Notes to the Condensed Consolidated Financial
Statements
June 30, 2020
|
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”).
These condensed 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.
Going Concern
The Company’s condensed consolidated
financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2020, the Company has a working
capital deficit, and continues to have an accumulated deficit, and has generated negative cash flows from operations. These factors raise
substantial doubt regarding the Company’s ability to continue as a going concern. In order to continue as a going concern and achieve
a profitable level of operations, the Company will need, among other things, additional capital resources and to develop a consistent
source of dependent upon the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's
operations. The management of the Company is developing a strategy, which it hopes will accomplish this objective through short-term related
party loans and additional equity funding, which will enable the Company to operate for the coming year. The accompanying financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Basis of Presentation
The interim condensed consolidated financial
statements included herein have been prepared by the Company, without audit and auditor review, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed
or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate so as to make the information
presented not misleading.
These interim condensed consolidated
financial statements follow the same significant accounting policies and methods of application as the Company’s annual consolidated
financial statements for the year ended September 30, 2019.
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 therein. However, the results of operations for the interim periods may not be indicative
of results to be expected for the full fiscal year. It is suggested that these condensed consolidated financial statements be read in
conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended September 30, 2019.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Consolidation
These interim condensed 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.
Crude oil and natural gas properties
The Company follows the full cost method
of accounting for oil sands properties pursuant to SEC Regulation S-X Rule 4-10. The full cost method of accounting for oil and gas operations
requires that all costs associated with the exploration for and development of oil and gas reserves be capitalized on a country by country
basis. Such costs include lease acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties,
costs of drilling both productive and non-productive wells, production equipment and overhead charges directly related to acquisition,
exploration and development activities.
Under
the full cost method, oil and gas properties are subject to the ceiling test performed quarterly. A
ceiling test write-down is recognized in net earnings if the carrying amount of a cost centre exceeds the “cost centre ceiling”.
The carrying amount of the cost centre includes the capitalized costs of proved oil and natural gas properties, net of accumulated depletion
and deferred income taxes. The cost centre ceiling is the sum of (A) present value of the estimated future net cash flows from proved
oil and natural gas reserves using a 10 percent per year discount factor, (B) the costs of unproved properties not being amortized,
and (C) the lower of cost or fair value of unproved properties included in the costs being amortized; less (D) related income tax effects.
As of June 30, 2020, no ceiling test write-downs were recorded for the Company’s oil and gas properties.
Costs associated with unproved properties
are excluded from the depletion calculation until it is determined that proved reserves are attributable or impairment has occurred. The
Company's unproved properties are assessed annually for impairment. Costs that have been impaired are included in the costs subject to
depletion within the full cost pool.
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 reasonably be 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 of June 30, 2020, and September 30, 2019, asset retirement obligations amount to $499,917 and $500,392, respectively.
The Company has posted bonds, where required, with the Government of Alberta based on the amount the government estimates the cost of
abandonment and reclamation to be.
Financial, Concentration and Credit
Risk
The Company’s consideration or
related financial credit risk related to cash and cash equivalents depends on if funds are fully insured by either The Canada Deposit
Insurance Corporation (“CDIC”), or The Credit Union Deposit Guarantee Corporation (“CUDGC”) deposit insurance
limit. As of June 30, 2020, the Company has approximately $21,108 funds that are in excess of deposit insurance limits, which may have
financial credit risk. For the Company funds that are maintained in a financial institution which has its deposits fully guaranteed by
CUDGC, there is no financial credit risk.
The Company is not directly subject
to credit risk resulting from the concentration of its crude oil sales. For the period ending June 30, 2020 and June 30, 2019 the Company
recorded no oil sales.
Basic and Diluted Net Loss Per Share
Basic net loss per share amounts are
computed based on the weighted average number of shares actually outstanding. Diluted net 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 antidilutive and then the basic and diluted per share amounts are the same. There were
no potentially dilutive securities excluded from the the diluted earnings per share calculation because their effect would be antidilutive.
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU
2016-02, “Leases (Topic 842),” requiring lessees to recognize lease assets and lease liabilities for most leases classified
as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, with early
adoption permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after
the beginning of the earliest comparative period in the financial statements. This ASU does not apply to the Company’s oil sand
leases. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements because
the Company has no leases that the new accounting standard applies to.
