UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended: September 30,
2009
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the
transition period
from to
Commission
File Number 000-26721
AUSTRALIAN
OIL & GAS CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
|
84-1379164
|
(State or other
jurisdiction of incorporation of organization)
|
(IRS Employer
Identification Number)
|
Level 21, 500 Collins
Street
Melbourne, Victoria,
3000
Australia
Issuer’s
Telephone Number: (61-3) 8610 4701
NOT
APPLICABLE
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
o
Accelerated
filer
o
Non-accelerated
filer
o
(Do not check if a smaller reporting
company)
Smaller
reporting company
x
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.
Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
43,450,531
shares of common stock, $0.001 par value, as of November 10, 2009.
INDEX
AUSTRALIAN
OIL & GAS CORPORATION
(an
exploration stage enterprise)
For
the Quarterly Period Ended: September 30, 2009
Part
1. FINANCIAL INFORMATION
Item 1. Financial
Statements. (Unaudited)
Consolidated
Balance Sheets as at September 30, 2009 (Unaudited) and December 31, 2008
(Audited)
Consolidated
Statements of Operations for the nine months ended September 30, 2009 and 2008
(Unaudited), three months ended September 30, 2009 and 2008 (Unaudited) and for
the cumulative period from August 6, 2003 (Date of Inception) to September 30,
2009 (Unaudited)
Consolidated
Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
(Unaudited) and the cumulative period from August 6, 2003 (Date of Inception) to
September 30, 2009 (Unaudited)
Notes to
Financial Statements (Unaudited)
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Item
3. Quantitative and Qualitative Disclosures about Market Risk.
Item 4. Controls and
Procedures.
Part
11. OTHER INFORMATION
Item
6. Exhibits.
Signatures
Item
1. Financial Statements (Unaudited)
Australian
Oil & Gas Corporation
(an
exploration stage enterprise)
CONSOLIDATED
BALANCE SHEETS
|
|
September
30, 2009
|
|
|
December
31, 2008
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
$
|
|
|
|
$
|
|
Current
assets
|
|
|
41
|
|
|
|
8
|
|
Cash
and cash equivalents
|
|
|
10
|
|
|
|
1
|
|
Receivables
|
|
|
51
|
|
|
|
9
|
|
Total
Current Assets
|
|
|
51
|
|
|
|
9
|
|
Total
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses (Note 4)
|
|
|
118
|
|
|
|
214
|
|
Accounts
p
ayable to director related entities
|
|
|
23
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
141
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
|
|
|
|
|
Line of
Credit – Director Related
|
|
|
200
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Current Liabilities
|
|
|
200
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
341
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity ( Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value;75,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
Issued
shares, 45,100,531 at September 30, 2009 and 43, 450,531
|
|
|
|
|
|
|
|
|
at
December 31, 2008; Outstanding shares, 43,450,531 at
|
|
|
|
|
|
|
|
|
September 30,
2009 and 41,050,531 at December 31, 2008. (Note 5)
|
|
|
35
|
|
|
|
33
|
|
Capital
in excess of par value
|
|
|
2,644
|
|
|
|
2,519
|
|
Accumulated
other Comprehensive Income
|
|
|
270
|
|
|
|
316
|
|
Deficit
accumulated during the exploration stage
|
|
|
(3,239
|
)
|
|
|
(3,251
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity (Deficit)
|
|
|
(290
|
)
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity (Deficit)
|
|
|
51
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
2
Australian
Oil & Gas Corporation
(an
exploration stage enterprise)
CONSOLIDATED
STATEMENTS OF OPERATIONS
for nine
months ended September 30, 2009 and 2008,
for the
three months ended September 30, 2009 and 2008 and
for the
period from inception (August 6, 2003) to September 30, 2009
(Dollar
amounts in thousands)
|
|
For
the nine
months
ended
Sept.
30, 2009
$
|
|
|
For
the nine
months
ended
Sept.
30, 2008
$
|
|
|
For
the three
months
ended
Sept.
30, 2009
$
|
|
|
For
the three
months
ended
Sept.
30, 2008
$
|
|
|
Cumulative
period
from
Aug. 6, 2003
(Date
of Inception)
to
Sept. 30, 2009
$
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
90
|
|
|
|
117
|
|
|
|
34
|
|
|
|
25
|
|
|
|
1,119
|
|
Merger and
reorganisation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249
|
|
Exploration
|
|
|
193
|
|
|
|
299
|
|
|
|
104
|
|
|
|
91
|
|
|
|
2,003
|
|
Total
operating expenses
|
|
|
283
|
|
|
|
416
|
|
|
|
138
|
|
|
|
116
|
|
|
|
3,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Profit / (loss) before other income and expense
|
|
|
(283
|
)
|
|
|
(416
|
)
|
|
|
(138
|
)
|
|
|
(116
|
)
|
|
|
(3,371
|
)
|
Other
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from sale of tenement and tenement information (Note 7)
|
|
|
249
|
|
|
|
389
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,899
|
|
Write
down of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,759
|
)
|
Currency exchange gain
/(loss)
|
|
|
48
|
|
|
|
(29
|
)
|
|
|
14
|
|
|
|
(55
|
)
|
|
|
56
|
|
Interest income
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
1
|
|
|
|
63
|
|
Interest expense
|
|
|
(2
|
)
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
/ (Loss) before income tax
|
|
|
12
|
|
|
|
(63
|
)
|
|
|
(124
|
)
|
|
|
(170
|
)
|
|
|
(3,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Profit / (loss)
|
|
|
12
|
|
|
|
(63
|
)
|
|
|
(124
|
)
|
|
|
(170
|
)
|
|
|
(3,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/
(loss) per Common share :
Loss
before extraordinary item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit / (loss)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common share used in calculation
|
|
|
44,006,575
|
|
|
|
39,216,282
|
|
|
|
44,556,575
|
|
|
|
42,056,026
|
|
|
|
33,767,051
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
3
Australian
Oil & Gas Corporation
(an
exploration stage enterprise)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the
nine months ended September 30, 2009 and 2008
and
Cumulative from inception (August 6, 2003) to September 30, 2009
(Dollar
amounts in thousands – except per share data)
|
|
For
the nine
months ended
Sept. 30, 2009
|
|
|
For
the nine
months endedSept. 30, 2008
|
|
|
For
the nine
months endedSept. 30, 2009
|
|
|
For
the nine
months endedSept. 30, 2008
|
|
|
Cumulative
period
from Aug. 6, 2003
(Date of Inception)
to Sept. 30, 2009
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
90
|
|
|
|
117
|
|
|
|
34
|
|
|
|
25
|
|
|
|
1,119
|
|
Merger and reorganisation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249
|
|
Exploration
|
|
|
193
|
|
|
|
299
|
|
|
|
104
|
|
|
|
91
|
|
|
|
2,003
|
|
Total
operating expenses
|
|
|
283
|
|
|
|
416
|
|
|
|
138
|
|
|
|
116
|
|
|
|
3,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Profit / (loss) before other income and expense
|
|
|
(283
|
)
|
|
|
(416
|
)
|
|
|
(138
|
)
|
|
|
(116
|
)
|
|
|
(3,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from sale of tenement and tenement information (Note 7)
|
|
|
249
|
|
|
|
389
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,899
|
|
Write
down of investments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,759
|
)
|
Currency exchange gain /(loss)
|
|
|
48
|
|
|
|
(29
|
)
|
|
|
14
|
|
|
|
(55
|
)
|
|
|
56
|
|
Interest income
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
1
|
|
|
|
63
|
|
Interest
expense
|
|
|
(2
|
)
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
/ (Loss) before income tax
|
|
|
12
|
|
|
|
(63
|
)
|
|
|
(124
|
)
|
|
|
(170
|
)
|
|
|
(3,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit / (loss)
|
|
|
12
|
|
|
|
(63
|
)
|
|
|
(124
|
)
|
|
|
(170
|
)
|
|
|
(3,239
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements
5
Australian
Oil & Gas Corporation
(an
exploration
stage
enterprise)
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
The
accompanying interim consolidated financial statements of Australian Oil &
Gas Corporation are unaudited. However, in the opinion of management,
the interim data includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the results for the interim
period. The results of operations for the period ended September 30, 2009 are
not necessarily indicative of the operating results for the entire year. The
interim financial statements should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 2008.
