MAGELLAN PETROLEUM CORP /DE/ - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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 NUMBER 1-5507
MAGELLAN PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 06-0842255
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10 COLUMBUS BOULEVARD, HARTFORD, CT 06106
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(860) 293-2006

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant at the $1.31 closing price on December 31,
2003 (the last business day of the most recently completed second quarter) was
$33,453,370.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

Common stock, par value $.01 per share, 25,784,983 shares outstanding as of
October 4, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement related to the Annual Meeting of
Stockholders for the fiscal year ended June 30, 2004, are incorporated by
reference in Part III of this Form 10-K to the extent stated herein.

TABLE OF CONTENTS

Unless otherwise indicated, all dollar figures set forth herein are in United
States currency. Amounts expressed in Australian currency are indicated as
"A.$00". The exchange rate at October 8, 2004 was approximately A.$1.00 equaled
U.S.$.74.

1

PART I

ITEM 1. BUSINESS

Magellan Petroleum Corporation (the Company or MPC) is engaged in the sale
of oil and gas and the exploration for and development of oil and gas reserves.
At June 30, 2004, MPC's principal asset was a 55.06% equity interest in its
subsidiary, Magellan Petroleum Australia Limited (MPAL), which has one class of
stock that is publicly held and traded in Australia.

MPAL's major assets are two petroleum production leases covering the
Mereenie oil and gas field (35% working interest) and one petroleum production
lease covering the Palm Valley gas field (52% working interest). Both fields are
located in the Amadeus Basin in the Northern Territory of Australia. Santos
Ltd., a publicly owned Australian company, owns a 48% interest in the Palm
Valley field and a 65% interest in the Mereenie field. Santos Ltd owned 18.2% of
MPAL's outstanding stock at June 30, 2003. It sold all of its interest during
2004. Origin Energy Limited, a publicly owned Australian company, owned 17.1% of
MPAL's outstanding stock at June 30, 2003. On July 10, 2003, a subsidiary of
Origin Energy, Sagasco Amadeus Pty. Limited, agreed to exchange 1.2 million
shares of MPAL for 1.3 million shares of the Company's common stock. After the
exchange was completed on September 2, 2003, MPC's interest in MPAL increased to
55% and Origin Energy's interest decreased to 14.5%.

During July 2004, MPAL reached an agreement with Voyager Energy Limited for
the purchase of its 40.936% working interest (38.703% net revenue interest) in
its Nockatunga assets in southwest Queensland. The assets comprise several
producing oil fields in Petroleum Leases 33, 50 and 51 together with exploration
acreage in ATP 267P at a purchase price of approximately $1.4 million. The
project is currently producing about 285 barrels of oil per day (MPAL share 115
bbls).

MPC has a direct 2.67% carried interest in the Kotaneelee gas field in the
Yukon Territory of Canada. During September 2003, the litigants in the
Kotaneelee litigation entered into a settlement agreement. During October 2003,
the Company received approximately $851,000, after Canadian withholding taxes
and reimbursement of certain past legal costs. The plaintiffs terminated all
litigation against the defendants related to the field, including the claim that
the defendants failed to fully develop the field. Since each party agreed to
bear its own legal costs, there were no taxable costs assessed against any of
the parties. See Item 3 -- Legal Proceedings.

The following chart illustrates the various relationships between MPC and
the various companies discussed above.

The following is a tabular presentation of the omitted material:

MPC -- MPAL RELATIONSHIPS CHART
MPC owns 55% of MPAL.
MPC owns 2.67% of the Kotaneelee Field, Canada.
MPAL owns 52% of the Palm Valley Field, Australia.
MPAL owns 35% of the Mereenie Field, Australia.
MPAL owns 40.94% of the Nockatunga Field, Australia.
Origin Energy Limited owns 14.5% of MPAL.
SANTOS owns 48% of the Palm Valley Field, Australia.
SANTOS owns 65% of the Mereenie Field, Australia.
SANTOS owns 59.06% of the Nockatunga Field, Australia.

(a) General Development of Business.

Operational Developments Since the Beginning of the Last Fiscal Year.

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AUSTRALIA

MEREENIE

MPAL (35%) and Santos (65%), the operator, (together known as the Mereenie
Producers) own the Mereenie field which is located in the Amadeus Basin of the
Northern Territory. MPAL's share of the Mereenie field proved developed oil
reserves was approximately 249,000 barrels and 8.2 billion cubic feet (bcf) of
gas at June 30, 2004. The Mereenie Producers installed during fiscal 2004
additional compression equipment in the field at an estimated cost of $13.1
million (MPAL share $4.6 million) that will increase field deliverability and
partially meet certain gas contract requirements. In addition, two gas wells
will be drilled later in 2004 to meet the gas contractual requirements until
June 2007.

During fiscal 2004, MPAL's share of oil sales was 131,000 barrels and 3.9
bcf of gas sold, which is subject to net overriding royalties aggregating
4.0625% and the statutory government royalty of 10%. The oil is transported by
means of a 167-mile eight-inch oil pipeline from the field to an industrial park
near Alice Springs. The oil is then shipped south approximately 950 miles by
road to the Port Bonython Export Terminal, Whyalla, South Australia for sale.
The cost of transporting the oil to the terminal is being borne by the Mereenie
Producers. The Mereenie Producers are providing Mereenie gas in the Northern
Territory to the Power and Water Corporation (PAWC) and Gasgo Pty. Ltd. (Gasgo),
a company PAWC wholly owns, for use in Darwin and other Northern Territory
centers. See "Gas Supply Contracts" below. The petroleum lease covering the
Merenie field expires in November 2023.

PALM VALLEY

MPAL has a 52% interest in, and is the operator of, the Palm Valley gas
field which is also located in the Amadeus Basin of the Northern Territory.
Santos, the operator of the Mereenie field, owns the remaining 48% interest in
Palm Valley which provides gas to meet the Alice Springs and Darwin supply
contracts with PAWC and Gasgo. See "Gas Supply Contracts" below. MPAL's share of
the Palm Valley proved developed reserves was 13.9 bcf at June 30, 2004. During
fiscal 2004, MPAL's share of gas sales was 2.9 bcf which is subject to a 10%
statutory government royalty and net overriding royalties aggregating 7.3125%.
MPAL drilled an additional development well, Palm Valley-11, in 2004. The well
was a dry hole. Gasgo will pay for the cost of the well under the gas supply
agreement. The producers and Gasgo have agreed to install additional compression
equipment in the field that will assist field deliverability during the
remaining Darwin gas contract period. Gasgo will pay for the cost of the
additional compression under the gas supply agreement.

The production lease covering the Palm Valley field was renewed in November
2003 for an additional term of 21 years.

GAS SUPPLY CONTRACTS

In 1983, the Palm Valley Producers (MPAL and Santos) commenced the sale of
gas to Alice Springs under a 1981 agreement. In 1985, the Palm Valley Producers
and Mereenie Producers signed agreements for the sale of gas to PAWC for use in
the PAWC's Darwin generating station and at a number of other generating
stations in the Northern Territory. The gas is being delivered via the 922-mile
Amadeus Basin to the Darwin gas pipeline which was built by an Australian
consortium. Since 1985, there have been several additional contracts for the
sale of Mereenie gas. The Palm Valley Darwin contract expires in the year 2012
and Mereenie contracts expire in the year 2009. Under the 1985 contracts, there
is a difference in price between Palm Valley gas and most of the Mereenie gas
for the first 20 years of the 25 year contracts which takes into account the
additional cost to the pipeline consortium to build a spur line to the Mereenie
field and increase the size of the pipeline from Palm Valley to Mataranka. The
price of gas under the Palm Valley and Mereenie gas contracts is adjusted
quarterly to reflect changes in the Australian Consumer Price Index.

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At June 30, 2004, MPAL's commitment to supply gas under the above
agreements was as follows:

DINGO GAS FIELD

MPAL has a 34.3% interest in the Dingo gas field which is held under a
retention license. No market has emerged for the gas volumes that have been
discovered in the Dingo gas field, which is located in the Amadeus Basin in the
Northern Territory. MPAL's share of potential production from this permit area
is subject to a 10% statutory government royalty and overriding royalties
aggregating 4.8125%. The license was renewed for a further term of five years
from October 2003 to October 2008.

BROWSE BASIN

During fiscal year 2000, MPAL (100%) was granted exploration permits
WA-287-P and WA-288-P in the eastern Browse Basin, offshore Western Australia.
During fiscal 2002, MPAL was granted a permit over area WA-311-P which is
adjacent to WA-288-P. In 2002, INPEX Corporation, a Japanese company, earned a
65% interest in WA-288-P and WA-311-P by paying for the cost (except for MPAL's
share of $150,000) of drilling the Strumbo-1 well that was a dry hole. MPAL has
withdrawn from all of these permits.

During fiscal year 2001, MPAL acquired a 50% working interest in each of
exploration permits WA-306-P and WA-307-P in the Barcoo Sub-basin of the
southern Browse Basin, offshore Western Australia. Antrim Energy, a Canadian
company, is the operator of the joint venture. During October 2004, Antrim
Energy and ONGC Videsh Limited, an Indian company, funded the drilling of the
South Galapagos-1 well in WA-306-P, including MPAL's estimated share of the well
cost of $1,175,000. MPAL's interest in WA-306-P has reduced to 12.5%. At June
30, 2004, MPAL's share of the work obligations of the two permits totaled
$4,603,000, of which $9,000 is committed.

CARNARVON BASIN

During fiscal year 1999, MPAL was awarded permit WA-291-P, offshore Western
Australia in the Carnarvon Basin. Tap Oil, an Australian company, has agreed to
participate in exploration on the permit and has a 50% interest in the permit.
MPAL and Tap Oil are seeking additional partners to share the cost of drilling a
well. At June 30, 2004, MPAL's share (50%) of the work obligations of the permit
totaled $2,510,000, of which is $35,000 is committed.

MARYBOROUGH BASIN

MPAL holds a 100% interest in exploration permit ATP 613P in the
Maryborough Basin in Queensland, Australia. MPAL (100%) also has applications
pending for permits ATP 674P and ATP 733P which are adjacent to ATP 613P. Novus
Australia Energy Company Limited earned a 50% interest in the North Area of the
permit by drilling the Gregory River-3 well in 2003. The well was a dry hole and
Novus withdrew from the area. At June 30, 2004, MPAL's share of the work
obligations of permit ATP 613P totaled $1,119,000, of which $227,000 is
committed.

COOPER/EROMANGA BASIN

PEL 94 & PEL 95

During fiscal year 1999, MPAL (50%) and its partner Beach Petroleum NL were
successful in bidding for two exploration blocks (PEL 94 and PEL 95) in South
Australia's Cooper Basin. Aldinga-1 was

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completed in September 2002 and began producing in May 2003 at about 80 barrels
of oil per day. By June 2004, production had declined to about 30 barrels of oil
per day. During November 2003, the Waitpinga-1 well was drilled in PEL 94 and
the Seacliff-1 well in PEL 95. Both wells were dry holes. In June 2004, an
additional two wells were drilled, Myponga-1 in PEL 94 and Noarlunga-1 in PEL
95. Both these wells were dry holes. Black Rock Petroleum NL contributed to the
cost of drilling the Myponga-1 well to earn a 15% interest in the PEL 94 permit.
MPAL's interest in PEL 94 is reducing to 35%. MPAL's share of the cost of the
four wells was approximately $1,000,000. These have been reflected as
exploration and production costs in the consolidated financial statements. At
June 30, 2004, MPAL's share of the work obligations of the two permits totaled
$1,071,000, of which $17,000 is committed.

PEL 110 & PELA 116

During fiscal year 2001, MPAL and its partner Beach Petroleum NL were also
successful in bidding for two additional exploration blocks, PEL 110 (37.5%) and
PELA 116 (50%) in the Cooper Basin. PEL 110 was granted in February 2003 and PEL
116 remains under application. During October 2003, the Semaphore-1 well was
drilled in PEL 110. The well was a dry hole. Cooper Energy NL contributed to the
cost of the well to earn a 25% interest in PEL 110. At June 30, 2004, MPAL's
share of the work obligations of the PEL 110 permit totaled $841,000, of which
$420,000 is committed.

