UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended: March 31, 2006
[ ] TRANSITION REPORT UNDER 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 (IRS Employer
incorporation of organization) Identification Number)
2480 North Tolemac Way, Prescott, Arizona 86305
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(Address of principal executive offices)
Issuer's Telephone Number: (928) 778 1450 Internet Website: www.ausoil.com
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NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
29,800,528 shares of common stock, $0.001 par value, as of March 31, 2006.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ x ]
INDEX
AUSTRALIAN OIL & GAS CORPORATION
For the Quarterly Period Ended: March 31, 2006
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as at March 31, 2006 (Unaudited) and
December 31, 2005 (Audited)
Consolidated Statements of Operations for the three months
ended March 31, 2006 and 2005(Unaudited) and the cumulative
period from August 6, 2003 (Date of Inception) to March 31,
2006 (Unaudited)
Consolidated Statements of Cash Flows for the three months
ended March 31, 2006 and 2005 (Unaudited) and the cumulative
period from August 6, 2003 (Date of Inception) to March 31,
2006 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
Part 11. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Item 1. Financial Statements (Unaudited)
Australian Oil & Gas Corporation
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
March 31, 2006 (Unaudited) and December 31, 2005 (Audited)
ASSETS
(Dollar amounts in thousands) As at 3/31/06 As at 12/31/05
(Unaudited) (Audited)
$ $
Current assets:
Cash and cash equivalents 15 10
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Total Current Assets 15 10
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Fixed assets:
Capitalized exploration expenditure 7 7
Investments in director related entities 74 74
Advances to director-related entities 1 1
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Total Fixed Assets 82 82
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Total Assets 97 92
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 89 21
Advances from director related entities 101 101
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Total Current Liabilities 190 122
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Non-current liabilities:
Convertible Notes 256 250
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Total Non-current Liabilities (Note 3) 256 250
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Total Liabilities 446 372
============ =============
Stockholders' Equity (Deficiency)
Common stock, $0.001 par value;75,000,000 shares
Authorized 29,800,528 shares issued and outstanding 22 22
Capital in excess of par value 303 303
Deficit accumulated during the development stage (674) (605)
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Total Stockholders' Deficit (349) (280)
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Total Liabilities and Stockholders' Deficit 97 92
============ ==============
The accompanying notes are an integral part of these consolidated financial
statements.
Australian Oil & Gas Corporation
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended March 31, 2006 (Unaudited) and the
equivalent comparative period for 2005, and for the Cumulative
period from August 6, 2003 (Date of Inception) to March 31, 2006
(Unaudited)
(Dollar amounts in thousands -except per share data)
For the three For the three Cumulative period
months ended months ended from Inception
March 31, 2006 March 31, 2005 to March 31,
2006
$ $ $
Revenues: Nil Nil Nil
Costs and Expenses:
General and administrative 69 64 285
Merger and reorganisation - - 139
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Compensation expense - - 250
------------ ----------- ------------
69 64 674
------------ ----------- ------------
Net Loss (69) (64) (674)
============ =========== ============
Basic loss per share $ (*) $ (*) $ (0.02)
============ =========== ============
Number of Common Shares used in
calculation 29,800,528 27,300,550 29,800,528
============ =========== ============
*Less than $.01 per share
The accompanying notes are an integral part of these
consolidated financial statements.
Australian Oil & Gas Corporation
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 2006 (Unaudited) and
the equivalent comparative period, 2005 and for the
cumulative period from August 6, 2003 (Date of Inception) to
March 31, 2006 (Unaudited)
(Dollar amounts in thousands - except per share data)
For the three For the three Cumulative period
months ended months ended from inception to
March 31, 2006 March 31, 2005 March 31, 2006
$ $ $
Cash flows from operating activities:
Net loss (69) (64) (674)
Adjustments for non-cash items:
Increase in convertible notes 6 - 256
----------- ----------- -----------
(63) (64) (418)
Adjustments to reconcile net loss to net cash used
in operating activities:
Change in assets and liabilities:
Increase in accrued expenses and payables 68 54 89
----------- ----------- -----------
Total adjustments 68 54 89
----------- ----------- -----------
Net cash provided by (used in) operating activities 5 (10) (329)
----------- ----------- -----------
Cash flows from investing activities:
Exploration tenement expenditure - (3) (7)
Advances to director-related entities - (1) (1)
Shares in director-related entities - (1) (74)
----------- ----------- -----------
Net cash used in investing activities - (4) (82)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from advances from director-related entities - 18 351
Proceeds from the sale of common stock - net - - 75
----------- ----------- -----------
Net cash provided by financing activities - 18 426
----------- ----------- -----------
Increase in cash 5 4 15
Cash and cash equivalents at beginning of period 10 2 -
----------- ----------- -----------
Cash and cash equivalents at end of period 15 6 15
=========== =========== ===========
Supplemental disclosure of non-cash activities
Great Missenden Holdings Pty Ltd charged:-
Administration Fees - - 97
Interest 6 4 37
Compensation awarded to EG Albers
Issuance of Stock 50 53 300
The accompanying notes are an integral part of these
consolidated financial statements.
