”. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. Any forward-looking
statement speaks only as of the date on which it was made and, except as required by law, we disclaim any obligation to publicly
update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further
disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q, 8-K and any other SEC filing or amendments thereto
should be consulted.
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We
are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and therefore are not required to provide the
information required under this item.
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
SADLER,
GIBB & ASSOCIATES, LLC
Certified
Public Accountants
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors
Deep Well
Oil and Gas, Inc.
We have audited the accompanying consolidated balance sheets of Deep Well Oil & Gas, Inc. (“the Company”)
as of September 30, 2014 and 2013, and the related consolidated statements of operations, shareholders’ equity and cash
flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Deep Well Oil & Gas, Inc.
as of September 30, 2014 and 2013, and the results of its operations and cash flows for the years then ended, in conformity with
U.S. generally accepted accounting principles.
/s/ Sadler,
Gibb & Associates, LLC
Sadler,
Gibb & Associates, LLC
Salt Lake
City, UT
January
13, 2015
office |
801.783.2950 |
fax |
801.783.2960 |
www.sadlergibb.com
2455 E. Parleys Way Suite 320, Salt Lake City, UT 84109
DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
Consolidated
Balance Sheets
September
30, 2014 and September 30, 2013
| |
September
30, | | |
September
30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current
Assets | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 2,324,755 | | |
$ | 7,633,009 | |
Accounts
receivable net of allowance of $nil (September 30, 2013 - $17,048) | |
| 1,050,099 | | |
| 55,216 | |
Prepaid
expenses | |
| 43,875 | | |
| 82,700 | |
| |
| | | |
| | |
Total
Current Assets | |
| 3,418,729 | | |
| 7,770,925 | |
| |
| | | |
| | |
Long
term investments | |
| 409,618 | | |
| 343,565 | |
Oil
and gas properties, net, based on successful efforts method of accounting | |
| 19,604,050 | | |
| 15,921,770 | |
Property
and equipment, net of depreciation | |
| 259,198 | | |
| 330,108 | |
| |
| | | |
| | |
TOTAL
ASSETS | |
$ | 23,691,595 | | |
$ | 24,366,368 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current
Liabilities | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
$ | 714,198 | | |
$ | 268,258 | |
Accounts
payable and accrued liabilities– related parties | |
| 16,977 | | |
| 18,144 | |
Loan
payable – related parties (Note 9) | |
| – | | |
| 189,500 | |
| |
| | | |
| | |
Total
Current Liabilities | |
| 731,175 | | |
| 475,902 | |
| |
| | | |
| | |
Asset
retirement obligations (Note 10) | |
| 469,013 | | |
| 446,155 | |
| |
| | | |
| | |
TOTAL
LIABILITIES | |
| 1,200,188 | | |
| 922,057 | |
| |
| | | |
| | |
SHAREHOLDERS’
EQUITY | |
| | | |
| | |
Common
Stock: (Note 11) | |
| | | |
| | |
Authorized:
600,000,000 shares at $0.001 par value Issued and outstanding: 229,326,987 shares (September 30, 2013 – 229,326,987
shares) | |
| 229,326 | | |
| 229,326 | |
Additional
paid in capital | |
| 41,040,447 | | |
| 39,953,091 | |
Accumulated
Deficit | |
| (18,778,366 | ) | |
| (16,738,106 | ) |
| |
| | | |
| | |
Total
Shareholders’ Equity | |
| 22,491,407 | | |
| 23,444,311 | |
| |
| | | |
| | |
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
$ | 23,691,595 | | |
$ | 24,366,368 | |
See accompanying
notes to the consolidated financial statements
DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
Consolidated
Statements of Operations and Comprehensive Income (Loss)
For
the Years Ended September 30, 2014 and 2013
| |
September 30, | | |
September 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Revenue | |
$ | 50,570 | | |
$ | – | |
Royalty expenses | |
| (3,454 | ) | |
| – | |
Revenue, net of royalty | |
| 47,116 | | |
| – | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Operating expenses | |
| 239,820 | | |
| – | |
Operating expense covered by Farmout | |
| (192,705 | ) | |
| – | |
General and administrative | |
| 1,970,824 | | |
| 854,358 | |
Cost related to Farmout (Note 3) | |
| – | | |
| 1,790,684 | |
Depreciation, accretion and depletion | |
| 100,610 | | |
| 112,192 | |
| |
| | | |
| | |
Net loss from operations | |
| (2,071,433 | ) | |
| (2,757,234 | ) |
| |
| | | |
| | |
Other income and expenses | |
| | | |
| | |
Rental and other income | |
| 19,675 | | |
| 272,339 | |
Interest income | |
| 11,112 | | |
| 21,492 | |
Loss on disposal of assets | |
| 386 | | |
| – | |
| |
| | | |
| | |
Net loss and comprehensive loss | |
$ | (2,040,260 | ) | |
$ | (2,463,403 | ) |
| |
| | | |
| | |
Net loss per common share | |
| | | |
| | |
Basic and Diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Weighted Average Outstanding Shares (in thousands) | |
| | | |
| | |
Basic and Diluted | |
| 229,326 | | |
| 181,661 | |
See accompanying
notes to the consolidated financial statements
DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
Consolidated
Statements of Shareholders’ Equity
For
the Period from September 30, 2012 to September 30, 2014
| |
Common Shares | | |
Additional
Paid in | | |
Capital Stock Subscriptions | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Received | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance at September 30, 2012 | |
| 136,739,971 | | |
$ | 136,739 | | |
$ | 27,166,742 | | |
| – | | |
$ | (14,274,703 | ) | |
$ | 13,028,778 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private Placement November 23, 2012 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Shares (Note
11) | |
| 42,857,142 | | |
| 42,858 | | |
| 2,957,142 | | |
| – | | |
| – | | |
| 3,000,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private Placement June 20, 2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Shares (Note
11) | |
| 850,000 | | |
| 850 | | |
| 26,598 | | |
| – | | |
| – | | |
| 27,448 | |
- Warrants (850,000) (Note
11) | |
| – | | |
| – | | |
| 15,052 | | |
| – | | |
| – | | |
| 15,052 | |
- Accounts Payable Forgiven
(Note 11) | |
| – | | |
| – | | |
| 234,402 | | |
| – | | |
| – | | |
| 234,402 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private Placement July 31, 2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Shares (Note
11) | |
| 45,111,778 | | |
| 45,111 | | |
| 21,954,889 | | |
| – | | |
| – | | |
| 22,000,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Exercised August 12, 2013 (Note
11) | |
| 2,000,000 | | |
| 2,000 | | |
| 179,000 | | |
| – | | |
| – | | |
| 181,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Exercised August 12, 2013 (Note
11) | |
| 330,000 | | |
| 330 | | |
| 24,670 | | |
| – | | |
| – | | |
| 25,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Exercised August 13, 2013 (Note
11) | |
| 600,000 | | |
| 600 | | |
| 69,900 | | |
| – | | |
| – | | |
| 70,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Exercised August 14, 2013 (Note
11) | |
| 238,096 | | |
| 238 | | |
| 24,762 | | |
| – | | |
| – | | |
| 25,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- Exercised August 15, 2013 (Note
11) | |
| 600,000 | | |
| 600 | | |
| 69,900 | | |
| – | | |
| – | | |
| 70,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Return of Capital Distribution | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
- September 20, 2013 (Note
11) | |
| – | | |
| – | | |
| (12,895,065 | ) | |
| – | | |
| – | | |
| (12,895,065 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for services | |
| – | | |
| – | | |
| 125,099 | | |
| – | | |
| – | | |
| 125,099 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net operating loss for the year ended
September 30, 2013 | |
| – | | |
| – | | |
| – | | |
| – | | |
| (2,463,403 | ) | |
| (2,463,403 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2013 | |
| 229,326,987 | | |
$ | 229,326 | | |
$ | 39,953,091 | | |
$ | – | | |
$ | (16,738,106 | ) | |
$ | 23,444,311 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options granted for services | |
| – | | |
| – | | |
| 1,087,356 | | |
| – | | |
| – | | |
| 1,087,356 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net operating loss for the year ended
September 30, 2014 | |
| – | | |
| – | | |
| – | | |
| – | | |
| (2,040,260 | ) | |
| (2,040,260 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2014 | |
| 229,326,987 | | |
$ | 229,326 | | |
$ | 41,040,447 | | |
$ | – | | |
$ | (18,778,366 | ) | |
$ | 22,491,407 | |
See accompanying
notes to the consolidated financial statements
DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
Consolidated
Statements of Cash Flows
For
the Years Ended September 30, 2014 and 2013
| |
September 30, | | |
September 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
CASH PROVIDED BY (USED IN): | |
| | |
| |
| |
| | |
| |
Operating Activities | |
| | |
| |
Net loss | |
$ | (2,040,260 | ) | |
$ | (2,463,403 | ) |
Items not affecting cash: | |
| | | |
| | |
Share based compensation | |
| 1,087,356 | | |
| 125,099 | |
Bad debts | |
| 428 | | |
| (261,666 | ) |
Depreciation, accretion and depletion | |
| 100,610 | | |
| 112,192 | |
Forgiveness of loan payable and accounts payable | |
| – | | |
| 234,402 | |
Settlement of lawsuit | |
| – | | |
| 12,274 | |
Loss on disposal of assets | |
| (386 | ) | |
| – | |
Net changes in non-cash working capital (Note 13) | |
| (511,285 | ) | |
| (130,005 | ) |
| |
| | | |
| | |
Net Cash Used in Operating Activities | |
| (1,363,537 | ) | |
| (2,371,107 | ) |
| |
| | | |
| | |
Investing Activities | |
| | | |
| | |
Purchase of property and equipment | |
| (2,046 | ) | |
| – | |
Investment in oil and gas properties | |
| (3,672,309 | ) | |
| (2,566,139 | ) |
Long term investments | |
| (80,862 | ) | |
| (40,371 | ) |
| |
| | | |
| | |
Net Cash Used in Investing Activities | |
| (3,755,217 | ) | |
| (2,606,510 | ) |
| |
| | | |
| | |
Financing Activities | |
| | | |
| | |
Payments on loan payable – related parties | |
| (189,500 | ) | |
| 260,000 | |
Proceeds from issuance of common stock | |
| – | | |
| 25,001,500 | |
Return of capital distribution | |
| – | | |
| (12,895,065 | ) |
| |
| | | |
| | |
Net Cash Provided by (Used in) Financing Activities | |
| (189,500 | ) | |
| 12,366,435 | |
| |
| | | |
| | |
Increase (decrease) in cash and cash equivalents | |
| (5,308,254 | ) | |
| 7,388,818 | |
| |
| | | |
| | |
Cash and cash equivalents, beginning of year | |
| 7,633,009 | | |
| 244,191 | |
| |
| | | |
| | |
Cash and cash equivalents, end of year | |
$ | 2,324,755 | | |
$ | 7,633,009 | |
| |
| | | |
| | |
Supplemental Cash Flow Information: | |
| | | |
| | |
Cash paid for interest | |
$ | – | | |
$ | – | |
Cash
paid for income taxes | |
$ | – | | |
$ | – | |
See accompanying
notes to the consolidated financial statements
DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
Notes
to the Consolidated Financial Statements
September
30, 2014 and 2013
1. |
NATURE OF BUSINESS AND BASIS OF PRESENTATION |
Nature
of Business
Deep
Well Oil & Gas, Inc. was originally incorporated on July 18, 1988 under the laws of the state of Nevada as Worldwide Stock
Transfer, Inc. (Worldwide Stock Transfer, Inc. later changed its name to Allied Devices Corporation) and in connection with a
plan of reorganization, effective on September 10, 2003, the company was reorganized and changed its name to Deep Well Oil &
Gas, Inc. (“Deep Well”).
Deep
Well together with its subsidiaries, Northern Alberta Oil Ltd. and Deep Well Oil & Gas (Alberta) Ltd, (collectively referred
to as the “Company”) is an independent junior oil sands exploration and development company with an existing oil sands
land base in the Peace River oil sands area in Alberta, Canada.
These
consolidated financial statements have been prepared showing the name “Deep Well Oil & Gas, Inc. (and Subsidiaries)”
(“the Company”) and the post-split common stock, with $0.001 par value.
Basis
of Presentation
These
consolidated financial statements are expressed in U.S. dollars and are prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”).
These
statements reflect all adjustments, consisting solely of normal recurring adjustments (unless otherwise disclosed) which, in the
opinion of management, are necessary for a fair presentation of the information contained herein.
2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES |
Basis
of Consolidation
These
consolidated financial statements include the accounts of two wholly owned subsidiaries: (1) Northern Alberta Oil Ltd. ("Northern")
from the date of acquisition, being June 7, 2005, incorporated under the Business Corporations Act (Alberta), Canada; and (2)
Deep Well Oil & Gas (Alberta) Ltd., incorporated under the Business Corporations Act (Alberta), Canada on September 15, 2005.
All inter-company balances and transactions have been eliminated.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Accounts
Receivable, Net
As
of September 30, 2014, accounts receivable included a prepayment of $1,200,000 Cdn that the Company subsequently collected from
Farmout partner on October 21, 2014.
Allowance
for Doubtful Accounts
The
Company determines allowances for doubtful accounts based on aging of specific accounts. Accounts receivable are stated at the
historical carrying amounts net of allowances for doubtful accounts and include only the amounts the Company deems to be collectable.
The allowance for bad debts was $nil and $17,048 at September 30, 2014 and September 30, 2013 respectively.
Crude
oil and natural gas properties
The
Company uses the successful efforts method of accounting for crude oil and natural gas properties whereby costs incurred to acquire
mineral interests in crude oil and natural gas properties, to drill and equip exploratory wells that find proved reserves, to
drill and equip development wells, and expenditures for enhanced recovery operations are capitalized. Geological and geophysical
costs, seismic costs incurred for exploratory projects, lease rentals and costs associated with unsuccessful exploratory wells
or projects are expensed as incurred. Costs of seismic studies that are utilized in development drilling within an area of proved
reserves are capitalized as development costs. To the extent a seismic project covers areas of both developmental and exploratory
drilling, those seismic costs are proportionately allocated between capitalized development costs and exploration expense. Maintenance,
repairs and costs of injection are expensed as incurred, except that the costs of replacements or renewals that expand capacity
or improve production are capitalized.
Under
the successful efforts method of accounting, the Company capitalizes exploratory drilling, equipping and facility costs on the
balance sheet pending determination of whether the project has found proved reserves in economically producible quantities. The
Company capitalizes costs associated with the acquisition or construction of support equipment and facilities with the drilling
and development costs to which they relate. If proved reserves are assigned to a project, the associated capitalized costs become
part of well equipment and facilities. However, if proved reserves are not found in a project, the capitalized costs associated
with the project are expensed, net of any salvage value. Total capitalized costs pending the determination of proved reserves
were $19.6 million and $15.9 million as of September 30, 2014 and 2013, respectively.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the declining balance method
over the estimated useful life of the asset. Only half of the depreciation rate is taken in the year of acquisition. The following
is a summary of the depreciation rates used in computing depreciation expense:
|
Software | |
- | 100 | % |
|
Computer equipment | |
- | 55 | % |
|
Portable work camp | |
- | 30 | % |
|
Vehicles | |
- | 30 | % |
|
Road Mats | |
- | 30 | % |
|
Wellhead | |
- | 25 | % |
|
Office furniture and equipment | |
- | 20 | % |
|
Oilfield Equipment | |
- | 20 | % |
|
Tanks | |
- | 10 | % |
Expenditures
for major repairs and renewals that extend the useful life of the asset are capitalized. Minor repair expenditures are charged
to expense as incurred. Leasehold improvements are amortized over the greater of five years or the remaining life of the lease
agreement.
Long-Lived
Assets
Oil
and Gas Properties - Proved crude oil and natural gas properties are reviewed for impairment on a field-by-field basis
each quarter, or when events and circumstances indicate a possible decline in the recoverability of the carrying value of such
field. The estimated future cash flows expected in connection with the field are compared to the carrying amount of the field
to determine if the carrying amount is recoverable. If the carrying amount of the field exceeds its estimated undiscounted future
cash flows, the carrying amount of the field is reduced to its estimated fair value. Due to the unavailability of relevant comparable
market data, a discounted cash flow method is used to determine the fair value of proved properties. The discounted cash
flow method estimates future cash flows based on management’s estimates of future crude oil and natural gas production,
commodity prices based on commodity futures price strips, operating and development costs, and a risk-adjusted discount rate.
Non-producing
crude oil and natural gas properties primarily consist of undeveloped leasehold costs and costs associated with the purchase of
certain proved undeveloped reserves. Individually significant non-producing properties, if any, are assessed for impairment on
a property-by-property basis and, if the assessment indicates an impairment, a loss is recognized by providing a valuation allowance
consistent with the level at which impairment was assessed. For individually insignificant non-producing properties, impairment
losses are recognized by amortizing the portion of the properties’ costs which management estimates will not be transferred
to proved properties over the lives of the leases based on experience of successful drilling and the average holding period. The
Company’s impairment assessments are affected by economic factors such as the results of exploration activities, commodity
price outlooks, anticipated drilling programs, remaining lease terms, and potential shifts in business strategy employed by management.
Non
Oil and Gas Assets - The Company reviews for the impairment of long-lived assets annually and whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized
when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less
than its carrying amount. Impairment is measured as the amount by which the assets’ carrying value exceeds its fair value.
No impairments to the Company’s long-lived assets were identified or recorded in the fiscal years ended September 30, 2014
and 2013.
Depreciation,
Depletion and Amortization
Depreciation,
depletion and amortization of capitalized drilling and development costs of producing crude oil and natural gas properties, including
related support equipment and facilities, are computed using the unit-of-production method on a field basis based on total estimated
proved developed crude oil and natural gas reserves. Amortization of producing leaseholds is based on the unit-of-production method
using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable
crude oil and natural gas reserves are established based on estimates made by the Company’s internal geologists and engineers
and external independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated depreciation,
depletion and amortization are eliminated from the accounts and the resulting gain or loss, if any, is recognized. Unit of production
rates are revised whenever there is an indication of a need, but at least in conjunction with annual reserve reports. Revisions
are accounted for prospectively as changes in accounting estimates.
Asset
Retirement Obligations
The
Company accounts for asset retirement obligations by recording the fair value of the estimated future cost of the Company’s
plugging and abandonment obligations. The asset retirement obligation is recorded when there is a legal obligation associated
with the retirement of a tangible long-lived asset and the fair value of the liability can be reasonably estimated. Upon initial
recognition of an asset retirement obligation, the Company increases the carrying amount of the long-lived asset by the same amount
as the liability. Over time, the liabilities are accreted for the change in their present value through charges to oil and gas
production and well operations costs. The initial capitalized costs are depleted over the useful lives of the related assets through
charges to depreciation, depletion, and amortization. If the fair value of the estimated asset retirement obligation changes,
an adjustment is recorded to both the asset retirement obligation and the asset retirement cost.
Revisions
in estimated liabilities can result from revisions of estimated inflation rates, escalating retirement costs, and changes in the
estimated timing of settling asset retirement obligations. As at September 30, 2014 and 2013, asset retirement obligations amount
to $469,013 and $446,155, respectively. The Company has posted bonds, where required, with the Government of Alberta based on
the amount the government estimates the costs of abandonment and reclamation to be.
Foreign
Currency Translation
The
functional currency of the Canadian subsidiaries is the United States dollar. However, the Canadian subsidiaries transact in Canadian
dollars. Consequently, monetary assets and liabilities are remeasured into United States dollars at the exchange rate on the balance
sheet date and non-monetary items are remeasured at the rate of exchange in effect when the assets are acquired or obligations
incurred. Revenues and expenses are remeasured at the average exchange rate prevailing during the year. Foreign currency transaction
gains and losses are included in results of operations.
Accounting
Methods
The
Company recognizes income and expenses based on the accrual method of accounting.
Dividend
Policy
The
Company has not yet adopted a policy regarding payment of dividends.
Financial,
Concentration and Credit Risk
The
Company does not have any concentration or related financial credit risk related to cash as most of the Company’s funds
are maintained in a financial institution which has its deposits fully guaranteed by the Government of Alberta.
The
Company is not directly subject to credit risk resulting from the concentration of its crude oil sales. For the year ended September
30, 2014, the Company has recorded oil sales received from the operator of the Company’s producing properties. The Company’s
joint venture partner is the operator of the Company’s producing properties and it is the Company’s joint venture
partner who sells 100% of the Company’s oil production to two or more purchasers in the oil and gas industry. The Company
does not require collateral and management periodically evaluates the operator’s financial statements and the collectability
of oil sales receivables from the operator and believes that the Company’s oil sales receivables are fully collectable and
that the risk of loss is minimal.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities
are determined based on the differences between financial reporting and the tax bases of the assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Due
to the uncertainty regarding the Company’s profitability, a valuation allowance has been recorded against the future tax
benefits of its losses and no net benefit has been recorded in the consolidated financial statements.
Revenue
Recognition
The
Company is in the business of exploring for, developing, producing, and selling crude oil and natural gas. Crude oil revenue is
recognized when the product is taken from the storage tanks on the lease and delivered to the purchaser and title transfers to
the purchaser. Payment is generally received one to three months after the sale has occurred.
Occasionally
the Company may sell specific leases, and the gain or loss associated with these transactions will be shown separately from the
profit or loss from the operations or sales of oil and gas products. Such gain or losses will be measured and recognized when
all of the following have occurred: (1) there is persuasive evidence of an arrangement to sell; (2) the price of the sale is fixed
or determinable; (3) the title to the lease has transferred; and (4) collection is reasonably assured.
Advertising
and Market Development
The
Company expenses advertising and market development costs as incurred.
Basic
and Diluted Net Income (Loss) Per Share
Basic
net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted
net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares
outstanding as if shares had been issued on the exercise of the common share rights, unless the exercise becomes anti-dilutive
and then the basic and diluted per share amounts are the same. There were 51,340,385 common stock equivalents excluded from the
calculation because their effect would be antidilutive.
Financial
Instruments
Financial
instruments include cash and cash equivalents, accounts receivable, long term investments, investment in equity securities, accounts
payable and accounts payable – related parties. The fair value of these financial instruments approximates their carrying
value because of the short-term maturity of these items unless otherwise noted. The fair value of the investment in equity securities
cannot be determined as the market value is not readily obtainable. The equity securities are reported using the cost method.
Environmental
Requirements
At
the report date, environmental requirements related to the oil and gas properties acquired are unknown and therefore an estimate
of any future cost cannot be made.
Share-Based
Compensation
The
Company accounts for stock options granted to directors, officers, employees and non-employees using the fair value method of
accounting. The fair value of stock options for directors, officers and employees are calculated at the date of grant and is expensed
over the vesting period of the options on a straight-line basis. For non-employees, the fair value of the options is measured
on the earlier of the date at which the counterparty performance is complete or the date at which the performance commitment is
reached. The Company uses the Black-Scholes model to calculate the fair value of stock options issued, which requires certain
assumptions to be made at the time the options are awarded, including the expected life of the option, the expected number of
granted options that will vest and the expected future volatility of the stock. The Company reflects estimates of award forfeitures
at the time of grant and revises in subsequent periods, if necessary, when forfeiture rates are expected to change.
Recently
Adopted Accounting Standards
In
June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates
the definition of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP
for development or exploration stage entities, primarily presentation of inception to date financial information. The provisions
of the amendments are effective for annual reporting periods beginning after December 15, 2014, and the interim periods therein.
However, early adoption is permitted. Accordingly, the Company has adopted this standard as of September 30, 2014.
The
Company does not expect the adoption of any other recent accounting pronouncements to have a material impact on its financial
statements.
Estimates
and Assumptions
Management
uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used in preparing
these consolidated financial statements.
Significant
estimates by management include valuations of oil and gas properties, valuation of accounts receivable, useful lives of long-lived
assets, asset retirement obligations, valuation of share-based compensation, and the realizability of future income taxes.
3. |
OIL AND GAS PROPERTIES |
The
Company’s undeveloped oil sands acreage as of September 30, 2014, covers 43,015 gross acres (34,096 net acres) on 68 sections
of land under nine oil sands leases. However, the Company announced in late September of 2014 that the operator confirmed production
from the joint SAGD Project on some of the Company’s acreage. Until such time that the SAGD Project lands are classified
as developed the Company will classify all of its oil sands acreage as undeveloped as of September 30, 2014. Until the Company
extends the leases “into perpetuity” based on the Alberta governmental regulations, the lease expiration dates of
the Company’s nine oil sands leases are as follows:
| 1) | 32
sections of land under five oil sands leases are set to expire on July 10, 2018; |
| 2) | 31
sections of land under three oil sands leases are set to expire on August 19, 2019; and |
| 3) | 5
sections of land under one oil sand lease are set expire on April 9, 2024. It is the
Company’s opinion that the Company has already met the governmental requirements
for this lease and it will be applying to continue this lease into perpetuity. |
Effective
September 25, 2014, the Company, through its subsidiary Deep Well Alberta, entered into a Purchase and Sale agreement with Classic
Energy Inc. (“Classic”), pursuant to which the Company acquired Classic’s 20% working interest in five sections
in one Sawn Lake oil sands lease where the Company already owned working interests. As of September 25, 2014, the Company increased
its net acres in the Sawn Lake oil sands properties from 33,463 to 34,096 net acres.
Lease
Rental Commitments
The
Company has acquired interests in certain oil sands properties located in North Central Alberta, Canada. The terms include certain
commitments related to oil sands properties that require the payments of rents as long as the leases are non-producing. As of
September 30, 2014, the Company’s net payments due under this commitment are as follows:
|
| |
(Cdn $) | |
|
2015 | |
$ | 48,294 | |
|
2016 | |
$ | 48,294 | |
|
2017 | |
$ | 48,294 | |
|
2018 | |
$ | 48,294 | |
|
2019 | |
$ | 29,478 | |
|
Subsequent | |
$ | 22,400 | |
The
Government of Alberta owns this land and the Company has acquired the rights to perform oil and gas activities on these lands.
If the Company meets the conditions of the 15-year leases the Company will then be permitted to drill on and produce oil from
the land into perpetuity. These conditions give the Company until the expiration of the leases to meet the following requirements
on its primary oil sands leases:
| 1. | drill
68 wells throughout the 68 sections; or |
| 2. | drill
44 wells within the 68 sections and having acquired and processed two miles of seismic
on each other undrilled section. |
The
Company plans to meet the second of these conditions. As at September 30, 2014 and 2013, the Company has an interest in ten wells,
which can be counted towards these requirements.
The
Company has identified two other wells drilled on these leases, which may be included in the satisfaction of this requirement.
The Company has also acquired and processed 25 miles of seismic on the leases, which can be counted towards these requirements.
The
Company follows the successful efforts method of accounting for costs of oil and gas properties. Under this method, only those
exploration and development costs that relate directly to specific oil and gas reserves are capitalized; costs that do not relate
directly to specific reserves are charged to expense. Producing, non-producing and unproven properties are assessed annually,
or more frequently as economic events indicate, for potential impairment.
This
consists of comparing the carrying value of the asset with the asset's expected future undiscounted cash flows without interest
costs. Estimates of expected future cash flows represent management's best estimate based on reasonable and supportable assumptions.
Proven oil and gas properties are reviewed for impairment on a field-by-field basis. No impairment losses were recognized for
the year ended September 30, 2014 (September 30, 2013 - $nil).
Capitalized
costs of proven oil and gas properties will be depleted using the unit-of-production method when the property is placed in production.
Substantially
all of the Company's oil and gas activities are conducted jointly with others. The accounts reflect only the Company's proportionate
interest in such activities.
Steam
Assisted Gravity Drainage Demonstration Project
On
July 30, 2013, the Company entered into a Steam Assisted Gravity Drainage demonstration project (“SAGD Project”) Agreement
with the Company’s joint venture partner to participate in a recently, Alberta Energy Regulator (“AER”), approved
SAGD Project on the Company’s 50% (before Farmout Agreement) owned oil sands properties located in North Central Alberta,
Canada (also known as the Sawn Lake heavy oil reservoir). On August 15, 2013, and in accordance with the SAGD Project Agreement
and the Amendment, the Company served notice (“Notice of Election”) to the operator of the Company’s election
to participate in the SAGD Project. Upon signing the Notice of Election the Company was required to pay in full the cash calls
for the Company’s initial share of the costs of the SAGD Project and in accordance with a Farmout Agreement dated July 31,
2013, the Company has since paid all cash calls in full to the operator of the SAGD Project.
Farmout
Agreement
On
July 31, 2013, the Company entered into Farmout agreement (the “Farmout Agreement”) with an additional joint venture
partner (the “Farmee”) to fund the Company’s share of the AER approved SAGD Project at the Company’s Sawn
Lake heavy oil reservoir in North Central Alberta, Canada. In accordance with the Farmout Agreement the Farmee has agreed to provide
up to $40,000,000 in funding for the Company’s portion of the costs for the SAGD Project, in return for a net 25% working
interest in 12 sections where the Company has a working interest of 50%. The Farmee will also provide funding to cover monthly
operating expenses of the Company, of which the first such payment shall be in respect of the month of August 2013 and not to
exceed $30,000 per month. In addition, until December 31, 2014, the Farmee has the option to elect to obtain a working interest
of 40% to 45% working interest in the remaining 56 sections of land where the Company has working interests ranging from 80% to
90% (amended November 17, 2014, see Note 17 herein), by committing an additional $110,000,000 of financing to the development
of the Company’s Sawn Lake oil sands properties. An agent fee of $1,500,000 was paid in connection with the Farmout Agreement.
SAGD
Project – Phase 1
The
SAGD Project started with the first phase (“Phase 1”) consisting of the drilling and completion of one SAGD well pair,
the construction of a facility for steam generation, water handling and oil treating, plus water source and disposal facilities.
As required by the Farmout Agreement, the Farmee has since paid Cdn $16,677,530 to the operator of the SAGD Project for the Farmee’s
share and the Company’s share of the costs of the SAGD Project up to September 30, 2014. The total SAGD Project capital
costs for Phase 1 plus additions have been estimated by the operator to be Cdn $32.6 million. In late September of 2014, the Company
paid a cash call to the operator in the amount of Cdn $1,200,000 for the winterization program of the SAGD Project. Pursuant to
the Farmout Agreement dated July 31, 2013, the Farmee reimbursed the Company in the amount of Cdn $1,200,000 for the cash call
in October 2014.
SAGD
Project – Phase 2
On
June 27, 2014, the Company paid a Cdn $300,000 cash call to the operator for the proposed Phase 2 front end costs for the SAGD
Project. The Phase 2 front end costs include work on preliminary engineering design, regulatory approval, environmental approval
work and determining regulatory requirements sufficient to define the work program, schedule and estimated cost of this second
phase which is anticipated to include the drilling of two additional SAGD well pairs and the associated expansion of the current
SAGD steam plant. The Farmee has reimbursed the Company in the amount of Cdn $300,000 as per the Farmout Agreement dated July
31, 2013.
Water
Rights Conveyance Agreement
On
October 9, 2013, and in connection to the SAGD Project agreement dated July 30, 2013, the Company entered into a Water Rights
Conveyance Agreement whereby the Company acquired a 25% working interest in one water source well and one water disposal well
for a cost of Cdn $384,046, which in turn was reimbursed to the Company by the Farmee. Also pursuant to the Water Rights Conveyance
Agreement dated October 9, 2013 and the SAGD Project agreement dated July 30, 2013, the Company was issued a cash call in the
amount of Cdn $1,058,568 for the expenditures relating to the water source well, water disposal well and pipelines to connect
them to the SAGD Project surface facility. The Farmee has since paid this cash call in the amount of Cdn $1,058,568 pursuant to
the Farmout Agreement dated July 31, 2013.
Acquisition
of Royalty Interests
On
March 18, 2014 and June 27, 2014, the Company, through its 100% wholly owned subsidiary company Northern Alberta Oil Ltd., entered
into and subsequently closed two Acquisition of Royalty Interest Agreements and General Indenture of Conveyance, Assignment and
Transfer Agreements (collectively the “Agreements”), with the Company’s joint venture partner (“JV Partner”)
and one related party (Mr. Malik Youyou), whereby the Company acquired and cancelled 5.5% of a disputed 6.5% overriding royalty
claim (the “Purported 6.5% Royalty”) potentially on some lands owned by the Company. The Company’s counsel and
vendor’s counsel negotiated the terms and conditions of both the “Acquisition of Royalty Interest” and “General
Indenture of Conveyance, Assignment and Transfer” agreements. Although the Company does not confirm the validity of the
Purported 6.5% Royalty, the Company determined that it was in the best interests of its shareholders to come to an arrangement
to acquire and cancel most of the Purported 6.5% Royalty to prevent a potential encumbrance over its land or the possibility of
future litigation resulting from these alleged royalty claims. Pursuant to the terms and conditions of the Agreements to acquire
the purported overriding royalty interest claims, the Company paid the following consideration:
| a) | US
$2,435,124 (Cdn $2,697,600) was paid to the JV Partner for the purchase and transfer
of an undivided 3% interest out of the Purported 6.5% Royalty. The consideration paid
was the original cost (in Canadian dollars) that the JV Partner paid to acquire its 3%
interest in the Purported 6.5% Royalty. |
| b) | US
$1,007,000 was paid to Mr. Malik Youyou, who is a director and majority shareholder of
the Company, for the purchase and transfer of an undivided 2.5% interest out of the Purported
6.5% Royalty. The consideration paid was for the reimbursement of the original cost (in
US dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5%
Royalty from an arm’s length third party. |
4. |
CAPITALIZATION OF COSTS INCURRED IN OIL AND GAS ACTIVITIES |
The
Company accounts for the cost of its oil sands projects and continues to capitalize its project costs after the completion of
drilling, equipping and facility construction as long as a sufficient progress is being made in assessing the oil sands reserves
to justify the oil sands project as a producing facility.
