TMK ENERGY LIMITED — Annual Report 2009

Sep 30, 2009

==> picture [564 x 126] intentionally omitted <==

Kilgore Oil & Gas

ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2009

THE INFORMATION CONTAINED IN THIS DOCUMENT SHOULD BE READ IN CONJUSTION WITH KILGORE OIL AND GAS FULL YEAR REPORT DATED 30 JUNE 2008 AND ANY PUBLIC ANNOUNCEMENTS MADE BY THE COMPANY IN ACCORDANCE WITH THE CONTINUOUS DISCLOSURE OBLIGATIONS ARISING FROM THE CORPORATIONS ACT 2001 AND THE ASX LISTING RULES.

Contents

CORPORATE DIRECTORY ....................................................................................................................................... 2 CHAIRMAN’S LETTER ................................................................................................................................................. 3 REVIEW OF OPERATIONS .......................................................................................................................................... 4 DIRECTORS’ REPORT .............................................................................................................................................. 10 AUDITOR’S INDEPENDENCE DECLARATION ......................................................................................................... 19 INCOME STATEMENTS ............................................................................................................................................. 20 BALANCE SHEETS .................................................................................................................................................... 21 CASH FLOW STATEMENTS ...................................................................................................................................... 22 STATEMENTS OF CHANGES IN EQUITY ................................................................................................................. 23 NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................. 24 DIRECTORS’ DECLARATION .................................................................................................................................... 52 INDEPENDENT AUDIT REPORT TO THE MEMBERS .............................................................................................. 53 SHAREHOLDER INFORMATION ............................................................................................................................... 55

CORPORATE DIRECTORY

Chairman Gordon Sklenka Managing Director Anthony Short Non Executive Director Brian Ayers Company Secretary David Ballantyne Registered & Principal Office 2/16 Ord Street WEST PERTH WA 6005 Telephone: + 618 9486 1122 Facsimile: + 618 9486 1011 Postal Address P.O. Box 1779 WEST PERTH WA 6872 Auditors BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 Solicitors – Perth Hardy Bowen Level 1, 28 Ord St West Perth WA 6005 Website Address www.kilgoreoilandgas.com.au Stock Exchange Listings Kilgore Oil & Gas Ltd shares are listed on the Australian Stock Exchange under the code KOG Share Registry Advanced Share Registry Services 150 Stirling Hwy Nedlands WA 6009

CHAIRMAN’S LETTER

Dear Shareholder

Following its listing in July 2008, your Company completed the 10 well drilling programme outlined in its May 2008 prospectus as well as participating in the drilling of an additional well, Egret#1, in the offshore Galveston 307 Block. This drilling programme has been a success with six commercial discoveries out of a total eleven wells drilled. Three onshore wells have been completed and the other three, being the offshore Galveston 307 wells, are partially completed and, it is intended, will be connected in the last quarter of this calendar year, subsequent to the end of the hurricane season in the Gulf of Mexico. A further two wells, Cedar Creek and Boettcher, intersected hydrocarbons but were not completed.

The technical success has, to date, not been matched by the anticipated commercial success in large part due to a mixture of sharply lower gas prices, high drilling prices, volatile currency markets and the turbulence of international markets over the last twelve months. However your Board has been encouraged by the recent lift in natural gas and looks forward with renewed optimism to production revenues from both its offshore and onshore assets, and to evaluating other opportunities during the current year.

Your Board has also recently announced a three stage process to raise around $4.1 million to be used for further development of its existing projects, for assessment of new opportunities and for debt retirement. We are confident that this will be completed in the last quarter of this calendar year, and encourage shareholders to participate, as your Directors fully intend so to do, in the rights issue component of this process. The Board will be working diligently in the coming financial year to add value to your Company, and takes this opportunity to thank you for your support throughout this eventful year.

==> picture [107 x 74] intentionally omitted <==

Gordon Sklenka Chairman 30 September 2009

REVIEW OF OPERATIONS

Corporate overview and strategy

Operational Overview

Following its listing in July 2008, Kilgore completed the 10 well drilling programme outlined in its May 2008 prospectus as well as participating in the drilling of an additional well, Egret#1, in the offshore Galveston 307 Block. This drilling programme resulted in six commercial discoveries out of a total eleven wells drilled. Three onshore wells (Upmach, Stary and Alford) have been completed and the other three, being the three offshore Galveston 307 wells (Snipe, Egret and Sandpiper), are partially completed and, it is intended, will be connected in the last quarter of this calendar year, subsequent to the end of the hurricane season in the Gulf of Mexico. A further two wells, Cedar Creek and Boettcher, intersected hydrocarbons but were not completed.

Galveston 307 Prospect (Snipe, Egret and Sandpiper), Texas State Waters (WI 5.625% NRI 4.5% post Odin earn-in)

The operator, Black Pool Energy, successfully drilled, cased and tested three directional wells from the same location in the 1st and 2nd quarters of 2009 generating gross proven reserves in excess of 17 Bcfe. The wells were tested at a combined flow rate in excess of 10,000 Mcf/d (450 Mcf/d net to Kilgore post-Odin Joint Venture).

A production caisson has been installed, production facilities and platform are being designed and permitted and it is anticipated the wells will come on line in the 4th quarter of 2009, at the end of the hurricane season, and following the anticipated uplift in gas prices.

Black Pool and Kilgore have already commenced discussions regarding the sale of their interests in GAL307. Terms are likely to be finalised in the 1st or 2nd quarter of 2010 when the wells are likely to have been in production for several months and gas prices are likely to be higher.

UpMach Prospect-Goliad County, Texas (WI 22.5%, NRI 16.425%)

The DM Rush#1 well was completed in the March Quarter and produced at a sustained rate of 250 Mcf/d. Production was subsequently suspended due to high water production. The operator, Tempest Energy, has plugged back the well to the 10,200 foot sand and produced the well at an initial flow rate to sales of approximately 900 Mcf and 6 barrels of condensate per day for 10 days before again encountering water influx. At the time of this report, the operator is performing various diagnostics to obtain the source of the water.

There are at least three additional drilling locations for the 10,100, 10,200 and 10,250 ft sands on the UpMach Prospect. Wells with virtually identical log characteristics in the offsetting Bullock’s Church Field came online at 1,500 to 1,700 Mcfe/d and produced 4.0 to 4.4 Bcfe per well from these intervals.

Stary Prospect, Lavaca County, Texas (WI 33.75%, NRI 25.31%)

After completion, the well was perforated and hydraulically fractured in the 10,100 ft Wilcox and began producing in March at over 1,900 Mcfe/d. Production was not sustained at this rate due to low reservoir permeability. Kilgore therefore plans to plug the well back to the shallower 9,500 foot Wilcox sand that produced 0.75 BCF and 35,000 BO from the Talon Stary#2 offset well. Kilgore expects initial net production to be approximately 330 Mcfe/d when the plug back is completed in the 4th quarter of 2009.

The operator, Hibernia Resources LLC, constructed and laid a 2.5 mile pipeline to transport the gas from the Stary #1 well and the additional assets that will be developed on and around this prospect. In September 2009 the operator contracted with a third party to move their gas thru this pipeline thereby providing additional reoccurring revenue to the Kilgore.

The successful drilling of the Stary Prospect has resulted in the identification of a regional target that has the potential to be significantly more valuable than the existing discovery. Analysis of re-processed seismic data indicates that the productive sands encountered in the Stary#1 well are stratigraphically-trapped within a major erosional feature. This 220 square mile area contains at least twenty prospects each of which, if commercial discoveries, would support four wells.

Alford Prospect - Victoria County, Texas (WI 67.5%, NRI 50.625%)

The Alford #1 well (operated by Hibernia Resources, LLC) was put on production in December 2008 at 125 Mcf/d (70 Mcf/d net to Kilgore). The well began to load with formation water in January and stopped flowing in February. In late March, the well was put on gas assist in order to keep the well unloaded. This method of artificial lift successfully increased the gas rate to 100 Mcf/d but the disposal cost for the corresponding formation water production was not economical at the current low gas prices. Currently, the well is being produced in sufficient quantities to hold the lease for further development. Geological mapping, supported by engineering data from the productive sand, is currently being evaluated to determine if a proved undeveloped location might exist updip to the Alford #1, away from the water column.

Others

Cedar Creek and Boettcher encountered hydrocarbons but were not completed at the time. Vermillion 141, Skimmer and Joshua were plugged and abandoned.