PL33 -- PL50 -- PL 51 -- ATP 267P, NOCKATUNGA

During July 2003, MPAL reached an agreement with Voyager Energy Limited for
the purchase of its 40.936% working interest (38.703% net revenue interest) in
its Nockatunga assets in southwest Queensland. The assets comprise several
producing oil fields in PLs 33, 50 and 51 together with exploration acreage in
ATP 267P at a purchase price of approximately $1.4 million. The project is
currently producing about 285 barrels of oil per day (MPAL share 115 bbls). A
development well, Thungo-8, was drilled in PL 51 in October 2003 and is
currently producing at around 10 barrels of oil per day. Callisto-1 was drilled
in ATP 267P during November 2003. The well was a dry hole. A 3D seismic survey
is planned for late 2004 over PL51 and parts of PL33 and ATP 267P. MPAL's share
of the cost is approximately $1,065,000. At June 30, 2004, MPAL's share of the
work obligations of ATP 267P totaled $315,000, of which none is committed.

NEW ZEALAND

PEP 38222 & PEP 38225

During fiscal 2002, MPAL (100%) was granted exploration permit PEP 38222,
offshore south of the South Island of New Zealand. At June 30, 2004, MPAL's
share of the work obligations of the permit totaled $11,678,000, all of which is
discretionary. In November 2003, MPAL (100%) was granted permit PEP 38225, which
is adjacent to PEP 38222. At June 30, 2004, MPAL's obligations of the PEP 38225
permit totaled $11,748,000, of which none is committed.

PEP 38746 -- PEP 38748 -- PEP 38753 -- PEP 38765 -- PEP 38766

MPAL has a 25% interest in permits PEP 38746, PEP 38748 and PEP 38753 in
the Taranaki Basin in the North Island, New Zealand. MPAL and its partners
spudded the Warwiri-1 well in PEP 38753 during September 2003 at an approximate
cost of $268,000 to MPAL, and the Bluff-1 well in PEP 38746 during October. Both
wells were dry holes. MPAL has withdrawn from the PEP 38753 permit. At June 30,
2004, MPAL's share of the work obligations of the PEP 38746 and PEP 38748
permits totaled $105,000, of which none is committed. The drilling plans for the
Hihi-1 and Kakariki-1 wells in PEP 38753 are in progress and spudding of these
wells is expected in 2004.

MPAL was granted exploration permits PEP 38765 (12.5%) and PEP 38766 (25%)
during February 2004. The drilling plan for the Miromiro-1 well in PEP 38765 is
in progress and spudding of this well is expected later in calendar 2004. At
June 30, 2004, MPAL's share of the work obligations of the PEP 38765 and PEP
38766 permits totaled $717,000, of which $175,000 is committed.

5

UNITED KINGDOM

PEDL 098 & PEDL 099

During fiscal year 2001, MPAL acquired an interest in two licenses in
southern England in the Weald-Wessex basin. The two licenses, PEDL 098 (22.5%)
in the Isle of Wight and PEDL 099 (40%) in the Portsdown area of Hampshire, were
each granted for a period of six years. The drilling plan for the Sandhills-2
well as the PEDL 098 obligation well is in progress and spudding of this well is
expected in 2004. At June 30, 2004, MPAL's share of the work obligations of the
permits totaled $660,000, of which none is committed. The UK companies, Northern
Petroleum and Montrose Industries, will fund MPAL's share of the cost of the
Sandhills-2 well.

PEDL 112 & PEDL 113

During fiscal year 2002, MPAL acquired two additional licenses in southern
England. The two licenses, PEDL 113 (22.5%, formerly 45%) in the Isle of Wight
and PEDL 112 (33.3%) in the Kent area on the margin of the Weald-Wessex basin,
were each granted for a period of six years. At June 30, 2004, MPAL's share of
the work obligations of the permits totaled $818,000, of which $22,000 is
committed.

PEDL 125 & PEDL 126

Effective July 1, 2003, MPAL acquired two additional licenses each granted
for a period of six years in southern England, PEDL 125 (50%) in Hampshire and
PEDL 126 (50%) in West Sussex. At June 30, 2004, MPAL's share of the work
obligations of the two permits totaled $1,114,000, of which $28,000 is
obligatory. The drilling plan for the Hedge End-2 well in PEDL 125 is in
progress and spudding of this well is expected in 2005. MPAL's (50%) share of
the cost of the well is estimated at approximately $1,130,000, of which $28,000
is committed.

CANADA

MPC owns a 2.67% carried interest in a lease (31,885 gross acres, 850 net
acres) in the southeast Yukon Territory, Canada, which includes the Kotaneelee
gas field. Devon Canada Corporation is the operator of this partially developed
field which is connected to a major pipeline system. Production at Kotaneelee
commenced in February 1991.

During September 2003, MPC entered into a settlement agreement with the
litigants in the Kotaneelee litigation. In October 2003, the Company received
approximately $851,000, after Canadian withholding taxes and reimbursement of
certain past legal costs from the settlement. The plaintiffs, including MPC,
terminated all litigation against the defendants related to the field, including
the claim that the defendants failed to fully develop the field. Since each
party agreed to bear its own legal costs, there were no taxable costs assessed
against any of the parties. See Item 3. Legal Proceedings.

(b) Financial Information About Industry Segments.

The Company is engaged in only one industry, namely, oil and gas
exploration, development, production and sale. The Company conducts such
business through its two operating segments; MPC and its majority owned
subsidiary MPAL.

(c) (1) Narrative Description of the Business.

MPC was incorporated in 1957 under the laws of Panama and was reorganized
under the laws of Delaware in 1967. MPC is directly engaged in the exploration
for, and the development and production and sale of oil and gas reserves in
Canada, and indirectly through its subsidiary MPAL in Australia, New Zealand and
the United Kingdom.

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(i) Principal Products.

MPAL has an interest in the Palm Valley gas field and in the Mereenie oil
and gas field. See Item 1(a) -- Australia -- for a discussion of the oil and gas
production from the Mereenie and Palm Valley fields. MPC has a direct 2.67%
carried interest in the Kotaneelee gas field in Canada.

(ii) Status of Product or Segment.

See Item 1(a) -- Australia and Canada -- for a discussion of the current
and future operations of the Mereenie and Palm Valley fields in Australia, the
Nockatunga fields in Australia and MPC's interest in the Kotaneelee field in
Canada.

(iii) Raw Materials.

Not applicable.

(iv) Patents, Licenses, Franchises and Concessions Held.

MPAL has interests directly and indirectly in the following permits. Permit
holders are generally required to carry out agreed work and expenditure
programs.

7

Leases issued by the Northern Territory are subject to the Petroleum
(Prospecting and Mining) Act of the Northern Territory. Lessees have the
exclusive right to produce petroleum from the land subject to a lease upon
payment of a rental and a royalty at the rate of 10% of the wellhead value of
the petroleum produced. Rental payments may be offset against the royalty paid.
The term of a lease is 21 years, and leases may be renewed for successive terms
of 21 years each.

Since 1992, there has been an ongoing controversy regarding the Aborigines
and the ownership of their traditional lands. There has been legislation aimed
at resolving this controversy. The Company does not believe that this issue will
have a material adverse impact on MPAL's properties.

(v) Seasonality of Business.

Although the Company's business is not seasonal, the demand for oil and
especially gas is subject to fluctuations in the Australian weather.

(vi) Working Capital Items.

See Item 7 -- Liquidity and Capital Resources for a discussion of this
information.

(vii) Customers.

Although the majority of MPAL's producing oil and gas properties are
located in a relatively remote area in central Australia (See Item 1 -- Business
and Item 2 -- Properties), the completion in January 1987 of the Amadeus Basin
to Darwin gas pipeline has provided access to and expanded the potential market
for MPAL's gas production.

Natural Gas Production

MPAL's principal customer and the most likely major customer for future gas
sales is PAWC, a governmental authority of the Northern Territory Government,
which also has substantial regulatory authority over MPAL's oil and gas
operations. The loss of PAWC as a customer would have a material adverse effect
on MPAL's business.

Oil Production

Presently all of the crude oil production from Mereenie is being shipped
and sold through the Port Bonython Export Terminal, Whyalla, South Australia.
Crude oil production from Aldinga and Nocatunga is shipped and sold through the
IOR refinery at Eromanga, Southwest Queensland.

(viii) Backlog.

Not applicable.

(ix) Renegotiation of Profits or Termination of Contracts or Subcontracts
at the Election of the Government.

Not applicable.

(x) Competitive Conditions in the Business.

The exploration for and production of oil and gas are highly competitive
operations. The ability to exploit a discovery of oil or gas is dependent upon
such considerations as the ability to finance development costs, the
availability of equipment, and the possibility of engineering and construction
delays and difficulties. The Company also must compete with major oil and gas
companies which have substantially greater resources than the Company.

Furthermore, various forms of energy legislation which have been or may be
proposed in the countries in which the Company holds interests may substantially
affect competitive conditions. However, it is not possible to predict the nature
of any such legislation which may ultimately be adopted or its effects upon the
future operations of the Company.

8

At the present time, the Company's principal income producing operations
are in Australia and for this reason, current competitive conditions in
Australia are material to the Company's future. Currently, most indigenous crude
oil is consumed within Australia. In addition, refiners and others import crude
oil to meet the overall demand in Australia. The Palm Valley Producers and the
Mereenie Producers are developing and separately marketing the production from
each field. Because of the relatively remote location of the Amadeus Basin and
the inherent nature of the market for gas, it would be impractical for each
working interest partner to attempt to market its respective share of production
from each field.

(xi) Research and Development.

Not applicable.

(xii) Environmental Regulation.

The Company is subject to the environmental laws and regulations of the
jurisdictions in which it carries on its business, and existing or future laws
and regulations could have a significant impact on the exploration for and
development of natural resources by the Company. However, to date, the Company
has not been required to spend any material amounts for environmental control
facilities. The federal and state governments in Australia strictly monitor
compliance with these laws but compliance therewith has not had any adverse
impact on the Company's operations or its financial resources.

At June 30, 2004, the Company had accrued approximately $4.9 million for
asset retirement obligations for the Mereenie, Palm Valley, Kotaneelee,
Nockatunga and Dingo fields. See Note 2 of the Consolidated Financial Statements
under Item 8. Financial Statements and Supplementary Data.

(xiii) Number of Persons Employed by Company.

At June 30, 2004, MPC had one full-time employee in the United States and
MPAL had 31 employees in Australia. MPC relies to a great extent on consultants
for legal, accounting, administrative and geological services.

(d) (2) Financial Information Relating to Foreign and Domestic Operations.

See Note 10 to the Consolidated Financial Statements.

(3) Risks Attendant to Foreign Operations.

Most of the properties in which the Company has interests are located
outside the United States and are subject to certain risks involved in the
ownership and development of such foreign property interests. These risks
include but are not limited to those of: nationalization; expropriation;
confiscatory taxation; changes in foreign exchange controls; currency
revaluations; price controls or excessive royalties; export sales restrictions;
limitations on the transfer of interests in exploration licenses; and other laws
and regulations which may adversely affect the Company's properties, such as
those providing for conservation, proration, curtailment, cessation, or other
limitations of controls on the production of or exploration for hydrocarbons.
Thus, an investment in the Company represents a speculation with risks in
addition to those inherent in domestic petroleum exploratory ventures.

Since 1992, there has been an ongoing controversy regarding the Aborigines
and the ownership of their traditional lands. There has been legislation aimed
at resolving this controversy. The Company does not believe that this issue will
have a material adverse impact on MPAL's properties.

(4) Data Which are Not Indicative of Current or Future Operations.

None.

ITEM 2. PROPERTIES.

(a) MPC has interests in properties in Australia through its 55% equity
interest in MPAL which holds interests in the Northern Territory, Queensland,
South Australia and Western Australia. MPAL also has

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interests in New Zealand and the United Kingdom. In Canada, MPC has a direct
interest in one lease. For additional information regarding the Company's
properties, See Item 1 -- Business.

(b) (1) The information regarding reserves, costs of oil and gas
activities, capitalized costs, discounted future net cash flows and results of
operations is contained in Supplementary Oil & Gas Information under Item
8 -- Financial Statements and Supplementary Data.