For
the fiscal year ending September 30, 2014, the Company’s management determined that sufficient progress has been made in
assessing its oil sands reserves for continued capitalization of exploratory drilling, equipping and facility costs. In relation
to this sufficient progress assessment of its oil sands project the Company considered among other criteria; long lead times in
getting regulatory approval for oil sands thermal recovery projects, road bans, winter access only properties and governmental
and environmental regulations which can and often delay development of oil sands projects. Because of these and other factors,
the Company’s oil sands project can take significantly longer to complete than regular conventional drilling programs for
lighter oil. To date the Company’s geological, engineering, economic studies and recently AER approved thermal recovery
projects; including the Company’s now producing SAGD Project, continue to lead them to believe that there is continuing
progress toward bringing the project to commercial production. Therefore, the Company has continued to capitalize its costs associated
with its oil sands project.
For the Company’s oil sands
projects, exploratory drilling, equipping and facility costs are capitalized on the balance sheet under “Oil and Gas Properties”
line item, pending a determination of whether potentially economic oil sands reserves have been discovered by the drilling effort
to justify the oil sands projects a producing facility. The Company periodically assesses the exploration, drilling, equipping
and facility capitalized costs for impairment and once a determination is made that a well is of no potential economic value,
the costs related to that oil sands project are expensed as dry hole and reported in exploration expense. No impairments to the
Company’s long-lived assets were identified or recorded in the fiscal years ended September 30, 2014 and 2013.
The
following table illustrates capitalized costs relating to oil and gas – producing activities for two fiscal years ended
September 30, 2014 and September 30, 2013:
|
| |
September 30, 2014 | | |
September 30, 2013 | |
|
Unproved Oil and Gas Properties | |
$ | 19,651,296 | | |
$ | 15,963,517 | |
|
Proved Oil and Gas Properties | |
| 4,568 | | |
| – | |
|
Accumulated Depreciation and Depletion | |
| (51,814 | ) | |
| (41,747 | ) |
|
Net Capitalized Cost | |
$ | 19,604,050 | | |
$ | 15,921,770 | |
5. |
EXPLORATION ACTIVITIES |
The
following table presents information regarding the Company’s costs incurred in the oil and gas property acquisition, exploration
and development activities for two fiscal years ended September 30, 2014 and September 30, 2013:
|
| |
September 30, 2014 | | |
September 30, 2013 | |
|
Acquisition of Properties: | |
| | | |
| | |
|
Proved | |
$ | – | | |
$ | – | |
|
Unproved | |
| 3,692,346 | | |
| 2,740,967 | |
|
Exploration costs | |
| 47,182 | | |
| 55,810 | |
|
Development costs | |
| – | | |
| – | |
6. | INVESTMENT
IN EQUITY SECURITIES |
On
February 25, 2005, the Company acquired an interest in Signet Energy Inc. (“Signet” formerly Surge Global Energy,
Inc.) as a result of a Farmout Agreement dated February 25, 2005. Signet amalgamated with Andora Energy Corporation (“Andora”)
in 2007.
As
of November 19, 2008, the Company converted its Signet shares into 2,241,558 shares of Andora, which represents an equity interest
in Andora of approximately 2.24% as of September 30, 2013, which is Andora’s fiscal year end. These shares are carried at
a nominal value using the cost method and their value is included under oil and gas properties on the Company’s balance
sheet.
7. |
PROPERTY AND EQUIPMENT |
|
| |
September 30, 2014 | |
|
| |
| | | |
| Accumulated | | |
| Net Book | |
|
| |
| Cost | | |
| Depreciation | | |
| Value | |
|
Computer equipment | |
$ | 32,198 | | |
$ | 31,264 | | |
$ | 934 | |
|
Office furniture and equipment | |
| 34,130 | | |
| 26,880 | | |
| 7,250 | |
|
Software | |
| 5,826 | | |
| 5,826 | | |
| – | |
|
Leasehold improvements | |
| 4,936 | | |
| 4,936 | | |
| – | |
|
Portable work camp | |
| 170,580 | | |
| 146,211 | | |
| 24,369 | |
|
Vehicles | |
| 38,077 | | |
| 32,637 | | |
| 5,440 | |
|
Oilfield equipment | |
| 249,045 | | |
| 135,030 | | |
| 114,015 | |
|
Road mats | |
| 364,614 | | |
| 312,525 | | |
| 52,089 | |
|
Wellhead | |
| 3,254 | | |
| 2,053 | | |
| 1,201 | |
|
Tanks | |
| 96,085 | | |
| 42,185 | | |
| 53,900 | |
|
| |
$ | 998,745 | | |
$ | 739,547 | | |
$ | 259,198 | |
|
| |
September 30, 2013 | |
|
| |
| | |
Accumulated | | |
Net Book | |
|
| |
Cost | | |
Depreciation | | |
Value | |
|
Computer equipment | |
$ | 31,084 | | |
$ | 30,576 | | |
$ | 508 | |
|
Office furniture and equipment | |
| 33,199 | | |
| 24,938 | | |
| 8,261 | |
|
Software | |
| 5,826 | | |
| 5,826 | | |
| – | |
|
Leasehold improvements | |
| 4,936 | | |
| 4,602 | | |
| 334 | |
|
Portable work camp | |
| 170,580 | | |
| 135,767 | | |
| 34,813 | |
|
Vehicles | |
| 38,077 | | |
| 30,306 | | |
| 7,771 | |
|
Oilfield equipment | |
| 249,045 | | |
| 106,527 | | |
| 142,518 | |
|
Road mats | |
| 364,614 | | |
| 290,202 | | |
| 74,412 | |
|
Wellhead | |
| 3,254 | | |
| 1,653 | | |
| 1,601 | |
|
Tanks | |
| 96,085 | | |
| 36,196 | | |
| 59,889 | |
|
| |
$ | 996,700 | | |
$ | 666,593 | | |
$ | 330,107 | |
There
was $72,956 of depreciation expense for the year ended September 30, 2014 (September 30, 2013 - $86,884)
Long
term investments consist of cash held in trust by the Alberta Energy Regulator (“AER”) which bears an interest at
a rate of prime minus 0.375% and has no stated date of maturity. These investments are required by the AER to ensure there are
sufficient future cash flows to meet the expected future asset retirement obligations and are restricted for this purpose.
9. |
SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES |
Accounts
payable – related parties was $16,977 as of September 30, 2014 (September 30, 2013 - $18,144) for expenses to be reimbursed
to directors. This amount is unsecured, non-interest bearing, and has no fixed terms of repayment.
As
of September 30, 2014, officers, directors, their families, and their controlled entities have acquired 52.92% of the Company’s
outstanding common capital stock. This percentage does not include unexercised warrants or stock options.
The
Company incurred expenses totalling $198,703 to one related party, Concorde Consulting, for professional fees and consulting services
provided to the Company during the fiscal year ended September 30, 2014 (September 30, 2013 - $275,800, of which $98,500 of expenses
related to Portwest was reversed as part of the Amending Agreement, referred to in Note 15. These amounts are included in the
balance of accounts payable – related parties as of September 30, 2013).
As
of June 27, 2014, $1,007,000 was paid to Mr. Malik Youyou, who is a director and majority shareholder of the Company, for the
purchase and transfer of an undivided 2.5% interest out of the Purported 6.5% Royalty. The consideration paid was for the reimbursement
of the original cost (in US Dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty from a third
party based on that third parties alleged costs.
As
of June 30, 2013, the Company received a loan for $260,000 as a note payable from one of the Company’s directors. On August
15, 2013, the loan payable was offset by the amount of $70,500 for exercising that director’s stock options reducing the
total loan payable to $189,500 as of September 30, 2013. In November 2013, this note payable in the amount of $189,500, from one
of the Company’s directors, was fully paid.
See
Note 12 for description of stock options issued to related parties.
10. |
ASSET RETIREMENT OBLIGATIONS |
The
total future asset retirement obligation is estimated by management based on the Company’s net working interests in all
wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be
incurred in future periods. At September 30, 2014, the Company estimates the undiscounted cash flows related to asset retirement
obligation to total approximately $689,445 (September 30, 2013 - $674,296). The fair value of the liability at September 30, 2014
is estimated to be $469,013 (September 30, 2013 - $446,155) using a risk free rate of 3.74% and an inflation rate of 2%. The actual
costs to settle the obligation are expected to occur in approximately 35 years.
Changes
to the asset retirement obligation were as follows:
|
| |
September 30, 2014 | | |
September 30, 2013 | |
|
| |
| | | |
| | |
|
Balance, beginning of year | |
$ | 446,155 | | |
$ | 425,700 | |
|
Liabilities incurred | |
| 73,395 | | |
| 23,400 | |
|
Effect of foreign exchange | |
| (64,079 | ) | |
| (19,299 | ) |
|
Disposal | |
| (4,045 | ) | |
| – | |
|
Accretion expense | |
| 17,587 | | |
| 16,354 | |
|
Balance, end of year | |
$ | 469,013 | | |
$ | 446,155 | |
Effective
on November 23, 2012, the Company completed a private placement for an aggregate of 42,857,142 units at a price of $0.07 per unit
for an aggregate of $3,000,000. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles
the holder to purchase one additional common share at a price of $0.105 per common share for a period of three years from the
date of closing, provided that if the closing price of the common shares of the Company on the principal market on which the shares
trade is equal to or exceeds $1.00 for 30 consecutive trading days, the warrant term shall automatically accelerate to the date
which is 30 calendar days following the date that written notice has been given to the warrant holders. The warrants expire on
November 23, 2015. The value of the common shares and the warrants totaled $1,985,249 and $1,014,751, respectively.
On
June 20, 2013, the Company completed a private placement for an aggregate of 850,000 units at a price of $0.05 per unit for an
aggregate of $42,500. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the
holder to purchase one additional common share at a price of $0.075 per common share for a period of three years from the date
of closing, provided that if the closing price of the common shares of the Company on the principal market on which the shares
trade is equal to or exceeds $1.00 for 30 consecutive trading days, the warrant term shall automatically accelerate to the date
which is 30 calendar days following the date that written notice has been given to the warrant holders. The warrants expire on
June 20, 2016. The value of the common shares and the warrants totaled $27,448 and $15,052, respectively.
On
July 31, 2013, the Company completed a private placement for an aggregate of 45,111,778 common shares for an aggregate of $22,000,000.
Pursuant to the subscription agreement between the Company and investor the Company issued the shares to the investor after September
20, 2013 but before November 30, 2013. No warrants were issued to the investor in connection with this private placement.
Between
August 12 and August 15, 2013, six directors and two consultants of the Company acquired a combined total of 3,768,096 common
shares, upon exercising stock options and warrants, at exercise prices ranging from $0.05 to $0.14 per common share for total
combined gross proceeds to the Company of $372,000.
Return
of Capital Distribution
On
August 9, 2013, the Company approved a distribution to its shareholders in the amount of $0.07 per share to be payable on September
20, 2013 (the “Payment Date”) to the holders of record of all the issued and outstanding shares of common stock of
the Company as of the close of business on August 16, 2013, (the “Record Date”). This
cash distribution to the Company’s shareholders was not a dividend paid out of the earnings and profits, but was a non-dividend
distribution characterized as a “return of capital”.
Warrants
On
October 10, 2013, the Company extended the expiration date of two warrants to purchase up to an aggregate of 29,047,617 shares
of the Company’s common stock. The exercise price of the warrants remains unchanged at $0.105 per share. As a result of
this extension, the expiration date of the warrants has been amended from the original expiry date of November 9, 2013 to November
23, 2015.
On
June 23, 2014, 47,618 partial warrants were cancelled and transferred to a non-related party.
The
following table summarizes the Company’s warrants outstanding as of September 30, 2014:
|
| | |
Shares Underlying Warrants Outstanding | | |
Shares Underlying Warrants Exercisable | |
|
Range of Exercise Price | | |
Shares Underlying Warrants Outstanding | | |
Weighted Average Remaining Contractual Life | | |
Weighted Average Exercise Price | | |
Shares Underlying Warrants Exercisable | | |
Weighted Average Exercise Price | |
|
| | |
| | |
| | |
| | |
| | |
| |
|
$0.105 at September 30, 2014 | | |
| 71,904,759 | | |
| 1.15 | | |
$ | 0.105 | | |
| 71,904,759 | | |
$ | 0.105 | |
|
$0.075 at September 30, 2014 | | |
| 520,000 | | |
| 1.72 | | |
| 0.075 | | |
| 520,000 | | |
| 0.075 | |
|
| | |
| 72,424,759 | | |
| 1.15 | | |
$ | 0.105 | | |
| 72,424,759 | | |
$ | 0.105 | |
The
following is a summary of warrant activity for the year ending September 30, 2014:
|
| | |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Intrinsic Value | |
|
| | |
| | |
| | |
| |
|
Balance, September 30, 2013 | | |
| 72,424,759 | | |
$ | 0.105 | | |
$ | 0.195 | |
|
Cancelled at June 23, 2014 | | |
| 47,618 | | |
| 0.105 | | |
| 0.215 | |
|
Granted at June 23, 2014 | | |
| 47,618 | | |
| 0.105 | | |
| 0.215 | |
|
Exercised | | |
| – | | |
| – | | |
| – | |
|
Balance, September 30, 2014 | | |
| 72,424,759 | | |
$ | 0.105 | | |
$ | 0.215 | |
|
Outstanding Warrants, September 30, 2014 | | |
| 72,424,759 | | |
$ | 0.105 | | |
$ | 0.215 | |
There
were 72,424,759 warrants outstanding as of September 30, 2014 (September 30, 2013 – 72,424,759), which have a historical
fair market value of $1,743,336 (September 30, 2013 - $1,743,336).
Measurement
Uncertainty for Warrants
The
Company used the Black-Scholes option pricing model (“Black-Scholes”) to value the options and warrants. This model
was developed for use in estimating the fair value of traded “European” options which are liquid and that have no
vesting restrictions and are fully transferable. The stock options that are granted to employees and directors and the warrants
attached to the units issued by the Company are non-transferable and some vest over time, and are “American” options.
Option pricing models require the input of subjective assumptions including expected share price volatility. The fair value estimate
can vary materially as a result of changes in the assumptions. The following assumptions are used in the Black-Scholes option-pricing
model:
Expected
Term – Expected term of 5 years represents the period that the Company’s stock-based awards are expected to be outstanding.
Expected
Volatility – Expected volatilities are based on historical volatility of the Company’s stock, adjusted where determined
by management for unusual and non-representative stock price activity not expected to recur. The expected volatility used ranged
from 96% to 116%.
Expected
Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company currently
pays no dividends and does not expect to pay dividends in the foreseeable future.
Risk-Free
Interest rate – The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury
zero-coupon issues with an equivalent remaining term. The risk-free rate used ranged from 0.62% to 1.31%.
On
November 28, 2005, and as amended on December 4, 2014, the Board of Deep Well adopted the Deep Well Oil & Gas, Inc. Stock
Option Plan (the “Plan’). The Plan was approved by the majority of shareholders at the February 24, 2010 general meeting
of shareholders. The Plan, is administered by the Board, permits options to acquire shares of the Company’s common stock
(the “Common Shares”) to be granted to directors, senior officers and employees of the Company and its subsidiaries,
as well as certain consultants and other persons providing services to the Company or its subsidiaries.
The
maximum number of shares, which may be reserved for issuance under the Plan, may not exceed 10% of the Company’s issued
and outstanding Common Shares, subject to adjustment as contemplated by the Plan. The aggregate number of Common Shares with respect
to which options may be vested to any one person (together with their associates) under the Plan, together with all other incentive
plans of the Company in any one year shall not exceed 2% of the total number of Common Shares outstanding and in total shall not
exceed 6% of the total number of Common Shares outstanding.
On
March 23, 2011, the Company granted six of its directors options to purchase 450,000 shares each of common stock at an exercise
price of $0.14 per Common Share, 150,000 vesting immediately and the remaining vesting one-third on March 23, 2012, and one-third
on March 23, 2013, with a five-year life.
On
June 20, 2013, the Company granted six of its directors options to purchase 450,000 shares each of common stock at an exercise
price of $0.05 per Common Share, 150,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third
on June 20, 2015, with a five-year life.
On
June 20, 2013, the Company granted two consultants an option to purchase each 1,000,000 shares each of common stock at an exercise
price of $0.05 per Common Share, 500,000 vesting immediately and remaining vesting on June 20, 2014.
On
June 20, 2013, the Company granted one employee an option to purchase 150,000 shares each of common stock at an exercise price
of $0.05 per Common Share, 50,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third on June
20, 2015, with a five-year life.
From
August 12 to 15, 2013, there were 3,200,000 stock options exercised for total gross proceeds to the Company of $322,000 from six
directors and one consultant.
On
October 28, 2013, the Company granted a contractor an option to purchase 250,000 shares of common stock at an exercise price of
$0.30 per Common Share, all vesting immediately, with a five-year life, for his services in connection with the Farmout Agreement
dated July 31, 2013.
On
December 4, 2013, the Company appointed a new director to its Board and in connection with the appointment the Company granted
the new director an option to purchase 450,000 shares each of common stock at an exercise price of $0.34 per Common Share, 150,000
vesting immediately and the remaining vesting one-third on December 4, 2014, and one-third on December 4, 2015, with a five-year
life.
On
September 19, 2014, the Company granted seven of its directors options to purchase 600,000 shares each of common stock at an exercise
price of $0.38 per Common Share, 200,000 vesting immediately and the remaining vesting one-third on September 19, 2015, and one-third
on September 19, 2016, with a five-year life.
On
September 19, 2014, the Company granted two consultants an option to purchase each 1,200,000 shares each of common stock at an
exercise price of $0.38 per Common Share, 600,000 vesting immediately and remaining vesting on September 19, 2015.
On
September 19, 2014, the Company granted one employee an option to purchase 180,000 shares each of common stock at an exercise
price of $0.38 per Common Share, 60,000 vesting immediately and the remaining vesting one-third on September 19, 2015, and one-third
on September 19, 2016, with a five-year life.
For
the period ended September 30, 2014, the Company recorded share based compensation expense related to stock options in the amount
of $1,087,356 (September 30, 2013 - $125,099) on the stock options that vested during the year and the stock options that were
granted during the year. As of September 30, 2014, there was remaining unrecognized compensation cost of $1,251,266 related to
the non-vested portion of these unit option awards. Compensation expense is based upon straight-line depreciation of the grant-date
fair value over the vesting period of the underlying unit option.
|
| |
Shares Underlying Options Outstanding | | |
Shares Underlying Options Exercisable | |
|
Range of Exercise Prices | |
Shares Underlying Options Outstanding | | |
Weighted Average Remaining Contractual Life | | |
Weighted Average Exercise Price | | |
Shares Underlying Options Exercisable | | |
Weighted Average Exercise Price | |
|
$0.14 at September 30, 2014 | |
| 900,000 | | |
| 1.48 | | |
$ | 0.14 | | |
| 900,000 | | |
$ | 0.14 | |
|
$0.05 at September 30, 2014 | |
| 3,450,000 | | |
| 3.72 | | |
| 0.05 | | |
| 2,500,000 | | |
| 0.05 | |
|
$0.30 at September 30, 2014 | |
| 250,000 | | |
| 4.08 | | |
| 0.30 | | |
| 250,000 | | |
| 0.30 | |
|
$0.34 at September 30, 2014 | |
| 450,000 | | |
| 4.18 | | |
| 0.34 | | |
| 150,000 | | |
| 0.34 | |
|
$0.38 at September 30, 2014 | |
| 6,780,000 | | |
| 4.97 | | |
| 0.38 | | |
| 2,660,000 | | |
| 0.38 | |
|
| |
| 11,830,000 | | |
| 4.29 | | |
$ | 0.26 | | |
| 6,460,000 | | |
$ | 0.21 | |
The
aggregate intrinsic value of exercisable options as of September 30, 2014, was $0.11 (September 30, 2013 - $0.19).
The
following is a summary of stock option activity as at September 30, 2014:
|
| |
Number of Underlying Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Fair Market Value | |
|
Balance , September 30, 2013 | |
| 4,350,000 | | |
$ | 0.07 | | |
$ | 0.06 | |
|
Balance, September 30, 2014 | |
| 11,830,000 | | |
$ | 0.26 | | |
$ | 0.21 | |
|
Exercisable, September 30, 2014 | |
| 6,460,000 | | |
$ | 0.21 | | |
$ | 0.17 | |
A
summary of the options granted at September 30, 2014 and September 30, 2013 and changes during the periods then ended is presented
below:
|
| |
September 30, 2014 | | |
September 30, 2013 | |
|
| |
Shares | | |
Weighted Average Exercise Price | | |
Shares | | |
Weighted Average Exercise Price | |
|
| |
| | |
| | |
| | |
| |
|
Outstanding balance at beginning of period | |
| 900,000 | | |
$ | 0.14 | | |
| 1,800,000 | | |
$ | 0.14 | |
|
Vested at March 23, 2013 | |
| 3,450,000 | | |
| 0.05 | | |
| 900,000 | | |
| 0.14 | |
|
Granted at June 20, 2013 | |
| – | | |
| – | | |
| 4,850,000 | | |
| 0.05 | |
|
Vested at June 20, 2013 | |
| – | | |
| – | | |
| 1,950,000 | | |
| 0.05 | |
|
Exercised August 12 – 15, 2013 | |
| – | | |
| – | | |
| 1,800,000 | | |
| 0.14 | |
|
Exercised August 12 – 15, 2013 | |
| – | | |
| – | | |
| 1,400,000 | | |
| 0.05 | |
|
Granted at October 28, 2013 | |
| 250,000 | | |
| 0.30 | | |
| – | | |
| – | |
|
Granted at December 4, 2013 | |
| 450,000 | | |
| 0.34 | | |
| – | | |
| – | |
|
Vested at June 20, 2014 | |
| 1,950,000 | | |
| 0.05 | | |
| – | | |
| – | |
|
Granted at September 19, 2014 | |
| 6,780,000 | | |
| 0.38 | | |
| – | | |
| – | |
|
Vested at September 19, 2014 | |
| 2,660,000 | | |
| 0.38 | | |
| – | | |
| – | |
|
Outstanding at end of period | |
| 11,830,000 | | |
$ | 0.26 | | |
| 4,350,000 | | |
$ | 0.07 | |
|
Exercisable | |
| 6,460,000 | | |
$ | 0.21 | | |
| 1,450,000 | | |
$ | 0.11 | |
There
were 5,370,000 unvested stock options outstanding as of September 30, 2014 (September 30, 2013 – 2,900,000).
Measurement
Uncertainty for Stock Options
The
Company used the Black-Scholes option pricing model (“Black-Scholes”) to value the options and warrants. This model
was developed for use in estimating the fair value of traded “European” options which are liquid and that have no
vesting restrictions and are fully transferable. The stock options that are granted to employees and directors and the warrants
attached to the units issued by the Company are non-transferable and some vest over time, and are “American” options.
Option pricing models require the input of subjective assumptions including expected share price volatility. The fair value estimate
can vary materially as a result of changes in the assumptions. The following assumptions are used in the Black-Scholes option-pricing
model:
Expected
Term – Expected term of 5 years represents the period that the Company’s stock-based awards are expected to be outstanding.
Expected
Volatility – Expected volatilities are based on historical volatility of the Company’s stock, adjusted where determined
by management for unusual and non-representative stock price activity not expected to recur. The expected volatility used ranged
from 96% to 122%.
Expected
Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company currently
pays no dividends and does not expect to pay dividends in the foreseeable future.
Risk-Free
Interest rate – The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury
zero-coupon issues with an equivalent remaining term. The risk-free rate used ranged from 0.62% to 1.83%.
13. |
CHANGES IN NON-CASH WORKING CAPITAL |
|
| |
September 30, | | |
September 30, | |
|
| |
2014 | | |
2013 | |
|
Accounts receivable | |
$ | (994,883 | ) | |
$ | 101,035 | |
|
Prepaid expenses | |
| 38,825 | | |
| (36,468 | ) |
|
Accounts payable | |
| 444,773 | | |
| (194,572 | ) |
|
| |
$ | (511,285 | ) | |
$ | (130,005 | ) |
As
of September 30, 2014, the Company has approximately $5,909,394 (2013 – $5,759,755) of operating losses expiring through
2034 that may be used to offset future taxable income but are subject to various limitations imposed by rules and regulations
of the Internal Revenue Service. The net operating losses are limited each year to offset future taxable income, if any, due to
the change of ownership in the Company's outstanding shares of common stock. In addition, at September 30, 2014, the Company had
an unused Canadian net operating loss carry-forward of approximately $10,361,017 (2013 – $11,687,391), expiring through
2034. These operating loss carry-forwards may result in future income tax benefits of approximately $4,658,542. However, because
realization is uncertain at this time, a valuation reserve in the same amount has been established. Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.
The
components of the net deferred tax asset, the statutory tax rate, the effective rate and the elected amount of the valuation allowance
are as follows:
|
| |
Year Ended September 30, 2014 | | |
Year Ended September 30, 2013 | |
|
Statutory and effective tax rate | |
| | |
| |
|
Domestic | |
| | |
| |
|
Statutory U.S. federal rate | |
| 35 | % | |
| 35.00 | % |
|
Foreign | |
| 25 | % | |
| 25.00 | % |
|
| |
Year Ended September 30, 2014 | | |
Year Ended September 30, 2013 | |
|
Income taxes recovered at the statutory and effective tax rate | |
| | |
| |
|
Domestic | |
| | | |
| | |
|
Statutory U.S. federal rate | |
$ | 449,831 | | |
$ | 607,443 | |
|
Foreign | |
| 188,757 | | |
| 181,963 | |
|
| |
| | | |
| | |
|
Timing differences: | |
| | | |
| | |
|
Non-deductible expenses | |
| (487,505 | ) | |
| (74,171 | ) |
|
Other deductible charges | |
| 59,858 | | |
| 67,568 | |
|
Benefit of tax losses not recognized in the year | |
| (210,941 | ) | |
| (782,803 | ) |
|
Income tax recovery (expense) recognized in the year | |
$ | – | | |
$ | – | |
The
approximate tax effects of each type of temporary difference that gives rise to deferred tax assets are as follows:
|
| |
Year Ended September 30, 2014 | | |
Year Ended September 30, 2013 | |
|
Deferred income tax assets (liabilities) | |
| | |
| |
|
Net operating loss carry-forwards | |
$ | 4,658,542 | | |
$ | 4,937,762 | |
|
Oil and gas properties | |
| 54,589 | | |
| 731,166 | |
|
Equipment | |
| 187,394 | | |
| 183,824 | |
|
Valuation allowance | |
| (4,900,525 | ) | |
| (5,852,752 | ) |
|
Net deferred income tax assets | |
$ | – | | |
$ | – | |
In accordance with generally accepted
accounting principles, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax
returns for the open tax years in such jurisdictions. The Company has identified its federal income tax returns for the previous
five years remain subject to examination. The Company’s income tax returns in state income tax jurisdictions also remain
subject to examination for the previous five years. The Company currently believes that all significant filing positions are highly
certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the
Company has no significant reserves for uncertain tax positions, and no adjustments to such reserves were required by generally
accepted accounting principles. No interest or penalties have been levied against the Company and none are anticipated, therefore
no interest or penalty has been included in the provision for income taxes in the consolidated statements of operations.
Compensation to Executive Officers
Since the acquisition of Northern
Alberta Oil Ltd., the Company and Northern have entered into the following contracts with the following companies for the services
of their officers:
| 1.) | Portwest Investments Ltd. (“Portwest”), a company owned 100% by Dr. Horst A. Schmid
(the “Consultant”), for providing services to the Company as Chief Executive Officer and President for Cdn $12,500
per month. On July 1, 2005, the Company entered into a consulting agreement (the “Prior Agreement”) with Portwest,
as filed with the Company’s annual report on Form 10-KSB filed on February 23, 2007, and incorporated by reference herein.
On July 10, 2013, the Company and Portwest agreed to amend (the “Amending Agreement”) the Prior Agreement whereby the
following was settled and amended: |
|
i. |
Effective date of the Amending Agreement will be June
20, 2013; |
|
ii. |
Term of Agreement will be until December 31, 2014; |
|
iii. |
The fees payable to the Consultant in the Prior Agreement will be
terminated and the Company will grant the Consultant 5-year options on 1,000,000 of its common shares exercisable at $0.05 per
share, which was the market price at that time. One half of these shares were vested immediately and the remaining one half will
be vested on June 20, 2014; |
|
iv. |
The Consultant
will receive: |
| a. | Cdn $70,000, and |
| b. | 850,000 units of the Company’s shares and warrants at a price of $0.05 per unit, which was
the market price at that time. Each unit shall be comprised of one restricted Company common share and one 3 year full warrant
entitling Portwest to be able to purchase another share for $0.075. The warrants expire on June 20, 2016, |
As consideration for the execution
of the Amending Agreement and the Termination of parts of the Prior Agreement, and waiving Cdn $239,528 accrued by the Company
as owing to Portwest.
In the September 30, 2014 year-end,
no fees were owed or paid to Portwest. As of September 30, 2013, the Company has settled all outstanding amounts owed to Portwest.
| 2.) | Concorde Consulting, a company owned 100% by Mr. Curtis J. Sparrow, for providing services as Chief
Financial Officer to the Company for Cdn $15,000 per month. As of September 30, 2014, the Company owed Concorde Consulting Cdn
$nil for services provided to the Company. |
Rental Agreement
On January 21, 2014, the Company
renewed its Edmonton office lease commencing effective on January 1, 2014 and expiring on June 30, 2015. The quarterly payments
due in Cdn are as follows:
|
2015 Q1 (October - December) | |
| 9,031 | |
|
2015 Q2 (January - March) | |
| 9,031 | |
|
2015 Q3 (April - June) | |
| 9,031 | |
The total sum of future minimum lease
payments through lease expiration on June 30, 2015 is $27,904.
DISSMISSED - I.G.M Resources
Corp. vs. Deep Well Oil & Gas, Inc., et al
On February 11, 2014, the Court dismissed,
without any costs to the Company, the Plaintiff’s claims against Deep Well Oil & Gas, Inc. and its subsidiary Northern
Alberta Oil Ltd.
On March 10, 2005, I.G.M. Resources
Corp. (the “Plaintiff”) filed against Classic Energy Inc., 979708 Alberta Ltd., Deep Well Oil & Gas, Inc., Nearshore
Petroleum Corporation, Mr. Steven P. Gawne, Rebekah Gawne, Gawne Family Trust, 1089144 Alberta Ltd., John F. Brown, Diane Lynn
McClaflin, Cassandra Doreen Brown, Elissa Alexandra Brown, Brown Family Trust, Priority Exploration Ltd., Northern Alberta Oil
Ltd. and Gordon Skulmoski (the “IGM Defendants”) a Statement of Claim in the Court of Queen's Bench of Alberta Judicial
District of Calgary. This suit is a part of a series of lawsuits or actions undertaken by the Plaintiff against some of the other
above IGM Defendants.
The Plaintiff was and still is a
minority shareholder of 979708 Alberta Ltd. ("979708"). 979708 was in the business of discovering, assembling and acquiring
oil and gas prospects. In 2002 and 2003, 979708 acquired oil and gas prospects in the Sawn Lake area of Alberta. On or about the
14th of July, 2003, all or substantially all the assets of 979708 were sold to Classic Energy Inc. The Plaintiff claims
the value of the assets sold was far in excess of the value paid for those assets. On April 23, 2004 Northern Alberta Oil Ltd.,
purchased Classic Energy Inc.'s assets some of which are under dispute by the Plaintiff. On June 7, 2005 Deep Well acquired all
of the common shares of Northern thereby giving Deep Well an indirect beneficial interest in the assets in which the Plaintiff
is claiming an interest.
The Plaintiff was seeking an order
setting aside the transaction and returning the assets to 979708, compensation in the amount of Cdn $15,000,000, a declaration
of trust declaring that Northern and Deep Well hold all of the assets acquired from 979708 and any property acquired by use of
such assets, or confidential information of 979708, in trust for the Plaintiff.
On October 3, 2014, a warrant holder of the Company acquired
47,618 common shares of the Company, upon exercising warrants, at an exercise price of $0.105 per common share for gross proceeds
to the Company of $4,999.90.
On October 21, 2014, the Company’s Farmout partner
reimbursed the Company in the amount of Cdn $1,200,000 for a cash call the Company paid to the Operator of the SAGD Project for
the winterization program.
On November 17, 2014, the Company
appointed a new director to its Board and in connection with the appointment the Company granted the new director an option to
purchase 600,000 shares each of common stock at an exercise price of $0.23 per Common Share, 200,000 vesting immediately and the
remaining vesting one-third on November 17, 2015, and one-third on November 17, 2016, with a five-year life.
As previously disclosed, on July
31, 2013, the Company through its subsidiary companies entered into a Farmout Agreement with one of its joint venture partners
(the “Farmee”) to fund the Company’s share of the SAGD Project. Effective on November 17, 2014, the Company and
the Farmee agreed to amend the Farmout Agreement (the “Amending Agreement”) to extend the expiry date of the Farmee’s
option, from December 31, 2014 to December 31, 2015, to elect to acquire additional working interests of 45% to 50% in the remaining
56 sections of land where the Company has working interests ranging from 90% to 100%, by committing an additional $110,000,000
of financing to the development of the Company’s Sawn Lake oil sands properties.
