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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Deep Well Oil and Gas (CE) | USOTC:DWOG | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.000001 | 0.00 | 01:00:00 |
(Mark One)
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þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
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Or
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o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-24012
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Nevada
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98-0501168
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Suite 700, 10150 - 100 Street, Edmonton, Alberta, Canada
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T5J 0P6
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(Address of principal executive offices)
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(Zip Code)
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TABLE OF CONTENTS
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Page Number
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|||
PART I – FINANCIAL INFORMATION
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ITEM 1.
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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||
Condensed Consolidated Balance Sheets
|
3
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||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
|
4
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||
Condensed Consolidated Statements of Cash Flows
|
5
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||
Notes to the Condensed Consolidated Financial Statements
|
6
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||
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
19
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|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
25
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|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
25
|
PART II – OTHER INFORMATION
|
||
ITEM 1.
|
LEGAL PROCEEDINGS
|
26
|
ITEM 1A.
|
RISK FACTORS
|
26
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
26
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
26
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
26
|
ITEM 5.
|
OTHER INFORMATION
|
26
|
ITEM 6.
|
EXHIBITS
|
26
|
SIGNATURES
|
27
|
June 30,
|
September 30,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 2,534,059 | $ | 7,633,009 | ||||
Accounts receivable net of allowance of $nil (September 30, 2013 - $17,408)
|
527,030 | 55,216 | ||||||
Prepaid expenses
|
328,230 | 82,700 | ||||||
Total Current Assets
|
3,389,319 | 7,770,925 | ||||||
Long term investments
(Note 8)
|
427,208 | 343,565 | ||||||
Oil and gas properties, net
(Notes 3 and 4)
|
19,575,219 | 15,921,770 | ||||||
Property and equipment, net of depreciation
(Note 7)
|
276,156 | 330,108 | ||||||
TOTAL ASSETS
|
$ | 23,667,902 | $ | 24,366,368 | ||||
LIABILITIES
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$ | 409,950 | $ | 268,258 | ||||
Accounts payable – related parties (Note 9)
|
– | 18,144 | ||||||
Loan payable – related parties (Note 9)
|
– | 189,500 | ||||||
Total Current Liabilities
|
409,950 | 475,902 | ||||||