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

AUSTRALIAN MAP WITH MPAL PROJECTS SHOWN

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

AMADEUS BASIN PROJECTS MAP

The map indicates the location of the Amadeus Basin interests in the
Northern Territory of Australia. The following items are identified:

Palm Valley Gas Field
Mereenie Oil & Gas Field
Dingo Gas Field
Nockatunga Oil Field
Palm Valley -- Alice Springs Gas Pipeline
Palm Valley -- Darwin Gas Pipeline
Mereenie Spur Gas Pipeline

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

CANADIAN PROPERTY INTERESTS MAP

The map indicates the location of the Kotaneelee Gas Field in the Yukon
Territories of Canada. The map identifies the following items:

Kotaneelee Gas Field
Pointed Mountain Gas Field
Beaver River Gas Field

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

UNITED KINGDOM PROPERTY INTERESTS MAP

The map indicates the location of the MPAL property interests in the United
Kingdom.

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

NEW ZEALAND PROPERTY INTERESTS MAP

The map indicates the location of the MPAL property interests in New
Zealand.

(2) Reserves Reported to Other Agencies.

None

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(3) Production.

MPC's net production volumes for gas and oil during the three years ended
June 30, 2004 were as follows (data for Canada has not been included since MPC
is in a carried interest position and the data is not material)

The average sales price per unit of production for Australia for the
following fiscal years is as follows:

The average production cost per unit of production for the following fiscal
years has been impacted by transportation costs on Mereenie oil in Australia.
During fiscal 2004, 2003 and 2002, the cost of remedial work on various wells in
the Mereenie field and lower production levels increased production costs.

Amounts presented above are in Australian dollars to show a more meaningful
trend of underlying operations. For the year ended June 30, 2004, 2003 and 2002
the average foreign exchange rates were .7179, .5852, and .5238, respectively.

(4) Productive Wells and Acreage.

Productive wells and acreage at June 30, 2004:

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(5) Undeveloped Acreage.

The Company's undeveloped acreage (except as indicated below) is set forth
in the table below:

GROSS AND NET ACREAGE AS OF JUNE 30, 2004

MPAL has interests in the following properties (before royalties). MPC has
an interest in these properties through its 55% interest in MPAL.

- ---------------

(1) Includes 41,644 gross developed acres and 14,575 net acres.

(2) Includes 31,567 gross developed acres and 16,422 net acres.

(3) Includes 3,350 gross developed acres and 89 net acres.

(4) Includes 346 gross developed acres and 173 net acres.

(6) Drilling Activity.

Productive and dry net wells drilled during the following years (data
concerning Canada and the United States is insignificant):

(7) Present Activities.

There were two wells being drilled at June 30, 2004. During August 2004,
the Company decided to plug and abandon development well Palm Valley-11. See
Item 1 -- Cooper Basin and New Zealand for a discussion of the present
activities of MPAL.

(8) Delivery Commitments.

See discussion under Item 1 concerning the Palm Valley and Mereenie fields.

ITEM 3. LEGAL PROCEEDINGS.

KOTANEELEE GAS FIELD

MPC's 2.67% carried interest in the Kotaneelee gas field is held in trust
by Canada Southern Petroleum Ltd. (Canada Southern) which has a 30.7% carried
interest in the field. Canada Southern and MPC (the plaintiffs) had believed
that the working interest owners in the Kotaneelee gas field had not adequately
pursued the attainment of contracts for the sale of Kotaneelee gas.

In October 1989 and March 1990, Canada Southern filed statements of claim
in the Court of Queens Bench of Alberta, Judicial District of Calgary, Canada,
against the working interest partners in the Kotaneelee gas field. MPC was
subsequently added as a Plaintiff in the action. The named defendants were Amoco

13

Canada Petroleum Corporation, Ltd., Dome Petroleum Limited (now Amoco Canada
Resources Ltd.), and Amoco Production Company (collectively the Amoco Dome
Group), Columbia Gas Development of Canada Ltd., Mobil Oil Canada Ltd. and Esso
Resource of Canada Ltd. (collectively the defendants).

During September 2003, the litigants in the Kotaneelee litigation entered
into a settlement agreement. In October 2003, the Company received approximately
$851,000, after Canadian withholding taxes and reimbursement of certain past
legal costs. The plaintiffs terminated all litigation against the defendants
related to the field, including the claim that the defendants failed to fully
develop the field. Since each party agreed to bear its own legal costs, there
were no taxable costs assessed against any of the parties.

The components of the settlement payment, which was recorded in September
2003 are as follows:

Gas sales................................................... $1,135,000
Interest income............................................. 102,000
Canadian withholding taxes.................................. (386,000)
----------
Total....................................................... $ 851,000
==========

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following information with respect to the current and former executive
officers of the Company is furnished pursuant to Instruction 3 to Item 401(b) of
Regulation S-K.

- ---------------

(1) Retired as officer and director effective June 30, 2004.

(2) Effective July 1, 2004 office held is President and Chief Financial Officer.

All officers of MPC are elected annually by the Board of Directors and
serve at the pleasure of the Board of Directors.

MPC is not aware of any arrangements or understandings between any of the
individuals named above and any other person pursuant to which any individual
named above was selected as an officer.

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF SECURITIES

(a) Principal Market

The principal market for MPC's common stock is the NASDAQ SmallCap market
under the symbol MPET. The stock is also traded on the Boston Stock Exchange
under the symbol MPC. The quarterly high

14

and low prices and the number of shares traded on the most active market,
NASDAQ, during the calendar quarterly periods indicated were as follows:

(b) Approximate Number of Holders of Common Stock at October 12, 2004

(c) Frequency and Amount of Dividends

MPC has never paid a cash dividend on its common stock.

RECENT SALES OF UNREGISTERED SECURITIES

On September 2, 2003, the Company completed its previously announced
acquisition of 1,200,000 shares of its majority-owned subsidiary, MPAL, from
Sagasco Amadeus Pty Limited (Sagasco), a subsidiary of Origin Energy Limited, a
diversified energy company based in Sydney, Australia. The acquisition of MPAL
shares by the Company was made pursuant to a share sale agreement entered into
by the Company and Sagasco, dated as of July 10, 2003 (Share Sale Agreement).
The MPAL share acquisition followed the receipt of governmental approval in
Australia and has increased the Company's holdings in MPAL from 52.4% to
approximately 55%.

In consideration for its receipt of the MPAL shares, the Company issued to
Sagasco 1,300,000 shares of its common stock, par value $.01 per share in a
private placement transaction conducted outside the United States pursuant to
the exemption from registration provided by Regulation S under the Securities
Act of 1933. The fair value of the 1,300,000 shares on July 10, 2003 was
$1,508,000, based on the closing price of the Company's common stock on the
Nasdaq SmallCap Market on that date.

At the closing, the Company also entered into a registration rights
agreement with Sagasco, dated as of September 2, 2003 (Registration Rights
Agreement), pursuant to which the Company has agreed to register, upon receipt
of a written demand by Sagasco, the 1,300,000 shares of common stock for public
resale by Sagasco under the Securities Act. Sagasco exercised its rights under
the Registration Rights Agreement to cause the Company to prepare and file a
registration statement under the Securities Act covering the public resale by
Sagasco of the 1,300,000 shares. On October 8, 2003, the Company filed a
registration statement on Form S-3 to register the 1.3 million shares issued to
Origin Energy for resale that was declared effective on February 20, 2004. As of
April 21, 2004, Origin Energy had resold all of the 1.3 million shares of the
Company's common stock.

15

ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth the number of shares that the Company has
repurchased under any of its repurchase plans for the stated periods, the cost
per share of such repurchases and the number of shares that may yet be
repurchased under the plans:

- ---------------

(1) The Company through its stock repurchase plan may purchase up to one million
shares of its common stock in the open market. Through June 30, 2004, the
Company had purchased 680,850 of its shares at an average price of $1.01 per
share, or a total cost of approximately $686,000, all of which shares have
been cancelled.

16

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected data (in thousands) and other
operating information of the Company. The selected consolidated financial data
in the table are derived from the consolidated financial statements of the
Company. This data should be read in conjunction with the consolidated financial
statements, related notes and other financial information included herein.

17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

FORWARD LOOKING STATEMENTS

Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, forward looking statements for
purposes of the "Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995. The Company cautions readers that forward looking statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those indicated in the forward looking statements.
Among these risks and uncertainties are pricing and production levels from the
properties in which the Company has interests, and the extent of the recoverable
reserves at those properties. In addition, the Company has a large number of
exploration permits and there is the risk that any wells drilled may fail to
encounter hydrocarbons in commercial quantities. The Company undertakes no
obligation to update or revise forward-looking statements, whether as a result
of new information, future events, or otherwise.

CRITICAL ACCOUNTING POLICIES

OIL AND GAS PROPERTIES

The Company follows the successful efforts method of accounting for its oil
and gas operations. Under this method, the costs of successful wells,
development dry holes and productive leases are capitalized and amortized on a
units-of-production basis over the life of the related reserves. Cost centers
for amortization purposes are determined on a field-by-field basis. The Company
records its proportionate share in joint venture operations in the respective
classifications of assets, liabilities and expenses. Unproved properties with
significant acquisition costs are periodically assessed for impairment in value,
with any impairment charged to expense. The successful efforts method also
imposes limitations on the carrying or book value of proved oil and gas
properties. Oil and gas properties are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amounts may not be
recoverable. The Company estimates the future undiscounted cash flows from the
affected properties to determine the recoverability of carrying amounts. In
general, analyses are based on proved developed reserves, except in
circumstances where it is probable that additional resources will be developed
and contribute to cash flows in the future.

Exploratory drilling costs are initially capitalized pending determination
of proved reserves but are charged to expense if no proved reserves are found.
Other exploration costs, including geological and geophysical expenses,
leasehold expiration costs and delay rentals, are expensed as incurred. Because
the Company follows the successful efforts method of accounting, the results of
operations may vary materially from quarter to quarter. An active exploration
program may result in greater exploration and dry hole costs.

ASSET RETIREMENT OBLIGATIONS

Effective July 1, 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires legal obligations associated with the retirement
of long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, that cost is
capitalized as part of the related long-lived asset (oil & gas properties) and
amortized on a units-of-production basis over the life of the related reserves.
Accretion expense in connection with the discounted liability is recognized over
the remaining life of the related reserves. See Note 2 to the consolidated
financial statements regarding the cumulative effect of the accounting change
and its effect on net income.

The estimated liability is based on the future estimated cost of land
reclamation, plugging the existing oil and gas wells and removing the surface
facilities equipment in the Palm Valley, Mereenie, Kotaneelee, Nockatunga and
Dingo fields. The liability is a discounted liability using a credit-adjusted
risk-free rate on the date such liabilities are determined. A market risk
premium was excluded from the estimate of asset retirement obligations because
the amount was not capable of being estimated. Revisions to the liability could
occur due to changes in the estimates of these costs, acquisition of additional
properties and as new wells are drilled.

18

Estimates of future asset retirement obligations include significant
management judgment and are based on projected future retirement costs. Such
costs could differ significantly when they are incurred.

REVENUE RECOGNITION

The Company recognizes oil and gas revenue from its interests in producing
wells as oil and gas is produced and sold from those wells. Oil and gas sold is
not significantly different from the Company's share of production. Revenues
from the purchase, sale and transportation of natural gas are recognized upon
completion of the sale and when transported volumes are delivered. Shipping and
handling costs in connection with such deliveries are included in production
costs (cost of goods sold). Revenue under carried interest agreements is
recorded in the period when the net proceeds become receivable, measurable and
collection is reasonably assured. The time the net revenues become receivable
and collection is reasonably assured depends on the terms and conditions of the
relevant agreements and the practices followed by the operator. As a result, net
revenues from carried interests may lag the production month by one or more
months.

LIQUIDITY AND CAPITAL RESOURCES

During September 2003, the litigants in the Kotaneelee litigation entered
into a settlement agreement. In October 2003, the Company received approximately
$851,000, after Canadian withholding taxes and reimbursement of certain past
legal costs. The plaintiffs terminated all litigation against the defendants
related to the field, including the claim that the defendants failed to fully
develop the field. Since each party has agreed to bear its own legal costs,
there were no taxable costs assessed against any of the parties. The settlement
was recorded during the quarter ending September 30, 2003. See Note 2 to the
consolidated financial statements.

CONSOLIDATED

At June 30, 2004, the Company on a consolidated basis had approximately
$20.4 million of cash and cash equivalents and marketable securities.