18. | CRUDE OIL AND NATURAL GAS PROPERTY INFORMATION |
Results of Operations from Oil and Gas Producing
Activities
The following table sets forth the
results of the Company’s operations from oil (in the form of bitumen) producing activities from the Company’s Sawn
Lake oil sands properties located in Alberta, Canada, for the years ended September 30, 2014 and 2013:
|
| |
September 30, 2014 | | |
September 30, 2013 | |
|
Oil sales after royalties | |
$ | 47,116 | | |
$ | – | |
|
| |
| | | |
| | |
|
Production (Operating) expenses | |
| (47,115 | ) | |
| – | |
|
Exploration expenses | |
| (47,182 | ) | |
| (55,810 | ) |
|
Depreciation, accretion and depletion | |
| (97,646 | ) | |
| (106,476 | ) |
|
| |
| (144,827 | ) | |
| (162,286 | ) |
|
| |
| | | |
| | |
|
Income tax expenses | |
| – | | |
| – | |
|
Results of operations from producing activities | |
$ | (144,827 | ) | |
$ | (162,286 | ) |
The Company reported its first oil
revenue in the amount of $47,116 after deduction of royalties. Given that the Company’s first oil production began on September
16, 2014, the Company produced oil for only 14 days during the year ending September 30, 2014; therefore the volumes of oil delivered
were only 818.6 barrels net to the Company, before royalties, with an average oil sales price of $61.77 per barrel. Operating expenses
are zero since at this time they were paid for under the Farmout Agreement. Transportation costs are included in these operating
costs. The total share of the material costs and operating expenses of the Company’s joint SAGD Project, has been funded
in accordance with the Farmout Agreement, at a net cost to the Company of $Nil. As required by the Farmout Agreement, the Farmee
has since paid Cdn $16,677,530 to the operator of the SAGD Project for the Farmee’s share and the Company’s share of
the costs of the SAGD Project up to September 30, 2014. These costs included the drilling of the SAGD well pair; the purchase and
transportation of equipment; installation and construction of the steam plant facility; testing and commissioning; the purchase
of the water source and disposal wells and expenditures to connect these water wells to the steam plant facility along with a fuel
source tie-in; and the monthly operating expenses associated with the steaming and production of the SAGD well pair up to September
30, 2014.
Capitalized Costs Relating Specifically to the SAGD
Project
The Company entered into a Farmout
Agreement dated July 31, 2013, whereby the Company’s operating costs of the SAGD Project are paid in full by the Farmee in
accordance with the Farmout Agreement; therefore the Company has not capitalized any of the operating costs paid by the Farmee
to the operator of the SAGD Project. As required by the Farmout Agreement, the Farmee has since paid Cdn $16,677,530 to the operator
of the SAGD Project for the Farmee’s share and the Company’s share of the costs of the SAGD Project up to September
30, 2014. See Note 4 herein “Capitalization of Costs Incurred in Oil and Gas Activities”.
Costs Incurred in Oil and Gas Property Acquisition,
Exploration, and Development
See Note 5 herein “Exploration
Activities”.
19. | SUPPLEMENTARY INFORMATION ON OIL AND GAS RESERVES (UNAUDITED) |
The following supplemental information
regarding the Company’s oil and gas activities is presented pursuant to the disclosure requirements promulgated by the U.S.
Securities and Exchange Commission (“SEC”) and ASC 932, Extractive Activities - Oil and Gas, (“ASC 932”).
Users of this supplemental information
should be aware that the process of estimating quantities of “proved” and “proved developed” oil reserves
is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic
data for the reservoir. The data for a reservoir may also change substantially over time as a result of numerous factors including,
but not limited to, additional development activity, evolving production history and continual reassessment of the viability of
production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time.
Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible,
the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than
other estimates included in the financial statement disclosures. Proved reserves represent estimated quantities of natural gas
and crude oil that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from
known reservoirs under economic and operating conditions in effect when the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place and under operating methods used when the estimates
were made.
Under current SEC standards, “Proved
Reserves” are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic
conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate
expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods
are used for the estimation.
Under current SEC standards, the
term “Reasonable Certainty” if deterministic methods are used, implies a high degree of confidence that the quantities
will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered
will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be achieved than not,
and, as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic
data are made to estimated ultimate recovery (“EUR”) with time, reasonably certain EUR is much more likely to increase
or remain constant than to decrease. Reasonable certainty can be established using techniques that have been proved effective by
actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology
that establishes reasonable certainty.
Under current SEC standards, “Reliable
Technology” is a grouping of one or more technologies (including computational methods) that have been field tested and have
demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an
analogous formation.
Estimated Oil and Gas Reserve Quantities of Proved
Developed and Proved Undeveloped Reserves
The following table illustrates the
Company’s estimated net proved reserves for the periods indicated, as estimated by third party reservoir engineers. The Company’s
oil reserves are attributable solely to properties within Alberta, Canada. The following table discloses, in the aggregate, the
Company’s estimated reserves on the Company’s Sawn Lake oil sands properties located in the Peace River oil sands area
of Alberta, Canada, as of September 30, 2014, based on estimated constant prices and cost assumptions.
|
| |
Oil | | |
Natural Gas | | |
Total | |
|
| |
Gross (1) (Mbbl) | | |
Net (2)
Mbbl) | | |
Gross
(Mmcf) | | |
Net
(Mmcf) | | |
BOE
(MBOE) | |
|
Proved developed and undeveloped reserves: | |
| | | |
| | | |
| | | |
| | | |
| | |
|
as of September 30, 2013 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
Revisions of previous estimates | |
| 572 | | |
| 530 | | |
| – | | |
| – | | |
| 572 | |
|
Improved recovery | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
Purchases of minerals in place | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
Extensions and discoveries | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
Production | |
| (1 | ) | |
| (1 | ) | |
| – | | |
| – | | |
| (1 | ) |
|
Sales of minerals in place | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
as of September 30, 2014 | |
| 571 | | |
| 530 | | |
| – | | |
| – | | |
| 571 | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
|
Proved developed reserves: | |
| | | |
| | | |
| | | |
| | | |
| | |
|
as of September 30, 2013 | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
|
as of September 30, 2014 | |
| 571 | | |
| 530 | | |
| – | | |
| – | | |
| 571 | |
(1)Gross Reserves –
are defined as the Company’s working interest reserves (operating or non-operating) before deduction of royalties.
(2)Net Reserves – are defined as the Company’s working interest reserves (operating or non-operating) after deduction of royalties.
Revisions of previous estimates
– are revisions that represent changes in previous estimates of proved reserves, either upward or downward, resulting from
new information (except for an increase in proved acreage) normally obtained from development drilling and production history or
resulting from a change in economic factors. The Company was assigned probable reserves based on Petroleum Resources Management
System (“PRMS”) standards as of the Company’s September 30, 2013 fiscal year end, of which a percentage of these
probable reserves were then assigned as proved reserves in connection with production from the Company’s SAGD Project which
began producing on September 16, 2014.
Improved recovery –
are changes in reserve estimates resulting from application of improved recovery techniques. The Company reported no proved reserves
based on Petroleum Resources Management System (“PRMS”) standards as of the Company’s September 30, 2013 fiscal
year end, therefore there were no changes of previous estimates for improved recovery to
be disclosed from the prior years developed and undeveloped reserve estimates.
Purchases
of minerals in place – For the year ended September 30, 2014, the Company did not report any property acquisitions whereby
the Company purchased any properties with proved reserves.
Extensions and discoveries
– are additions to proved reserves that result from (1) extension of the proved acreage of previously discovered reservoirs
through additional drilling in periods subsequent to discovery and (2) discovery of new fields with proved reserves or of new reservoirs
of proved reserves in old fields. There were no additions to proved reserves resulting from extensions or discoveries during the
fiscal year September 30, 2014.
Production – The Company’s
first SAGD well pair began producing oil on September 16, 2014.
Sales of minerals in place
– For the year ended September 30, 2014, the Company did not report any sale of its properties of which had proved reserves.
The following table discloses, in
the aggregate, the Company’s estimated proved developed and undeveloped reserves on the Company’s Sawn Lake oil sands
properties located in the Peace River oil sands area of Alberta, Canada, as of September 30, 2014, based on estimated constant
prices and cost assumptions.
Summary of Oil and
Gas Reserves as of September 30, 2014 (Constant Prices and Costs)
| |
RESERVES | |
| |
Light and Medium Oil | | |
Heavy Oil | | |
Oil | | |
Natural Gas | | |
Natural Gas Liquids | |
Reserves Category | |
Gross (Mbbl) | | |
Net (Mbbl) | | |
Gross (Mbbl) | | |
Net (Mbbl) | | |
Gross (1) (Mbbl) | | |
Net (2) (Mbbl) | | |
Gross (Mmcf) | | |
Net (Mmcf) | | |
Gross (Mbbl) | | |
Net (Mbbl) | |
Proved | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Developed Producing | |
| – | | |
| – | | |
| – | | |
| – | | |
| 281 | | |
| 260 | | |
| – | | |
| – | | |
| – | | |
| – | |
Developed Non-producing | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Undeveloped | |
| – | | |
| – | | |
| – | | |
| – | | |
| 290 | | |
| 269 | | |
| – | | |
| – | | |
| – | | |
| – | |
Total Proved | |
| – | | |
| – | | |
| – | | |
| – | | |
| 571 | | |
| 529 | | |
| – | | |
| – | | |
| – | | |
| – | |
(1) Gross Reserves –
are defined as the Company’s working interest reserves (operating or non-operating) before deduction of royalties.
(2) Net Reserves
– are defined as the Company’s working interest reserves (operating or non-operating) after deduction of
royalties.
Standardized Measure of Discounted Future Net Cash
Flows Related to Proved Oil and Gas Reserve Quantities
The
following table discloses, in the aggregate, the Company’s estimated net present value of future cash flows attributable
to the Company’s estimated oil reserves on the Company’s Sawn Lake oil sands properties
located in the Peace River oil sands area of Alberta, Canada, as of September 30, 2014, based on estimated constant prices and
cost assumptions. The future cash flow estimate set forth below are estimates only and the actual realized cash flow may be greater
or less than those calculated and should not be considered as representative of the current value of the Company.
|
| |
Year Ended | | |
Year Ended | |
|
In Thousands | |
September 30, 2014(1) | | |
September 30, 2013(1) | |
|
| |
| | | |
| | |
|
Future cash inflows | |
$ | 31,062 | | |
$ | – | |
|
Future Royalties | |
| (2,456 | ) | |
| – | |
|
Future Operating costs | |
| (13,040 | ) | |
| – | |
|
Future Development Costs | |
| (8,586 | ) | |
| – | |
|
Future Abandonment Costs | |
| (161 | ) | |
| – | |
|
Future income tax expenses | |
| – | | |
| – | |
|
Future net cash flows | |
$ | 6,819 | | |
$ | – | |
|
10% annual discount for estimated timing of cash flows | |
| (4,919 | ) | |
| – | |
|
Standardize measure of discounted future net cash flows | |
$ | 1,900 | | |
$ | – | |
(1) Future net cash flows
were converted from Cdn$ to US$ in this table based on the year-end exchange rate of $0.8962.
The Company reported no proved reserves
based on Petroleum Resources Management System (“PRMS”) standards as of the Company’s September 30, 2013 fiscal
year end, therefore there were no changes to the standardized measure of discounted future net cash flows from previous estimates
attributable to the Company’s proved developed and undeveloped reserve estimates from the prior years.
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE |
On
November 16, 2012, we formally informed Madsen & Associates CPAs, Inc. (“Madsen”) of the appointment of a different
auditor as our independent registered public accounting firm upon expiry of Madsen’s term of appointment. The reports of
Madsen on our financial statements as of and for the years ended September 30, 2011 and 2010 contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. Our Board participated in
and approved the decision to appoint a different independent registered public accounting firm upon expiry of Madsen’s term
of appointment. This decision was formally finalized on December 11, 2012.
During
the years ended September 30, 2011, and 2010, and through November 16, 2012, there have been no disagreements with Madsen on any
matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements
if not resolved to the satisfaction of Madsen would have caused them to make reference thereto in connection with their report
on the financial statements for such years. Our Company has requested that Madsen furnish it with a letter addressed to the SEC
stating whether or not it agrees with the above statements. For further information see our current report on Form 8-K filed on
December 17, 2012 and incorporated herein by reference.
On
November 16, 2012, our Company engaged Sadler, Gibb & Associates, L.L.C. (“Sadler Gibb”) as its new independent
registered public accounting firm. During the years ended September 30, 2011 and 2010, and through November 16, 2012, our Company
did not consult with Sadler Gibb regarding any of the following:
| (i) | the
application of accounting principles to a specific transaction, either completed or proposed; |
| (ii) | the
type of audit opinion that might be rendered on the Company’s consolidated financial
statements, and none of the following was provided to the Company: (a) a written report,
or (b) oral advice that Sadler Gibb concluded was an important factor considered by the
Company in reaching a decision as to accounting, auditing or financial reporting issue;
or |
| (iii) | any
matter that was subject of a disagreement, as that term is defined in Item 304 of Regulation
S-K. |
ITEM 9A. |
CONTROLS AND PROCEDURES |
Disclosure
Controls and Procedures
As
of the end of the fiscal year ended September 30, 2014, an evaluation of the effectiveness of our “disclosure controls and
procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) was carried out under the
supervision and with the participation of our principal executive officer and principal financial officer. Based upon that evaluation,
our principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, our disclosure
controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit
under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and
forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure.
It
should be noted that while our principal executive officer and principal financial officer believe that our disclosure controls
and procedures provide a reasonable level of assurance that they are effective, they do not expect that our disclosure controls
and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is
defined in Rule 13a-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting
and consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Our
management, which included our principal executive officer and principal financial officer, assessed our internal control over
financial reporting as of September 30, 2014. This assessment was based on criteria for effective internal control over financial
reporting described in the internal control integrated framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, our management believes that, as of September 30, 2014, our internal control over financial
reporting was effective.
Attestation
Report of the Independent Registered Public Accounting Firm
We
are a smaller reporting company within the meaning of Rule 12b-2 under the Exchange Act. Therefore this Annual Report is not required
to include an attestation report of our independent registered public accounting firm, Sadler Gibb with respect to our internal
control over financial reporting. Sadler Gibb audit included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of our internal control over financial reporting. Accordingly, Sadler Gibb expressed no such opinion on our
internal control over financial reporting as of September 30, 2014.
Changes
in Internal Control Over Financial Reporting
During
the fiscal year ended September 30, 2014 there were no changes in our internal control over financial reporting that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. |
OTHER INFORMATION |
Deep
Well reported all information that was required to be disclosed on Form 8-K during the fourth quarter of the fiscal year covered
by this Annual Report.
PART
III
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors
and Executive Officers
The directors
and executive officers of Deep Well are as follows:
As
at September 30, 2014 |
Name |
|
Age |
|
Position/Office |
|
|
|
|
|
|
|
Mr.
Said Arrata |
|
74 |
|
Director |
|
Mr.
Satya Brata Das |
|
58 |
|
Director |
|
Mr.
Pascal Nodé-Langlois |
|
67 |
|
Director |
|
Mr.
David Roff |
|
43 |
|
Director |
|
Dr.
Horst A. Schmid |
|
81 |
|
Director
and Chairman of the Board, President and Chief Executive Officer |
|
Mr.
Curtis James Sparrow |
|
57 |
|
Director
and Chief Financial Officer, Secretary and Treasurer |
|
Mr.
Malik Youyou |
|
61 |
|
Director
and Vice Chairman |
|
Biographies
of Directors and Executive Officers
Brief
biographies of the directors and executive officers of Deep Well are set forth below. All directors hold office until the next
shareholders’ meeting or until their death, resignation, retirement, removal, disqualification or until their successors
have been elected and qualified. Vacancies in the existing Board may be filled by majority vote of the remaining directors. Officers
of our Company serve at the will of the Board. As of September 30, 2014 there were no written employment contracts outstanding
for officers, other than the consulting contracts as disclosed herein.
Mr.
Said Arrata has served as director of Deep Well since March 8, 2011. Mr. Arrata is a highly experienced energy executive who brings
a sophisticated understanding of energy company development to the Deep Well Board. Mr. Arrata is the chairman of the board of
directors and chief executive officer of Sea Dragon Energy Inc., a firm domiciled in Calgary, Alberta, devoted exclusively to
overseas production, and concentrated in Egypt. In 2007 the company he co-founded, Centurion Energy, was sold for $1.2 billion
to Dana Gas Inc. and Mr. Arrata subsequently established Sea Dragon Energy Inc. Since May of 2007, Mr. Arrata has been a board
member of Dan Gas Inc., a company which operates oil and gas concessions in Egypt and the Province of Kurdistan. Reputed as a
company-builder, focused on building maximum value for shareholders during his more than 40 years in the oil and gas industry
during which he held management and board positions with major oil and gas companies in Canada and overseas. Mr. Arrata holds
a B.Sc. degree in Petroleum Engineering along with several post-graduate accreditations at various universities in North America
and is an active member of several professional engineering and industry associations.
Mr.
Satya Brata Das has served as director of Deep Well since March 8, 2011. Mr. Das offers strategic advice and guidance to public
and private sector leaders as co-founder, director and Principal of Edmonton based Cambridge Strategies Inc. A public policy expert
on the sustainable development of heavy oil and the oil sands, he is author of “Green Oil: Clean Energy for the 21st Century?”
A frequent commentator on air, in print and on podiums, Mr. Das brings his deep experience and insight on public policy issues
to the Deep Well Board. A former columnist, foreign correspondent and editorialist, Mr. Das has advised at the highest levels
of municipal, provincial and federal governments in Canada.
Dr.
Horst A. Schmid has served as director and Chairman of Deep Well since February 6, 2004. From June 29, 2005 to the present he
has been the Chief Executive Officer and President of Deep Well. From September 1996 to the present, Dr. Schmid has been director,
President and Chief Executive Officer of Portwest Investment Ltd., a private firm, located in Edmonton, Alberta, Canada. Prior
to that, Dr. Schmid spent 15 years as Cabinet Minister for the government of Alberta and ten years as Commissioner General for
Trade and Tourism for the province of Alberta. During that time he was involved in numerous successful overseas negotiations for
the Alberta Oil & Gas Industry, achieving major contracts for Alberta Exploration/Production/Service Companies. He is the
recipient of many Canadian and International Awards for his accomplishments. Dr. Schmid received an Honorary Law Degree from the
University of Alberta.
Mr.
Curtis James Sparrow has served as director of Deep Well since February 6, 2004. From that time until the present Mr. Sparrow
has also been the Chief Financial Officer, Corporate Secretary and Treasurer of Deep Well. Since the mid-1980s, Mr. Sparrow has
been a self-employed management consultant specializing in the natural resource sector. Mr. Sparrow has been involved in the oil
and gas industry in various capacities for over 35 years. He has held directorships and senior officer positions with junior exploration
and development companies before becoming a self-employed consultant. He has also participated in the marketing side of the oil
and gas industry, and was part of an acquisition team formed to assess and develop a bid for a multi-billion dollar integrated
oil company. His experience also includes corporate and project management, international businesses and mining. Mr. Sparrow received
his Bachelor of Science Degree in Engineering and M.B.A. from the University of Alberta. Mr. Sparrow is also a registered Professional
Engineer.
Mr.
David Roff has served as a director of Deep Well since April 3, 2006. Mr. Roff is the co-president of Brave Investment Corporation,
a private consulting and investment company and has held this position since 2001. Mr. Roff has extensive experience working with
small cap public and private companies for more than fifteen years. Prior to that, Mr. Roff was a management consultant for Coopers
& Lybrand Consulting where he advised large financial institutions, investment fund complexes and other organizations on technology
and internal control strategies. Mr. Roff is a Chartered Professional Accountant with a B.A. degree from the University of Western
Ontario.
Mr.
Malik Youyou has served as director of Deep Well since August 20, 2008 and Vice Chairman of Deep Well since January 1, 2014. Mr.
Youyou is an experienced international entrepreneur, investor and director of several companies. With more than three decades
of business experience in highly competitive global markets, beginning in his native France, Mr. Youyou brings a strong international
perspective to Deep Well’s Board. Mr. Youyou has created and led several companies involved in the development, branding,
and marketing of luxury goods from leading international houses.
Mr.
Pascal Nodé-Langlois has served as a director of Deep Well since December 4, 2013. Mr. Nodé-Langlois is a French
entrepreneur with a broad experience in banking. In 1975, he founded in Switzerland, the company Stock and Commodity Services
SA (“SCS”). In 1991, SCS became Banque SCS Alliance SA (BSA), a fully licensed Swiss bank with branches in Switzerland
and subsidiaries abroad. In 2006, after a consistent career of more than 30 successful years as the principal owner, managing
director and chairman of the board of directors of BSA (previously SCS), Mr. Nodé-Langlois sold his stake in the bank.
In 2007, he founded a new financial boutique, in Luxembourg: Voltaire Group SA. This company operates as a holding company. It
acquires majority participations and/or creates operating companies with the aim of providing a wide variety of financial services
in the areas of expertise that Mr. Nodé-Langlois developed during his previous activity in banking. Its main present participation
is PARfinance SA, a Swiss registered wealth management company.
On
November 17 2014, our Board appointed Mr. Colin P. Outtrim as a director of Deep Well. Mr. Outtrim is a highly experienced petroleum
engineer bringing with him extensive reservoir appraisal knowledge to our Board. Mr. Outtrim has over 40 years of experience in
the global petroleum reserves and resources industry and has conducted and or participated in several hundred reservoir engineering
and economic evaluation projects covering oil, gas and geothermal properties in all parts of the world having asset values from
between one million to 20 billion dollars. Early in his career he worked with the Alberta Government Energy Resources and Conversation
Board (now known as the AER) as a Reserves Engineer assessing the Alberta oil sands, at which time he also president and chief
executive officer of Outtrim Szabo Associates Ltd. which served petroleum companies undertaking energy developments around the
world. In 2004 Outtrim Szabo Associates Ltd. was acquired by DeGolyer and Mr. Outtrim became president and a director of DeGolyer
until his retirement in 2012. From 2008 to 2012, Deep Well engaged DeGolyer to prepare Deep Well’s independent reserves
and resources analysis reports, at which time Mr. Outtrim was providing independent consulting engineering services to Deep Well
through DeGolyer. His career has provided him broad experience reporting to audit committees as a “qualified reserves evaluator
and auditor”. He is one of a few expert members from around the world selected to sit on and serve as a technical member
of the Experts Group sub-committee on the United Nations Economic Commission for Europe (“UNECE”), the United Nations
Framework Classification (“UNFC”) for the standardization of petroleum reserves and resource definitions, and has
recently completed a three-year term on the board of trustees of the Society of Petroleum Engineers Canadian Educational Trust
Fund as trustee and treasurer. He is currently serving as director and reserves audit committee chairman of CaiTerra International
Energy Corporation and currently provides reservoir engineering advisory services to Tallahassee Resources Inc. He is also the
past chairman of the Petroleum Society of the Canadian Institute of Mining. Mr. Outtrim holds a B.Sc. in Geological Engineering
from the University of British Columbia and is a registered Petroleum Engineer.
Family
Relationships
There
are no family relationships among the directors and executive officers of our Company.
Involvement
in Certain Legal Proceedings
The
following does not describe any past legal proceeding to which Deep Well or its subsidiaries are a party. For a description of
certain past legal proceedings involving Deep Well and its subsidiaries, see Item 3 “Legal Proceedings” of this Annual
Report. In the past ten years:
No
bankruptcy petition has been filed by or against any business of which any current director was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time.
No
current director has been convicted in a criminal proceeding and is not subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses).
No
current director has been the subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities.
No
current director has been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any
Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage
in any activity described in paragraph (f)(3)(i) of section 229.401 of Regulation S-K, or to be associated with persons engaged
in any such activity.
No
current director has been found by a court of competent jurisdiction in a civil action or by the SEC to have violated a Federal
or State securities law that has not been reversed, suspended, or vacated.
No
current director has been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission
to have violated any Federal commodities law that has not been subsequently reversed, suspended or vacated.
No
current director has been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree,
or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities
or commodities law or regulation; any law or regulation respecting financial institutions or insurance companies including, but
not limited to, a temporary or permanent injunction, order or disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order; or any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity.
No
current director has been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated,
of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that
has disciplinary authority over its members or persons associated with a member.
Section
16 (a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our Company’s officers, directors and persons who beneficially own more than 10% of a
registered class of our Company’s equity securities to file reports of ownership and changes in ownership with the SEC,
and to furnish to our Company copies of such reports. Based solely on the review of Forms 3 and 4 received by our Company during
the September 30, 2014 fiscal year, as required under Section 16(a)(2) of the Exchange Act, the following directors, although
they reported all their transactions as required on either a Form 3 or Form 4, did not report on a timely basis as follows: Mr.
Said Arrata, a director of our Company, filed one Form 4 late (relating to one transaction); Mr. Satya Brata Das, a director of
our Company, filed one Form 4 late (relating to two transactions); Mr. Pascal Nodé-Langlois, a director of our Company
filed one Form 3 late (relating to one transaction) and one Form 4 late (relating to five transactions); Dr. Horst A. Schmid,
a director of our Company, filed one Form 4 late (relating to one transaction); Mr. Curtis James Sparrow, a director of our Company,
filed one Form 4 late (relating to one transaction); and Mr. Malik Youyou, a director and a 10% or more beneficial owner of our
Company, filed two Form 4s late (relating to 34 transactions).
Code
of Ethics
Our
Company recently adopted a formal Code of Business Conduct and Ethics policy governing our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions, including our directors
and employees, to promote honest and ethical conduct, full, fair, accurate, understandable and timely disclosure in our reports
to the SEC, and compliance with applicable governmental laws, rules and regulations. A copy of our Code of Business Conduct and
Ethics policy may be obtained from our website at www.deepwelloil.com, or by written request addressed to the Corporate Secretary
of Deep Well Oil & Gas, Inc., Suite 700, 10150 – 100 Street, Edmonton, Alberta, T5J 0P6, Canada. Filed herewith, as
Exhibit 14.1, is a copy of our Code of Business Conduct and Ethics policy.
Corporate
Governance
Director
Independence
Under
the standards for independence set forth by the NASDAQ Stock Market Rule 5605(a)(2) and the independence standards specified in
Rule 10A-3 under the Exchange Act, our Board determined that as of September 30, 2014, our Board consisted of a majority of independent
directors, with four being independent and three being non-independent directors. The directors of our Company are as follows:
As
at September 30, 2014 |
|
Name |
|
Year
When First
Appointed as Director |
|
|
|
Mr.
Said Arrata |
|
2011 |
|
Independent
director |
|
Mr.
Satya Brata Das |
|
2011 |
|
Independent
director |
|
Mr.
Pascal Nodé-Langlois |
|
2013 |
|
Independent
director |
|
Mr.
David Roff |
|
2006 |
|
Independent
director |
|
Dr.
Horst A. Schmid |
|
2004 |
|
Non-independent
director |
|
Mr.
Curtis James Sparrow |
|
2004 |
|
Non-independent
director |
|
Mr.
Malik Youyou |
|
2008 |
|
Non-Independent
director |
|
Board
Meetings, Committees and Annual Meeting Attendance
In
the fiscal year ended September 30, 2014 our Board had six meetings. Each director of our Company attended 100% of all meetings
held by the Board. As our Board only recently appointed the following committees there were no meetings held by any of our recently
appointed committees during our September 30, 2014 fiscal year.
All
of our directors attended our last general meeting of shareholders held on September 17, 2014. Our Board’s policy is to
encourage all of its directors to attend all general meetings of our shareholders. Such attendance allows for direct interaction
between shareholders and members of our Board.
Corporate
Governance and Nominating Committee
Our
Board recently appointed a corporate governance and nominating committee consisting of four Board members. Our Board appointed
Mr. Satya Brata Das, Mr. Pascal Nodé-Langlois, Mr. Colin Outtrim and Mr. David Roff to serve on our corporate governance
and nominating committee. Our Board appointed Mr. Pascal Nodé-Langlois as chairman of the corporate governance and nominating
committee. As the Board only recently appointed a corporate governance and nominating committee there were no meetings held by
this committee during the September 30, 2014 fiscal year. Our Board also recently adopted a formal corporate governance and nominating
committee charter. A copy of this charter may be obtained from our website at www.deepwelloil.com. Filed herewith, as Exhibit
99.5, is a copy of our Corporate Governance and Nominating Committee Charter.
The
purpose of our corporate governance and nominating committee is to, but not limited to: (i) assist the Board in identifying individuals
qualified to serve as members of our Board; (ii) develop and recommend to the Board corporate governance guidelines for our Company;
and (iii) oversee the evaluation of the Board and management of our Company.
Audit
Committee
Our
Board recently appointed an audit committee consisting of four Board members. Our Board appointed Mr. Said Arrata, Mr. Satya Brata
Das, Mr. Pascal Nodé-Langlois and Mr. David Roff to serve on our audit committee. Our Board appointed Mr. David Roff as
chairman of the audit committee. As the Board only recently appointed an audit committee there were no meetings held by this committee
during the September 30, 2014 fiscal year. Our Board also recently adopted a formal audit committee charter. A copy of this charter
may be obtained from our website at www.deepwelloil.com. Filed herewith, as Exhibit 99.3, is a copy of our Audit Committee Charter.
Our
Board has determined that Mr. David Roff, who was recently appointed to serve on our audit committee, is independent and is recognized
as an audit committee financial expert. Mr. Roff is a chartered professional accountant, with a B.A. degree from the University
of Western Ontario, has worked as an auditor from 1995 to 1998 and is a Certified Public Accountant in good standing since 1995.
The
purpose of our audit committee is to prepare the audit committee report required by the SEC to be included in our proxy statement
and to assist our Board in overseeing and monitoring: (i) the quality and integrity of our financial statements; (ii) our accounting
and reporting processes and consolidated financial statements audits; (iii) our compliance with legal and regulatory requirements;
(iv) our independent registered public accounting firm’s qualifications and independence; (v) the performance of our independent
registered public accounting firm; and (vi) our systems of disclosure controls and procedures, internal controls over financial
reporting, and compliance with ethical standards adopted by our Board.
Compensation
Committee
Our
Board recently appointed a compensation committee consisting of four Board members. Our Board appointed Mr. Said Arrata, Mr. Satya
Brata Das, Mr. Pascal Nodé-Langlois and Mr. Colin Outtrim to serve on our compensation committee. Our Board appointed Mr.
Satya Brata Das as chairman of the compensation committee. As the Board only recently appointed a compensation committee there
were no meetings held by this committee during the September 30, 2014 fiscal year. Our Board also recently adopted a formal compensation
committee charter. A copy of this charter may be obtained from our website at www.deepwelloil.com. Filed herewith, as Exhibit
99.4, is a copy of our Compensation Committee Charter.
The
purpose of our compensation committee is to assist our Board in discharging its responsibilities relating to: (i) determining,
reviewing, approving or recommending to our Board, the compensation of our executive officers, committee members and directors;
(ii) monitoring our incentive and equity-based compensation plans; (iii) preparing the compensation committee report if and when
required to be included in our proxy statement under the rules and regulations of the SEC; (iv) evaluating the performance of
the committee, including a review of the committee’s compliance with its charter, and reviewing and reassessing its charter
and submitting any recommended changes to our Board for its consideration; and (v) oversee all matters relating to shareholder
approval, on a non-binding basis of executive compensation (“say-on-pay” votes), including the frequency of such votes
and the appropriate committee response to a say-on-pay vote.
Reserves
and Resources Committee
Our
Board recently appointed a reserves and resources committee consisting of four Board members. Our Board appointed Mr. Said Arrata,
Mr. Colin Outtrim, Mr. David Roff and Mr. Curtis James Sparrow to serve on our reserves and resources committee. Our Board appointed
Mr. Colin Outtrim as chairman of the reserves and resources committee. As the Board only recently appointed a reserves and resources
committee there were no meetings held by this committee during the September 30, 2014 fiscal year. Our Board also recently adopted
a formal reserves and resources committee charter. A copy of this charter may be obtained from our website at www.deepwelloil.com.
Filed herewith, as Exhibit 99.6, is a copy of our Reserves and Resources Committee Charter.
The
purpose of our reserves and resources committee is to assist our Board in monitoring: (i) the integrity of the independent reserves
and resources estimates and related U.S. and Canadian regulatory disclosures of our Company; and (ii) the qualifications and independence
of the independent reservoir engineers, geologists and geophysicists.
Our
reserves data and estimates are prepared by independent examination and evaluation of our production data, reservoir pressure
data, logs, geological data, and offset analogies in compliance with SEC definitions and guidance and in accordance with generally
accepted petroleum engineering principles. The technical persons employed by the independent reserves evaluators are required
to meet the requirements regarding qualifications, independence, objectivity and confidentiality set forth in the “Standards
Pertaining to the Estimating and Auditing of Oil and Natural Gas Reserves Information” promulgated by the Society of Petroleum
Engineers. Our independent reserves evaluators are provided full access to complete and accurate information pertaining to our
properties, and to all applicable personnel of our Company. Our reserves estimates and process for developing such estimates are
reviewed by our current reserves and resources committee and approved by our management. Our management on behalf of our Board
ensures compliance with SEC disclosure and internal control requirements along with verifying the independence of all third-party
consultants. Our management is ultimately responsible for reserve estimates and reserve disclosures and ensuring that they are
in accordance with the applicable regulatory requirements and industry standards and practices.
Shareholder
Communications
We
recognize the investment in our Company that shareholders of our common stock have made and accordingly, we are committed to the
open exchange of ideas, concerns and suggestions with our shareholders. Shareholders desiring to communicate with the Board of
our Company can do so by mailing a letter to the attention of the Chairman of the Board addressed to our Company’s corporate
office at Suite 700, 10150 – 100 Street, Edmonton, Alberta, T5J 0P6.
Board
Leadership Structure and Role in Risk Oversight
As
of September 30, 2014, Dr. Horst A. Schmid served as our President and Chief Executive Officer and also serves as the Chairman
of our Board. Because of the small size of our Company we do not have a lead independent director. Our Board of Directors consists
of four independent and three non-independent directors as of September 30, 2014. Our independent directors take an active role
on our Board and make up a majority of our Board. Given the size of our Company, our entire Board believes that our current board
leadership structure is appropriate at this time and that Dr. Horst A. Schmid and Mr. Curtis James Sparrow bring valuable industry
experience and historical knowledge of our Company’s history.
Our
entire Board performs the role of risk oversight and includes all of our executive officers. Our management submits weekly updates
to our entire Board for review and discussion. These weekly updates include, but are not limited to, regulatory disclosure, administrative
and operational updates, weekly financial status and discussion of major expenditures. Our independent Board members regularly
discuss their concerns and observations regarding all aspects of our Company’s business plans, risks and operations. These
weekly updates facilitate discussions regarding risk-related information or concerns between our Board and our management. Dr.