Australian Oil & Gas Corporation
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The accompanying interim 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 March 31, 2006 are not necessarily
indicative of the operating results for the entire year. The interim financial
statements should be read in conjunction with our Annual Report on Form 10-KSB
for the year ended December 31, 2005.
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 and a
development stage enterprise as defined by SFAS No. 7, and since inception, has
been engaged in the assessment of oil and gas exploration properties. The
authorized capital stock of the Australian Oil & Gas Corporation consists of
75,000,000 shares of common stock, $0.001 par value.
Note 2: Related Party Transactions
Mr. E Geoffrey Albers is a director and shareholder of each of Great Missenden
Holdings Pty Ltd and of Setright Oil & Gas Pty Ltd. Effective from April 4,
2005, in return for the previous advances of $212,000, the Company issued to
Great Missenden Holdings Pty Ltd 212 Series I Convertible Notes of $1,000 each,
with an interest coupon of 10% per annum, convertible into shares of Common
Stock at any time on or before December 31, 2007 on the basis of 12,500 shares
of Common Stock for every $1,000 Convertible Note or part thereof. Effective
from April 26, 2005, Great Missenden Holdings Pty Ltd approved a further
$100,000 Line of Credit to the Company in return for the issue to Great
Missenden Holdings of 100 Series II Convertible Notes of $1,000 each with an
interest rate of 10% per annum, convertible into shares of Common Stock at any
time on or before 31 December, 2008 on the basis of 10,000 shares of Common
Stock for every $1,000 Series II Convertible Notes or part thereof. As at March
31, 2006, an amount of $44,000 had been drawn down pursuant to the $100,000 Line
of Credit, which were converted into these Series II Convertible Notes. A total
charge of $6,175.81 by way of interest on all advances from Great Missenden
Holdings Pty Ltd was incurred during the quarter. For the quarter ended March
31, 2006, Setright Oil & Gas Pty Ltd charged the Company $8,305 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 to be remunerated separately. At March 31, 2006 an
aggregate amount of $10,210 (representing charges made prior to 31 December
2005) was recorded as a liability to Setright Oil & Gas Pty Ltd.
We also have the use of premises in Australia at Level 25, 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.
With regard to exploration permits AC/P33, AC/P35 and AC/P39, Mr. Albers is a
director and shareholder in the joint venture participants; namely Natural Gas
Corporation Pty Ltd and Auralandia N.L.
With regard to the various interests in the Browse Joint Venture, Mr. Albers is
a director and shareholder in each of Batavia Oil & Gas Pty Ltd (Batavia) and
Exoil Limited (Exoil), the parent company of Hawkestone Oil Pty Ltd
(Hawkestone). He is also a major shareholder in and a director of Alpha and a
shareholder of Goldsborough Limited, the parent of Goldsborough Energy Pty Ltd
(Goldsborough). Mr. Mark A Muzzin, a director of AOGC, is a shareholder in Exoil
and is a director of Goldsborough. Batavia, Hawkestone, Alpha and Goldsborough
are collectively the holders of the Browse Joint Venture.
With regard to the interest in the National Gas Consortium, Mr. Albers, a
director of AOGC, is a director and shareholder in each of National Oil & Gas
Pty Ltd, Australian Natural Gas Pty Ltd and Nations. These companies are the
members of the National Gas Consortium.
Note 3: Non-Current Liabilities
At March 31, 2006 the Company recorded a liability to Setright Oil & Gas Pty Ltd
of $10,210 as set out in Note 2 Related Party Transaction.
