(Mark One)
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||
þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2013
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||
Or
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||
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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13-3087510
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Suite 700, 10150 - 100 Street, Edmonton, Alberta, Canada
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T5J 0P6
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer o | Accelerated filer o | ||
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
TABLE OF CONTENTS
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||||
Page
Number
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||||
PART I – FINANCIAL INFORMATION
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||||
ITEM 1.
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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|||
Condensed Consolidated Balance Sheets
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3
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|||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
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4
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|||
Condensed Consolidated Statements of Cash Flows
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5
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|||
Notes to the Condensed Consolidated Financial Statements
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6
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|||
ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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19
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||
ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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24
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||
ITEM 4.
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CONTROLS AND PROCEDURES
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24
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||
PART II – OTHER INFORMATION
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||||
ITEM 1.
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LEGAL PROCEEDINGS
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24
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||
ITEM 1A.
|
RISK FACTORS
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24
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||
ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
25
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||
ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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25
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||
ITEM 4.
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MINE SAFETY DISCLOSURES
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25
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||
ITEM 5.
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OTHER INFORMATION
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25
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||
ITEM 6.
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EXHIBITS
|
26
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||
SIGNATURES
|
27
|
June 30,
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September 30,
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|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 220,323 | $ | 244,191 | ||||
Accounts receivable net of allowance of $16,700 (September 30, 2012 - $243,752)
|
11,936 | 156,251 | ||||||
Prepaid expenses
|
45,759 | 46,232 | ||||||
Total Current Assets
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278,018 | 446,674 | ||||||
Long term investments (Note 8)
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335,753 | 275,600 | ||||||
Oil and gas properties, net (Notes 3 and 4)
|
15,922,716 | 13,190,518 | ||||||
Property and equipment, net of depreciation (Note 7)
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351,238 | 322,660 | ||||||
TOTAL ASSETS
|
$ | 16,887,725 | $ | 14,235,452 | ||||
LIABILITIES
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
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$ | 85,540 | $ | 72,697 | ||||
Accounts payable – related parties (Note 9)
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207,483 | 408,277 | ||||||
Total Current Liabilities
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293,023 | 480,974 | ||||||
Asset retirement obligations (Note 10)
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432,888 | 425,700 | ||||||
Loan payable - related party
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260,000 | – | ||||||
TOTAL LIABILITIES
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985,911 | 906,674 | ||||||
SHAREHOLDERS’ EQUITY
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||||||||
Common Stock: (Note 11)
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||||||||
Authorized: 600,000,000 shares at $0.001 par value
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||||||||
Issued and outstanding: 180,447,113 shares
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||||||||
(September 30, 2012 – 136,739,971 shares)
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180,447 | 136,739 | ||||||
Additional paid in capital
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30,501,972 | 27,166,742 | ||||||
Deposits on stock subscription (Note 11)
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– | 300,000 | ||||||
Deficit accumulated during exploration stage
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(14,780,605 | ) | (14,274,703 | ) | ||||
Total Shareholders’ Equity
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15,901,814 | 13,328,778 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 16,887,725 | $ | 14,235,452 |
September 10,
|
||||||||||||||||||||
Three Months
Ended |
Three Months
Ended |
Nine Months
