Oil and Gas Properties

3 Months Ended

Dec. 31, 2018

Extractive Industries [Abstract]

OIL AND GAS PROPERTIES

3. OIL AND GAS PROPERTIES

The Company’s oil sands acreage as of December 31, 2018, covers 36,689 gross acres (28,814 net acres) of land under nine oil sands leases. Until the Company extends its oil sands leases “into perpetuity”, based on the Alberta governmental regulations, the lease expiration dates of the Company’s nine oil sands leases are as follows:

1. 20,242 gross acres (13,284 net acres) under five oil sands leases were set to expiry on July 10, 2018. In November of 2017, the Company’s joint venture partner and operator of two of the five oil sands leases, submitted two continuation applications to the Alberta Oil Sands Tenure division to apply to continue 7,591 gross acres (1,898 net acres) and on January 29, 2018, approval was received from Alberta Energy to continue 6,958 gross acres (1,740 net acres). In June of 2018, the Company as operator of three of these five oil sands leases, submitted three continuation applications to the Alberta Oil Sands Tenure division to apply to continue another 7,591 gross acres (6,832 net acres) where resources were identified. In mid-July 2018, two of the Company’s continuation applications received approval from Alberta Energy to continue 5,693 gross acres (5,124 net acres). In late December 2018, one more of the Company’s continuation applications received approval from Alberta Energy to continue 1,265 gross acres (1,139 net acres). Of these five oil sands leases that were set to expiry on July 10, 2018, a total of 6,326 gross acres (5,282 net acres) expired without being continued. It is the opinion of the Company, that these expired lands were primarily areas where the Company was unable to ascertain exploitable resources. Of these five oil sands leases 13,917 gross acres (8,002 net acres) have been approved by Alberta Energy to be continued beyond the original expiry date of July 10, 2018. These continued leases have no future expiry dates but are subject to yearly escalating rental payments until they are deemed to be producing leases;

2. 19,610 gross acres (17,649 net acres) under three northern oil sands leases are set to expire on August 19, 2019. The Company intends to apply for a term extension on these three northern oil sands leases, however it is not certain if an extension will be granted by Alberta Energy; and

3. 3,163 gross acres (3,163 net acres) under one oil sands lease are set to expire on April 9, 2024. It is the Company’s opinion that they have already met the governmental requirements for this lease and they will be applying to continue this lease into perpetuity.

Lease Rental Commitments

The Company has acquired interests in certain oil sands properties located in North Central Alberta, Canada. The lease terms include certain commitments related to oil sands properties that require the payments of yearly rents. As required by the Oil Sands Tenure Regulation of the Mines and Minerals Act of Alberta continued oil sands leases past their expiry dates are subject to escalating rental payments in respect of each term year of a continued lease that is designated as non-producing less any eligible research costs, exploration costs and development costs that are incurred in the term year of a continued lease. Escalating rent is payable at the end of each term year, while annual rent for leases are due at the beginning of each term year. Lessees of continued oil sands leases may reduce or eliminate their escalating rent obligations by conducting exploration or development work, or research, on the non-producing lease. As of December 31, 2018, excluding any eligible research, exploration and or development costs that may be used to reduce the Company’s yearly escalating future rents, the following table sets out the estimated net payments due under this commitment, which could be as high:

	(USD $)		(Cdn $)
2019	$	15,813	$	21,574
2020	$	18,711	$	25,527
2021	$	17,726	$	24,183
2022	$	23,861	$	32,553
2023	$	20,822	$	28,407
Subsequent	$	111,548	$	152,178

The Company follows the full cost method of accounting for costs of oil properties. Under this method, oil and gas properties, for which no proved reserves have been assigned, must be assessed at least annually to ascertain whether or not a write down should occur. Unproven properties are assessed annually, or more frequently as economic events indicate, for potential write down.

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 properties are reviewed for any write down on a field-by-field basis. No write downs were recognized for the period ended December 31, 2018.

Capitalized costs of proven oil properties will be depleted using the unit-of-production method when the property is placed in production.

Substantially all of the Company’s oil activities are conducted jointly with others. The accounts reflect only the Company’s proportionate interest in such activities.