Horst A. Schmid and our entire Board form the agendas for all Board meetings.
ITEM 11. |
EXECUTIVE COMPENSATION |
Summary
Compensation Table
The
following table provides information about the compensation paid to, earned or received during the two fiscal years ended September
30, 2014 and September 30, 2013, by the executive officers listed below (the “Named Executive Officers”).
Executive Compensation Summary |
Name and Principal Position | |
Fiscal
Year Sept. 30 | | |
Fee $US | | |
Bonus US$ | | |
Stock Awards US$ | | |
Option Awards US$ | | |
Non-Equity Incentive Plan Compensation
US$ | | |
Non-qualified Deferred Compensation Earnings
US$ | | |
All Other Compensation US$ | | |
Total US$ | |
Dr. Horst A. Schmid (1) | |
| 2014 | | |
$ | – | (2) | |
$ | – | | |
$ | – | | |
$ | 266,994 | (3) | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 266,994 | (9) |
President and | |
| 2013 | | |
$ | – | (2) | |
$ | – | | |
$ | – | | |
$ | 36,496 | (4) | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 78,996 | (9) |
Chief Executive Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Mr. Curtis James Sparrow (5) | |
| 2014 | | |
$ | 166,356 | (6) | |
$ | 32,347 | | |
$ | – | | |
$ | 266,994 | (7) | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 465,697 | (9) |
Chief Financial Officer | |
| 2013 | | |
$ | 177,300 | (6) | |
$ | – | | |
$ | – | | |
$ | 36,496 | (8) | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 213,796 | (9) |
(1)
Dr. Horst A. Schmid has served our Company as director and Chairman of the Board since February 6, 2004. Since June 29,
2005 to present Dr. Schmid has been the President and Chief Executive Officer of our Company.
(2)
Portwest, a company owned 100% by Dr. Horst A. Schmid, provided services as Chief Executive Officer and President to our
Company for $Nil for the 2014 fiscal year and $Nil for the 2013 fiscal year. For further information see Note 15 in the notes
to our consolidated financial statements contained herein.
(3)
Disclosed herein are the estimated valuations for Dr. Horst A. Schmid’s direct and indirect stock options that vested
on June 20, 2014 and September 19, 2014. On June 20, 2013, our Board granted Dr. Schmid, as a director of our Company, options
to purchase 450,000 shares of common stock at an exercise price of $0.05 per share of common stock, 150,000 vesting immediately
and the remaining vesting one-third on June 20, 2014, and one-third on June 20, 2015, with a five-year life, and on August 12,
2013, Dr. Schmid acquired 150,000 shares of our Company’s common stock upon the exercise of some of these options for an
exercise price of $0.05 per common share. Also on June 20, 2013, our Board granted Portwest, options to purchase 1,000,000 shares
of common stock at an exercise price of $0.05 per share of common stock, with one-half vesting immediately and one-half vesting
on June 20, 2014, with a five-year life, and as of September 30, 2013, Portwest had not exercised any of these options. On September
19, 2014, our Board granted Dr. Schmid, as a director of our Company, options to purchase 600,000 shares of common stock at an
exercise price of $0.38 per share of common stock, 200,000 vesting immediately and the remaining vesting one-third on September
19, 2015, and one-third on September 19, 2016, with a five-year life, and as of September 30, 2014, Dr. Schmid had not exercised
any of these options. On September 19, 2014, our Board granted Portwest, options to purchase 1,200,000 shares of common stock
at an exercise price of $0.38 per share of common stock, with one-half vesting immediately and one-half vesting on September 19,
2015, with a five-year life, and as of September 30, 2014, Portwest has not exercised any of these options. For the assumptions
used in the valuation of these stock option awards see Note 12 in the notes to our consolidated financial statements contained
herein.
(4)
Disclosed herein are the estimated valuations for Dr. Horst A. Schmid’s direct and indirect stock options that vested
on March 23, 2013 and June 20, 2013. On March 23, 2011, our Board granted Dr. Schmid, as a director of our Company, options to
purchase 450,000 shares of common stock at an exercise price of $0.14 per share of common stock, 150,000 vesting immediately and
the remaining vesting one-third on March 23, 2012, and one-third on March 23, 2013, with a five-year life, and as of September
30, 2014, Dr. Schmid had not exercised any of these options. As previously disclosed in footnote (3) above, on June 20, 2013,
our Board granted Dr. Schmid, as a director of our Company, options to purchase 450,000 shares of common stock at an exercise
price of $0.05 per share of common stock, 150,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and
one-third on June 20, 2015, with a five-year life, and on August 12, 2013, Dr. Schmid acquired 150,000 shares of our Company’s
common stock upon the exercise of some of these options for an exercise price of $0.05 per common share. Also, as previously disclosed
in footnote (3) above, on June 20, 2013, our Board granted Portwest, options to purchase 1,000,000 shares of common stock at an
exercise price of $0.05 per share of common stock, with one-half vesting immediately and one-half vesting on June 20, 2014, with
a five-year life, and as of September 30, 2013, Portwest had not exercised any of these options. For the assumptions used in the
valuation of these stock option awards see Note 12 in the notes to our consolidated financial statements contained herein.
(5)
Mr. Curtis James Sparrow has served our Company as director since February 6, 2004. Since February 9, 2004 Mr. Sparrow has
been the Chief Financial Officer, Corporate Secretary and Treasurer of our Company.
(6)
Concorde Consulting, a company owned 100% by Mr. Curtis James Sparrow, provided services as Chief Financial Officer to our
Company for $166,356 (Cdn$180,000) for the 2014 fiscal year and $177,300 (Cdn$180,000) for the 2013 fiscal year.
(7)
Disclosed herein are the estimated valuations for Mr. Curtis James Sparrow’s direct and indirect stock options that
vested on June 20, 2014 and September 19, 2014. On June 30, 2013, our Board granted Mr. Sparrow, as a director of our Company,
options to purchase 450,000 shares of common stock at an exercise price of $0.05 per share of common stock, 150,000 vesting immediately
and the remaining vesting one-third on June 20, 2014, and one-third on June 20, 2015, with a five-year life, and on August 12,
2013, Mr. Sparrow acquired 150,000 shares of our Company’s common stock upon the exercise of these options for an exercise
price of $0.05 per common share. Also on June 20, 2013, our Board granted Concorde Consulting, options to purchase 1,000,000 shares
of common stock at an exercise price of $0.05 per share of common stock, with one-half vesting immediately and one-half vesting
on June 20, 2014, with a five-year life, and on August 12, 2013, Concorde Consulting acquired 500,000 shares of our Company’s
common stock upon the exercise of half of these options for an exercise price of $0.05 per common share. On September 19, 2014,
our Board granted Mr. Sparrow, as a director of our Company, options to purchase 600,000 shares of common stock at an exercise
price of $0.38 per share of common stock, 200,000 vesting immediately and the remaining vesting one-third on September 19, 2015,
and one-third on September 19, 2016, with a five-year life, and as of September 30, 2014, Mr. Sparrow had not exercised any of
these options. On September 19, 2014, our Board granted Concorde Consulting, options to purchase 1,200,000 shares of common stock
at an exercise price of $0.38 per share of common stock, with one-half vesting immediately and one-half vesting on September 19,
2015, with a five-year life, and as of September 30, 2014, Concorde Consulting had not exercised any of these options. For the
assumptions used in the valuation of these stock option awards see Note 12 in the notes to our consolidated financial statements
contained herein.
(8)
Disclosed herein are the estimated valuations for Mr. Curtis James Sparrow’s direct and indirect stock options that
vested on March 23, 2013 and June 20, 2013. On March 23, 2011, our Board granted Mr. Sparrow, as a director of our Company, options
to purchase 450,000 shares of common stock at an exercise price of $0.14 per share of common stock, 150,000 vesting immediately
and the remaining vesting one-third on March 23, 2012, and one-third on March 23, 2013, with a five-year life, and on August 12,
2013, Mr. Sparrow acquired 450,000 shares of our Company’s common stock upon the exercise of these options for an exercise
price of $0.14 per common share. As previously disclosed in footnote (7) above, on June 30, 2013, our Board granted Mr. Sparrow,
as a director of our Company, options to purchase 450,000 shares of common stock at an exercise price of $0.05 per share of common
stock, 150,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third on June 20, 2015, with
a five-year life, and on August 12, 2013, Mr. Sparrow acquired 150,000 shares of our Company’s common stock upon the exercise
of these options for an exercise price of $0.05 per common share. Also, as previously disclosed in footnote (7) above, on June
20, 2013, our Board granted Concorde Consulting, options to purchase 1,000,000 shares of common stock at an exercise price of
$0.05 per share of common stock, with one-half vesting immediately and one-half vesting on June 20, 2014, with a five-year life,
and on August 12, 2013, Concorde Consulting acquired 500,000 shares of our Company’s common stock upon the exercise of half
of these options for an exercise price of $0.05 per share of common stock. For the assumptions used in the valuation of these
stock option awards see Note 12 in the notes to our consolidated financial statements contained herein.
Compensation
Arrangements for Executive Officers
Our
Company currently does not provide retirement benefits to its executive officers.
Our
Company has entered into the following contracts with the following companies for services of certain officers and/or directors
of our Company:
| 1. | Portwest
for providing services as Chief Executive Officer and President to our Company for Cdn$12,500
per month. On July 1, 2005, our Company entered into a consulting agreement (the “Prior
Agreement”) with Portwest, as filed with our Company’s annual report on Form
10-KSB filed on February 23, 2007, and incorporated by reference herein. On July 10,
2013, our Company and Portwest agreed to amend the Prior Agreement whereby the following
was settled and amended: |
| a) | the
effective date of the amending agreement was June 20, 2013; |
| b) | the
term of Prior Agreement expired on December 31, 2014; |
| c) | The
fees payable to Portwest in the Prior Agreement will be terminated and our Company will
grant Portwest 5-year options on 1,000,000 of its common shares exercisable at $0.05
per share of common stock, which was the market price at that time. One half of these
shares were vested immediately and the remaining one half vested on June 20, 2014; |
| d) | Portwest,
as consideration for the execution of the amending agreement, the termination of parts
of the Prior Agreement and the waiving of Cdn$239,528 accrued by our Company as owing
to Portwest, received: |
| | |
|
ii. |
850,000 units of our Company’s shares and warrants at a price of $0.05 per unit, which was the market price at that time.
Each unit shall be comprised of one restricted Company common share and one 3-year full warrant entitling Portwest to be able
to purchase another share for $0.075. The warrants will expire on June 20, 2016. |
In
the 2014 fiscal year, no fees were owed or paid to Portwest. As of September 30, 2013, our Company has settled all outstanding
amounts owed to Portwest.
| 2. | Concorde
Consulting, a company owned 100% by Mr. Curtis James Sparrow for providing services as
Chief Financial Officer to our Company for Cdn$15,000 per month. As of September 30,
2014, the Company owed Concorde Consulting Cdn $nil for services provided to the Company. |
On
March 23, 2011, and as herein reported under the Executive Compensation Summary table, our Board granted Dr. Schmid and Mr. Sparrow,
as directors of our Company, options to purchase 450,000 shares each of common stock at an exercise price of $0.14 per common
share, one-third vesting immediately, one-third vesting on March 23, 2012, and one-third vesting on March 23, 2013, each with
a five-year life.
On
June 20, 2013, and as herein reported under the Executive Compensation Summary table, our Board granted Dr. Schmid and Mr. Sparrow,
as directors of our Company, options to purchase 450,000 shares each of common stock at an exercise price of $0.05 per common
share, one-third vesting immediately, one-third vesting on June 20, 2014, and one-third on June 20, 2015, each with a five-year
life.
On
September 19, 2014, and as herein reported under the Executive Compensation Summary table, our Board granted Dr. Schmid and Mr.
Sparrow, as a directors of our Company, options to purchase 600,000 shares of common stock at an exercise price of $0.38 per common
share, one-third vesting immediately and the remaining vesting one-third on September 19, 2015, and one-third on September 19,
2016, each with a five-year life.
Outstanding Equity Awards Granted to Executive Officers at September 30, 2014 |
| |
Options Awards (1) | |
Stock Awards | |
Name | |
Number of Securities Underlying Unexercised Options (#) Exercisable | | |
Number of Securities Underlying Unexercised Options (#) Unexercisable | | |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | |
Option Exercise Price ($) | | |
Option Expiration Date | |
Number of Shares or Units of Stock That Have Not Vested (#) | | |
Market Value of Shares or Units of Stock That Have Not Vested ($) | | |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |
Portwest Investments Ltd. (1) | |
| 1,000,000 | | |
| – | | |
| – | | |
$ | 0.05 | | |
06/20/2018 | |
| – | | |
| – | | |
| – | | |
| – | |
Portwest Investments Ltd. (2) | |
| 600,000 | | |
| 600,000 | | |
| – | | |
$ | 0.38 | | |
09/19/2019 | |
| – | | |
| – | | |
| – | | |
| – | |
Concorde Consulting (3) | |
| 500,000 | | |
| – | | |
| – | | |
$ | 0.05 | | |
06/20/2018 | |
| – | | |
| – | | |
| – | | |
| – | |
Concorde Consulting (4) | |
| 600,000 | | |
| 600,000 | | |
| – | | |
$ | 0.38 | | |
09/19/2019 | |
| – | | |
| – | | |
| – | | |
| – | |
(1)
On June 20, 2013, Portwest, a company owned 100% by Dr. Horst A. Schmid, was granted options to purchase 1,000,000 shares
of common stock for providing consulting services as President and Chief Executive Officer of our Company, half vesting immediately
and the other half vesting on June 20, 2013. See the Executive Compensation table for more disclosure. As of the date of this
report Portwest had not exercised any of these stock options.
(2)
On September 19, 2014, our Board granted Portwest, options to purchase 1,200,000 shares of common stock at an exercise price
of $0.38 per share of common stock, with one-half vesting immediately and one-half vesting on September 19, 2015. See the Executive
Compensation table for more disclosure. As of the date of this report Portwest had not exercised any of these stock options.
(3)
On June 20, 2013, Concorde Consulting, a company owned 100% by Mr. Curtis James Sparrow, was granted options to purchase
1,000,000 shares of common stock for providing consulting services as Chief Financial Officer of our Company, half vesting immediately
and the other half vesting on June 20, 2013. See the Executive Compensation table for more disclosure. On August 12, 2013, Concorde
Consulting acquired 500,000 common shares, upon exercising stock options, at an exercise price of $0.05 per share of common stock.
(4)
On September 19, 2014, our Board granted Concorde Consulting, options to purchase 1,200,000 shares of common stock at an
exercise price of $0.38 per share of common stock, with one-half vesting immediately and one-half vesting on September 19, 2015.
See the Executive Compensation table for more disclosure. As of the date of this report Concorde Consulting had not exercised
any of these stock options.
Compensation
of Directors
On
November 28, 2005 and as amended on December 4, 2013, our Board adopted the Deep Well Oil & Gas, Inc. Stock Option Plan. The
Stock Option Plan was approved by the majority of shareholders at the February 24, 2010 general meeting of shareholders. The Stock
Option Plan is administered by our Board and permits options to acquire shares of Deep Well’s common stock to be granted
to directors of our Company. The vesting of such director options will occur only if the holder of the options continues to provide
services to us during the immediate annual period preceding the relevant vesting date. The options will terminate at the close
of business five years from the date of grant.
On
March 23, 2011, our Board granted each of its directors, Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. David Roff,
Mr. Curtis James Sparrow and Mr. Malik Youyou, options to purchase 450,000 shares each of common stock at an exercise price of
$0.14 per share of common stock, 150,000 vesting immediately and the remaining vesting one-third on March 23, 2012, and one-third
on March 23, 2013, with such options expiring on March 23, 2016.
On
June 20, 2013, our Board granted each of its directors, Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. David Roff, Mr.
Curtis James Sparrow and Mr. Malik Youyou, options to purchase 450,000 shares each of common stock at an exercise price of $0.05
per share of common stock, 150,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third on
June 20, 2015, with such options expiring on June 20, 2018.
Between
August 12 and August 15, 2013, six directors and two consultants of our Company acquired a combined total of 3,768,096 common
shares, upon exercising stock options and warrants, at exercise prices ranging from $0.05 to $0.14 per common share for total
combined gross proceeds to our Company of $372,000. The common shares were issued pursuant to Section 4(2) of the Securities Act.
On
December 4, 2013, the Board appointed Mr. Pascal Nodé-Langlois as a director and in connection with the appointment our
Board granted Mr. Nodé-Langlois an option to purchase 450,000 shares of common stock at an exercise price of $0.34 per
share of common stock, 150,000 vesting immediately and the remaining vesting one-third on December 4, 2014, and one-third on December
4, 2015, with such options expiring on December 4, 2018.
On
September 19, 2014, the Board granted each of its directors, Dr. Horst A. Schmid, Mr. Said Arrata, Mr. Satya Das, Mr. Pascal Nodé-Langlois,
Mr. David Roff, Mr. Curtis James Sparrow and Mr. Malik Youyou, options to purchase 600,000 shares each of common stock at an exercise
price of $0.38 per share of common stock, 200,000 vesting immediately and the remaining vesting one-third on September 19, 2015,
and one-third on September 19, 2016, with such options expiring on September 19, 2019.
For
the fiscal year ended September 30, 2014, our Company recorded share based compensation expense related to stock options in the
amount of $1,087,356 (September 30, 2013 - $125,099) on the stock options that vested during the year and the stock options that
were granted during the year. As of September 30, 2014, there was remaining unrecognized compensation cost of $1,251,266 related
to the non-vested portion of these unit option awards. Compensation expense is based upon straight-line depreciation of the grant-date
fair value over the vesting period of the underlying unit option.
Director Compensation at September 30, 2014 |
Name | |
Fees Earned or Paid in Cash ($) | | |
Stock Awards ($) | | |
Option Awards ($)(6) | | |
Non-Equity Incentive Plan Compensation ($) | | |
Nonqualified Deferred Compensation Earnings ($) | | |
All Other Compensation ($) | | |
Total ($) | |
Dr. Horst A. Schmid | |
Disclosed in the Summary Compensation Table above. | |
Mr. Said Arrata(1) | |
| – | | |
| – | | |
| 69,205 | | |
| – | | |
| – | | |
| – | | |
| 69,205 | |
Mr. Satya Brata Das(2) | |
| – | | |
| – | | |
| 69,205 | | |
| – | | |
| – | | |
| – | | |
| 69,205 | |
Mr. Pascal Nodé-Langlois(3) | |
| – | | |
| – | | |
| 181,613 | | |
| – | | |
| – | | |
| – | | |
| 181,613 | |
Mr. David Roff(4) | |
| – | | |
| – | | |
| 69,205 | | |
| – | | |
| – | | |
| – | | |
| 69,205 | |
Mr. Curtis James Sparrow | |
| Disclosed in the Summary Compensation Table above. |
| | | |
| | |
Mr. Malik Youyou(5) | |
| – | | |
| – | | |
| 69,205 | | |
| – | | |
| – | | |
| – | | |
| 69,205 | |
(1) Mr. Said Arrata has served our Company as director since March 8, 2011. Disclosed herein is the estimated valuation for Mr. Arrata’s stock options that vested on June 20, 2014 and September 19, 2014. |
|
(2) Mr. Satya Brata Das has served our Company as director since March 8, 2011. Disclosed herein is the estimated valuation for Mr. Das’ stock options that vested on June 20, 2014 and September 19, 2014. |
|
(3) Mr. Pascal Nodé-Langlois has served our Company as director since December 4, 2013. Disclosed herein is the estimated valuation for Mr. Nodé-Langlois’ stock options that vested on December 4, 2013 and September 19, 2014. |
|
(4) Mr. David Roff has served our Company as director since April 3, 2006. Disclosed herein is the estimated valuation for Mr. Roff’s stock options that vested on June 20, 2014 and September 19, 2014. |
|
(5) Mr. Malik Youyou has served our Company as director since August 20, 2008. Disclosed herein is the estimated valuation for Mr. Youyou’s stock options that vested on June 20, 2014 and September 19, 2014. |
|
(6) For the assumptions used in these
valuations of these stock option awards see Note 12 in the notes to our consolidated financial statements contained herein.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS |
Securities
Authorized for Issuance under Equity Compensation Plans
As
of September 30, 2014, with respect to shares of Deep Well common stock that may be issued under our existing equity compensation
plan, see Item 5 “Equity Compensation Plan Information” of this Annual Report.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth the number and percentage of the beneficial ownership of shares of Deep Well’s outstanding common
stock as of October 31, 2014 by each person or group known by us to be the beneficial owner of more than 5%, and all of our directors
and executive officers individually and as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS As of October 31, 2014 |
Name and Address of Beneficial Owner | |
Title of Class | | |
Number of Shares Beneficially Owned (1) (2) | | |
Percentage of Class Beneficially Owned | | |
Nature of Beneficial Ownership | |
| |
| | |
| | |
| | |
| |
Malik Youyou (†)
Director
Sadovnicheskeya nab 69
Moscow 115035, Russia | |
| Common | | |
| 184,800,964 | | |
| 61.37 | %(3) | |
| Direct and Indirect | |
| |
| | | |
| | | |
| | | |
| | |
MP West Canada SAS
Beneficial Owner of 5% or more
51, Rue D’Anjou, Paris, 75008, France | |
| Common | | |
| 45,111,778 | | |
| 19.67 | (4) | |
| Direct | |
| |
| | | |
| | | |
| | | |
| | |
Dr. Horst A. Schmid (†)
Director and Chairman of the Board, President
and Chief Executive Officer
Suite 700, 10150 - 100 Street
Edmonton, Alberta T5J 0P6 Canada | |
| Common | | |
| 6,200,000 | | |
| 2.67 | %(5) | |
| Direct and Indirect | |
| |
| | | |
| | | |
| | | |
| | |
Mr. Curtis James Sparrow (†)
Director, Chief Financial Officer, Corporate
Secretary and Treasurer
Suite 700, 10150 - 100 Street
Edmonton, Alberta T5J 0P6 Canada | |
| Common | | |
| 3,100,000 | | |
| 1.34 | (6) | |
| Direct and Indirect | |
| |
| | | |
| | | |
| | | |
| | |
Mr. Satya Brata Das (†)
Director
Suite 710, 10150 - 100 Street
Edmonton, Alberta T5J 0P6 Canada | |
| Common | | |
| 2,570,952 | | |
| 1.12 | (7) | |
| Direct and Indirect | |
| |
| | | |
| | | |
| | | |
| | |
Mr. Said Arrata (†)
Director
Suite 2320, 255 – 5 Avenue S.W.
Calgary, Alberta T2P 3G6 Canada | |
| Common | | |
| 1,450,000 | | |
| * | (8) | |
| Direct | |
| |
| | | |
| | | |
| | | |
| | |
Mr. David Roff (†)
Director
27 Chicora Avenue
Toronto, Ontario M5R 1W7 Canada | |
| Common | | |
| 1,112,441 | | |
| * | (9) | |
| Direct | |
| |
| | | |
| | | |
| | | |
| | |
Mr. Pascal Nodé-Langlois (†)
Director
Rue d'Esch 412FLuxembourg L-2086 | |
| Common | | |
| 750,000 | | |
| * | (10) | |
| Direct | |
| |
| | | |
| | | |
| | | |
| | |
(†) All Officers and Directors as a Group | |
| Common | | |
| 199,984,357 | | |
| 64.98 | % | |
| Direct and Indirect | |
*
Less than 1%
(1)
Under the rules of the SEC, a person or entity beneficially owns stock of a company if such person or entity directly or
indirectly has, or shares the power to, vote or direct the voting, or the power to dispose or direct the disposition of such stock,
whether through any contract, arrangement, understanding, relationship or otherwise. A person or entity is also deemed to be the
beneficial owner of stock if such person or entity has the right to acquire either of such powers at any time within 60 days through
the exercise of any option, warrant, right or conversion privilege or pursuant to the power to revoke a trust, a discretionary
account or similar arrangement or pursuant to the automatic termination of a trust, discretionary account or similar arrangement.
(2)
Based on 229,326,987 of our common shares issued and outstanding on October 31, 2014. For calculating the percentage of
beneficial ownership separately for each person, his or her options, warrants or both that can be acquired within 60 days are
included in both the numerator and the denominator. For the directors as a group, their collective options and warrants that can
be acquired within 60 days are included in both the numerator and the denominator when calculating their group percentage ownership.
(3)
Mr. Malik Youyou has served our Company as director since August 20, 2008. Mr. Youyou has also served as our Company's Vice
Chairman since January 01, 2014. As of October 31, 2014, Mr. Youyou beneficially owns 184,800,964 shares of our common stock,
of which (i) 105,175,042 shares are held directly; (ii) 7,847,352 shares are held indirectly by Westline Enterprises Limited,
a corporation 100% owned by Mr. Youyou; (iii) Mr. Youyou presently holds directly exercisable warrants to acquire 71,428,570 shares
of our common stock; and (iv) Mr. Youyou presently directly holds exercisable options to acquire 350,000 shares of our common
stock. Assuming the issuance of 71,778,570 shares of our common stock, pursuant to the exercise of Mr. Youyou’s presently
exercisable warrants and options, Mr. Youyou would beneficially own 61.37% of our Company’s outstanding common stock. As
October 31, 2014, Mr. Youyou has not exercised any of these currently outstanding warrants or options and without the exercise
of Mr. Youyou’s outstanding warrants and options, Mr. Youyou has a 49.28% ownership of our issued and outstanding common
stock.
(4)
Based solely on our statement of security holder listing report received from our transfer agent on October 31, 2014, MP
West Canada SAS owns 45,111,778 shares of our common stock and based on this report MP West Canada SAS owns 19.67% of our Company’s
issued and outstanding common stock.
(5)
Dr. Horst A. Schmid has served our Company as director and Chairman of the Board since February 6, 2004. Dr. Schmid has
also served our Company as President and Chief Executive Officer since June 29, 2005. Dr. Schmid beneficially owns 6,200,000 shares
of our common stock, of which (i) 150,000 shares are held directly; (ii) 3,130,000 shares are held indirectly by Portwest Investments
Ltd., a private corporation 100% owned by Dr. Schmid; (iii) Dr. Schmid presently holds indirectly through Portwest Investments
Ltd., exercisable warrants to acquire 520,000 shares of our common stock; (iv) Dr. Schmid presently indirectly holds exercisable
options through Portwest Investments Ltd., to acquire 1,600,000 shares of our common stock; and (v) Dr. Schmid presently holds
directly exercisable options to acquire an additional 800,000 shares of our common stock. Assuming the issuance of 2,920,000 shares
of common stock, pursuant to the exercise of Dr. Schmid’s presently exercisable warrants and options, Dr. Schmid would beneficially
own 2.67% of our Company’s outstanding common stock. As October 31, 2014, Dr. Schmid has not exercised any of these currently
outstanding warrants and options and without the exercise of Dr. Schmid’s outstanding warrants and options, Dr. Schmid has
a 1.43% ownership of our issued and outstanding common stock.
(6)
Mr. Sparrow has served our Company as director and Chief Financial Officer since February 9, 2004. Mr. Sparrow beneficially
owns 3,100,000 shares of our common stock, of which (i) 600,000 shares are held directly; (ii) 1,050,000 shares are held indirectly
by Concorde Consulting, a private corporation owned 100% by Mr. Sparrow; (iii) Mr. Sparrow presently indirectly holds exercisable
options through Concorde Consulting, to acquire 1,100,000 shares of our common stock; and (v) Mr. Sparrow also presently holds
directly exercisable options to acquire an additional 350,000 shares of our common stock. Assuming the issuance of 1,450,000 shares
of common stock, pursuant to the exercise of Mr. Sparrow’s presently exercisable warrants and options, Mr. Sparrow would
beneficially own 1.34% of our Company’s outstanding common stock. As October 31, 2014, Mr. Sparrow has not exercised any
of these currently outstanding options and without the exercise of Mr. Sparrow’s outstanding options. Mr. Sparrow has a
0.72% ownership of our issued and outstanding common stock.
(7)
Mr. Satya Brata Das has served our Company as director since March 8, 2011. Mr. Das beneficially owns 2,570,952 shares of
our common stock, of which (i) 390,000 shares are held directly; (ii) 952,381 are held indirectly by Cambridge Strategies Inc.,
a company 50% owned by Mr. Satya Brata Das and 50% owned by his wife; (iii) Mr. Das presently holds indirectly through Cambridge
Strategies Inc., exercisable warrants to acquire 428,571 shares of our common stock; (iv) Mr. Das presently holds directly exercisable
options to acquire an additional 600,000 shares of our common stock; and (v) Mr. Das also presently holds indirectly through Cambridge
Strategies Inc., exercisable options to acquire an additional 200,000 shares of our common stock. Assuming the issuance of 1,228,571
shares of our common stock, pursuant to the exercise of Mr. Das’ presently exercisable warrants and options, Mr. Das would
beneficially own 1.12% of our Company’s outstanding common stock. As October 31, 2014, Mr. Das has not exercised any of
these currently outstanding warrants and options and without the exercise of Mr. Das’ outstanding warrants and options,
Mr. Das has a 0.59% ownership of our issued and outstanding common stock.
(8)
Mr. Said Arrata has served our Company as director since March 8, 2011. Mr. Arrata beneficially owns 1,450,000 shares of
our common stock of which (i) 1,100,000 shares are held directly; and (ii) Mr. Arrata presently holds directly exercisable options
to acquire an additional 350,000 shares of our common stock. Assuming the issuance of 350,000 shares of our common stock, pursuant
to the exercise of Mr. Arrata’s presently exercisable options, Mr. Arrata would beneficially own 0.63% of our Company’s
outstanding common stock. As October 31, 2014, Mr. Arrata has not exercised any of these currently outstanding options and without
the exercise of Mr. Arrata’s outstanding options, Mr. Arrata has a 0.48% ownership of our issued and outstanding common
stock.
(9)
Mr. David Roff has served our Company as director since April 3, 2006. Mr. Roff beneficially owns 1,112,441 shares of our
common stock of which (i) 762,441 shares are held directly; and (ii) Mr. Roff presently holds directly exercisable options to
acquire an additional 350,000 shares of our common stock. Assuming the issuance of 350,000 shares of our common stock, pursuant
to the exercise of Mr. Roff’s presently exercisable options, Mr. Roff would beneficially own 0.48% of our Company’s
outstanding common stock. As October 31, 2014, Mr. Roff has not exercised any of these currently outstanding options and without
the exercise of Mr. Roff’s outstanding options, Mr. Roff has a 0.33% ownership of
our issued and outstanding common stock.
(10) Mr.
Pascal Nodé-Langlois has served our Company as director since December 4, 2013. Mr. Nodé-Langlois beneficially owns
400,000 shares of our common stock of which (i) 400,000 shares are held indirectly through Voltaire Group SA, a company 100% owned
by Mr. Nodé-Langlois; and (ii) Mr. Nodé-Langlois presently holds indirectly through Voltaire Group SA, exercisable
options to acquire an additional 350,000 shares of our common stock. Assuming the issuance of 350,000 shares of our common stock,
pursuant to the exercise of Mr. Nodé-Langlois’ presently exercisable options, Mr. Nodé-Langlois would beneficially
own 0.33% of our Company’s outstanding common stock. As October 31, 2014, Mr. Nodé-Langlois has not exercised any
of these currently outstanding options and without the exercise of Mr. Nodé-Langlois’ outstanding options, Mr. Nodé-Langlois
has a 0.17% ownership of our issued and outstanding common stock.
Changes
in Control
Except
as described below, Deep Well is not aware of any arrangement that may result in a change in control of Deep Well or its subsidiary
companies.
As
of October 31, 2014, and based solely on Mr. Malik Youyou’s filed Form 4s and most recent Schedule 13D, Mr. Youyou, a director
of our Company, beneficially owns 184,800,964 common shares of Deep Well, representing 61.37% of Deep Well’s outstanding
shares of common stock (assuming the exercise of all outstanding warrants and options held by Mr. Youyou).
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Transactions
with Related Persons
Effective
November 23, 2012, pursuant to a subscription agreement, our Company completed a private placement with Mr. Malik Youyou of an
aggregate of 42,857,142 units at a price of $0.07 per unit, for total gross proceeds of $3,000,000. Each unit is comprised of
one share of common stock and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common
stock at a price of $0.105 for a period of three years from the date of closing, provided that if the closing price of the common
shares of our Company on the principal market on which our common shares trade is equal to or exceeds $1.00 for thirty consecutive
trading days, the warrant term will automatically accelerate to the date that is thirty calendar days following the date that
written notice has been given to the warrant holder. No commission or finder’s fees were payable in connection with this
private placement. The units were issued pursuant to Regulation S. The warrants will expire on November 23, 2015 unless the warrant
term is automatically accelerated.
In
our Company’s third fiscal quarter of 2013, our Company received a loan for $260,000 as a note payable from Mr. Malik Youyou,
a director and majority shareholder of the Company. In November 2013, this note payable was paid in full to Mr. Youyou.
We
paid Concorde Consulting, a company 100% owned by Mr. Curtis James Sparrow, $198,703 for consulting services provided to our Company
for professional fees provided to our Company as Chief Financial Officer, Corporate Secretary and Treasurer, during the fiscal
year ended September 30, 2014. Mr. Sparrow is also a director of our Company.
On
June 27, 2014, our Company, through Northern, entered into and subsequently closed an Acquisition of Royalty Interest Agreement
(the “Acquisition Agreement”), with Mr. Malik Youyou, a director and majority shareholder of the Company, whereby
we acquired and cancelled 2.5% of the disputed Purported 6.5% Royalty on certain lands owned us. Although we continue todeny the
validity of the Purported 6.5% Royalty, the Company determined that it was in the best interests of our shareholders to come to
an arrangement to acquire and cancel most of the Purported 6.5% Royalty to prevent a potential encumbrance over our land or the
possibility of future litigation resulting from these alleged royalty claims. Pursuant to the terms and conditions of the Acquisition
Agreement to acquire the purported overriding royalty interest claim, we paid US$1,007,000 to Mr. Malik Youyou, for the purchase
and transfer of an undivided 2.5% interest out of the Purported 6.5% Royalty. The consideration paid was for the reimbursement
of the original cost (in US dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty from an
arm’s length third party.