In May
2009, the FASB issued guidance now codified as FASB ASC Topic 855, “
Subsequent Events
” which
establishes general standards of accounting for, and the disclosures of, events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. This pronouncement is effective for
interim or fiscal periods ending after June 15, 2009. Accordingly, the Company
adopted the provisions of FASB ASC Topic 855 on March 29, 2009. The adoption of
this pronouncement did not have a material impact on our consolidated financial
position, results of operations or cash flows. However, the provisions of FASB
ASC Topic 855 resulted in additional disclosures with respect to subsequent
events. See Note 8,
Subsequent
Events
, for this additional disclosure.
In June
2009, the FASB issued guidance now codified as FASB ASC Topic 105, “
Generally Accepted Accounting
Principles
” as the single source of authoritative nongovernment U.S.
GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to
simplify access to all authoritative U.S. GAAP by providing all authoritative
literature related to a particular topic in one place. All existing accounting
standard documents will be superseded and all other accounting literature not
included in the FASB Codification will be considered non-authoritative. These
provision of FASB ASC Topic 105 are effective for interim and annual reporting
periods ended September 15, 2009 and, accordingly, are effective for the Company
for the current fiscal reporting period. The adoption of this pronouncement did
not have an impact of the Company’s financial condition or results of
operations, but will impact our financial reporting process by elimination all
references to pre-codification standards. On the effective date of this
Statement, the Codification superseded all then-existing non-SEC accounting and
reporting standards, and all other non-grandfathered non-SEC accounting
literature not included in the Codification became
non-authoritative.
Note
1: Organization
Australian
Oil & Gas Corporation (the Company) was incorporated in Delaware on August
6, 2003, and began operations on August 11, 2003 and is considered to be a crude
petroleum and natural gas company in the exploratory stage as defined by SFAS
No. 7. Since inception it has been engaged in the assessment of oil and gas
exploration properties.
The
authorized capital stock of the AOGC consists of 75,000,000 shares of common
stock (AOG Common Stock), $0.001 par value
The two,
Delaware-incorporated US subsidiaries; Gascorp, Inc. and Nations LNG, Inc were
dissolved March 18, 2009. The company still has two wholly owned Australian
subsidiaries; Alpha Oil & Natural Gas Pty Ltd and Nations Natural Gas Pty
Ltd.
6
Alpha Oil
& Natural Gas Pty Ltd itself now has three wholly owned Australian
subsidiaries, Vulcan Australia Pty Ltd (which holds the joint venture interest
in the Vulcan Joint Ventures), Braveheart Oil & Gas Pty Ltd (which holds the
joint venture interest in the Braveheart Joint Venture) and Cornea Oil & Gas
Pty Ltd (which will hold the joint venture interest in the Cornea Joint
Venture). Cornea Oil & Gas Pty Ltd was incorporated in Australia on July 17,
2009.
Nations
Natural Gas Pty Ltd itself now has a wholly owned Australian subsidiary,
Napoleon Nations Gas Pty Ltd (which will hold the joint venture interest in the
National Gas Consortium Joint Venture). Napoleon Nations Gas Pty Ltd was
incorporated in Australia on July 17, 2009.
Note
2: Summary of Significant Accounting Policies
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and footnotes thereto. Actual results could differ from those
estimates.
Note
3: Related Party Transactions
Mr. E
Geoffrey Albers, the Chairman and President of AOGC, is a director and
shareholder of each of Great Missenden Holdings Pty Ltd and of Setright Oil
& Gas Pty Ltd.
Setright
Oil & Gas Pty Ltd charged the Company $3,626 during the quarter for the
provision of accounting and administrative services rendered by third parties
for the benefit of the Company, but not including services rendered by Mr. E
Geoffrey Albers, who is remunerated separately.
We also
have the use of premises in Australia at Level 21, 500 Collins Street,
Melbourne, Victoria. The office space is taken on a nonexclusive
basis, with no rent payable, but the usage of the premises is included in the
charges Setright Oil & Gas Pty Ltd makes in respect to the administration of
the Company.
Mr.
Albers is a director and shareholder in the joint venture participants with
Alpha Oil & Natural Gas Pty Ltd (Alpha) with regard to exploration permits
ACP/33, ACP/35 and AC/P39; namely National Gas Australia Pty Ltd, Natural Gas
Corporation Pty Ltd and Auralandia N.L. Mr Muzzin is a shareholder in
Auralandia N.L. As a result of incurring expenditures, National Gas Australia
Pty Ltd has earned an aggregate 25% interest in each of AC/P33, AC/P35 and
AC/P39 (Vulcan Joint Venture), 5% of which was earned from AOGC subsidiary,
Alpha.
With
regard to the Browse Joint Venture, Mr. Albers is a director and shareholder in
each of Batavia Oil & Gas Pty Ltd and Exoil Limited, the parent of
Hawkestone Oil Pty Ltd. He is a major shareholder in the parent of Goldsborough
Energy Pty Ltd. All of these companies are the holders of the Browse
Joint Venture.
Mr. Mark
A Muzzin, a director and Vice-President of AOGC, resigned as a director of
Goldsborough Energy Pty Ltd, a subsidiary of Goldsborough Limited in December
2008.He is a shareholder in Exoil Limited, the parent of Hawkestone Oil Pty
Ltd.
With
regard to the National Gas Consortium, Mr. Albers is a director and shareholder
in each of National Oil & Gas Limited, Australian Natural Gas Pty Ltd and
Natural Gas Australia Pty Ltd. Expenditure incurred by National Gas Australia
Pty Ltd has resulted in National Gas Australia Pty Ltd earning an aggregate 30%
interest in each of NT/P62, NT/P63, NT/P64, NT/P65, NT/P71 and NT/P72, (National
Gas Consortium), of which 9% was earned from Nations.
7
The
Company entered into a new agreement on February 17, 2009 with Mr. Albers to
secure his services on a part-time basis for a new 4-year period, with a
commencement date effective from January 1, 2008 ending December 31,
2011. As the Company’s cash resources were limited, the board has
again agreed to remunerate Mr. Albers by issuing common stock in lieu of cash
payments. Specifically, the Company issued 2,400,000 shares of Common Stock to
Mr. Albers on March 26, 2009 for his services in relation to the period from
January 1, 2008 to December 31, 2008. A further 2,200,000 shares of
Common Stock will be issued to him for his services for the period from January
1, 2009 to December 31, 2009 A further 2,000,000 shares of Common Stock will be
issued to him for his services for the period from January 1, 2010 to December
31, 2010. A further 1800,000 shares of Common Stock will be issued to him for
his services for the period from January 1, 2011 to December 31,
2012.
On
September 22, 2009, Great Missenden Holdings Pty Ltd, a company in which Mr
Albers is a director and the owner of, advanced $200,000 to AOGC under the terms
of the Line of Credit Agreement signed between AOGC and Great Missenden Holdings
Pty Ltd on February 17, 2009. This line of credit expires December 31,
2012.
Note
4: Current Liabilities
At
September 30, 2009 the accounts payable balance includes $99,000 for
remuneration due to Mr Albers for his services.
Note
5: Issued Shares
At
September 30, 2009, 1,650,000 shares included in issued and outstanding shares
of 45,100,531 disclosed in the balance sheet and used for the earnings per
common share calculation were reserved but not yet issued. These shares will be
used to compensate Mr Albers and will be issued in the quarter ending March 31
2010 (See Note 4).
Note
6: Comprehensive Income
Comprehensive
income is the change in equity during a period from transactions and other
events from non-owner sources. The Company is required to classify items of
other comprehensive income in financial statement to display the accumulated
balance of other comprehensive income separately in the equity section of the
Consolidated Balance Sheet.
The
functional currency of Australian Oil & Gas Corporation’s Australian
subsidiaries is the Australian dollar. The comprehensive income of
$270,000 disclosed in the Consolidated Balance Sheet is the accumulation of all
currency exchange differences arising from translating the Australian
subsidiaries’ financial statements from functional currency to presentation from
the acquisition date of these Australian subsidiaries to the current balance
date.
Note
7: Sale of Tenement Information
On April
3, 2009 the company’s Australian subsidiary, Alpha Oil and Natural Gas Pty Ltd
sold information in the NT/P73 exploration permit to Gascorp Australia Pty Ltd
(Gascorp) for $249,935 (AUD$350,000). Gascorp is an affiliate company of Mr. EG
Albers.