Net cash provided by operations was $11,503,323 in 2004 compared to
$9,073,000 in 2003. The increase is primarily related to the cash received from
the Kotaneelee settlement and increased collections from MPAL's largest
customer. Cash flow from operations is primarily the result of MPAL's oil and
gas activities.

During 2004, the Company had net investments in marketable securities of
$990,000 compared to $493,000 in 2003. The increase in investments was the
result of MPC investing the cash received from the Kotaneelee settlement.

The Company invested $9,723,210 and $6,365,000 in oil and gas exploration
activities during 2004 and 2003, respectively. The net increase resulted from an
increase in investment in the Mereenie and Palm Valley fields and the
acquisition of Nockatunga. The Company continues to invest in exploratory
projects that result in exploratory and dry hole expenses in the consolidated
financial statements.

AS TO MPC (UNCONSOLIDATED)

At June 30, 2004, MPC, on an unconsolidated basis, had working capital of
approximately $3.6 million. Working capital is comprised of current assets less
current liabilities. MPC's current cash position, its annual MPAL dividend and
the anticipated revenue from the Kotaneelee field should be adequate to meet its
current cash requirements. MPC has in the past invested and may in the future
invest substantial portions of its cash to maintain or increase its majority
interest in its subsidiary, MPAL. On July 10, 2003, a subsidiary of Origin
Energy, Sagasco Amadeus Pty. Limited, agreed to exchange 1.2 million shares of
MPAL for 1.3 million shares of the Company's common stock. After the exchange
was completed on September 2, 2003, the Company's interest in MPAL increased to
55%.

In addition to the aforementioned stock exchange, during fiscal 2004, MPC
purchased 24,259 shares of MPAL's stock at a cost of $22,259 and increased its
interest in MPAL from 55.00% to 55.06%.

19

During fiscal 2004, MPC received a dividend from MPAL of approximately
$911,000.

During the fiscal year 2001, MPC announced a stock repurchase plan to
purchase up to one million shares of its common stock in the open market.
Through June 30, 2004, MPC had purchased 680,850 of its shares at a cost of
approximately $686,000. There were no shares purchased during fiscal 2004.

AS TO MPAL

At June 30, 2004, MPAL had working capital of approximately $18.3 million.
MPAL has budgeted approximately $5.3 million for specific exploration projects
in fiscal year 2004 as compared to the $5.0 million expended during fiscal 2004.
However, the total amount to be expended may vary depending on when various
projects reach the drilling phase. The current composition of MPAL's oil and gas
reserves are such that MPAL's future revenues in the long term are expected to
be derived from the sale of gas in Australia. MPAL's current contracts for the
sale of Palm Valley and Mereenie gas will expire during fiscal year 2012 and
2009, respectively. Unless MPAL is able to obtain additional contracts for its
remaining gas reserves or be successful in its current exploration program, its
revenues will be materially reduced after 2009.

MPAL expects to fund its exploration costs through its cash and cash
equivalents and cash flow from Australian operations. MPAL also expects that it
will seek partners to share its exploration costs. If MPAL's efforts to find
partners are unsuccessful, it may be unable or unwilling to complete the
exploration program for some of its properties.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We do not use off-balance sheet arrangements such as securitization of
receivables with any unconsolidated entities or other parties. The Company does
not engage in trading or risk management activities and does not have material
transactions involving related parties. The following is a summary of our
consolidated contractual obligations:

- ---------------

(1) Represents firm commitments for exploration and capital expenditures.
Exploration contingent expenditures of $36,419,000 which are not legally
binding have been excluded from the table above and based on exploration
decisions would be due as follows: $17,195, 000 (less than 1 year),
$16,649,000 (1-3 years), $2,575,000 (3-5 years).

In January 2003, the FASB issued Interpretation No. (FIN) 46,
"Consolidation of Variable Interest Entities," was effective for the Company on
December 31, 2003. FIN 46 requires that the party to a VIE that absorbs the
majority of the VIE's losses, defined as the "primary beneficiary," consolidate
the VIE. The Company has determined that it is not required to consolidate or
disclose information about a VIE. In December 2003, the FASB issued a revised
version of FIN 46R that was effective for the Company for fiscal year 2004. FIN
46R did not have an impact on the Company's consolidated financial statements.

20

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes standards on how to classify and measure certain financial
instruments with characteristics of both liabilities and equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise effective for the Company for the first quarter of fiscal 2004.
The adoption of SFAS No. 150 did not have an impact on the Company's financial
statements.

In December 2003, the FASB issued SFAS No. 132 (Revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits." (SFAS No. 132R)
This statement revises employers' disclosures about pension plans and other
postretirement benefit plans, requires additional disclosures about the assets,
obligations, cash flows, and the net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans and requires
companies to disclose various elements of pension and postretirement benefit
costs in interim period financial statements. The annual disclosures in SFAS No.
132R are effective for the Company's defined benefit pension plan for the fiscal
year ended June 30, 2004. The required disclosures are included in Note 8.
Pension plan costs.

RESULTS OF OPERATIONS

2004 VS. 2003

Revenues

Oil sales increased 48% in 2004 to $4,923,000 from $3,329,000 in 2003
because of a 23% Australian foreign exchange rate increase discussed below and
new oil sales from the Cooper Basin and the Nockatunga project. Oil unit sales
are expected to continue to decline in the Mereenie field unless additional
development wells are drilled to maintain production levels. MPAL is dependent
on the operator (65% control) of the Mereenie field to maintain production. Oil
unit sales (net of royalties) in barrels (bbls) and the average price per barrel
sold during the periods indicated were as follows:

Amounts presented above are in Australian dollars to show a more meaningful
trend of underlying operations. For the years ended June 30, 2004, 2003 and 2002
the average foreign exchange rates were .7179, .5852, and .5238, respectively.

Gas sales increased 26% to $12,870,000 in 2004 from $10,182,000 in 2003
because of the 23% Australian foreign exchange rate increase discussed below and
the $1,135,000 in gross proceeds from the Canadian Kotaneelee gas field
settlement. In addition, the recurring portion of Kotaneelee revenues declined
from $536,000 in 2003 to $423,000 in 2004 due to reduced production. This trend
is likely to continue. These increases were partially offset by a 2% decrease in
volume and a 3% decrease in Australian gas prices.

21

The volumes in billion cubic feet (bcf) (net of royalties) and the average
price of gas per thousand cubic feet (mcf) sold during the periods indicated
were as follows:

Other production related revenues increased 33% to $1,632,000 in 2004 from
$1,225,000 in 2003. Other production related revenues are primarily MPAL's share
of gas pipeline tariff revenues which increased as a result of the higher
volumes of gas sold at Mereenie, and because of the 23% Australian foreign
exchange rate increase discussed below.

Interest and other income increased 28% to $1,099,000 in 2004 from $860,000
in 2003 primarily because of the $102,000 interest received from the funds held
in escrow from the Kotaneelee settlement and because of the 23% Australian
foreign exchange rate increase discussed below.

Costs and Expenses

Production costs increased 21% in 2004 to $5,416,000 from $4,461,000 in
2003 in part because of the 23% Australian foreign exchange rate increase
discussed below. During 2004, production costs also increased because of the new
costs of $545,000 for the Nockatunga project. These increases were partially
offset by a decrease in production costs applicable to two wells that were
plugged and abandoned in the Mereenie field in 2003. In addition, a Mereenie two
well workover program was completed during the 2003 period.

Exploration and dry hole costs increased 10% to $3,225,000 in 2004 from
$2,920,000 in 2003. The 2004 and 2003 costs related to the exploration work
being performed on MPAL's properties. The primary reason for the increase in
2004 is the 23% Australian foreign exchange rate increase discussed below. For
the 2004 period, exploration costs totaled $1,509,000 and dry hole costs totaled
$1,716,000. For the 2003 period, exploration costs totaled $2,043,000 and dry
hole costs totaled $877,000. The dry holes were drilled on MPAL properties in
Australia and New Zealand.

Salaries and employee benefits increased 95% to $3,812,000 in 2004 from
$1,958,000 in 2003. During the 2004 period, there was a 23% increase in the
Australian foreign exchange rate discussed below. In addition, MPAL curtailed
its pension plan in 2004 which resulted in a $1,248,000 charge, of which
$961,000 was non cash.

Depletion, depreciation and amortization increased 71% from $3,719,000 in
2003 to $6,342,000 in 2004. During the 2004 period, there was a 23% increase in
the Australian foreign exchange rate as discussed below. Depletion expense for
the Palm Valley and Mereenie fields increased 55% during the period primarily
because of the increase in oil and gas properties related to MPC's increased
interest in MPAL and the current Mereenie development program. In addition, in
2004, $528,000 in DD&A was also recorded for the Nockatunga project and the
Cooper Basin. The reserves in the Cooper Basin were reduced by 50% from 50,000
barrels to 25,000 barrels during the current period because of lower oil
production than estimated. In the 2003 period the Palm Valley gas reserves were
increased by 35% and DD&A decreased by approximately $405,000 because of this
change in gas reserves.

Auditing, accounting and legal expenses increased 2% in 2004 to $414,000
from $404,000 in 2003 primarily because of the 23% Australian foreign exchange
rate increase discussed below. The increase was partially offset because the
2003 period included higher audit fees in connection with the adoption of the
new accounting standard for asset retirement obligations.

22

Accretion expense increased 47% in the 2004 period from $243,000 in 2003 to
$357,000 in 2004. Accretion expense represents the accretion on the asset
retirement obligations (ARO) under SFAS 143 that was adopted effective July 1,
2002. The increase in the 2004 period results from the 23% increase in the
Australian foreign exchange rate as discussed below and the additions for the
Nockatunga project and the Kotaneelee gas field.

Shareholder communications costs increased 5% from $171,000 in 2003 to
$180,000 in 2004 primarily because of MPC and MPAL's increased costs related to
their status as public companies.

Other administrative expenses increased 78% from $370,000 in 2003 to
$660,000 in 2004. During the 2004 period, there was a 23% increase in the
Australian foreign exchange rate as discussed below. In addition, there were
increases in consultants' fees ($134,000), directors' fees and expenses
($101,000), insurance costs ($120,000), rent ($72,000) and travel expenses
($26,000) during the 2004 period that were partially offset by an increase in
the amount of overhead charges that MPAL as operator was able to charge its
partners.

The Company anticipates that it will be required in the future to incur
significant administrative, auditing and legal expenses with respect to new SEC
and accounting rules adopted pursuant to the Sarbanes-Oxley Act of 2002,
particularly the requirements to document, test and audit the Company's internal
controls to comply with Section 404 of the Act and rules adopted thereunder.

Income tax benefits for the years ended June 30, 2004 and 2003 were
$778,085 and $773,548, respectively. The income tax benefits were reduced
$362,000 in 2004 related to Canadian withholding taxes as a result of increased
revenues from the Kotaneelee Settlement. Income tax benefits were further
reduced as a result of a decrease from $1,202,000 in 2003 to $929,000 in 2004 of
financing related benefits received by MPAL. As a result of a change in
Australian tax law during 2004, MPAL does not expect to receive similar
financing benefits in the future. These reductions were offset by tax benefits
from MPAL's operating losses.

EXCHANGE EFFECT

THE VALUE OF THE AUSTRALIAN DOLLAR RELATIVE TO THE U.S. DOLLAR INCREASED to
$.6993 at June 30, 2004 compared to $.6737 at June 30, 2003. This resulted in a
$915,000 credit to accumulated translation adjustments for fiscal 2004. The 4%
increase in the value of the Australian dollar increased the reported asset and
liability amounts in the balance sheet at June 30, 2004 from the June 30, 2003
amounts. The annual average exchange rate used to translate MPAL's operations in
Australia for fiscal 2004 was $.7179, which is a 23% increase compared to the
$.5852 rate for fiscal 2003.