Note 4: Unaudited Proforma Consolidated Statements of Income
On 12 April, 2006 Australian Oil & Gas Corporation completed its acquisition of
Nations Natural Gas Pty Ltd and Alpha Oil & Natural Gas Pty Ltd, both companies
are incorporated in Australia.
The unaudited proforma consolidated statements of income data for each of the
quarters ended March 31, 2006 and 2005, assuming that Alpha Oil & Natural Gas
Pty Ltd and Nations Natural Gas Pty Ltd were included in our results from the
beginning of 2005, are as follows:
(Dollar amounts in thousands) For the three For the three
months ended months ended
March 31, 2006 March 31, 2005
$ $
Costs and Expenses
General and administrative Expenses 69 64
Other Income
Sale of interest in permit WA-341 1,257 -
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Net Income/ (Loss) 1,188 (64)
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Basic Earnings per share $.04 $(*)
Basic Weighted average common shares 29,800,528 27,300,550
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward-looking statements
References in this report to "the Company", "we", "us", or "our" are intended to
refer to Australian Oil & Gas Corporation. This quarterly report contains
certain statements that may be deemed forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (Securities
Act), and Section 21E of the United Stated Securities Exchange Act of 1934, as
amended (Exchange Act). Readers of this quarterly report are cautioned that such
forward-looking statements are not guarantees of future performance and that
actual results, developments and business decisions may differ from those
envisaged by such forward-looking statements.
All statements, other than statements of historical facts, so included in this
quarterly report that address activities, events or developments that the
Company intends, expects, projects, believes or anticipates will or may occur in
the future, including, without limitation: statements regarding our business
strategy, plans and objectives and statements expressing beliefs and
expectations regarding our ability to successfully raise the additional capital
necessary to meet our obligations, our ability to secure the permits necessary
to facilitate anticipated seismic and drilling activities and our ability to
attract additional working interest owners to participate in the exploration for
and development of oil and gas resources, are forward-looking statements within
the meaning of the Act. These forward-looking statements are and will be based
on management's then-current views and assumptions regarding future events.
Plan of Operation
General Australian Oil & Gas Corporation is an independent energy company
focused on the acquisition and exploration for oil and natural gas resources.
Our core business is directed at the acquisition of interests in oil and gas
properties in the offshore areas of Australia's territorial waters. We rely on
the considerable experience in the oil and gas industry of our President, Mr. E.
Geoffrey Albers, and our consultants, to identify and conduct initial analyses
of properties in which we may acquire an interest.
Strategy We devote essentially all of our resources to the identification of
large-tract oil and gas properties in their early stages of exploration which
have the potential for a high impact outcome for the Company in the event of
exploration success. We plan to advance the prospectivity of these properties
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. We retain selected consultants, contractors
and service companies. We use proven technologies in evaluating the
prospectivity of our oil and gas properties. We expect to invest in projects at
different levels of participation, including 100% ownership. We plan to maintain
as high a percentage of participation as can be prudently managed. We will 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 industry players so as to
minimize our financial outlay requirements, wherever possible, through promoted
transactions. Our overall intention is to provide maximum leverage for
shareholders at minimal cost, in return for the high risk activities that we
undertake.
Since August 2003, when current management began operating the Company, we have
not conducted any revenue generating business operations. Accordingly, we have
no results of such operations to report. However, we continue to actively pursue
our long term strategy of acquiring interests in oil and gas exploration
projects with a particular emphasis on the northern basins of the North West
Shelf of Australia.
Browse Basin, Australia Region In June 2004, we entered into a preliminary,
non binding agreement to acquire a 20% interest in the permits of the Browse
Joint Venture, by acquiring all the shares in Alpha Oil & Natural Gas Pty Ltd
(Alpha). Since the period of this report, on 12 April 2006 we completed the
acquisition of Alpha. 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 and
WA-342-P. The shareholders of Alpha are entitled to receive 2,000,002 shares of
common stock in AOGC and to be paid AUD$100,000. Prior to the agreement between
being finalized, Alpha (with the approval of AOGC) sold its 20% interest in
WA-341-P for an amount in excess of book value. The settlement funds have been
received by Alpha and since 12 April 2006 have been incorporated in funds
available to AOGC through its new wholly owned subsidiary, Alpha.