Asset retirement obligations
(Note 10)
|
485,512 | 446,155 | ||||||
TOTAL LIABILITIES
|
895,462 | 922,057 | ||||||
SHAREHOLDERS’ EQUITY
|
||||||||
Common Stock:
(Note 11)
|
||||||||
Authorized: 600,000,000 shares at $0.001 par value
|
||||||||
Issued and outstanding: 229,326,987 shares
|
||||||||
(September 30, 2013 – 229,326,987 shares)
|
229,326 | 229,326 | ||||||
Additional paid in capital
|
40,192,571 | 39,953,091 | ||||||
Deficit accumulated during exploration stage
|
(17,649,457 | ) | (16,738,106 | ) | ||||
Total Shareholders’ Equity
|
22,772,440 | 23,444,311 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 23,667,902 | $ | 24,366,368 |
September 10, 2003 | ||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
Nine Months Ended
|
Nine Months Ended |
(Inception) to
June 30,
|
||||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013 | 2014 | ||||||||||||||||
Revenue
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
||||||||||
Expenses
|
||||||||||||||||||||
General and administrative
|
55,031
|
270,885
|
862,245
|
694,875
|
15,713,536
|
|||||||||||||||
Cost related to Farmout
|
–
|
–
|
–
|
–
|
1,790,684
|
|||||||||||||||
Depreciation and accretion
|
25,790
|
28,324
|
74,315
|
84,423
|
857,079
|
|||||||||||||||
Net loss from operations
|
(80,821
|
)
|
(299,209
|
)
|
(936,560
|
)
|
(779,298
|
)
|
(18,361,299
|
)
|
||||||||||
Other income and expenses
|
||||||||||||||||||||
Rental and other income
|
4,347
|
3,352
|
15,813
|
271,279
|
363,222
|
|||||||||||||||
Interest income
|
2,091
|
770
|
9,009
|
2,116
|
244,767
|
|||||||||||||||
Interest expense
|
–
|
–
|
–
|
–
|
(208,580
|
)
|
||||||||||||||
Forgiveness of loan payable
|
–
|
–
|
–
|
–
|
287,406
|
|||||||||||||||
Settlement of debt
|
–
|
–
|
–
|
–
|
24,866
|
|||||||||||||||
Loss on disposal of assets
|
387
|
–
|
387
|
–
|
161
|
|||||||||||||||
Net loss and comprehensive loss
|
$
|
(73,996
|
)
|
$
|
(295,087
|
)
|
$
|
(911,351
|
)
|
$
|
(505,903
|
)
|
$
|
(17,649,457
|
)
|
|||||
Net loss per common share
|
||||||||||||||||||||
Basic and Diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||||||||
Weighted Average Outstanding
|
||||||||||||||||||||
Shares (in thousands)
|
||||||||||||||||||||
Basic and Diluted
|
229,326
|
179,699
|
229,326
|
171,311
|
Nine Months
|
Nine Months
|
September 10, 2003
|
||||||||||
Ended
|
Ended
|
(Inception) to
|
||||||||||
June 30,
|
June 30,
|
June 30,
|
||||||||||
2014
|
2013
|
2014
|
||||||||||
Cash Provided by (Used in):
|
||||||||||||
Operating Activities
|
||||||||||||
Net income (loss)
|
$
|
(911,351
|
)
|
$
|
(505,903
|
)
|
$
|
(17,649,457
|
)
|
|||
Items not affecting cash:
|
||||||||||||
Share based compensation
|
239,480
|
102,036
|
1,690,666
|
|||||||||
Bad debts
|
428
|
(263,738
|
)
|
250,394
|
||||||||
Depreciation and accretion
|
74,315
|
84,423
|
857,079
|
|||||||||
Forgiveness of loan payable and accounts payable
|
234,402
|
(53,004
|
)
|
|||||||||
Settlement of lawsuit
|
447,823
|
|||||||||||
Commissions withheld from loans proceeds
|
121,000
|
|||||||||||
Loss on disposal of assets
|
(387
|
)
|
(161
|
)
|
||||||||
Net changes in non-cash working capital (Note 13)
|
(593,796
|
)
|
(19,763
|
)
|
(970,977
|
)
|
||||||
Net Cash (Used) in Operating Activities
|
(1,191,311
|
)
|
(368,543
|
)
|
(15,306,637
|
)
|