2003 VS. 2002

Revenues

OIL SALES INCREASED 2% IN 2003. Oil sales in Australia in 2003 amounted to
$3,329,000 as compared to $3,259,000 in 2002 because of a 3% increase in oil
prices and the 12% Australian foreign exchange increase discussed below which
was partially offset by the 10% decrease in the number of units produced. Cooper
Basin production began in May 2003. Oil unit sales (before deducting royalties)
in barrels (bbls) and the average price per barrel sold during the periods
indicated were as follows:

23

GAS SALES INCREASED 17% IN FISCAL 2003. Gas sales increased from $8,667,000
in 2002 to $10,182,000 in 2003 primarily because of the 5% increase in the
average price of gas sold in Australia and the 12% Australian foreign exchange
increase discussed below. Gas sales in 2003 include $535,000 ($483,000 in 2002)
of gas sales from the Kotaneelee gas field in Canada. The volumes in billion
cubic feet (bcf) (before deducting royalties) and the average price of gas per
thousand cubic feet (mcf) sold in Australia during the periods indicated were as
follows:

OTHER PRODUCTION INCOME DECREASED 31% TO $1,225,000 IN 2003 from $1,774,000
in 2002. Other production income includes royalties and MPAL's share of gas
pipeline tariffs. The primary reason for this decrease was that MPAL's share of
gas pipeline tariffs in 2002 included an additional amount of $855,000 of
pipeline tariff revenue to reflect a resolution of a dispute regarding the
calculation of the pipeline tariffs. The decrease in 2003 was partially offset
by the 12% Australian foreign exchange increase as discussed below.

INTEREST INCOME IN 2003 INCREASED 32%. Interest income in 2003 amounted to
$860,000 as compared to $652,000 in 2002. More funds were available in Australia
for investment at higher interest rates than in 2002 and there was a 12%
Australian foreign exchange increase as discussed below.

Costs and Expenses

PRODUCTION COSTS INCREASED 18% IN 2003 to $4,461,000 from $3,770,000 in
2002 primarily because of the 12% increase in the Australian foreign exchange
rate discussed below. During 2003, two wells were plugged and abandoned in the
Mereenie field at a cost of approximately $86,000. The $27,000 difference
between the amount of the asset retirement obligation of $59,000 and the
abandonment costs of $86,000 is included in production costs. In addition, a
Mereenie two well workover program was completed in 2003.

EXPLORATORY AND DRY HOLE COSTS DECREASED 30% TO $2,920,000 IN 2003 from
$4,143,000 in 2002. The 2003 and 2002 costs related primarily to the geological
and geophysical work and seismic acquisition on MPAL's exploration permits. The
costs in 2003 include MPAL's share of the dry hole costs of the Strumbo-1 well
($150,000) located offshore Western Australia, two Cooper Basin wells ($600,000)
and the Gregory River-3 well ($524,000) in the Maryborough Basin in Queensland.
In addition, the costs in 2002 include the dry hole costs (a total of $2.7
million incurred primarily in the second quarter of fiscal 2002) of the
Carbine-1 and the Maribo-1 wells which were drilled in the Browse Basin offshore
Western Australia.

SALARIES AND EMPLOYEE BENEFITS INCREASED 57% TO $1,958,000 IN 2003 from
$1,248,000 in 2002. During 2003, MPAL changed its classification of salary costs
as overhead charged to its joint venture partners. Although this change resulted
in an amount of $433,000 being charged to salaries and employee benefits there
was a corresponding credit of $433,000 in other administrative expenses. The
information necessary to reclassify 2002's expense amounts is not available. In
addition, there was a 12% increase in the Australian foreign exchange rate as
discussed below. There were also regular annual increases in salaries.

DEPRECIATION, DEPLETION AND AMORTIZATION INCREASED 8% IN 2003 to $3,719,000
from $3,447,000 in 2002. During 2003, the Palm Valley gas reserves were
increased by approximately 35% to reflect the current

24

operating performance of the field and the capability of the field to produce
additional quantities of gas. This change reduced DD&A expense for 2003 by
approximately $207,000. In addition, based on a 2003 study, salvage value was
included in the calculation of DD&A. This change reduced DD&A expense by
approximately $177,000 for 2003. The decrease in DD&A was offset by the 12%
increase in the Australian exchange rate discussed below.

AUDITING, ACCOUNTING AND LEGAL EXPENSES INCREASED 45% from $278,000 in 2002
to $404,000 in 2003 because of an increase in MPC's and MPAL's audit fees and
the 12% increase in the Australian exchange rate discussed below.

ACCRETION EXPENSE WAS $243,000 IN 2003 which represents the accretion on
the Asset Retirement Obligation under SFAS 143 which was adopted effective July
1, 2002. The corresponding expense for 2002 would have been $261,000.

SHAREHOLDER COMMUNICATIONS COSTS INCREASED 13% to $171,000 in 2003 compared
to $152,000 in 2002 primarily because of MPAL's increased costs in satisfying
its statutory obligations in Australia as a public company and MPC's costs in
holding its Annual Meeting of Shareholders and an increase in its Nasdaq listing
fees.

OTHER ADMINISTRATIVE EXPENSES DECREASED 52% from $776,000 in 2002 to
$370,000 in 2003 primarily because of an increase in the amount of overhead that
MPAL, as operator, charged its partners during 2003. During 2003, MPAL also
changed its classification of salary costs as overhead charged to its joint
venture partners. Although this change of $433,000 resulted in an amount being
charged to salaries and employee benefits, there was a corresponding credit of
$433,000 in other administrative expenses. The information necessary to
reclassify 2002's expense amounts is not available. The increase in the amount
of overhead charged was partially offset by a 12% increase in the Australian
foreign exchange rate and increases in consultants expenses ($51,000), directors
fees ($52,000), insurance ($41,000) and rent ($51,000).

Income Taxes

INCOME TAX BENEFIT FOR 2003 WAS $774,000 compared to an income tax
provision of $39,000 for 2002. The components of income tax expense (benefit) in
thousands were as follows:

MPC's 2003 and 2002 income tax represents the 25% Canadian withholding tax
on its Kotaneelee net proceeds. The tax benefits of $1,202,000 in fiscal 2003
and $43,000 in fiscal 2002 relate primarily to tax deductions taken in
connection with financing current year exploration activities in Australia.

25

Exchange Effect

THE VALUE OF THE AUSTRALIAN DOLLAR RELATIVE TO THE U.S. DOLLAR INCREASED to
$.6737 at June 30, 2003 compared to $.5635 at June 30, 2002. This resulted in a
$3,508,000 credit to accumulated translation adjustments for fiscal 2003. The
20% increase in the value of the Australian dollar increased the reported asset
and liability amounts in the balance sheet at June 30, 2003 from the June 30,
2002 amounts. The annual average exchange rate used to translate MPAL's
operations in Australia for fiscal 2003 was $.5852, which is a 12% increase
compared to the $.5238 rate for fiscal 2002.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company does not have any significant exposure to market risk, other
than as previously discussed regarding foreign currency risk and the risk of
fluctuations in the world price of crude oil, as the only market risk sensitive
instruments are its investments in marketable securities. For the twelve months
ended June 30, 2004, oil sales represented approximately 28% of production
revenues, therefore, an increase in the world price of crude oil would only have
a modest positive impact on the Company's earnings, while a decrease in crude
oil prices would have a similar negative impact on earnings. Gas sales, which
represented approximately 72% of production revenues in 2004, are derived
primarily from the Palm Valley and Mereenie fields in the Northern Territory of
Australia and the gas prices are set according to long term contracts that are
subject to changes in the Australian Consumer Price Index. At June 30, 2004, the
carrying value of such investments including those classified as cash and cash
equivalents was approximately $24 million, which approximates the fair value of
the securities. Since the Company expects to hold the investments to maturity,
the maturity value should be realized.

26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Magellan Petroleum Corporation

We have audited the accompanying consolidated balance sheet of Magellan
Petroleum Corporation ("the Company") as of June 30, 2004, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of June 30,
2004, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

/s/ DELOITTE & TOUCHE LLP

October 13, 2004
Hartford, CT

27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Magellan Petroleum Corporation

We have audited the accompanying consolidated balance sheet of Magellan
Petroleum Corporation as of June 30, 2003 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the two years in the period ended June 30, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Magellan Petroleum Corporation at June 30, 2003 and the consolidated results of
its operations and its cash flows for each of the two years in the period ended
June 30, 2003, in conformity with U.S. generally accepted accounting principles.

As discussed in Notes 1 and 2 to the consolidated financial statements, in
2003 the Company changed its method of accounting for asset retirement
obligations.

/s/ Ernst & Young LLP

Stamford, Connecticut
September 19, 2003

28

MAGELLAN PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

See accompanying notes.
29

MAGELLAN PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes.
30

MAGELLAN PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED JUNE 30, 2004

See accompanying notes.
31

MAGELLAN PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.
32

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

Magellan Petroleum Corporation (the Company or MPC) is engaged in the sale
of oil and gas and the exploration for and development of oil and gas reserves.
At June 30, 2004 and 2003, MPC's principal asset was a 55% and 52.44%,
respectively, equity interest in its subsidiary, Magellan Petroleum Australia
Limited (MPAL), which has one class of stock that is publicly held and traded in
Australia. MPAL's major assets are two petroleum production leases covering the
Mereenie oil and gas field (35% working interest), one petroleum production
lease covering the Palm Valley gas field (52% working interest), and three
petroleum production leases covering the Nockatunga oil field (41% working
interest). Both fields are located in the Amadeus Basin in the Northern
Territory of Australia. MPC has a direct 2.67% carried interest in the
Kotaneelee gas field in the Yukon Territory of Canada.

On July 10, 2003, a subsidiary of Origin Energy, Sagasco Amadeus Pty.
Limited, agreed to exchange 1.2 million shares of MPAL for 1.3 million shares of
the Company's common stock. After the exchange was completed on September 2,
2003, MPC's interest in MPAL increased to 55%. In fiscal 2004 and 2003, MPC
purchased 24,000 (for $22,000) and 184,000 shares (for $174,000), respectively
of MPAL.

The accompanying consolidated financial statements include the accounts of
MPC and its majority owned subsidiary, MPAL, collectively the Company. All
intercompany transactions have been eliminated.

REVENUE RECOGNITION

The Company recognizes oil and gas revenue from its interests in producing
wells as oil and gas is produced and sold from those wells. Oil and gas sold is
not significantly different from the Company's share of production. Revenues
from the purchase, sale and transportation of natural gas are recognized upon
completion of the sale and when transported volumes are delivered. Shipping and
handling costs in connection with such deliveries are included in production
costs (cost of goods sold). Revenue under carried interest agreements is
recorded in the period when the net proceeds become receivable, measurable and
collection is reasonably assured. The time the net revenues become receivable
and collection is reasonably assured depends on the terms and conditions of the
relevant agreements and the practices followed by the operator. As a result, net
revenues from carried interests may lag the production month by one or more
months.

OIL AND GAS PROPERTIES

Oil and gas properties are located in Australia, New Zealand, Canada and
the United Kingdom. The Company follows the successful efforts method of
accounting for its oil and gas operations. Under this method, the costs of
successful wells, development dry holes and productive leases are capitalized
and amortized on a units-of-production basis over the life of the related
reserves. Cost centers for amortization purposes are determined on a
field-by-field basis. The Company records its proportionate share in its working
interest agreements in the respective classifications of assets, liabilities and
expenses. Unproved properties with significant acquisition costs are
periodically assessed for impairment in value, with any impairment charged to
expense. The successful efforts method also imposes limitations on the carrying
or book value of proved oil and gas properties. Oil and gas properties are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable. The Company estimates the
future undiscounted cash flows from the affected properties to determine the
recoverability of carrying amounts. In general, analyses are based on proved
developed reserves, except in circumstances where it is probable that additional
resources will be developed and contribute to cash flows in the future.

Exploratory drilling costs are initially capitalized pending determination
of proved reserves but are charged to expense if no proved reserves are found.
Other exploration costs, including geological and geophysical expenses,
leasehold expiration costs and delay rentals, are expensed as incurred.

Effective July 1, 2002, the Company adopted the provisions of SFAS 143,
"Accounting for Asset Retirement Obligations." SFAS 143 requires legal
obligations associated with the retirement of long-lived assets to be recognized
at their fair value at the time that the obligations are incurred. Upon initial
recognition
33

of a liability, that cost is capitalized as part of the related long-lived asset
(oil & gas properties) and amortized on a units-of-production basis over the
life of the related reserves. Accretion expense in connection with the
discounted liability is recognized over the remaining life of the related
reserves.