The remaining Permits of the Browse Joint Venture are contiguous and are located
in the offshore Browse Basin, a part of the North West Shelf of Australia. They
cover a total area of 9,460 km(2) (2,336,620 acres).
The Browse Basin region, off the coast of Western Australia, has a 40-year
history of exploration. It is a proven major hydrocarbon province and it forms a
part of the extensive series of continental margin sedimentary basins that,
together, comprise the North West Shelf hydrocarbon province of Australia. The
Browse Basin has been host to a series of major gas, gas condensate and oil
discoveries which began with the 1971 discovery at Scott Reef-1. The Browse
Basin is currently the focus for two proposals to establish new LNG export
facilities; one by Woodside Energy Ltd in relation to the Scott Reef/Brecknock
complex and the other by Inpex Corporation in relation to the Ichthys complex.
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. The Browse Joint Venture has
recently completed the shooting of approximately 1700 line kilometers of new 2D
seismic survey over these Browse Joint venture permits.
Vulcan Sub-basin, Australia Region Our wholly owned subsidiary, Gascorp, Inc
(Gascorp) holds a 20% interest in the permits, AC/P33, AC/P35 and AC/P39 in
joint venture with its affiliates; Natural Gas Corporation Pty Ltd (NGC) (40%)
and Auralandia N.L. (Auralandia) (40%), the designated Operator. The permits are
within the territory of Ashmore and Cartier Islands, an Australian offshore
territory. We hold a 20% interest in the permits.
AC/P33, AC/P35 and AC/P39 are located on the eastern margin of the Vulcan
Sub-basin; one of a number of proven petroliferous sub-basins which together
comprise the North West Shelf hydrocarbon province of Australia.
AC/P33 includes the undeveloped Oliver oil and gas accumulation, drilled by the
now plugged and suspended Oliver-1 well. AC/P33 comprises five graticular
blocks, totaling approximately 400 km2 (98,800 acres). In the first three years
of the initial 6-year term of permit AC/P33, the joint venture participants plan
to obtain a range of pertinent existing reports and open file seismic data, and
with this data, to map, interpret and revise analyses and concepts which
presently exist for the area. The joint venture has committed to the enhancement
of existing seismic data around the Oliver and the Oliver NE feature, and will
examine various techniques for their potential use as direct hydrocarbon
indicators. The joint venture plans to acquire 80 km2 (19,760 acres) of new
enhanced parameter 3D seismic survey. It is intended that the survey will be
conducted over the Oliver and Oliver NE features. Should the joint venture so
decide, it can elect to enter the second three years of the initial permit and
drill one exploration well and perform further interpretational work. Geological
and geophysical evaluation of the permit has commenced.
AC/P35 is located immediately to the north of AC/P33. It comprises 46
graticular blocks, totaling approximately 3410 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. In the first three years of the initial
6-year term of the AC/P35 permit, we plan to obtain a range of pertinent
existing reports and open file seismic data. In the third year, we presently
plan to shoot 250 km2 of 3D seismic survey. Should we so decide, we can elect to
enter the second three years of the initial permit term and drill one
exploration well and perform further interpretational work.
AC/P39 is located 600 km west of Darwin, immediately to the east of AC/P33 and
AC/P35. It comprises 11 graticular blocks, totalling approximately 920 km(2)
(2,273 acres). AC/P39 lies within 100 km of existing petroleum production
facilities and along the eastern elevated flank of a broad, deep and proven
hydrocarbon-generative 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 plan to obtain a range of existing reports
and open file seismic data. In the third year, we plan to drill one exploration
well.
Central Bonaparte Gulf, Australia Region In September 2004, we entered into a
preliminary, non binding agreement to acquire a 30% interest in the permits of
the National Gas Consortium, by acquiring all the shares in Nations Natural Gas
Pty Ltd (Nations). Since the period of this report, on 12 April 2006, we
completed of the acquisition of Nations. The acquisition of Nations was made in
order to acquire a 30% interest in the four permits of the National Gas
Consortium, being permits, NT/P62, NT/P63, NT/P64 and NT/P65. The shareholders
of Nations are entitled to receive 2,100,001 shares of common stock in AOGC and
AUD$50,000 as consideration for Nations.
