Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-29832
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
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(Exact Name of Registrant as Specified in its Charter)
British Columbia, Canada 75-2712845
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification #)
1301 Avenue M, Cisco, TX 76437
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(Address of Principal Executive Offices) (Zip Code)
(254) 442-2638
Registrant's Telephone Number Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company.
( ) Large accelerated filer ( ) Accelerated filer ( ) Non-accelerated filer
(X) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 20,148,284 shares of common
stock, No Par Value, outstanding as of
April 21, 2010
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
BALANCE SHEETS
March 31, December 31,
2011 2010
----------- -----------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash $ 8,302 $ 2,345
Accounts receivable 24,472 28,992
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Total Current Assets 32,774 31,337
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PROPERTY AND EQUIPMENT
Oil and gas properties-being amortized 582,792 582,792
Oil and gas properties-not being amortized 565,077 565,077
Office equipment and software 24,783 24,783
Accumulated depreciation and depletion (228,048) (216,771)
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Net Property and Equipment 944,604 955,881
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OTHER ASSETS 1,084 1,084
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TOTAL ASSETS $ 978,462 $ 988,302
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 5,791 $ 11,243
Accounts payable - related party 47,747 39,216
Accrued expenses 128,738 115,486
Loans from officers 25,000 25,000
Loans from stockholders 26,266 26,266
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Total Current Liabilities 233,542 217,211
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STOCKHOLDERS' EQUITY
Preferred stock, no par value (50,000,000 shares authorized,
none outstanding) - -
Common stock, no par (50,000,000 shares authorized,
20,148,284 and 20,048,284 shares in 2011 and 2010
issued and outstanding) 3,759,099 3,745,099
Additional paid-in capital 174,352 173,552
Accumulated (deficit) (3,188,531) (3,147,560)
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Total Stockholders' Equity 744,920 771,091
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 978,462 $ 988,302
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AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
2011 2010
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OIL AND GAS REVENUES $ 33,100 $ 16,690
COST OF SALES
Production taxes 38 19
Depletion 11,184 3,695
Transportation costs 5,028 -
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GROSS PROFIT 16,850 12,976
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OPERATING EXPENSES
Personnel costs 32,051 11,656
Professional fees 9,915 31,185
Promotion and advertising 5,725 4,597
Office expenses 1,287 1,494
Depreciation 92 530
Directors' fees and other 77 520
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Total Operating Expenses 49,147 49,982
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OPERATING LOSS (32,297) (37,006)
OTHER INCOME/(EXPENSE)
Interest expense (1,163) (465)
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NET LOSS BEFORE INCOME TAXES (33,460) (37,471)
Australian income taxes 7,511 4,692
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NET LOSS $ (40,971) $ (42,163)
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BASIC (LOSS) PER COMMON SHARE $ (0.00) $ (0.00)
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Weighted average number of common shares
outstanding: 20,062,728 19,491,141
============ ============
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
2011 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(40,971) $(42,163)
Adjustments to reconcile net (loss) to net cash
provided by operations:
Depreciation, depletion and amortization 11,276 4,225
Value of expenses contributed by officers 800 800
Stock issued for services 14,000 -
Changes in:
Receivables 4,520 (1,445)
Accounts payable and accrued expenses 16,332 44,180
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 5,957 5,597
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NET INCREASE (DECREASE) IN CASH 5,957 5,597
Cash, Beginning of Period 2,345 6,262
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Cash, End of Period $ 8,302 $ 11,859
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SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Australian income taxes $ 7,511 $ 4,692
======== ========
AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
SELECTED INFORMATION FOR FINANCIAL STATEMENTS
March 31, 2011
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principals for interim financial information
and with the instructions of Regulation S-B. They do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information included in the Company's Report on Form 10-K
for the year ended December 31, 2010. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
period ended March 31, 2011, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2011.
NOTE 2: GOING CONCERN CONSIDERATIONS
As of March 31, 2011, the Company has limited disposable cash and its revenues
are not sufficient to, and cannot be projected to, cover operating expenses and
expansion by the Company. These factors raise substantial doubt as to the
ability of the Company to continue as a going concern. Management's plans
include attempting to raise funds from the public through a stock offering, and
attempting to acquire additional producing interests in exchange for stock.