||||||
Investing Activities
|
||||||||||||
Purchase of property and equipment
|
(408
|
)
|
(904,877
|
)
|
||||||||
Investment in oil and gas properties
|
(3,635,922
|
)
|
(2,566,139
|
)
|
(14,813,166
|
)
|
||||||
Long term investments
|
(81,809
|
)
|
(49,186
|
)
|
(387,172
|
)
|
||||||
Cash from acquisition of subsidiary
|
–
|
–
|
11,141
|
|||||||||
Return of costs from Farmout Agreement
|
–
|
–
|
961,426
|
|||||||||
Net Cash (Used) in Investing Activities
|
(3,718,139
|
)
|
(2,615,325
|
)
|
(15,132,648
|
)
|
||||||
Financing Activities
|
||||||||||||
Proceeds from Loan payable
|
–
|
–
|
275,852
|
|||||||||
Payments on Loan payable – related parties
|
(189,500
|
)
|
260,000
|
(741,246
|
)
|
|||||||
Note payable repayment
|
–
|
–
|
(111,306
|
)
|
||||||||
Debenture repayment
|
–
|
–
|
(1,004,890
|
)
|
||||||||
Deposit on stock subscription
|
–
|
–
|
300,000
|
|||||||||
Proceeds from issuance of common stock
|
–
|
2,700,000
|
46,270,999
|
|||||||||
Proceeds from debenture net of commissions
|
–
|
–
|
879,000
|
|||||||||
Return of capital distribution
|
–
|
–
|
(12,895,065
|
)
|
||||||||
Net Cash Provided by (Used in) Financing Activities
|
(189,500
|
)
|
2,960,000
|
32,973,344
|
||||||||
Increase (decrease) in cash and cash equivalents
|
(5,098,950
|
)
|
(23,868
|
)
|
2,534,059
|
|||||||
Cash and cash equivalents, beginning of period
|
7,633,009
|
244,191
|
–
|
|||||||||
Cash and cash equivalents, end of period
|
$
|
2,534,059
|
220,323
|
2,534,059
|
||||||||
Supplemental Cash Flow Information:
|
||||||||||||
Cash paid for interest
|
$
|
–
|
$
|
–
|
202,159
|
Software
|
- 100
|
%
|
||
Computer equipment
|
- 55
|
%
|
||
Portable work camp
|
- 30
|
%
|
||
Vehicles
|
- 30
|
%
|
||
Road Mats
|
- 30
|
%
|
||
Wellhead
|
- 25
|
%
|
||
Office furniture and equipment
|
- 20
|
%
|
||
Oilfield Equipment
|
- 20
|
%
|
||
Tanks
|
- 10
|
%
|
2014
|
$ | 11,850 | ||
2015
|
$ | 47,398 | ||
2016
|
$ | 47,398 | ||
2017
|
$ | 47,398 | ||
2018
|
$ | 47,398 | ||
Subsequent
|
$ | 46,502 |
1)
|
drill 68 wells throughout the 68 sections; or
|
2)
|
drill 44 wells within the 68 sections and having acquired and processed 2 miles of seismic on each other undrilled section.
|
1)
|
32 sections of land under 5 oil sands leases are set to expire on July 10, 2018;
|
2)
|
31 sections of land under 3 oil sands leases are set to expire on August 19, 2019; and
|
3)
|
5 sections of land under 1 oil sands lease are set expire on April 9, 2024. It is the Company’s opinion that the Company has already met the governmental requirements for this lease and it will be applying to continue this lease into perpetuity.
|
a)
|
$2,435,124 U.S. dollars ($2,697,600 Canadian dollars) was paid to the JV Partner for the purchase and transfer of an undivided 3% interest out of the Purported 6.5% Royalty. The consideration paid was the original cost (in Canadian dollars) that the JV Partner paid to acquire its 3% interest in the Purported 6.5% Royalty.
|
b)
|
$1,007,000 U.S. dollars was paid to Mr. Malik Youyou, who is a director and majority shareholder of the Company, for the purchase and transfer of an undivided 2.5% interest out of the Purported 6.5% Royalty. The consideration paid was for the reimbursement of the original cost (in US Dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty.
