United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-31900

AMERICAN OIL & GAS INC.

(Exact name of registrant as specified in its charter)

Nevada		88-0451554
(State or jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1050 17th Street, Suite 2400, Denver, CO		80265
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (303) 991-0173

Indicate by check mark whether the issuer (i) 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o {Files Not required}.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o*		Smaller reporting company þ
				(*Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date:

The total shares of $.001 Par Value Common Stock outstanding at June 7, 2010 were 60,814,656.

 

 

EXPLANATORY NOTES

American Oil & Gas Inc. (the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, filed with the Securities and Exchange Commission (the “SEC”) on May 17, 2010 (the “Original 10-Q”). This Amendment No. 1 makes the following changes to the Original 10-Q:

	1.		We amend the cover to classify the Company as a “smaller reporting company” rather than a “non-accelerated company.”
	2.		We add to Item 6’s list of exhibits the exhibit 10(i) Asset Sales Agreement dated March 19, 2010 for the property sale closed March 31, 2010, between American Oil & Gas Inc and North Finn LLC (the Sellers) and Chesapeake AEZ Exploration, LLC (the Buyer). There is no affiliation between us and the Buyer.
	3.		We include Exhibit 10(i) in this Amendment No. 1.
	4.		We added to Item 2’s first sentence the words “from Chesapeake AEZ Exploration, LLC, which is a unit of publicly held Chesapeake Energy Corporation.”
	5.		In Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Original 10-Q, we had included a discussion of pro-forma revenues and expenses as if the properties that were sold on March 31, 2010 had instead been sold on January 1, 2010 or on January 1, 2009. In this Amendment, we add after that discussion three paragraphs on pro forma net income and earnings per share.
	6.		We update Item 6’s list of exhibits to include the certifications specified in Rule 13a-14(a) under the Securities Exchange Act of 1934 required to be filed with this Amendment.

Except for the changes listed above, this Amendment No. 1 makes no other changes to the Original 10-Q. This Amendment No. 1 does not reflect events occurring after the filing of the Original 10-Q or modify or update those disclosures affected by subsequent events.

The aggregate market value of our common stock held by non-affiliates on June 30, 2009 was $31,658,346 when our common stock closed at $1.00 per share. Because such aggregate market value was below $50,000,000 on June 30, 2009, we qualify as a smaller reporting company for the filing of quarterly reports on Form 10-Q for the quarterly periods ending March 31, June 30 and September 30, 2010.

Chesapeake AEZ Exploration LLC is an affiliate of Chesapeake Exploration LLC, the party originally named in our Form 8-K filed February 26, 2010 as the buyer in the letter of intent for the sale of the properties. Both companies are units of publicly held Chesapeake Energy Corporation.

AMERICAN OIL & GAS INC.
FORM 10-Q
INDEX

PART I. FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			4
PART II. OTHER INFORMATION
Item 6. Exhibits			7
Signatures			7
Exhibit 10(i)
Exhibit 31.1
Exhibit 31.2

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On March 31, 2010, we sold all of our oil and gas interests in the Fetter and Krejci projects located in the Power River Basin, Wyoming and received approximately $46.2 million in sales proceeds from Chesapeake AEZ Exploration, LLC, which is a unit of publicly held Chesapeake Energy Corporation. Our primary focus area is our Goliath Bakken and Three Forks focused project located in the Williston Basin, North Dakota where we control approximately 68,500 net acres.

The Williston Basin has become one of the most actively drilled basins in the continental United States. Recent advancements in drilling, completion and stimulation technologies used by other operators have resulted in commercially successful Bakken and Three Forks wells. We have recently commenced drilling operations that utilize these advanced technologies.

In December 2009, we commenced drilling the Tong Trust 1-20H Bakken well pursuant to a participation agreement with Halliburton Energy Services, Inc. (“Halliburton”). Halliburton paid us approximately $1.1 million in cash and paid 100% of our share of costs to drill and complete the Tong Trust 1-15H well. In return, Halliburton earned a 25% working interest in approximately 30,000 of our net acres in the eastern portion of our Goliath project, resulting in our current ownership in the Goliath project area of approximately 68,500 net acres. We now own a 27.1% working interest and an approximate 21.7% net revenue interest in the Tong Trust well. In mid-March 2010, the Tong Trust well was placed on production at an initial 24 hour production rate of 1,421 barrels of oil equivalent (“BOE”) per day (1,114 barrels of oil and 1.84 MMcf of natural gas).

In February 2010, we commenced drilling the Ron Viall 1-25H Bakken well at Goliath and in mid-May, this well was placed on production at an initial 24 hour production rate of 2,844 BOE (1,981 barrels of oil and 5.2 MMcf of natural gas). This well was drilled outside of the area of mutual interest with Halliburton. We own a 95% working interest and an approximate 76% net revenue interest in this well.