CORPORATE GOVERNANCE

COMPLIANCE WITH ASX CORPORATE GOVERNANCE RECOMMENDATIONS

Introduction

Kilgore Oil and Gas Ltd ("Company") has adopted systems of control and accountability as the basis for the administration of corporate governance. These policies and procedures are summarised below.

Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the Company are achieved, how risk is monitored and assessed and how performance is optimised.

The Board and management are committed to corporate governance and, to the extent they are applicable to the Company, have adopted the Eight Essential Corporate Governance Principles as set out in the Corporate Governance Principles and Recommendation (2nd Edition) as published by the ASX Corporate Governance Council.

To obtain a copy of these principles please go to the ASX website (http://www.asx.com.au/supervision/governance/index.htm). Whilst the Board has demonstrated, and continues to demonstrate, its commitment to best practice in corporate governance, it emphasises that good corporate governance is only one factor contributing to the success of the Company's operations.

Additional information about the Company's corporate governance practices is set out on the Company's website at www.kilgoreoilandgas.com.au.

The table below summarises the Company’s compliance with the Corporate Governance Council’s Recommendations:

Principle	ASX Corporate Governance Council Recommendations	Comply
1	Lay solid foundations for management and oversight
1.1	Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.	Yes
1.2	Disclose the process for evaluating the performance of senior executives.	Yes
1.3	Provide the information indicated in the Guide to reporting on principle 1.	Yes
2	Structure the Board to add value
2.1	A majority of the board should be independent directors.	No
2.2	The chair should be an independent director.	No
2.3	The roles of chair and chief executive officer should not be exercised by the same individual.	Yes
2.4	The board should establish a nomination committee.	No
2.5	Disclose the process for evaluating the performance of the board, its committees and individual directors.	Yes
2.6	Provide the information indicated in the Guide to reporting on principle 2.	Yes
3	Promote ethical and responsible decision-making
3.1	Establish a code of conduct and disclose the code or a summary as to:	Yes
	• the practices necessary to maintain confidence in the company’s integrity;
	• the practices necessary to take into account the company’s legal obligations and the reasonable expectations of its
	stakeholders; and
	• the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

3.2	Establish a policy concerning trading in company securities by directors, senior executives and employees and disclose	Yes
	the policy or a summary.
3.3	Provide the information indicated in the Guide to reporting on principle 3.	Yes
4	Safeguard integrity in financial reporting
4.1	The board should establish an audit committee.	No
4.2	The audit committee should be structured so that it:	No
	• consists only of non-executive directors;
	• consists of a majority of independent directors;
	• is chaired by an independent chair, who is not chair of the board; and
	• has at least three members.
4.3	The audit committee should have a formal charter	Yes
4.4	Provide the information indicated in the Guide to reporting on principle 4.	Yes
5	Make timely and balanced disclosure
5.1	Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure	Yes
	accountability at senior executive level for that compliance and disclose those policies or a summary of those policies.
5.2	Provide the information indicated in the Guide to reporting on principle 5.	Yes
6	Respect the rights of shareholders
6.1	Design a communications policy for promoting effective communication with shareholders and encouraging their	Yes
	participation at general meetings and disclose the policy or a summary of that policy.
6.2	Provide the information indicated in the Guide to reporting on principle 6.	Yes
7	Recognise and manage risk
7.1	Establish policies for the oversight and management of material business risks and disclose a summary of those policies.	Yes
7.2	The board should require management to design and implement the risk management and internal control system to	Yes
	manage the company’s material business risks and report to it on whether those risks are being managed effectively. The
	board should disclose that management has reported to it as to the effectiveness of the company’s management of its
	material business risks.
7.3	The board should disclose whether it had received assurance from the chief executive officer and the chief financial	Yes
	officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound
	system of risk management and internal control and that the system is operating effectively in all material respects in
	relation to financial reporting risks.
7.4	Provide the information indicated in the Guide to reporting on principle 7.	Yes
8	Remunerate fairly and responsibly
8.1	The board should establish a remuneration committee.	No
8.2	Clearly distinguish the structure on non-executive directors’ remuneration from that of executive directors and senior	Yes
	executives.
8.3	Provide the information indicated in the Guide to reporting on principle 8.	Yes

Council Principle 1: Lay solid foundations for management and oversight

1.1 Role of the Board

The Board's primary role is the protection and enhancement of medium to long term shareholder value. To fulfil this role, the Board is responsible for the overall Corporate Governance of the consolidated entity including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

1.2 Responsibility of the Board

The Board is collectively responsible for promoting the success of the Company by:

• Supervising the Company’s framework of control and accountability systems to enable risk to be assessed and managed;

• Ensuring the Company is properly managed;

CORPORATE GOVERNANCE (Cont)

• Approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;

• Approval of the annual budget;

• Monitoring the financial performance of the Company;

• Approving and monitoring financial and other reporting;

• Overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;

• Liaising with the Company’s external auditors as appropriate; and

• Monitoring, and ensuring compliance with, all of the Company's legal obligations, in particular those obligations relating to the environment, native title, cultural heritage and occupational health and safety.

The Board must convene regular meetings with such frequency as is sufficient to appropriately discharge its responsibilities. Between regular meetings it will also ensure that important matters are addressed by way of circular resolutions. The Board may, from time to time, delegate some of the responsibilities listed above to its senior management team.

1.3 Materiality threshold

The Board has agreed on both quantitative and qualitative guidelines for assessing the materiality of matters. Qualitative indications of materiality would include if:

• They impact on the reputation of the Company;

• They involve a breach of legislation;

• They are outside the ordinary course of business;

• They could affect the Company’s rights to its assets; or

• If accumulated they would trigger the quantitative tests.

1.4 The Chairman

The chairman is responsible for leadership of the Board, for the efficient organisation and conduct of the Board's function and for the briefing of all directors in relation to issues arising at Board meetings. The chairman is also responsible for overall shareholder communication, chairing shareholder meetings, and arranging Board performance evaluation.

1.5 The Managing Director

The managing director is responsible for running the affairs of the Company under delegated authority from the Board and to implement the policies and strategy set by the Board. In carrying out his/her responsibilities the managing director must report to the Board in a timely manner and ensure all reports to the Board present a true and fair view of the Company’s financial condition and operational results.

1.6 Role and responsibility of management

The role of management is to support the managing director and implement the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. Management is responsible for reporting all matters which fall within the Materiality Threshold at first instance to the managing director or if the matter concerns the managing director then directly to the chairman or the lead independent director, as appropriate.

1.7 Relationship of Board with management

Management of the day-to-day business of the Company is to be conducted by or under the supervision of the Board, and by those other officers and employees to whom the management function is properly delegated by the Board.

The Board will adopt appropriate structures and procedures to ensure that the Board functions independently of management. Appropriate procedures may involve the Board meeting on a regular basis without management present, or may involve expressly assigning the responsibility for administering the Board's relationship to management to a Committee of the Board.

CORPORATE GOVERNANCE (Cont)

Information is formally presented to the Board at Board meetings by way of Board reports and review of performance to date. When directors are providing information about opportunities for the Company, this should always be through the Board.

Council Principle 2: Structure the board to add value

The Company presently has two executive directors and one non-executive Chairman (Mr Gordon Sklenka), who is not independent in terms of the ASX Corporate Governance Council’s definition of an independent director, because of his relevant interest in the Company’s securities. The Board believes that the Chairman is able and does bring quality and independent judgment to all relevant issues falling within the scope of the role of a Chairman. Therefore no director is independent in accordance with Council Principle 2. However the Board considers that its structure has been and continues to be appropriate in the context of the company’s current projects and operations. The Company considers that each director possesses skills and experience suitable for building the Company. Furthermore, the Board considers that in the current phase of the Company's growth, the Company's shareholders are better served by directors who have a vested interest in the Company. The Board intends to reconsider its composition as the Company's operations evolve, and appoint independent directors as appropriate.

The Company has not established a nomination committee, believing that the Company is not currently of a size to justify its formation.

Council Principle 3: Promote ethical and responsible decision-making

The Company complies with this recommendation. The company has adopted a code of conduct incorporating all corporate executives. It requires all business affairs to be conducted legally, ethically and with integrity. The code provides for reporting of breach of the code by others. The code of conduct has been made available on the company’s website.

The Board has adopted a policy and procedure on dealing in the Company’s securities by directors, officers and employees which:

• Prohibits dealing in the Company's securities whilst in possession of insider information;

• Prevents short term trading in the Company's securities;

• Requires the company secretary or a director (other than the director trading, if applicable) to be notified upon a trade occurring; and

• Prevents dealing in the Company's securities during specified blackout periods.