The estimated liability is based on the future estimated cost of plugging
the existing oil and gas wells and removing the surface facilities equipment in
the Palm Valley and Mereenie fields in the Northern Territory of Australia, the
Nockatunga fields in Queensland, the Aldinga fields in South Australia, and the
Kotaneelee fields in Southeast Yukon Territory of Canada. The liability is a
discounted liability using a credit-adjusted risk-free rate, based on the date
the liability was recorded and the geographic locations of the fields as
follows: Mereenie and Palm Valley, approximately 8%; Nockatunga, 6.25%; Aldinga,
6.3%; and Kotaneelee, 4.5%. A market risk premium was excluded from the estimate
of asset retirement obligations because the amount was not capable of being
estimated. Revisions to the liability could occur due to changes in the
estimates of these costs, acquisition of additional properties and as new wells
are drilled.

Effective July 1, 2002, the Company adopted the provisions of SFAS 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144
supersedes previous guidance related to the impairment or disposal of long-lived
assets. For long-lived assets to be held and used, it resolves certain
implementation issues of the former standards, but retains the basic
requirements of recognition and measurement of impairment losses. For long-lived
assets to be disposed of by sale, it broadens the definition of those disposals
that should be reported separately as discontinued operations. There was no
impact on the Company in adopting SFAS 144.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

LAND, BUILDINGS AND EQUIPMENT AND FIELD EQUIPMENT

Land, buildings and equipment and field equipment are carried at cost.
Depreciation and amortization are provided on a straight-line basis over their
estimated useful lives. The estimated useful lives are: buildings -- 40 years,
equipment and field equipment -- 3 to 15 years.

INVENTORIES

Inventories consist of crude oil in various stages of transit to the point
of sale and are valued at the lower of cost (determined on an average cost
basis) or market.

FOREIGN CURRENCY TRANSLATIONS

The accounts of MPAL, whose functional currency is the Australian dollar,
are translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52. The translation adjustment is included as a
component of stockholders' equity and comprehensive income (loss), whereas gain
or loss on foreign currency transactions is included in the determination of
income. All assets and liabilities are translated at the rates in effect at the
balance sheet dates. Revenues, expenses, gains and losses are translated using
quarterly weighted average exchange rates during the period. At June 30, 2004
and 2003, the Australian dollar was equivalent to U.S. $.70 and $.67,
respectively. The annual average exchange rate used to translate MPAL's
operations in Australia for the fiscal years 2004, 2003 and 2002 was $.72, $.59
and $.52, respectively.

ACCOUNTING FOR INCOME TAXES

The Company follows FASB Statement 109, the liability method in accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial

34

reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The Company records a valuation allowance for deferred tax
assets when it is more likely than not that such assets will not be recovered.

FINANCIAL INSTRUMENTS

The carrying value for cash and cash equivalents, accounts receivable,
marketable securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid short term investments with
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are carried at cost which approximates
market value. The components of cash and cash equivalents are as follows:

MARKETABLE SECURITIES

At June 30, 2004 and 2003, MPC had the following marketable securities
which are expected to be held until maturity:

EARNINGS PER SHARE

Earnings per common share are based upon the weighted average number of
common and common equivalent shares outstanding during the period. The only
reconciling item in the calculation of diluted EPS is the dilutive effect of
stock options which was computed using the treasury stock method. In 2004, the
Company had 595,000 stock options that were issued that had a strike price below
the year end stock price and resulted in 37,594 incremental diluted shares.
There were no other potentially dilutive items at June 30, 2004. The exercise
price of outstanding stock options exceeded the average market price of the
common stock during the years 2003 and 2002. The Company's basic and diluted
calculations of EPS are the same in 2003 and 2002 because the exercise of
options is not assumed in calculating diluted EPS, as the result would be
anti-dilutive.

STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its stock options. Under APB No. 25, because
the exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
See Note 4 Capital and Stock Options for the pro forma impact of stock options
on net income and earnings per share.

For the purpose of pro forma disclosures required by SFAS 123, "Accounting
for Stock Based Compensation," as amended by SFAS 148 "Accounting for
Stock-Based Compensation -- Transition and Disclosure," the estimated fair value
of the stock options is generally expensed in the year of grant since most of
the options are vested and immediately exercisable. See Note 4, Capital and
Stock Options for the pro forma impact of stock options on net income and
earnings per share.

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss at June 30, 2004 and 2003 was as
follows:

SALES TAXES

Government sales taxes related to MPAL's oil and gas production revenues
are collected by MPAL and remitted to the Australian government. Such amounts
are excluded from revenue and expenses.

36

2. OIL AND GAS PROPERTIES

MPC had the following amounts recorded in oil and gas properties at June
30, 2004 and 2003.

ACCUMULATED DEPLETION, DEPRECIATION AND AMORTIZATION

DEPLETION, DEPRECIATION AND AMORTIZATION

During the years ended June 30, 2004, 2003 and 2002, the depletion rate of
Mereenie and Palm Valley was 20.9%, 17.6% and 17.3%, respectively. During the
year ended June 30, 2004, the depletion rate for Nockatunga, Aldinga and
Kontaneelee was 9.5% 70.2% and 25%, respectively.

NOCKATUNGA ACQUISITION

During July 2003, MPAL reached an agreement with Voyager Energy Limited for
the purchase of its 40.936% working interest (38.703% net revenue interest) in
its Nockatunga assets in southwest Queensland. The assets comprise several
producing oil fields in PLs 33, 50 and 51 together with exploration acreage in
ATP 267P at a purchase price of approximately $1.4 million.

EXPLORATORY AND DRY HOLE COSTS

The 2004, 2003 and 2002 costs relate primarily to the geological and
geophysical work and seismic acquisition on MPAL's exploration permits. The
costs (in thousands) for MPAL by location were as follows:

See Note 11 commitments for a summary of MPAL's required and contingent
commitments for exploration expenditures for the five year period beginning July
1, 2004.

3. ASSET RETIREMENT OBLIGATIONS

Upon the adoption of SFAS 143 on July 1, 2002, the Company recorded a
discounted liability (asset retirement obligation) of $3,794,000, increased oil
and gas properties by $526,000 and recognized a one-time, cumulative effect
after-tax charge of $738,000 (net of $316,000 deferred tax benefit and minority
interest of $680,000) which has been reflected as a cumulative effect of
accounting change.

37

If the provisions of SFAS 143 had been adopted in prior years, net income
would have decreased by approximately $77,000 for the fiscal year ended June 30,
2002. The adoption of SFAS 143 decreased net income before cumulative effect of
accounting change by approximately $76,000 for the fiscal year ended June 30,
2003. The pro forma effects for the year ended June 30, 2002, assuming the
adoption of SFAS 143 as of July 1, 2001, had no impact on earnings per share.

A reconciliation of the Company's asset retirement obligations for the year
ended June 30, 2004 and 2003, is as follows:

During fiscal year 2003, two wells were plugged and abandoned in the
Mereenie field at a cost of approximately $86,000. The $27,000 difference
between the amount of the asset retirement obligation of $59,000 and the
abandonment costs of $86,000 is included in production costs.

4. CAPITAL AND STOCK OPTIONS

MPC's certificate of incorporation provides that any matter to be voted
upon must be approved not only by a majority of the shares voted, but also by a
majority of the stockholders casting votes present in person or by proxy and
entitled to vote thereon.

On December 8, 2000, MPC announced a stock repurchase plan to purchase up
to one million shares of its common stock in the open market. Through June 30,
2003, MPC had purchased 680,850 of its shares at a cost of approximately
$686,000, all of which were cancelled. No shares have been repurchased during
2004.

On July 10, 2003, a subsidiary of Origin Energy, Sagasco Amadeus Pty.
Limited, agreed to exchange 1.2 million shares of MPAL for 1.3 million shares of
the Company's common stock. The exchange was completed on September 2, 2003. The
fair value of the 1,300,000 shares on July 10, 2003 was $1,508,000, based on the
closing price of the Company's common stock on the Nasdaq SmallCap market on
that date.

The Company's Stock Option Plan provides for options to be granted at a
price of not less than fair value on the date of grant and for a term of not
greater than ten years. As of June 30, 2004, 205,000 options were available for
future issuance under the plan.

38

The following is a summary of option transactions for the three years ended
June 30, 2004:

SUMMARY OF OPTIONS OUTSTANDING AT JUNE 30, 2004

All of the options have been granted at the fair value at the date of
grant. Upon exercise of options, the excess of the proceeds over the par value
of the shares issued is credited to capital in excess of par value. No charges
have been made against income in accounting for options during the three year
period ended June 30, 2004.

The pro forma information regarding net income and earnings per share as
required by Statement 123, as amended, has been determined as if the Company had
accounted for its stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model.

Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. The assumptions used in the 2000
valuation model were: risk free interest rate -- 6.65%, expected life -- 5
years, expected volatility -- .419, expected dividend -- 0. The assumptions used
in the 2003 valuation model were: risk free interest rate -- 3.16%, expected
life -- 5 years, expected volatility -- .439, expected dividend -- 0.

The Company's pro forma information follows:

39

5. INCOME TAXES

Components of income before income taxes, minority interests and cumulative
effect of accounting change by geographic area (in thousands) are as follows:

Reconciliation of the provision for income taxes (in thousands) computed at
the Australian statutory rate to the reported provision for income taxes is as
follows:

- ---------------

(a) MPC's income tax provisions represent the 25% Canadian withholding tax on
its Kotaneelee gas field carried interest net proceeds.

40

Significant components of the Company's deferred tax assets and liabilities
were as follows:

The net deferred tax liabilities at June 30, 2004 and 2003, respectively,
consist of deferred tax liabilities of $2,068,000 and $3,192,000, primarily
relating to the deduction of acquisition and development costs which are
capitalized for financial statement purposes, offset by deferred tax assets of
$1,665,000 and $1,421,000, primarily relating to asset retirement obligations
which will result in tax deductions when paid. The tax benefits of $929,000 in
fiscal 2004 and $1,202,000 in fiscal 2003 relate primarily to additional tax
benefits taken in connection with financing prior year exploration activities in
Australia. These benefits were reserved in prior years and as a result of the
benefits becoming recoverable during the current year, such reserves were
reversed.

UNITED STATES

At June 30, 2004, the Company had approximately $12,216,000 and $853,000 of
net operating loss carry forwards for federal and state income tax purposes,
respectively, which are scheduled to expire periodically between the years 2004
and 2023. Of this amount, MPC has federal loss carry forwards that expire as
follows: $265,000 in 2007, $2,055,000 in 2008, $408,000 in 2020, $52,000 in 2021
and 110,000 in 2023. MPAL's U.S. subsidiary has federal loss carry forwards that
expire as follows: $220,000 in 2005, $2,392,000 in 2006, $1,669,000 in 2010,
$1,764,000 in 2011, $2,855,000 in 2012, $229,000 in 2013, $96,000 in 2019,
$25,000 in 2021, $73,000 in 2022 and $2,000 in 2023 and $1,000 in 2024. MPC also
has approximately $223,000 of foreign tax credit carryovers, which are scheduled
to expire periodically between the years 2005 and 2006. MPC's state loss carry
forwards expire periodically between the years 2005 and 2024. For financial
reporting purposes, a valuation allowance has been recognized to offset the
deferred tax assets related to those carry forwards and other deductible
temporary differences.

6. RELATED PARTY AND OTHER TRANSACTIONS

G&O'D INC, a firm that provides accounting and administrative services,
office facilities and support staff to MPC, was paid $24,723, $20,830 and
$34,120 in fees for fiscal years 2004, 2003 and 2002 respectively. James R.
Joyce, the former President and Chief Financial Officer of MPC, is the owner of
G&O'D INC. Mr. Joyce retired from his position effective June 30, 2004.
Effective January 1, 2000, Mr. Joyce became a paid officer of MPC and received
an annual salary of $175,000 for calendar year 2004 ($175,000 for 2003 and
$160,000 for 2002). Mr. Timothy L. Largay, a director of the Company is a member
of the law firm of Murtha Cullina LLP, which firm was paid fees of $120,563,
$69,459 and $36,597 for fiscal years 2004, 2003 and 2002, respectively.

41

7. LEASES

At June 30, 2004, future minimum rental payments applicable to MPC's and
MPAL's non-cancelable operating (office) lease were $163,000, $170,000,
$177,000, $183,000, and $165,000 for 2005, 2006, 2007, 2008 and 2009,
respectively.

