Replies to post #1883 on Deep Well Oil and Gas (fka DWOG)

[bhumiartha]

Why create a "mystery?" when the disclosure is in the 10Q?

First production of oil in the form of bitumen began on September 16, 2014. For the period ending December 31, 2014, we reported oil revenue in the amount of $146,400 before deduction of royalties. For the period ending December 31, 2014, the volumes of oil delivered were 3,614 barrels net to our Company, before royalties, with an average oil sales price of Cdn$41.68 per barrel. The realized sales price of our oil is discounted for diluent, trucking, pipeline and additional treating costs from the West Texas Intermediate (“WTI”) benchmark price. While there has been a significant decline in oil prices, the Canadian dollar has weakened and offset some of the impact. In addition, our fuel gas costs to operate our SAGD Project steam facility plant have declined similarly to the decline in the WTI benchmark price. Our net operating margin after operating expenses is zero since at this time any negative operating margins are paid for under the farmout agreement we entered into on July 31, 2013 (the “Farmout Agreement”) to fund our share of the SAGD Project. Transportation costs are included in these operating costs. Therefore, the total share of the material costs and operating expenses of our Company’s joint SAGD Project, has been funded in accordance with the Farmout Agreement, at a net cost to our Company of $Nil. As required by the Farmout Agreement, the Farmee (as defined below) has since paid Cdn$19.4 million to the operator of the SAGD Project for the Farmee’s share and our share of the costs of the SAGD Project up to December 31, 2014. These costs included the drilling of the SAGD well pair; the purchase and transportation of equipment; installation and construction of the steam plant facility; testing and commissioning; the purchase of the water source and disposal wells and expenditures to connect these water wells to the steam plant facility along with a fuel source tie-in; and the monthly operating expenses associated with the steaming and production of the SAGD well pair up to December 31, 2014.

For the three months ended December 31, 2014, our general and administrative expenses increased by $122,598 compared to the three months ended December 31, 2013, which was primarily due to (i) an increase of $160,585 in non-cash share based compensation charged to expense, which was mainly due to vested stock options we granted on September 19, 2014 and November 17, 2014 to our directors and contractors; and (ii) an increase in engineering fees for the preparation of an independent reserves evaluation of our Sawn Lake properties. These increases were offset by (i) a decrease of foreign exchange loss of $31,485; and (ii) a decrease in legal fees. We also received $90,000 during this quarter from one of our joint venture partners in accordance with a Farmout Agreement to offset some of our monthly operational expenses. After adjusting for the non-cash items listed above, our general and administrative expenses were $180,558 for the three months ended December 31, 2014 compared to $185,295 for the three months ended December 31, 2013.