|
June 30,
2014
|
September 30,
2013
|
|||||||
Unproved Oil and Gas Properties
|
$ | 19,624,144 | $ | 15,963,517 | ||||
Proved Oil and Gas Properties
|
– | – | ||||||
Accumulated Depreciation
|
(48,925 | ) | (41,747 | ) | ||||
Net Capitalized Cost
|
$ | 19,575,219 | $ | 15,921,770 |
June 30,
2014
|
September 30,
2013
|
|||||||
Acquisition of Properties:
|
||||||||
Proved
|
$ | – | $ | – | ||||
Unproved
|
3,660,626 | 2,740,967 | ||||||
Exploration costs
|
21,813 | 55,810 | ||||||
Development costs
|
– | – |
June 30, 2014
|
||||||||||||
Accumulated
|
Net Book
|
|||||||||||
Cost
|
Depreciation
|
Value
|
||||||||||
Computer equipment
|
$ | 31,492 | $ | 30,870 | $ | 622 | ||||||
Office furniture and equipment
|
33,199 | 26,177 | 7,022 | |||||||||
Software
|
5,826 | 5,826 | – | |||||||||
Leasehold improvements
|
4,936 | 4,936 | – | |||||||||
Portable work camp
|
170,580 | 143,600 | 26,980 | |||||||||
Vehicles
|
38,077 | 32,055 | 6,022 | |||||||||
Oilfield equipment
|
249,046 | 127,904 | 121,142 | |||||||||
Road mats
|
364,614 | 306,945 | 57,669 | |||||||||
Wellhead
|
3,254 | 1,953 | 1,301 | |||||||||
Tanks
|
96,085 | 40,687 | 55,398 | |||||||||
$ | 997,109 | $ | 720,953 | $ | 276,156 | |||||||
September 30, 2013
|
||||||||||||
Accumulated
|
Net Book
|
|||||||||||
Cost
|
Depreciation
|
Value
|
||||||||||
Computer equipment
|
$ | 31,084 | $ | 30,576 | $ | 508 | ||||||
Office furniture and equipment
|
33,199 | 24,938 | 8,261 | |||||||||
Software
|
5,826 | 5,826 | – | |||||||||
Leasehold improvements
|
4,936 | 4,602 | 334 | |||||||||
Portable work camp
|
170,580 | 135,767 | 34,813 | |||||||||
Vehicles
|
38,077 | 30,306 | 7,771 | |||||||||
Oilfield equipment
|
249,045 | 106,527 | 142,518 | |||||||||
Road mats
|
364,614 | 290,202 | 74,412 | |||||||||
Wellhead
|
3,254 | 1,653 | 1,601 | |||||||||
Tanks
|
96,085 | 36,196 | 59,889 | |||||||||
$ | 996,700 | $ | 666,593 | $ | 330,107 |
June 30,
2014
|
September 30,
2013
|
|||||||
Balance, beginning of period
|
$ | 446,155 | $ | 425,700 | ||||
Liabilities incurred
|
73,395 | 23,400 | ||||||
Effect of foreign exchange
|
(42,769 | ) | (19,299 | ) | ||||
Disposal
|
(4,045 | ) | – | |||||
Accretion expense
|
12,776 | 16,354 | ||||||
Balance, end of period
|
$ | 485,512 | $ | 446,155 |
Shares Underlying
Warrants Outstanding
|
Shares Underlying
Warrants Exercisable
|
|||||||||||||||||||
Range of Exercise Price
|
Shares Underlying Warrants Outstanding
|
Weighted Average Remaining Contractual Life
|
Weighted Average Exercise Price
|
Shares Underlying Warrants Exercisable
|
Weighted Average Exercise Price
|
|||||||||||||||
$0.105 at June 30, 2014
|
71,904,759 | 1.40 | 0.105 | 71,904,759 | 0.105 | |||||||||||||||
$0.075 at June 30, 2014
|
520,000 | 1.98 | 0.075 | 520,000 | 0.075 | |||||||||||||||
72,424,759 | 1.40 | 0.105 | 72,424,759 | 0.105 |
Number of Warrants
|
Weighted Average Exercise Price
|
Intrinsic Value
|
||||||||||
Balance, September 30, 2013
|
72,424,759 | $ | 0.105 | $ | 0.195 | |||||||
Cancelled at June 23, 2014
|
(47,618 | ) | 0.105 | 0.216 | ||||||||
Granted at June 23, 2014
|
47,618 | 0.105 | 0.216 | |||||||||
Exercised
|
– | – | – | |||||||||
Balance, June 30, 2014
|
72,424,759 | $ | 0.105 | $ | 0.216 | |||||||