The
information will be used by Gascorp to investigate a proposal to take up to a
35% interest in the permit.
8
Note
8: Subsequent Events
In May
2009, the FASB issued guidance now codified as FASB ASC Topic 855, “
Subsequent Events
” which
establishes general standards of accounting for, and the disclosures of, events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. This pronouncement is effective for
interim or fiscal periods ending after June 15, 2009. Accordingly, the Company
adopted the provisions of FASB ASC Topic 855 on March 29, 2009. The Company has
evaluated subsequent events for the period from September 30, 2009, the date of
these financial statements through to October 28, 2009, which represents the
date these financial statements are being filed with the Commission. Pursuant to
the requirements of FASB ASC Topic 855, there were no events or transactions
occurring during this subsequent event reporting period that require recognition
or disclosure in the financial statement, apart from the one transaction shown
below, With respect to this disclosure, the Company has not evaluated subsequent
events occurring after November 10, 2009.
Sale
of Permit Interest – October 23, 2009.
AOGC’s
wholly owned subsidiary, Vulcan Australia Pty Ltd (“Vulcan”) has agreed to sell
its 7.5% interest in an Australian offshore petroleum exploration permit AC/P33
(“Permit”) to a wholly-owned subsidiary of PTT Exploration and Production Public
Company Limited (“PTTEP”), a major Thailand petroleum exploration and production
company. Vulcan expects to recover not less than $4,125,000 for its 7.5%
interest. The transaction with PTTEP is subject to conditions precedent, which
include, inter alia, Australian Foreign Investment Review Board (FIRB) and the
usual Australian government consents and approvals. In the meantime, for the
transaction to proceed, certain conditions must be met, including approval and
registration of the dealing by the Designated Authority of the Australian
government for such matters. Completion will not occur until all
necessary consents are obtained.
9
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-looking
statements
References
in this report to “the Company”, “AOGC”, “we”, “us”, or “our” are intended to
refer to Australian Oil & Gas Corporation and its subsidiaries. This
quarterly report contains certain statements that may be deemed forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the United Stated Securities Exchange Act of 1934,
as amended. Readers of this quarterly report are cautioned that such
forward-looking statements are not guarantees of future performance and that
actual results, developments and business decisions may differ from those
envisaged by such forward-looking statements.
All
statements, other than statements of historical facts, so included in this
quarterly report that address activities, events or developments that the
Company intends, expects, projects, believes or anticipates will or may occur in
the future, including, without limitation: statements regarding our business
strategy, plans and objectives and statements expressing beliefs and
expectations regarding our ability to successfully raise the additional capital
necessary to meet our obligations, our ability to secure the permits necessary
to facilitate anticipated seismic and drilling activities and our ability to
attract additional working interest owners or farminees to participate in the
exploration for and development of oil and gas resources, are forward-looking
statements within the meaning of the Act. These forward-looking statements are
and will be based on management's then-current views and assumptions regarding
future events.
Plan of
Operation
General
Australian
Oil & Gas Corporation is an independent energy company focused on the
acquisition of petroleum exploration permits in the offshore areas adjacent to
Australia and exploration for oil and natural gas resources within the area of
those permits. We rely on the considerable experience in the oil and gas
industry of our President, Mr. E. Geoffrey Albers, together with our
consultants, in order to identify and conduct initial analyses of permits in
which we may acquire an interest.
Strategy
We
have devoted essentially all of our resources to the identification of
large-tract exploration permits in their early stages of
exploration. We have attempted to focus on areas where we consider
there is potential for a high impact outcome for the Company, in the event of
exploration success. We plan to advance the prospectivity of these acreages
largely through the application of geological and geophysical expertise and
through the provision of new 2D and 3D seismic surveys. We seek to keep our
capital outlays and overheads at a minimum level by farming-out exploration
costs and by retaining selected consultants, contractors and service companies
to develop our exploration plays and concepts. We generally use proven
technologies in evaluating the prospectivity of our oil and gas properties. We
expect to invest in projects at different percentage levels of participation,
including up to 100% ownership. We plan to maintain as high a participation as
can be prudently managed in the early stages of a project. We focus on areas
considered to have speculative near term potential for oil discovery or medium
term potential for gas discovery. An important part of our strategy is to select
prospective acreage which, at the seismic or drilling stage, can be farmed out
and/or developed in conjunction with other, preferably larger, more financially
robust petroleum industry participants, so as to reduce exploration risk (which
is high) and minimize our financial outlay requirements (which are also
high). We attempt to do so, wherever possible, through promoted
transactions. Our overall intention is to provide shareholders with exposure to
potential high level outcomes, thus providing maximum leverage at minimal cost,
in return for the extreme risk activities that we undertake. The
funding of our exploration programs is an on-going challenge.
10
Since
August 2003, when the Company began operations, we have not conducted any
business which generates revenue from the sale of hydrocarbons. Accordingly, we
have no results of such operations to report. We are actively pursuing our long
term strategy of maintaining and maturing our oil and gas exploration projects
which, in the long-term and given success, may have the future potential to
generate substantial revenue.
Permitting
It
should be noted that Australian offshore petroleum permits are initially granted
for a term of 6 years, pursuant to the Offshore Petroleum and Greenhouse Gas
Storage Act, 2006 (Commonwealth). Provided all exploration
commitments are met, petroleum exploration permits may be renewed for two
consecutive 5-year terms, with relinquishment of 50% of the area of a permit at
the end of the first 6-year term, and again at the end of the second 5-year
permit term. Any Retention Lease or Production License is excluded from the
calculation of the area to be relinquished. Exploration permits
therefore, have a potential 16-year life, subject to these requirements and to
the fulfillment of exploration commitments.
Management
The
Company’s Chairman and President, who also holds the position of Chief Executive
Officer and Chief Financial Officer, Mr. E Geoffrey Albers, manages the
Company’s operations. The Company previously entered into an agreement with Mr.
Albers to secure his services on a part-time basis for a 3-year period, with a
commencement date effective from January 1, 2005. As the Company’s
cash resources are limited, the board agreed to remunerate Mr. Albers by issuing
common stock in lieu of cash payments. On February 17, 2009 the
Company signed a new four-year contract with Mr. Albers (“the Director”) with
respect to the continuation of his services for a further period effective from
January 1, 2008 to 31 December 2011, on terms which include the
following:
(i)
|
by
the Company issuing to the Director or, at the election of the Director,
to the Trustee of the Fund, Common Stock in lieu of cash
payments. Specifically, during the first quarter of 2009, the
Company will issue 2,400,000 shares of Common Stock for his services in
relation to the period from 1 January 2008 to 31 December 2008. These
shares were issued March, 26, 2009.
|
(ii)
|
by
the Company issuing to the Director or, at the election of the Director,
to the Trustee of the Fund, Common Stock in lieu of cash
payments. Specifically, during the fourth quarter of 2009, the
Company will issue 2,200,000 shares of Common Stock for his services in
relation to the period from 1 January 2009 to 31 December
2009.
|
11
(iii)
|
by
the Company issuing to the Director or, at the election of the Director,
to the Trustee of the Fund, Common Stock in lieu of cash
payments. Specifically, during each the fourth quarter of 2010,
the Company will issue 2,000,000 shares of Common Stock for his services
in relation to the period from 1 January 2010 to 31 December
2010.
|
(iv)
|
by
the Company issuing to the Director or, at the election of the Director,
to the Trustee of the Fund, Common Stock in lieu of cash
payments. Specifically, during the fourth quarter of 2011, the
Company will issue 1,800,000 shares of Common Stock for his services in
relation to the period from 1 January 2011 to 31 December
2011.
|
Working Capital
Funding
As an exploration stage enterprise,
the Company has and continues to rely on capital infusions through the advances
of Great Missenden Holdings Pty Ltd. The Company has accepted advances and in
the future anticipates that it will draw down further advances to enable it to
meet its administrative costs and expenditure requirements in developing its
portfolio of oil and gas interests.
Funding for
Exploration Programs
When
the Company requires further significant funds for its exploration programs,
then it is the Company’s intention that the additional funds would be raised in
a manner deemed most expedient by the Board of Directors at the time, taking
into account budgets, share market conditions and the interest of industry in
co-participation in the Company’s programs.
It is the
Company’s intention to meet its obligations by either partial sale of the
Company’s interests or farm-out, the latter course of action being a fundamental
part of the Company’s overall strategy. Should funds be required for appraisal
or development purposes the Company would, in addition, look to project loan
finance.