We now have a two-rig continual drilling program for 2010. Ensign rig 24 is currently drilling the Bergstrom 15-23H Bakken well (95% WI) located in T156N-R98W Sections 23 and 14, Williams County, and Nabors rig 486 is drilling the Johnson 15-35H Bakken well (approximate 83% WI), located in T156N-R98W Sections 35 and 26, Williams County. Including wells already drilled, we expect to drill a total of ten to twelve gross (seven to nine net) wells during 2010 and expect that at least one of these wells will target the Three Forks formation.

We are in the process of evaluating the productive potential of another area located in the Rocky Mountain region that we call our Bigfoot project. This is a shallow natural gas project where we currently control approximately 213,000 gross (131,000 net) acres. We are primarily targeting a formation that is less that 2,000’ deep and have drilled test wells for less than $100,000 per well. During 2010, we expect to continue to drill test wells as we evaluate the commercial viability of this area.

Results of Operations

The following discussion should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. It also should be read in conjunction with the financial statements and notes thereto included in this report.

The Quarter Ended March 31, 2010 Compared with the Quarter Ended March 31, 2009

For the quarter ended March 31, 2010, we recorded net income of $28,034,714 ($0.49 per share, basic and $0.46 per share, diluted), as compared to a net loss attributable to common stockholders of $3,891,363 ($0.08 loss per common share, basic and diluted) for the quarter ended March 31, 2009. The $32 million increase in net income is primarily due to a $36.4 million pre-tax gain on the sale of substantially all of our Wyoming oil and gas interests on March 31, 2010. The increase in net income is also attributable in part to an $8.3 million change in deferred tax asset valuation allowances, with a $7 million reduction in valuation allowance for the 2010 quarter compared with a $1.2 million increase in valuation allowance in the 2009 quarter. There was no impairment expense in the 2010 quarter compared with a $2,100,000 impairment in the 2009 quarter. Oil production and oil and gas prices were significantly greater in the 2010 period compared with the 2009 period as shown in the table below.

For the quarter ended March 31, 2010, we recorded total oil and gas revenues of $859,971 compared with $305,674 for the quarter ended March 31, 2009. The $554,297 increase from the 2009 quarter is attributable to a 107% increase in oil production and significantly higher oil and gas prices. Oil and gas sales and production costs and other components of income from operations are summarized in the following table:

		Three months ended
		March 31,
		2010				2009
Oil sold (barrels)			7,820				3,778
Average oil price		$	71.14			$	33.83
Oil revenue		$	556,342			$	127,809
Gas sold (mcf)			45,490				51,414
Average gas price		$	6.67			$	3.46
Gas revenue		$	303,629			$	177,865
Total oil and gas revenues		$	859,971			$	305,674
Less lease operating expenses			(241,409	)			(299,675	)
Less oil & gas amortization expense			(246,000	)			(113,000	)
Less accretion of asset retirement obligation			(10,213	)			(9,653	)
Less impairment of oil and gas assets			—				(2,100,000	)
Plus gain on sale of oil and gas properties			36,400,000				—
Income (loss) from oil & gas operations			36,762,349				(2,216,654	)
Less depreciation of office facilities			(19,701	)			(19,143	)
Less amortization of other intangible asset			(45,000	)			(45,000	)
Less general and administrative expenses			(2,002,729	)			(1,631,546	)
Income (loss) from operations		$	34,694,919			$	(3,912,343	)
Total barrels of oil equivalent (“boe”) sold			15,402				12,347
Revenue per boe sold		$	55.84			$	24.76
Lease operating expense per boe sold		$	15.67			$	24.27
Amortization expense per boe sold		$	15.97			$	9.15

Both the 2010 quarter and the 2009 quarter results summarized above include the revenues and lease operating expense of the Powder River Basin properties sold on March 31, 2010. Excluding the revenues and lease operating expense of the sold properties, the quarterly revenues and lease operating expenses would have been as follows:

		Three months ended
Pro Forma Revenues and Expenses		March 31,
(excluding properties sold on 3/31/10)		2010				2009
Oil sold (barrels)			3,553				1,875
Average oil price		$	73.64			$	32.34
Oil revenue		$	261,626			$	60,642
Gas sold (mcf)			5,855				3,291
Average gas price		$	6.17			$	8.03
Gas revenue		$	36,149			$	26,420
Total oil and gas revenues		$	297,775			$	87,062
Less lease operating expenses			(67,426	)			(93,448	)
Revenues net of lease operating expenses		$	230,349			$	(6,386	)

As shown in the above Pro Forma table, the revenues from our oil and gas properties retained after the March 31, 2010 sale accounted for very little of our revenues and lease operating expenses in the quarters ended March 31, 2010 and 2009.