Outstanding Warrants, June 30, 2014
|
72,424,759 | $ | 0.105 | $ | 0.216 |
Shares Underlying
Options Outstanding
|
Shares Underlying
Options Exercisable
|
|||||||||||||||||||
Range of Exercise Prices
|
Shares Underlying Options Outstanding
|
Weighted Average Remaining Contractual Life
|
Weighted Average Exercise Price
|
Shares Underlying Options Exercisable
|
Weighted Average Exercise Price
|
|||||||||||||||
$0.14 at June 30, 2014
|
900,000 | 1.73 | $ | 0.14 | 900,000 | $ | 0.14 | |||||||||||||
$0.05 at June 30, 2014
|
3,450,000 | 3.98 | 0.05 | 2,500,000 | 0.05 | |||||||||||||||
$0.30 at June 30, 2014
|
250,000 | 4.33 | 0.30 | 250,000 | 0.30 | |||||||||||||||
$0.34 at June 30, 2014
|
450,000 | 4.43 | 0.34 | 150,000 | 0.34 | |||||||||||||||
5,050,000 | 3.63 | $ | 0.10 | 3,800,000 | $ | 0.10 |
Number of Underlying Shares
|
Weighted Average Exercise Price
|
Weighted Average Fair Market Value
|
||||||||||
Balance, September 30, 2013
|
4,350,000 | $ | 0.07 | $ | 0.06 | |||||||
Balance, June 30, 2014
|
5,050,000 | $ | 0.10 | $ | 0.09 | |||||||
Exercisable, June 30, 2014
|
3,800,000 | $ | 0.10 | $ | 0.09 |
June 30, 2014
|
September 30, 2013
|
|||||||||||||||
Shares
|
Weighted Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
|||||||||||||
Outstanding balance at beginning of period
|
900,000 | $ | 0.14 | 1,800,000 | $ | 0.14 | ||||||||||
Vested at March 23, 2013
|
3,450,000 | 0.05 | 900,000 | 0.14 | ||||||||||||
Granted at June 20, 2013
|
– | – | 4,850,000 | 0.05 | ||||||||||||
Vested at June 20, 2013
|
– | – | 1,950,000 | 0.05 | ||||||||||||
Exercised August 12 – 15, 2013
|
– | – | 1,800,000 | 0.14 | ||||||||||||
Exercised August 12 – 15, 2013
|
– | – | 1,400,000 | 0.05 | ||||||||||||
Granted at October 28, 2013
|
250,000 | 0.30 | – | – | ||||||||||||
Granted at December 4, 2013
|
450,000 | 0.34 | – | – | ||||||||||||
Vested at June 20, 2014
|
1,950,000 | 0.05 | ||||||||||||||
Outstanding at end of period
|
5,050,000 | $ | 0.10 | 4,350,000 | $ | 0.07 | ||||||||||
Exercisable
|
3,800,000 | 0.10 | 1,450,000 | 0.11 |
Nine Months Ended
|
Nine Months Ended
|
|||||||
June 30, 2014
|
June 30, 2013
|
|||||||
Accounts receivable
|
$ | (471,814 | ) | 144,315 | ||||
Prepaid expenses
|
123,548 | 473 | ||||||
Accounts payable
|
(245,530 | ) | (164,551 | ) | ||||
$ | (593,796 | ) | (19,763 | ) |
1)
|
Portwest Investments Ltd. (“Portwest”), a company owned 100% by Dr. Horst A. Schmid (the “Consultant”), for providing services to the Company as Chief Executive Officer and President for Cdn $12,500 per month. On July 1, 2005, the Company entered into a consulting agreement (the “Prior Agreement”) with Portwest, as filed with the Company’s annual report on Form 10-KSB filed on February 23, 2007, and incorporated by reference herein. On July 10, 2013, the Company and Portwest agreed to amend (the “Amending Agreement”) the Prior Agreement whereby the following was settled and amended:
|
i.
|
Effective date of the Amending Agreement will be June 20, 2013;
|
ii.
|
Term of Agreement will be until December 31, 2014;
|
iii.
|
The Consultant shall continue to provide services as Chief Executive Officer and President of the Company until the termination of the Agreement;
|
iv.