Should
these methods considered not to be viable, or in the best interests of
stockholders, then it is the Company’s plan that they could be raised by any one
or a combination of the following manners: stock placements, pro-rata issue to
stockholders, and/or an issue of stock to eligible parties.
Following
implementation of our acquisition strategy, we now hold interests in 14
Petroleum Exploration Permits granted by the Commonwealth of Australia. They are
held in joint venture with other parties. A summary of the permits
and the current activities in each permit is set out below.
12
Funding for
Braveheart-1 Well and
Cornea-3
The Braveheart-1
well in WA-333-P and the Cornea-3 appraisal well in WA-342-P are anticipated to
be drilled in Q4, 2009 or early Q1, 2010.
The
Company expects to have available to it the proceeds from the sale of the AC/P33
interest to PTT. (See Note 8 Subsequent Events in Notes to Financial
Statements (Unaudited) and also explanation following under the heading Oliver
Joint Venture). This amounts to $4,125,000. The Company’s
estimated requirement for the Braveheart-1 well is $2.25 million, while the
estimate for the cost of our 17% interest in the Cornea-3 well is $4.1
million. (See following).
The
Company has negotiated to sell a 7% interest in the Cornea permit, WA-342-P, for
approximately $1.25 million, subject to completion of
documentation. With the conclusion of this sale, the Company’s
funding requirement for the 14.5% interest in the Braveheart-1 well would be
$2.25 million and for the remaining 10% of the Cornea-3 Appraisal well would be
$2.4 million; a total of $4.65 million. The combined proceeds from
the sale of AC/P33 interest and the sale of a 7% interest in WA-342-P would
amount to $5.375 million, thus providing a buffer in the event of cost
overrun.
Funding for
Vulcan Sub-basin
Interests
The
Company is considering how it might meet future funding requirements for the
remaining Vulcan Sub-basin interests following the sale of
AC/P33. Discussions amongst the joint venture participants has
focused on the concept of each of the participants, other than the operator
Auralandia, selling their interest in each of the remaining Vulcan Sub-basin
permits AC/P35 and AC/P39 to Auralandia or another jointly sponsored company in
return for an appropriate pro rate issue of shares. Auralandia has signified
that it is open to proposals which would see it as the corporate vehicle for
unifying interests in this manner. The Company is investigating this concept,
and may participate, pending further investigations and finalization in an
appropriate commercial arrangement. Capital would thus be required by the entity
for further drilling, but would relieve the Company of any direct cost
commitment to the remaining Vulcan Sub-basin permits (AC/P35 and
AC/P39).
Funding for
Bonaparte Basin
Interests
The
Bonaparte Basin interests have been offered for farmout, with a number of
international companies having considered parts of or the whole of the acreage.
In the meantime, the various Joint Venture participants are considering methods
of meeting the funding requirements for the drilling of a well or wells, should
these farmout efforts not be successful. Discussions amongst the joint venture
participants have focused on the formation or acquisition of a special purpose
company to acquire the permit interests in return for a pro rata issue of shares
to each of the joint venture participants. This special purpose public company
would then seek public equity funding in Australia in order to meet the
significant cost of any well or wells to be drilled in the permits.
The
Nature of Prospective Resources
In this
Quarterly Report we have attempted to give you our best estimate of the size of
the features that we are assessing. We have referred to “Prospective
Resources” when quantifying the size of the features.
The term
“
resources
”, as used in
the
SPE Petroleum Resources
Classification System
,
encompass all
quantities of petroleum naturally occurring on or within the Earth’s crust,
discovered and undiscovered (recoverable and unrecoverable), plus those
quantities already produced.
13
The SPE
resources classification system defines the major recoverable resources classes:
Production, Reserves, Contingent Resources, and Prospective Resources, as well
as Unrecoverable petroleum. Shareholders should understand that
“Prospective Resources” are “those quantities of petroleum which are estimated,
on a given date, to be potentially recoverable from undiscovered
accumulations.” They are not discovered resources.
Estimates
of resources of any category rely on the integrity, skill, and judgement of the
evaluator and are affected by the geological complexity, stage of exploration or
development and amount of available data from which they are
derived. The assessment of any resource is also affected by a wide
range of other assumptions. Any estimate is ultimately a matter of
opinion and is subject to an inherent level of uncertainty and in the case of
Prospective Resources, it should be recognised that there must always be the
prospect that, as the definition refers to “
undiscovered accumulations
”,
the “
accumulation
”
might not exist, with the result that no actual resources will ultimately be
discovered.
14
EXPLORATION AND APPRAISAL
ACTIVITIES
VULCAN
SUB-BASIN INTERESTS, TERRITORY OF ASHMORE AND CARTIER ISLANDS, AUSTRALIA
(AC/P33, AC/P35 and AC/P39)
Geologically,
AC/P33, AC/P35 and AC/P39 are located on the eastern margin of the Vulcan
Sub-basin, a broad, deep and proven hydrocarbon-generative basin, one of a
number of proven petroliferous sub-basins which together comprise the North West
Shelf hydrocarbon province of Australia.
The
permits are within the Territory of Ashmore and Cartier Islands (“the
Territory”), an Australian offshore territory which was ceded from Britain and
accepted by the Commonwealth of Australia (“Commonwealth”) in 1933. The
responsibility for the administration of the Territory was transferred from the
Northern Territory of Australia (“Northern Territory”) to the Commonwealth when
a level of self-government was instituted in the Northern Territory in
1978.
The
Territory comprises West, Middle and East Islands of Ashmore Reef, Cartier
Island and a large area of territorial sea generated by those
islands. The Territory is an area of active offshore oil and gas
exploration. The islands are uninhabited, small, low and composed of
coral and sand, with some grass cover.
The
Territory is located on the outer edge of the continental shelf in the Indian
Ocean approximately 320 km off Australia’s north-west coast and 144 kilometres
south of the Indonesian Island of Roti. The Jabiru and Challis oil
fields are located within the Territory, as are numerous other oil and gas
accumulations and occurrences.
Petroleum
extraction activities within the Territory are administered on behalf of the
Commonwealth by the Northern Territory Department of Mines and Energy through
the Designated Authority protocol operating pursuant to the Offshore Petroleum
and Greenhouse Gas Storage Act 2006 (Commonwealth).
Commonwealth
laws, laws of the Northern Territory and Ordinances made by the Governor-General
make up the body of law generally applicable in the Territory.
We
acquired our initial 20% interest in the Vulcan Sub-basin permits as a result of
the acquisition of Alpha Oil & Natural Gas Pty Ltd (“Alpha”) in
2006.
On May
15, 2006 Alpha agreed to farmout 5% of its 20% interest in each of the Vulcan
Sub-basin permits to National Gas Australia Pty Ltd (“NGA”) (leaving Alpha with
a 15% interest), in return for the acquisition and funding of Alpha’s 20% share
of the new Oliver 3D seismic survey of approximately 124 km² and the funding of
the cost of reprocessing of approximately 2,800 km² of the existing Onnia 3D
Seismic Survey data, relevant to all of AC/P33, AC/P35 and
AC/P39. The cost of the Company’s share of the Oliver 3D seismic
survey and the Onnia reprocessing has thus been met entirely by
NGA. NGA subsequently transferred its interests to its wholly owned
subsidiary, Petrocorp Australia Pty Ltd.
15
Our
wholly owned subsidiary, Alpha, established a wholly owned subsidiary named
Vulcan Australia Pty Ltd (“Vulcan”) and transferred its interests in each of its
Timor Sea permits, AC/P33, AC/P35 and AC/P39 to Vulcan.
We
subsequently farmed out half of our interest in AC/P33 to Stuart Petroleum
Limited (“Stuart”) (see Oliver Joint Venture below), leaving us with a 7.5%
interest.
In
addition, the singular joint venture operating agreement, which previously
governed joint venture operations in all three of the permits, has been replaced
by new separate joint venture agreements for each permit. The new
joint ventures are known as Oliver Joint Venture (AC/P33), Vulcan Joint Venture
(AC/P35) and Nome Joint Venture (AC/P39).