Mr.
Malik Youyou has served our Company as director since August 20, 2008. As of October 31, 2014, 2014, Mr. Youyou beneficially owns
184,800,964 shares of our common stock, of which; (i) 105,175,042 shares are held directly; (ii) 7,847,352 shares are held indirectly
by Westline Enterprises Limited, a corporation 100% owned by Mr. Youyou; (iii) Mr. Youyou presently holds directly exercisable
warrants to acquire 71,428,570 shares of our common stock; and (iv) Mr. Youyou presently directly holds exercisable options to
acquire 350,000 shares of our common stock. Assuming the issuance of 71,778,570 shares of our common stock, pursuant to the exercise
of Mr. Youyou’s presently exercisable warrants and options, Mr. Youyou would beneficially own 61.37% of our Company’s
outstanding common stock. As October 31, 2014, Mr. Youyou has not exercised any of these currently outstanding warrants or options
and without the exercise of Mr. Youyou’s outstanding warrants and options, Mr. Youyou has a 49.28% ownership of our issued
and outstanding common stock
Director
Independence
See
the disclosure under Item 10 “Directors, Executive Officers and Corporate Governance” of this Annual Report.
ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
In
the fiscal year ended September 30, 2014, we estimate that we will have paid Collins Barrow, an independent third party, PCAOB
registered, chartered accounting firm fees of Cdn$10,500 relating to the preparation of our Company’s tax returns. In the
fiscal year ended September 30, 2013, we paid Collins Barrow, an independent third party, PCAOB registered, chartered accounting
firm fees of Cdn$13,531 relating to the preparation of our Company’s tax returns. All of our quarterly financial statements
for the fiscal years ended September 30, 2014 and 2013 were reviewed by Sadler Gibb and our September 30, 2014 and 2013 fiscal
year ends were also audited by Sadler Gibb In the fiscal year ended September 30, 2013, we paid Collins Barrow, an independent
third party, PCAOB registered, chartered accounting firm fees of Cdn$10,500, relating to the preparation of our Company’s
tax returns and first quarter financial statements.
The
following table is a summary of the fees billed to us by Sadler Gibb for professional services for the fiscal years ended September
30, 2014 and September 30, 2013:
Fee Category | |
Fiscal 2014 Fees | | |
Fiscal 2013 Fees | |
| |
| | |
| |
Audit Fees | |
$ | 30,500 | | |
$ | 29,500 | |
Audit Related Fees | |
| – | | |
| – | |
Tax Fees | |
| – | | |
| – | |
All Other Fees | |
| – | | |
| – | |
Total Fees | |
$ | 30,500 | | |
$ | 29,500 | |
Audit
Fees
Audit
fees consist of fees for services provided by Sadler Gibb for the audit of our annual consolidated financial statements included
in our this Annual Report for the fiscal years ended September 30, 2014 and 2013. Audit fees also include fees for services provided
by Sadler Gibb for the review of our quarterly consolidated financial statements included in our quarterly filings on Form 10-Q
for the periods ending December 31, 2013, March 31, 2014 and June 30, 2014. Audit fees also include fees for services provided
by Sadler Gibb for the review of our quarterly consolidated financial statements included in our quarterly filings on Form 10-Q
for the periods ending December 31, 2012, March 31, 2013 and June 30, 2013.
Audit
Committee Pre-Approval Policies and Procedures
Our
recently appointed audit committee is responsible for appointing, setting the compensation and overseeing the work of the independent
auditor. Our audit committee pre-approves all audit and non-audit services provided by our independent auditor.
Because
our Board only recently appointed an audit committee and adopted an audit committee charter, our Board as a whole pre-approved
all audit and non-audit services provided by Sadler Gibb for the fiscal year ended September 30, 2104. Further our Board considered
the nature and amount of the fees billed by Sadler Gibb, and believes that the provision of the services for activities unrelated
to the audit of our September 30, 2014 financial statements is compatible with maintaining the independence of Sadler Gibb.
PART
IV
ITEM 15. |
EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Financial
Statements filed with this Annual Report
The
following listed financial statements and report of independent registered public accounting firm are filed as part of this Annual
Report (see disclosure under Item 8 “Financial Statements and Supplementary Data” of this Annual Report for further
information)
| 1. | Consolidated
Balance Sheets for September 30, 2014 and 2013. |
| 2. | Consolidated
Statements of Operations for the years ended September 30, 2014 and 2013. |
| 3. | Consolidated
Statements of Shareholders’ Equity for the period from September 30, 2012 to September
30, 2014. |
| 4. | Consolidated
Statements of Cash Flows for the years ended September 30, 2014 and 2013. |
| 5. | Notes
to the Consolidated Financial Statements. |
| 6. | Sadler,
Gibb & Associates, LLC Report of Independent Registered Public Accounting Firm. |
Financial
Statement Schedules filed with this Annual Report
None.
Exhibits
The following
Exhibits have been or are being filed herewith and are numbered in accordance with Item 601 of Regulation S-K:
Exhibit
No. |
|
Description |
2.1 |
|
Liquidating
Plan of Reorganization of Allied Devices Corporation, now known as Deep Well Oil & Gas, Inc. (incorporated by reference
to Exhibit 2.1 to our Form 10-K/A filed on January 28, 2004). |
2.2 |
|
Order
and Plan of Reorganization of the U.S. Bankruptcy Court in and for the Eastern District of New York, In re: Allied Devices
Corporation, Chapter 11, Case No. 03-80962-511, dated September 10, 2003 (incorporated by reference to Exhibit 2.2 to our
Form 10-K/A filed on January 28, 2004). |
3.1 |
|
Restated
and Amended Articles of Incorporation filed with and accepted by the Secretary of State of Nevada on October 22, 2003, changing
the name to “Deep Well Oil and Gas, Inc.” and otherwise implementing the Plan (incorporated by reference to Exhibit
3.1 to our Form 10-K/A filed on January 28, 2004). |
3.2 |
|
Amended
Articles of Incorporation filed with the State of Nevada on February 27, 2004, reflecting our two (2) shares for one (1) share
forward stock split (incorporated by reference to Exhibit 3.1 to our Form 8-K filed on March 5, 2004). |
3.3 |
|
Amended
Articles of Incorporation filed with the State of Nevada on May 5, 2004, reflecting our three (3) shares for one (1) share
forward stock split (incorporated by reference to Exhibit 3.2 to our Form 8-K filed on May 7, 2004). |
3.4 |
|
Registrant’s
By-laws, filed with Form 10-KSB on February 23, 2007 (incorporated by reference to Exhibit 3.4 to our Form 10-KSB filed on
February 23, 2007). |
3.5 |
|
Registrant’s
Amended and Restated By-laws, filed with Form 8-K on September 3, 2009 (incorporated by reference to Exhibit 3.1 to our Form
8-K filed on September 3, 2009). |
3.6 |
|
Amended
Articles of Incorporation filed with the State of Nevada on May 15, 2013 and effective on May 24, 2013, increasing the aggregate
number of shares which the Company has authority to issue from 300,000,000 common shares, with $0.001 par value per share,
to 600,000,000 shares of common stock, with $0.001 par value per share (incorporated by reference to Exhibit 3.1 to our Form
8-K filed on May 17, 2013). |
4.1 |
|
Form
of Warrant issued pursuant to a Subscription Agreement dated effective November 23, 2012 by and among our Company with one
investor related to one Private Placement offering (incorporated by reference to Exhibit 4.2 to our Form 8-K filed on December
12, 2012). |
4.2* |
|
Form
of Warrant issued pursuant to a Subscription Agreement dated July 10, 2013 by and among our Company with a consultant of our
Company related to an Amending Agreement by and between Northern Alberta Oil Ltd. and Portwest Investments Ltd., dated July
10, 2013 (incorporated by reference to Exhibit 4.2 to our Form 8-K filed on July 16, 2013). |
10.1* |
|
Consulting
agreement by and between Northern Alberta Oil Ltd. and Portwest Investments Ltd., dated July 1, 2005 (incorporated by reference
to Exhibit 10.16 to our Form 10-KSB filed on February 23, 2007). |
10.2* |
|
Consulting
agreement by and between Northern Alberta Oil Ltd. and Concorde Consulting, dated July 1, 2005 (incorporated by reference
to Exhibit 10.17 to our Form 10-KSB filed on February 23, 2007). |
10.3* |
|
Deep
Well Oil & Gas, Inc. Stock Option Plan, effective November 28, 2005 and amended December 4, 2013. |
10.4 |
|
Sample
Stock Option Agreement issued on March 23, 2011, to six directors (Mr. Said Arrata, Mr. Satya Brata Das, Mr. David Roff, Dr.
Horst A. Schmid, Mr. Curtis James Sparrow and Mr. Malik Youyou) of the Company. |
Exhibit
No. |
|
Description |
|
|
|
10.5 |
|
Form
of Subscription Agreement dated effective November 23, 2012 by and among our Company with one investor (incorporated by reference
to Exhibit 4.1 to our Form 8-K filed on December 12, 2012). |
10.6 |
|
Form
of Purchase and Sale Agreement effective December 3, 2012 by and among our Company and 1132559 Alberta Ltd. (incorporated
by reference to Exhibit 10.1 to our Form 8-K filed on December 17, 2012). |
10.7 |
|
Sample
Stock Option Agreement issued on June 20, 2013, to six directors (Mr. Said Arrata, Mr. Satya Brata Das, Mr. David Roff, Dr.
Horst A. Schmid, Mr. Curtis James Sparrow and Mr. Malik Youyou) of the Company. |
10.8* |
|
Stock
Option Agreement issued on June 20, 2013, to Concorde Consulting. |
10.9* |
|
Stock
Option Agreement issued on June 20, 2013, to Portwest Investments Ltd. |
10.10 |
|
Sample
Stock Option Agreement issued on June 20, 2013, to one employee of the Company. |
10.11* |
|
Form
of Subscription Agreement dated July 10, 2013 by and among our Company with a consultant of our Company, related to an Amending
Agreement by and between Northern Alberta Oil Ltd. and Portwest Investments Ltd., dated July 10, 2013 (incorporated by reference
to Exhibit 4.1 to our Form 8-K filed on July 16, 2013). |
10.12* |
|
Amended
Consulting Agreement by and between Northern Alberta Oil Ltd. and Portwest Investments Ltd., dated July 10, 2013 (incorporated
by reference to Exhibit 10.3 to our Form 8-K filed on July 16, 2013). |
10.13 |
|
Form
of Subscription Agreement dated effective July 31, 2013 by and among our Company with one investor (incorporated by reference
to Exhibit 4.1 to our Form 8-K filed on August 5, 2013 and Exhibit 4.1 to our Form 8-K/A filed on October 15, 2013). |
10.14 |
|
Farmout
Agreement between the Company and Farmee dated July 31, 2013 (incorporated by reference to Exhibit 10.1 to our Form 8-K/A
filed on October 15, 2013). |
10.15 |
|
SAGD
Demonstration Project Agreement dated July 30, 2013 between the Company and its joint venture partner (incorporated by reference
to Exhibit 4.1 to our Form 8-K filed on August 21, 2013). |
10.16 |
|
Stock
Option Agreement issued on October 28, 2013, to a contractor of the Company. |
10.17 |
|
Stock
Option Agreement issued on December 4, 2013, to a director (Mr. Pascal Node-Langlois) of the Company. |
10.18 |
|
Acquisition
of Royalty Interest Agreement dated March 18, 2014 between Northern Alberta Oil Ltd. and JV Partner (incorporated by reference
to Exhibit 10.1 to our Form 8-K filed on July 3, 2014). |
10.19 |
|
General
Indenture of Conveyance, Assignment and Transfer Agreement dated March 18, 2014 between Northern Alberta Oil Ltd. and JV Partner
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed on July 3, 2014). |
10.20 |
|
Acquisition
of Royalty Interest Agreement dated June 16, 2014 between Northern Alberta Oil Ltd. and Mr. Malik Youyou (incorporated by
reference to Exhibit 10.1 to our Form 8-K filed on July 3, 2014). |
10.21 |
|
General
Indenture of Conveyance, Assignment and Transfer Agreement dated June16, 2014 between Northern Alberta Oil Ltd. and Mr. Malik
Youyou (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on July 3, 2014). |
10.22 |
|
Sample
Stock Option Agreement issued on September 19, 2014, to seven directors (Mr. Said Arrata, Mr. Satya Brata Das, Mr. Pascal
Node-Langlois, Mr. David Roff, Dr. Horst A. Schmid, Mr. Curtis James Sparrow and Mr. Malik Youyou) of the Company. |
10.23* |
|
Sample
Stock Option Agreement issued on September 19, 2014, to Concorde Consulting. |
10.24* |
|
Sample
Stock Option Agreement issued on September 19, 2014, to Portwest Investments Ltd. |
10.25 |
|
Sample
Stock Option Agreement issued on September 19, 2014, to one employee of the Company. |
10.26 |
|
Sample
Indemnity Agreement with all directors of the Company (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on
September 25, 2014). |
10.27 |
|
Stock
Option Agreement issued on November 17, 2014, to a director (Mr. Colin Outtrim) of the Company. |
10.28 |
|
Farmout
Amending Agreement dated November 17, 2014 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on November 21,
2014). |
14.1 |
|
Code
of Business Conduct and Ethics. |
16.1 |
|
Changes
in registrant’s certifying accountant, Letter of Madsen & Associates, CPA’s Inc. dated November 16, 2012 (incorporated
by reference to Exhibit 16.1 to our Form 8-K filed on December 17, 2012). |
21.1 |
|
Subsidiaries
of Registrant. |
23.1 |
|
Consent
of DeGolyer and MacNaughton Canada Limited, independent petroleum engineers. |
31.1 |
|
Certification
of President and Chief Executive Officer pursuant to Rule 13a-14(a). |
31.2 |
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a. |
32.1 |
|
Certification
of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
32.2 |
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
99.1 |
|
Insider
Trading Policy. |
99.2 |
|
Audit
Committee Whistle-Blower Policy. |
99.3 |
|
Audit
Committee Charter. |
99.4 |
|
Compensation
Committee Charter. |
99.5 |
|
Corporate
Governance and Nominating Committee Charter. |
99.6 |
|
Reserves
and Resources Committee Charter. |
101 |
|
Interactive
Data Files |
* Management
contract or compensatory plan or arrangement.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
DEEP
WELL OIL & GAS, INC. |
|
|
|
|
|
By |
/s/
Horst A. Schmid |
|
|
|
Dr.
Horst A. Schmid |
|
|
|
Chairman
of the Board |
|
|
|
|
|
Date |
January
13, 2015 |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
|
By |
/s/
Horst A. Schmid |
|
|
|
Dr.
Horst A. Schmid |
|
|
|
Chief
Executive Officer and President |
|
|
|
(Principal
Executive Officer) |
|
|
|
|
|
Date |
January
13, 2015 |
|
|
|
|
|
By |
/s/
Curtis James Sparrow |
|
|
|
Mr.
Curtis James Sparrow |
|
|
|
Chief
Financial Officer |
|
|
|
(Principal
Financial Officer) |
|
|
|
|
|
Date |
January
13, 2015 |
Exhibit
10.3
STOCK
OPTION PLAN
SECTION
1. GENERAL PROVISION
1.1
Purpose
The
purpose of the Stock Option Plan (the Plan") of Deep Well Oil & Gas, Inc. (herein called the "Corporation")
is to advance the interests of the Corporation by:
(A)
providing Eligible Persons with additional incentive;
(B)
encouraging stock ownership by such Eligible Persons;
(C)
increasing their proprietary interest in the success of the Corporation;
(D)
encouraging them to remain with the Corporation or its Subsidiaries; and
(E)
attracting new employees, officers and directors.
Options
issued under this Plan will not be Incentive Stock Options under Internal Revenue Code Section 422.
1.2
Administration
(A)
The Plan shall be administered by the Board of Directors of the Corporation (the “Board”)
(B)
Subject to the limitations of the Plan, the Board shall have the authority:
| (i) | to
grant Options to acquire shares of common stock of the Corporation (the "Common Shares") to Eligible Persons; |
| (ii) | to
determine the terms, limitations, restrictions and conditions upon such grants; |
| (iii) | to
interpret the Plan and to adopt, amend and rescind such administrative guidelines and other rules and regulations relating to
the Plan as it shall from time to time deem advisable; and |
| (iv) | to
make all other determinations and to take all other actions in connection with the implementation and administration of the Plan
as it may deem necessary or advisable. The Board's guidelines, rules, regulations, interpretations and determinations shall be
conclusive and binding upon the Corporation and all other persons. |
(C)
No Option shall be granted under the Plan unless recommended and approved by the Board.
1.3
Interpretation
For
the purposes of the Plan, the following terms shall have the following meanings:
| (A) | "Code"
means the United States Internal Revenue Code of 1986, as amended; |
| (B) | "Eligible
Person" means a director, senior officer or employee of, or a consultant (or their corporation) or any other person or corporation
providing services to, the Corporation or of any Subsidiary pursuant to a written contract; |
| (C) | "Fair
Market Value" means, subject to applicable exchange requirements, the last closing price for Common Shares on the date of
reference on wherever the Corporation is listed, (presently the “OTCQB Marketplace”), or if the Common Shares are
not listed or admitted to trading on any exchange, as determined by any other appropriate method selected by the Board. |
| (D) | “Insider”
if used in relation to the Corporation, means: |
| (i) | a
director or senior officer of the Corporation, |
| (ii) | a
director or senior officer of of a company that is an Insider or subsidiary of the Corproation, |
| (iii) | a
person that beneficially owns or controls, directly or indirectly, voting shares carrying more than 10% of the voting rights attached
to all outstanding voting shares of the Corporation, or |
| (iv) | the
Corporation itself if it holds any of its own securities. |
| (E) | "Option"
means an option to acquire Common Shares granted under the Plan; |
| (F) | "Participant"
means an Eligible Person to whom Options have been granted; |
| (G) | "Subsidiary"
means any company that is a subsidiary of the Corporation as defined in section 424(f) of the Code; |
| (H) | "Underlying
Share" means a Common Share issuable upon the exercise of an Option; and |
|
(I) | "Year"
with respect to any Option granted under the Plan means the period of 12 months commencing on the date of the granting of such
Option or on any anniversary thereof. |
Words
importing the singular number only shall include the plural and vice versa and words importing the masculine shall include the
feminine.
The
Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the
State of Nevada.
1.4
Shares Reserved
All
shares of the Corporation issued under the Plan shall be Common Shares in the capital stock of the Corporation. Options may be
granted in respect of authorized and unissued Common Shares.
The
maximum number of Common Shares which may be reserved for issuance under the Plan shall be no more than 10% of the Company’s
issued and outstanding Common Shares, which number is subject to adjustment in accordance with the provisions of the Plan.
The
aggregate number of Common Shares with respect to which Options may be vested to any one person (together with their associates)
under this Plan, together with all other incentive plans of the Corporation in:
| (A) | any
one Year shall not exceed 2% of the total number of common shares outstanding, and |
| (B) | in
total shall not exceed 6% of the total number of common shares outstanding. |
Any
Common Shares subject to an Option that for any reason expires without having been exercised, shall again be available for grants
under the Plan. No fractional shares shall be issued, and the Board may determine the manner in which fractional share value shall
be treated.
In
the event of any change in the outstanding Common Shares by reason of any stock dividend or split, recapitalization, merger, arrangement,
consolidation, combination or exchange of shares, or other corporate change, or in the event of any issue of rights pursuant to
a shareholder rights plan or other similar plan, the Board shall make, subject to the prior approval of any relevant stock exchange,
appropriate substitution or adjustment in:
| (A) | the
number or kind of shares or other securities reserved for issuance pursuant to the Plan; and |
| (B) | the
number and kind of shares subject to unexercised Options theretofore granted and in the Exercise Price of such Options; provided,
however, that no substitution or adjustment shall obligate the Corporation to issue or sell fractional shares. In the event of
the reorganization of the Corporation or the amalgamation, merger or consolidation of the Corporation with another corporation,
or the payment of a special or extraordinary dividend, the Board may make such provision for the protection of the rights of Participants
as the Board in its sole discretion deems appropriate. |
1.5
Non-Exclusivity
Nothing
contained herein shall prevent the Corporation from adopting other or additional compensation arrangements, subject to any required
approval.
1.6
Amendment and Termination
No
Option shall be granted hereunder after October 31, 2019; provided, however, that the Board of Directors may at any time prior
to that date amend, suspend or terminate the Plan or any portion thereof. No such amendments, suspension or termination shall
alter or impair any Options or any rights pursuant thereto granted previously to any Participant without the consent of such Participant.
Any reduction in the exercise price of Options held by Insiders at the time of the proposed amendment requires disinterested shareholder
approval. In the event of termination of the Plan, the provisions of the Plan and any administrative guidelines, and other rules
and regulations adopted by the Board and in force at the time of the Plan termination shall continue in effect during such time
as an Option or any rights pursuant thereto remain outstanding.
1.7
Compliance with Legislation
The
Board may postpone the exercise of any Option or the issue of any Underlying Shares pursuant to the Plan for such time as the
Board in its discretion may deem necessary in order to permit the Corporation to effect or maintain registration of the Plan or
the Common Shares issuable pursuant thereto under the securities laws of any applicable jurisdiction, or to determine that such
shares and the Plan are exempt from such registration. The Corporation shall not be obligated by any provision of the Plan or
grant thereunder to sell or issue Common Shares in violation of the law of any government or exchange having jurisdiction therein.
In addition, the Corporation shall have no obligation to issue any Common Shares pursuant to the Plan unless such Common Shares
shall have been duly listed, upon official notice of issuance, with a stock exchange on which such Common Shares are listed for
trading.
1.8
Acceleration of Exercisability of Options Upon Occurrence of Certain Events.
The
Board may, in its discretion, provide in the case of any Option granted under the Plan that, in connection with any merger, arrangment
or consolidation which results in the holders of the outstanding voting securities of the Corporation (determined immediately
prior to such merger or consolidation) owning, directly or indirectly, less than a majority of the outstanding voting securities
of the surviving corporation (determined immediately following such merger or consolidation), or any sale or transfer by the Corporation
of all or substantially all its assets or any tender offer or exchange offer for or the acquisition, directly or indirectly, by
any person or group of all or a majority of the then outstanding voting securities of the Corporation, such Option shall become
exercisable in full or part, notwithstanding any other provision of the Plan or of any outstanding Options granted thereunder,
on and after
(A)
the fifteenth day prior to the effective date of such merger, arrangement, consolidation, sale, transfer or acquisition or
(B)
the date of commencement of such tender offer or exchange offer, as the case may be.
SECTION
2. OPTIONS
2.1
Grants
Subject
to the provisions of the Plan, the Board shall have the authority to determine the limitations, restrictions and conditions, if
any, in addition to those set forth in Section 2.3 hereof, applicable to the exercise of an Option, including, without limitation,
the nature and duration of the restrictions, if any, to be imposed upon the sale or other disposition of the Underlying Shares,
and the nature of the events, if any, and the duration of the period in which any Participant's rights in respect of the Underlying
Shares may be forfeited. An Eligible Person may receive Options on more than one occasion under the Plan and may receive separate
Options on any one occasion. At the date of grant of any option hereunder, the Eligible Person must be a bona fide director, officer,
employee, consultant (or other person providing services) of the Corporation or its Subsidaries.
2.2
Option Exercise Price
The
Board shall establish the exercise price ("Exercise Price") of each Option at the time such Option is granted, which
shall not be less than the Fair Market Value of a Common Share on the date of grant of such Option.
The
Exercise Price shall be subject to adjustment in accordance with the provisions of Section 1.4 hereof.
2.3
Exercise of Options
(A)
The Board shall determine the time or times at which an Option may be exercised in whole or in part, and the method or methods
by which, and the form or forms (including, without limitation, cash, Common Shares, or other property, or any combination thereof,
having a value on the exercise date equal to the relevant Exercise Price) in which payment of the Exercise Price may be made or
deemed to have been made. The Board may provide for the receipt, without payment by the Participant, of an amount per Option (the
"Growth Amount") equal to the difference between the Exercise Price of the Option and the Fair Market Value of the Common
Shares, which Growth Amount, at the election of the Participant, will be payable either in cash or by the issuance by the Corporation
to the Participant of that number of Common Shares calculated by dividing the Growth Amount by the Fair Market Value of a Common
Share.
(B)
Options shall not be exercisable later than 5 years after the date of grant.
(C)
The Board may determine when any Option shall become exercisable and may determine that the Option can be exercisable in installments.
(D)
Except as otherwise determined by the Board:
|
(i) |
If a Participant ceases to be an Eligible Person as a result of termination
for cause (as such term is defined at common law), no Option held by such Participant may be exercised following the date on which
such Participant ceased to be an Eligible Person; |
|
(ii) |
If a Participant ceases to be an Eligible Person for any reason other than
termination for cause or death, any vested Option held by such Participant may continue be exercised by the Participant to and
until the earlier of: |
|
(a) |
the applicable expiration of the Option Period in respect of such Option;
and |
|
(b) |
the period after the date on which such Participant ceases to be an Eligible
Person that is permitted by the applicable laws, policies, rules and regulations of any stock exchange upon which the Underlying
Shares are then listed, posted and/or quoted for trading.; and |
(iii)
in the event of death, the heirs, administrators or legal representatives of a Participant may exercise the Participant's Options
within twelve months after the date of the Participant's death to the extent such Options were by their terms exercisable prior
to his death or within the period of twelve months following his death; but for greater certainty no Option shall be exercisable
after its stated termination date. In the event that the heirs, administrators or legal representatives of a Participant who has
died exercises the Participant's Option in accordance with the terms of the Plan, the Corporation shall have no obligation to
issue the Common Shares until evidence satisfactory to the Corporation has been provided by such heirs, administrators or legal
representatives that such heirs, administrators or legal representatives are entitled to acquire the Common Shares under the Plan.
(E)
Except as provided in Section 2.3(d), or as otherwise provided in the applicable Option Agreement, during the lifetime of a Participant,
Options held by such Participant shall be exercisable only by him and no Option shall be transferable other than by will or the
laws of descent and distribution.
(F)
Each Option shall be confirmed by an agreement (an "Option Agreement") executed by the Corporation and by the Participant.
(G)
If, as and when any Common Shares have been duly issued upon the exercise of an Option and in accordance with the terms of such
Option and the Plan, such Underlying Shares shall be conclusively deemed allotted as fully paid and non-assessable shares of the
Corporation.
(H)
Options may not be exercised for fewer than 1000 Common Shares at any one time, unless the Participant holds Options for less
than 1000 Underlying Shares.
SECTION
3. APPROVAL
3.1
Approval
The
Plan was approved by the Board of Directors on November 28, 2005, and was approved by the stockholders of the Corporation at its
February 24, 2010 Meeting. The Plan was subsequently amended in accordance with provisions in the Plan by the Board on December
4, 2013.
SECTION
4. MISCELLANEOUS
4.1
Withholding
It
shall be a condition to the obligation of the Corporation to issue Common Shares upon exercise of an Option that the Participant
(or any beneficiary, transferee or person entitled to act under Sections 2.3(d) or 2.3(e) hereof) pay to the Corporation, upon
its demand, such amount as may be requested by the Corporation for the purpose of satisfying any liability to withhold federal,
state or local income or other taxes. If the amount requested is not paid, the Corporation may refuse to issue such Common Shares.
4.2
Issuance of Certificates; Legends
Common
Shares duly acquired under the terms of an Option shall be registered in the name of the Participant and a share certificate representing
the number of such Common Shares shall be issued in the name of the Participant, his or her legal representatives or as he, she
or they may direct. The Corporation may endorse such legend or legends upon the certificates for Common Shares issued upon the
exercise of an Option granted hereunder and may issue such "stop transfer" instructions to its transfer agent in respect
of such shares as, in its absolute discretion, it determines to be necessary or appropriate.
4.3
Correction of Defects, Omissions, and Inconsistencies
The
Board may correct any defect, supply any omission, or reconcile any inconsistency in this Plan in the manner and to the extent
it shall deem desirable to carry this Plan into effect, subject to applicable regulatory approval if any.
4.4
Other Actions
Nothing
contained in this Plan shall be construed to limit the authority of the Corporation to exercise its corporate rights and powers,
including but not by way of limitation, the right of the Corporation to grant Options for proper corporate purposes other than
under the Plan with respect to any other person, firm, corporation or association.
The
Plan was adopted by the Board on November 28, 2005 and then amended on December 4, 2013.
Page
8 of 8
Exhibit
10.4
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This
NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made this 23rd day of March, 2011, by and
between Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and ________________________,
an individual resident of ________________________a (“Optionee”).
1. Grant
of Option
The
Corporation hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of
450,000 shares (the “Shares”) of Common Stock of the Corporation at the exercise price of $0.14 US per share
according to the terms and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock
Option Plan (the “Plan”). The Option will not be treated as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued under the Plan
and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i)
150,000 Shares immediately,
(ii)
150,000 Shares on March 23, 2012,
(iii)
150,000 Shares on March 23, 2013,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable by Optionee,
other than by will or the laws of descent and distribution. Notwithstanding the foregoing, until such time as the Corporation
inter-lists on an exchange in Canada, and with the prior written consent of the Corporation, Optionee may transfer the Option
to a member of the immediate family of such Optionee or to a trust, partnership, limited partnership, limited liability company
or other entity formed exclusively for the benefit of such Optionee or members of the immediate family of such Optionee (“Family
Member”), provided, however, that
(i) Optionee
may not receive any consideration for such transfer,
(ii) the
Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of the descent
and distribution and
(iii)
the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii)
within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit
10.7
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 20th day of June, 2013, by and between Deep
Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and Mr. ________________________, an
individual resident of _______________________ (“Optionee”).
1.
Grant of Option
The
Corporation hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of
450,000 shares (the “Shares”) of Common Stock of the Corporation at the exercise price of $0.05 US per share
according to the terms and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock
Option Plan (the “Plan”). The Option will not be treated as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued under the Plan
and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2.
Vesting of Option Rights; Transferability
(A)
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i)
150,000 Shares immediately,
(ii)
150,000 Shares on June 20, 2014,
(iii)
150,000 Shares on June 20, 2015,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B)
During the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable
by Optionee, other than by will or the laws of descent and distribution. Notwithstanding the foregoing, until such time as
the Corporation inter-lists on an exchange in Canada, and with the prior written consent of the Corporation, Optionee may
transfer the Option to a member of the immediate family of such Optionee or to a trust, partnership, limited partnership,
limited liability company or other entity formed exclusively for the benefit of such Optionee or members of the immediate
family of such Optionee (“Family Member”), provided, however, that
(i)
Optionee may not receive any consideration for such transfer,
(ii)
the Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of
the descent and distribution and
(iii)
the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii)
within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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OPTIONEE |
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Page 6 of 6
Exhibit 10.8
Deep Well Oil
& Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK OPTION AGREEMENT
(the “Agreement”) is made this 20th day of June, 2013, by and between Deep Well Oil & Gas,
Inc., a Nevada corporation (the “Corporation”) and __________________________, an Alberta Company (“Optionee”).
Whereas the Optionee has
entered in to a consulting services agreement with a subsidiary of the Corporation dated July 1, 2005 (“Consulting Agreement”)
1. Amendment to Existing
Agreement
This Agreement shall replace
clause 5.0 in the Consulting Agreement and amend it accordingly.
2. Grant of Option
The Corporation hereby grants
Optionee the option (the “Option”) to purchase all or any part of an aggregate of 1,000,000 shares (the “Shares”)
of Common Stock of the Corporation at the exercise price of $0.05 per share according to the terms and conditions set forth in
this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”). The
Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions. A copy
of the Plan will be furnished upon request of Optionee.
The Option shall terminate
at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting of Option
Rights; Transferability
(A) This Option shall
be exercisable, in whole or in part, according to the following vesting schedule:
(i) 500,000
Shares immediately,
(ii) 500,000
Shares on June 20, 2014,
subject to Optionee’s continuing to provide
services to the Corporation or any Subsidiary as an employee, director or consultant, as the case may be, provided that the Optionee
continues to provide services on such anniversary date.
(iii) During
the lifetime of the consulting contract with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise of Option
after Death or Termination of Services or Employment
Except as otherwise determined
by the Board:
(A) In the event that
an Optionee ceases to provide services to the Corporation as a result of termination for cause (as
such term is defined in clause 22.3 of the Consulting Agreement), each of the Options held by the Optionee shall cease to
be exercisable after the date of termination of services as a consultant.
(B) In the event that
an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any vested Option held
by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the applicable
expiration of the Option Period in respect of such Option; and
(ii) the period
after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws, policies,
rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for trading;
(C) Notwithstanding the
above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method of Exercise
of Option
Subject to the foregoing,
the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Corporation at its
principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised
and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in cash (including bank check, personal
check or money order payable to the Corporation),
(B) with the approval of the Corporation (which
may be given in its sole discretion), by delivering to the Corporation for cancellation shares of the Corporation’s Common
Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal to the full exercise price of the Shares
being acquired,
(C) with the approval of the Corporation (which
may be given in its sole discretion), by electing to have the Corporation retain from the number of Shares to be issued to the
Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of exercise equal to the aggregate exercise
price payable upon exercise of such Option;
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option) shall concurrently provide
irrevocable instructions
(i) to a Corporation designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income
and employment taxes required to be withheld by the Corporation by reason of such exercise and
(ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in order to complete the sale; or
(E) by any combination of the methods of payment
described above.
6. Securities Law
Matters.
(A) Restricted Securities.
The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the United States Securities
Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in reliance on an exemption from
the registration requirements of the Securities Act, and that the Option and the Shares are, or will be, as applicable, “restricted
securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor.
The Optionee represents that it is an “accredited investor” within the meaning of Rule 501(a) under the Securities
Act.