COVID-19 Impact
On March 11, 2020, the World Health
Organization assessed and characterized the novel coronavirus disease (“COVID-19”) as a pandemic. In an effort to contain
and mitigate the spread of COVID-19, several measures have been implemented in Canada and the rest of the world in response to the impact
from COVID-19. The Company continues to operate its business at this time and continues to monitor the COVID-19 developments but since
the duration and impact of the COVID-19 pandemic is unknown at this time, it is not possible to reliably estimate the length of the outbreak,
or the severity of its impact will have on the Company. The ongoing spread of COVID-19 and mitigation measures to prevent its spread,
along with a decline in oil prices, could have a material adverse effect on the Company’s business, financial condition, results
of operations and its future ability to raise funds. The Company, if eligible, has or will apply for any financial relief available to
the Company.
On
April 20, 2020, one of the Company’s Canadian subsidiaries received a loan from that subsidiary’s Canadian chartered bank
in the amount of $29,352 ($40,000 Cdn) as part of the Canadian government’s COVID-19 relief program. Under this loan program,
eligible businesses receive a $40,000 Cdn interest-free loan until December 31, 2022. If $30,000 Cdn is repaid on or before December 31,
2022, the remaining amount of the loan is eligible for complete forgiveness. If the loan is not repaid by December 31, 2022, it will be
extended for an additional 3-year term bearing an interest rate of 5% per annum. It is the Company’s intention to repay $30,000
Cdn of the loan on or before December 31, 2022. As such, the forgivable portion of the loan $7,413
($10,000 Cdn) has been recorded as income, and $22,014 ($30,000 Cdn) has been recorded as loan payable.
|
4.
|
OIL AND GAS PROPERTIES
|
The Company’s oil sands properties
under lease as of June 30, 2020, cover 19,610 gross acres (13,632 net acres) of land under seven oil sands leases. The lease expiration
dates of the Company’s oil sands leases are as follows:
|
1.
|
Out of 20,242 gross acres (13,284 net acres) under five oil sands leases that were set to expiry on July
10, 2018, 14,549 gross acres (8,571 net acres) were granted continuation under the Alberta Oil Sands Tenure regulations and have no set
expiry date. In November of 2017, the Company’s joint venture partner and operator of two of the five oil sands leases, submitted
two continuation applications to the Alberta Oil Sands Tenure division to apply to continue 7,591 gross acres (1,898 net acres) and in
January 2018, approval was received from Alberta Energy to continue 6,958 gross acres (1,740 net acres). In June 2018, the Company as
operator of three of these five oil sands leases, submitted three continuation applications to the Alberta Oil Sands Tenure division to
apply to continue another 7,591 gross acres (6,832 net acres) where resources were identified and in July 2018 and April 2019, approval
was received from Alberta Energy to continue 7,591 gross acres (6,832 net acres). Of these five oil sands leases that were set to expiry
on July 10, 2018, a total of 5,693 gross acres (4,713 net acres) expired without being continued. These expired lands were primarily areas
where the Company determined that there was no or limited exploitable resources. These continued leases are now held by the Company for
perpetuity, subject to yearly escalating rental payments until they are deemed to be producing leases;
|
|
2.
|
Out of 19,610 gross acres (17,649 net acres) under the three most northern oil sands leases that were
set to expire on August 19, 2019, 1,898 gross acres (1,708 net acres) were granted continuation under the Alberta Oil Sands Tenure regulations
and have no set expiry date. In August 2019, the Company as operator of these three most northern leases submitted one continuation application
to the Alberta Oil Sands Tenure division to apply to continue 1,898 gross acres (1,708 net acres) and in October 2019, approval was received
from Alberta Energy to continue 1,898 gross acres (1,708 net acres). Of these three most northern oil sands leases that were set to expiry
on August 19, 2019, a total of 17,712 gross acres (15,941 net acres) expired without being continued. These expired lands were primarily
areas where the Company determined that there was no or limited exploitable resources. This one partially continued lease is now held
by the Company for perpetuity, subject to yearly escalating rental payments until the lease is deemed to be a producing lease. See “Subsequent
Events” in the notes to the Condensed Consolidated Financial Statements for the period ending June 30, 2020 as disclosed herein;
and
|
|
3.