Management intends to make every effort to identify and develop sources of
funds. There is no assurance that Management will be successful. The Company is
effectively debt free and could continue to operate at subsistence levels
pending development of funding sources.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Any statements that are contained in this Form 10-Q that are not statements of
historical fact are forward-looking statements. Readers can identify these
statements by words such as 'may,' 'will,' 'expect,' 'anticipate,' 'estimate,'
'continue' or other similar words. These statements discuss future expectations,
contain projections of results of operations or financial condition or state
other forward-looking information and are based on certain assumptions and
analyses made by the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including such
factors as uncertainties in cash flow, expected costs of litigation, the outcome
of litigation, the potential impact of government regulations and rulings,
fluctuations in the economic environment and other such matters, many of which
are beyond the control of the Company. Readers are cautioned that
forward-looking statements are not guarantees of future performance and that
actual results or developments may differ materially from those expressed or
implied in the forward-looking statements.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto as of December 31, 2010 and
March 31, 2011 and 2010, for the respective periods then ended.
GENERAL DISCUSSION:
The Company's strategy is two fold: 1) to seek overriding royalty interests in
oil and gas concessions within sedimentary basins in Australia, and 2) to seek
working interests in oil and gas concessions within sedimentary basins of
Australia to promote oil and gas exploration through seismic programs and
drilling operations.
The Company's ability to explore other oil and gas opportunities is dependent on
adequate capital resources being available and equity being obtained, and/or
finding partners to fund the exploration and drilling programs on the areas in
which the Company holds working interests.
The Company holds overriding royalty interests in the Cooper/Eromanga Basins
that cover parts of Queensland and South Australia. The Company's overriding
royalties total 488,040 net royalty acres under 13,679,838 gross surface acres
in thirteen concessions located in the Cooper/Eromanga Basins. In addition the
Company also owns 3,113 net royalty acres under 672,040 gross acres in four
concessions located in the Bass Strait of the Gippsland Basin located offshore
of the state of Victoria, Australia. The Company also has working interests
under 7,914,460 gross surface acres covering four concessions located in
Queensland and South Australia.
ACOR began its movement from being primarily an oil royalty company to an
exploration company in 2000 when ACOR et al was awarded three large concessions
in South Australia. The risk of exploration was downgraded by the success rate
by new junior oil companies in the Cooper/Eromanga Basin averaging 52%. ACOR
entered into a farm-out arrangement with Holloman Energy Corp. to drill three
wells retaining a 13.8325% carried working interest. During 2008, Holloman
drilled the Pecos #1 well on PEL 112, being the first of the three well program.
The Pecos #1 was completed as a dry hole. During 2008 Holloman obtained approval
from the South Australian Government for new exploration terms giving a new
five-year work program for PEL 112 and consolidating PEL 108 & 109 to a new
exploration permit PEL 444. The Company's terms and conditions mentioned above
remain in force on these two permits. Holloman is seeking joint venture partners
to conduct additional seismic and drill several wells.
ACOR is the concession holder of ATP-582 located in Queensland Australia in the
prolific Cooper/Eromanga Basin. The permit area covers approximately 6,716,000
gross acres. ATP 582 lies within the Georgina Basin, which covers most of the
central-eastern part of the Northern Territory and is considered one of the most
prospective undeveloped onshore petroleum provinces in Northern Territory and
Queensland. Although the Georgina Basin has not had a discovery today, the
Cambrian Thorntonia-Arthur Creek succession of the Georgina Basin possess all of
the required elements necessary for petroleum generation, migration and
entrapment. Of particular interest in the Georgina Basin and on ATP 582 is the
presence of the Arthur Shale, which has similar characteristics to the Brakken
Shale of Western Canada and North Dakota that has produced more than 10 TCF of
gas and 1 Billion barrels of oil.
