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: June 30, 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
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(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification Number)
2480 North Tolemac Way, Prescott, Arizona 86305
(Address of principal executive offices)
Issuer's Telephone Number: (928) 778 1450 Internet Website: www.ausoil.com
--------------
NOT APPLICABLE
(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 [ ] 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 June 30, 2006.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
AUSTRALIAN OIL & GAS CORPORATION
For the Quarterly Period Ended: June 30, 2006
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as at June 30, 2006 (Unaudited) and
December 31, 2005 (Audited)
Consolidated Statements of Operations for the three months ended June
30, 2006 and the equivalent comparative period for 2005, for the six
months ended June 30, 2006 (Unaudited) and the equivalent comparative
period for 2005 and for the cumulative period from August 6, 2003
(Date of Inception) to June 30, 2006 (Unaudited)
Consolidated Statements of Cash Flows for the six months ended June
30, 2006 and 2005 (Unaudited) and the cumulative period from August 6,
2003 (Date of Inception) to June 30, 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
ASSETS
(Dollar amounts in thousands) As at 6/30/06 As at 12/31/05
(Unaudited) (Audited)
$ $
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Current assets:
Cash and cash equivalents 824 10
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Total Current Assets 824 10
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Other assets:
Capitalized exploration expenditure - 7
Investments in director related entities - 74
Advances to director-related entities 12 1
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Total Fixed Assets 12 82
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Total Other Assets 836 92
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 141 21
Income tax expense payable 63 -
Advances from director related entities 40 101
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Total Current Liabilities 244 122
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Non-current liabilities:
Convertible Notes 263 250
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Total Non-current Liabilities (Note 3) 263 250
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Total Liabilities 507 372
============= ==============
Stockholders' Equity (Deficiency)
Common stock, $0.001 par value; 75,000,000 shares authorized,
34,900,531 shares issued and outstanding 26 22
Capital in excess of par value 750 303
Accumulated other comprehensive income- Foreign currency exchange 80 -
Deficit accumulated during the development stage (527) (605)
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Total Stockholders' Equity / (Deficit) 329 (280)
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Total Liabilities and Stockholders' Equity / (Deficit) 836 92
============= ==============
The accompanying notes are an integral part of these
consolidated financial statements.
F-1
Australian Oil & Gas Corporation
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollar amounts in thousands -except per share data)
Cumulative period
For the six For the six For the three For the three from Aug. 6, 2003
months ended months ended months ended months ended (Date of Inception)
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 to June 30, 2006
------------- ------------- ----------- ------------- -----------------
Expenses
General and administrative 69 141 24 77 285
Merger and reorganisation -- -- -- -- 139
Stock based compensation 110 -- 60 -- 360
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Total operating expenses 179 141 84 77 784
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Net loss before other income and
extraordinary item (179) (141) (84) (77) (784)
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Other Income
Interest income 9 -- 9 -- 9
------------- ------------- ----------- ------------- -----------------
Loss before extraordinary item (170) (141) (75) (77) (775)
Extraordinary Items
Gain on purchase of
subsidiaries, net of tax 682 -- -- -- 682
Net income / (loss) 512 (141) (75) (77) (93)
============= ============= =========== ============= =================
Income/ (Loss) per common share:
Loss before extraordinary item $ (.005) $ (.005) $ (*) $ (*) $ (.02)
============= ============= =========== ============= =================
Extraordinary item $ .02 $ (*) $ (*) $ (*) $ .02
============= ============= =========== ============= =================
Net income / (loss) $ .02 $ (.005) $ (*) $ (*) $ .02
============= ============= =========== ============= =================
Weighted average common share used in
calculation 31,866,828 27,300,550 31,866,828 27,300,550 31,866,828
============= ============= =========== ============= =================
*Less than $.005 per share
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
Australian Oil & Gas Corporation
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands - except per share data)
For the six For the six Cumulative period
months ended months ended from inception to
June 30, 2006 June 30, 2005 June 30, 2006
$ $ $
------------- ------------- -----------------
Cash flows from operating activities:
Net income / (loss) 512 (141) (93)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Extraordinary Gain (682) - (682)
Stock based compensation 110 - 110
Increase in convertible notes 13 - 263
Increase (decrease in cash) from changes in:
Increase in accrued expenses and payables 120 106 141
Increase in receivables - (4)
Decrease in other assets 5
Increase provision for income tax 63 - 63
------------- ------------- -----------------
Net cash provided by (used in) operating activities 141 (35) (197)
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Cash flows from investing activities:
Cash of acquired subsidiaries 782 (3) 779
Acquisition of subsidiaries (112) - (186)
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Net cash provided by (used in) investing activities 670 (3) 593
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Cash flows from financing activities:
Advances from director-related entities 3 - 353
Proceeds from sale of Common Stock - net - - 75
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Net cash provided by financing activities 3 38 428
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Increase/(decrease) in cash 814 (1) 824
Cash and cash equivalents at beginning of period 10 2 -
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Cash and cash equivalents at end of period 824 1 824
============= ============= =================
Supplemental disclosure of non-cash activities
Great Missenden Holdings Pty Ltd charged:-
Administration Fees - - 97
Interest 12 9 43
Issuance of Stock 410 - 410
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
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 June 30, 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.