|
3,163 gross acres (3,163 net acres) under one oil sands lease are set to expire on April 9, 2024. The
Company will be applying to continue this lease into perpetuity.
|
Lease
Rental Commitments
The
Company has acquired interests in certain oil sands properties located in North Central Alberta, Canada. The lease terms include certain
commitments related to oil sands properties that require the payments of yearly rents. As required by the amended Oil Sands Tenure Regulation
of the Mines and Minerals Act of Alberta continued oil sands leases past their expiry dates are subject to escalating rental payments
in respect of each term year of a continued lease that is designated as non-producing. Annual and escalating rent of continued leases
are due at the beginning of each term year. As of June 30, 2020, the following table sets out the estimated net payments due under lease
rental commitments for non-producing continued leases, which could be as high as, until the leases are classified as producing continued
leases:
|
|
(USD
$)
|
|
|
(Cdn
$)
|
|
2020
|
|
$
|
12,648
|
|
|
$
|
17,236
|
|
2021
|
|
$
|
19,828
|
|
|
$
|
27,022
|
|
2022
|
|
$
|
27,463
|
|
|
$
|
37,426
|
|
2023
|
|
$
|
27,463
|
|
|
$
|
37,426
|
|
2024
|
|
$
|
30,281
|
|
|
$
|
41,266
|
|
Subsequent
|
|
$
|
218,372
|
|
|
$
|
297,592
|
|
The
Company follows the full cost method of accounting for costs of oil properties. Under this method, oil and gas properties, for which
no proved reserves have been assigned, must be assessed at least annually to ascertain whether or not a write down should occur. Unproven
properties are assessed annually for potential write down.
Estimates
of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions. No write downs
were recognized for the period ended June 30, 2020.
Capitalized
costs of proven oil properties will be depleted using the unit-of-production method when the property is placed in production.
Many
of the Company’s oil activities are conducted jointly with others. The accounts reflect only the Company’s proportionate
interest in such activities.
|
5.
|
CAPITALIZATION
OF COSTS INCURRED IN OIL AND GAS ACTIVITIES
|
The
following table illustrates capitalized costs relating to oil producing activities for the nine months ended June 30, 2020 and the fiscal
year ended September 30, 2019:
|
|
June 30,
2020
|
|
|
September 30,
2019
|
|
Unproved Oil and Gas Properties
|
|
$
|
22,168,513
|
|
|
$
|
22,147,367
|
|
Accumulated Depreciation and Depletion
|
|
|
(115,434
|
)
|
|
|
(107,060
|
)
|
Net Capitalized Cost
|
|
$
|
22,053,079
|
|
|
$
|
22,040,307
|
|
Depreciation
and depletion expense for the nine months ended June 30, 2020 and 2019 were $8,356 and $8,356 respectively.
|
6.
|
EXPLORATION
ACTIVITIES
|
The
following table presents information regarding the Company’s costs incurred in the oil property acquisition, exploration and development
activities for the nine months ended June 30, 2020 and the fiscal year ended September 30, 2019:
|
|
June 30,
2020
|
|
|
September 30,
2019
|
|
Acquisition of Properties:
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
–
|
|
|
$
|
–
|
|
Unproved
|
|
$
|
–
|
|
|
$
|
–
|
|
Exploration costs
|
|
$
|
21,146
|
|
|
$
|
75,580
|
|
Development costs
|
|
$
|
–
|
|
|
$
|
–
|
|
|
7.
|
SIGNIFICANT
TRANSACTIONS WITH RELATED PARTIES
|
Accounts
payable – related parties were $6,119 as of June 30, 2020 (September 30, 2019 - $1,375) for expenses to be reimbursed to directors.
This amount is unsecured, non-interest bearing, and has no fixed terms of repayment.
As
of June 30, 2020, officers, directors, their families, and their controlled entities have acquired 53.59% of the Company’s outstanding
common capital stock.