Oliver
Joint Venture (AC/P33)
Our
wholly owned subsidiary, Vulcan, following farmout of drilling and development
commitments made by Stuart (see below), now holds a 7.5% interest in the Oliver
Joint Venture permit, AC/P33, in joint venture with Stuart (50%), now the
designated operator, and our joint venture affiliates; Petrocorp Australia Pty
Ltd (“Petrocorp”) (12.5%), Natural Gas Corporation Pty Ltd (NGC) (15%) and
Auralandia N.L. (Auralandia) (15%).
AC/P33
(granted July 6, 2004) includes the undeveloped Oliver oil and gas accumulation,
drilled by the now plugged and abandoned Oliver-1 well. AC/P33 comprises five
graticular blocks, totalling approximately 400 km² (98,800 acres). During the
first three years of the initial 6-year term of permit AC/P33, the joint venture
participants obtained a range of existing reports and open file seismic data and
mapped, interpreted and revised analyses and concepts for the area. The joint
venture carried out enhancement of existing seismic data around the Oliver
feature and examined various techniques with potential to provide direct
hydrocarbon indicators. As a result of the farmout to NGA, the joint
venture acquired 124 km² of new high quality enhanced parameter 3D seismic
survey, known as the Oliver 3D Seismic Survey. The survey was conducted over the
Oliver feature and part of its extension to the east. Processing of
the new Oliver Seismic Survey and reprocessing of part of the immediately
adjacent Onnia 3D Seismic Survey in the vicinity of the Oliver-1 well was
carried out.
The joint
venture elected to enter the second three years of the initial permit and,
following farmout, Stuart made plans to drill one exploration well in late
2009/early 2010, and to perform further interpretational work at its
cost.
Stuart’s
earn-in obligations were to be satisfied by sole funding the drilling of an
appraisal well on the Oliver feature, completion of engineering studies up to
final investment decision for development of an oilfield and sole funding the
first $25 million of development expenditure.
The
Oliver field, containing a column of oil, gas and condensate, was discovered by
a BHP Petroleum operated consortium in 1988. The Oliver 1 well was
drilled in 305 metres of water to a depth of 3,500 metres. The well
encountered the column in the Plover Formation between 2,927 metres and 3,097
metres.
16
The first
phase of development of the Oliver field was the drilling the appraisal well,
Oliver 2. Studies to identify economic development alternatives and
to determine viability had been undertaken by Stuart, to be followed by the
Oliver 2 appraisal well to confirm the size of the field. The
semi-submersible drilling rig, Songa Venus, was contracted by Stuart to drill
this well at Stuart’s cost.
Equity
participants in permit AC/P33 at the end of the quarter were:
|
%
|
|
Stuart
Petroleum Limited (Operator)
|
50.0
|
|
Natural
Gas Corporation Pty Ltd
|
15.0
|
|
Auralandia
NL
|
15.0
|
|
Petrocorp
Australia Pty Ltd (subsidiary of National Gas Australia Pty
Ltd)
|
12.5
|
|
Vulcan
Australia Pty Ltd (Australian Oil & Gas Corporation
subsidiary)
|
7.5
|
|
During
the quarter, Stuart carried out detailed planning in preparation for appraisal
drilling of the Oliver 2 well, as part of their farmin obligations. To
facilitate the drilling of Oliver 2, Stuart had earlier joined a drilling
consortium for the use of the semi-submersible drilling rig, the Songa Venus and
generally made all the necessary arrangements to drill the well, estimated to
cost more than $30 million.
We had
expected advice from Stuart about the progress that had been made in upgrading
the Oliver feature in AC/P33 and, in particular, their plans for the imminent
drilling of Oliver 2, in accordance with the terms of our
farmout. This would have seen Vulcan and its joint venturers fully
carried at no cost through to Oliver appraisal drilling and engineering studies
necessary for a final investment decision (FID) to develop Oliver, as well as
Stuart meeting the first $25 million of development expenditure following
FID.
After the
close of the quarter, Stuart advised us that they intended to sell their
interest to another company. It seemed apparent to us that Stuart’s
efforts to farmout their obligations and or to raise capital for the Oliver-2
appraisal well commitment had not been successful. This left the
remaining joint venture in a most difficult position, as Stuart had contracted a
rig (in their own name and right), with the well due to spud.
Stuart
had negotiated to sell their interest to PTT Australasia (Ashmore Cartier) Pty
Ltd (PTT). This is a subsidiary of a major Thailand petroleum
company. The remaining joint venture did not see joint venture
compatibility with PTT who stated that they were interested in developing Oliver
for floating LNG, while we are interested in the oil and liquids content of
Oliver, the basis and expectation on which we had farmed out to
Stuart. The two objectives are, to a very large extent,
incompatible. The timeframe that PTT saw for the commencement of
development of Oliver was 2023. This timeframe was unacceptable to
us.
17
We
concluded that, in all the circumstances, the best outcome was to negotiate for
an exit from the permit. We have done so, and we expect to recover
not less than US$4,125,000 for our 7.5% interest in AC/P33. Like
Stuart, we have now executed an agreement with PTT for the sale of our interest
in AC/P33. It is subject to conditions precedent, which include
Australian Foreign Investment Review Board (FIRB) and the usual government
consents and approvals in relation to PTT.
It is not
the outcome we sought, but given that Stuart had not farmed out or raised funds
to meet the cost of Oliver 2, the incompatibility of PTT’s objectives and
timeframe with ours, and the economics of the currently understood oil and
liquids reserves at current prices, the remaining joint venture participants’
inability or unwillingness to match PTT’s purchase price and to also take on
Stuart’s Oliver 2 well commitments at short notice, then, in the circumstances,
it is an acceptable outcome. This was not the long term involvement
in the development of Oliver that we had envisaged for the Company.
Vulcan
Joint Venture (AC/P35)
AC/P35
(granted October 18, 2005) is located immediately to the north of AC/P33. It
comprises 46 graticular blocks, totalling approximately 3,410 km² (842,645
acres). There have been five wells drilled in the area, with two having oil and
gas indications, all of which were plugged and abandoned. During the first three
years of the initial 6-year term of the AC/P35 permit, we obtained a range of
pertinent existing reports and open file seismic data. We also
acquired the right to the reprocessed Onnia 3D seismic data-set of some 1,750
km² within AC/P35. On June 15, 2009 the company was granted a 12
month extension on year three of the permit. Year three now ends April 17, 2010
and includes an existing work obligation to shoot up to 250 km² of a new 3D
seismic survey and a new obligation for 200km of 2D seismic, which we have met
with a 275 km acquisition (see below).
Our
geological evaluation of this permit during the quarter saw the development of
the Fairfax feature as a focus of our exploration efforts in
AC/P35. The Fairfax feature was not within the area of coverage of
the Onnia 3D survey, being in the west of AC/P35 and being covered only by some
older seismic lines acquired by previous explorers. We saw the
potential for the Fairfax feature to be a possible mirror-image of the Oliver
oil/gas accumulation. In order to better understand the feature and
to advance it to lead status, we decided to acquire a 2D seismic survey to
infill the existing data bank and to constrain the south-western end of the
feature. The Fairfax 2D seismic was recently completed, with
approximately 275 kms of new high quality 2D acquired, utilizing Bergen
Offshore’s BOS Atlantic vessel. The joint venture plans to co-process
the new acquisition and some of the pre-existing seismic lines which are already
held over Fairfax.
Before
their decision to sell out of AC/P33, Stuart Petroleum had shown significant
interest in Fairfax, such that Stuart took an option to acquire a 250 km² 3D
survey over Fairfax in return for meeting the cost of the Fairfax 2D
survey.
On July
27, 2009, Stuart Petroleum Limited signed an agreement with the Vulcan Joint
Venture participants in relation to AC/P35. Stuart agreed to fund the
cost of acquisition and processing of a 2D seismic survey over the Fairfax
feature in AC/P35. The cost of
this work
was estimated at $240,000 and the data was acquired in August 2009.
18
Following
acquisition and processing of the Fairfax 2D seismic, Stuart would have become
entitled, at its option, to earn up to a 70% participating interest in
AC/P35.
However,
subsequently, as a condition to agreeing to Stuart’s arrangement with PTT in
relation to AC/P33, the joint venture participants insisted that Stuart
relinquish all rights to AC/P35, which has occurred, subject to the transaction
with PTT proceeding to settlement.
