Oil and Gas Properties

12 Months Ended

Sep. 30, 2020

Oil and Gas Property [Abstract]

OIL AND GAS PROPERTIES

4. OIL AND GAS PROPERTIES

The Company’s oil sands acreage as of September 30, 2020, covers 17,712 gross acres (11,734 net acres) of land under six oil sands leases. The lease expiration dates of the Company’s oil sands leases are as follows:

1. The Company has five oil sands leases that cover 14,549 gross acres (8,571 net acres) and have no set expiry date. These continued leases are now held by the Company for perpetuity, subject to yearly escalating rental payments until they are deemed to be producing leases;

2. 3,163 gross acres (3,163 net acres) under one oil sands lease are set to expire on April 9, 2024. The Company 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 amended 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. Annual and escalating rent of continued leases are due at the beginning of each term year. As of September 30, 2020, the following table sets out the estimated net payments due under lease rental commitments for non-producing continued leases, which could be as high as, until the leases are classified as producing continued leases:

	(USD $)		(Cdn $)
2021	$	17,144	$	22,868
2022	$	28,059	$	37,426
2023	$	28,059	$	37,426
2024	$	30,938	$	41,266
2025	$	46,537	$	62,074
Subsequent	$	257,185	$	343,048

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 for potential write down.

Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions. No write downs were recognized for the year ended September 30, 2020.

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

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

Farmout Agreement

On July 31, 2013, the Company entered into a Farmout agreement (the “Farmout Agreement”) with an additional joint venture partner (the “Farmee”) to fund the Company’s share of the Alberta Energy Regulator (“AER”) approved joint Steam Assisted Gravity Drainage Demonstration project (“SAGD Project”) at the Company’s Sawn Lake heavy oil reservoir in North Central Alberta, Canada. In accordance with the Farmout Agreement the Farmee has agreed to provide up to $40,000,000 in funding for the Farmee’s share and the Company’s share of the capital costs and operating expenses for the SAGD Project, in return for a net 25% working interest in 12 sections (now 11 sections) where the Company had a working interest of 50% (before the execution of the Farmout Agreement). The Farmee will also provide funding to cover monthly operating expenses of the Company, of which the first such monthly payment began in respect of the month of August 2013 and shall not to exceed $30,000 per month.

See “Subsequent Events” in the notes to the Condensed Consolidated Financial Statements for the year ended September 30, 2020, as disclosed herein.