Council Principle 4: Safeguard integrity in financial reporting

The Company’s Managing Director and Chief Financial Officer report in writing to the Board that the consolidated financial statements of the Company and its controlled entities for each half and full year present a true and fair view, in all material aspects, of the Company’s financial condition and operational results and are in accordance with accounting standards.

The Company has not established an audit committee believing that the Company is not of a size, nor are its financial affairs of such complexity to warrant its establishment. The Board as a whole fulfils the role of an audit committee by:

• Monitoring the integrity of the financial statements of the Company, and reviewing significant financial reporting judgments.

• Reviewing the Company’s internal financial control system and risk management systems.

• Reviewing the appointment of the external auditor and approving the remuneration and terms of engagement.

• Monitoring and reviewing the external auditor’s independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements.

Council Principle 5: Make timely and balanced disclosure

Compliance procedures for ASX Listing Rule disclosure requirements have been adopted by the Company. It has appointed an officer of the Company to be responsible for compliance.

Council Principle 6: Respect the rights of shareholders

Information will be communicated to shareholders as follows:

CORPORATE GOVERNANCE (Cont)

• The annual report is distributed to all shareholders. The Board ensures that the annual report includes relevant information about the operations of the consolidated entity during the year, changes in the state of affairs of the consolidated entity and details of future developments, in addition to the other disclosures required by the Corporations Act. The annual report is made available on the Company’s website, and is provided in hard copy format to any shareholder who requests it.

• The half-yearly report contains summarised financial information and a review of the operations of the consolidated entity during the year. The half-year audited financial report is prepared in accordance with the requirements of applicable Accounting Standards and the Corporations Act and is lodged with the Australian Securities Exchange. The half-yearly report is made available on the Company’s website, and is sent to any shareholder who requests it.

• The quarterly report contains summarised cash flow financial information and details about the Company’s activities during the quarter. The quarterly report is made available on the Company’s website, and is sent to any shareholder who requests it.

• Proposed major changes in the consolidated entity which may impact on share ownership rights are submitted to a general meeting of shareholders.

• The Company's website is well promoted to shareholders and shareholders may register to receive updates, either by email or in hard copy.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the consolidated entity’s strategy and goals. Important issues are presented to the shareholders as resolutions.

The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares to directors and changes to the constitution. Copies of the constitution are available to any shareholder who requests it.

Company's website

The Company maintains a website at www.kilgoreoilandgasltd.com.au.

On its website, the Company makes the following information available on a regular and up to date basis:

• company announcements;

• latest information briefings;

• notices of meetings and explanatory materials; and

• quarterly, half yearly and annual reports.

The website is being continuously updated with any information the directors and management may feel is material. The Company also ensures that the audit partner attends the Annual General Meeting.

Council Principle 7: Recognise and manage risk

The Company has developed a framework for risk management and internal compliance and control systems which covers organisational, financial and operational aspects of the Company's affairs. It appoints the managing director as being responsible for ensuring that the systems are maintained and complied with.

Council Principle 8: Remunerate fairly and responsibly

The Board believes the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of a remuneration committee. The Board as a whole is responsible for the remuneration arrangements for Directors and executives of the Company and considers it more appropriate to set time aside at board meetings to specifically address matters that would ordinarily fall to the remuneration committee.

DIRECTORS’ REPORT

Your Directors present their report on the consolidated entity (Group) for the year ended 30 June 2009.

Directors

The names and details of the Company’s Directors in office at any time during the financial year and until the date of this report are detailed below.

G. Sklenka B. Ayers A. Short

Principal activities

The principal continuing activities of the Group and Company during the financial year were the acquisition, production and exploration of petroleum and gas properties in Texas, United States of America.

There were no changes in the nature of the activities of the group during the year.

Operating results

The net operating loss of the Group for the year ended 30 June 2009 after income tax amounted to $8,188,910 (2008: Loss $1,000,990).

Dividends paid or recommended

No dividend was paid or declared during the year and the Directors do not recommend the payment of a dividend.

Review of operations

A detailed review of the Group’s activities is contained in the Operations Review section of the Annual Report.

Significant changes in the state of affairs

On 10 July 2008 the Company was admitted to the Official List of ASX, with an issued capital of 96,800,003 shares including 7,000,000 shares issued from the Class A convertible performance shares.

During the year a further 14,000,000 shares were issued from the Class B and Class C convertible performance shares upon the achievement of gross proven reserve milestones of 2 Bcfe and 4 Bcfe respectively.

During the year the Company has drilled the ten prospects outlined in its May 2008 prospectus, and an eleventh additional target, Egret. Of these eleven targets, six have been completed, or are in the process of being completed: Snipe, Egret, and Sandpiper (Galveston, offshore Texas state waters), and Upmach, Stary and Alford (onshore Texas). During the year the Company has spent $11,209,892 (US$9,214,532) on drilling and completion costs, and has written off $6,410,750 (US$5,269,637) of costs on the four prospects which were either plugged and abandoned, or had hydrocarbon shows which it was decided not to pursue further at the time.

In February the Company entered into an agreement with Odin Energy Ltd to fund the drilling and the majority of completion costs (prior to final well connection) on the Snipe, Egret and Sandpiper offshore wells, in return for 50% of Kilgore’s interest in these wells. Odin Energy Ltd spent approximately $2.4 million (US$ 1.6 million) to earn this interest.

Events Subsequent to Balance Sheet Date

On 22 September the Company announced plans to undertake a three-stage $4.1m capital raising by way of the following:

• A non-renounceable rights Issue of 110,800,003 Shares at an issue price of one cent ($0.01) on the basis of one (1) share for every one (1) share held on the record date together with one (1) free attaching option for every two (2) shares applied for and allotted for to raise $1,108,000 before costs (Rights Issue);

• A share and option placement comprising 250,000,000 shares at an issue price of one cent ($0.01) together with one (1) free attaching option for every two (2) shares applied for to raise $2,500,000 before costs (Share and Option Placement); and

• An option placement comprising the issue of 275,000,000 options at an issue price of 0.2 cents ($0.002) to raise $550,000 before costs (Option Placement).

All options will have an exercise price of five cents ($0.05) and an expiry date 30 months from the date of issue.

The Share and Option Placement and the Option Placement are subject to shareholder approval. The Company will seek to obtain the required shareholder approval and a Notice of Meeting will be sent to shareholders in due course.

It is proposed that the three phases will be completed successively with the record date for the Rights Issue being before either the Share and Option Placement or the Option Placement. Consequently, placees will not be entitled to participate in the Rights Issue. The record date for the Rights Issue will be advised in due course.

The funds raised will be used to complete the Galveston 307 Block offshore production facilities and sales pipeline which will be used for its Snipe, Egret and Sandpiper discoveries. Funds will also be utilised to retire debt, to fund new acquisitions and for working capital purposes.

Loan and Debt Facilities

The Company has in the order of $2.1 million in loan funds, repayable in the current financial year. These loans attract interest at rates between 6.25% and 15% per annum. The majority of these loan funds will be retired upon completion of the Company’s proposed capital raising of $4.1 million.

Likely developments

The Company intends to complete production facilities and the platform at it Galveston 307 prospect, with anticipated production to commence in the December quarter. It is intended that this project will be sold during the current financial year. The Company will also plug its Stary prospect back to the 9,500 foot Wilcox sand, which it is hoped will be completed and in production during the December quarter. Diagnostics will be run at the Upmach prospect to obtain the source of the water influx, with a view to re-commencing production.

Other opportunities both within existing projects and elsewhere will be evaluated upon completion of the proposed capital raising of $4.1 million and the retirement of debt.

Environmental Issues

The Group’s operations are subjects to various environmental regulations under the Federal and State Laws of United States of America. The majority of the company’s activities involve low level disturbance associated with its production facilities and exploration drilling programs. As at the date of this report the group complies fully with all such regulations.

The Group is subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act 2007.

The Energy Efficiency Opportunities Act 2006 requires the Group to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the Group intends to take as a result.

The National Greenhouse and Energy Reporting Act 2007 require the Group to report its annual greenhouse gas emissions and energy use. The first measurement period for this Act ran from 1 July 2008 to 30 June 2009. The Group will not be in commercial production until the last quarter of 2009 so no measurements has been recorded. The Group intense to implement system and process for the collection and calculation of the data required in financial year 2010.

