Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________to___________ .
Commission File No. 0-29832
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
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(Exact Name of Registrant as Specified in its Charter)
British Columbia, Canada 75-2712845
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification #)
1301 Avenue M, Cisco, TX 76437
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(Address of Principal Executive Offices) (Zip Code)
(254) 442-2638
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Registrant's Telephone Number Including Area Code
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 preceding 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 large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company.
( ) Large accelerated filer ( ) Accelerated filer
( ) Non-accelerated filer ( X ) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes ____ No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 20,905,269 shares of common stock, No Par Value,
outstanding as of July 28, 2010
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
BALANCE SHEETS
June 30, December 31,
2011 2010
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(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash $ 24,908 $ 2,345
Accounts receivable 26,187 28,992
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Total Current Assets 51,095 31,337
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PROPERTY AND EQUIPMENT
Oil and gas properties-being amortized 582,792 582,792
Oil and gas properties-not being amortized 565,077 565,077
Office equipment and software 24,783 24,783
Accumulated depreciation and depletion (239,325) (216,771)
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Net Property and Equipment 933,327 955,881
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OTHER ASSETS 1,084 1,084
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TOTAL ASSETS $ 985,506 $ 988,302
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 896 $ 11,243
Account payable - related party 48,542 39,216
Accrued expenses 170,730 115,486
Loans from stockholders 26,266 26,266
Loans from officers 25,000 25,000
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Total Current Liabilities 271,434 217,211
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STOCKHOLDERS' EQUITY
Preferred stock no par value (50,000,000 shares authorized
none outstanding) -- --
Common stock, no par (50,000,000 shares authorized
20,905,269 and 20,048,284 shares in 2011 and 2010
issued and outstanding) 3,846,099 3,745,099
Additional paid in capital 175,152 173,552
Accumulated deficit (3,307,179) (3,147,560)
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Total Stockholders' Equity 714,072 771,091
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 985,506 $ 988,302
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See accompanying notes to financial statements.
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AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 2011 and 2010
(Unaudited)
Three Months Six Months
2011 2010 2011 2010
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OIL AND GAS REVENUES $ 14,171 $ (2,906) $ 47,271 $ 13,784
COST OF SALES
Production taxes 33 -- 71 19
Transportation costs 3,110 1,263 8,138 1,263
Depletion 11,184 3,695 22,368 7,391
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GROSS PROFIT/LOSS (156) (7,864) 16,694 5,111
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OPERATING EXPENSES
Personnel costs 33,941 5,313 65,992 16,969
Professional fees 28,081 6,412 37,995 37,597
Promotion and advertising 5,287 1,647 11,012 6,245
Office expenses 1,421 558 2,709 2,052
Depreciation 93 (345) 185 185
Directors' fees and other 48,094 431 48,171 951
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Total Operating Expenses 116,917 14,016 166,064 63,999
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OPERATING LOSS (117,073) (21,880) (149,370) (58,888)
OTHER INCOME/(EXPENSE)
Interest expense (1,176) (289) (2,339) (754)
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NET LOSS BEFORE INCOME TAXES (118,249) (22,169) (151,709) (59,642)
Australian income taxes (399) 1,717 (7,910) (2,975)
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NET LOSS $ (118,648) $ (20,452) $ (159,619) $ (62,617)
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BASIC (LOSS) PER COMMON SHARE $ (0.01) $ (0.00) $ (0.01) $ (0.00)
============= ============ ============ ============
Weighted Average Number of Common
Shares Outstanding:
Basic 20,380,388 19,587,745 20,238,058 19,556,255
============= ============ ============ ============
See accompanying notes to financial statements.