Operating lease rental expenses for each of the years ended June 30, 2004,
2003 and 2002 were $311,497, $239,026 and $188,494, respectively.

On August 6, 2004, MPC entered into a four-year operating lease of its
corporate offices, with estimated annual payments of $24,000.

8. PENSION PLAN

MPAL maintains a defined benefit pension plan and contributes to the plan
at rates which (based on actuarial determination) are sufficient to meet the
cost of employees' retirement benefits. No employee contributions are required.
Plan participants are entitled to defined benefits on normal retirement, death
or disability. MPAL is only legally obligated to pay employees their pro rata
share of the fair value of plan assets. However, MPAL is committed to making up
any shortfall in the plan's assets to meet payments to employees as they become
due. On August 31, 2004, the MPAL Board formally terminated the Plan. The
termination was effective as of June 30, 2004 and a settlement and curtailment
loss of $1,237,425 was recognized for the year ended June 30, 2004.

The following table sets forth the actuarial present value of benefit
obligations and funded status for the MPAL pension plan:

The net pension expense for the MPAL pension plan was as follows:

Significant assumptions used in determining pension cost and the related
obligations were as follows:

At June 30, 2004, Plan assets were held 98% in equity mutual funds and 2%
in cash. Such assets are held for distribution to plan participants. As a result
of the Plan's termination, the Plan assets are expected to be distributed during
2005 with no additional pension plan expenditures anticipated.

9. SEGMENT INFORMATION

The Company has two reportable segments, MPC and its majority owned
subsidiary, MPAL. Although each company is in the same business, MPAL is also a
publicly held company with its shares traded on the Australian Stock Exchange.
MPAL issues separate audited consolidated financial statements and operates
independently of MPC.

Segment information (in thousands) for the Company's two operating segments
is as follows:

- ---------------

(1) Equity in earnings of MPAL of $670,000 is reported net of $378,000 in oil
and gas property depletion related to MPC book value of oil and gas property
and resulting from its step reporting of MPAL.

44

10. GEOGRAPHIC INFORMATION

As of each of the stated dates, the Company's revenue, operating income,
net income or loss and identifiable assets (in thousands) were geographically
attributable as follows:

Substantially all (99% in 2004, 99% in 2003 and 92% in 2002) of MPAL's gas
sales were to the Power and Water Corporation (PAWC) of the Northern Territory
of Australia (NTA). All of MPAL's crude oil production was sold to the Mobil
Port Stanvac Refinery near Adelaide during the three years ended June 30, 2004.

45

11. COMMITMENTS

We do not use off-balance sheet arrangements such as securitization of
receivables with any unconsolidated entities or other parties. The Company does
not engage in trading or risk management activities and does not have material
transactions involving related parties.

GAS SUPPLY CONTRACTS

In 1983, the Palm Valley Producers (MPAL and Santos) commenced the sale of
gas to Alice Springs under a 1981 agreement. In 1985, the Palm Valley Producers
and Mereenie Producers signed agreements for the sale of gas to PAWC for use in
PAWC's Darwin generating station and at a number of other generating stations in
the Northern Territory. The gas is being delivered via the 922-mile Amadeus
Basin to Darwin gas pipeline which was built by an Australian consortium. Since
1985, there have been several additional contracts for the sale of Mereenie gas.
The Palm Valley Darwin contract expires in the year 2012 and Mereenie contracts
expire in the year 2009. Under the 1985 contracts, there is a difference in
price between Palm Valley gas and most of the Mereenie gas for the first 20
years of the 25 year contracts which takes into account the additional cost to
the pipeline consortium to build a spur line to the Mereenie field and increase
the size of the pipeline from Palm Valley to Mataranka. The price of gas under
the Palm Valley and Mereenie gas contracts is adjusted quarterly to reflect
changes in the Australian Consumer Price Index.

At June 30, 2004, MPAL's commitment to supply gas under the above
agreements was as follows:

MPC owns a 2.67% carried interest in the Kotaneelee gas field in the Yukon
Territory which has been in production since February 1991 with two producing
wells. For financial statement purposes in fiscal 1987 and 1988, MPC wrote down
its costs relating to the Kotaneelee field to a nominal value because of the
uncertainty as to the date when sales of Kotaneelee gas might begin and the
immateriality of the carrying value of the investment. Since October 1989, the
field has been the subject of litigation, because the carried interest owners
(including MPC) believed that the working interest parties had not adequately
pursued the attainment

46

of contracts for the sale of Kotaneelee gas. A decision in the litigation was
rendered on September 14, 2001. The decision of the trial court was generally
favorable to the Company but the decision was appealed by all of the parties.

During September 2003, the litigants in the Kotaneelee litigation entered
into a settlement agreement. In October 2003 the Company received approximately
$851,000, after Canadian withholding taxes and reimbursement of certain past
legal costs. The plaintiffs terminated all litigation against the defendants
related to the field, including the claim that the defendants failed to fully
develop the field. Since each party agreed to bear its own legal costs, there
were no taxable costs assessed against any of the parties.

The components of the settlement payment, which was recorded in September
2003 are as follows:

Gas sales................................................... $1,135,000
Interest income............................................. 102,000
Canadian withholding taxes.................................. (386,000)
----------
Total....................................................... $ 851,000
==========

The Kotaneelee settlement agreement provides that the carried interest
partners will share in the abandonment of the Kotaneelee field wells and
facilities.

12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary (in thousands, except for per share amounts) of
the quarterly results of operations for the years ended June 30, 2004 and 2003:

47

13. SUPPLEMENTARY OIL AND GAS DISCLOSURE (UNAUDITED)

The consolidated data presented herein include estimates which should not
be construed as being exact and verifiable quantities. The reserves may or may
not be recovered, and if recovered, the cash flows there from, and the costs
related thereto, could be more or less than the amounts used in estimating
future net cash flows. Moreover, estimates of proved reserves may increase or
decrease as a result of future operations and economic conditions, and any
production from these properties may commence earlier or later than anticipated.

ESTIMATED NET QUANTITIES OF PROVED DEVELOPED AND PROVED OIL AND GAS RESERVES:

- ---------------

* The amount of proved reserves applicable to the Palm Valley and Mereenie
fields only reflects the amount of gas committed to specific contracts.
Approximately 44.9% of reserves are attributable to minority interests at
June 30, 2004 (47.6% for 2003 and 48% for 2002).

** On January 19, 2001, MPC's carried interest account in the Kotaneelee reached
undisputed payout status.

COSTS OF OIL AND GAS ACTIVITIES (IN THOUSANDS):

48

CAPITALIZED COSTS SUBJECT TO DEPLETION, DEPRECIATION AND AMORTIZATION (DD&A)
(IN THOUSANDS):

DISCOUNTED FUTURE NET CASH FLOWS:

The following is the standardized measure of discounted (at 10%) future net
cash flows (in thousands) relating to proved oil and gas reserves during the
three years ended June 30, 2004. At June 30, 2004, approximately 44.9% (47.6%
for 2003 and 48.% for 2002) of the reserves and the respective discounted future
net cash flows are attributable to minority interests.

49

The following are the principal sources of changes in the above
standardized measure of discounted future net cash flows (in thousands):

ADDITIONAL INFORMATION REGARDING DISCOUNTED FUTURE NET CASH FLOWS:

AUSTRALIA

Reserves -- Natural Gas

Future net cash flows from net proved gas reserves in Australia were based
on MPAL's share of reserves in the Palm Valley and Mereenie fields which has
been limited to the quantities of gas committed to specific contracts and the
ability of the fields to deliver the gas in the contract years. Gas prices are
computed on the prices set forth in the respective gas sales contracts at June
30, 2004.

Reserves and Costs -- Oil

At June 30, 2004, future net cash flows from the net proved oil reserves in
Australia were calculated by the Company. Estimated future production and
development costs were based on current costs and rates for each of the three
years ended at June 30, 2004. All of the crude oil reserves are developed
reserves. Undeveloped proved reserves have not been estimated since there are
only tentative plans to drill additional wells.

Income Taxes

Future Australian income tax expense applicable to the future net cash
flows has been reduced by the tax effect of approximately A.$22,005,000,
A.$$25,658,000 and A.$13,982,000 in unrecouped capital expenditures at June 30,
2004, 2003 and 2002, respectively. The tax rate in computing Australian future
income tax expense was 30%.

CANADA

Reserves and Costs

On January 19, 2001, the Company's carried interest account in the
Kotaneelee gas field reached undisputed payout status. During the 4th quarter of
the fiscal year 2001, the Company began accruing its share of Kotaneelee net
proceeds as income. Future net cash flows from net proved gas reserves in Canada
were based on the Company's share of reserves in the Kotaneelee gas field which
was prepared by independent petroleum consultants, Paddock Lindstrom &
Associates Ltd., Calgary, Canada. The estimates were based on the selling price
of gas Can. $5.90 at June 30, 2004 (Can. $4.61 -- 2003) and estimated future
production and development costs at June 30, 2004.

50

RESULTS OF OPERATIONS

The following are the Company's results of operations (in thousands) for
the oil and gas producing activities during the three years ended June 30, 2004:

- ---------------

* Income tax provision Australia 30%. Americas 25% due to a 25% Canadian
withholding tax on Kotaneelee gas sales.

** Minority interests 44.9% in 2004, 47.6% in 2003 and 48.0% in 2002.

ITEM 9.

PREVIOUS INDEPENDENT ACCOUNTANTS

On August 15, 2003, the Audit Committee of the Board of Directors of the
Company determined to dismiss Ernst & Young LLP as the Company's independent
auditors, effective upon completion of the annual audit for the fiscal year
ended June 30, 2003. This decision was subject to the condition that Magellan
Petroleum Australia Limited (MPAL), the Company's majority owned subsidiary,
make a similar determination to dismiss Ernst & Young as its independent
auditors. Ernst & Young had served as the Company's independent auditors for
many years. On September 4, 2003, the audit committee of the Board of Directors
of MPAL made a similar determination to dismiss Ernst & Young as its independent
accountants, effective upon the completion of the annual audit for the fiscal
year ended June 30, 2003.

The reports of Ernst & Young on the Company's financial statements for the
two fiscal years ended June 30, 2003 did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to audit scope or
accounting principles.

Ernst & Young LLP was dismissed on September 26, 2003, upon filing of the
Company's annual report on Form 10-K for the fiscal year ended June 30, 2003.
The report of Ernst & Young LLP was dated September 19, 2003.

51

In connection with the audits of the Company's financial statements for
each of the two fiscal years ended June 30, 2003 and through September 19, 2003,
there were no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to Ernst & Young's satisfaction, would have
caused Ernst & Young to make reference to the matter in their report. In
addition, there were no "reportable events" as that term is described in Item
304(a)(1)(v) of Regulation S-K.

NEW INDEPENDENT ACCOUNTANTS

Effective October 30, 2003, the Audit Committee of the Company's Board of
Directors retained Deloitte & Touche LLP as the Company's new independent
auditors for the fiscal year ended June 30, 2004.

During the Company's two most recent fiscal years and the subsequent
interim period(s) prior to engaging Deloitte & Touche LLP, neither the Company
nor anyone acting on behalf of the Company consulted Deloitte & Touche LLP
regarding (i) either (a) the application of accounting principles to a specified
transaction, either completed or proposed, or (b) the type of audit opinion that
might be rendered on the Company's financial statements; or (ii) any matter that
was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv)
of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or
a reportable event (as described in paragraph 304(A)(1)(v) of Regulation S-K).
In addition, during the Company's two most recent fiscal years and the
subsequent interim period(s) prior to engaging Deloitte & Touche LLP, no written
report was provided by Deloitte & Touche LLP to the Company and no oral advice
was provided that Deloitte & Touche LLP concluded was an important factor
considered by the Company in reaching a decision as to any accounting, auditing,
or financial reporting issue.

ITEM 9A. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of the Company's management, including Daniel J. Samela, the
Company's President, Chief Executive Officer and Chief Financial and Accounting
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule
15d-15(e) promulgated under the Securities and Exchange Act of 1934) as of June
30, 2004. Based on this evaluation, the Company's President concluded that the
Company's disclosure controls and procedures were effective such that the
material information required to be included in the Company's Securities and
Exchange Commission reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms relating to the
Company, including its consolidated subsidiaries, and was made known to him by
others within those entities, particularly during the period when this report
was being prepared.