The improvement in multi high-pressure fracing technology over the past 10 years
has made low permeable shale very economic to produce both oil and gas and has
been widely used in North American to unlock unconventional reservoirs in shale
bearing hydrocarbons. This technology has not been utilized in the Georgina
Basin; however, on the adjoining concession to the east in the Northern
Territory two horizontal wells are planned for drilling into the Arthur Creek
Shale utilizing the current high pressure multiple stage fracing on this
formation. ATP 582 is well positioned, with the northern most 1,000,000 acres of
its 6,716,000 acres, known to have the presence of the Arthur Creek Shale in
place.
The adjoining concession to the west of ATP 582 operated by Baraka Petroleum
Limited plans a four well program and if successful plans to expand to a 20 well
exploration drilling program. The Company has entered into a Joint Venture
arrangement where the partner will operate the concession, pay to obtain Native
Title clearance, shoot a new seismic grid survey over the leads identified by
ACOR management from old seismic data to confirm good drillable targets, with
plans to drill a well to earn a 50% working interest under ATP 582 (ACOR will be
carried for 50% WI). No exploration work can begin until native title has been
cleared
A 12" pipeline was constructed to the Longtom Field with the first delivery of
gas beginning on October 21, 2009. Revenues from gas sales for the Company begin
in 2010. During 2010 the Longtom Field was shut in due to mercury levels
exceeding gas plant standards. A processing plant was installed to remove the
excess mercury and production from the Longtom Field resumed during the previous
quarter (November 2010). Revenues from gas sales for the Company is expected to
begin during the first half of 2010. The Longtom #4 tested 58 million cubic feet
of gas per day with liquid hydrocarbons. The net pay section in both Longtom #3
& #4 is 4,000 feet thick and the total depth of both wells was approximately
15,000 feet.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically addressed its long-term liquidity needs for the oil
and gas exploration and development for its Australian working interests.
Through the use of farm-out agreements the Company sells a portion of its
ownership interest in the concession to an outside party who is then responsible
for the exploration activities i.e. seismic, drilling etc. This is the strategy
that management is following in order to meet the expenditure requirements on
the Australian concessions.
In addition, the Company may also satisfy its future capital requirements by
selling its common stock. Should the Company become unable to reach satisfactory
farm-out arrangements or obtain financing from the sale of its securities or
some other source, the Company may not be able to achieve some of its future
goals.
The principal assets of ACOR are oil and gas properties. On March 31, 2011 the
Company reported $944,604 in total net property and equipment compared to
$970,498 on March 31, 2010 and $955,881 on December 31, 2010.
The Total Current Assets increased from March 31, 2010 from $22,454 to $32,774
on March 31, 2011. The Current Assets on December 31, 2010 were $31,337. The
Company's Total Current Assets as of March 31, 2011, was $32,774 with Total
Current Liabilities of $233,542 giving a liquidity ratio of .14 to 1. The
Company's Total Current Assets as of March 31, 2010, was $22,454 with Total
Current Liabilities of $168,196, giving a liquidity ratio of .13 to 1. The
Company's cash position was $8,302 on March 31, 2011 compared to $2,345 and
$11,859 on December 31, 2010 and March 31, 2010 respectively. The fluctuations
in current assets from March 31, 2011 compared to December 31, 2010 and March
31, 2010 is directly related to the amount of cash on hand.
The Company's Total Assets on March 31, 2011 were $978,462 compared to $988,302
on December 31, 2010 and $994,086 on March 31, 2010. The decrease in total
assets from March 31, 2010 to March 31, 2011 is related to the combination of
reduction of cash and accumulated depletion.
The Company continues to operate without any long-term debt.
Stockholders' Equity decreased when comparing March 31, 2011 ($744,920) to
December 31, 2010 and March 31, 2010 being $771,091 and $825,840 respectively.
The decrease in stockholders' equity from March 31, 2010 to March 31, 2011 was
attributed to an increase in current liabilities.
Management believes that its current cash balance is sufficient to fund
immediate administrative needs. However, long-term plans are expected to require
significant additional capital and there is not any assurance that the Company
will be able to obtain such funds or obtain the required capital on terms
favorable to the Company.