Information on Directors and Secretary

Names, qualifications, experience and special responsibilities of current directors and company secretary:

Anthony Short, BPE, B.Comm, Grad Dip Fin, MAICD Managing Director (Executive), Age 50

Mr Short has 18 years experience in the administration and management of listed public companies. He has extensive experience at board level in the management and formation of public companies in the areas of oil and gas exploration and production and gold mining in the USA. Mr Short has held the position of chairman, CFO and managing director in a number of listed public companies and has also acted as corporate advisor on a number of successful public listings. He was a founding director of Amadeus Energy Ltd and Advance Energy Ltd has a very strong working relationship with strategic partners in the US.

Current Directorship and date of appointment:

He is currently the managing director of Advance Energy Ltd since 16/11/04, Vector Resources Ltd (director since 06/01/05), Regal Resources Ltd (10/09/03) and Palace Resources Ltd (director since 9/09/03).

Other Directorships within the last three years:

Odin Energy Ltd – appointed on 23/03/07 and resigned on 23/02/2009.

Special Responsibilities:

Managing Director

Brian Ayers, B.Geophs, MBA Exploration Director (Executive), Age 52

Mr. Ayers is an E&P executive with over 28 years of experience in the US oil and gas industry. He began his career as a geophysicist with Texaco USA in New Orleans, Louisiana then became an exploration geologist with Coastal Oil and Gas (pipeline, marketing, exploration and production company) where he rose to Vice President, Domestic Exploration over an 18-year tenure. He was Vice President and Houston Division Manager for Samson Resources, a large, private oil and gas company based in Oklahoma, then was President and CEO of Centurion Exploration Company, a private, US Gulf Coast explorer, for four years. Mr. Ayers is currently Senior Vice President and Houston Division Manager for America Capital Energy Corporation. He has wide-ranging technical experience in the Gulf Coast arena and has successfully managed several integrated oil and gas exploration and production teams.

Current Directorship and date of appointment:

None

Other Directorships within the last three years:

None

Special Responsibilities:

Exploration Director

Gordon Sklenka, B.Com, (UWA) Chairman (Non-Executive Director), Age 48

Mr Sklenka began his career in Chartered Accounting in Sydney and Perth. He has more than 15 years experience in corporate finance in the areas of capital raisings, IPOs, acquisitions and project finance in the resources and technology sectors. He has worked with a number of listed public companies in both Australia and Canada and developed extensive experience in company formation, capital raisings and project acquisition.

Current Directorship and date of appointment:

Advance Energy Ltd (director since 16/11/04), AXG Mining Ltd (director since 16/02/05), Vector Resources Ltd (director since 06/01/05), Regal Resources Ltd (director since on10/09/03), Rand Mining NL (director since 16/08/04) and Tribune Resources NL (director since 16/08/04).

Other Directorships within the last three years:

None

Special Responsibilities:

Chairman / Non Executive Director

David Ballantyne - Company Secretary MA (Hons) University of Edinburgh, ACA Company Secretary, Age 48

Mr. Ballantyne is a Chartered Accountant who has a significant level of commercial experience and technical ability in the exploration / mining industry plus in the biotechnology and aquaculture industries. He has previously worked for a former Big 4 accounting firm and second tier accounting firms in the areas of audit, corporate services and insolvency. Mr Ballantyne has also had extensive experience in the corporate management, directorship and company secretary roles of small mineral exploration and production companies and has completed listings on AIM and the ASX.

Special Responsibilities: Company Secretary

Meetings of Directors

The number of meetings held by the company’s board of directors during the year ended 30 June 2009 and the number of meeting attended by each director were:

y each director were:
Director	Board meetings held	Board meetings attended
G. Sklenka	15	15
B. Ayers	15	14
A. Short	15	15

Securities held and controlled by Directors

As at the date of this report, the interests of the Directors in shares and Convertible Performance Shares (“CPS”) of the Company were:

Ordinary shares

Holder	Held at beginning of the year	Acquired	Sold	Converted from CPS	Balance at end of the year
Brian Ayers - Direct	-	-	-	3,000,000	3,000,000
Gordon Sklenka -Indirect	3,000,001	-	-	3,000,000	6,000,001
Anthony Short -Indirect	3,000,001	-	-	3,000,000	6,000,001

Converting Performance shares (CPS)

Holder	Held at beginning of the year	Acquired	Sold	Converted to shares	Balance at end of the year
Brian Ayers - Direct	8,000	-	-	6,000	2,000

Gordon Sklenka - Indirect	8,000	-	-	6,000	2,000
Anthony Short - Indirect	8,000	-	-	6,000	2,000
Details of the conditions relating to conversion of the Converting Performance Shares are included in note 21.

REMUNERATION REPORT (AUDITED)

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporation Act 2001.

This report outlines the remuneration arrangements in place for directors and executives of Kilgore Oil & Gas Limited. This report has been set out under the following main headings:

• A. Principles Used to Determine the Nature and Amount of Remuneration

• B. Service Agreements

• C. Details of Remuneration

• D. Share-based Compensation

• E. Additional Information

As noted in the corporate governance, section of this Annual Report, under council principle 8, the company is not currently of a size, nor are its affairs of such complexity to justify the formation of a remuneration committee. The board manages the remuneration policy, setting the terms and conditions for executive directors and other senior executives.

A. Principles Used to Determine the Nature and Amount of Remuneration

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and Executive Officers. The board will assess the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• Competitiveness and reasonableness

• Acceptability to shareholders

• Performance linkage/alignment of executive compensation

• Transparency

• Capital management

The board policy is to remunerate non executive directors at fair market rates for comparable companies for the relevant time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually based on market practice, duties and accountability. The maximum amount of fees that can be paid to directors is subject to approval by shareholders at the Annual General Meeting. The maximum amount approved is $300,000. Fees for non-executive directors are not linked to the performance of the Group. However, to align director’s interests with shareholder interests the directors are encouraged to hold shares in the company and may be issued with additional securities as deemed appropriate.

The Board believes that the remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate for aligning director and executive objectives with shareholder and business objectives. The board will continually develop new practices which are appropriate to the Company’s size and stage of development.

Executive Officers are those directly accountable for the operational management and strategic direction of the Company and the consolidated entity.

All contracts with directors and executives may be terminated by either party with three months notice.

Fixed remuneration

Fixed remuneration consists of a base remuneration package, which includes directors’ fees (in the case of Directors), salaries, consulting fees and employer contributions to superannuation funds.

Fixed remuneration levels for Directors and executive officers will be reviewed annually by the board through a process that considers the employee’s personal development, achievement of key performance objectives for the year, industry benchmarks wherever possible and CPI data.

Performance-linked remuneration

All employees may receive bonuses and/or share options based on achievement of specific goals related to performance against individual KPIs and to the performance of the Company as a whole as determined by the directors, based on a range of factors. These factors include traditional financial considerations such as operating performance, cash consumption and deals concluded. They also include industryspecific factors relating to the advancement of the Company’s activities and relationships with third parties and internal employees. There were no bonus or options granted during the year.

B. Service Agreements

Remuneration, consulting and other terms of employment for the key management personnel are determined by the board and are not currently formalised in service agreements. Each of the directors have fully paid ordinary shares and convertible performance shares in the Company which give them considerable incentive to see the Company perform well. Other current provisions are set out below.

The directors and key management personnel during the year included:

Directors

Mr A Short, Managing Director, Executive Director

• Agreement commenced 26 September 2007, no termination date;

• Consulting fees (including directors’ fees) for the year ended 30 June 2009 of $220,000 to be reviewed annually by the board; and

• � Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to 3 months’ consulting fees.

Mr B Ayers, Exploration Director, Executive Director

• Agreement commenced 21 January 2008, no termination date;

• Consulting fees (including directors’ fees) for the year ended 30 June 2009 of $ 32,470.00 to be reviewed annually by the board; and

• Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to 3 months’ consulting fees.

Mr G Sklenka, Chairman, Non-Executive Director

• Agreement commenced 26 September 2007, no termination date;

• Consulting fees (including directors’ fees) for the year ended 30 June 2009 of $144,000 to be reviewed annually by the board; and

• Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to 3 months’ consulting fees.

Key Management Personnel Remuneration

Mr D Ballantyne, Company Secretary

• Term of agreement commencing 1 June 2008, no termination date;

• Consulting fee, based upon actual hours worked, but not to exceed $120,000 and to be reviewed annually by the board; and

• Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to one (1) months’ consulting fee.

C. Details of Remuneration

The key management personnel of Kilgore Oil & Gas Limited during the year ended 30 June 2009 includes all directors and executives mentioned above. There are no other executives of the company which are required to be discussed.

