Crude Oil and Natural Gas Property Information (Unaudited)

12 Months Ended

Sep. 30, 2020

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

CRUDE OIL AND NATURAL GAS PROPERTY INFORMATION (Unaudited)

17. CRUDE OIL AND NATURAL GAS PROPERTY INFORMATION (Unaudited)

Results of Operations from Oil and Gas Producing Activities

The following table sets forth the results of the Company’s operations from oil producing activities from the Company’s Sawn Lake oil sands properties located in Alberta, Canada, for the years ending September 30, 2020 and 2019:

	September 30, 2020			September 30, 2019
Oil sales after royalties	$	–		$	–
Production (Operating) expenses		–			–
Depreciation, accretion and depletion		(41,629	)		(44,457	)
Oil sales less expenses		(41,629	)		(44,457	)
Income tax expenses		–			–
Results of operations from producing activities	$	(41,629	)	$	(44,457	)

There was no production volumes or revenues for the fiscal years ending September 30, 2020 and 2019, due to a majority of the Company’s Joint Venture partners voting to temporarily suspend operations of the SAGD Project at the end of February 2016. In accordance with the Farmout Agreement the Company entered into on July 31, 2013, the Farmee has agreed to provide up to $40,000,000 in funding for the Company’s working interest portion of the costs of the SAGD Project before the execution of the Farmout Agreement in return for a net 25% working interest in two oil sands leases where the Company had a working interest of 50%. The Farmee is also required to provide funding to cover monthly administrative expenses of the Company provided that such funding shall not exceed $30,000 per month. The Farmee shall continue to cover the Company’s administrative costs up to $30,000 per month, under the Farmout Agreement, until completion in all substantial respects of the SAGD Project agreement entered into between the Company and the operator of the SAGD Project.

Operating expenses are zero since at this time they are paid for under the Farmout Agreement. Transportation costs are included in these operating costs. The total share of the capital costs and operating expenses of the Company’s joint Steam Assisted Gravity Drainage Demonstration project (“SAGD Project”), has been funded in accordance with the Farmout Agreement, at a net cost to the Company of $Nil. As required by the Farmout Agreement, as of September 30, 2020, the Farmee has reimbursed the Company and/or paid the operator up to a total of approximately Cdn $27.5 million, which depending upon the exchange rates used over time could presently be approximately $20.6 million USD for the Farmee’s share and the Company’s share of the capital costs and operating expenses of the SAGD. These costs include the drilling and completion of one SAGD well pair; the purchase and transportation of equipment of which included the once through steam generator (“OTSG”), production tanks, water treatment plant, and power generators; installation and construction of the steam plant facility; testing and commissioning; the purchase of the water source and disposal wells, construction of pipelines and expenditures to connect and tie-in the source and disposal water wells to the steam plant facility along with a fuel source tie-in pipeline; equipment for processing and treating the bitumen production at the SAGD facility site; replacement of the electrical submersible pump; front end costs for the expansion; the operating expenses associated with the steaming and production of the one SAGD well pair when the facility was producing; and the expenses associated with the monthly shut-in operations of the SAGD Project facility. The capital costs of the existing the SAGD Project steam plant facility, with pipelines and one SAGD well pair was approximately $26.5 million (Cdn $34.8 million) on a 100% working interest basis, of which the Company’s share was covered under the Farmout Agreement. These capital costs do not include the start-up operating expenses to initiate oil production from the SAGD well pair.

SAGD Project Outlook - The SAGD Project has successfully shown the capability of producing oil from the Bluesky reservoir using steam. The SAGD Project has:

● confirmed that the SAGD process works in the Bluesky formation at Sawn Lake;

● established characteristics of ramp up through stabilization of SAGD performance;

● indicated the productive capability and steam-oil ratio (“SOR”) of the reservoir; and

● provided critical information required for well and facility design associated with future commercial development.

The first SAGD well pair, for the SAGD Project, was drilled to a vertical depth of approximately 650 meters with a horizontal length of 780 meters each. Steam injection commenced in May 2014 and production started in September of 2014. Production from this one SAGD well pair increased significantly over the 18-month period it produced. Over January and February of 2016 production from the SAGD Project averaged 615 bopd, on a 100% basis (154 bopd net to the Company), and achieved an instantaneous Steam Oil Ratio (“ISOR”) efficiency of 2.1 from one SAGD well pair, demonstrating the productive capability of our Sawn Lake reservoir. The ISOR is reflective of the amount of steam needed to produce one barrel of oil. The lower the ISOR the lower the production costs and emissions per barrel of oil produced. In early May of 2016, an amended application was submitted to the Alberta Energy Regulator (“AER”) for a commercial expansion of the existing SAGD Project facility site and received regulatory approval in December 2017. This expansion application sought approval to expand the existing SAGD Project facility site to 3,200 bopd (100% basis). The Company anticipates that only five SAGD well pairs will need to be operating to achieve this production level. The Company anticipates that the commercial expansion to 3,200 bopd (100% basis) would include the reactivation of the existing demonstration project SAGD facility and existing SAGD well pair, the drilling of an additional four wellpairs and expansion of the existing SAGD facility to generate the additional necessary steam. As 2021 and 2022 proceeds, the operator of the SAGD Project should be consulting with its joint venture partners regarding development potential and alternatives for the SAGD Project.

Capitalized Costs Relating Specifically to the SAGD Project

The Company entered into a Farmout Agreement dated July 31, 2013, whereby the Company’s costs of the SAGD Project are paid in full by the Farmee in accordance with the Farmout Agreement; therefore, the Company has not capitalized any of the capital costs and operating expenses paid by the Farmee to the operator of the SAGD Project. See Note 5 herein “Capitalization of Costs Incurred in Oil and Gas Activities”.

Costs Incurred in Oil and Gas Property Acquisition, Exploration, and Development

See Note 5 herein “Exploration Activities”.