The Company issued $14,000 in common shares for consideration of public
relations work during the quarter ended March 31, 2011. On March 31, 2011 the
Company had 20,148,284 common shares issued and outstanding.
RESULTS OF OPERATIONS
Oil and gas revenues reported for the three months ended March 31, 2011 was
$33,100 compared to $16,690 for the three months ended March 31, 2010. The
Australian revenues were generated from concessions ATP 267, ATP 299, ATP 560
and PEL 115. The Company holds an overriding royalty interest of 5.75% of 1%
under ATP 299, 25% of 1% under ATP 560 and a 15.15% of 1% under ATP 267.
Total Operating Expenses were $49,147 for the three months ended March 31, 2011
compared to $49,982 for the quarter ended March 31, 2010. The other operating
expense categories were not materially different. Personnel costs increased from
$11,656 to $32,051, primarily due to an increase in contract labor, while
professional fees decreased from $31,185 to $9,915 during this period.
The Company's operating loss was $32,297 for the quarter ended March 31, 2011
compared to an operating loss of $37,006 for the same period in 2010. The
Company's reserves as of December 31, 2010 on its producing properties caused
the calculation of the Company's depletion to be raised which is reflected in
the comparison of the quarter ended March 31, 2010 ($3,695) to March 31,
2011($11,184). This caused operating losses to be less for the quarter ended
March 31, 2010 when comparing these two quarters.
The Company had no interest income for the quarter ended March 31, 2011. The
Company did incur interest expense of $465 during the quarter ended March 31,
2010 compared to $1,163 for the quarter ended March 31, 2011. All of the
interest expense paid during the quarter ended March 31, 2011 was paid to
officers or stockholders on their loans to the Company as was the interest paid
during the quarter ended March 31, 2010.
The net loss for the three months ended March 31, 2011 was $40,971 compared to a
net loss of $42,163 for the quarter ended March 31, 2010. The decrease in net
loss is primarily attributable to an increase in the amount of oil and gas
revenues.
PLAN OF OPERATION AND FUNDING
The Company plans to seek additional oil and gas concessions in Australia on a
ground level basis and will seek partners to join in this process. The Company
has been successful in the past (2006 and 2007) to enter into farm-out
arrangements on concessions awarded to the Company and its partners. These
farm-out arrangements have allowed the Company to retain a carried interest and
in some cases receive cash consideration, in addition to deferring the
exploration commitments on concessions to the buyers.
MATERIAL COMMITMENTS
The Company as of March 31, 2011 does not have any material work or exploration
commitments on its oil and gas interests in Australia as the Company has been
successful in entering into farm-out arrangements to transfer those exploration
costs to others in lieu of cash, carried working interest and/or an override.
PURCHASE OF SIGNIFICANT EQUIPMENT
The Company does not intend to purchase any significant equipment during the
year.
RELATED PARTY TRANSACTIONS
During the first quarter of 2011, the Company paid $4,397 for personnel costs
and other expenses to related parties, primarily Secretarial Services, Inc. and
Tensleep Oil & Production, Inc. In addition, the Company reimbursed Australian
Grazing & Pastoral Co., Pty. Ltd. for professional fees. Robert Kamon, the
Company's Secretary, controls these entities.
OFF-BALANCE SHEET ARRANGEMENTS
As of March 31, 2011, the Company had no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a small reporting company as defined by Rule 12b-2 of the Securities
Exchange Act of 1934 and are not required to provide the information under this
item.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules, regulations and related forms, and that
such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
As of March 31, 2011, we carried out an evaluation, under the supervision and
with the participation of our principal executive officer and our principal
financial officer of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this report.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting
during the quarter ended March 31, 2011 that have materially affected or are
reasonably likely to materially affect our internal controls.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 31.1 -- Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 -- Certification of President and Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 -- Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Australian-Canadian Oil Royalties Ltd.
Date: May 6, 2011 /s/ MAHNAZ NOURMAND
------------------------------------------------
By: Mahnaz Nourmand, Principal Financial Officer