Ended |
Nine Months
Ended |
2003
Inception to
|
||||||||||||||||
June 30, 2013
|
June 30, 2012
|
June 30, 2013
|
June 30, 2012
|
June 30,2013
|
||||||||||||||||
Revenue
|
$ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Expenses
|
||||||||||||||||||||
General and Administrative
|
270,885 | 249,836 | 694,875 | 859,045 | 14,691,808 | |||||||||||||||
Depreciation and accretion
|
28,324 | 31,733 | 84,423 | 96,741 | 754,995 | |||||||||||||||
Net loss from operations
|
(299,209 | ) | (281,569 | ) | (779,298 | ) | (955,786 | ) | (15,446,803 | ) | ||||||||||
Other income and expenses
|
||||||||||||||||||||
Rental and other income
|
3,352 | 8,124 | 271,279 | 32,433 | 346,349 | |||||||||||||||
Interest income
|
770 | 678 | 2,116 | 2,531 | 216,382 | |||||||||||||||
Interest expense
|
– | – | – | – | (208,580 | ) | ||||||||||||||
Forgiveness of loan payable
|
– | – | – | – | 287,406 | |||||||||||||||
Settlement of debt
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– | – | – | – | 24,866 | |||||||||||||||
Loss on disposal of assets
|
– | – | – | (64 | ) | (226 | ) | |||||||||||||
Net loss and comprehensive loss
|
$ | (295,087 | ) | $ | (272,767 | ) | $ | (505,903 | ) | $ | (920,886 | ) | $ | (14,780,606 | ) | |||||
Net loss per common share
|
||||||||||||||||||||
Basic and Diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||||||
Weighted Average Outstanding
|
||||||||||||||||||||
Shares (in thousands)
|
||||||||||||||||||||
Basic and Diluted
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179,699 | 136,740 | 171,311 | 136,740 |
Nine Months
|
Nine Months
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September 10, 2003
|
||||||||||
Ended
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Ended
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Inception to
|
||||||||||
June 30,
|
June 30,
|
June 30,
|
||||||||||
2013
|
2012
|
2013
|
||||||||||
Cash Provided by (Used in):
|
||||||||||||
Operating Activities
|
||||||||||||
Net income (loss)
|
$
|
(505,903
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)
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$
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(920,886
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)
|
$
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(14,780,606
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)
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|||
Items not affecting cash:
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||||||||||||
Share based compensation
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102,036
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94,701
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1,428,123
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|||||||||
Bad debts
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(263,738
|
)
|
(10,565
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)
|
247,894
|
|||||||
Depreciation and accretion
|
84,423
|
96,741
|
754,995
|
|||||||||
Forgiveness of loan payable
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234,402
|
–
|
(53,004
|
)
|
||||||||
Settlement of lawsuit
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–
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–
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435,549
|
|||||||||
Commissions withheld from loans proceeds
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–
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–
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121,000
|
|||||||||
Loss on disposal of assets
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–
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64
|
226
|
|||||||||
Net changes in non-cash working capital (Note 13)
|
(19,763
|
)
|
180,294
|
(266,939
|
)
|
|||||||
Net Cash (Used) in Operating Activities
|
(368,543
|
)
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(559,651
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)
|
(12,112,762
|
)
|
||||||
Investing Activities
|
||||||||||||
Purchase of property and equipment
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–
|
(860
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)
|
(904,469
|
)
|
|||||||
Investment in oil and gas properties
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(2,566,139
|
)
|
(50,101
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)
|
(11,177,244
|
)
|
||||||
Long term investments
|
(49,186
|
)
|
(5,343
|
)
|
(314,178
|
)
|
||||||
Cash from acquisition of subsidiary
|
–
|
–
|
11,141
|
|||||||||
Return of costs from Farmout Agreement
|
–
|
–
|
961,426
|
|||||||||
Net Cash (Used) in Investing Activities
|
(2,615,325
|
)
|
(56,304
|
)
|
(11,423,324
|
)
|
||||||
Financing Activities
|
||||||||||||
Loan payable
|
–
|
–
|
275,852
|
|||||||||
Loan advance – related parties
|
260,000
|
–
|
(551,746
|
)
|
||||||||
Note payable repayment
|
–
|
–
|
(111,306
|
)
|
||||||||
Debenture repayment
|
–
|
–
|
(1,004,890
|
)
|
||||||||
Deposit on stock subscription
|
–
|
–
|
300,000
|
|||||||||
Proceeds from issuance of common stock
|
2,700,000
|
23,969,499
|
||||||||||
Proceeds from debenture net of commissions
|
–
|
–
|
879,000
|
|||||||||
Net Cash Provided by Financing Activities
|
2,960,000
|
23,756,409
|
||||||||||
Increase (decrease) in cash and cash equivalents
|
(23,868
|
)
|
(615,955
|
)
|
220,323
|
|||||||
Cash and cash equivalents, beginning of period
|
244,191
|
723,766
|
–
|
|||||||||
Cash and cash equivalents, end of period
|
$
|
220,323
|
$
|
107,811
|
$
|
220,323
|
||||||
Supplemental Cash Flow Information:
|
||||||||||||
Cash paid for interest
|
$
|
–
|
$
|
–
|
202,159
|
Software
|
-
|
100% |
Computer equipment
|
-
|
55% |
Portable work camp
|
-
|
30% |
Vehicles
|
-
|
30% |
Road Mats
|
-
|
30% |
Wellhead
|
-
|
25% |
Office furniture and equipment
|
-
|
20% |
Oilfield Equipment
|
-
|
20% |
Tanks
|
-
|
10% |
2013
|
$ | 13,755 | ||
2014
|
$ | 55,021 | ||
2015
|
$ | 55,021 | ||
2016
|
$ | 55,021 | ||
2017
|
$ | 55,021 | ||
Subsequent
|
$ | 108,608 |
a)
|
drill 68 wells throughout the 68 sections; or
|
b)
|