The
Company incurred expenses $100,076 to one related party, Concorde Consulting, an entity controlled by a director, for professional fees
and consulting services provided to the Company during the period ended June 30, 2020 (June 30, 2019 - $101,574).
|
8.
|
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 as determined by the Alberta Energy Regulator to reclaim and abandon wells and facilities and the estimated
timing of the costs to be incurred in future periods. At June 30, 2020, the Company estimates the undiscounted cash flows related to
asset retirement obligations to total approximately $593,076 (September 30, 2019 - $610,291). The fair value of the liability at June
30, 2020 is estimated to be $499,917 (September 30, 2019 - $500,392) 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 23 years.
Changes
to the asset retirement obligation were as follows:
|
|
June 30,
2020
|
|
|
September 30,
2019
|
|
Balance, beginning of period
|
|
$
|
500,392
|
|
|
$
|
493,467
|
|
Liabilities incurred
|
|
|
–
|
|
|
|
–
|
|
Effect of foreign exchange
|
|
|
(14,255
|
)
|
|
|
(11,081
|
)
|
Disposal
|
|
|
–
|
|
|
|
–
|
|
Accretion expense
|
|
|
13,780
|
|
|
|
18,006
|
|
Balance, end of period
|
|
$
|
499,917
|
|
|
$
|
500,392
|
|
Common
Stock Issued and Outstanding
As
of June 30, 2020, the Company had outstanding 230,574,603 shares of common stock. See “Subsequent Events” in the notes to
the Condensed Consolidated Financial Statements for the period ending June 30, 2020, as disclosed herein.
On
November 17, 2019, 600,000 stock options previously granted on November 17, 2014 to one director expired unexercised.
The
following is a summary of stock option activity as at June 30, 2020:
|
|
Number of
Underlying
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average Fair
Market Value
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
|
600,000
|
|
|
$
|
0.23
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired, November 17, 2019
|
|
|
(600,000
|
)
|
|
|
0.23
|
|
|
|
0.18
|
|
Balance, June 30, 2020
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
11.
|
CHANGES
IN NON-CASH WORKING CAPITAL
|
|
|
Nine Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(55,919
|
)
|
|
$
|
(47,495
|
)
|
Prepaid expenses
|
|
|
16,768
|
|
|
|
(15,885
|
)
|
Accounts payable
|
|
|
71,633
|
|
|
|
(19,548
|
)
|
|
|
$
|
32,482
|
|
|
$
|
(82,928
|
)
|
Compensation
to Executive Officers
Concorde
Consulting, a company owned 100% by Mr. Curtis J. Sparrow, for providing services as Chief Financial Officer to the Company for $11,120
per month (Cdn $15,000 per month).
Office
Lease
On
June 24, 2020, the Company extended the Edmonton office lease commencing effective on July 1, 2020 and expiring on June 30, 2021. The
quarterly payments due, under this original lease, are as follows:
|
|
USD $
|
|
|
Cdn $
|
|
|
|
|
|
|
|
|
2020 Q4 (July - September)
|
|
|
3,643
|
|
|
|
4,965
|
|
2021 Q1 (October - December)
|
|
|
3,643
|
|
|
|
4,965
|
|
2021 Q2 (January - March)
|
|
|
3,643
|
|
|
|
4,965
|
|
2021 Q3 (April - June)
|
|
|
3,643
|
|
|
|
4,965
|
|
In
an effort to contain and mitigate the spread of COVID-19, Canada has imposed unprecedented, but are not limited to, restrictions on businesses,
including mandatory work from home measures unless the employer determines a physical presence is required for operational effectiveness.
Due to COVID-19 the Company implemented a work from home program for its staff beginning on March 14, 2020. Therefore the Company has
moved out of this office space.
See
“Subsequent Events” in the notes to the Condensed Consolidated Financial Statements for the period ending June 30, 2020,
as disclosed herein.
Provident
Premier Master Fund Ltd. vs Northern Alberta Oil Ltd., Deep Well Oil & Gas (Alberta) Ltd., Andora Energy Corporation and MP Energy
West Canada Corp.