Remuneration packages contain the following key elements: Primary benefits – salary/fees and bonuses; Post-employment benefits – including superannuation; Equity – share options and other equity securities; and Other benefits.

Nature and amount of remuneration for the year ended 30 June 2009 and 2008:

		Short-term employee benefits	Post -employment benefits	Equity Performance related
Salary, consulting fees AU$ Bonus AU$ Superannuation AU$ Performance share based payments AU$ Total AU$
Executive directors B Ayers 2009 2008 32,471 51,788 - - - - - - 32,471 51,788 A Short 2009 2008 220,000 168,055 - - - - - - 220,000 168,055 Non-executive directors G Sklenka 2009 2008 144,000 110,000 - - - - - - 144,000 110,000 Total directors’ compensation 2009 2008 396,471 329,843 - - - - - - 396,471 329,843 Other key management personnel L Camacho (former Director/Company Secretary)(26/09/07-20/01/08) 2009 2008 - - - - - - - - - - D Ballantyne (Company Secretary 6/06/08) 2009 2008 69,548 52,711 - - - - - - 69,548 52,711 Total other key management compensation 2009 2008 69,548 52,711 - - - - - - 69,548 52,711 TOTAL COMPENSATION 2009 2008 466,019 382,554 - - - - - - 466,019 382,554

Mr Camacho was director until 20/01/08 and company secretary until 06/06/08. For detail remuneration refer note 20 of this annual report.

D. Share-based Compensation

Options

No options were granted to directors and other key management during the year ended 30 June 2009.

The Directors and their related entities have the following ordinary shares and convertible performance shares during the year ended on 30 June 2009.

Director	Ordinary Shares	Converting Performance Shares
A Short	6,000,001	2,000
G Sklenka	6,000,001	2,000
B Ayers	3,000,000	2,000
D Ballantyne (Indirect )	200,000	-

Upon listing Mr Short, Mr Sklenka and Mr Ayers were issued 1,000,000 shares each via conversion of 2,000 Class A Converting Performance Shares each.

E. Additional information

Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance.

In considering the Company’s performance and its effect on shareholder wealth, the Board have regard to a broad range of factors, some of which are financial and others of which relate to the progress on the Company’s projects, results and progress of exploration and development activities, joint venture agreements etc.

The Board also gives consideration to the Company’s result and cash consumption for the year. It does not utilise earnings per share as a performance measure or contemplate payment of any dividends in the short to medium term given that all efforts are currently being expended to build the business and establish self-sustaining revenue streams.

END OF AUDITED REMUNERATION REPORT

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the Company maintained an insurance policy which indemnifies the Directors and Officers of Kilgore Oil & Gas Limited in respect of any liability incurred in connection with the performance of their duties as Directors or Officers of the Company. The Directors made a personal contribution toward the premium to satisfy Section 199B of the Corporations Act 2001. The Company’s insurers have prohibited disclosure of the amount of the premium payable and the level of indemnification under the insurance contract.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporation Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the company with leave of the court under section 237 of the Corporation Act 2001.

NON-AUDIT SERVICES

The following non-audit services were provided by the entity’s auditor, BDO Kendalls / Audit and Assurance (WA) Pty Ltd or associated entities. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and

• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

BDO Kendalls received or are due to receive the following amounts for the provision of audit and/or non-audit services:

Other assurance services		Group
BDO Kendalls / Audit and Assurance (WA) Pty Ltd	2009AU$		2008AU$
- Audit and assurance services	47,713		23,663
- Tax and other advices	5,326		9,207
Total Remuneration	53,039		32,870

AUDITORS INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration, as required under Section 307c of the Corporations Act 2001, for the financial year ended 30 June 2009 has been received and can be found on page 19.

Signed in accordance with a resolution of the Board of Directors.

==> picture [99 x 54] intentionally omitted <==

==> picture [87 x 54] intentionally omitted <==

G. Sklenka A. Short Chairman Managing Director West Perth, W.A. 30/09/09

==> picture [152 x 32] intentionally omitted <==

30 September 2009

==> picture [172 x 152] intentionally omitted <==

The Directors Kilgore Oil and Gas Limited Suite 4, 16 Ord Street West Perth WA 6005

Dear Sirs

DECLARATION OF INDEPENDENCE BY GLYN O’BRIEN TO THE DIRECTORS OF KILGORE OIL AND GAS LIMITED

As lead auditor of Kilgore Oil and Gas Limited for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Kilgore Oil and Gas Limited and the entities it controlled during the period.

==> picture [130 x 20] intentionally omitted <==

Glyn O’Brien Director

==> picture [118 x 18] intentionally omitted <==

BDO Kendalls Audit & Assurance (WA) Pty Ltd

Perth, Western Australia. Dated 30 September 2009

BDO Kendalls is a national association of separate partnerships and entities. Liability limited by a scheme approved under Professional Standards Legislation.

INCOME STATEMENTS

For the year ended 30 June 2009

	Consolidated Parent Entity
Revenue Lease operating expense Depreciation Accounting and audit Consultancy Staff costs Travel expenses Research report & maps Rent Legal fees Marketing and advertising Regulatory expenses Administrative expenses Finance Costs Exploration write off Other Expenses Impairment of intercompany receivables Foreign exchange gains/losses Loss before tax Income tax (expense)/benefit Net loss for the year attributable to the ordinary shareholders of the company Loss per share / Basic and diluted (cents per share)	Notes Year End 30/06/2009 AU$ Period End 30/06/2008 AU$ Year End 30/06/2009 AU$ Period End 30/06/2008 AU$
	5 139,416 17,489 562,708 42,797 (38,062) - - - 6,10 (2,583) (537) - - (170,584) (33,000) (64,372) (33,000) (827,786) (415,000) (643,183) (415,000) (4,045) (14,000) (4,045) (14,000) (311,681) (151,000) (297,855) (151,000) - (16,000) - (16,000) (50,647) (65,000) (50,647) (14,000) (34,038) (12,000) (5,362) (12,000) (90,774) (122,000) (23,991) (122,000) (64,378) (12,000) (64,378) (12,000) (162,108) (177,942) (123,662) (15,907) (91,275) - (91,275) - 11 (6,410,751) - - - (69,614) - (1,364) - 9 - - (7,478,726) - - - 206,804 (102,090) (8,188,910) (1,000,990) (8,079,348) (864,200) 7 - - - - (8,188,910) (1,000,990) (8,079,348) (864,200) 17 (0.078) (0.055)

The Income Statements should be read in conjunction with the notes to the financial statements.

BALANCE SHEETS

As at 30[th] June 2009

	Consolidated Parent Entity
Current Assets Cash and cash equivalents Receivables Total current assets Non current Assets Property, plant and equipment Oil and gas properties Receivables Investment in subsidiary Deferred Tax Assets Total non current assets Total Assets Current Liabilities Payables Borrowings Total Liabilities Net Assets Equity Issued share capital Reserves Accumulated Losses Total Equity	Notes Year End 30/06/2009 AU$ Period End 30/06/2008 AU$ Year End 30/06/2009 AU$ Period End 30/06/2008 AU$
	8 58,560 8,722,683 53,971 7,328,897 9 493,428 552,489 319,790 153,480 551,988 9,275,172 373,761 7,482,377 10 12,721 6,305 - - 11 4,799,141 1,786,283 - - 9 320,000 - 3,920,366 2,634,078 12 - - 1,082 1,082 7 29,250 - - - 5,161,112 1,792,588 3,921,448 2,635,160 5,713,100 11,067,760 4,295,209 10,117,537 13 1,901,392 1,565,704 483,501 388,716 13 2,162,328 - 2,162,328 - 4,063,720 1,565,704 2,645,829 388,716 1,649,380 9,502,056 1,649,380 9,728,821 14 10,592,848 10,592,861 10,592,848 10,592,861 15 246,432 (89,815) 80 160 16 (9,189,900) (1,000,990) (8,943,548) (864,200) 1,649,380 9,502,056 1,649,380 9,728,821

==> picture [330 x 5] intentionally omitted <==

The Balance Sheets should be read in conjunction with the notes to the financial statements.