drill 44 wells within the 68 sections and having acquired and processed 2 miles of seismic on each other undrilled section.
|
June 30, 2013
|
September 30, 2012
|
|||||||
Unproved Oil and Gas Properties
|
$ | 15,962,035 | $ | 13,222,551 | ||||
Proved Oil and Gas Properties
|
– | – | ||||||
Accumulated Depreciation
|
(39,319 | ) | (32,033 | ) | ||||
Net Capitalized Cost
|
$ | 15,922,716 | $ | 13,190,518 |
June 30, 2013
|
September 30, 2012
|
|||||||
Acquisition of Properties:
|
||||||||
Proved
|
$ | – | $ | – | ||||
Unproved
|
2,739,484 | 57,005 | ||||||
Exploration costs
|
24,937 | 119,353 | ||||||
Development costs
|
– | – |
June 30, 2013
|
||||||||||||
Accumulated
|
Net Book
|
|||||||||||
Cost
|
Depreciation
|
Value
|
||||||||||
Computer equipment
|
$ | 31,084 | $ | 30,421 | $ | 663 | ||||||
Office furniture and equipment
|
33,199 | 24,421 | 8,777 | |||||||||
Software
|
5,826 | 5,826 | – | |||||||||
Leasehold improvements
|
4,936 | 4,435 | 501 | |||||||||
Portable work camp
|
170,580 | 132,037 | 38,543 | |||||||||
Vehicles
|
38,077 | 29,474 | 8,603 | |||||||||
Oilfield equipment
|
249,045 | 100,567 | 148,478 | |||||||||
Road mats
|
364,614 | 282,229 | 82,385 | |||||||||
Wellhead
|
3,254 | 1,519 | 1,735 | |||||||||
Tanks
|
96,085 | 34,532 | 61,553 | |||||||||
$ | 996,700 | $ | 645,461 | $ | 351,238 |
September 30, 2012
|
||||||||||||
Accumulated
|
Net Book
|
|||||||||||
Cost
|
Depreciation
|
Value
|
||||||||||
Computer equipment
|
$ | 31,084 | $ | 29,312 | $ | 1,772 | ||||||
Office furniture and equipment
|
33,199 | 21,152 | 12,046 | |||||||||
Software
|
5,826 | 5,826 | – | |||||||||
Leasehold improvements
|
4,936 | 3,934 | 1,002 | |||||||||
Portable work camp
|
170,580 | 120,847 | 49,733 | |||||||||
Vehicles
|
38,077 | 26,976 | 11,101 | |||||||||
Oilfield equipment
|
154,713 | 82,689 | 72,024 | |||||||||
Road mats
|
364,614 | 258,311 | 106,303 | |||||||||
Wellhead
|
3,254 | 1,119 | 2,135 | |||||||||
Tanks
|
96,085 | 29,541 | 66,544 | |||||||||
$ | 902,368 | $ | 579,707 | $ | 322,660 |
June 30, 2013
|
September 30, 2012
|
|||||||
Balance, beginning of period
|
$ | 425,700 | $ | 387,368 | ||||
Liabilities incurred
|
23,400 | – | ||||||
Effect of foreign exchange
|
(28,355 | ) | 22,038 | |||||
Disposal
|
– | – | ||||||
Accretion expense
|
12,143 | 16,294 | ||||||
Balance, end of period
|
$ | 432,888 | $ | 425,700 |
Shares Underlying
Warrants Outstanding
|
Shares Underlying
Warrants Exercisable
|
|||||||||||||||||||
Range of Exercise Price
|
Shares
Underlying
Warrants Outstanding
|
Weighted
Average
Remaining
Contractual Life
|
Weighted
Average
Exercise
Price
|
Shares
Underlying
Warrants
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||||||
$0.105 at June 30, 2013
|
72,142,855 | 1.57 | 0.1050 | 72,142,855 | 0.1050 | |||||||||||||||
$0.075 at June 30, 2013
|
850,000 | 2.98 | 0.0750 | 850,000 | 0.0750 | |||||||||||||||
72,992,855 | 1.59 | 0.1047 | 72,992,855 | 0.1047 |
Number of
Warrants
|
Weighted Average Exercise Price
|
Intrinsic
Value
|
||||||||||
Balance, September 30, 2012
|
29,285,713 | $ | 0.1050 | $ | – | |||||||
Warrants granted November 23, 2012
|
42,857,142 | 0.1050 | – | |||||||||
Warrants granted June 20, 2013
|
850,000 | 0.0750 | – | |||||||||
Balance, June 30, 2013
|
72,992,855 | $ | 0.1047 | $ | – | |||||||
Outstanding Warrants, June 30, 2013
|
72,992,855 | $ | 0.1047 | $ | – |
Shares Underlying
Options Outstanding
|
Shares Underlying
Options Exercisable
|
|||||||||||||||||||
Range of Exercise Prices
|
Shares Underlying Options Outstanding
|
Weighted Average Remaining Contractual Life
|
Weighted Average Exercise
Price
|
Shares Underlying Options Exercisable
|
Weighted Average Exercise
Price
|
|||||||||||||||
$0.14 at March 31, 2013
|
2,700,000 | 2.73 | $ | 0.14 | 2,700,000 | $ | 0.14 | |||||||||||||
$0.05 at June 30, 2013
|
4,850,000 | 4.98 | 0.05 | 1,950,000 | 0.05 | |||||||||||||||
7,550,000 | 4.17 | $ | 0.08 | 4,650,000 | $ | 0.10 |
Number of
Underlying Shares
|
Weighted Average Exercise Price
|
Weighted Average Fair Market Value
|
||||||||||
Balance, September 30, 2012
|
2,700,000 | $ | 0.14 | $ | 0.12 | |||||||
Balance, June 30, 2013
|
7,550,000 | $ | 0.08 | $ | 0.07 | |||||||
Exercisable, June 30, 2013
|
4,650,000 | $ | 0.10 | $ | 0.09 |
June 30, 2013
|
September 30, 2012
|
|||||||||||||||
Shares
|
Weighted Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
|||||||||||||
Outstanding balance at beginning of period
|
2,700,000 | $ | 0.14 | 1,800,000 | $ | 0.14 | ||||||||||
Granted at June 20, 2013
|
4,850,000 | 0.05 | – | – | ||||||||||||
Vested at June 20,2013
|
1,950,000 | 0.05 | – | – | ||||||||||||
Exercised
|
– | – | – | |||||||||||||
Expired or canceled
|
– | – | – | |||||||||||||
Outstanding at end of period
|
7,550,000 | $ | 0.08 | 1,800,000 | $ | 0.14 | ||||||||||
Exercisable
|
4,650,000 | $ | 0.10 | 1,800,000 | $ | 0.14 |
Nine Months Ended
|
Nine Months Ended
|
|||||||
June 30, 2013
|
June 30, 2012
|
|||||||
Accounts receivable
|
$ | 144,315 | $ | 6,116 | ||||
Prepaid expenses
|
473 | (4,408 | ) | |||||
Accounts payable
|
(164,551 | ) | 178,586 | |||||
$ | (19,763 | ) | $ | 180,294 |
1.)
|
Portwest Investments Ltd. (“Portwest”), a company owned 100% by Dr. Horst A. Schmid (the “Consultant”), for providing services to the Company as Chief Executive Officer and President for Cdn $12,500 per month. On July 1, 2005, the Company entered into a consulting agreement (the “Prior Agreement”) with Portwest, as filed with the Company’s annual report on Form 10-KSB filed on February 23, 2007, and incorporated by reference herein. As of June 20, 2013, the Company owed Portwest Cdn $352,958 for services Portwest provided to the Company from 2010 thru June 20, 2013. On July 10, 2013, the Company and Portwest agreed to amend (the “Amending Agreement”) the Prior Agreement whereby the following was settled and amended:
|
i.
|
Effective date of the Amending Agreement will be June 20, 2013;
|
ii.
|
Term of Agreement will be until December 31, 2014;
|
iii.
|
The Consultant shall continue to provide services as Chief Executive Officer and President of the Company until the termination of the Agreement;
|
iv.