For the quarters ended March 31, 2010 and March 31, 2009, we incurred $2,002,729 and $1,631,546, respectively, in general and administrative expenses. The $371,183 increase is largely attributable to a $283,000 increase in employee compensation expense, including $150,000 in employee cash bonuses relating to the successful March 31, 2010 sale of our Powder River Basin properties. The bonuses were to all employees, excluding the four employees who also are directors or large shareholders.

Pro Forma Net Income and Earnings per Share. The above table of Pro Forma Revenues and Lease Operating Expenses reflects hypothetical cases of the properties that were sold on March 31, 2010 as being sold at the beginning of the respective quarterly periods, i.e., on January 1, 2010 and January 1, 2009, respectively. If the properties had been sold on January 1, 2010 at the same price and for the same gain as at March 31, 2010, then for the quarterly period, income from operations would have changed from $34.7 million to $34.5 million and net income would have changed from $28.0 million to $27.9 million, with no change in basic earnings per share and a $0.01 reduction in diluted earnings per share.

If the properties had been sold on January 1, 2009, at the same price as at March 31, 2010, then (i) the estimated recognized gain would have approximated $21 million for that 2009 quarterly period, (ii) the period’s income from operations would have changed from a $3.9 million loss to approximately $17.8 million of income, and (iii) the period’s net income would have changed from a $3.9 million loss to approximately $16.9 million of income. Earnings per share, basic and diluted, would have changed from an $0.08 loss per share to approximately $0.35 income per share (basic) and $0.33 income per share (diluted). However, given industry macroeconomic conditions and project microeconomic conditions existing in January 2009, Company management believes that if the properties that were sold on March 31, 2010 were instead sold on January 1, 2009, the sales proceeds would have been substantially less than the $46.2 million realized at March 31, 2010 and net income for the 2009 quarter would have been substantially less than the pro forma $16.9 million and perhaps even a net loss.

Company management cautions that such pro forma net income and pro forma earnings per share are of limited value in indicating future financial performance when the Company is undertaking a major 2010 drilling program at its Goliath Project after the successful Bakken formation completions in the Company’s Tong Trust 1-20H well in March 2010 and the Company’s Ron Vial1 1-25H well in May 2010.

Liquidity and Capital Resources

At March 31, 2010 and December 31, 2009, we had working capital of $73.7 million and $44.5 million, respectively. We had cash and cash equivalents at March 31, 2010 of $73.9 million.

For the calendar year ending December 31, 2010, we anticipate spending a total of approximately $70 million in capital expenditures, consisting primarily of (i) approximately $55 million drilling and completing North Dakota wells to the Bakken formation or Three Forks formation at our Goliath Project, (ii) approximately $10 million for North Dakota lease acquisitions and extensions, and approximately $1 million drilling wells at our Bigfoot Project. As a result of our 2010 drilling program, we expect increased revenues from operations in 2010, compared to 2009, for the last nine months of the year. We anticipate using cash from operations and cash on hand at March 31, 2010 to pay for capital expenditures in 2010.

For the three-month periods ended March 31, 2010 and March 31, 2009, our sources and uses of cash were as follows:

Net Cash Provided (Used) By Operating Activities — Our net cash provided by operating activities increased by $2,107,367 (from $1,507,565 net cash used for operating activity for the quarter ended March 31, 2009 to $599,802 cash provided by operations for the quarter ended March 31, 2010). The increase was due primarily to a $1.7 million increase in payables for lease operating expenses and general and administrative expenses for the quarter ended March 31, 2010.

Net Cash Provided (Used) In Investing Activities — During the quarter ended March 31, 2010, investing activities provided a net $32.3 million in cash as compared with $6.0 million of cash used by investing activities in the quarter ended March 31, 2009. The $38.3 million increase is primarily due to (i) the $46.2 million received on the sale of oil and gas properties in the Powder River Basin in Wyoming, less (ii) our $7.4 million increase in spending, relating to our leasing costs and drilling activity relating to our Goliath Project.

Net Cash Provided By Financing Activities — During the quarters ended March 31, 2010 and 2009, the only financing activities were $403,800 in cash received in the 2010 period relating to stock option exercises by five employees and one director.

PART II

Item 6. EXHIBITS

Exhibit
No.				Description
	10	(i)		Asset Sales Agreement dated March 19, 2010 for the property sale closed March 31, 2010, between American Oil & Gas Inc and North Finn LLC (the Sellers) and Chesapeake AEZ Exploration, LLC (the Buyer)
	31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished as Exhibit 32.1 to the Original 10-Q)
	32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished as Exhibit 32.2 to the Original 10-Q)

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Signatures		Title		Date
/s/ Patrick D. O’Brien   Patrick D. O’Brien		Chief Executive Officer and Chairman of The Board of Directors		June 11, 2010
/s/ Joseph B. Feiten   Joseph B. Feiten		Chief Financial Officer (principal financial officer and principal accounting officer)		June 11, 2010