INTERNAL CONTROL OVER FINANCIAL REPORTING.

There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fourth fiscal quarter of the Company's fiscal
year ended June 30, 2004 that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

PART III

For information concerning Item 10 -- Directors and Executive Officers of
the Company, Item 11 -- Executive Compensation, Item 12 -- Security Ownership of
Certain Beneficial Owners and Management, and Related Stockholder Matters Item
13 -- Certain Relationships and Related Transactions and Item 14 -- Principal
Accounting Fees and Services, see the Proxy Statement of Magellan Petroleum
Corporation relative
52

to the Annual Meeting of Stockholders for the fiscal year ended June 30, 2004,
to be filed with the Securities and Exchange Commission, which information is
incorporated herein by reference. For information concerning the Executive
Officers of the Company, see Part I.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about the Company's common stock
that may be issued upon the exercise of options and rights under the Company's
existing equity compensation plan as of June 30, 2004.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements.

The financial statements listed below and included under Item 8 are filed
as part of this report.

(2) Financial Statement Schedules.

All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and the notes thereto.

(c) Exhibits.

The following exhibits are filed as part of this report:

ITEM NUMBER

2. Plan of acquisition, reorganization, arrangement, liquidation or
succession.

None.

3. Articles of Incorporation and By-Laws.

(a) Restated Certificate of Incorporation as filed on May 4, 1987 with the
State of Delaware and Amendment of Article Twelfth as filed on February 12, 1988
with the State of Delaware filed as exhibit 4(b)

53

to Form S-8 Registration Statement, filed on January 14, 1999, are incorporated
herein by reference. Certificate of Amendment to Certificate of Incorporation as
filed on December 26, 2000 with the State of Delaware, filed as Exhibit 3(a) to
the Company's quarterly report on Form 10-Q filed on February 13, 2001 and
incorporated herein by reference.

(b) Copy of the By-Laws, as amended on July 22, 2004 is filed herein.

4. Instruments defining the rights of security holders, including
indentures.

None.

9. Voting Trust Agreement.

None.

10. Material contracts.

(a) Petroleum Lease No. 4 dated November 18, 1981 granted by the Northern
Territory of Australia to United Canso Oil & Gas Co. (N.T.) Pty Ltd. filed as
Exhibit 10(a) to Annual Report on Form 10-K for the year ended June 30, 1999
(File No. 001-5507) is incorporated herein by reference.

(b) Petroleum Lease No. 5 dated November 18, 1981 granted by the Northern
Territory of Australia to Magellan Petroleum (N.T.) Pty. Ltd. filed as Exhibit
10(b) to Annual Report on Form 10-K for the year ended June 30, 1999 (File No.
001-5507) is incorporated herein by reference.

(c) Gas Sales Agreement between The Palm Valley Producers and The Northern
Territory Electricity Commission dated November 11, 1981 filed as Exhibit 10(c)
to Annual Report on Form 10-K for the year ended June 30, 1999 (File No.
001-5507) is incorporated herein by reference.

(d) Palm Valley Petroleum Lease (OL3) dated November 9, 1982 filed as
Exhibit 10(d) to Annual Report on Form 10-K for the year ended June 30, 1999
(File No. 001-5507) is incorporated herein by reference.

(e) Agreements relating to Kotaneelee.

(1) Copy of Agreement dated May 28, 1959 between the Company et al and
Home Oil Company Limited et al and Signal Oil and Gas Company filed as
Exhibit 10(e) to Annual Report on Form 10-K for the year ended June 30,
1999 (File No. 001-5507) is incorporated herein by reference.

(2) Copies of Supplementary Documents to May 28, 1959 Agreement (see
(e)(1) above), dated June 24, 1959, consisting of Guarantee by Home Oil
Company Limited and Pipeline Promotion Agreement filed as Exhibit 10(e) to
Annual Report on Form 10-K for the year ended June 30, 1999 (File No.
001-5507) is incorporated herein by reference.

(3) Copy of Modification to Agreement dated May 28, 1959 (see (e)(1)
above), made as of January 31, 1961. Filed as Exhibit 10(e) to Annual
Report on Form 10-K for the year ended June 30, 1999 (File No. 001-5507) is
incorporated herein by reference.

(4) Copy of Letter Agreement dated February 1, 1977 between the
Company and Columbia Gas Development of Canada, Ltd. for operation of the
Kotaneelee gas field filed as Exhibit 10(e) to Annual Report on Form 10-K
for the year ended June 30, 1999 (File No. 001-5507) is incorporated herein
by reference.

(f) Palm Valley Operating Agreement dated April 2, 1985 between Magellan
Petroleum (N.T.) Pty. Ltd., C. D. Resources Pty. Ltd., Farmout Drillers N.L.,
Canso Resources Limited, International Oil Proprietary, Pancontinental Petroleum
Limited, I.E.D.C. Australia Pty. Ltd., Southern Alloys Ventures Pty. Limited and
Amadeus Oil N.L. filed as Exhibit 10(f) to Annual Report on Form 10-K for the
year ended June 30, 1999 (File No. 001-5507) is incorporated herein by
reference.

(g) Mereenie Operating Agreement dated April 27, 1984 between Magellan
Petroleum (N.T.) Pty., United Oil & Gas Co. (N.T.) Pty. Ltd., Canso Resources
Limited, Oilmin (N.T.) Pty. Ltd., Krewliff

54

Investments Pty. Ltd., Transoil (N.T.) Pty. Ltd. and Farmout Drillers NL and
Amendment of October 3, 1984 to the above agreement filed as Exhibit 10(g) to
Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 001-5507)
is incorporated herein by reference.

(h) Palm Valley Gas Purchase Agreement dated June 28, 1985 between Magellan
Petroleum (N.T.) Pty. Ltd., C. D. Resources Pty. Ltd., Farmout Drillers N.L.,
Canso Resources Limited, International Oil Proprietary, Pancontinental Petroleum
Limited, IEDC Australia Pty Limited, Amadeus Oil N.L., Southern Alloy Venture
Pty. Limited and Gasgo Pty. Limited. Also included are the Guarantee of the
Northern Territory of Australia dated June 28, 1985 and Certification letter
dated June 28, 1985 that the Guarantee is binding. All of the above were filed
as Exhibit 10(h) to Annual Report on Form 10-K for the year ended June 30, 1999
(File No. 001-5507) and are incorporated herein by reference.

(i) Mereenie Gas Purchase Agreement dated June 28, 1985 between Magellan
Petroleum (N.T.) Pty. Ltd., United Oil & Gas Co. (N.T.) Pty. Ltd., Canso
Resources Limited, Moonie Oil N.L., Petromin No Liability, Transoil No
Liability, Farmout Drillers N.L., Gasgo Pty. Limited, The Moonie Oil Company
Limited, Magellan Petroleum Australia Limited and Flinders Petroleum N.L. Also
included is the Guarantee of the Northern Territory of Australia dated June 28,
1985. All of the above were filed as Exhibit 10(i) to Annual Report on Form 10-K
for the year ended June 30, 1999 (File No. 001-5507) and are incorporated herein
by reference.

(j) Agreements dated June 28, 1985 relating to Amadeus Basin -Darwin
Pipeline which include Deed of Trust Amadeus Gas Trust, Undertaking by the
Northern Territory Electric Commission and Undertaking from the Northern
Territory Gas Pty Ltd. filed as Exhibit 10(j) to Annual Report on Form 10-K for
the year ended June 30, 1999 (File No. 001-5507) is incorporated herein by
reference.

(k) Agreement between the Mereenie Producers and the Palm Valley Producers
dated June 28, 1985 filed as Exhibit 10(k) to Annual Report on Form 10-K for the
year ended June 30, 1999 (File No. 001-5507) is incorporated herein by
reference.

(l) Form of Agreement pursuant to Article SIXTEENTH of the Company's
Certificate of Incorporation and the applicable By-Law to indemnify the
Company's directors and officers filed as Exhibit 10(l) to Annual Report on Form
10-K for the year ended June 30, 1999 (File No. 001-5507) is incorporated herein
by reference.

(m) 1998 Stock Option Plan, filed as Exhibit 4(a) to Form S-8 Registration
Statement on January 14, 1999, filed as Exhibit 10(m) to Annual Report on Form
10-K for the year ended June 30, 1999 (File No. 001-5507) is incorporated herein
by reference.

(n) 1989 Stock Option Plan filed as Exhibit O to Annual Report on Form 10-K
for the year ended June 30, 2002 (File No. 001-5507) is incorporated herein by
reference.

(o) Palm Valley Gas Purchase Agreement Deed of Amendment dated January 17,
2003 filed as Exhibit 10(p) to Annual Report on Form 10-K for the year ended
June 30, 2003 (file No. 001-5507) is incorporated herein by reference.

(p) Share sale agreement dated July 10, 2003 between Sagasco Amadeus Pty.
Limited and Magellan Petroleum Corporation filed as Exhibit 10(p) to Annual
Report on Form 10-K for the year ended June 30, 2003 (File No. 001-5507) is
incorporated herein by reference.

(q) Registration Rights Agreement date September 2, 2003 between 2003
between Sagasco Amadeus Pty. Limited and Magellan Petroleum Corporation filed as
Exhibit 10(p) to Annual Report on Form 10-K for the year ended June 30, 2003
(File No. 001-5507) is incorporated herein by reference.

(r) Employment Agreement between Daniel J. Samela and Magellan Petroleum
Corporation effective March 1, 2004, filed as Exhibit 10(1) to Quarterly Report
on Form 10-Q for the quarter ended March 31, 2004 (File No. 001-5507) is
incorporated herein by reference.

(s) Palm Valley Renewal of Petroleum Lease dated November 6, 2003 is filed
herein.

55

11. Statement re computation of per share earnings.

Not applicable.

12. Statement re computation of ratios.

None.

13. Annual report to security holders, Form 10-Q or quarterly report to
security holders.

Not applicable.

16. Letter re change in certifying accountant.

Letter of Ernst & Young LLP dated August 27, 2003 filed as exhibit 16 to
Current Report on Form 8-K filed on August 27, 2003 (File No. 001-5507) is
incorporated herein by reference.

18. Letter re change in accounting principles.

None.

21. Subsidiaries of the registrant.

Filed herein.

22. Published report regarding matters submitted to vote of security
holders.

Not applicable.

23. Consent of experts and counsel.

1. Consent of Deloitte & Touche LLP is filed herein.

2. Consent of Ernst & Young LLP is filed herein.

3. Consent of Paddock Lindstrom & Associates, Ltd. is filed herein.

24. Power of attorney.

None.

31. Rule 13a-14(a) Certifications.

Certification of Daniel J. Samela, Chief Executive Officer and Chief
Financial and Accounting Officer, pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, is filed herein.

32. Section 1350 Certifications.

Certification of Daniel J. Samela, President, Chief Executive Officer and
Chief Financial and Accounting Officer, pursuant to 18 U.S.C. sec. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is filed
herein.

(d) Financial Statement Schedules.

None.

56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

MAGELLAN PETROLEUM CORPORATION
(Registrant)

/s/ DANIEL J. SAMELA
--------------------------------------
Daniel J. Samela
President, Chief Executive Officer,
Chief Financial and Accounting Officer

Dated: October 13, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

/s/ DANIEL J. SAMELA President, Chief Executive Dated: October 13, 2004
- -------------------------------------- Officer, Chief Financial
Daniel J. Samela and Accounting Officer

/s/ DONALD V. BASSO Director Dated: October 13, 2004
- --------------------------------------
Donald V. Basso

/s/ TIMOTHY L. LARGAY Director Dated: October 13, 2004
- --------------------------------------
Timothy L. Largay

/s/ WALTER MCCANN Director Dated: October 13, 2004
- --------------------------------------
Walter McCann

/s/ RONALD P. PETTIROSSI Director Dated: October 13, 2004
- --------------------------------------
Ronald P. Pettirossi

57

INDEX TO EXHIBITS

3(b) By laws as amended on July 22, 2004.
10(s) Palm Valley Renewal of Petroleum Lease dated November 6,
2003.
21. Subsidiaries of the Registrant.
23. 1. Consent of Deloitte & Touche LLP
2. Consent of Ernst & Young LLP
3. Consent of Paddock Lindstrom & Associates, Ltd.
31. Rule 13a-14(a) Certifications.
32. Section 1350 Certifications.