|
The fees payable to the Consultant in the Prior Agreement will be terminated and the Company will grant the Consultant 5-year options on 1,000,000 of its common shares exercisable at $0.05 per share. One half of these shares are vested immediately and the remaining one half will be vested on June 20, 2014;
|
v.
|
As consideration for the execution of the Amending Agreement and the Termination of parts of the Prior Agreement, the Consultant will receive:
|
a.
|
$70,000 CDN, and
|
b.
|
850,000 units of the Company’s shares and warrants at a price of $0.05 per unit. Each unit shall be comprised of one restricted Company common share and one 3 year full warrant entitling Portwest to be able to purchase another share for $0.075. The warrants expire on June 20, 2016.
|
|
2.)
|
Concorde Consulting, a company owned 100% by Mr. Curtis J. Sparrow, for providing services as Chief Financial Officer to the Company for Cdn $15,000 per month. As of September 30, 2012 and June 30, 2013 the Company owes Concorde Consulting Cdn $138,725 and Cdn $168,403, respectively.
|
2013 Q4 (July - September)
|
$ | 10,625 | ||
2014 Q1 (October - December)
|
$ | 10,625 |
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
September 10,
|
||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
2003 to
|
||||||||||||||||
June 30, 2013
|
June 30, 2012
|
June 30, 2013
|
June 30, 2012
|
June 30, 2013
|
||||||||||||||||
Revenue
|
$ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Expenses
|
||||||||||||||||||||
General and administrative
|
270,885 | 249,836 | 694,875 | 859,045 | 14,691,808 | |||||||||||||||
Depreciation and accretion
|
28,324 | 31,733 | 84,423 | 96,741 | 754,995 | |||||||||||||||
Net loss from operations
|
(299,209 | ) | (281,569 | ) | (779,298 | ) | (955,786 | ) | (15,446,803 | ) | ||||||||||
Other income and expenses
|
||||||||||||||||||||
Rental and other income
|
3,352 | 8,124 | 271,279 | 32,433 | 346,349 | |||||||||||||||
Interest income
|
770 | 678 | 2,116 | 2,531 | 216,382 | |||||||||||||||
Interest expense
|
– | – | – | – | (208,580 | ) | ||||||||||||||
Forgiveness of loan payable
|
– | – | – | – | 287,406 | |||||||||||||||
Settlement of debt
|
– | – | – | – | 24,866 | |||||||||||||||
Loss on disposal of assets
|
– | – | – | (64 | ) | (226 | ) | |||||||||||||
Net loss and comprehensive loss
|
$ | (295,087 | ) | $ | (272,767 | ) | $ | (505,903 | ) | $ | (920,886 | ) | $ | (14,780,606 | ) |
Nine Months Ended
|
Year Ended
|
|||||||
June 30, 2013
|
September 30, 2012
|
|||||||
Current Assets
|
$ | 278,018 | $ | 446,674 | ||||
Current Liabilities
|
293,023 | 480,974 | ||||||
Working Capital
|
$ | (15,005 | ) | $ | (34,300 | ) |
●
|
our current business strategy;
|
●
|
our future financial position and projected costs;
|
●
|
our projected sources and uses of cash;
|
●
|
our plan for future development and operations, including the building of all-weather roads;
|
●
|
our drilling and testing plans;
|
●
|
our proposed enhanced oil recovery test well project;
|
●
|
the sufficiency of our capital in order to execute our business plan;
|
●
|
resource estimates;
|
●
|
the timing and sources of our future funding.
|
●
|
the intent to issue a distribution to our shareholders.
|
●
|
changes in general business or economic conditions;
|
●
|
changes in legislation or regulation that affect our business;
|
●
|
our ability to obtain necessary regulatory approvals and permits;
|
●
|
our ability to receive approvals from the ERCB for additional tests to further evaluate the wells on our lands;
|
●
|
opposition to our regulatory requests by various third parties;
|
●
|
actions of aboriginals, environmental activists and other industrial disturbances;
|
●
|
the costs of environmental reclamation of our lands;
|
●
|
availability of labor or materials or increases in their costs;
|
●
|
the availability of sufficient capital to finance our business plans on terms satisfactory to us;
|
●
|
adverse weather conditions and natural disasters;
|
●
|
risks associated with increased insurance costs or unavailability of adequate coverage;
|
●
|
volatility of oil and natural gas prices;
|
●
|
competition;
|
●
|
changes in labor, equipment and capital costs;
|
●
|
future acquisitions or strategic partnerships;
|
●
|
the risks and costs inherent in litigation;
|
●
|
imprecision in estimates of reserves, resources and recoverable quantities of oil and natural gas;
|
●
|
product supply and demand;
|
●
|
fluctuations in currency and interest rates; and
|
●
|
the additional risks and uncertainties, many of which are beyond our control, referred to elsewhere in this quarterly report on Form 10-Q and in our other SEC filings.
|
Exhibit No.
|
Description
|
|
4.1
|
Form of Subscription Agreement for private placement dated July 31, 2013 (incorporated by reference to exhibit 4.1 to our Form 8-K filed on August 5, 2013).
|
|
23.1
|
Consent of DeGolyer and MacNaughton Canada Limited, independent petroleum engineers, (incorporated by reference to exhibit 23.1 on our Form 10-Q filed on May 15, 2012).
|
|
31.1
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
|
|
32.1
|
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
|
101
|
Interactive Data Files
|
DEEP WELL OIL & GAS, INC.