CASH FLOW STATEMENTS

For the year ended 30 June 2009

	Consolidated Parent Entity
Cash flows from operating activities Payments to suppliers and consultants Interest received Net cash (used in) operating activities Cash flows from investing activities Exploration costs Acquisition of oil and gas properties Development – intangible assets Development – other tangible assets Purchase of plant and equipment Advance to subsidiary Loans to third parties Bond to related company Net cash (used in) investing activities Cash flows from financing activities Proceeds from issues of shares Borrowings Advance to subsidiary Capital raising costs Net cash flows provided by financing activities Net increase or (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period	Notes Year End 30/06/2009 AU$ Period End 30/06/2008 AU$ Year End 30/06/2009 AU$ Period End 30/06/2008 AU$
	(1,890,725) (894,371) (1,254,073) (681,336) 94,375 17,489 65,403 17,489 18 (1,796,350) (876,882) (1,188,670) (663,847) (213,767) - - - - (1,098,477) - - (1,749,119) - - - (6,563,890) - - - (9,000) (6,604) - - 9 (260,000) - (260,000) (1,082) (122,957) (150,000) (121,270) (150,000) (60,000) - (60,000) - (8,978,733) (1,255,081) (441,270) (151,082) - 11,523,163 - 11,523,163 2,111,053 - 2,141,053 - - - (7,785,946) (2,710,820) (93) (668,517) (93) (668,517) 2,110,960 10,854,646 (5,644,986) 8,143,826 (8,664,123) 8,722,683 (7,274,926) 7,328,897 8,722,683 - 7,328,897 - 8 58,560 8,722,683 53,971 7,328,897

The Cash Flow Statements should be read in conjunction with the notes to the financial statements.

STATEMENTS OF CHANGES IN EQUITY

	Consolidated			30/06/2009	30/06/2009	(AU$)										30/06/2008 (AU$)	30/06/2008 (AU$)	30/06/2008 (AU$)
		Issued	Accumulated	Equity	Investment				Foreign		Total Equity		Issued		Accumulated		Equity	Foreign	Total Equity
		Capital	Losses	Reserve	Revaluation				Currency				Capital		Losses		Reserve	Currency
						Reserve			Reserve									Reserve
	Balance at	10,592,861	(1,000,990)	160		-			(89,976)			9,502,055		-		-	-	-	-
	beginning of year
	Other equity	-	-	-		97,500				-		97,500		-		-	-	-	-
	reserve
	difference
	Currency	-	-	-		-			238,828			238,828		-		-	-	(89,976)	(89,976)
	translation
	difference
	Net Income and	-	-	-		-			238,828			238,828		-		-	-	(89,976)	(89,976)
	Expenses for the
	year recognised
	directly in equity
	Profit/(Loss) for	-	(8,188,910)	-		-				-	(8,188,910)			-	(1,000,990)		-	-	(1,000,990)
	the year
	Total Income or	-	(8,188,910)	-		-			238,828		(7,950,082)			-	(1,000,990)		-	(89,976)	(1,090,966)
	Expenses for the
	year
	Total recognised
	expense for the
	year is attributed
	to equity holders:
	Issues of share	80	-	(80)		-				-		-	11,493,003			-	160	-	11,493,163
	capital
	Capital raising	(93)	-	-		-				-		(93)	(900,142)			-	-	-	(900,142)
	costs
	Balance at end of	10,592,848	(9,189,900)	80		97,500			148,852			1,649,380	10,592,861		(1,000,990)		160	(89,976)	9,502,055
	theyear
	The Statements of Changes in Equity should be read				in conjunction				with	the notes to the financial statements.
	Parent Entity							30/06/2009 (AU$)									30/06/2008 (AU$)
				Issued		Accumulated				Equity		Total	Equity	Issued		Accumulated		Equity	Total Equity
				Capital			Losses			Reserve				Capital		Losses		Reserve
	Balance at beginning of year			10,592,861		(864,200)					160	9,728,821			-		-	-	-
	Profit / (Loss) for the year			-		(8,079,348)					-	(8,079,348)			-	(864,200)		-	(864,200)
	Total Income or Expense for the year			-		(8,079,348)					-	(8,079,348)			-	(864,200)		-	(864,200)
	Total recognised expense for the year is attributed
	to equity holders:
	Transactions with equity holders In their capacity
	as equity holders.
	Issues of share capital			80				-			(80)		-	11,493,003				160	11,493,163
	Capital Raising Costs			(93)				-			-	(93)		(900,142)			-	-	(900,142)
	Balance at end of the year			10,592,848		(8,943,548)					80	1,649,380		10,592,861		(864,200)		160	9,728,821
	The Statements of Changes in Equity should be read				in conjunction				with	the notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For The year Ended 30 June 2009

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the year presented, unless otherwise stated. The financial report includes separate financial statements for Kilgore Oil & Gas Limited as an individual entity and the consolidated entity consisting of Kilgore Oil & Gas Limited and its subsidiaries.

(a) Basis of Preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.

i) Going concern

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation and settlement of liabilities in the normal course of business.

The Consolidated entity has incurred a loss after tax for the year ended 30 June 2009 of $8,188,910 (2008: $1,000,990) and experienced net cash outflow of $8,664,123(2008 net inflow: $8,722,683). As at 30 June 2009 the Consolidated Entity had a net current asset deficiency of $3,511,732 (2008 net current assets: $7,709,468).

During the year to 30 June 2009 and the year to the date of this report, the Directors have taken steps to ensure the Consolidated Entity continues as a going concern. These steps have included:

• (i) The Consolidated Entity has undertaken to secure funds via a capital raising pursuant to a prospectus dated on or around 10[th] October 2009 for the issue of 360.8 m shares at 1 cent each and the issue of 275m options at 0.2 of a cent to raise a total of $4.158m;

• (ii) Progressing the sale of the Galveston 307 project and receipt of the Consolidated Entity’s share of proceeds;

• (iii) The Directors have reviewed the quantum and timing of all discretionary expenditures including exploration and development costs and wherever necessary these costs will be minimised or deferred to suit the Consolidated Entity’s cash flow from operations ; and

The ability of the Consolidated Entity to continue as a going concern and to pay its debts as and when they fall due is dependent on the following:

• (i) Ongoing and active management of expenditure incurred by the Consolidated Entity and the achievement of planned production and output at commodity prices of greater than USD$3.00/MCF for gas and greater than USD$70.64/Bbl;

• (ii) Successful completion of the fundraising of $4.158m currently in progress; and

• (iii) The successful disposal of the interest in Galveston 307 project.

The Directors have reviewed the Consolidated Entity’s overall position and outlook in respect of the matters identified above and are of the opinion that the use of the going concern basis is appropriate in the circumstances.

However, should the entity be unable to continue as a going concern, it may be required to realise its assets and extinguish liabilities other than those in the normal course of business and at amounts different from those stated in the financial report. The financial report does not include any adjustments relating to classification of recorded amounts of assets or liabilities that may be necessary should the Consolidated Entity be unable to continue as a going concern.

ii) Compliance with IFRSs

Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRs). Compliance with AIFRSs ensures that the financial report of Kilgore Oil & Gas Ltd comply with International Financial Reporting Standards (IFRSs).

iii) Early adoption of standards

The Group has not elected to apply any early pronouncements.

iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets.

v) Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies (refer note 3).

(b) Principles of Consolidation

i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Kilgore Oil & Gas Limited (“company” or “parent entity”) as at 30 June 2009 and the results of all subsidiaries for the year then ended. Kilgore Oil & Gas Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Kilgore Oil & Gas Limited.

ii) Jointly controlled assets and operations

The majority of operations are carried out subject to joint venture arrangements. The proportionate interests in the assets, liabilities, income and expenditure of a joint venture activity have been incorporated in the financial statements under the appropriate headings.

The interest in a joint venture partnership is accounted for in the consolidated financial statements using the equity method and is carried at cost by the parent entity. Under the equity method, the share of the profits or losses of the partnership is recognised in the income statement, and the share of movements in reserves is recognised in reserves in the balance sheet.

(c) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(d) Foreign currency translation

i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Kilgore Oil & Gas Limited’s functional and presentation currency. The functional currency of the overseas subsidiaries is US$.

ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

• Income and expenses for each income statement are translated at average exchange rate (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• All resulting exchange differences are recongnised as a separate component of equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

(e) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised as follows:

(i) Interest income

Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

(ii) Oil and Gas revenue

Revenue is recognised when the significant risks and rewards of ownership of the goods have delivered to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(f) Inventories

Oil stocks and field consumables are stated at the lower of cost and net realisable value. Cost includes all expenditure incurred in acquiring and bringing the inventories to their existing condition and location.

(g) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for doubtful debts. Trade receivables are due for settlement between thirty (30) and ninety (90) days from the date of recognition.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement within “other expenses”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against other expense in the income statement.