The Company presently operates through four wholly owned subsidiaries; Alpha Oil
& Natural Gas Pty Ltd (Alpha), Nations Natural Gas Pty Ltd (Nations), Gascorp,
Inc. and Nations LNG, Inc.
Note 2: Related Party Transactions
Mr. E Geoffrey Albers is a director and shareholder of each of Great Missenden
Holdings Pty Ltd, National Gas Australia 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 June 30, 2006, an amount of $51,000 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 $6,403.40 by way of interest on all advances from Great
Missenden Holdings Pty Ltd was incurred during the quarter.
For the quarter ended June 30, 2006, Setright Oil & Gas Pty Ltd charged the
Company $21,545 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.
During the quarter ended June 30, 2006 an additional $60,000 was accrued as
remuneration due to Mr E. Geoffrey Albers in line with the agreement noted in
Item 2 below in the funding details. At 30 June, 2006 a total of $110,000 was
included in current liabilities as the amount due to Mr E. Geoffrey Albers. 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.
F-4
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.
We have entered into farmout arrangements with National Gas Australia Pty Ltd in
relation to the acquisition of 2D seismic in the six permits of the National Gas
Consortium. In return for funding Nations 30% share of the cost of the Kurrajong
and Sunshine 2D surveys of about 3000 kms) ($840,000) National Gas is entitled
to a 6% interest in such permits, leaving Nations with a net 24% interest in the
permits of the National Gas Consortium.
We have entered into farmout arrangements with National Gas Australia Pty Ltd in
relation to the acquisition of 2D seismic in the NT/P70 permit in which we hold
a 100% interest. In return for funding AOGC 100% share of the cost of the
Crocodile 2D survey of about 700 kilometres ($722,150) National Gas is entitled
to a 20% interest in such permits, leaving AOGC with a net 80% interest in the
NT/P70 permit.
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 former 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 and Alpha. 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, National Gas Australia Pty Ltd, Australian Natural Gas Pty Ltd and a
director and former shareholder of Nations. These companies are the members of
the National Gas Consortium.
Note 3: Current Liabilities
At June 30, 2006 the accounts payable balance includes $110,000 for remuneration
due to Mr Albers as set out in Note 2 Related Party Transaction.
Note 4: Acquisition of subsidiaries
On April 12, 2006, Australian Oil & Gas Corporation (AOGC) completed the
acquisitions of each of Nations Natural Gas Pty Ltd (Nations) and Alpha Oil &
Natural Gas Pty Ltd (Alpha), both companies incorporated in Australia. A
director of AOGC, Mr EG Albers, is a director and or shareholder of each of the
vendors of shares in Nations and Alpha.
The purchase of Nations was made in order to acquire 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 have received AUD$50,000 as consideration for
Nations. The shares in AOGC will be issued during the next quarter.
The purchase 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
the payment of AUD$100,000. The shares in AOGC will be issued during the next
quarter. Prior to the agreement between AOGC and Alpha being finalized, Alpha
(with the approval of AOGC) sold its 20% interest in WA-341-P for an amount
substantially in excess of book value. The settlement funds have been received
by Alpha and are incorporated in settlement funds available to AOGC through its
new wholly owned subsidiary, Alpha.
F-5
Note 5: Principles of Consolidation
The consolidated financial statements include the accounts of Australian Oil and
Gas Corporation and its wholly owned subsidiaries Alpha and Nations. For
reporting purposes, the subsidiaries were first included in the consolidated
entity as at 31 March 2006.
Note 6: Authorised and Issued Shares
At 30 June 2006, 5,100,003 shares included in authorised shares of 34,900,531
disclosed in the balance sheet and used for the earnings per common share
calculation were not issued. These shares were authorised to compensate Mr
Albers (1,000,000 shares) and for the purchase of subsidiaries (4,100.003
shares) and will be issued in the quarter ending September 30 2006.
Note 7: 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 subsidiaries is
Australian dollars. The comprehensive income of $80,000 disclosed in the
consolidated balance sheet is due to translating the subsidiaries' common stock
to US dollars using the foreign currency exchange rate on two different dates:
March 31, 2006 and June 30, 2006.
Note 8: Deficit accumulated during the development stage
Changes in the accumulated deficit are as follows:
(Dollar amounts in thousands)
Balance at December 31, 2005 $ (605)
Net income for the period $ 512
Adjustments made on acquisition of subsidiaries $ (434)
------
Balance at June 30, 2005 $ 527
======
F-6
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.