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AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)
2011 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (159,619) $ (62,617)
Adjustments to reconcile net (loss) to net cash
provided by operations:
Depreciation, depletion and amortization 22,553 7,576
Value of expenses contributed by officers 1,600 1,600
Stock issued for services 25,000 --
Stock issued for officers and directors 26,000 --
Changes in:
Receivables 2,805 4,240
Accounts payable and accrued expenses 54,224 22,738
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NET CASH (USED) BY OPERATING ACTIVITIES (27,437) (26,463)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 50,000 25,000
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NET CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES 50,000 25,000
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NET INCREASE (DECREASE) IN CASH 22,563 (1,463)
Cash, Beginning of Period 2,345 6,262
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Cash, End of Period $ 24,908 $ 4,799
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SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest $ -- $ --
Australian income taxes $ 7,910 $ 2,975
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See accompanying notes to financial statements.
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AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions of Regulation S-B. They do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information included in the Company's Report on Form 10-K
for the year ended December 31, 2010. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six-month period
ended June 30, 2011, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2011.
NOTE 2: GOING CONCERN CONSIDERATIONS
The Company neither has sufficient cash on hand nor is it generating sufficient
revenues to cover its operating overhead. These facts raise doubt as to the
Company's ability to continue as a going concern. The Company has been operating
over the past year based on loans/stock purchases from its officers/directors.
There is no guarantee that such officers/directors will continue to provide
operating funds for the Company. In order to pursue its goals and commitments
under the Australian concession prospects that it has obtained, the Company will
be required to obtain significant funding or to exchange all or portions of its
interests in those concessions to meet the minimum expenditure requirements
underlying the concessions. Management's plans include attempting to find a
drilling company to farm out the working interests under the concessions,
raising funds from the public through a stock offering, and attempting to
acquire additional producing interests in exchange for stock. Management intends
to make every effort to identify and develop sources of funds. There is no
assurance that Management's plans will be successful.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
Any statements that are contained in this Form 10-Q that are not statements of
historical fact are forward-looking statements. Readers can identify these
statements by words such as 'may,' 'will,' 'expect,' 'anticipate,' 'estimate,'
'continue' or other similar words. These statements discuss future expectations,
contain projections of results of operations or financial condition or state
other forward-looking information and are based on certain assumptions and
analyses made by the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including such
factors as uncertainties in cash flow, expected costs of litigation, the outcome
of litigation, the potential impact of government regulations and rulings,
fluctuations in the economic environment and other such matters, many of which
are beyond the control of the Company. Readers are cautioned that
forward-looking statements are not guarantees of future performance and that
actual results or developments may differ materially from those expressed or
implied in the forward-looking statements.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto as of December 31, 2010 and
June 30, 2011 for the respective periods then ended.
GENERAL DISCUSSION:
The Company's strategy is two fold: 1) to seek overriding royalty interests in
oil and gas concessions within sedimentary basins in Australia, and 2) to seek
working interests in oil and gas concessions within sedimentary basins of
Australia to promote oil and gas exploration through seismic programs and
drilling operations.
The Company's ability to explore other oil and gas opportunities is dependent on
adequate capital resources being available and equity being obtained, and/or
finding partners to fund the exploration and drilling programs on the areas in
which the Company holds working interests.
The Company holds overriding royalty interests in the Cooper/Eromanga Basins
that cover parts of Queensland and South Australia. The Company's overriding
royalties total 488,040 net royalty acres under 13,679,838 gross surface acres
in thirteen concessions located in the Cooper/Eromanga Basins. In addition, the
Company also owns 3,113 net royalty acres under 672,040 gross acres in four
concessions located in the Bass Strait of the Gippsland Basin, located offshore
of the State of Victoria, Australia. The Company also has working interests
under 7,914,460 gross surface acres covering four concessions located in
Queensland and South Australia.
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ACOR began its movement from being primarily an oil royalty company to an
exploration company in 2000 when ACOR et al was awarded three large concessions
in South Australia. The risk of exploration was downgraded by the success rate
by new junior oil companies in the Cooper/Eromanga Basin averaging 52%. ACOR
entered into a farm-out arrangement with Holloman Energy Corp. to drill three
wells retaining a 13.8325% carried working interest. During 2008, Holloman
drilled the Pecos #1 well on PEL 112, being the first of the three well program.