|
The fees payable to the Consultant in the Prior Agreement will be terminated and the Company will grant the Consultant 5-year options on 1,000,000 of its common shares exercisable at $0.05 per share, which was the market price at the time. One half of these shares were vested immediately and the remaining one half were vested on June 20, 2014;
|
v.
|
The Consultant received:
|
a.
|
Cdn $70,000, and
|
b.
|
850,000 units of the Company’s shares and warrants at a price of $0.05 per unit, which was the market price at the time. Each unit shall be comprised of one restricted Company common share and one 3 year full warrant entitling Portwest to be able to purchase another share for $0.075. The warrants expire on June 20, 2016.
|
2)
|
Concorde Consulting, a company owned 100% by Mr. Curtis J. Sparrow, for providing services as Chief Financial Officer to the Company for Cdn $15,000 per month. As of June 30, 2014, the Company did not owe Concorde Consulting any of this amount.
|
2014 Q4 (July - September)
|
9,031 | |||
2015 Q1 (October - December)
|
9,031 | |||
2015 Q2 (January - March)
|
9,031 | |||
2015 Q3 (April - June)
|
9,031 |
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
September 10,
|
||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
2003 to
|
||||||||||||||||
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
June 30, 2013
|
June 30, 2014
|
||||||||||||||||
Revenue
|
$ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Expenses
|
||||||||||||||||||||
General and administrative
|
55,031 | 270,885 | 862,245 | 694,875 | 15,713,536 | |||||||||||||||
Cost related to Farmout
|
– | – | – | – | 1,790,684 | |||||||||||||||
Depreciation and accretion
|
25,790 | 28,324 | 74,315 | 84,423 | 857,079 | |||||||||||||||
Net loss from operations
|
(80,821 | ) | (299,209 | ) | (936,560 | ) | (779,298 | ) | (18,361,299 | ) | ||||||||||
Other income and expenses
|
||||||||||||||||||||
Rental and other income
|
4,347 | 3,352 | 15,813 | 271,279 | 363,222 | |||||||||||||||
Interest income
|
2,091 | 770 | 9,009 | 2,116 | 244,767 | |||||||||||||||
Interest expense
|
– | – | – | – | (208,580 | ) | ||||||||||||||
Forgiveness of loan payable
|
– | – | – | – | 287,406 | |||||||||||||||
Settlement of debt
|
– | – | – | – | 24,866 | |||||||||||||||
Loss on disposal of assets
|
387 | – | 387 | – | 161 | |||||||||||||||
Net loss and comprehensive loss
|
$ | (73,996 | ) | $ | (295,087 | ) | $ | (911,351 | ) | $ | (505,903 | ) | $ | (17,649,457 | ) |
Operations
As previously disclosed by us, on July 31, 2013 we entered into a Farmout Agreement with our new joint venture partner, MP West Canada SAS (the “Farmee”), to fund our share of the recently AER approved Steam Assisted Gravity Drainage Demonstration Project (the “SAGD Project”) we entered into on July 30, 2013. The SAGD Project is located on our joint Sawn Lake properties in the Peace River oil sands region of Alberta. In accordance with the Farmout Agreement, the Farmee has agreed to provide up to $40,000,000 in funding for our portion of the costs for the SAGD Project, in return for a net 25% working interest in 12 sections where we have a working interest of 50% (before the Farmout Agreement). Also, the Farmee is required to provide funding to cover our monthly operating expenses not to exceed $30,000 per month. In addition, the Farmee has the option to elect to obtain a working interest ranging from 40% to 45% in the remaining 56 sections of land where we have working interests ranging from 80% to
90%, by committing an additional $110,000,000 of financing for the development of our Sawn Lake oil sands project. In addition to and as contemplated by the Farmout Agreement, on July 31, 2013, we completed a private placement financing with the Farmee, for aggregate gross proceeds of $22,000,000, in connection with which we sold 45,111,778 common shares at a price of $0.488 per common share. Our total share of the material costs and initial operating expenses of the SAGD Project will be funded in accordance with this Farmout Agreement, at a net cost to us of $Nil. The Farmee has paid Cdn $14,961,661 to the operator of the SAGD Project for the Farmee’s share and our share of the costs incurred as of June 30, 2014. These costs included the drilling of the SAGD well pair; the purchase and transportation of equipment; installation and construction of the steam plant facility; testing and commissioning; monthly operating expenses since first steaming of the wells; and the October 9, 2013, purchase of the water source and disposal wells and expenditures to connect these water wells to the steam plant facility.