The Permits of the National Gas Consortium are located in the Australian sector
of the Timor Sea, offshore from the Northern Territory, and cover a total area
of approximately 14,875 km(2) (3,674,125 acres) . The Timor Sea covers a huge
area underlain by sedimentary basins with potential for new hydrocarbon
discoveries. The region has a long history of discovery and has now become the
focus for domestic and international petroleum exploration and development
activities. There have been numerous oil and wet gas discoveries to the north
west of the permits, including the Laminaria, Corallina and Bayu-Undan fields,
and the giant gas fields of Greater Sunrise, Evans Shoal, Caldita and Lyndoch
are to the north east of the permits.
The Timor Sea is a major emerging oil and gas 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 production and
revenue, through value-added gas projects covering a wide spectrum of gas to
liquids processes and technologies.
In the first three year term of the Permits, the National Gas Consortium has
committed to reprocess 750 km of 2D seismic data and shoot 500 km of new 2D
seismic survey within each permit. Preliminary geological and geophysical
evaluation of the Permits has commenced.
Eastern Bonaparte Gulf, Australia Region On 10 October 2005, the Australian
Government granted a petroleum exploration permit, NT/P70, for an initial 6-year
term, effective from October 10, 2005. The Company holds a 100% interest in the
permit.
NT/P70 covers an area of 7370 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 and
Caldita gas accumulations are located to the west and southwest of the NT/P70
permit area.
NT/P70, which straddles the Calder Graben, contains a play trend which is likely
to have oil potential. There have been no wells drilled within that part of the
Calder Graben which is present within NT/P70.
An undrilled closure, identified as the Warawi Prospect, has been mapped on the
currently available 2D seismic data on the eastern side of the Graben. A
selection of 1988 BHP seismic data obtained from the Geoscience Australia data
repository in Canberra confirms the prospectivity of the eastern Calder Graben
margin and the presence of the Warawi Prospect. The structure appears to have
ample relief and to be large enough to contain a significant hydrocarbon
accumulation. Screening volumetrics suggest that the Warawi feature might
contain recoverable volumes in excess of 100 million barrels of oil in the event
of a successful well test.
We consider that the oil potential of the undrilled trend that is located along
the eastern margin of the Calder Graben warrants further exploration effort in
light of current and predicted oil prices.
Warawi Prospect
NT/P70 is covered by existing available BHP and Nexen seismic datasets. Regional
interpretation shows the Calder Graben area to be clearly defined. However, on
the steeply dipping eastern flank of the Graben there exists an interesting area
where a change in structural fault trends occurs and where an apparently
"compressional" closed structural feature, hitherto named the "Warawi Prospect",
is located.
The Warawi Prospect is situated on the Lynedoch Bank Fault System in water
depths of between 160m and 180m. This fault system forms a hinge line/transfer
zone separating the Bonaparte Basin in the west from the Money Shoals Platform
to the east. There are two major depocentres in the eastern Bonaparte Basin, the
north-east/south-west oriented Malita Graben and the
north-north-east/south-south-west Calder Graben. These elongate depocentres
converge in the south-west area of NT/P70 where the Lynedoch Fault zone becomes
the eastern bounding margin of the Calder Graben. The Warawi feature lies at
this convergence, and is almost certainly a transpressional feature related to
boundary adjustments between the Malita and Calder Grabens. Structural growth is
evident over a prolonged period from Mid-Jurassic through the Cretaceous but has
been essentially static since that time. The base Tertiary reflector shows
minimal displacement across the feature.
It is of considerable significance that the Warawi structure has been in place
since the late Cretaceous and has remained apparently undisturbed by faulting
that has affected other areas of the Bonaparte basin. The Plover Formation, a
major source for hydrocarbons within the Bonaparte Gulf region, is believed to
have entered the oil generation window in the late to mid Cretaceous in the
Malita Graben. While there are no well penetrations in the Calder Graben,
similar timing is likely to apply there. If this is the case, then the timing of
the formation of the Warawi structure would appear to be entirely favourable for
the entrapment of any hydrocarbon charge.
While there are no established well data points in the Calder Graben, it is not
unreasonable to assume a close similarity with the confluent Malita Graben. That
being the case, the Warawi Structure presents stacked objectives, ranging from
fractured reservoir in the (Aptian) Darwin Radiolarite, through possible
sandstones in the underlying Echuca Shoals/Flamingo/Elang Formations to
sandstones in the Plover Formation itself (Late Jurassic to Early Cretaceous).