|
|||
By
|
/s/ Horst A. Schmid | ||
Dr. Horst A. Schmid
|
|||
Chief Executive Officer and President
|
|||
(Principal Executive Officer)
|
|||
Date
|
August 13, 2013
|
||
By
|
/s/ Curtis James Sparrow | ||
Mr. Curtis James Sparrow
|
|||
Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
|||
Date
|
August 13, 2013
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Deep Well Oil & Gas, Inc. for the quarterly period ended June 30, 2013;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
August 13, 2013
|
By:
|
/s/ Horst A. Schmid
|
Dr. Horst A. Schmid
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Deep Well Oil & Gas, Inc. for the quarterly period ended June 30, 2013;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
August 13, 2013
|
By:
|
/s/ Curtis James Sparrow
|
Mr. Curtis James Sparrow
|
|
Chief Financial Officer
|
Date:
|
August 13, 2013
|
By:
|
/s/ Horst A. Schmid
|
Dr. Horst A. Schmid
|
|
President and Chief Executive Officer
|
Date:
|
August 13, 2013
|
By:
|
/s/ Curtis James Sparrow
|
Mr. Curtis James Sparrow
|
|
Chief Financial Officer
|
Stock Options
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options | 12. Stock Options
On November 28, 2005, the Board of Deep Well adopted the Deep Well Oil & Gas, Inc. Stock Option Plan (the “Plan’). The Plan was approved by the majority of shareholders at the February 24, 2010 general meeting of shareholders. The Plan, is administered by the Board, permits options to acquire shares of the Company’s common stock (the “Common Shares”) to be granted to directors, senior officers and employees of the Company and its subsidiaries, as well as certain consultants and other persons providing services to the Company or its subsidiaries.
The maximum number of shares, which may be reserved for issuance under the Plan, may not exceed 10% of the Company’s issued and outstanding Common Shares, subject to adjustment as contemplated by the Plan. The aggregate number of Common Shares with respect to which options may be vested to any one person (together with their associates) in any one year, together with all other incentive plans of the Company, may not exceed 500,000 Common Shares per year, and in total may not exceed 2% of the total number of Common Shares outstanding.
On November 28, 2010, all of the stock options previously granted to five directors and three consultants , expired unexercised. In total 2,727,500 options granted to directors and former directors and their controlled companies expired.
On March 23, 2011, the Board approved to decrease the exercise price of the stock options to purchase 36,000 shares of common stock of Deep Well previously granted to an employee of the Company on September 20, 2007. The exercise price of the stock option is reduced from $0.47 per Common Share to $0.14 per Common Share, effective immediately. All other terms and conditions of the option agreement will remain unchanged. The options expired on September 20, 2012.
On March 23, 2011, the Company granted six of its directors options to purchase 450,000 shares each of common stock at an exercise price of $0.14 per Common Share, 150,000 vesting immediately and the remaining vesting one-third on March 23, 2012, and one-third on March 23, 2013, with a five-year life.
On October 25, 2011, 375,000 stock options previously granted on October 25, 2006 to a director expired unexercised.
On September 20, 2012, 240,000 and 36,000 stock options previously granted on September 20, 2007 to R.N. Dell Energy Ltd. and an employee of the Company, respectively, expired unexercised.
On June 20, 2013, the Company granted six of its directors options to purchase 450,000 shares each of common stock at an exercise price of $0.05 per Common
Share, 150,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third on June 20, 2015, with a five-year life.
On June 20, 2013, the Company granted two consultants an option to purchase each 1,000,000 shares each of common stock at an exercise price of $0.05 per Common Share, 500,000 vesting immediately and remaining vesting on June 20, 2014.
On June 20, 2013, the Company granted one employee an option to purchase 150,000 shares each of common stock at an exercise price of $0.05 per Common Share, 50,000 vesting immediately and the remaining vesting one-third on June 20, 2014, and one-third on June 20, 2015, with a five-year life.
For the period ended June 30, 2013, the Company recorded share based compensation expense related to stock options in the amount of $102,036 (September 30, 2012 – $108,664) on the 4,850,000 stock options issued June 20, 2013. No options were exercised during the period ended June 30, 2013, therefore, the intrinsic value of the options exercised during the period ended June 30, 2013 is $nil. As of June 30, 2013, there was remaining unrecognized compensation cost of $106,916 related to the non-vested portion of these unit option awards. Compensation expense is based upon straight-line depreciation of the grant-date fair value over the vesting period of the underlying unit option.
The aggregate intrinsic value of exercisable options as of June 30, 2013, was $nil (September 30, 2012 - $nil).
The following is a summary of stock option activity as at June 30, 2013:
A summary of the options granted at June 30, 2013 and September 30, 2012 and changes during the periods then ended is presented below:
There were 2,900,000 unvested stock options outstanding as of June 30, 2013 (September 30, 2012 – 900,000).
Measurement Uncertainty
The Company used the Black-Scholes option pricing model (“Black-Scholes”) to value the options and warrants. This model was developed for use in estimating the fair value of traded “European” options which are liquid and that have no vesting restrictions and are fully transferable. Stock options and the warrants attached to the units issued by the Company are non-transferable and vest over time, and are “American” options. Option pricing models require the input of subjective assumptions including expected share price volatility. The fair value estimate can vary materially as a result of changes in the assumptions. The following assumptions are used in the Black-Scholes option-pricing model:
Expected Term – Expected term of 5 years represents the period that the Company’s stock-based awards are expected to be outstanding.
Expected Volatility – Expected volatilities are based on historical volatility of the Company’s stock, adjusted where determined by management for
unusual and non-representative stock price activity not expected to recur. The expected volatility used ranged from 96% to 116%.
Expected Dividend – The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company currently pays no dividends and does not expect to pay dividends in the foreseeable future.