On
October 28, 2019, Provident Premier Master Fund Ltd. (the “Plaintiff”), filed and served an Amended Statement of Claim against
Northern Alberta Oil Ltd., Deep Well Oil & Gas (Alberta) Ltd., Andora Energy Corporation and MP Energy West Canada Corp. (the “Defendants”)
in the Court of Queen’s Bench of Alberta Judicial District of Calgary. The Original Statement of Claim had been filed on November
1, 2018 but the Company states that it was never served, so the Company was not aware of the claim until served with the Amended Statement
of Claim. The Plaintiff claims that on December 12, 2003, Nearshore Petroleum Corporation (“Nearshore”) entered into a royalty
agreement with Northern Alberta Oil Ltd. (“Northern”) in which Northern supposedly granted a 6.5% gross overriding royalty
(the “Purported GORR”) in all petroleum substances produced, saved and marketed from certain oil sands leases located within
the Company's Sawn Lake properties. The Plaintiff further claims that on September 22, 2006, Nearshore and Gemini Strategies LLC (“Gemini”)
entered into a royalty conveyance agreement whereby Nearshore sold 1% of the Purported GORR to Gemini. The Plaintiff further states that
Gemini acquired the 1% of the Purported GORR as agent for Provident, Grey K Fund LP (“Grey K”) and Grey K Offshore Fund Ltd.
(“Grey K Offshore”). The Plaintiff further claims that on September 22, 2006, Gemini delivered a notice of assignment, in
accordance with the 1993 Canadian Association of Petroleum Landmen Assignment Procedure (the “1993 CAPL”), to the grantors
of the 1% of the Purported GORR, novating Provident (66.67%, net 0.6667%), Grey K (19.33%, net 0.1933%) and Grey K Offshore (14%, net
0.14%) into the Purported GORR agreement. The Plaintiff further claims that on September 2, 2009, any legal title in the Purported GORR
beneficially owned by Grey K and Grey K Offshore vested in the Crown in right of Alberta pursuant to Section 229(1) of the Business Corporations
Act and pursuant to section 15 of the Unclaimed Personal Property and Vested Property Act. The Plaintiff further claims that the Purported
GORR was payable by one or more of the Defendants to Provident and that the Defendants are in breach of the Purported GORR agreement
by failing to pay the Purported GORR. Despite the allegation within the claim that the Purported GORR was payable to each of Provident,
Grey K and Grey K Offshore, the only Plaintiff named in the Amended Statement of Claim is Provident and relief is only being sought by
Provident in relation to its purported 0.67% interest.
The
Plaintiff seeks: 1) A declaration that the Plaintiff is the legal owner of 0.67% of the Purported GORR payable on all oil sands produced
from the lands which is payable by one or more of the Defendants; 2) An accounting to determine the amount of the outstanding royalty
of which judgment is estimated by the Plaintiff to be in the amount of $73,380 ($100,000 Cdn); and 3) Interest and costs.
The
Company continues to deny the validity of the Purported GORR in the first instance. As well, if the Purported GORR was valid, which is
denied, it was not a gross overriding interest, but rather an overriding interest, which allowed for the deduction of operating and marketing
costs. The Company plans to vigorously defend itself against the Plaintiff’s claims. As at June 30, 2020, no contingent liability
has been recorded, as a successful outcome for the Plaintiff is not probable.
See
“Subsequent Events” in the notes to the Condensed Consolidated Financial Statements for the period ending June 30, 2020,
as disclosed herein.
Loan
As
previously disclosed in Note 3 above, on April 20, 2020, one of the Company’s Canadian subsidiaries, received a loan from that
subsidiary's Canadian chartered bank in the amount of $29,352 ($40,000 Cdn) as part of the Canadian government’s COVID-19 relief
program. In addition, on December 18, 2020, the Company’s Canadian subsidiary, received an additional $14,676 ($20,000 Cdn) under
the same COVID relief program.
Office
Lease
From
March 14, 2020 thru to June 30, 2021, the Company did not utilize its office space, and therefore the Company did not renew its office
lease on June 30, 2021. As previously disclosed above in Note 12, due to COVID-19 and certain governmental restrictions and recommendations,
the Company’s staff has continued to work from home.
Effective
February 2021, the Company currently rents office and storage space on a month-to-month basis with no lease commitment The quarterly
payments due are as follows:
|
|
USD $
|
|
|
Cdn $
|
|
|
|
|
|
|
|
|
2021 Q2 (January - March)
|
|
|
1,578
|
|
|
|
2,150
|
|
2021 Q3 (April - June)
|
|
|
2,367
|
|
|
|
3,225
|
|
Legal
Actions
Provident
Premier Master Fund Ltd. vs Northern Alberta Oil Ltd., Deep Well Oil & Gas (Alberta) Ltd., Andora Energy Corporation and MP Energy
West Canada Corp.