Recoverability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

(h) Property, Plant and Equipment

i) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated losses for impairment.

ii) Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset which is estimated to vary between 5 and 15 years.

iii) Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any indication of impairment exists and where the carrying values exceed the estimated recoverable amount, the assets or cashgenerating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Impairment losses are recognised separately in the income statement.

Any item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.

i) Leases

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as an expense in the income statement on a straight line basis over the lease term.

(j) Investments and other financial assets

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet (note 9).

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Loans and receivables are carried at amortised cost using the effective interest method.

(k) Exploration, evaluation and development expenditure

Exploration, evaluation and development expenditure incurred is either written off as incurred or accumulated in respect of each identifiable area of interest. Costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure.

(l) Oil and gas properties

Following commencement of production activities all acquisition, exploration, evaluation and development expenditure in relation to an area of interest is accumulated into an oil and gas property.

When further development expenditure is incurred in respect of a property after the commencement of production, such expenditure is carried forward as part of the cost of that property only when substantial economic benefits are established, otherwise such expenditure is classified as part of the cost of production.

Amortisation of the cost of oil and gas properties is provided on the unit-of-production basis over the proved developed reserves of the field concerned with separate calculations being made for each resource. The unit-of-production basis results in an amortisation charge proportional to the depletion of the economically recoverable reserves. Amortisation is charged from the commencement of production.

The net carrying value of each property is reviewed regularly for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If the asset does not generate largely independent cash follows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets are written down to their recoverable amount.

The recoverable amount is the greater of fair-value less costs to sell and value in use. In assessing value in use, the estimated cash flows are discounted to their present value using the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the assets.

(m) Fair Value estimation

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired at fair value. The fair value of financial assets and financial liabilities must be estimated for recognition and measured or for disclosure purposes.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(n) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the year of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(o) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year, which remain unpaid at year end. The amounts are unsecured and are usually paid within 60 days of recognition. They are recognised at fair value on initial recognition and subsequently at amortised cost.

(p) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(q) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal of providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value.

(r) Share Based Payments

The Group may at times provide benefits to employees (including directors) and consultants of the Group in the form of share-based payment transactions, whereby employees and consultants render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of these equity-settled transactions with employees and consultants is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the Black & Scholes method.

The fair value of the Convertible Performance Shares granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions. Non- market vesting conditions are included in assumptions about the number of CPS that are expected to become ordinary shares. At each reporting date, the entity revises its estimate of the number of CPS that are expected to become ordinary shares.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the year in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognized as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(s) Borrowing Costs

Borrowing costs are recognised as an expense when incurred except if costs were incurred for the construction of any qualifying asset, where the costs are capitalised over the year that is required to complete and prepare the asset for its intended use or sale.

(t) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(u) Income Tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements and are recognised for all taxable temporary differences:

• Except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised:

• Except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future extent that it is probable that the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

(v) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except:

• Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authorities, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense item as applicable; and

• Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(w) Contributed Equity

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction, net of tax, of the share proceeds received.

(x) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary share and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(aa) New accounting standards and interpretations

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2008. The adoption of these new and revised Standards and Interpretations did not have any effect on the financial position or performance of the Group. However, the Standards have affected the disclosures in the financial report.

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting year ending 30 June 2009. These are outlined in the table below:

New Pronouncement	Superseded Pronouncement	Mandoatory application date	Summary of key requirements/changes	Related Pronouncements
AASB 1 First- time Adoption	AASB 1 First time	Annual reporting	The structure of the standard has been amended for ease of use,	N/A
of Australian Accounting	Adoption of	periods	and is only applicable to an entity's first ser of IFRS compliant
Standards (May 2009)	Australian	beginning on or	financial statements.
	Accounting	after 01 July
	Standards (June	2009
	2007)
AASB 8 Operating	AASB 114 Segment	Annual reporting	This standard replace AASB 114 and requires the identification	AASB 2007-3
Segments	Reporting	periods	of operating segments on the basis of international reports that
		beginning on or	are regularly reviewed by an entity's chief operating decision
		after 01 July	makers for the purposes of monitoring and allocating resources.

		2009	It is possible that under AASB 8 more segments will require
			disclosure. Also, given the lower economic level at which
			segments may be defined, and the fact that cash generating
			units cannot be bigger than operating segments, impairment
			calculations may be affected.
AASB 101 Presentation of	AASB 101	Annual reporting	The revised AASB 101 redefines the composition of financial	AASB 207-8
Financial Statements (September 2007)	Presentation of Financial	periods beginning on or	statements together with the inclusion of a statement of comprehensive income. Other changes made as a result of the	AASB 2007-10
	Statements (July	after 1 January	revision include the disclosure of income tax relating to each
	2007)	2009	component of other comprehensive income and the disclosure
			of reclassification adjustments relating to components of other
			comprehensive income. Where an entity makes and adjustment
			or reclassification to information presented in the comparative
			reporting period a third balance sheet as at the beginning of the
			comparative period will also be required.
AASB 2007-08 Amendments	Various	Annual reporting	This standard makes consequential amendments to other	AASB 101
to Australian Accounting		periods	Australian Accounting Standards arising from the revision of	(September
Standards arising from		beginning on or	AAS 101	2007)
AASB 101		after 1 January 2009		AASB 2007-10
AASB 2007-10 Further	Various	Annual reporting	This standard makes consequential amendments to other	AASB 101
Amendments to Australian		periods	Australian Accounting Standards arising from the revision of	(September
Accounting Standards		beginning on or	AASB 101.	2007)
arising from AASB 101		after 1 January 2009	See AASB 101 (September 2007) for an explanation of the amendments.	AASB 2007-8
AASB 2008-1 Amendments	AASB 2 Share-	Annual reporting	The amendments to AASB 2 clarify that vesting conditions	None
to Australian Accounting	based payments	periods	consist of service and performance conditions only. Other
Standard - share- based	(June 2007)	beginning on or	elements of a share based payment transactions should
Payments: Vesting		after 1 January	therefore be considered for the purposes of determining fair
Conditions and		2009	value. Cancellations are also requirements to be treated in the
Cancellations (AASB 2)			same manner whether cancelled by the entity or by another
			party.
AASB 2008-2 Amendments	Various	Annual reporting	This amending standard introduces an exception to the	None
to Australian Accounting		periods	definition of a financial liability that enables certain puttable
Standards - Putt able		beginning on or	financial instruments and certain other financial instruments that
Financial Instruments and		after 1 January	impose an obligation to deliver a pro-rata share of net assets
Obligation arising on		2009	only upon liquidation, to be classified as equity instruments,
Liquidation (AASB 7,AASB			subject to specified criteria being met.
101, AASB 132, AASB 139 &
Interpretation 2)
AASB 2008-3	Various	Annual reporting	AASB 2008-3 makes consequential amendments to a number of	AASB 3 (March
Amendments to Australian		periods	accounting standards arising from the issue of AASB 3 (March	2008)
Accounting Standards arising from AASB 3 and AASB 127 (AASBs 1,2,4,5,7,101,107,112,114)		beginning on or after 1 January 2009	2008) and AASB 127 (March 2008). See AAB 3 (March 2008) and AASB 127 (March 2008) for an explanation of amendments.	AASB 127 (March 2008)
AASB 123 Borrowing Costs	AASB 123	Annual reporting	The revised AASB 123 has removed the option to expenses	AASB 2007-6
(June 2007)	Borrowing Costs	periods	certain borrowing costs, now requiring the capitalisation of all
	(July 2004)	beginning on or	borrowing costs directly attributable to the acquisition,
		after 1 January	construction or production of a qualifying asset.
		2009
AASB 127 Consolidated	AASB 127	Annual reporting	The revised standard makes changes to a number of the	AASB 3 (March
and Separated Financial	Consolidate and	periods	consolidated financial reporting accounting requirements	2008)
Statements (March 2008)	Separation Financial Statements (July 2004)	beginning on or after 1 January 2009	including: � There shall be no gain or loss from transactions affecting a parent's ownership interest in a subsidiary with all transactions required to be	AASB 2008-3 AASB 2008-11
			accounted for as equity transactions; and
			� where there is in substance no change to group
			interests, parent entities inserted above existing
			groups shall measure the cost of its investments at
			the carrying amount of its share of the equity items
			shown in the balance sheet of the original parent at