Risk-Free Interest rate – The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The risk-free rate used ranged from 0.62% to 1.31%. |
Stock Options (Details 2) (Stock Options [Member], USD $)
|
9 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Sep. 30, 2012
|
|
Stock Options [Member]
|
|||
Summary of stock option activity | |||
Number of Underlying Shares, beginning balance | 2,700,000 | 1,800,000 | |
Number of option, Granted | 4,850,000 | ||
Number of option, Vested | 1,950,000 | ||
Number of option, Exercised | |||
Number of option, Expired or canceled | |||
Number of Underlying Shares, ending balance | 7,550,000 | 1,800,000 | |
Number of underlying shares exercisable | 4,650,000 | 1,800,000 | 1,800,000 |
Weighted Average Exercise Price, beginning balance | $ 0.14 | $ 0.14 | |
Weighted average exercise price, Option granted at June 20, 2013 | $ 0.05 | ||
Weighted average exercise price, Option vested at June 20, 2013 | $ 0.05 | ||
Weighted average exercise price, Option Exercised at June 20, 2013 | |||
Weighted Average Exercise Price, Option Expired or canceled | |||
Weighted Average Exercise Price, ending balance | $ 0.08 | $ 0.14 | |
Weighted Average Exercise Price Exercisable | $ 0.10 | $ 0.14 |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $)
|
3 Months Ended | 9 Months Ended | 118 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
|
Statements of Operations and Comprehensive Income (Loss) [Abstract] | |||||
Revenue | |||||
Expenses | |||||
General and Administrative | 270,885 | 249,836 | 694,875 | 859,045 | 14,691,808 |
Depreciation and accretion | 28,324 | 31,733 | 84,423 | 96,741 | 754,995 |
Net loss from operations | (299,209) | (281,569) | (779,298) | (955,786) | (15,446,803) |
Other income and expenses | |||||
Rental and other income | 3,352 | 8,124 | 271,279 | 32,433 | 346,349 |
Interest income | 770 | 678 | 2,116 | 2,531 | 216,382 |
Interest expense | (208,580) | ||||
Forgiveness of loan payable | 287,406 | ||||
Settlement of debt | 24,866 | ||||
Loss on disposal of assets | (64) | (226) | |||
Net loss and comprehensive loss | $ (295,087) | $ (272,767) | $ (505,903) | $ (920,886) | $ (14,780,606) |
Net loss per common share | |||||
Basic and Diluted | $ 0.00 | $ 0.00 | $ 0.00 | $ (0.01) | |
Weighted Average Outstanding Shares (in thousands) | |||||
Basic and Diluted | 179,699 | 136,740 | 171,311 | 136,740 |
Exploration Activities
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exploration Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exploration Activities | 5. Exploration Activities
The following table presents information regarding the Company’s costs incurred in the oil and gas property acquisition, exploration and development activities for the nine months ended June 30, 2013 and the fiscal year ended September 30, 2012:
|
Summary of Significant Accounting Policies (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
Summary of depreciation rates used in computing depreciation expense |
|
Commitments (Details) (USD $)
|
Jun. 30, 2013
|
---|---|
Summary of annual payments under office lease agreement | |
2013 Q4 (July - September) | $ 10,625 |
2014 Q1 (October - December) | $ 10,625 |
Changes in Non-Cash Working Capital
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Non Cash Working Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Non-Cash Working Capital | 13. Changes in Non-Cash Working Capital
|
Commitments (Details Textual)
|
0 Months Ended | 9 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 01, 2008
|
Nov. 20, 2007
|
Jun. 30, 2013
agreement
|
Jun. 20, 2013
|
Sep. 30, 2012
|
Jun. 20, 2013
Portwest Investments Ltd [Member]
CAD
|
Jun. 30, 2013
Portwest Investments Ltd [Member]
Chief Executive Officer and President [Member]
CAD
|
Jul. 31, 2013
Portwest Investments Ltd [Member]
Subsequent Event [Member]
Chief Executive Officer and President [Member]
USD ($)
|
Jun. 10, 2013
Portwest Investments Ltd [Member]
Amending Agreement [Member]
Chief Executive Officer and President [Member]
|
Jun. 20, 2013
Portwest Investments Ltd [Member]
Amending Agreement [Member]
Chief Executive Officer and President [Member]
USD ($)
|
Jun. 20, 2013
Portwest Investments Ltd [Member]
Amending Agreement [Member]
Chief Executive Officer and President [Member]
CAD
|
Jun. 30, 2013
Concorde Consulting [Member]
CAD
|
Sep. 30, 2012
Concorde Consulting [Member]
CAD
|
Jun. 30, 2013
Concorde Consulting [Member]
Chief Financial Officer [Member]
CAD
|
|
Commitments (Textual) | ||||||||||||||
Percentage of ownership interest | 100.00% | 100.00% | ||||||||||||
Compensation to directors per month | 12,500 | 15,000 | ||||||||||||
Accrued compensation to directors | 352,958 | 168,403 | 138,725 | |||||||||||
Office lease agreements, expiration date | Dec. 31, 2013 | Nov. 30, 2012 | ||||||||||||
Term of agreement | Dec. 31, 2014 | Dec. 31, 2014 | ||||||||||||
Option vesting period | 5 years | |||||||||||||
Number of common shares called by options | 1,000,000 | 1,000,000 | ||||||||||||
Option exercise price | 0.05 | 0.1047 | 0.05 | 0.05 | ||||||||||
Description of stock options vesting | One half of these shares are vested immediately and the remaining one half will be vested on June 20, 2014. | |||||||||||||
Consideration paid for termination of parts of the Prior Agreement | 70,000 | |||||||||||||
Units of shares and warrants issued for termination of original agreement | 850,000 | 850,000 | ||||||||||||
Shares and warrants issued, price per share | $ 0.05 | |||||||||||||
Description of units issued | Each unit shall be comprised of one restricted Company common share and one 3 year full warrant entitling Portwest to be able to purchase another share for $0.075. | |||||||||||||
Warrants expiration date | Jun. 20, 2016 | |||||||||||||
Value of settlement of accrued payables to related party | 302,958 | $ 50,000 | ||||||||||||
Number of office lease agreements | 2 |
Oil and Gas Properties (Details Textual)
|
9 Months Ended | |
---|---|---|
Jun. 30, 2013
Well
|
Sep. 30, 2012
Well
|
|
Oil and Gas Properties (Textual) | ||
Oil sands lease term | 15 years | |
Description for term of capital lease | If the Company meets the conditions of the 15-year leases the Company will then be permitted to drill on and produce oil from the land into perpetuity. These conditions give the Company until the expiration of the leases to meet the following requirements on its primary oil sands leases: a) drill 68 wells throughout the 68 sections; or b) drill 44 wells within the 68 sections and having acquired and processed 2 miles of seismic on each other undrilled section. | |
Number of wells company has interest in | 10 | 10 |