The
participants in the Vulcan Joint Venture currently are:
|
%
|
|
|
30.0
|
|
Natural
Gas Corporation Pty Ltd
|
30.0
|
|
Petrocorp
Australia Pty Ltd (subsidiary of National Gas Australia Pty
Ltd)
|
25.0
|
|
Vulcan
Australia Pty Ltd (subsidiary of Australian Oil & Gas
Corporation)
|
15.0
|
|
|
|
|
Nome
Joint Venture (AC/P39)
AC/P39
(granted April 7, 2006) is located 600 km west of Darwin, immediately to the
east of AC/P33 and AC/P35. It comprises 11 graticular blocks,
totalling approximately 920 km² (2,273 acres). AC/P39 lies within 100
km of existing petroleum production facilities and along the eastern elevated
flank of the Vulcan Sub-basin. There have been five wells drilled in the area,
with two having oil and gas indications. In the first three years of
the initial 6-year term of the AC/P39 permit, we obtained a range of existing
reports and open file seismic data. We requested a 12 month
suspension and extension of Year 2 in order to complete the reprocessing of 920
km² Onnia 3D seismic survey within the permit. The re-processing has now been
completed, but was delayed because of the manpower constraints of the
contractor. Geological evaluation of the permit is continuing,
including the assessment of risk as to whether any leads are of sufficient
quality to warrant the risk and cost of drilling and the likelihood of a
farminee being prepared to meet the cost of such a well.
Interpretation
of approximately 920 km² of reprocessed Onnia 3D seismic within AC/P39 is
on-going. We are planning for a further 3D seismic program over our
best lead in AC/P39, before making any commitment to drill a well.
We have
developed nine high risk/high impact leads within AC/P39 ranging in size from a
mean scope for recovery of prospective resources of 21 million barrels (Tancred
NE lead) to 340 million barrels (Ceto lead).
The
participants in the Nome Joint Venture are:
|
%
|
|
|
30.0
|
|
Natural
Gas Corporation Pty Ltd
|
30.0
|
|
Petrocorp
Australia Pty Ltd (subsidiary of National Gas Australia Pty
Ltd)
|
25.0
|
|
Vulcan
Australia Pty Ltd (subsidiary of Australian Oil & Gas
Corporation)
|
15.0
|
|
|
|
|
19
BROWSE
BASIN INTERESTS, OFFSHORE FROM WESTERN AUSTRALIA
–
WA-332-P, WA-333-P and WA-342-P
The
Browse Basin region is a major proven hydrocarbon area and it forms a part of
the extensive series of continental margin sedimentary basins that, together,
comprise the North West Shelf hydrocarbon province of Australia. The Browse
Basin has been host to a series of major gas, gas condensate and oil discoveries
which began with the 1971 discovery at Scott Reef-1 (now called Torosa). The
Browse Basin is currently the focus for two proposals to establish new LNG
export facilities; one by Woodside Energy Ltd in relation to the
Torosa/Brecknock/Calliance complex and the other by Inpex Corporation in
relation to the Ichthys complex. Two of the Browse Joint Venture permits are
presently lightly explored. There is one well on the boundary of WA-332-P
(Prudhoe-1), one well in WA-333-P (Rob Roy-1), and a total of fourteen wells in
WA-342-P, mostly associated with the undeveloped Cornea oil and gas
accumulation.
On April
12, 2006, we completed the acquisition of Alpha Oil & Natural Gas Pty Ltd
(“Alpha”), a transaction entered into on July 1, 2004. The
acquisition of Alpha was made in order to acquire a 20% interest in the Browse
Joint Venture, being permits, WA-332-P, WA-333-P, WA-341-P and
WA-342-P. Following signing of this transaction, but prior to the
agreement between being finalized, Alpha (with the approval of AOGC) sold its
20% interest in WA-341-P to a third party for an amount in excess of book value.
The settlement funds received by Alpha were incorporated in funds available to
AOGC, through this wholly owned subsidiary, following completion of the Alpha
purchase.
The now
remaining three permits within the Browse Basin, WA-332-P, WA-333-P and
WA-342-P, are contiguous and are located offshore in the eastern Browse Basin.
They cover a total area of 9,460 km² (2,336,620 acres).
Our
wholly owned subsidiary, Alpha, together with its joint venturers, in 2008
entered into a farmout agreement with respect to WA-332-P, WA-333-P and WA-342-P
(“Permits”) with Gascorp Australia Pty Ltd (“Gascorp”) whereby Gascorp agreed to
earn a 15% interest in each of the three Permits in return for Gascorp expending
$1,120,000 in acquiring approximately 490 line kilometres of new 2D seismic data
(the Braveheart 2D survey) in the Permits and in acquiring a drill site survey
in order to determine a specific well location from which to test the Braveheart
prospect. The seismic surveys provided further coverage of the
Braveheart Prospect as well as coverage of leads within WA-332-P. As
a result of this farmout, Alpha’s interest in each of the three permits reduced
from 20% to 17%.
Separate
new operating agreements were recently entered into for WA-332-P and WA-33-P
(Braveheart) and WA-342-P (Cornea).
Braveheart
Joint Venture – WA-332-P and WA-333-P
In the
first three year term of these permits, the Joint Venture obtained available
open file reports and basic 2D and 3D seismic data acquired by the earlier
efforts of previous explorers. We also acquired reprocessed 2D
seismic data. The pre-existing 2D seismic data sets have been
integrated with the acquisition and processing by the Joint Venture of the
Braveheart 2D seismic survey of approximately 1,949 line km of new 2D seismic
survey over these permits. This survey has recently been infilled
with a further 490 kms of 2D seismic. The Braveheart Joint Venture
elected to enter a second three year permit term in which it has planned for the
drilling of Braveheart 1 in WA-333-P.
20
On April
3, 2009 the Browse Joint Venture was granted an 18-months suspension and
extension of Year 5 of permit WA-332-P and WA-333-P in order to acquire further
new infill 2D seismic survey over potential leads in WA-332-P and to secure a
drilling vessel. Year 5 of WA-332-P ends March 31, 2010. Further
extensions may be necessary.
On April
3, 2009 the Browse Joint Venture was also granted a 12-month suspension and
extension of Year 5 of the WA-333-P permit in order to allow additional time for
the drilling of the Braveheart-1 well in WA-333-P. The Joint Venture has entered
into a contract with a drilling vessel management company, as a result of which
a well is expected to be drilled on the Braveheart feature in late 2009. Year-5
of WA-333-P ends on March 31, 2010.
The
participants in each of the WA-332-P and WA-333-P permits have formed new 100%
owned subsidiary companies and transferred their respective interests in the
Braveheart Joint Venture to such wholly owned subsidiaries. Alpha
incorporated Braveheart Oil & Gas Pty Ltd as a wholly owned subsidiary to
which it has assigned its residual 17% interest in each of these
Permits. The Joint Venture adopted the new name of the “Braveheart
Joint Venture” and entered into a new joint venture operating agreement on 21
October 2009 and confirmed the appointment of Hawkestone Oil Pty Ltd (a
subsidiary of Exoil Limited) as operator.
The
participants had previously farmed out a further 12.5% interest in the
Braveheart Permits to Gascorp Australia Pty Ltd in return for that company
meeting all of the costs for the planning services of Australian Drilling
Associates Pty Ltd in the lead up to drilling Braveheart-1.
Interests
in the Braveheart Joint Venture permits at the end of the quarter
were:
Braveheart
Resources Pty Ltd (subsidiary of Exoil Limited)
|
25.375%
|
|
Braveheart
Petroleum Pty Ltd (subsidiary of Batavia Oil & Gas Pty
Ltd)
|
25.375%
|
|
Browse
Petroleum Pty Ltd (subsidiary of Gascorp Australia Pty
Ltd)
|
27.500%
|
|
Braveheart
Oil & Gas Pty Ltd (subsidiary of Australia Oil & Gas
Corporation)
|
14.500%
|
|
Braveheart
Energy Pty Ltd (subsidiary of Goldsborough Limited)
|
7.250%
|
|
Through
Hawkestone, the participants
in the Joint Venture
contracted the services of Australian Drilling Associates Pty Ltd to provide
project management support the conduct of Braveheart-1 drilling operations and
has gained access to one drilling slot in a group sponsored multi-well drilling
program utilising the semi-submersible drilling rig, the Songa
Venus. The drilling slot is to be used for the drilling of the
Braveheart 1 well, anticipated in late 2009.