The Pecos #1 was completed as a dry hole. During 2008 Holloman obtained approval
from the South Australian Government for new exploration terms giving a new
five-year work program for PEL 112 and consolidating PEL 108 & 109 to a new
exploration permit PEL 444. The Company's terms and conditions mentioned above
remain in force on these two permits. Holloman has entered into a joint venture
letter of intent with Brandenburg Energy Corp. to conduct a 125 square kilometer
3D seismic program over both PEL 112 and 444 plus drill a total of six wells.
ACOR agreed to reduce its carried working interest from 13.8325% to 8.65% in
this new exploration program to be conducted by Brandenburg Energy Corp. on PEL
112 and 444.
ACOR is the concession holder of ATP-582, located in Queensland Australia, in
the prolific Cooper/Eromanga Basin. The permit area covers approximately
6,716,000 gross acres. ATP 582 lies within the Georgina Basin, which covers most
of the central-eastern part of the Northern Territory and is considered one of
the most prospective undeveloped onshore petroleum provinces in Northern
Territory and Queensland. Although the Georgina Basin has not had a discovery
today, the Cambrian Thorntonia-Arthur Creek succession of the Georgina Basin
possess all of the required elements necessary for petroleum generation,
migration and entrapment. Of particular interest in the Georgina Basin and on
ATP 582 is the presence of the Arthur Shale, which has similar characteristics
to the Brakken Shale of Western Canada and North Dakota that has produced more
than 10 TCF of gas and 1 Billion barrels of oil.
The improvement in multi high-pressure fracing technology over the past 10 years
has made low permeable shale very economic to produce both oil and gas and has
been widely used in North America to unlock unconventional reservoirs in shale
bearing hydrocarbons. This technology has not been utilized in the Georgina
Basin; however, on the adjoining concession to the east in the Northern
Territory two horizontal wells are planned for drilling into the Arthur Creek
Shale utilizing the current high pressure multiple stage fracing on this
formation. ATP 582 is well positioned, with the northern most 1,000,000 acres of
its 6,716,000 acres known to have the presence of the Arthur Creek Shale in
place.
The adjoining concession to the west of ATP 582 operated by Baraka Petroleum
Limited plans a four well program and if successful plans to expand to a 20 well
exploration drilling program. The Company has entered into a Joint Venture
arrangement where the partner will operate the concession, pay to obtain Native
Title clearance, shoot a new seismic grid survey over the leads identified by
ACOR management from old seismic data to confirm good drillable targets, with
plans to drill a well to earn a 50% working interest under ATP 582 (ACOR will be
carried for 50% WI). During the quarter, native title was obtained on ATP582
allowing exploration to begin subject to environmental approvals and clearances.
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A 12" pipeline was constructed to the Longtom Field with the first delivery of
gas beginning on October 21, 2009. Revenues from gas sales for the Company began
in 2010. During 2010, the Longtom Field was shut in due to mercury levels
exceeding gas plant standards. A processing plant was installed to remove the
excess mercury and production from the Longtom Field resumed during the fourth
quarter of 2010 (November 2010). Revenues from gas sales for the Company's 5% of
1% override are expected to be received during the second half of 2011. It was
reported that gas sales for the months of May and June 2011 were at record
levels with over 3,300,000 MCF produced each month. Offshore works to enhance
the reliability of the offshore production system is planned for the second half
of 2011, depending on vessel availability. Planning for the drilling of the
Longtom South Prospect, located approximately 3.5 kilometers south of the field
infrastructure, is also planned during the second half of 2011, subject to rig
availability.
ATP 560 covers 625,600 acres under which the Company holds a 25% of 1% override.