Number of other wells drilled by others | 2 | |
Description for acquisition of seismic on lease | 25 miles of seismic. |
Exploration Activities (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exploration Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cost incurred in oil and gas property acquisition, exploration and development activities |
|
Capitalization of Costs Incurred in Oil and Gas Activities (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
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Oil and Gas Properties and Capitalization of Costs Incurred in Oil and Gas Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of capitalized costs relating to oil and gas producing activities |
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Asset Retirement Obligations (Details) (USD $)
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9 Months Ended | 12 Months Ended |
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Jun. 30, 2013
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Sep. 30, 2012
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Schedule of changes to the asset retirement obligation | ||
Balance, beginning of period | $ 425,700 | $ 387,368 |
Liabilities incurred | 23,400 | |
Effect of foreign exchange | (28,355) | 22,038 |
Disposal | ||
Accretion expense | 12,143 | 16,294 |
Balance, end of period | $ 432,888 | $ 425,700 |
Nature of Business and Basis of Presentation (Details) (USD $)
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Jun. 30, 2013
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Sep. 30, 2012
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Sep. 10, 2003
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Nature of Business and Basis of Presentation (Textual) | |||
Common stock, par value | $ 0.001 | $ 0.001 | |
Accumulated deficit | $ 0 |
Exploration Activities (Details) (USD $)
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9 Months Ended | 12 Months Ended |
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Jun. 30, 2013
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Sep. 30, 2012
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Acquisition of Properties: | ||
Proved | ||
Unproved | 2,739,484 | 57,005 |
Exploration costs | 24,937 | 119,353 |
Development costs |
Stock Options (Tables)
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Jun. 30, 2013
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Stock options [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock options |
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Stock Option Activity |
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Summary of option granted |
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Property and Equipment (Details Textual) (USD $)
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9 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Property and Equipment (Textual) | ||
Depreciation expense | $ 65,753 | $ 78,089 |
Oil and Gas Properties (Tables)
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9 Months Ended | |||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Oil and Gas Properties and Capitalization of Costs Incurred in Oil and Gas Activities [Abstract] | ||||||||||||||||||||||||||||||||||||
Summary of net payments due under commitments related to oil sands properties |
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Nature of Business and Basis of Presentation
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9 Months Ended |
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Jun. 30, 2013
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Nature of Business and Basis of Presentation [Abstract] | |
Nature of Business and Basis of Presentation | 1. Nature of Business and Basis of Presentation
Nature of Business
Allied Devices Corporation (“Allied”) and its former subsidiaries were engaged in the manufacture and distribution of standard and custom precision mechanical assemblies and components throughout the United States.
On February 19, 2003, Allied filed a petition for bankruptcy in the United States Bankruptcy Court under Chapter 11 in the Eastern District of New York titled “Allied Devices Corporation, Case No. 03-80962-511.” The company emerged from bankruptcy pursuant to a Bankruptcy Court Order entered on September 10, 2003, with no remaining assets or liabilities and the company name was changed from “Allied Devices Corporation” to Deep Well Oil & Gas, Inc.” (“Deep Well”).
Upon emergence from Chapter 11 proceedings, Deep Well adopted fresh-start reporting in accordance with the Financial Accounting Standards Board (“FASB) Accounting Standards Codification (“ASC”) 852-10. In connection with the adoption of fresh-start reporting, a new entity was deemed created for financial reporting purposes, and Deep Well adopted the provisions of fresh-start reporting effective September 10, 2003. As a result, the company was required to value its assets and liabilities at fair value and eliminate any accumulated deficit as of September 10, 2003. Deep Well emerged from Chapter 11 proceedings with no assets and liabilities pursuant to the Bankruptcy Order. After the Bankruptcy Order and restructuring was completed, Deep Well entered into the oil and gas exploration business and acquired properties in the Peace River oil sands area, located in the province of Alberta, Canada. Because the current business, heavy oil and gas exploration, has no relevance to the predecessor company, there is no basis for financial comparisons between Deep Well’s current operations and the predecessor company.
These financial statements have been prepared showing the name “Deep Well Oil & Gas, Inc. (and Subsidiaries)” (“the Company”) and the post-split common stock, with $0.001 par value, from inception. The accumulated deficit has been restated to zero and dated September 10, 2003, with the statement of operations to begin on that date.
Basis of Presentation
The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate so as to make the information presented not misleading.
These interim condensed consolidated financial statements follow the same significant accounting policies and methods of application as the Company’s annual consolidated financial statements for the year ended September 30, 2012.
These statements reflect all adjustments, consisting solely of normal recurring adjustments (unless otherwise disclosed) which, in the opinion of management, are necessary for a fair presentation of the information contained therein. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012.