(C) Restrictions on
Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from the
registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed exercise,
the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares may be issued
pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale Restrictions.
The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement, the Option
and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within
the United States, in a transaction that does not require registration under the Securities Act or any applicable state securities
laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may require an
opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer may be effected
without registration under the Securities Act or applicable state securities laws.
(E) Legend. The
Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as the
same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates representing
the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with respect to the
transfer restrictions set forth above.
7. Miscellaneous
(A) Plan Provisions
Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan, the terms of the Plan shall control.
(B) No Rights of Stockholders.
Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of the rights
and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such Shares have been issued in
the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No Right to Employment.
The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ of, or as giving a director
of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of the Corporation or a Subsidiary,
nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such employment or position at any time,
with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss Optionee from employment, or terminate
the term of a director of the Corporation or a Subsidiary, free from any liability or any claim under the Plan or the Agreement.
Nothing in the Agreement shall confer on any person any legal or equitable right against the Corporation or any Subsidiary, directly
or indirectly, or give rise to any cause of action at law or in equity against the Corporation or a Subsidiary. The Option granted
hereunder shall not form any part of the wages or salary of Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of
the Corporation or any Subsidiary be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan
which such optionee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way
of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed
to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted
by the Committee and shall be fully bound thereby.
(D) Governing Law.
The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the
Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to
such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No Trust or Fund
Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions Precedent
to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless such exercise
and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the corporate laws of the state
of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of counsel for the Corporation, such a representation
and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment to
Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of the
Corporation into Shares.
(K) Review of Plan.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Board upon any questions arising under the Plan or this Option.
(L) Change of Address.
Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN WITNESS WHEREOF,
the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit 10.9
Deep Well Oil
& Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK OPTION AGREEMENT
(the “Agreement”) is made this 20th day of June, 2013, by and between Deep Well Oil & Gas,
Inc., a Nevada corporation (the “Corporation”) and __________________________, an Alberta Company (“Optionee”).
Whereas the Optionee has
entered in to a consulting services agreement with a subsidiary of the Corporation dated July 1, 2005 and whereas
the Corporation entered into an Amending Agreement dated July 10, 2013 with the Optionee to amend the Consulting Agreement dated
July 1, 2005 between the Corporation and the Optionee (the “Amended Consulting Agreement”).
1. Amendment to Existing
Agreement
This Agreement shall replace
clause 2.0 in the Amended Consultant Agreement dated July 10, 2013 and amend it accordingly.
2. Grant of Option
The Corporation hereby grants
Optionee the option (the “Option”) to purchase all or any part of an aggregate of 1,000,000 shares (the “Shares”)
of Common Stock of the Corporation at the exercise price of $0.05 per share according to the terms and conditions set forth in
this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”). The
Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions. A copy
of the Plan will be furnished upon request of Optionee.
The Option shall terminate
at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting of Option
Rights; Transferability
(A) This Option shall
be exercisable, in whole or in part, according to the following vesting schedule:
(i) 500,000
Shares immediately,
(ii) 500,000
Shares on June 20, 2014,
subject to Optionee’s continuing to provide
services to the Corporation or any Subsidiary as an employee, director or consultant, as the case may be, provided that the Optionee
continues to provide services on such anniversary date.
(iii) During
the lifetime of the consulting contract with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise of Option
after Death or Termination of Services or Employment
Except as otherwise determined
by the Board:
(A) In the event that
an Optionee ceases to provide services to the Corporation as a result of termination for cause (as
such term is defined in clause 22.3 of the Consulting Agreement), each of the Options held by the Optionee shall cease to
be exercisable after the date of termination of services as a consultant.
(B) In the event that
an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any vested Option held
by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the applicable
expiration of the Option Period in respect of such Option; and
(ii) the period
after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws, policies,
rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for trading;
(C) Notwithstanding the
above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method of Exercise
of Option
Subject to the foregoing,
the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Corporation at its
principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised
and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in cash (including bank check, personal
check or money order payable to the Corporation),
(B) with the approval of the Corporation (which
may be given in its sole discretion), by delivering to the Corporation for cancellation shares of the Corporation’s Common
Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal to the full exercise price of the Shares
being acquired,
(C) with the approval of the Corporation (which
may be given in its sole discretion), by electing to have the Corporation retain from the number of Shares to be issued to the
Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of exercise equal to the aggregate exercise
price payable upon exercise of such Option;
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option) shall concurrently provide
irrevocable instructions
(i) to a Corporation designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income
and employment taxes required to be withheld by the Corporation by reason of such exercise and
(ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in order to complete the sale; or
(E) by any combination of the methods of payment
described above.
6. Securities Law
Matters.
(A) Restricted Securities.
The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the United States Securities
Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in reliance on an exemption from
the registration requirements of the Securities Act, and that the Option and the Shares are, or will be, as applicable, “restricted
securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor.
The Optionee represents that it is an “accredited investor” within the meaning of Rule 501(a) under the Securities
Act.
(C) Restrictions on
Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from the
registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed exercise,
the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares may be issued
pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale Restrictions.
The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement, the Option
and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within
the United States, in a transaction that does not require registration under the Securities Act or any applicable state securities
laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may require an
opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer may be effected
without registration under the Securities Act or applicable state securities laws.
(E) Legend. The
Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as the
same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates representing
the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with respect to the
transfer restrictions set forth above.
7. Miscellaneous
(A) Plan Provisions
Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan, the terms of the Plan shall control.
(B) No Rights of Stockholders.
Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of the rights
and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such Shares have been issued in
the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No Right to Employment.
The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ of, or as giving a director
of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of the Corporation or a Subsidiary,
nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such employment or position at any time,
with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss Optionee from employment, or terminate
the term of a director of the Corporation or a Subsidiary, free from any liability or any claim under the Plan or the Agreement.
Nothing in the Agreement shall confer on any person any legal or equitable right against the Corporation or any Subsidiary, directly
or indirectly, or give rise to any cause of action at law or in equity against the Corporation or a Subsidiary. The Option granted
hereunder shall not form any part of the wages or salary of Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of
the Corporation or any Subsidiary be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan
which such optionee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way
of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed
to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted
by the Committee and shall be fully bound thereby.
(D) Governing Law.
The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the
Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to
such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No Trust or Fund
Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions Precedent
to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless such exercise
and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the corporate laws of the state
of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of counsel for the Corporation, such a representation
and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment to
Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of the
Corporation into Shares.
(K) Review of Plan.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Board upon any questions arising under the Plan or this Option.
(L) Change of Address.
Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN WITNESS WHEREOF,
the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit 10.10
Deep
Well Oil & Gas, Inc.
NON-Qualified
STOCK OPTION AGREEMENT
This
NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made as of June 20, 2013, by and between Deep
Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and ____________________, an
_____________ (“Optionee”).
Whereas
the Optionee has entered in to an employment agreement and an amendment to the original employment agreement with a subsidiary
of the Corporation effective November 7, 2005 (“Employment Agreement and Amendment”).
1. Amendment
to Existing Agreement
This
Agreement shall replace clause 6.0 in the Employment Agreement and Amendment and amend it accordingly.
2. Grant
of Option
The
Corporation hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of
150,000 shares (the “Shares”) of Common Stock of the Corporation at the exercise price of $0.05 USD per share
according to the terms and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock
Option Plan (the “Plan”). The Option will not be treated as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued under
the Plan and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
| i. | 50,000
Shares immediately, |
| ii. | 50,000
Shares on June 20, 2014 |
| iii. | 50,000
Shares on June 20, 2015 |
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, provided that the Optionee continues to provide services on such vesting date.
(B) During
the lifetime of the employee agreement with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined in clause 7(a)(ii) of the Employment Agreement), each of the Options held by the Optionee shall cease to be exercisable
after the date of termination of services as a consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any
vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
6. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B)
Securities Representations. The Optionee represents that it is resident in Canada, was offered the Options in Canada and
executed this Agreement in Canada.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
7. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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6
Exhibit
10.16
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This
NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made this 28th day of October, 2013, by and
between Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and ________________________,
an individual resident of ________________ (“Optionee”).
1. Grant
of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 250,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.30 US per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i)
250,000 Shares vesting immediately,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall
not be assignable or transferable by Optionee, other than by will or the laws of descent
and distribution. Notwithstanding the foregoing, until such time as the Corporation inter-lists
on an exchange in Canada, and with the prior written consent of the Corporation, Optionee
may transfer the Option to a member of the immediate family of such Optionee or to a
trust, partnership, limited partnership, limited liability company or other entity formed
exclusively for the benefit of such Optionee or members of the immediate family of such
Optionee (“Family Member”), provided, however, that
(i) Optionee
may not receive any consideration for such transfer,
(ii) the
Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of the descent
and distribution and
(iii)
the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised
only pursuant to an exemption from the registration requirements of the Securities Act
and applicable state securities laws, and that at the time of any proposed exercise,
the Corporation may require an opinion of counsel or other evidence satisfactory to it
to the effect that the Shares may be issued pursuant to such exercise without registration
under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii)
within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit
10.17
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 4th day of December, 2013, by and between Deep
Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and ______________________, an individual
resident of ______________________ (“Optionee”).
1. Grant
of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 450,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.34 US per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i) 150,000 Shares immediately,
(ii) 150,000 Shares on December 4, 2014,
(iii) 150,000
Shares on December 4, 2015,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable by Optionee,
other than by will or the laws of descent and distribution. Notwithstanding the foregoing, until such time as the Corporation
inter-lists on an exchange in Canada, and with the prior written consent of the Corporation, Optionee may transfer the Option
to a member of the immediate family of such Optionee or to a trust, partnership, limited partnership, limited liability company
or other entity formed exclusively for the benefit of such Optionee or members of the immediate family of such Optionee (“Family
Member”), provided, however, that
(i) Optionee
may not receive any consideration for such transfer,
(ii) the
Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of the descent
and distribution and
(iii)
the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit
10.22
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 19th day of September, 2014, by and between
Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and _______________________,
an individual resident of _________________ (“Optionee”).
1. Grant
of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 600,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.38 US per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i) 200,000 Shares immediately,
(ii) 200,000 Shares on September 19, 2015,
(iii) 200,000
Shares on September 19, 2016,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable by Optionee,
other than by will or the laws of descent and distribution. Notwithstanding the foregoing, until such time as the Corporation
inter-lists on an exchange in Canada, and with the prior written consent of the Corporation, Optionee may transfer the Option
to a member of the immediate family of such Optionee or to a trust, partnership, limited partnership, limited liability company
or other entity formed exclusively for the benefit of such Optionee or members of the immediate family of such Optionee (“Family
Member”), provided, however, that
(i) Optionee
may not receive any consideration for such transfer,
(ii) the
Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of the descent
and distribution and
(iii) the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit 10.23
Deep Well Oil
& Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 19th day of September, 2014, by and between
Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and __________________________,
an Alberta Company (“Optionee”).
Whereas the Optionee has
entered in to a consulting services agreement with a subsidiary of the Corporation dated July 1, 2005 (“Consulting Agreement”)
1. Amendment to Existing
Agreement
This Agreement shall replace
clause 5.0 in the Consulting Agreement and amend it accordingly.
2. Grant of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 1,200,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.38 per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The Option shall terminate
at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting of Option
Rights; Transferability
(A) This Option shall
be exercisable, in whole or in part, according to the following vesting schedule:
(i) 600,000
Shares immediately,
(ii) 600,000
Shares on September 19, 2015,
subject to Optionee’s continuing to provide
services to the Corporation or any Subsidiary as an employee, director or consultant, as the case may be, provided that the Optionee
continues to provide services on such anniversary date.
(iii) During
the lifetime of the consulting contract with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise of Option
after Death or Termination of Services or Employment
Except as otherwise determined
by the Board:
(A) In the event that
an Optionee ceases to provide services to the Corporation as a result of termination for cause (as
such term is defined in clause 22.3 of the Consulting Agreement), each of the Options held by the Optionee shall cease to
be exercisable after the date of termination of services as a consultant.
(B) In the event that
an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any vested Option held
by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the applicable
expiration of the Option Period in respect of such Option; and
(ii) the period
after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws, policies,
rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for trading;
(C) Notwithstanding the
above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method of Exercise
of Option
Subject to the foregoing,
the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Corporation at its
principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised
and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in cash (including bank check, personal
check or money order payable to the Corporation),
(B) with the approval of the Corporation (which
may be given in its sole discretion), by delivering to the Corporation for cancellation shares of the Corporation’s Common
Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal to the full exercise price of the Shares
being acquired,
(C) with the approval of the Corporation (which
may be given in its sole discretion), by electing to have the Corporation retain from the number of Shares to be issued to the
Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of exercise equal to the aggregate exercise
price payable upon exercise of such Option;
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option) shall concurrently provide
irrevocable instructions
(i) to a Corporation designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income
and employment taxes required to be withheld by the Corporation by reason of such exercise and
(ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in order to complete the sale; or
(E) by any combination of the methods of payment
described above.
6. Securities Law
Matters.
(A) Restricted Securities.
The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the United States Securities
Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in reliance on an exemption from
the registration requirements of the Securities Act, and that the Option and the Shares are, or will be, as applicable, “restricted
securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor.
The Optionee represents that it is an “accredited investor” within the meaning of Rule 501(a) under the Securities
Act.
(C) Restrictions on
Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from the
registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed exercise,
the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares may be issued
pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale Restrictions.
The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement, the Option
and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within
the United States, in a transaction that does not require registration under the Securities Act or any applicable state securities
laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may require an
opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer may be effected
without registration under the Securities Act or applicable state securities laws.
(E) Legend. The
Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as the
same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates representing
the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with respect to the
transfer restrictions set forth above.
7. Miscellaneous
(A) Plan Provisions
Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan, the terms of the Plan shall control.
(B) No Rights of Stockholders.
Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of the rights
and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such Shares have been issued in
the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No Right to Employment.
The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ of, or as giving a director
of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of the Corporation or a Subsidiary,
nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such employment or position at any time,
with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss Optionee from employment, or terminate
the term of a director of the Corporation or a Subsidiary, free from any liability or any claim under the Plan or the Agreement.
Nothing in the Agreement shall confer on any person any legal or equitable right against the Corporation or any Subsidiary, directly
or indirectly, or give rise to any cause of action at law or in equity against the Corporation or a Subsidiary. The Option granted
hereunder shall not form any part of the wages or salary of Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of
the Corporation or any Subsidiary be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan
which such optionee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way
of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed
to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted
by the Committee and shall be fully bound thereby.
(D) Governing Law.
The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the
Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to
such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No Trust or Fund
Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions Precedent
to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless such exercise
and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the corporate laws of the state
of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of counsel for the Corporation, such a representation
and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment to
Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of the
Corporation into Shares.
(K) Review of Plan.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Board upon any questions arising under the Plan or this Option.
(L) Change of Address.
Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN WITNESS WHEREOF,
the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit 10.24
Deep Well Oil
& Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 19th day of September, 2014, by and between
Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and____________________, an
Alberta Company (“Optionee”).
Whereas the Optionee has
entered in to a consulting services agreement with a subsidiary of the Corporation dated July 1, 2005 and whereas
the Corporation entered into an Amending Agreement dated July 10, 2013 with the Optionee to amend the Consulting Agreement dated
July 1, 2005 between the Corporation and the Optionee (the “Amended Consulting Agreement”).
1. Amendment to Existing
Agreement
This Agreement shall replace
clause 2.0 in the Amended Consultant Agreement dated July 10, 2013 and amend it accordingly.
2. Grant of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 1,200,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.38 per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The Option shall terminate
at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting of Option
Rights; Transferability
(A) This Option shall
be exercisable, in whole or in part, according to the following vesting schedule:
(i) 600,000
Shares immediately,
(ii) 600,000
Shares on September 19, 2015,
subject to Optionee’s continuing to provide
services to the Corporation or any Subsidiary as an employee, director or consultant, as the case may be, provided that the Optionee
continues to provide services on such anniversary date.
(iii) During
the lifetime of the consulting contract with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise of Option
after Death or Termination of Services or Employment
Except as otherwise determined
by the Board:
(A) In the event that
an Optionee ceases to provide services to the Corporation as a result of termination for cause (as
such term is defined in clause 22.3 of the Consulting Agreement), each of the Options held by the Optionee shall cease to
be exercisable after the date of termination of services as a consultant.
(B) In the event that
an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any vested Option held
by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the applicable
expiration of the Option Period in respect of such Option; and
(ii) the period
after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws, policies,
rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for trading;
(C) Notwithstanding the
above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method of Exercise
of Option
Subject to the foregoing,
the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Corporation at its
principal office within the Option period. The notice shall state the number of Shares as to which the Option is being exercised
and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in cash (including bank check, personal
check or money order payable to the Corporation),
(B) with the approval of the Corporation (which
may be given in its sole discretion), by delivering to the Corporation for cancellation shares of the Corporation’s Common
Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal to the full exercise price of the Shares
being acquired,
(C) with the approval of the Corporation (which
may be given in its sole discretion), by electing to have the Corporation retain from the number of Shares to be issued to the
Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of exercise equal to the aggregate exercise
price payable upon exercise of such Option;
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option) shall concurrently provide
irrevocable instructions
(i) to a Corporation designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income
and employment taxes required to be withheld by the Corporation by reason of such exercise and
(ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in order to complete the sale; or
(E) by any combination of the methods of payment
described above.
6. Securities Law
Matters.
(A) Restricted Securities.
The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the United States Securities
Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in reliance on an exemption from
the registration requirements of the Securities Act, and that the Option and the Shares are, or will be, as applicable, “restricted
securities” as defined in Rule 144 under the Securities Act.
(B) Accredited Investor.
The Optionee represents that it is an “accredited investor” within the meaning of Rule 501(a) under the Securities
Act.
(C) Restrictions on
Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from the
registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed exercise,
the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares may be issued
pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale Restrictions.
The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement, the Option
and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within
the United States, in a transaction that does not require registration under the Securities Act or any applicable state securities
laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may require an
opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer may be effected
without registration under the Securities Act or applicable state securities laws.
(E) Legend. The
Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as the
same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates representing
the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with respect to the
transfer restrictions set forth above.
7. Miscellaneous
(A) Plan Provisions
Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan, the terms of the Plan shall control.
(B) No Rights of Stockholders.
Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option shall have any of the rights
and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such Shares have been issued in
the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No Right to Employment.
The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ of, or as giving a director
of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of the Corporation or a Subsidiary,
nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such employment or position at any time,
with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss Optionee from employment, or terminate
the term of a director of the Corporation or a Subsidiary, free from any liability or any claim under the Plan or the Agreement.
Nothing in the Agreement shall confer on any person any legal or equitable right against the Corporation or any Subsidiary, directly
or indirectly, or give rise to any cause of action at law or in equity against the Corporation or a Subsidiary. The Option granted
hereunder shall not form any part of the wages or salary of Optionee for purposes of severance pay or termination indemnities,
irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of
the Corporation or any Subsidiary be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan
which such optionee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way
of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Optionee shall be deemed
to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted
by the Committee and shall be fully bound thereby.
(D) Governing Law.
The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the
Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to
such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No Trust or Fund
Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions Precedent
to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless such exercise
and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the corporate laws of the state
of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation may require that the person
exercising or paying the purchase price represent and warrant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of counsel for the Corporation, such a representation
and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment to
Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of the
Corporation into Shares.
(K) Review of Plan.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Board upon any questions arising under the Plan or this Option.
(L) Change of Address.
Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN WITNESS WHEREOF,
the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit
10.25
Deep
Well Oil & Gas, Inc.
NON-Qualified
STOCK OPTION AGREEMENT
This
NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made this 19th day of September,
2014, by and between Deep Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and
__________________, an individual resident of _________________ (“Optionee”).
Whereas
the Optionee has entered in to an employment agreement and an amendment to the original employment agreement with a subsidiary
of the Corporation effective November 7, 2005 (“Employment Agreement and Amendment”).
1. Amendment
to Existing Agreement
This
Agreement shall replace clause 6.0 in the Employment Agreement and Amendment and amend it accordingly.
2. Grant
of Option
The
Corporation hereby grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of
180,000 shares (the “Shares”) of Common Stock of the Corporation at the exercise price of $0.38 USD per share
according to the terms and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock
Option Plan (the “Plan”). The Option will not be treated as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued under the Plan
and is subject to its terms and conditions. A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
3. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
| i. | 60,000
Shares immediately, |
| ii. | 60,000
Shares on September 19, 2015 |
| iii. | 60,000
Shares on September 19, 2016 |
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, provided that the Optionee continues to provide services on such vesting date.
(B) During
the lifetime of the Employee Agreement with the Optionee, the Option shall be exercisable only by Optionee and shall not be assignable
or transferable by Optionee.
4. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined in clause 7(a)(ii) of the Employment Agreement), each of the Options held by the Optionee shall cease to be exercisable
after the date of termination of services as a consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause, any
vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
5. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
6. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B)
Securities Representations. The Optionee represents that it is resident in Canada, was offered the Options in Canada and
executed this Agreement in Canada.
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii)
within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
7. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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Page 6 of 6
Exhibit
10.27
Deep
Well Oil & Gas, Inc.
NON-Qualified STOCK OPTION AGREEMENT
This NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”) is made this 17th day of November, 2014, by and between Deep
Well Oil & Gas, Inc., a Nevada corporation (the “Corporation”) and _____________________, an individual
resident of __________________ (“Optionee”).
1. Grant
of Option
The Corporation hereby
grants Optionee the option (the “Option”) to purchase all or any part of an aggregate of 600,000 shares (the
“Shares”) of Common Stock of the Corporation at the exercise price of $0.23 US per share according to the terms
and conditions set forth in this Agreement and in the Deep Well Oil & Gas, Inc. November 28, 2005 Stock Option Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is subject to its terms and conditions.
A copy of the Plan will be furnished upon request of Optionee.
The
Option shall terminate at the close of business five years from the date hereof (the “Option Termination Date”).
2. Vesting
of Option Rights; Transferability
(A) This
Option shall be exercisable, in whole or in part, according to the following vesting schedule:
(i)
200,000 Shares immediately,
(ii)
200,000 Shares on November 17, 2015,
(iii)
200,000 Shares on November 17, 2016,
subject
to Optionee’s continuing to provide services to the Corporation or any Subsidiary as an employee, director or consultant,
as the case may be, during the immediate annual period preceding such dates.
(B) During
the lifetime of Optionee, the Option shall be exercisable only by Optionee and shall not be assignable or transferable by Optionee,
other than by will or the laws of descent and distribution. Notwithstanding the foregoing, until such time as the Corporation
inter-lists on an exchange in Canada, and with the prior written consent of the Corporation, Optionee may transfer the Option
to a member of the immediate family of such Optionee or to a trust, partnership, limited partnership, limited liability company
or other entity formed exclusively for the benefit of such Optionee or members of the immediate family of such Optionee (“Family
Member”), provided, however, that
(i) Optionee
may not receive any consideration for such transfer,
Stock Option Agreement - Colin P. Outtrim - November 17, 2014
(ii) the
Family Member must agree in writing not to make any subsequent transfers of the Option other than by will or the laws of the descent
and distribution and
(iii) the Corporation receives prior written notice of such transfer.
3. Exercise
of Option after Death or Termination of Services or Employment
Except
as otherwise determined by the Board:
(A) In
the event that an Optionee ceases to provide services to the Corporation as a result of termination for cause (as such term is
defined at common law), each of the Options held by the Optionee shall cease to be exercisable after the date of termination of
employment or services as a director or consultant.
(B) In
the event that an Optionee ceases to provide services to the Corporation for any reason other than termination for cause or death,
any vested Option held by Optionee may continue to be exercised by the Optionee to and until the earlier of:
(i) the
applicable expiration of the Option Period in respect of such Option; and
(ii) the
period after the date on which Optionee ceases to provide services to the Corporation that is permitted by the applicable laws,
policies, rules and regulations of any stock exchange upon which the Underlying Shares are then listed, posted and/or quoted for
trading;
(C) In
the event of death, the heirs, administrators or legal representatives of a Optionee, or any person or persons to whom the Option
is transferred by will or the applicable laws of descent, may exercise the Optionee's Options within twelve months after the date
of the Optionee's death to the extent such Options were by their terms exercisable prior to his death or within the period of
twelve months following his death; but for greater certainty no Option shall be exercisable after its stated termination date.
In the event that the heirs, administrators or legal representative of an Optionee who has died, or any person or persons to whom
the Option is transferred by will or the applicable laws of descent, exercises the Optionee's Option in accordance with the terms
of the Plan, the Corporation shall have no obligation to issue the Common Shares until evidence satisfactory to the Corporation
has been provided by such persons that persons are entitled to acquire the Common Shares under the Plan.
(D) Notwithstanding
the above, in no case may the Option be exercised to any extent by anyone after the Option Termination Date.
Stock Option Agreement - Colin P. Outtrim - November 17, 2014
4. Method
of Exercise of Option
Subject
to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the
Corporation at its principal office within the Option period. The notice shall state the number of Shares as to which the Option
is being exercised and shall be accompanied by payment of the exercise price. Payment of the exercise price shall be made;
(A) in
cash (including bank check, personal check or money order payable to the Corporation),
(B) with
the approval of the Corporation (which may be given in its sole discretion), by delivering to the Corporation for cancellation
shares of the Corporation’s Common Stock already owned by Optionee having a Fair Market Value (as defined in the Plan) equal
to the full exercise price of the Shares being acquired,
(C) with
the approval of the Corporation (which may be given in its sole discretion), by electing to have the Corporation retain from the
number of Shares to be issued to the Optionee upon the exercise of such Option Shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable upon exercise of such Option;
(D) through
a special sale and remittance procedure pursuant to which Optionee (or any other person or persons permitted to exercise the option)
shall concurrently provide irrevocable instructions
(i) to
a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such
exercise and
(ii) to
the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the
sale; or
(E) by
any combination of the methods of payment described above.
5. Securities
Law Matters.
(A) Restricted
Securities. The Optionee understands and acknowledges that neither the Option nor the Shares have been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), that the Option has been issued to it in
reliance on an exemption from the registration requirements of the Securities Act, and that the Option and the Shares are, or
will be, as applicable, “restricted securities” as defined in Rule 144 under the Securities Act.
(B) Accredited
Investor. The Optionee represents that it is an “accredited investor” within the meaning of Rule 501(a) under
the Securities Act.
Stock Option Agreement - Colin P. Outtrim - November 17, 2014
(C) Restrictions
on Exercise. The Optionee understands and acknowledges that the Option may be exercised only pursuant to an exemption from
the registration requirements of the Securities Act and applicable state securities laws, and that at the time of any proposed
exercise, the Corporation may require an opinion of counsel or other evidence satisfactory to it to the effect that the Shares
may be issued pursuant to such exercise without registration under the Securities Act or applicable state securities laws.
(D) Resale
Restrictions. The Optionee understands and acknowledges that notwithstanding anything to the contrary contained in this Agreement,
the Option and the Shares may be offered, sold, pledged or otherwise transferred only
(i) to
the Corporation;
(ii) outside
the United States in accordance with Rule 904 of Regulation S under the Securities Act and in compliance with applicable Canadian
local laws and regulations; or
(iii) within the United States, in a transaction that does not require registration under the Securities Act or any applicable state
securities laws. In connection with any proposed sale, pledge or other transfer of the Option or the Shares, the Corporation may
require an opinion of counsel or other evidence satisfactory to it to the effect that the proposed sale, pledge or other transfer
may be effected without registration under the Securities Act or applicable state securities laws.
(E) Legend.
The Optionee understands and acknowledges that upon the original issuance of the Shares, as applicable, and until such time as
the same is no longer required under applicable requirements of the Securities Act or state securities laws, the certificates
representing the Shares, and all certificates issued in exchange therefor or in substitution thereof, shall bear a legend with
respect to the transfer restrictions set forth above.
6. Miscellaneous
(A) Plan
Provisions Control. In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan, the terms of the Plan shall control.
(B) No
Rights of Stockholders. Neither Optionee, Optionee’s legal representative nor a permissible assignee of this Option
shall have any of the rights and privileges of a stockholder of the Corporation with respect to the Shares, unless and until such
Shares have been issued in the name of Optionee, Optionee’s legal representative or permissible assignee, as applicable.
Stock Option Agreement - Colin P. Outtrim - November 17, 2014
(C) No
Right to Employment. The grant of the Option shall not be construed as giving Optionee the right to be retained in the employ
of, or as giving a director of the Corporation or a Subsidiary (as defined in the Plan) the right to continue as a director of
the Corporation or a Subsidiary, nor will it affect in any way the right of the Corporation or a Subsidiary to terminate such
employment or position at any time, with or without cause. In addition, the Corporation or Subsidiary may at any time dismiss
Optionee from employment, or terminate the term of a director of the Corporation or a Subsidiary, free from any liability or any
claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against
the Corporation or any Subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the
Corporation or a Subsidiary. The Option granted hereunder shall not form any part of the wages or salary of Optionee for purposes
of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances
shall any person ceasing to be an employee of the Corporation or any Subsidiary be entitled to any compensation for any loss of
any right or benefit under the Agreement or Plan which such optionee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating
in the Plan, Optionee shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(D) Governing
Law. The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan
and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada.
(E) Severability.
If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Agreement under any law deemed applicable by the Committee (as defined in the Plan), such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as
to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.
(F) No
Trust or Fund Created. Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation or any Subsidiary and Optionee or any other person.
(G) Headings.
Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.
(H) Conditions
Precedent to Issuance of Shares; Repurchase Rights. Shares shall not be issued pursuant to the exercise of the Option unless
such exercise and the issuance and delivery of the applicable Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, the requirements of any applicable Stock Exchange or the Nasdaq National Market and the
corporate laws of the state of Nevada. As a condition to the exercise of the purchase price relating to the Option, the Corporation
may require that the person exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Corporation, such a representation and warranty is required by law.
Stock Option Agreement - Colin P. Outtrim - November 17, 2014
(I) Withholding.
In order to comply with all applicable federal, state or provincial income tax laws or regulations, the Corporation may take such
action as it deems appropriate to assure that all applicable federal, state or provincial payroll, withholding, income or other
taxes are withheld or collected from Optionee.
(J) Adjustment
to Number of Shares and Exercise Price. Subject to approval if necessary of any relevant stock exchange, the Board will adjust
the number of Shares subject to an Option, and the exercise price per Share payable upon exercise of an Option, upon the occurrence
of any stock dividend, stock split, reverse stock split, combination of shares, reclassification of shares, recapitalization or
other similar corporate transaction with respect to the Shares. Notwithstanding the preceding sentence to the contrary, no such
adjustment will be made upon the conversion of any debt instrument, share of preferred stock or other convertible security of
the Corporation into Shares.
(K) Review
of Plan. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or this Option.
(L) Change
of Address. Optionee further agrees to notify the Corporation upon any change in the residence address indicated below.
IN
WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement as of the date set forth in the first paragraph.
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DEEP
WELL OIL & GAS, INC. |
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By: |
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Name: |
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Title: |
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OPTIONEE |
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By: |
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Name: |
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Title: |
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Address: |
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Stock Option Agreement - Colin P. Outtrim - November 17, 2014
Page 6 of 6
Exhibit
14.1
Deep
Well Oil & Gas, Inc.
CODE
of BUSINESS
CONDUCT
and ETHICS
for
Directors, Officers, Employees, Consultants and Contractors
Adopted:
December 17, 2014
Acknowledgement
of Company Code of Conduct
I
have read and am familiar with the Deep Well Oil & Gas, Inc.’s (the “Company”) Code of Business Conduct
& Ethics.
As
a director, officer, employee, consultant or contractor (the “Code Supporters”) of the Company, I understand that
I am expected to comply with and enforce this policy in its entirety. I understand that it is my responsibility to create an atmosphere
free of misconduct.
I
further understand that it is also my responsibility to promptly report any incident of misconduct or perceived misconduct that
I may experience or witness. I also understand that I may make confidential and anonymous submissions of reports, of misconduct
that I may experience or witness, to the CFO, Chairman of the Board or the Chairman of the Audit Committee.
Violations
of this policy will result in disciplinary action, up to and including termination of employment.
By
signing this acknowledgement I am indicating I have read, (initialed each page) and will abide by the Code of Business Conduct
& Ethics for Deep well Oil and Gas, Inc.
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(Print) |
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Position |
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Signature |
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Date |
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 2 of 10 |
CODE
OF BUSINESS CONDUCT and ETHICS
for
DIRECTORS, OFFICERS and EMPLOYEES
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1.0 |
General Policy Statement |
It
is the policy of Deep Well Oil and Gas, Inc. (the “Company”) and its affiliated companies that the conduct of every
director, officer (hereinafter the term “officer” includes the principal executive officer, principal financial officer
and any contractor appointed as a principal executive officer or principal financial officer), employee, consultant and contractor
(hereinafter defined together as a group and defined as “Code Supporters”) while acting on behalf of the Company be
based upon the highest ethical standards and compliance with the law. This Code of Business Conduct and Ethics (the “Code”)
affirms the policy of the Company and is a guideline to deter wrongdoing and to promote:
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1.1 |
Honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships; |
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1.2 |
Full,
fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to,
the U.S. Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; |
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1.3 |
Maintain
a corporate culture in which the integrity and dignity of each individual is valued. |
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1.4 |
Compliance
with applicable laws, rules and regulations that govern the Company's business activities; |
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1.5 |
The
prompt internal reporting of violations of the Code to the CFO, or alternatively the Chairman of the Board, or the Chairman
of the Audit Committee; and |
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1.6 |
Accountability
for adherence to the Code. |
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1.7 |
Ensure
the proper use of the Company’s assets. |
This
Code does not specifically address every potential form of unacceptable conduct, and it is expected that the Code Supporters will
exercise good judgment in compliance with the principles set out in this Code. Each Code Supporter has a duty to avoid any circumstance
that would violate the letter or spirit of this Code.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 3 of 10 |
Each
Code Supporter should endeavor to deal honestly and ethically with the Company’s directors, officers, employees, consultants,
contractors, auditors, advisors, customers, suppliers and competitors while engaged in business on behalf of the Company. Non-compliance
with this Code or the law or other unethical or dishonest business practices while acting on behalf of the Company are forbidden
and may result in disciplinary action, including termination of employment.