On
October 22, 2020, Provident Premier Master Fund Ltd. (the “Plaintiff”), filed and served a Second Amended Statement of Claim
against Northern Alberta Oil Ltd., Deep Well Oil & Gas (Alberta) Ltd., Andora Energy Corporation and MP Energy West Canada Corp.
(the “Defendants”) in the Court of Queen’s Bench of Alberta Judicial District of Calgary. The Original Statement of
Claim had been filed on November 1, 2018, but the Company states that it was never served, so the Company was not aware of the claim
until served with the first Amended Statement of Claim filed with the Court of Queen’s Bench of Alberta Judicial District of Calgary
on October 24, 2019. The Plaintiff claims that on December 12, 2003, Nearshore Petroleum Corporation (“Nearshore”) entered
into a royalty agreement with Northern Alberta Oil Ltd. (“Northern”) in which Northern granted a 6.5% gross overriding royalty
(the “Purported GORR”) in all petroleum substances produced, saved and marketed from certain oil sands leases held by the
Company located within the Company's Sawn Lake properties. The Plaintiff seeks: 1) A declaration that the Plaintiff is the legal owner
of 0.67% of the Purported GORR payable on all oil sands produced from the lands which is payable by one or more of the Defendants; 2)
As stated in Clause 18(b) of the Second Amended Statement of Claim, an accounting to determine the amount of the outstanding royalty;
3.) Judgment or restitution in the amount determined pursuant to clause 18(b) in the approximate amount of $73,380 ($100,000 Cdn) plus
such further amounts as come due following the filing of the action; and 4) Interest and costs.
On
November 30, 2020, the Defendants filed a Statement of Defence against the Plaintiff in the Court of Queen’s Bench of Alberta Judicial
District of Calgary. The Defendants continue to deny the validity of the Purported GORR in the first instance. As well, if the Purported
GORR was valid, which is denied, it was not a gross overriding interest, but rather an overriding interest, which allowed for the deduction
of operating and marketing costs. The Defendants plan to vigorously defend itself against the Plaintiff’s claims.
December
21,2020, Northern Alberta Oil Ltd., Deep Well Oil & Gas (Alberta) Ltd. (the “Third-Party Defendants”) filed a Statement
of Defence to Third Party Claim against the Plaintiff in the Court of Queen’s Bench of Alberta Judicial District of Calgary. The
remedy sought by the Third-Party Defendants is: 1.) the Third-Party Defendants ask that the Plaintiff’s claim against MP Energy
West Canada Corp. and Andora Energy Corporation be dismissed, with costs payable by the Plaintiff; and 2.) The Third-Party Defendants
ask that no costs be payable in relation to the Third-Party Claim.
Andora
Energy Corporation vs Northern Alberta Oil Ltd. and Deep Well Oil & Gas (Alberta), Ltd.
On
December 3, 2020, Andora Energy Corporation (the “Plaintiff”), filed a Statement of Claim against Northern Alberta Oil Ltd.
and Deep Well Oil & Gas (Alberta) Ltd. (the “Defendants”) in the Court of Queen’s Bench of Alberta Judicial District
of Calgary. The Company states that it was first served with this Statement of Claim on January 26, 2021. The Plaintiff claims that the
Defendants owe the Plaintiff $98,188 ($133,808 Cdn) for unpaid joint interest billings. The Plaintiff seeks: 1.) Judgment, or alternatively
damages, in the amount of the indebtedness, or such further amounts as may be due and owing as at the date of trail; 2.) Interest on
the amount found to be owing; 3.) Costs of this action; and 4.) Such further and other relief as counsel may advise and the court deems
just.
On
February 17, 2021, the Defendants filed a Statement of Defence against the Plaintiff in the Court of Queen’s Bench of Alberta Judicial
District of Calgary. The Defendants claimed that the Plaintiff owes monies to the Defendants for leases operated by the Defendants, and
that the Defendants have a right to off-set costs against any monies that may be owed to the Plaintiff’s.