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Oil and Gas Properties
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Jun. 30, 2013
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Oil and Gas Properties and Capitalization of Costs Incurred in Oil and Gas Activities [Abstract] | |||||||||||||||||||||||||||||||||||
Oil and Gas Properties | 3. Oil and Gas Properties
The Company has acquired interests in certain oil sands properties located in North Central Alberta, Canada. The terms include certain commitments related to oil sands properties that require the payments of rents as long as the leases are non-producing. As of June 30, 2013, Northern’s net payments due in Canadian dollars under this commitment are as follows:
The government of Alberta owns this land and the Company has acquired the rights to perform oil and gas activities on these lands. If the Company meets the conditions of the 15-year leases the Company will then be permitted to drill on and produce oil from the land into perpetuity. These conditions give the Company until the expiration of the leases to meet the following requirements on its primary oil sands leases:
The Company plans to meet the second of these conditions. As at June 30, 2013 and September 30, 2012, the Company has an interest in ten wells, which can be counted towards these requirements.
The Company has identified two other wells drilled on these leases, which may be included in the satisfaction of this requirement. The Company has also acquired and processed 25 miles of seismic on the leases, which can be counted towards these requirements.
The Company follows the successful efforts method of accounting for costs of oil and gas properties. Under this method, only those exploration and development costs that relate directly to specific oil and gas reserves are capitalized; costs that do not relate directly to specific reserves are charged to expense. Producing, non-producing and unproven properties are assessed annually, or more frequently as economic events indicate, for potential impairment.
This consists of comparing the carrying value of the asset with the asset’s expected future undiscounted cash flows without interest costs. Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions. Proven oil and gas properties are reviewed for impairment on a field-by-field basis. No impairment losses were recognized for the period ended June 30, 2013 (September 30, 2012 - $nil).
Capitalized costs of proven oil and gas properties are depleted using the unit-of-production method when the property is placed in production.
Substantially all of the Company’s oil and gas activities are conducted jointly with others. The accounts reflect only the Company’s proportionate interest in such activities. |
Investment in Equity Securities
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9 Months Ended |
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Jun. 30, 2013
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Investment in Equity Securities [Abstract] | |
Investment in Equity Securities | 6. Investment in Equity Securities
On February 25, 2005, the Company acquired an interest in Signet Energy Inc. (“Signet” formerly Surge Global Energy, Inc.) as a result of a Farmout Agreement. Signet amalgamated with Andora Energy Corporation (“Andora”) in 2007.
As of November 19, 2008, the Company converted its Signet shares into 2,241,558 shares of Andora, which represents an equity interest in Andora of approximately 2.24% as of September 30, 2012, which is Andora’s fiscal year end. These shares are carried at a nominal value using the cost method and their value is included under oil and gas properties on the Company’s balance sheet. |
Capitalization of Costs Incurred in Oil and Gas Activities
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Jun. 30, 2013
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Oil and Gas Properties and Capitalization of Costs Incurred in Oil and Gas Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of Costs Incurred in Oil and Gas Activities | 4. Capitalization of Costs Incurred in Oil and Gas Activities
The Company accounts for the cost of exploratory wells and continues to capitalize exploratory well costs after the completion of drilling as long as sufficient progress is being made in assessing the oil sands reserves to justify its completion as a producing well.
For the period ended June 30, 2013, the Company’s management determined that sufficient progress has been made in assessing its oil sands reserves for continued capitalization of exploratory well costs. In relation to this sufficient progress assessment of its oil sands project the Company considered among other criteria; long lead times in getting regulatory approval for oil sands thermal recovery projects, road bans, winter access only properties and governmental and environmental regulations which can and often delay development of oil sands projects. Because of these and other factors, the Company’s oil sands project can take significantly longer to complete than regular conventional drilling programs for lighter oil. To date the Company’s geological, engineering and economic studies continue to lead them to believe that there is continuing progress toward bringing the project to commercial production. Therefore, the Company has continued to capitalize its costs associated with its oil sands project.
For the Company’s exploratory wells, drilling costs are capitalized on the balance sheet under “Oil and Gas Properties” line item, pending a determination of whether potentially economic oil sands reserves have been discovered by the drilling effort to justify completion of the find as a producing well. The Company periodically assesses the exploration and drilling capitalized costs for impairment and once a determination is made that a well is of no potential economic value, the costs related to that well are expensed as dry hole and reported in exploration expense. No impairments to our long-lived assets were identified or recorded in the nine months ended June 30, 2013 or in the fiscal years ended September 30, 2012 and 2011.
The following table illustrates capitalized costs relating to oil and gas – producing activities for two periods ended June 30, 2013 and September 30, 2012:
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Investment in Equity Securities (Details)
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0 Months Ended | |
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Nov. 19, 2008
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Sep. 30, 2012
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Investment in Equity Securities (Textual) | ||
Conversion of Signet shares into shares of Andora Energy Corporation | 2,241,558 | |
Percentage of equity interest in Andora | 2.24% |
Property and Equipment (Tables)
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Jun. 30, 2013
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Property and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property and Equipment |
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Changes in Non-Cash Working Capital (Tables)
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Jun. 30, 2013
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Changes in Non Cash Working Capital [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in non-cash working capital |
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Oil and Gas Properties (Details) (USD $)
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Jun. 30, 2013
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Summary of commitments related to rent payments of oil sands properties | |
2013 | $ 13,755 |
2014 | 55,021 |
2015 | 55,021 |
2016 | 55,021 |
2017 | 55,021 |
Subsequent | $ 108,608 |
Changes in Non-Cash Working Capital (Details) (USD $)
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9 Months Ended | 118 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Summary of changes in non-cash working capital | |||
Accounts receivable | $ 144,315 | $ 6,116 | |
Prepaid expenses | 473 | (4,408) | |
Accounts payable | (164,551) | 178,586 | |
Net changes in non-cash working capital | $ (19,763) | $ 180,294 | $ (266,939) |