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3.0 |
Appropriate Use of Corporate
Assets |
Company
assets should be used only for the legitimate business purposes of the Company. All Code Supporters are prohibited from using
Company assets, confidential or proprietary information or position for personal gain. Unauthorized use or distribution of this
information would violate Company Policy.
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4.0 |
Compliance with Laws, Rules
and Regulations |
Any
transaction undertaken in the name of the Company that would violate the laws, rules or regulations of any country or its political
subdivisions in which this Company conducts business is prohibited. In case of conflict between U.S. laws and foreign laws, the
Chief Financial Officer (“CFO”), or his designee, must be consulted. Particular attention is directed to the laws,
rules and regulations relating to discrimination, securities, anti-trust, civil rights, transactions with foreign officials, safety
and the environment. If any uncertainty arises as to whether a course of action is within the letter and spirit of the law, advice
should be obtained from the appropriate Company’s Counsel or his designee as coordinated by the Company’s CFO.
Observing
the law is a minimum requirement. The Company’s Code envisions a level of ethical business conduct well above the minimum
required by law.
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4.1 |
Discrimination and Harassment |
The
Company is committed to providing a workplace free of discrimination and harassment based on race, color, religion, age, gender,
national origin, disability, veteran status, or any other basis prohibited by applicable law. Similarly, offensive or hostile
working conditions created by such harassment or discrimination will not be tolerated. Each Code Supporter has a duty while acting
on behalf of the Company to refrain from engaging in conduct that constitutes discrimination or harassment. Code Supporters should
promptly report any discrimination or harassment or any complaint of discrimination or harassment to the Company’s CFO or
alternatively the Chairman of the Board.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 4 of 10 |
Code
Supporters in possession of material information about the Company must abstain from trading in its securities until such information
is generally and publicly available by means of a press release or other public filing. Such material "inside information"
might include earnings estimates, stock and dividend activity, changes of control or management, pending mergers, sales, acquisitions,
reserves numbers or other significant business information or developments. Providing such inside information to others ("tipping")
who then trade on that information is also strictly prohibited. Trading on inside information is also a violation of applicable
securities law. This policy is more fully described in the Company’s Insider Trading Policy.
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5.0 |
Political Contributions |
Corporate
funds, credit, property or services may not be used (directly or indirectly) to support any political party or candidate for public
office, or to support or oppose any ballot measure, without the prior approval of the Company’s President or Chief Executive
Officer (“CEO”). Although Code Supporters are encouraged to support political parties and candidates with their personal
efforts and money, the Company will not reimburse or subsidize them in any way for such political participation.
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6.0 |
Confidential Information |
Our
Code Supporters will often come into contact with, or have possession of, non-public confidential information about the Company
or our operating or non-operating interest owners, suppliers, customers or affiliates, and they must take all appropriate steps
to assure that the confidentiality of such information is maintained. Confidential information includes all material non-public
information that might be of use to competitors or harmful to the Company if disclosed. It also includes material non-public information
that our operating or non-operating interest owners, suppliers, customers or affiliates have entrusted to us in accordance with
the confidentiality clauses in the Company’s joint operating agreements. It is the policy of the Company that all information
related to the Company is confidential unless its Code Supporter is notified that certain information is not confidential.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 5 of 10 |
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7.0 |
Conflicts of Interests and
Unduly Influencing Relationships |
Generally,
a conflict exists when the personal interests or activities of a Code Supporter (or immediate family members) may influence the
exercise of his or her independent judgment in the performance of one or more duties to the Company. Even the appearance of a
conflict of interest may be as damaging as an actual conflict and should be avoided. Code Supporters should not enter into any
transaction or engage in any practice (directly or indirectly) that would tend to influence him or her to act in any manner other
than in the best interests of the Company. Code Supporters (or members of their immediate family) also should not exercise discretionary
authority or make or influence any recommendation or decision on behalf of the Company that would result in an undisclosed financial
benefit to such Code Supporter or to members of his or her immediate family.
A
Code Supporter or members of their immediate family may obtain services from persons or entities who also provide services to
the Company, including legal, accounting or brokerage services, loans from banks or insurance from insurance companies, at rates
customary for similarly situated customers.
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7.2 |
Gifts, Gratuities and
Other Benefits |
No
Code Supporter shall (directly or indirectly) offer or give any gift, “kickback” or other improper payment or consideration
to any customer, supplier, government official or employee, or any other person in consideration for assistance or influence concerning
any transaction or potential transaction involving the Company. No Code Supporter, or member of his or her immediate family, shall
(directly or indirectly) solicit, accept or retain any gift, entertainment, trip, discount, service, or other benefit from any
organization or person doing business or competing with the Company, other than (i) gifts or entertainment with a value no greater
than $250 as part of normal business courtesy and hospitality that would not influence, and would not reasonably appear to be
capable of influencing, such Code Supporter to act in any manner not in the best interest of the Company or (ii) acceptance of
a nominal benefit that has been disclosed to and approved by the Code Supporters superior. Please discuss with the CFO of the
Company any entertainment or modest gift that you are not certain is appropriate.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 6 of 10 |
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7.3 |
Business Dealings in
Foreign Countries |
Various
laws prohibit the Company and those acting on its behalf, from bribing foreign officials to obtain or retain business. Foreign
officials include officers and employees of a foreign government, department or agency. Indirect payments, including those to
agents or third parties with the knowledge that at least a portion of the payment will be given to a foreign official for an illegal
purpose, are prohibited. The Company will not tolerate any conduct that violates any such law or applicable regulation, US or
foreign.
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7.4 |
Related Party Transactions |
Any
related party transactions over $120,000 or such other amount as revised under Regulation S-K Item 404(a), are to be reviewed
and approved by the Company’s independent audit committee and Board of Directors. All related party transactions under the
above amount are reviewed and approved by the Code Supporter’s superior.
In
each case the standard applied in approving the related party transaction will be in the best interests of the Company without
regard to the interests of the related party involved in the transaction.
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8.0 |
Corporate Opportunities |
Code
Supporters are prohibited from taking for themselves personally (or for members of their immediate family) any opportunity that
may be of interest to the Company that is discovered through the use of corporate property, information or position unless such
opportunity is first offered to the Company and the Company determines not to pursue the offer.
Each
officer and employee is expected to devote his or her full time and efforts during normal working hours to the service of the
Company. No officer or employee shall engage in any business or secondary employment that interferes with his or her obligations
and responsibilities to the Company.
Unless
disclosed to and approved by the CEO, President or CFO of the Company, no officer or employee or any member of their immediate
families may directly or indirectly have a financial interest (whether as an investor, lender, employee or other service provider)
in any company that is selling supplies, furnishing services or otherwise doing business or competing with the Company. This provision
does not apply to an officer or employee or members of their immediate family owning the securities of a publicly traded entity
as long as such ownership represents less than five percent (5%) of the outstanding securities.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 7 of 10 |
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10.0 |
Employment of Family Members
and Employee Relationships |
The
Company does not prohibit spouses, parents, children, and other persons related by blood or marriage from working for the Company
simultaneously, directly or indirectly. However, all such employees, officers, consultants or contractors must be hired by disinterested
personnel strictly on the basis of merit and without regard to family relationships. Reporting relationships between family members
are to be avoided to the maximum extent possible, to eliminate even the appearance of possible favoritism based on family ties.
For these reasons, employees should disclose to the Company the names and current job titles of all family members who work directly
or indirectly for the Company.
The
Company continually strives to promote positive and productive working relationships between its employees and to fully comply
with the letter and spirit of all laws prohibiting discrimination and sexual harassment. While the Company does not wish to unduly
interfere with the private lives of its employees, some limitations on personal relationships in the workplace are necessary in
order to prevent actual or perceived favoritism, problems with supervision, security and morale and possible claims of discrimination
or harassment. For these reasons, an employee may not engage in romantic or sexual encounters or relationships with any other
employee with whom he or she is in a supervisory or reporting relationship. This includes the immediate supervisor, any upper
level supervisor (that is, anyone up the supervisory chain), any person to whom the employee directly or indirectly reports, anyone
who evaluates the employee and any person whose input is regularly sought for the evaluation of an employee.
The
Company recognizes the importance of developing close working relationships among employees and this policy is not intended to
prohibit friendships that naturally develop in a work setting or social interaction among employees.
If
two employees become subject to the restrictions of this policy after they are hired, one or both of the employees must seek a
transfer or reassignment that eliminates the reporting or supervisory relationship. The decision as to which of the individuals
will remain within the department and/or with the Company must be made by the two employees within three (3) months. If no decision
has been made during this time, the Company may take whatever action it determines to be appropriate, including transfers, reassignments
or termination of one or both of the employees.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 8 of 10 |
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11.0 |
Accounting and Reporting |
Every
officer and employee is required to follow the Company’s Internal Control over Financial Reporting (“Accounting Policies”).
All accounting records should accurately reflect and describe corporate transactions. The recording of such data must not be falsified
or altered in any way to conceal or distort assets, liabilities, revenues, expenses or the nature of the activity. The Company’s
Accounting Policies may be obtained from the Company’s CFO. All public disclosures made by the Company, including disclosures
in reports and documents filed with or submitted to the U.S. Securities and Exchange Commission, shall be accurate and complete
in all material respects. Each Code Supporter is expected to carefully consider all inquiries from the Company related to the
Company’s public disclosure requirements and promptly supply complete and accurate responses.
If
any Code Supporter has any questions or concerns about any of the Company’s public disclosures, he or she should immediately
contact the CEO, President or CFO.
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12.0 |
Compliance and Enforcement |
Questions
of interpretation or application of this Code with respect to a particular situation should be addressed to the CEO, or the President,
or the CFO or their designee. Such requests may be made in writing or orally and will be handled discretely.
Compliance
with this Code is a condition of employment for each officer and employee. Conduct contrary to this Code is outside of the scope
of employment. Employees are encouraged to talk to supervisors, or an officer of the Company when in doubt about the best course
of action in a particular situation.
Any
suspected violation of applicable laws, rules or regulations or this Code, including any transaction or relationship that reasonably
could be expected to give rise to a conflict of interest, should be reported promptly to the Company’s CFO, or his designee,
without regard to the usual lines of reporting. Alternatively, any suspected violations of applicable laws, rules or regulations
or this Code or unethical business practices may be reported anonymously and confidentially by written report in a sealed envelope
marked “Private and Strictly Confidential – Attention: Chairman of the Audit Committee of Deep Well Oil & Gas,
Inc.”.
No
adverse action will be taken against any employee for making a complaint or disclosing information in good faith, and any officer
or employee who retaliates in any way against an employee who in good faith reports any violation or suspected violation of the
Code of Conduct will be subject to disciplinary action, including termination.
Any
violation of this Code of Conduct will be grounds for immediate disciplinary action including, termination of employment.
Adopted: December 17, 2014 | DWOG Code of Conduct | Page: 9 of 10 |
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13.0 |
Amendment, Modification and
Waiver |
Any
amendment or modification of this Code must be approved by the Company’s Board of Directors. Any waiver of this Code for
non-executive officers or employees may be granted by the President or CEO. Any waiver of this Code for directors or principal
executive officers may be granted only by the Board of Directors or a duly authorized board committee of the Company, subject
to the disclosure and other provisions of the SEC and stock exchange rules.
Adopted: December
17, 2014 |
DWOG
Code of Conduct |
Page:
10 of 10 |
Exhibit 21.1
Subsidiaries of Registrant
Deep Well Oil & Gas (Alberta) Ltd., was incorporated
in the province of Alberta, Canada on September 15, 2005.
Northern Alberta Oil Ltd., (formerly known as Mikwec Energy
Canada Ltd.) was incorporated in the province of Alberta, Canada on September 18, 2003.
Exhibit
23.1
DEGOLYER
AND MACNAUGHTON
Canada
Limited
311
– 6th Avenue SW, Suite 1430
Intact
Place, East Tower
Calgary,
Alberta, Canada T2P 3H2
TELEPHONE
(403)
266-8680
FAX
(403)
266-1887
January
9, 2015
Deep
Well Oil & Gas, Inc.
Suite
700, 10150 – 100 Street
Edmonton,
AB T5J 0P6
Canada
Re:
Form 10-K for the Year Ending September 30, 2014
Dear
Sir,
We
hereby consent to the reference to our firm name and to the use of our report entitled, “Appraisal Report as of September
30, 2014 on the Sawn Lake Property owned by Deep Well Oil & Gas, Inc. in Canada”, dated January 9, 2015, evaluating
the Proven and Probable reserves and the present worth values of those reserves attributable to the properties of the Corporation
(the “Report”) in the above-referenced Form 10-K.
We
have read the Form 10-K and have no reason to believe that there is any misrepresentation in the information contained therein
derived from our Report or that is within our knowledge as a result of the services we provided in preparing the Report.
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Very truly yours, |
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/s/
Douglas S. Christie
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Douglas
S. Christe, P.Geol
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Vice President |
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DeGolyer and MacNaughton |
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Canada Limited |
DSC
Exhibit
31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act
And Rule 13a-14(a) or 15d-14(a) under
the Securities Exchange Act of 1934
I, Dr. Horst A. Schmid, President and Chief Executive Officer of
Deep Well Oil & Gas, Inc. certifies that:
1. |
I have reviewed this Annual Report on Form 10-K of Deep Well Oil & Gas, Inc. for the year ended September 30, 2014; |
2. | Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
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a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared; |
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b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principals; |
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c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
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d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions): |
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a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and |
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b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date: |
January 13, 2015 |
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By: |
/s/ Horst A. Schmid |
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Dr. Horst A. Schmid |
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President and Chief Executive Officer |
|
Exhibit
31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act
And Rule 13a-14(a) or 15d-14(a) under the
Securities Exchange Act of 1934
I, Mr. Curtis James Sparrow, Chief Financial Officer of Deep Well
Oil & Gas, Inc. certifies that:
1. |
I have reviewed this Annual Report on Form 10-K of Deep Well Oil & Gas, Inc. for the year ended September 30, 2014; |
2. | Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principals; |
|
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions): |
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and |
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date: |
January 13, 2015 |
|
|
|
|
By: |
/s/ Curtis James Sparrow |
|
|
Mr. Curtis James Sparrow |
|
|
Chief Financial Officer |
|
Exhibit
32.1
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
In connection with the Annual Report of Deep
Well Oil & Gas, Inc. (“the Company”) on Form 10-K for the year ended September 30, 2014 filed with the Securities
and Exchange Commission on the date hereof (“the Report”), I, Dr. Horst A. Schmid, President and Chief Executive Officer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report
fairly presents, in all material respects, the financial condition and result of operations of the Company.
A signed original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
Date: |
January 13, 2015 |
|
|
|
|
|
|
|
By: |
/s/ Horst A. Schmid |
|
|
Dr. Horst A. Schmid |
|
|
President and Chief Executive Officer |
|
Exhibit
32.2
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
In connection with the Annual Report of Deep
Well Oil & Gas, Inc. (“the Company”) on Form 10-K for the year ended September 30, 2014 filed with the Securities
and Exchange Commission on the date hereof (“the Report”), I, Mr. Curtis James Sparrow, Chief Financial Officer, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report
fairly presents, in all material respects, the financial condition and result of operations of the Company.
A signed original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
Date: |
January 13, 2015 |
|
|
|
|
By: |
/s/ Curtis James Sparrow |
|
|
Curtis James Sparrow |
|
|
Chief Financial Officer |
|
+
Exhibit 99.1
Deep Well Oil & Gas,
Inc.
INSIDER
TRADING POLICY
Adopted: December 17, 2014
INSIDER
TRADING POLICY
1.
Purpose
The Board of Directors (the “Board”) of Deep Well Oil & Gas, Inc. (the “Company”) has adopted
this policy on insider trading to prevent improper insider trading of the Company’s securities. This policy was adopted
by the Company’s Board to restrict officers, directors, certain employees and consultants of the Company from trading
directly or indirectly in the Company’s securities during prescribed Blackout Periods disclosed in this policy or when
material information concerning the Company exists that has not been disclosed to the investing public. For clarification
a Trading Day is defined as a day on which the Stock Market or listing service where the Company’s common stock trades
on is open for trading and starts at the time trading begins on such a day.
2. Legal
Prohibition Against Insider Trading
The antifraud provisions of U.S. federal securities laws (Rule 10b-5 under the 1934 Act) prohibit directors, officers, employees
and consultants of the Company who possess material nonpublic information from trading, indirectly or directly, on the basis
of that information. It is also a violation for such persons to give material nonpublic information to others who then trade
on the basis of that information (commonly referred to as “tipping”). Transactions will be considered “on
the basis of” material nonpublic information if the person engaged in the transaction was aware of the material nonpublic
information at the time of the transaction. These illegal activities are commonly referred to as “insider trading.”
3. Material
Nonpublic Information
Information is considered nonpublic if the information has not been broadly disseminated to the public for a sufficient period
to be reflected in the price of the Company’s security. As a general rule, information should be considered nonpublic
until at least two full days have elapsed after the information is distributed to the public in a press release or publicly
disclosed under the U.S. Securities and Exchange Commission (“SEC”) disclosure regulations.
Adopted: December 17, 2014 | DWOG Insider Trading Policy | |
Information should
be considered as material if there is a significant likelihood that a reasonable investor would consider it influential in
deciding whether to buy, hold or sell securities of the Company. In general, any information that could reasonably be expected
to affect the market price of the Company’s is likely to be considered material. Either positive or negative information
may be considered material. While it is not possible to identify all information that would be deemed “material,”
the following are examples of potentially “material information” that ordinarily would be considered material
to the Company:
| ● | Unpublished quarterly and yearly financial results or operational
results; |
| ● | Projections of future earnings, losses or capital budgets; |
| ● | News of pending or proposed mergers, acquisitions or joint ventures; |
| ● | News of significant acquisition or a sale of significant assets; |
| ● | Increase, decrease or reclassification of oil sands reserves or resources; |
| ● | Actual or threatened major litigation or resolution of such litigation; |
| ● | Changes in control of the Company; |
| ● | Impending announcements of bankruptcy or financial liquidity difficulties; |
| ● | Splits, reverse
splits, offering of additional securities or other changes in the Company’s capital structure; |
| ● | Proposed new
equity or debt financings; |
| ● | Changes in independent
auditors; |
| ● | Changes in Company
management; |
| ● | Drilling results;
and |
| ● | Initiation of a dividend, distribution,
or other shareholder benefit. |
4. Blackout Periods
No trading, buying or selling, in the
Company’s securities directly or indirectly by the Company’s directors, officers, certain employees and consultants
during the period beginning approximately two weeks prior to the anticipated date of the filing of the Company’s quarterly
report on Form 10-Q or annual report on Form 10-K and ending after the second full trading day following the filing of the Company’s
Form 10-Q or 10-K. For example the following are the Blackout Periods the Company has imposed for the release of the Company’s
2014 and 2015 fiscal year end financial results:
|
SEC FILINGS FOR THE
COMPANY |
|
BLACKOUT PERIODS
(No Trading in Company’s Stock) |
|
2014 Fiscal Year Reports: |
|
|
|
Annual Report on Form 10-K |
|
From December 15, 2014 to January 2, 2015 |
|
2015 Fiscal Year Reports: |
|
|
|
1st Quarter Report on Form 10-Q |
|
From February 2, 2015 to February 19, 2015 |
|
2nd Quarter Report on Form 10-Q |
|
From May 1, 2015 to May 18, 2015 |
|
3rd Quarter Report on Form 10-Q |
|
From July 1, 2015 to August 17, 2015 |
|
Annual Report on Form 10-K |
|
From December 15, 2015 to January 2, 2016 |
The above Blackout periods may be amended by the Board if the Company
plans to file its Form 10-Q or 10-K earlier or later than the anticipated SEC filing date. Trading in the Company’s securities
outside these Blackout periods should not be considered a “safe harbor,” and all insiders should use their good judgment
at all times.
Adopted: December 17, 2014 | DWOG Insider Trading Policy | |
No
trading, buying or selling, in the Company’s securities directly or indirectly by the Company’s directors, officers,
certain employees and consultants during the assembly of a known press release. Or when information is known to the insider and that a press release is most likely to
be issued and ending after the second full trading day following the filing of a Form 8-K or public dissemination of a press
release.
|
OTHER SEC FILINGS FOR
THE COMPANY |
|
BLACKOUT PERIOD
(No Trading in Company’s Stock) |
|
Current Report on Form 8-K |
|
Until after the second full trading day following the filing date of a Form 8-K with the SEC. |
No trading, buying or selling, in the Company’s securities directly or indirectly by the Company’s directors,
officers, certain employees and consultants starting five trading days prior to, and continuing until two full trading days
after, any scheduled meeting of the Board of Directors, including any scheduled committee meetings of the Board of Directors
that the insider has attended or any scheduled joint venture partner operations meetings that the insider has attended.
Blackout
periods may also be imposed from time to time as a result of special circumstances relating to the Company. All directors,
officers, certain employees and consultants of the Company with knowledge of such special circumstances will be subject to
the Blackout period.
5. Insider
Reporting Requirements
Every person who
is directly or indirectly the beneficial owner of more than 10 percent of the Company’s securities or who is a director
or an officer of the Company, is personally responsible to file with the SEC an initial insider trading report on Form 3 disclosing
if any their beneficial ownership in the Company’s securities. Form 3s must be filed with the SEC within 10 days after he
or she becomes such beneficial owner, director, or officer of the Company. Each such person is also required to file with the
SEC an insider trading report on Form 4 any time their beneficial ownership in the Company’s securities change. Form 4s
must be filed with the SEC before the end of the second business day following the day on which the subject transaction has been
executed. Each such person is also required to file with the SEC a Form 5 which serves as an annual reconciliation of your Section
16 reports, and includes disclosures of certain small acquisitions, gifts, and disclosure of transactions that should have been
(but were not) reported on an earlier Form 4. Form 5s are due to be filed with the SEC no later than 45 days after the Company's
fiscal year end, or within six months after an insider ends his or her affiliation with the Company. If you have not had any reportable
transactions during the fiscal year or you have already reported all of your transactions on Form 4, then you need not file a
Form 5. In those cases where no Form 5 is required, you must provide the Company with a written notice of this fact to the Company.
The Company is available to assist its directors and officers in completing and filing their required insider trading reports
with the SEC. Directors and officers are reminded that according to the regulations that each director is personally responsible
for the timely disclosure of their trading activities in the Company’s securities and the assistance offered by the Company
in preparing their insider trading reports in no way reduces the obligation imposed on them be applicable insider trading laws.
Adopted: December 17, 2014 | DWOG Insider Trading Policy | |
6. Limited
Exemptions
The
following are certain limited exceptions to the restrictions imposed by the Company under this policy. Please be aware that even
if a transaction is subject to an exception to this policy, you will need to separately assess whether the transaction complies
with applicable law. You are responsible for complying with applicable law at all times.
|
6.1 |
Receipt and vesting of
stock options: |
|
6.1.1 |
The Blackout periods and
or trading restrictions under this policy do not apply to the acceptance or granting of stock options by
the Company.
|
|
|
|
|
6.1.2 |
The Blackout periods and or trading restrictions under this policy do not apply to the vesting, cancellation or forfeiture
of stock options received from the Company. |
|
6.2 |
Exercise of stock options: |
|
6.2.1 |
The Blackout periods and or trading restrictions under this policy do not apply to the exercise of stock options of the Company’s
shares. However, the Blackout periods and trading restrictions under this policy do apply to the sale of any of the Company’s
securities issued upon the exercise of a stock option. |
|
6.3 |
Stock splits and similar
transactions: |
|
6.3.1 |
The Blackout periods and or trading restrictions under this policy do not apply to a change in the number of securities held
as a result of a stock split or similar transaction applying equally to all securities of the Company of a certain class. |
7. Standing
or Limit Orders
Standing or limit orders (except standing
or limit orders under approved Rule 10b5-1 Plans, see “Planned Trading Programs” below) may create risks for insider
trading violations. There is no control over the timing of purchases or sales that result from standing instructions to a broker,
and as a result the broker could execute a transaction when an insider is in possession of material non¬public information.
If an insider of the Company using a standing or limit order to place trades on the Company’s securities, the insider must
make their bank or broker aware of the Company’s insider trading policy so that standing or limit orders comply with the
Company’s insider trading restrictions. Note that a standing or limit order does not, by itself, qualify as a Rule 10b5-1
plan, unless it is approved under a Planned Trading Program as described below.
Adopted: December 17, 2014 | DWOG Insider Trading Policy | |
8. Planned
Trading Programs
Trades by insiders
of the Company’s securities that are executed pursuant to an approved trading plan, as defined by Rule 10b5-1 of the U.S.
Securities and Exchange Act of 1934, would not be subject to the restrictions set forth under the blackout periods of this Policy,
provided that the trades in the Company’s securities were made pursuant to a written contract, letter of instruction, Standing
or Limit Orders or plan that:
| a) | complies with the requirements of SEC Rule 10b5-1 (a "Rule 10b5-1 Plan"); and |
| | |
| b) | has been approved, in writing, by the Company’s Chief Financial Officer in advance of the
first trade thereunder; and |
| | |
| c) | with respect to which the Company's Chief Financial Officer has received certification from such
insider that: |
| i. | such insider was not in possession of material nonpublic information about
the Company at the time the Rule 10b5-1 Plan was adopted and that all trades made under the Rule 10b5-1 Plan will comply with Rule
10b5-1 Plan and applicable securities laws; and |
| | |
| ii. | the Rule 10b5-1 Plan complies with the requirements of Rule 10b5-1. |
No such approval
by the Chief Financial Officer shall be considered the Chief Financial Officer's or the Company's determination that the Rule 10b5-1
Plan satisfies the requirements of Rule 10b5-1. It shall be the sole responsibility of the person establishing the Rule 10b5-1
Plan to ensure that such plan complies with the requirements of Rule 10b5-1.
9. Amendments or Modifications
The Board will review and evaluate this policy on an annual basis. Any amendment or modification to this policy must be approved
by the Company’s Board.
Adopted: December 17, 2014 | DWOG Insider Trading Policy | |
Page 6 of 6
Exhibit 99.2
Deep Well Oil & Gas,
Inc.
AUDIT
COMMITTEE WHISTLE-BLOWER
POLICY
& PROCEDURES
Adopted: December 17, 2014
AUDIT
COMMITTEE WHISTLE-BLOWER POLICY & PROCEDURES
1.
Purpose
As
mandated by the Sarbanes-Oxley Act, it is the Audit Committee’s responsibility to ensure that Deep Well Oil & Gas, Inc.
(the “Company”) has procedures in place for the receipt, retention, and treatment of complaints and concerns about
the Company’s accounting, internal accounting controls, and auditing matters. In addition, the Audit Committee must provide
for confidential, anonymous submission by the Company’s employees of concerns about questionable accounting or auditing
matters. The Procedures below are intended to fulfill these responsibilities and to ensure that any such complaints and concerns
are promptly and effectively addressed.
The
Audit Committee hereby adopts the following policy and procedures pursuant to the Company’s Audit Committee Charter, applicable
U.S. securities laws, the rules and regulations of stock market the Company’s common shares trade on and the U.S. Securities
and Exchange Commission (the "SEC").
2. Procedures
For
the submission and receipt of complaints and concerns from employees of the Company and non-employees:
| 2.1 | Employee
Complaints and Concerns |
|
2.1.1 |
Employees are free to bring complaints or concerns to the attention
of their supervisors as they would any other workplace concern. The recipients of such complaints or concerns shall forward them
promptly to the Chairman of the Audit Committee. |
|
2.1.2 |
To ensure confidentially or anonymous submission of a complaint or concern, employees should submit their complaint
or concern by regular mail (or other means of delivery), by submitting their complaint or concern to the Company’s head
office address at Suite 700, 10150 -100 Street, Edmonton, Alberta, T5J 0P6, in a sealed envelope marked “Private and
Strictly Confidential – Attention: Chairman of the Audit Committee of Deep Well Oil & Gas, Inc.”. All mail
marked and addressed in this manner which shall be forwarded. |
Adopted: December 17, 2014 DWOG Audit Committee Whistle-Blower Policy | Page: 2 of 5 |
|
2.2 |
Non-Employee Complaints and
Concerns |
|
2.2.1 |
Non-employees
may submit complaints and concerns by mail (or other means of delivery) to the Company’s head office address at Suite
700, 10150 -100 Street, Edmonton, Alberta, T5J 0P6, and addressed to the attention of the President, Chief Financial Officer
or the Chairman of the Audit Committee. |
|
2.3 |
Reporting a Complaint or Concern |
|
2.3.1 |
The
Company encourages that all complaints or concerns be in a written format. Any person making a complaint is encouraged to
provide specific details which should include names, dates, places, the violation they perceive has been committed and as
much factual information as possible rather than speculation or guessing. |
|
2.4 |
Retention of records of complaints
and concerns submitted to the Company: |
|
2.4.1 |
All complaints and concerns
received will be logged immediately. |
|
2.4.2 |
Records
pertaining to a complaint or concern are the property of the Company and shall be retained in compliance with the applicable
laws and document retention policies; subject to safeguards that ensure their confidentiality, and when applicable, the anonymity
of the person making the complaint or concern. |
|
2.4.3 |
The
President, Chief Financial Officer or Chairman of the Audit Committee shall report to the Audit Committee periodically about
the process for receiving complaints and concerns so that the Audit Committee can ensure that the process for receiving and
responding to complaints and concerns is satisfactory in its efficiency, accuracy, timeliness, protection of confidentiality
or anonymity, and effectiveness. |
|
2.5 |
Treatment,
investigation and evaluation of complaints and concerns submitted to the Company: |
Adopted: December 17, 2014 DWOG Audit Committee Whistle-Blower Policy | Page: 3 of 5 |
|
2.5.1 |
All complaints
and concerns shall be treated as confidential. |
|
2.5.2 |
Though
a person making an anonymous complaint or concern may be advised that maintaining anonymity could hinder an effective investigation,
the anonymity of the person making the complaint shall be maintained where legally appropriate until the person indicates
that he or she no longer wishes to remain anonymous. |
|
2.5.3 |
Upon
receiving a complaint or concern the President, Chief Financial Officer or Chairman of the Audit Committee will determine
whether the complaint pertains to accounting or auditing matters, and when possible acknowledge receipt of the complaint to
the sender. |
|
2.5.4 |
The
President, Chief Financial Officer or Chairman of the Audit Committee shall inform the Audit Committee of all complaints and
concerns received and determined to involve accounting or auditing matters, along with an initial assessment as to the appropriate
treatment of each complaint or concern. Assessment, investigation, and evaluation of complaints or concerns shall be conducted
by, or at the direction of, the Audit Committee. If the Audit Committee deems it appropriate, the Audit Committee may engage
at the Company’s expense independent advisors, such as outside counsel and accountants unaffiliated with the Company’s
independent auditor. |
|
2.5.5 |
Following
investigation and evaluation of a complaint or concern, the Chairman of the Audit Committee shall report to the Audit Committee
regarding the recommended disciplinary or remedial action, if any. The action determined by the Audit Committee to be appropriate
under the circumstances shall then be brought to the Board or to the appropriate members of Senior Management for authorization
or implementation, respectively. If the action taken to resolve a complaint or concern is deemed by the Audit Committee to
be material or otherwise appropriate for inclusion in the minutes of the meetings of the Audit Committee, it shall be so noted
in the minutes. |
Adopted: December 17, 2014 DWOG Audit Committee Whistle-Blower Policy | Page: 4 of 5 |
3
Retaliation not Permitted
Any
effort to retaliate against any person making a complaint or concern in good faith is strictly prohibited and shall be reported
immediately to the Chairman of the Audit Committee, or the Board.
4
Amendments or Modifications
The
Audit Committee will review and evaluate this policy and its procedures on at least an annual basis to determine whether the policy
is effective in providing a confidential and anonymous procedure to report complaints or concerns regarding accounting, internal
accounting controls, and auditing matters. Any amendment or modification to this policy or its procedures must be approved by
the Company’s Audit Committee and submitted to the Board for their approval.
5
Publication of Policy
This
policy will be posted on the Company’s website at www.deepwelloil.com.
Adopted: December 17, 2014 DWOG Audit Committee
Whistle-Blower Policy |
Page:5 of 5 |
Exhibit
99.3
Deep
Well Oil & Gas, Inc.
Audit
Committee Charter
Adopted:
December 17, 2014
AUDIT
COMMITTEE CHARTER
This
Charter governs the operations of the Audit Committee. The primary purpose of the Audit Committee is to assist the Board of Directors’
in fulfilling its oversight responsibilities of:
|
1.1 |
the
integrity of the Company’s consolidated financial statements; |
|
|
|
|
1.2 |
the
Company's accounting and financial reporting processes and consolidated financial statement audits1; |
|
|
|
|
1.3 |
the
Company’s compliance with legal and regulatory requirements; |
|
|
|
|
1.4 |
the
registered public accounting firm's (independent auditor’s) qualifications and independence2; |
|
|
|
|
1.5 |
the
performance of the Company’s independent auditors3; and |
|
1.6 |
the
Company's systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with ethical
standards adopted by the Company. |
The
Audit Committee shall prepare the report (Audit Committee Report) required by the rules of the U.S. Securities and Exchange Commission
(the “SEC”) to be included in the Company’s annual proxy statement.
While
the Audit Committee recognizes the importance of its role, it is not the responsibility of the Audit Committee to plan or conduct
audits, to determine that the Company’s consolidated financial statements are in all material respects complete and accurate
and in accordance with U.S. generally accepted accounting principles (“GAAP”), or to certify the Company’s consolidated
financial statements. These are the responsibilities of management and the independent auditor. It is also not the responsibility
of the Audit Committee to guarantee the independent auditor’s report. The Audit Committee shall assist the Board of Directors
in overseeing management and the independent auditors in fulfilling their responsibilities in the financial reporting process
of the Company.