Source rock potential is proven for the Echuca Shoals and Plover Formations,
although oils sourced from the Echuca Formation have not yet been found in a
commercial accumulation. These latter oils have however been sampled from
overlying fractured Darwin Radiolarite and typed. It should be noted that the
compressional nature of the Warawi structure strongly suggests that the Darwin
Radiolarite will be extensively fractured and hence provide a valid objective,
in addition to the other usual sandstone reservoirs.
The Warawi Prospect is located in a basin margin setting almost 400 metres
shallower, at least, than the Lynedoch and Caldita gas discoveries to the east,
and has been available for oil charge since the Late Cretaceous. Apart from
being structurally shallower at the Plover level than at nearby Lynedoch and
Caldita, any early entrapped hydrocarbon could be expected to preserve reservoir
quality.
Gas flushing is a risk for any Plover oil accumulation, as adjacent source rocks
in the Plover Formation attain higher maturity levels and are a proven source
for the large gas accumulations in the region. However, given the existence of
intraformational seals in the Flamingo and Elang Formations, it is likely that
reservoirs in the Echuca Shoals or the Darwin Formation would be shielded from
this effect and remain viable oil targets.
The Company plans to shoot a 3D seismic program over the Warawi Prospect in
order to define the feature and to bring it up to "drillable" status.
The permit has been designated as a "frontier area" by the Australian Government
attracting an exploration incentive which allows immediate uplift to 150% tax
deductibility on Australian Petroleum Resource Rent Tax ("PRRT").
In the first three years of the initial 6-year term of the NT/P70 permit, we
plan to obtain a range of pertinent existing reports and open file seismic data
and, with this data, to map, interpret and revise analyses and concepts which
presently exist for the area. In the third year, we presently plan to shoot 300
km2 of 3D seismic survey, and a 700 line km 2D seismic survey. Should we so
decide, we can elect to enter the second three years of the initial permit term
and drill one exploration well and perform further interpretational work. There
have been no wells drilled in the permit, but a course grid of 2D seismic is
available.
Permitting It should be noted that, provided all exploration commitments are
met, Australian offshore petroleum exploration permits may be renewed for two
further 5-year terms, upon relinquishment of 50% of the area of a permit at the
end of the first 6-year term, and again at the end of the second 5-year permit
term. Any Retention Lease or Production License is excluded from the calculation
of the area to be relinquished. Permits therefore, have a potential 16-year
life, subject to these requirements and to the fulfillment of exploration
commitments.
Management The Company relies upon its Chairman and President, who also holds
the position of Chief Executive Officer and Chief Financial Officer, Mr. E
Geoffrey Albers, to manage the Company's operations and to identify and acquire
interests in oil and gas prospects. The Company has 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 has agreed to remunerate Mr. Albers by issuing
common stock in lieu of cash payments. Specifically, during the fourth quarter
of 2005, the Company issued 2,500,000 shares of Common Stock to Mr. Albers for
his services in relation to the period from January 1, 2005 to December 31,
2005. A further 2,000,000 shares of Common Stock will be issued to him for his
services for the period from January 1, 2006 to December 31, 2006 (the financial
statements for the quarter have accrued $50,000 representing a pro-rata amount
of this compensation). A further 1,500,000 shares of Common Stock will be issued
to him for his services for the period from January 1, 2007 to December 31,
2007.
Funding As a development 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. 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. When
additional funds for exploration are required, 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. Should these methods considered not to be viable, or in the best
interests of stockholders, then it would be 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 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.
Item 3. 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,
2005. This evaluation was carried out under the supervision and with the
participation of our Chief Executive. Based upon that evaluation, our Chief
Executive and Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting management to material information
relating to us required to be included in our periodic SEC filings. There have
been no significant changes in our internal controls subsequent to the date we
carried out our evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the 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 in our reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive, to
allow timely decisions regarding required disclosure.
Part 11. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Since the period of this report, we have filed two 8K's announcing the
completion of the acquisitions of each of Nations Natural Gas Pty Ltd and Alpha
Oil & Natural Gas Pty Ltd, both companies incorporated in Australia, and the
granting of exploration permit AC/P39.
List of Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant 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
May 19, 2006