21
The
Braveheart prospect is now drill-ready, subject to obtaining of all final
government, environment and permit-related approvals. The Braveheart
prospect is a postulated strategraphic trap covering an area of more than 300
kms², with scope for large prospective resources potential. The
feature was delineated through AVO analysis and is in a water depth of about
125m, with the target at 2200m.
The
Braveheart Prospect reservoir target is submarine fan sandstones. The
target was first defined on the Braveheart 2D seismic acquired in 2005/6 and
further confirmed on the Braveheart Infill 2D seismic acquired in
2008. It comprises a prominent amplitude anomaly that was shown to
possess an amplitude versus offset (AVO) anomaly, suggestive of (but not
definitive of) the presence of hydrocarbons. This high amplitude area
corresponds to the thickest part of the interpreted isopach, which is estimated
to represent 32m of potential reservoir sandstone.
A large
amount of AVO analysis and testing over a considerable time was performed on the
seismic data. While not conclusive, a possible hydrocarbon content
can be inferred from the AVO response. Particularly encouraging was
that the AVO response terminated at the same two-way-time at both the top and
the bottom of the sedimentary unit, suggestive of a common hydrocarbon-water
contact but, again, not definitive.
Cornea
Joint Venture – WA-342-P
The
Cornea Joint Venture comprises the interests held in WA-342-P, which is adjacent
to WA-332-P and WA-333-P.
On
October 22, 2007, the Joint Venture lodged a request for a variation of the
permit WA-342-P so that instead of drilling a well in Year-5 the permit would
require geotechnical studies, while Year-6 of the permit would require
reprocessing 1000 kms² of the existing 3D seismic data set. Such
variation of the permit has been granted, with Year-6 of the permit commencing
on November 28, 2009.
The joint
venture has carried out extensive studies as to prospectivity of the known
Cornea gas/oil accumulation, where it is postulated that there is scope for
recovery of prospective resources of between 40 million and 90 million barrels
of oil, if our geological concepts and assumptions are
correct. However, the challenges at Cornea include a low permeability
reservoir with difficult to model production characteristics and the long,
narrow shape of the field.
Cornea
represents an opportunity to invest in an appraisal drilling campaign with the
possibility of development, if the geological assumptions are correct and if
initial and subsequent appraisal drilling objectives are
realised. The plan for Cornea is to now drill a vertical
exploration/appraisal well in the predicted best sands and conduct well-designed
tests to define oil and gas contacts. Conditional on a positive
outcome, a subsequent horizontal appraisal well could be undertaken to determine
production possibilities. An initial successful appraisal well would
also provide a focus for economic analysis and the applicability of various
methods for funding a development, including subsequent capital raising and/or
joint development (part sale or farmout). An appraisal and field
development strategy for Cornea would be prepared, if appropriate.
22
In
anticipation of the drilling of the Cornea-3 appraisal well, the various joint
venture participants transferred their interests to new wholly-owned
subsidiaries.
Participants
in the Cornea Joint Venture at the end of the quarter were:
Cornea
Resources Pty Ltd (subsidiary of Exoil Limited) (Operator)
|
29.75%
|
|
Cornea
Petroleum Pty Ltd (subsidiary of Batavia Oil & Gas Pty
Ltd)
|
29.75%
|
|
Coldron
Pty Ltd(subsidiary of Gascorp Australia Pty Ltd)
|
15.00%
|
|
Cornea
Oil & Gas Pty Ltd (subsidiary of Australia Oil & Gas
Corporation)
|
17.00%
|
|
Cornea
Energy Pty Ltd (subsidiary of Goldsborough Limited)
|
8.50%
|
|
The
Cornea Joint Venture have engaged the services of Australian Drilling Associates
Pty Ltd to provide project management services to support the conduct of
Cornea-3 appraisal drilling operations and have taken by assignment a drilling
slot in a group sponsored multi-well program utilising the semi-submersible
drilling rig, the Songa Venus. The drilling slot is for the drilling
of a vertical appraisal well into the postulated Cornea oil rim, anticipated in
late 2009/early 2010.
Evaluation
of the Cornea-3D seismic data set has indicated that significant oil resources
may exist within better quality sand units that could be developed with
multi-lateral, horizontal wells. Before such a development can be
considered, the production flow rates of these reservoirs need to be proved, as
do the location of the transition zone and free water level.
The
purpose of drilling Cornea-3 is to acquire modern, high quality nuclear magnetic
resonance (NMR) logs within the reservoir sands to obtain more accurate
information on reservoir porosity, especially productive porosity and
permeability, as well as hydrocarbon saturation and the location of the
transition zone and free water level. The acquisition of better
formation pressure measurements and formation fluid samples with a modular
formation pressure tester tool (“MDT”), including possible flow test from a dual
packer MDT, are planned. Data from the Cornea 3 appraisal well will
be used to plan a subsequent horizontal appraisal well and to evaluate the
commerciality of the field, and ultimately a field development plan, if found
appropriate.
BONAPARTE
BASIN INTERESTS, OFFSHORE FROM THE NORTHERN TERRITORY OF AUSTRALIA – NT/P62,
NT/P63, NT/P64, NT/P65, NT/P71 and NT/P72
The Timor
Sea covers a huge area underlain by the Bonaparte sedimentary basin made up of
various geological segments, with potential for new hydrocarbon discoveries. The
region has a long history of exploration activity and discovery and has become a
focus for domestic and international petroleum exploration and development
activities. There have been numerous oil, gas/condensate and gas discoveries to
the north west in the region of the permits, including the Laminaria, Corallina
and Bayu-Undan fields. The giant gas fields of Greater Sunrise, Evans
Shoal, Caldita and Barossa are to the north and east of the permits. Recent
Plover Formation discoveries have been made in the Heron-2 well and the
Blackwood-1 well, in permit NT/P68 immediately north of NT/P63 and immediately
south of NT/P65.
23
The Timor
Sea is a major emerging petroleum province, with a developing emphasis in gas
processing for the export market. Discoveries made over the past few
years are expected to lead to the area providing substantial gas production and
revenue, through value-added gas projects covering a range of gas to liquids
processes and technologies.
National
Gas Consortium - NT/P62, NT/P63, NT/P64, NT/P65, NT/P71 and NT/P72
On April
12, 2006, we completed the acquisition of 100% of Nations Natural Gas Pty Ltd
(Nations). The acquisition of Nations was entered into on September 10, 2004 and
made in order to acquire a 30% interest in the initial four permits of the
National Gas Consortium, being permits, NT/P62, NT/P63, NT/P64 and NT/P65
(“Timor Sea Permits”), located in the Australian sector of the Timor Sea,
offshore from the Northern Territory.
Nations,
on June 15, 2006, agreed to farmout 6% of its 30% interest in each of the Timor
Sea Permits to NGA (leaving Nations with a net 24% interest) in return for the
acquisition and funding by NGA of Nations 30% share of the new Sunshine 2D
seismic survey (887 kms) and Kurrajong 2D seismic survey (3,291 km), which were
acquired in November 2006.
Nations,
on June 16, 2008, agreed to a further farmout of 3% of its 24% interest in each
of the Timor Sea Permits to NGA (leaving Nations with a net 21% interest) in
return for expenditure of AUD$1.6 million by NGA on Joint Venture exploration
costs. The cost of the Company’s share of the Sunshine and Kurrajong surveys has
been met entirely by NGA.
On August
8, 2006, Nations, together with the other joint venturers in the National Gas
Consortium were granted petroleum exploration permits NT/P71 and NT/P72 for an
initial 6-year term. Permits NT/P71 and NT/P72, which cover a total
area of approximately 17,380 km² (4,294,772 acres), are located in the
Australian sector of the Timor Sea, and are held by the National Gas Consortium,
which holds the contiguous NT/P62, NT/P63 and NT/P64 permits to the immediate
west.
The
National Gas Consortium then held six permits aggregating approximately 32,255
km² (7,970,533 acres) namely, NT/P62, NT/P63, NT/P64, NT/P65, NT/ P71 and
NT/P72, all within jurisdiction of Australia.
The
participants in the National Gas Consortium then were:
|
%
|
|
National
Oil & Gas Pty Ltd (Operator)
|
24.5
|
|
Australian
Natural Gas Pty Ltd
|
24.5
|
|
National
Gas Australia Pty Ltd
|
30.0
|
|
Nations
Natural Gas Pty Ltd (
AOGC
subsidiary)
|
21.0
|
|
24
Interests
in the permits NT/P63, NT/P64, NT/ P71 and NT/P72 as at the end of the quarter
are as per the holdings shown above for the National Gas
Consortium.