2
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
----------------------- ------
On 12 April 2006 we completed the acquisition of Alpha, Oil & Natural Gas Pty
Ltd (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 were paid AUD$100,000. The shareholders of Alpha shall
receive the 2,000,002 shares of common stock during the next quarter. 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 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 the Braveheart seismic survey of
approximately 1700 line km of new 2D seismic survey over these Browse Joint
venture permits. A further 240 km of new 2D seismic survey is to be acquired
within WA-342-P in October 2006.
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. In order to resolve and simplify potential Australia tax and
administrative complication, the interest held by Gascorp is to be transferred
to our Australian incorporated subsidiary, Alpha Oil & Natural Gas Pty Ltd.
3
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 km(2) (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 feature, and will
examine various techniques for their potential use as direct hydrocarbon
indicators. The joint venture plans to acquire a minimum of 80 km(2) (19,760
acres) of new enhanced parameter 3D seismic survey. It is intended that the
survey will be conducted over the Oliver feature. 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 is underway.
AC/P35 is located immediately to the north of AC/P33. It comprises 46 graticular
blocks, totaling approximately 3410 km(2) (842,645 acres). There have been five
wells drilled in the area, with two having oil and gas indications, all of which
were plugged and abandoned. 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
km(2) of 3D seismic survey. Should we so decide, we can elect to enter the
second three years of the initial permit term and drill one exploration well and
perform further interpretational work. Geological evaluation of the permit has
commenced.
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 the Vulcan Sub-basin, 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. Geological evaluation of the permit has commenced.
Central Bonaparte Gulf, Australia Region
----------------------------------------
On 12 April 2006, we completed of the acquisition of Nations Natural Gas Pty Ltd
(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 ("Timor Sea Permits"), located in the
Australian sector of the Timor Sea, offshore from the Northern Territory. 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 shareholders of Nations
will receive the 2,100,001 shares of common stock during the next quarter.
4
The Timor Sea covers a huge area underlain by sedimentary basins with potential
for new hydrocarbon discoveries. The region has a long history of exploration
activity and discovery and has now become the focus for domestic and
international petroleum exploration and development activities. There have been
numerous oil 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.
On August 11, 2006, our wholly owned subsidiary Nations Natural Gas Pty Ltd
(Nations) was informed by the Designated Authority acting on behalf of the
Commonwealth of Australia, of the grant of petroleum exploration permits NT/P71
and NT/P72 for an initial 6-year term, effective from August 8, 2006. Nations
will hold a net 24% interest in the permits, following the farmout of seismic
commitments. The new permits, which are located in the Australian sector of the
Timor Sea, are held by the National Gas Consortium, which holds the contiguous
NT/P62, NT/P63 and NT/P64 permits.
The new Permits cover a total area of approximately 17,380 km(2) (4,294,772
acres). The National Gas Consortium now holds six permits aggregating
approximately 32,255 km(2) (7,970,533 acres) including the new permits NT/P71
and NT/P72 and the four permits already held, namely, NT/P62, NT/P63, NT/P64 and
NT/P65.
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.
The Company has agreed to farmout 6% of its 30% interest to National Gas
Australia Pty Ltd (leaving Nations with a net 24% interest) in the Timor Sea
Permits in return for the funding of Nations 30% share of the new Sunshine and
Kurrajong 2D seismic survey of approximately 3000 kms. The estimated cost of the
Company's 30% share of the Sunshine and Kurrajong surveys is in the order of
$840,000 which has been met by National Gas Australia Pty Ltd.
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 km(2) (1,821,200 acres) and is located in the
eastern Timor Sea, about 300 km north of Darwin, and 250 km northeast of the
proposed Darwin to Bayu-Undan gas pipeline. The Greater Sunrise, Evans Shoal 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.
5
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.
AOGC has agreed to farmout 20% of its 100% interest in NT/P70 to National Gas
Australia Pty Ltd in return for the funding by NGA of the cost of the new
Crocodile 2D seismic survey of approximately 700 kms to be acquired in the
NT/P70 permit. AOGC's share of the cost is estimated at $722,150.
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 Company plans to shoot a 2D seismic program in October 2006 over the Warawi
Prospect and other features along the eastern margin of the Calder Basin.
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. We presently plan to shoot 300 km(2) of 3D seismic
survey, and a 700 line km 2D seismic survey, the Crocodile 2D 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
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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
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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 (An additional
accrual of $60,000 was made this quarter representing a pro-rata amount of this
compensation. The total year-to-date amount accrued is $110,000). 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.
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Funding
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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 farmout or partial sale of the Company's interests, the former 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 June 30, 2006.
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.
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Part 11. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Since the period of this report we filed a Form 8-K/A showing the financial
information required by SEC regulations and we filed a Form 8K announcing the
granting of exploration permits NT/P71 and NT/P72.
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
August 18, 2006
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