|
SAGD Steam Plant Facility May 2014 – Startup of first steam.
|
Installation of the water treatment plant at our joint SAGD Project.
|
On October 9, 2013, and in connection with the SAGD Project agreement dated July 30, 2013, we entered into a Water Rights Conveyance Agreement whereby we acquired a 25% working interest in one water source well and one water disposal well for a cost of Cdn $384,046, which in turn was reimbursed to us by the Farmee. As required by the Farmout Agreement, the Farmee has also paid Cdn $1,058,568 to the operator of the SAGD Project for the Farmee’s share and our share of the expenditures relating to the water source well, water disposal well and pipelines to connect them to the SAGD Project steam plant facility.
Since entering into a Farmout Agreement and SAGD Project agreement with our joint venture partners we can report that the first SAGD well pair is currently steaming to establish communication between the injector well and the producer well. These horizontal wells were drilled to a vertical depth of approximately 650 meters and have horizontal legs of 780 meters. Steam will circulate for up to three months with production from the Bluesky oil sands reservoir to follow. After the Phase 1 production tests and depending on the results using SAGD technology, the operator of the SAGD Project will proceed with Phase 2. On June 27, 2014, we paid a Cdn $300,000 cash call to the operator for the proposed Phase 2 front end costs for the SAGD Project. The Phase 2 front end costs include work on preliminary engineering design, regulatory approval, environmental approval work and determining regulatory requirements sufficient to define the work program, schedule and estimated cost of the this second phase which is anticipated to include the drilling of two additional SAGD well pairs and the associated expansion of the current SAGD Project steam plant facility. The Farmee has since reimbursed us in the amount of Cdn $300,000 as per the Farmout Agreement dated July 31, 2013.
|
a)
|
$2,435,124 U.S. dollars ($2,697,600 Canadian dollars) was paid to our JV Partner for the purchase and transfer of an undivided 3% interest out of the Purported 6.5% Royalty. The consideration paid was the original cost (in Canadian dollars) that our JV Partner paid to acquire its 3% interest in the Purported 6.5% Royalty.
|
b)
|
$1,007,000 U.S. dollars was paid to Mr. Malik Youyou, who is a director and majority shareholder of our Company, for the purchase and transfer of an undivided 2.5% interest out of the Purported 6.5% Royalty. The consideration paid was for the reimbursement of the original cost (in US Dollars) that Mr. Youyou paid to acquire this 2.5% interest in the Purported 6.5% Royalty.
|
Nine Months
Ended
|
Year Ended | |||||||
June 30,
2014
|
September 30,
2013
|
|||||||
Current Assets
|
$ | 3,389,319 | $ | 7,770,925 | ||||
Current Liabilities
|
409,950 | 475,902 | ||||||
Working Capital
|
$ | 2,979,369 | $ | 7,295,023 |
·
|
our current business strategy;
|
·
|
our future financial position and projected costs;
|
·
|
our projected sources and uses of cash;
|
·
|
our plan for future development and operations, including the building of all-weather roads;
|
·
|
our drilling and testing plans;
|
·
|
our proposed thermal recovery projects;
|
·
|
the sufficiency of our capital in order to execute our business plan;
|
·
|
our resource estimates;
|
·
|
the timing and sources of our future funding.
|
·
|
the quantity of our reserves;
|
·
|
the value of our reserves;
|
·
|
the intent to issue a distribution to our shareholders.