The Utopia Oil Field is situated in ATP 560P in the Eromanga Basin in southwest
Queensland, approximately 150 km north east of the Jackson Oilfield and 50 km
south of the Kenmore Oilfield. The Utopia Field is a broad low-relief structure,
with a maximum relief of approximately 10 m. The field produces from the Early
Cretaceous Murta Formation and is the largest known Murta pool in the Queensland
Eromanga Basin. The oil pool is at an approximate depth of 1020 m. The most
recent technical review of Utopia, undertaken in June 2004, determined the field
could contain up to 2.86 million barrels of recoverable oil.
During the current quarter Utopia-11H, a horizontal development well, was
drilled and completed as a Murta oil producer after a 176.5-meter horizontal
drain hole was successfully drilled. The operator reports excellent oil shows in
very good quality reservoir sand continued to be encountered while drilling the
horizontal leg. The Utopia-11H well is expected to be placed into production
during the third quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically addressed its long-term liquidity needs for the oil
and gas exploration and development for its Australian working interests through
the use of farm-out agreements. The Company sells a portion of its ownership
interest in the concession to an outside party who is then responsible for the
exploration activities i.e. seismic, drilling etc. This is the strategy that
management is following in order to meet the expenditure requirements on the
Australian concessions.
In addition, the Company may also satisfy its future capital requirements by
selling its common stock. Should the Company become unable to reach satisfactory
farm-out arrangements or obtain financing from the sale of its securities or
some other source, the Company may not be able to achieve some of its future
goals.
The principal assets of ACOR are oil and gas properties (both those being
amortized and those not being amortized) reported at $1,147,869 on June 30, 2011
with no changes since December 30, 2010. The nominal decrease in assets from
December 31, 2010 to June 30, 2011 is related to the increase in accumulated
depreciation of property and equipment.
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The Total Current Assets increased from December 31, 2010 to June 30, 2011 from
$31,337 to $51,095. The Company's Total Current Assets as of June 30, 2010, was
$9,709 with Total Current Liabilities of 146,755, giving a liquidity ratio of
.066 to 1. The Company's Total Current Assets as of June 30, 2011, was $51,095
with Total Current Liabilities of 271,434, giving a liquidity ratio of .188 to
1. The Company's cash position was $24,908 on June 30, 2011 compared to $2,345
and $4,799 on December 31, 2010 and June 30, 2010 respectively. The fluctuations
in current assets from June 30, 2010 compared to December 31, 2010 and June 30,
2011 is directly related to the amount of cash on hand.
The Company continues to operate without any long-term debt.
Stockholders' Equity decreased when comparing June 30, 2011 to December 31, 2010
being $714,072 and $771,091 respectively, due to an increase in current
liabilities.
Management believes that its current cash balance is sufficient to fund
immediate administrative needs. However, long-term plans are expected to require
significant additional capital and there is not any assurance that the Company
will be able to obtain such funds or obtain the required capital on terms
favorable to the Company.
During the quarter ended June 30, 2011 the Company issued to an accredited
investor 555,556 restricted common shares for $50,000. Also, issued during the
quarter were 50,000 shares valued at $11,000 for consulting services, 80,000
shares issued to two directors valued at $16,000, and 71,429 restricted shares
issued to the Company's Chief Financial officer valued at $10,000. The number of
shares issued and outstanding as of June 30, 2011 was 20,905,269.
RESULTS OF OPERATIONS
Revenues of $14,171 were reported for the quarter ended June 30, 2011. Oil and
gas revenues accrued from prior periods caused the quarter ended June 30, 2010
to report a negative $2,906 due to an adjustment made during this quarter. Oil
and gas revenues reported for the six months ended June 30, 2011 was $47,271
compared to $13,784 for the six months ended June 30, 2010 reflecting the gas
sales from the Longtom Field on VicP54 located in the Bass Strait of the
Gippsland Basin of Australia. The Australian revenues were generated from
concessions ATP 267, ATP 299, ATP 560, PEL 115 and VicP54 under which the
Company hold overriding royalty interests.