On
March 18, 2021, Andora Energy Corporation (the “Plaintiff”), filed an Application for Summary of Judgment and Affidavit to
support the Application for Summary of Judgment against Northern Alberta Oil Ltd. and Deep Well Oil & Gas (Alberta) Ltd. (the “Defendants”)
in the Court of Queen’s Bench of Alberta Judicial District of Calgary. The Plaintiff seeks the repayment of outstanding joint interest
billings pursuant to a joint operating agreement between the parties (the “JOA”). The Plaintiff seeks an Order granting the
following relief: 1.) summary judgment in favour of Plaintiff as against the Defendant Northern Alberta Oil Ltd. in the amount of $96,281
($131,209 Cdn); 2.) summary judgment in favour of Plaintiff as the Defendant Deep Well Oil & Gas (Alberta) Ltd. in the amount of
$14,463 ($19,710 Cdn); 3.) interest on the amounts pursuant to the contractual interest rate prescribed by the JOA, or alternatively,
pursuant to the Judgement Interest Act RSA 2000, c J-1; 4.) costs of this Action, including costs of this Application, on such
basis as the Court deems appropriate; and 5.) such further and other relief as counsel may advices and the Court may deem just.
On
June 21, 2021, the Defendants filed an Affidavit against the Plaintiff’s application for an order for Summary of Judgment against
the Defendants in the Court of Queen’s Bench of Alberta Judicial District of Calgary. The Defendants claim that the Plaintiff owes
$125,870 ($171,531 Cdn) to the Defendants for, but are not limited to, for expenses incurred on leases operated by the Defendants, and
that the Defendants have a right to off-set costs against any monies that may be owed to the Plaintiff’s.
On
June 22, 2021, upon an application by the Plaintiff for an order for Summary of Judgment against the Defendants and upon the Court reviewing
the Affidavits filed by the Plaintiff and Defendants and upon hearing counsel for the Plaintiff and counsel for the Defendants, the Court
denied the Plaintiff’s order for a Summary of Judgment against the Defendants.
The
Defendants deny the Plaintiff’s claim regarding all of the monies which are claimed to be owed to the Defendants by the Plaintiff.
The Defendants plan to vigorously defend itself against the Plaintiff’s claims, but has provided for some of the claimed amounts
in the Company’s books.
Common
Stock Issued and Outstanding
As
previously disclosed in the Company’s annual report on Form 10-K for the year ending September 30, 2019, between June 8 to 10,
2018, five directors, two contractors and one employee of the Company, exercised a total of 3,150,000 option shares at an exercise price
of $0.05 by way of a cashless exercise to acquire a total of 899,998 common shares of the Company. On June 19, 2018, one director of
the Company acquired 300,000 common shares of the Company upon exercising stock options, at an exercise price of $0.05 per common share
for total gross proceeds to the Company of $15,000. All of the stock certificates from the exercise of these stock options are held in
escrow upon final approval and release by Management of the Company. Subsequently, on June 8, 2021, Management of the Company determined
that the conditions to issue the common shares were not met and 1,199,998 common shares previously exercised in June of 2018 will be
returned to treasury and $15,000 will be booked as a loan from one director.
Oil
and Gas Properties
Out
of 19,610 gross acres (17,649 net acres) under the three most northern oil sands leases that were set to expire on August 19, 2019, 1,898
gross acres (1,708 net acres) of land covering three sections were granted continuation on October 8, 2019, under the Alberta Oil Sands
Tenure regulations. Subsequently it was determined that there were no exploitable resources on the 1,898 gross acres (1,708 net acres)
that were granted continuation and the Company has let this lease expiry as of August 19, 2020.
Farmout
Agreement
In
accordance with the Farmout Agreement the Company entered into on July 31, 2013, the Farmee is required to provide up to $30,000 per
month to cover the Company’s monthly administrative expenses. Since March of 2020, the Farmee has been delinquent in making its
monthly payments in full to the Company. Currently the Farmee has only been paying about half of the $30,000 per month payments to the
Company late and not on a consistent monthly basis. To date the Farmee owes the Company approximately $345,000 in administrative costs
as required by the Farmout Agreement.
COVID-19
Relief
In
2020 and 2021, the Canadian federal government announced various COVID-19 relief programs which included but are not limited to, loans,
commercial rent and wage subsidies, to qualifying companies. The Company, if eligible, has or will apply for any financial relief available
to the Company.