|
·
|
our plans for development of our Sawn Lake properties;
|
·
|
funding from the Farmee to pay our costs for the joint SAGD project in connection to the Farmout Agreement;
|
·
|
additional sources of funding from the Farmout Agreement;
|
·
|
funding from the Farmee to cover our monthly operating expenses;
|
·
|
future production of our properties; and
|
·
|
expectations regarding the ability of our Company and its subsidiaries to raise capital and to continually add to reserves through acquisitions and development;
|
·
|
changes in general business or economic conditions;
|
·
|
changes in legislation or regulation that affect our business;
|
·
|
our ability to obtain necessary regulatory approvals and permits;
|
·
|
our ability to receive approvals from the AER for additional tests to further evaluate the wells on our lands;
|
·
|
our ability to obtain necessary regulatory approvals and permits for the development of our properties;
|
·
|
our Farmout Agreement and joint operating agreements;
|
·
|
opposition to our regulatory requests by various third parties;
|
·
|
actions of aboriginals, environmental activists and other industrial disturbances;
|
·
|
the costs of environmental reclamation of our lands;
|
·
|
availability of labor or materials or increases in their costs;
|
·
|
the availability of sufficient capital to finance our business plans on terms satisfactory to us;
|
·
|
adverse weather conditions and natural disasters;
|
·
|
unexpected adverse weather conditions affecting access to the Company’s properties;
|
·
|
risks associated with increased insurance costs or unavailability of adequate coverage;
|
·
|
volatility in market prices for crude oil, natural gas, and natural gas liquids;
|
·
|
competition;
|
·
|
changes in labor, equipment and capital costs;
|
·
|
future acquisitions or strategic partnerships;
|
·
|
the risks and costs inherent in litigation;
|
·
|
imprecision in estimates of reserves, resources and recoverable quantities of oil and natural gas;
|
·
|
product supply and demand;
|
·
|
imprecision in estimates of reserves and recoverable quantities of bitumen, oil and natural gas;
|
·
|
future appraisal of potential bitumen, oil and gas properties may involve unprofitable efforts;
|
·
|
the ability to meet minimum level of requirements to continue our oil sands leases;
|
·
|
changes in general business or economic conditions;
|
·
|
risks associated with the finding, determination, evaluation, assessment and measurement of bitumen, oil and gas deposits or reserves;
|
·
|
geological, technical, drilling and processing problems;
|
·
|
third party performance of obligations under contractual arrangements;
|
·
|
failure to obtain industry partner and other third party consents and approvals, when required;
|
·
|
treatment under governmental regulatory regimes and tax laws;
|
·
|
royalties payable in respect of bitumen, oil and gas production;
|
·
|
unanticipated operating events which can reduce production or cause production to be shut-in or delayed;
|
·
|
incorrect assessments of the value of acquisitions, and exploration and development programs;
|
·
|
changes in government regulatory regimes and tax laws;
|
·
|
stock market volatility and market valuation of the common shares of the Company;
|
·
|
fluctuations in currency and interest rates; and
|
·
|
the additional risks and uncertainties, many of which are beyond our control, referred to elsewhere in this quarterly report on Form 10-Q and in our other SEC filings.
|
Exhibit No.
|
Description
|
|
31.1
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
|
|
32.1
|
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
|
101
|
Interactive Data Files
|
DEEP WELL OIL & GAS, INC.
|
||
By
|
/s/ Horst A. Schmid
|
|
Dr. Horst A. Schmid
|
||
Chief Executive Officer and President
|
||
(Principal Executive Officer)
|
||
Date
|
August 14, 2014
|
|
By
|
/s/ C.J. Sparrow
|
|
Mr. Curtis James Sparrow
|
||
Chief Financial Officer
|
||
(Principal Financial and Accounting Officer)
|
||
Date
|
August 14, 2014
|
|
1 Year Deep Well Oil and Gas (CE) Chart |
1 Month Deep Well Oil and Gas (CE) Chart |
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