1
NASDAQ Corporate Governance Rule 5605(c)(1)(c)
2
NASDAQ Corporate Governance Rule 5605(c)(1)(b)
3
NASDAQ Corporate Governance Rule 5605(c)(1)(b)
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 2 of 9 |
|
2. |
Organization and Composition |
The
Board of Directors shall designate annually an Audit Committee comprised of three or more independent Directors, who may be removed
by the Board of Directors in its discretion. The members of the Audit Committee shall:
2.1 Be
“independent” as determined in accordance with the laws, rules and regulations of the SEC4;
2.2 Not
accept any consulting, advisory, or other compensation fee from the Company other than for service on the Company’s Board
or its Committees;
2.3 Not
be an affiliated person of the Company ("Affiliated Person" means an executive officer of the Company or a beneficial
owner of more than 10% of the Company's issued and outstanding voting shares.)
2.4 Be
able to read and understand fundamental financial statements;
2.5 Not
have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any
time during the past three years; and
At
least one member of the Audit Committee shall have past employment experience in finance or accounting with a professional certification
in accounting or any other comparable experience or background which results in the individual's financial expertise, including
being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities
or who meets the requirements of an "Audit Committee Financial Expert" as defined in Item 407(d)(5) of Regulation S-K
of the Securities Act of 1933.
The
Board of Directors shall elect a Chairman of the Audit Committee annually. The Chairman may be removed by the Board of Directors
in its discretion.
In
addition, if an Audit Committee member ceases to be independent for reasons outside the member’s reasonable control, his
or her membership on the Audit Committee may continue until the earlier of the Company’s next annual shareholder meeting
or one year from the occurrence of the event that caused the failure to qualify as independent. If the Company is not already
relying on this provision, and falls out of compliance with the requirements regarding Audit Committee composition due to a single
vacancy on the Audit Committee, then the Company will have until the earlier of the next annual shareholders’ meeting or
one year from the occurrence of the event that caused the failure to comply with this requirement. The Audit Committee shall cause
the Company to provide notice to the stock exchange where the Company is listed upon learning of the event or circumstance that
caused the non-compliance, if it expects to rely on either of these provisions for a cure period.
4
NASDAQ Corporate Governance Rule 5605(a)(2)
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 3 of 9 |
The
Audit Committee shall meet no less than four times each year, or more frequently as it deems necessary or appropriate to carry
out its responsibilities and may, in its sole discretion, form and delegate authority to subcommittees (comprised only of Audit
Committee members) in furtherance of such responsibilities. Meetings of the Audit Committee shall be called by the Chairman of
the Audit Committee, the Chairman of the Board or the President of the Company. The Audit Committee Chairman will approve the
agenda for the committee meetings and any member of the committee may suggest items for consideration.
All
such meetings shall be held pursuant to the Amended By-Laws of the Company with regard to notice and waiver thereof, and written
minutes of each such meeting shall be duly filed in the Company’s records. In order to foster open communications, the Audit
Committee shall have unrestricted access to and meet separately and regularly with senior management of the Company and the independent
auditor to discuss any matters that the Audit Committee or any such persons believe appropriate. In addition, the Audit Committee
or its Chairman should meet with the independent auditors and management quarterly to review the Company’s consolidated
financial statements. A majority of the members of the Audit Committee present in person or by telephone shall constitute a quorum.
The Audit Committee shall report regularly to the full Board of Directors with respect to its activities.
|
4. |
Relationship with Independent Auditors |
The
Audit Committee shall be directly responsible for the appointment, compensation (including as to fees and terms), retention and
oversight of the work of the Company’s independent auditor (including resolution of disagreements between management and
the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Company. The Company’s independent auditor shall report directly to the Audit Committee.
All auditing services and permitted non-audit services performed for the Company by the independent auditor shall be preapproved
by the Audit Committee subject to applicable laws, rules and regulations. The Audit Committee may form and delegate to a subcommittee
the authority to grant preapprovals with respect to auditing services and permitted non-auditing services, provided that any such
grant of preapproval shall be reported to the full Audit Committee at its next meeting.
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 4 of 9 |
|
5. |
Powers and Responsibilities |
Oversight
of the Company’ Consolidated Financial Reporting and Disclosure Matters
To
fulfill its responsibilities and duties the Audit Committee shall:
5.1 Meet
to review and discuss with management and the independent auditor the Company’s annual audited consolidated financial statements,
including the Company’s disclosures made under “Management’s Discussion and Analysis of Financial Conditions
and Results of Operations,” prior to the filing of the Company’s Annual Report on Form 10-K and recommend to the Board
of Directors whether such audited consolidated financial statements should be included in the Company’s annual report on
Form 10-K.
5.2 Meet
to review and discuss with management and the independent auditor the Company’s quarterly consolidated financial statements,
including the disclosures made under “Management’s Discussion and Analysis of Financial Conditions and Results of
Operations,” prior to the filing of the Company’s Quarterly Report on Form 10-Q.
5.3 Review
the Company’s consolidated financial statements which shall include:
5.3.1
Major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s
selection or application of accounting principles, and major issues as to the adequacy and effectiveness of the Company’s
internal controls over financial reporting and any special remedial actions adopted in light of significant deficiencies or material
weaknesses;
5.3.2
Discussion with management and the independent auditor regarding significant financial reporting issues and judgments made in
connection with the preparation of the Company’s consolidated financial statements and the reasonableness of those judgments,
including analyses of the effects of alternative GAAP methods on the Company’s consolidated financial statements;
5.3.3
Discuss with management and the independent auditor the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the Company’s consolidated financial statements; and
5.3.4
The completeness and clarity of the disclosures in the Company’s consolidated financial statements.
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 5 of 9 |
5.4 Review
and discuss with the independent auditor, before the filing of the Company’s Annual Report on Form 10-K:
5.4.1
all critical accounting practices and policies to be used;
5.4.2.
all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor;
and
5.4.3.
other material written communications between the independent auditor and management, such as any management letter or schedule
of unadjusted differences.
5.5 Review
and approve with the Board of Directors any related-party transactions over $120,000 or such other amount as revised under Regulation
S-K Item 404(a) to be disclosed and recommend to the Board of Directors its determination with respect to the related-party transactions.
The standard applied in approving any related party transaction will be to confirm that the transaction is in the best interests
of the Company without regard to the interests of the related party involved in the transaction.
5.6 Review
and discuss earnings press releases, as well as review any financial information and earnings guidance provided to analysts and
rating agencies.
5.7 Discuss
with management its process for performing its required quarterly and annual certifications required to be made under Section
302 of the Sarbanes-Oxley Act, including the evaluation of the effectiveness of its disclosure controls by the Chief Executive
Officer and Chief Financial Officer.
5.8
Discuss, with management, management’s process for assessing the effectiveness of internal control over financial reporting
under Section 404 of the Sarbanes-Oxley Act, including any material weaknesses or significant deficiencies identified.
5.9 When
the Company becomes subject to the SEC filing requirement with respect to the independent auditor’s attestation of the Company’s
internal control over financial reporting, review and discuss with management and the independent auditor such report and the
independent auditor’s attestation of the Company’s internal control over financial reporting prior to the filing of
the Company’s Annual Report on Form 10-K.
5.10 Discuss
with the independent auditor certain matters required to be discussed under auditing standards established from time to time by
the Public Company Accounting Oversight Board (“PCAOB”) and by the SEC rules relating to the conduct of the audit,
including any problems or difficulties encountered by the independent auditor in the course of the audit work, any restrictions
on the scope of the independent auditor’s activities or access to information, and any significant disagreements with management.
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 6 of 9 |
|
6. |
Oversight
of the Company’s Independent Auditor |
The
Audit Committee shall:
6.1 Obtain
and review the report from the independent auditor on at least an annual basis describing:
6.1.1
The internal quality-control procedures of such independent auditor;
6.1.2
Any material issues raised by the independent auditor’s most recent internal quality-control review or peer review and any
steps taken to deal with such issues;
6.1.3
Any material issues raised by any inquiry or investigation by governmental or professional authorities, within the preceding five
years, with respect to one or more independent audits carried out by the independent auditor and any steps taken to deal with
such issues; and
6.1.4
To assess the auditor’s independence, all relationships between the independent auditor and the Company and its subsidiaries.
6.2 Evaluate
the qualifications, performance and independence of the independent auditor, taking into account the foregoing report, the independent
auditor’s work throughout the year and the opinions of management, and report such conclusions to the Board of Directors.
6.3 Evaluate
the lead (or coordinating) audit partner having primary responsibility for the audit, taking into account the opinions of management.
6.4 Ensure
the required rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner
responsible for reviewing the independent audit, and consider whether it is appropriate or necessary, in order to assure continuing
independence, to rotate the Company’s independent auditor in accordance with the applicable rules and regulations.
6.5 Set
Company hiring policies with respect to the employment of current and former employees of the independent auditor.
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 7 of 9 |
|
7. |
Oversight of the Company’s
Compliance with Legal and Regulatory Requirements |
The
Audit Committee shall:
7.1 Obtain
assurance from the independent auditor that the Company is in compliance with the provisions of Section 10A(b) of the Securities
Exchange Act of 1934, as amended.
7.2 Review
with management the Company’s Code of Business Conduct and Ethics (“Code”), which prohibits unethical or illegal
activities by the Company’s directors, officers and employees, as well as review the actions taken to monitor compliance
with the Code.
7.3 Review
and approve any proposed waivers for directors or executive officers and review any material waivers for non-executive officers
or employees granted by the Company’s CEO, CFO or General Counsel pursuant to the Company’s Code of Conduct.
7.4 Discuss
with management the Company’s policies on risk assessment and risk management, including the risk of fraud and the Company’s
major financial risk exposures and the steps management has taken to monitor and control such exposures.
7.5 Review
with management and the Company’s counsel any legal, regulatory and environmental compliance matters that may have a material
impact on the Company’s consolidated financial statements or accounting policies.
7.6 Establish
procedures for the receipt, retention and treatment of complaints received by the Company regarding the Company’s accounting,
internal accounting controls or auditing matters, and confidential, anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters.
7.7 Review
and assess compliance with all applicable laws, rules and regulations, including those of the Securities and Exchange Commission,
specifically applicable to the composition and responsibilities of the Audit Committee.
Adopted: December 17, 2014 | DWOG Audit Committee Charter | Page: 8 of 9 |
|
8. |
Additional Powers & Responsibilities |
The
Audit Committee shall have the authority to engage and obtain advice and assistance from advisors, including independent or outside
legal counsel and accountants, as it determines necessary or appropriate to carry out its duties and responsibilities. All related
fees and costs of such advisors shall be paid promptly by the Company in accordance with its normal business practices. In carrying
out its duties and responsibilities, the Audit Committee shall also have the authority to meet with and seek any information it
requires from employees, officers, directors, or external parties.
The
Audit Committee shall, on an annual basis, review and reassess the adequacy of this Charter and conduct an evaluation of the Audit
Committee’s own performance during such past year.
The
Audit Committee shall report its activities to the full Board on a regular basis, including without limitation, any issues that
arise with respect to the quality or integrity of the Company’s consolidated financial statements, the Company’s compliance
with legal or regulatory requirements, the performance and independence of the Company’s independent auditors, and shall
perform such other activities or make such recommendations with respect to the above and other matters as the Audit Committee
or the Board of Directors may from time to time deem necessary or appropriate.
Adopted: December 17, 2014 |
DWOG Audit Committee Charter |
Page: 9 of
9 |
Exhibit 99.4
Deep
Well Oil & Gas, Inc.
Compensation
Committee Charter
Adopted: December 17, 2014
COMPENSATION
COMMITEE CHARTER
1.
Purpose
The
Compensation Committee of the Board of Directors (the “Committee”) of Deep Well Oil and Gas, Inc. (the “Company”),
on behalf of the Board of Directors (the “Board”), discharges the Board’s responsibilities relating to compensation
of the Company’s directors and executives. The Committee shall have the authority to determine, review and approve, or recommend
to the Board, the compensation of the Company’s executive officers, directors, committee members and other key employees,
as the Board may designate to the Committee for determination as well as oversee the adoption of policies that govern the Company’s
compensation programs. The Committee shall also establish all components of compensation for Directors and committee members of
the Company, if any. The Committee shall have the authority and membership and shall operate according to the procedures provided
in this Charter.
The
term “compensation” shall include salary, long-term incentives, bonuses, equity incentives, severance arrangements,
retirement benefits and other related benefits and benefit plans.
2.
Composition
The
Committee shall consist of three or more members of the Board and shall satisfy the laws governing the independence requirements
of applicable securities law, stock exchange and any other regulatory requirements and any exemptions thereto.
The
members of the Committee shall be appointed annually by the Board and may be replaced or removed by the Board at any time with
or without cause. Resignation or removal of a Director from the Board, for whatever reason, shall automatically constitute resignation
or removal, as applicable, from this committee. Vacancies occurring, for whatever reason, may be filled by the Board. The Board
shall designate one member of the Committee to serve as Chairman of the Committee.
3. Meetings
The
Committee shall hold such regular or special meetings in person or by telephone conference as its members shall deem necessary
or appropriate, but not less frequently than once each year. A majority of the members of the Committee shall constitute a quorum
for purposes of holding a meeting and the Committee may act by a vote of a majority of members present at such meeting. In lieu
of a meeting, the Committee may act by unanimous written consent. Minutes of each meeting of the Committee shall be prepared and
distributed to each Director of the Company and the Secretary of the Company after each meeting. The Chairman of the Committee
shall report to the Board from time to time, or whenever so requested by the Board.
Adopted: December 17, 2014 | DWOG Compensation Committee Charter | |
4. Compensation
Committee Activities
The
Committee’s purpose and responsibilities shall be to:
|
4.1 |
ANNUAL
REPORT on EXECUTIVE COMPENSATION: If and when applicable, produce or assist management of the Company with the preparation
of any disclosure and reports that may from time to time be required by the rules of the stock exchange where the Company
is listed, the U.S. Securities and Exchange Commission (the “SEC”), or another regulator the Company reports to,
to be included in the Company’s proxy statement on Schedule 14A for the annual meeting of shareholders or Annual Report
on Form 10-K or other filings. |
|
|
|
|
4.2 |
ANNUAL
PERFORMANCE EVALUATION of the COMPENSATION COMMITTEE and CHARTER: Evaluate the performance of the Committee, including
a review of the Committee’s compliance with this Charter, and review and reassess this Charter and submit any recommended
changes to the Board of its consideration. |
| 4.3 | RECOMMENDATIONS
REGARDING INCENTIVE-COMPENSATION PLANS and EQUITY-BASED PLANS: Review and make such
recommendations to the Board as the Committee deems advisable with regard to all incentive-based
compensation plans and equity-based plans. |
| 4.4 | MATTERS
RELATED to COMPENSATION of the COMPANY’s CHIEF EXECUTIVE OFFICER: |
| 4.4.1 | The
Committee shall review and approve the corporate goals and objectives that may be relevant
to the compensation of the Company’s Chief Executive Officer (“CEO”). |
| | |
| 4.4.2 | The
Committee shall evaluate the CEO’s performance in light of the goals and objectives
that were set for the CEO and determine and approve or recommend to the Board for approval,
the CEO’s compensation level (including salary, bonus, incentive compensation and
equity-based awards) based on such evaluation. In connection with determining the long-term
incentive component of the CEO’s compensation, the Committee shall consider the
Company’s performance and relative shareholder return, the value of similar incentive
awards to chief executive officers at comparable companies, and the awards given to the
Company’s management in past years, and such other factors as the Committee may
determine necessary or desirable. The CEO may not be present during voting or deliberations
related to his or her compensation. In evaluating and determining the CEO’s compensation,
the Committee shall consider the results of the most recent shareholder advisory vote
on executive compensation ("Say on Pay Vote") required by Section 14A of the Exchange
Act. |
Adopted: December 17, 2014 | DWOG Compensation Committee Charter | |
| 4.5 | MATTERS
RELATED to COMPENSATION of the OFFICERS OTHER THAN
the CHIEF EXECUTIVE OFFICER: The Committee
shall periodically review and shall have the authority to determine and approve or review
and recommend to the Board for approval the compensation (including salary, bonus, incentive
compensation and equity-based awards) of all officers of the Company other than the CEO;
for the purposes hereof the term “officer” means any President, Treasurer,
Chief Operating Officer, Senior Vice President, Vice President, Chief Financial Officer
or Corporate Secretary of the Company. In evaluating and determining any officer’s
compensation, the Committee shall consider the results of the most recent shareholder
advisory vote on executive compensation ("Say on Pay Vote") required by Section
14A of the Exchange Act. |
| 4.6 | SAY on PAY and FREQUENCY ADVISORY VOTE: Oversee all matters
relating to shareholder approval on a non-binding basis of executive compensation (“say-on- pay” votes), including
the frequency of such votes and the appropriate Committee response to a say- on-pay vote. |
5. Additional Compensation Committee Authority
The
Committee is authorized, on behalf of the Board, to do any of the following, as the Committee deems necessary or appropriate in
its discretion:
| 5.1 | MATTERS RELATED to COMPENSATION of the COMPANY’s DIRECTORS:
to the extent that the Company compensates its Directors, the Committee shall
annually review and make recommendations to the Board with respect to the compensation of Directors, including with respect to
any incentive-compensation plans and equity-based plans. |
| 5.2 | MATTERS
RELATED to COMPENSATION of the COMPANY’S VARIOUS COMMITTEE MEMBERS: to the
extent that the Company compensates its various committee members, the Committee shall
annually review and make recommendations to the Board with respect to the compensation
of its various committee members, including with respect to any incentive-compensation
plans and equity-based plans. |
Adopted: December 17, 2014 | DWOG Compensation Committee Charter | |
6. Outside
Advisors
The
Committee has the authority, in its sole discretion, to retain or obtain the advice of an outside compensation consultant, independent
legal counsel or other outside advisor on compensation matters to be used by the Committee to assist in the evaluation of Director,
CEO or the Company’s officers compensation only after assessing the independence of such person(s) in accordance with the
stock exchange listing rules and Item 407(e)(3)(iv) of Regulation S-K regarding conflict of interest. The Committee shall also
have sole authority to approve the consultant’s fees and other retention terms.
7. General
Items
The
Committee may establish and delegate authority to one or more subcommittees consisting of one or more of its members, when the
Committee deems it appropriate to do so in order to carry out its responsibilities.
| 7.1 | In
carrying out its responsibilities, the Committee shall be entitled to rely upon advice
and information that it receives in its discussions and communications with management
and such experts, advisors and professionals with whom the Committee may consult. The
Committee shall have the authority to request that any officer or employee of the Company,
the Company’s outside legal counsel, the Company’s independent auditor or
any other professional retained by the Company to render advice to the Company attend
a meeting of the Committee or meet with any members of or advisors to the Committee.
The Committee shall also have the authority to engage legal, compensation or other advisors
to provide it with advice and information in connection with carrying out its responsibilities
and shall have sole authority to approve any such advisor’s fees and other retention
terms. |
| 7.2 | The
Committee may perform such other functions as may be requested by the Board from time
to time |
Adopted: December 17, 2014 | DWOG Compensation Committee Charter | |
Page 5 of 5
Exhibit
99.5
Deep
Well Oil & Gas, Inc.
Corporate
Governance and
Nominating
Committee
Charter
Adopted:
December 17, 2014
CORPORATE
GOVERNANCE AND
NOMINATING
COMMITTEE CHARTER
The
Nominating and Corporate Governance Committee (the “Committee”) is appointed by the Board of Directors (the “Board”)
of Deep Well Oil & Gas, Inc. (the “Company”) for the purposes of (a) assisting the Board in identifying individuals
qualified to serve as members of the Board, (b) developing and recommending to the Board corporate governance guidelines for the
Company, and (c) overseeing the evaluation of the Board.
To
facilitate the goals of the Committee this Corporate Governance and Nominating Committee Charter governs the operations of this
Committee of the Board. This Charter is intended as a component of the flexible governance framework within which the Board, assisted
by its committees, directs the affairs of the Company. On behalf of the Board, the Committee is responsible for those duties set
out more fully in point 4 below but generally:
|
1.1 |
Identifying,
screening and reviewing individuals qualified to serve as directors and recommending to the Board: |
|
1.1.1 |
director
nominees for election, including nominees to be elected or re-elected as directors at each annual meeting of shareholders;
and |
|
|
|
|
1.1.2 |
candidates
to fill any vacancies on the Board; |
|
|
|
|
1.1.3 |
oversee
the evaluation of the Board and management of the Company; |
|
|
|
|
1.1.4 |
periodically
review the criteria for the selection of new directors to serve on the Board and recommend any proposed changes to the Board
for approval; |
|
|
|
|
1.1.5 |
annually
recommend to the Board the chairpersons and members of each of the Board’s committees. |
|
1.2 |
Overseeing
the implementation and monitoring the effectiveness of, interpreting and reviewing, the Company’s Corporate Governance
Guidelines and recommending to the Board modifications and/or additions to the Corporate Governance Guidelines. |
|
|
|
|
1.3 |
Reviewing,
on a regular basis, the overall corporate governance of the Company and recommending improvements as appropriate. |
Adopted: December 17, 2014 | DWOG Corporate Governance & Nominating Committee Charter | Page:2 of 6 |
In
addition to the powers and responsibilities expressly delegated to the Committee in this Charter, the Committee may exercise any
other powers and carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company’s
Bylaws, the listing requirements of the stock exchange where the Company is listed and applicable laws and regulations.
The
Committee shall consist of three or more members of the Board and shall satisfy the laws governing the independence requirements
of applicable securities law, stock exchange and any other regulatory requirements and any exemptions thereto.. The members of
the Committee shall be appointed by the Board and continue to be members until their successors are elected and qualified or until
their earlier resignation or removal from the Committee. Any member of the Committee may be removed, with or without cause, by
the Board at any time.
The
Board may appoint one member to serve as Chairman of the Committee, to convene and chair all regular and special sessions of the
Committee, to set agendas for Committee meetings, to determine and communicate to management and the full Board the information
needs of the Committee, and to report Committee determinations and actions on behalf of the Committee to the Board.
The
Chairman shall preside at each meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the
authority to establish its own rules and procedures for notice and conduct of its meetings as long as they are not inconsistent
with any provisions of the Company’s Bylaws or applicable laws or regulations.
The
Committee shall meet as frequently as the Committee may determine to carry out its duties and responsibilities under this Charter,
but in no event less than once each year. Meetings of the Committee may be held by telephone conference call. A majority of the
members of the Committee shall constitute a quorum sufficient for the taking of any action by the Committee.
The
Committee may, at its discretion and at the invitation of the Chairman, include in its meetings members of the Company’s
management, representatives of the Company’s outside advisors; any other personnel employed or retained by the Company or
any other persons whose presence the Committee believes to be necessary or appropriate. However; only independent directors of
the Committee may vote on matters.
The
Chairman shall report to the Board regularly regarding the Committee’s activities and actions and any matter of material
concern to the Company, including at the first Board meeting following any Committee meeting. The Committee shall keep regular
minutes of its meetings and report the same to the Board from time to time and upon request.
Adopted: December 17, 2014 | DWOG Corporate Governance & Nominating Committee Charter | Page:3 of 6 |
|
4. |
Duties and Responsibilities |
The
Committee shall have the following authority and responsibilities:
|
4.1 |
To review and report to the Board annually on the size, composition and
profile of the Board (age, geographical representation, disciplines, independence). |
|
|
|
|
4.2 |
To lead the search for selecting director nominees for election to the
Board and for filling vacancies on the Board and newly created directorships that may occur between annual meetings of shareholders.
The Committee is responsible for identifying individuals qualified to serve on the Board and recommending that the Board select
director nominees for election to the Board and to fill vacancies and newly created directorships. In fulfilling its responsibilities
to identify individuals qualified to become director nominees, the Committee will consider, but not limited to: |
|
4.2.1 |
The independence of each director nominee; |
|
|
|
|
4.2.2 |
The skills, experience, knowledge and background of each director nominee; |
|
|
|
|
4.2.3 |
The past performance of directors being considered for re-election; |
|
|
|
|
4.2.4 |
Applicable regulatory and stock exchange requirements; |
|
|
|
|
4.2.5 |
Director nominees with the highest personal and professional integrity;
and |
|
|
|
|
4.2.6 |
Director nominees who demonstrate exceptional ability and judgment. |
|
4.3 |
To review the Board committee structure and to recommend to the Board for
its approval directors to serve as members of each committee of the Board. The Committee shall review and recommend committee
positions annually and shall recommend additional committee members to fill vacancies or to augment the strength of those committees. |
|
|
|
|
4.4 |
Review planning for succession to the position of Chairman of the Board
and Chief Executive Officer and other senior management positions. To assist the Committee with this responsibility, if requested
by the Committee, the Chief Executive Officer will provide the Committee with recommendations and evaluations of potential successors
to succeed him or her and other members of senior management. |
Adopted: December 17, 2014 | DWOG Corporate Governance & Nominating Committee Charter | Page:4 of 6 |
|
4.5 |
To review proposals received from shareholders for persons to be considered
for nomination to the Board, and to designate a member of the Nominating Committee or the Corporate Secretary of the Company to
receive such communications directly from shareholders in compliance with the Company’s By-Laws. |
|
|
|
|
4.6 |
To assist management in the development and recommend to the Board for
its approval a set of corporate governance guidelines. The Committee shall review the guidelines from time to time, as it deems
appropriate, and recommend changes as necessary. |
|
|
|
|
4.7 |
To develop and recommend to the Board for its approval an annual self-evaluation
process of the Board and its committees. The Committee shall oversee the annual self-evaluations. |
|
|
|
|
4.8 |
To review and recommend changes to procedures whereby shareholders may
communicate with the Board. |
|
|
|
|
4.9 |
To review and assess the adequacy of this Committee Charter annually, requesting
Board approval for proposed changes, and ensure appropriate disclosure as may be required by law, regulation, the stock exchange
rules where the Company is listed, or consistent with the Company’s By-Laws. |
|
5. |
Access to Independent and Outside Advisors |
The
Committee shall have the authority, at the expense of the Company, to retain and determine compensation for search firms and other
outside legal, accounting or other advisors or consultants including independent third-party experts, as it shall deem necessary
or appropriate in its sole discretion in performance of its duties.
Members
of the Committee shall receive such fees, if any, for their service as Committee members as may be determined by the Board of
the Company.
Adopted: December 17, 2014 | DWOG Corporate Governance & Nominating Committee Charter | Page:5 of 6 |
The
Committee will consider all recommendations from any person (or group) who has (or collectively if a group has) held more than
5% of the Company’s voting securities for longer than one year. Shareholders desiring to submit proposals or recommendations
for director nominations to the Committee should submit the following information in writing addressed to the following person:
DEEP
WELL OIL & GAS, INC.
Suite 700, 10150 – 100 Street
Edmonton, Alberta
T5J 0P6 Canada
Attention: Corporate Secretary
Any
such proposals or recommendations for director nominations considered by the committee must comply with the rules pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended and in accordance with the Company’s By-Laws as previously
filed with the U.S. Securities and Exchange Commission or by requested a copy of the By-Laws from the Company at the above noted
address.
Adopted: December 17, 2014 |
DWOG Corporate Governance & Nominating Committee Charter |
Page: 6 of
6 |
Exhibit 99.6
Deep Well Oil & Gas,
Inc.
Reserves
and Resources
Committee Charter
Adopted: December 17, 2014
RESERVES and RESOURCES
COMMITTEE CHARTER
1.
Purpose
The Board of Directors
(the “Board”) of Deep Well Oil & Gas, Inc. (the “Company”) has established the Reserves and Resources
Committee of the Board (the ‘Committee”) with authority, responsibility and specific duties as described in this Charter
(the “Charter”).
The Committee has been adopted by the Board to assist the Board in monitoring:
| 1.1 | the
integrity of the independent reserve and resources estimates and related U.S. and Canadian
regulatory disclosures of the Company; and |
| | |
| 1.2 | the
qualifications and independence of the independent reservoir engineers,
geologists and geophysicists. |
2.
Organization and Composition
The Committee shall
be comprised of not less than three directors of the Board. The majority of the members of the Committee:
| 2.1 | Shall
be free from any relationship that could, in the view of the Board,
reasonably be seen to interfere with the exercise of a member’s
independent judgment. |
| | |
| 2.2 | Shall
have a majority of “independent” members as determined in accordance with
the laws, rules and regulations as defined by the stock exchange listing standards and
the independence standards as set out by the U.S. Securities and Exchange Commission
rules and regulations. The Chair of the Committee shall be designated by the Board. |
| | |
| 2.3 | Any
member of the Committee may be removed or replaced at any time by the Board. If a vacancy
exists on the Committee, the remaining members may exercise all of the powers of the
Committee so long as a quorum is present at the applicable meeting or the applicable
written resolution is signed by all current members. |
Adopted: December 17, 2014 | DWOG Reservers and Resurces Committee Charter | |
3. Meetings
The
Committee shall meet, either in person or by conference call, as often as it determines is necessary or advisable, but not less
frequently than once a year and at such places as determined by the Chairman of the Committee, and may act by unanimous written
consent. The Committee will meet at least once a year with the Company’s independent reservoir engineering firm.
A
majority of the members of the Committee, but in no event less than two members, shall constitute a quorum for the meetings of
the Committee.
Agendas
shall be circulated to Committee members along with background information on a timely basis prior to the Committee meetings.
Minutes
of each meeting of the Committee shall be prepared and distributed to each Director of the Company and the Secretary of the Company
after each meeting. The Chairman of the Committee shall report to the Board from time to time, or whenever so requested by the
Board.
4. Powers
and Responsibilities
To
fulfill its responsibilities and duties the Reserves and Resources Committee shall:
|
4.1 |
Approve
the appointment of, and any proposed change in the independent reservoir engineering firm retained to assist the Company in
the annual review of the Company’s reserves and resources. |
|
|
|
|
4.2 |
Approve
the scope of and oversee an annual assessment and evaluation of the Company’s reserves and resources by the independent
reservoir engineering firm, having regard to U.S. and or Canadian industry practices and all applicable laws and regulations. |
|
|
|
|
4.3 |
Review
the qualifications and independence of the Company’s independent reservoir engineering firm. |
|
|
|
|
4.4 |
Approve
the independent engineering firms’ engagement fees and terms of service. |
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4.5 |
Monitor
the performance of the Company’s independent reservoir engineering firm. |
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4.6 |
Review
the integrity of the Company’s reserves and resources evaluation process and reporting system. |
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4.7 |
Oversee
and evaluate the Company’s compliance with U.S. and or Canadian legal and regulatory requirements related to its reserves
and resources. |
Adopted: December 17, 2014 | DWOG Reservers and Resurces Committee Charter | |
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4.10 |
Review and approve any statement of reserves and or resources data, and any report of the independent reservoir engineering firm regarding the reserves and or resources to be filed with any securities regulatory authority in the U.S. and or Canada or to be disseminated to the public. |
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4.11 |
Advise the Board as to whether the Company’s public reserves and or resources disclosure is consistent with all required U.S. and or Canadian legal and regulatory requirements. |
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4.12 |
Review with the independent reservoir engineering firm any reserves and or resources reporting problems or difficulties and management’s response, including difficulties encountered in the course of the reserves and or resources engineering report preparation; any restrictions placed on the scope of the independent reservoir engineering consultants’ activities or access to requested information, and any significant disagreements with management. |
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4.13 |
Review the Company’s significant reserves and resources engineering principles and policies and any significant changes thereto and any proposed changes in reserves and resources engineering standards and principles which have, or may have, a material impact on the Company’s U.S. and Canadian reserves and resources disclosure. |
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4.14 |
Review any material reserves and resources adjustments. |
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4.15 |
Resolve any material disagreements or difficulties between the independent engineering reservoir firm and management. |
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4.16 |
Initiate, when appropriate, investigations of matters within the scope of its responsibilities. |
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4.17 |
Perform such other duties and responsibilities as the Board shall approve and assign to the Committee. |
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4.18 |
To review and make recommendations to the Board with respect to: |
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4.18.1 |
the Annual Evaluation Assessment of Reserves and or Resources Report prepared in accordance to the Petroleum Resources Management System (PRMS) standards. |
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4.18.2 |
the annual signed Report of Independent Qualified Reserves Evaluator or Auditor respecting the applicable Reserves and or Resources Report prepared in accordance with PRMS standards. |
Adopted: December 17, 2014 | DWOG Reservers and Resurces Committee Charter | |
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4.18.3 |
If required by Canadian regulations the Annual Evaluation Assessment or Appraisal of Reserves and or Resources Report prepared in accordance to COGEH standards. |
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4.18.4 |
If required by Canadian regulations the Company’s annual Statement of Reserves and Resources Data and Other Information prepared on Form 51-101F1 in accordance with the Canadian Oil and Gas Evaluation Handbook (COGEH); |
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4.18.5 |
If required by Canadian regulations the annual signed Report of Independent Qualified Reserves Evaluator or Auditor respecting the applicable Reserves and Resources Statement on Form 51-101F2 prepared in accordance with COGEH standards; |
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4.18.6 |
If required by Canadian regulations the annual Report of Management and Directors, on Form 51-101F3 (the “Management Report”), respecting the applicable Reserves and Resources Statement prepared in accordance COGEH standards; |
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4.19 |
to coordinate meetings with the Audit Committee of the Board, senior reserve and/or resources personnel, engineers and independent reserve evaluators, as required, to address areas of mutual interest or concern in respect of the Company’s evaluation of its oil sands reserves and/or resources. |
5. Reporting
The Committee will report to the Board not less than once each
year, and review any issues that arise with respect to:
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5.1 |
The quality or integrity of the Company’s reserves and resources evaluations and reports. |
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5.2 |
The Company’s compliance with U.S. and Canadian legal or regulatory requirements related to the Company’s reserves and resources. |
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5.3 |
The qualifications, performance and independence of the Company’s independent reservoir engineering firm. |
Adopted: December 17, 2014 | DWOG Reservers and Resurces Committee Charter | |
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