Total Operating Expenses were $116,917 for the three months ended June 30, 2011
compared to $14,016 for the quarter ended June 30, 2010. The principal reason
for the increase is caused by personnel costs up from $5,313 to $33,941,
professional fees were up from $6,412 to $28,081 and Directors' fees were up
from $431 to $48,094. Personnel costs included fees paid to the Company's Chief
Financial Officer in the form of 71,429 shares of stock valued at $10,000.
Professional fees were up due to accounting and auditing fees incurred for the
preparation of the audit and first quarter financial statements. Directors each
received 40,000 shares for their services valued at $8,000 each, of which only
two directors elected to receive their shares during the quarter. The shares for
the other four directors remain outstanding.
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Total Operating Expenses were $166,064 for the six months ended June 30, 2011
compared to $63,999 for the six months ended June 30, 2010. The principal reason
for the increase is due to personnel costs and directors' fees.
The Company's three-month operating loss was $117,073 for the quarter ended June
30, 2011 compared to an operating loss of $21,880 for the same period in 2010.
As stated above, the increase in personnel costs, professional fees and
directors' fees caused operating losses to increase. The Company's interest
expense for the three-months ended June 30, 2011 was $1,176 compared to $289 for
the same period ended in 2010. The Company's interest expense for the six-months
ended June 30, 2011 was $2,339 compared to $754 for the six-months ended June
30, 2010.
The net loss for the three months ended June 30, 2011 was $118,648 compared to a
net loss of $20,452 for the quarter ended June 30, 2010. The increase in net
loss is primarily attributable to the increase in personnel costs, professional
fees and directors' fees. The net loss for the six months ended June 30, 2011
was $159,619 compared to a net loss of $62,617 for the six-months June 30, 2010.
SUBSEQUENT EVENTS
There were no significant subsequent events to report since June 30, 2011.
PLAN OF OPERATION AND FUNDING
The Company plans to seek additional oil and gas concessions in Australia on a
ground level basis and will seek partners to join in this process. The Company
has been successful in the past (2006 and 2007) to enter into farm-out
arrangements on concessions awarded to the Company and its partners. These
farm-out arrangements have allowed the Company to retain a carried interest and
in some cases receive cash consideration in addition to deferring the
exploration commitments on concessions to the buyers.
MATERIAL COMMITMENTS
The Company as of June 30, 2011 does not have any material work or exploration
commitments on its oil and gas interests in Australia as the Company has been
successful in entering into farm-out arrangements to transfer those exploration
costs to others in lieu of cash, carried working interests and/or an override.
PURCHASE OF SIGNIFICANT EQUIPMENT
The Company does not intend to purchase any significant equipment during the
year.
RELATED PARTY TRANSACTIONS
During the second quarter of 2011, the Company paid $6,441 for personnel costs
and other expenses to related parties, primarily Secretarial Services, Inc. and
Tensleep Oil & Production, Inc. In addition, the Company reimbursed Australian
Grazing & Pastoral Co., Pty. Ltd. for professional fees. Robert Kamon, the
Company's Secretary, controls these entities.
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OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2011, the Company had no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a small reporting company as defined by Rule 12b-2 of the Securities
Exchange Act of 1934 and are not required to provide the information under this
item.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules, regulations and related forms, and that
such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
As of June 30, 2011, we carried out an evaluation, under the supervision and
with the participation of our principal executive officer and our principal
financial officer of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this report.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting
during the quarter ended June 30, 2011 that have materially affected or are
reasonably likely to materially affect our internal controls.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 31.1 -- Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 -- Certification of President and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 -- Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Australian-Canadian Oil Royalties Ltd.
Date: August 5, 2011 /s/ MAHNAZ NOURMAND
---------------------
By: Mahnaz Nourmand,
Principal Financial Officer
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