Sunshine
Joint Venture and Mimosa Joint Venture – NT/P65 and NT/P62
On May
29, 2009, the members of the National Gas Consortium applied for a variation in
the permits NT/P62 and NT/P65 where the year 5 well obligation in each permit
will be swapped for a seismic interpretation and mapping obligation from year
6.
The
obligation to acquire at least 150 km of new 2D seismic data in NT/P62 was met
through the completion of the Mimosa 2D survey carried out in March,
2009. Cost of the 2D survey was met by Gascorp Australia Pty Ltd as
its farmin obligation.
The
obligation to acquire at least 200 km of new 2D seismic data in NT/P65 was met
through the completion of the Sunshine Infill 2D survey carried out in March
2009. The cost of the Sunshine survey was met entirely by Gascorp Australia Pty
Ltd as its farmin obligation.
Following
these farmins the interests in NT/P62 and NT/P65 are:
|
%
|
|
Gascorp
Australia Pty Ltd
|
12.500
|
|
National
Oil & Gas Pty Ltd (Operator)
|
21.4375
|
|
Australian
Natural Gas Pty Ltd
|
21.4375
|
|
National
Gas Australia Pty Ltd
|
26.25
|
|
Nations
Natural Gas Pty Ltd (AOGC subsidiary)
|
18.375
|
|
Crocodile
Joint Venture - Eastern Bonaparte Basin - NT/P70
On
October 10, 2005, the Australian Government granted petroleum exploration permit
NT/P70, for a 6-year term. The Company initially held a 100% interest in the
permit and now holds an 80% interest as the result of farmout (see
below).
NT/P70
covers an area of 7,370 km² (1,821,200 acres) and is located in the eastern
Timor Sea, about 300 km north of Darwin, and 250 km northeast of the proposed
Darwin to Bayu-Undan gas pipeline. The Greater Sunrise, Evans Shoal, Barossa and
Caldita gas accumulations are located to the west and southwest of the NT/P70
permit area.
There
have been no wells drilled in the permit.
AOGC
agreed on June 15, 2006, to farmout 20% of its 100% interest in NT/P70 to NGA in
return for the acquisition and funding by NGA of the cost of acquisition of a
new 800 line km Crocodile 2D seismic survey in the NT/P70 permit. Subsequently
AOGC has agreed to transfer it’s 80% interest to it’s wholly owned subsidiary,
Alpha Oil & Natural Gas Pty Ltd.
25
The
equity participants in the NT/P70 Joint Venture at the end of the quarter
are:
|
%
|
|
Alpha
Oil & Natural Gas Pty Ltd (AOGC Subsidiary) (Operator)
|
80.0
|
|
National
Gas Australia Pty Ltd
|
20.0
|
|
In NT/P70
we have obtained a range of pertinent existing reports and open file seismic
data and, together with the Crocodile 2D seismic data, have mapped, interpreted
and revised analyses and concepts for the area. We have decided not
to acquire 300 km² of new 3D seismic survey as, from the seismic data we
acquired, we have been unable to confirm our initial perceptions of the
viability of either the Crocodile feature or the Warawi feature which have been
the major focus of our work in NT/P70. They are the only features
that we have identified as having any merit.
The
NT/P70 permit has previously been offered for farmout, with a number of
international companies having considered the acreage without any proposal
having been received.
Stillwater
Joint Venture - NT/P73
On March
27, 2007, the Australian Government granted our subsidiary, Alpha, a petroleum
exploration permit, NT/P73, for an initial 6-year term. NT/P73 is
located to the immediate south west of NT/P70 and covers an area of 6,815 km²
(1,683,300 acres). The Barossa and Caldita gas accumulations are located to the
west of the NT/P73 permit area.
In the
first three years of the initial 6-year term of the NT/P73 permit we plan to
obtain existing reports and open file seismic data and, with this data, to map,
interpret and revise analyses and concepts for the area. We are
required to acquire up to 2,000 line km of 2D in the third year of the
permit. Should we so decide, we can elect to enter the second three
years of the initial permit term and drill one exploration well and perform
further interpretational work. There have been no wells drilled in the permit
area.
Our work
to date has focused on the Stillwater feature of the NW corner of
NT/P73. We reached agreement with ConocoPhillips with respect to our
right to approximately 200 kms² of 3D data acquired by ConocoPhillips in the NW
corner of our NT/P73, most of which covers the highly interesting Stillwater
feature, which sits en enchelon with the Caldita feature, located in the
adjacent permit held by ConocoPhillips and Santos. This data has been
expressed in 2D format, exceeding 2000 line kms, thus meeting our third
permit-year obligation.
On April
3, 2009 the company’s Australian subsidiary, Alpha Oil and Natural Gas Pty Ltd,
sold “information” in the NT/P73 exploration permit to Gascorp Australia Pty Ltd
(Gascorp) for $249,935 (AUD$350,000). That information has been used
by Gascorp to investigate a proposal to take up to a 35% interest in the
permit. Gascorp Australia Pty Ltd is an affiliate company of Mr. EG
Albers.
26
Gascorp
had previously advised that it would take up this 35% interest and is in the
process of entering into a formal arrangement to do so.
The
NT/P73 permit has been offered for farmout.
27
Item
3. Quantitative and Qualitative Disclosures about Market
Risk.
We do not
engage in transactions in derivative financial instruments or derivative
commodity instruments. As of September 30, 2009, our financial instruments were
not exposed to significant market risk due to interest rate risk, foreign
currency exchange risk, commodity price risk or equity price risk.
Item
4. Controls and Procedures.
As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
Act”), we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of September 30, 2009.
This evaluation was carried out under the supervision and with the participation
of our President and Chief Financial Officer. Based upon that evaluation, our
President and Chief Financial Officer concluded that our disclosure controls and
procedures are effective as of such date.
As used
herein, "disclosure controls and procedures" means controls and other procedures
of ours that are designed to ensure that information required to be disclosed by
us in the reports we file or submit under the Securities Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports we file
under the Securities Exchange Act is accumulated and communicated to our
management, including our President and Chief Financial Officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
Internal
Controls
Since the
date of the evaluation described above, there were no significant changes in our
internal control or in other factors that could significantly affect these
controls, and there were no corrective actions with regard to significant
deficiencies and material weaknesses.
Management’s
Report on Internal Control over Financial Reporting
The
management of Australian Oil and Gas Corporation (“the Company”) is responsible
for (1) the preparation of the accompanying financial statements; (2)
establishing and maintaining internal controls over financial reporting; and (3)
the assessment of the effectiveness of internal control over financial
reporting. The Securities and Exchange Commission defines effective internal
control over financial reporting as a process designed under the supervision of
the company’s principal executive officer and principal financial officer, and
implemented in conjunction with management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with generally accepted
accounting principles.
All
internal control systems, no matter how well designed, have inherent limitations
and provide only reasonable assurance that the objectives of the
control system are met, Therefore, no evaluation of controls can provide
absolute assurance that all control issues and misstatements due to error or
fraud, if any, within the company have been detected. Additionally, any system
of controls is subject to risk that controls may become inadequate due to
changes in conditions or that compliance with policies or procedures mat
deteriorate. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because
changes in conditions or that compliance with the policies or procedures may
deteriorate.
28
As of
September 30, 2009, management of the Company conducted as assessment of the
effectiveness of the company’s internal control over financial reporting based
on criteria established in the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. From this assessment, management has concluded that the company’s
internal control over financial reporting was effective as of September 30,
2009.
This
Quarterly Report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management’s
report in this Quarterly Report.
Part
11. OTHER INFORMATION
Item
5. Other Information
Reports
on Form 8-K
During
the quarter ended September 30, 2009, no reports on Form 8K were
filed. On October 26, 2009, the Company filed a Report on Form 8K
relating to the sale of the Company’s interest in Exploration Permit
AC/P33.
Item
6. Exhibits
List
of Exhibits
31.1
|
Certification
pursuant to Section 302 of the
Sarbanes-Oxley Act of
2002
.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
29
SIGNATURES
Pursuant
to the requirements of the Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AUSTRALIAN OIL &
GAS CORPORATION
By:
/s/ E. Geoffrey
Albers
E. Geoffrey
Albers,
Chief Executive
Officer and
Chief Financial
Officer
November
10, 2009
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