			the date of reorganisation.
AASB 1039 Concise	AASB 1039	Annual reporting	These amendments were made in order to achieve consistency	AASB 101
Financial Reports (August	Concise Financial	periods	of terminology and descriptions with those used in AASB 101. A	(September
2008)	Reports (April	beginning on or	number of disclosure requirements were also amended for	2007)
	2005)	after 1 January 2009	consistency with AASB 8.	AASB 8
AASB 2007-3 Amendments	Various	Annual reporting	This standard makes consequential amendments to various	AASB 8
to Australian Accounting		periods	accounting standards arising from the issue of AASB 8.
Standards arising from AASB 8		beginning on or after 1 January	See AASB 8 for an explanation of the amendments.
(AASB		2009
5,6,102,107,119,127,134,136,
1023 & 1038)
AASB 2008-7 Amendments	Various	Annual reporting	This amending standards makes a number of changes to	None
to Australian Accounting		periods	accounting standards including the following:
Standards - Cost of an investment in a subsidiary, jointly controlled entity or associate. (AASB		beginning on or after 1 January 2009	� dividends declared out of pre-acquisition profits will no longer be deducted from the cost of an investment but will be recognised as income;
1,118,121,127,136)			� implements a new indicator of impairment for
			investments in subsidiaries, jointly controlled
			entities and associates where a dividend has been
			recognised; and
			� allows first time adopters to use a deemed cost of
			either fair value or the caring amount under previous
			GAAO to measure the initial cost of its investments
			in subsidiaries, jointly controlled entities and
			associates in the separate financial statements.

Interpretation to new accounting standards

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

(1) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 (effective from 1 January 2009)

AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a 'management approach' to reporting on financial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Group will adopt AASB 8 from 1 July 2009. It is likely to result in an increase in the number of reportable segments presented. In addition, the segments will be reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker. As goodwill is allocated by management to groups of cash-generating units on a segment level, the change in reportable segment may also require a reallocation of goodwill. However, this is not expected to result in any additional impairment of goodwill.

(2) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 (effective from 1 January 2009)

The revised AASB 123 has removed the option to expense all borrowing costs and - when adopted – will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of the Group, as the Group already capitalises borrowing costs relating to qualifying assets.

(3) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 (effective from 1 January 2009)

The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The Group will apply the revised standard from 1 July 2009.

(4) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations (effective from 1 January 2009)

AASB 2008-1 clarifies that vesting conditions are service conditions and performance conditions only and that other features of a sharebased payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the

same accounting treatment. The Group will apply the revised standard from 1 July 2009, but it is not expected to affect the accounting for the Group's share-based payments.

(5) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective 1 July 2009)

The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International Financial Reporting Standards are part of the IASB’s annual improvements project published in May 2008. They clarify that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosures should be made for this subsidiary if the definition of a discontinued operation is met. The Group will apply the amendments prospectively to all partial disposals of subsidiaries from 1 July 2009.

(6) AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009)

In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AABS 127 Consolidated and Separate Financial Statements. The Group will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary's fair value.

(7) AASB 2008-8 Amendment to IAS 39 Financial Instruments: Recognition and Measurement (effective 1 July 2009 )

AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. It is not expected to have a material impact on the Group’s financial statements.

• designates the beginning of the applicable annual reporting period unless otherwise stated.

2. FINANCIAL RISK MANAGEMENT

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and aeging analysis for credit risk.

Risk management is carried out by the Board of Directors.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally through foreign subsidiaries and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the US dollar.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The risk is measured using cash flow forecasting. The foreign exchange risk is not actively managed as the company does not expect repayment of the inter group loan within the short term and the subsidiary is not expected to remit operating profits in the short term.

The Group’s exposure to foreign currency risk at the reporting date was as follows:

Foreign Assets and Liabilities

	Consolidated Consolidated
Current Assets Cash and cash equivalents Receivables Total Assets Current Liabilities Payables Total Liabilities Net Assets	2009 US$ 2008 US$
	3,772 1,351,136 1,388 - 5,160 1,351,136 1,133,857 1,139,925 1,133,857 1,139,925 (1,128,697) 211,211

The parent entity operates in AU$ only. The carrying values of all assets, liability, income and expenses for US bases subsidiary are translated to AU$.

Group sensitivity

Based on the financial instruments held at 30 June 2009, had the Australian dollar weakened/strengthened by 10% (estimated average volatility over the last 5 years) against the US dollar with all other variables held constant, the Group's post-tax loss for the year and equity would have been $84,614 higher/$84,614 lower, mainly as a result of foreign exchange gains/losses on translation of US dollar denominated revenues and expenses.

Parent entity sensitivity

The parent entity’s post-tax loss for the year and equity would have been $60,062 lower/$60,062 higher had the Australian dollar weakened/strengthened by 10% (estimated historical volatility of USD exchange rate over the last 5 years) of against the US dollar, mainly as a result of foreign exchange gains/losses on the translation of US dollar denominated loans to the subsidiary. These borrowings are designated as the entity’s net investment in the US subsidiary and hence any foreign exchange gains or losses are taken to the foreign currency translation reserve on consolidation.

(ii) Price risk

The Group is in an early stage of production so not exposed to price risk on its financial instruments.

(iii) Cash flow and fair value interest rate risk

Interest rate risk arises from both short and long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During the year the Company has no exposure to long-term borrowings. The short term fixed rate borrowings are managed by limiting borrowings of this nature to the years of no more than two years, or if longer, to interest rate reviews every two years.

The Group and parent entity have interest rate risk arising from cash funds on deposits and (parent entity only) intercompany loans. It seeks to maximise interest earned on these funds by benchmarking to USD LIBON rates.

Group sensitivity

At 30 June 2009, if interest rates had changed by -/+ 10% (estimated historical volatility of USD LIBON rate over the last 5 years) from the year-end rates with all other variables held constant, post-tax loss for the year would have been $46,841 lower/ $46,841 higher mainly as a result of lower/higher interest income from funds on deposit.

Parent entity sensitivity

The parent entity is also subject to interest rate risk arising from cash equivalents with both fixed and variable interest rates. At 30 June 2009, if interest rates had changed by or are renewed with rates -/+ 10% from the year-end rates with all other variables held constant, posttax profit would have been $6,540 lower/ $6,540 higher as a result of interest income arises from funds at deposit and intercompany loans.

(b) Credit risk

The Group is in an early stage of production of oil. So there are no significant concentrations of credit risk. The Group ensure the used of leading investment institutions in terms of managing cash.

The group has policies in place to ensure that future sales of products and services are made to customers with an appropriate credit history. No guarantees are provided currently.

The Parent Entity has credit risk through its intercompany loans to its US subsidiary, Kilgore Exploration Inc; and manages this by ensuring it always has an adequate level of asset cover, through its high quality oil and gas production assets in long life stable producing areas.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions should they arise. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties. No unused lines of credit currently exist.

Maturities of financial liabilities

The tables below analyses the Group’s and the parent entity's financial liabilities based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows as at 30 June 2009.

	Consolidated Parent Entity
Note Financial Liabilities Trade Creditors and Borrowings payable within 6 months 13 Fixed Rate Barrowings payables between 6 to 12 months 13 Other Long term Borrowings payable between 1 and 2 years Total Financial Liabilities	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	1,901,392 1,565,704 483,501 388,716 2,162,328 - 2,162,328 - - - - - 4,063,720 1,565,704 2,645,829 388,716

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair values in accordance with values carried in the balance sheet.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(e) Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern. Where possible they seek to minimise additional equity capital, to avoid unnecessary shareholder dilution.

3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i)Estimated impairment

The Group tests annually whether oil and gas properties have suffered any impairment, in accordance with the accounting policy stated in note 1 (l). The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions like commodity price and production quantity. Some of these assumptions may be amended in the future and this may lead to the subsequent impairment of the assets concerned.

(ii)Income taxes

The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the year in which such determination is made.

(iii)Fair Value of Securities

Converting Performance Shares

The assessed fair value at grant date of CPS’s granted during the 2007 period was determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the CPS, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the CPS, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Since issue half the estimated full value of CPS has been amortised to the Income Statement by assuming the probability of conversion equal to the 50% of agreed performance achieved.

iv) Exploration expenditure

Expenditure and development expenditure that does not form part of the cash generating units assessed for impairment has been carried forward on the basis that exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. In the event that significant operations cease and/or economically recoverable reserves are not assessed as being present, this expenditure will be expensed to the Income Statement.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

4. SEGMENT REPORTING

Business Segment

The consolidated entity operates solely in the exploration and development of properties for the development of oil and gas. Therefore only geographical segment information is provided.

Geographical Segments

Geographical segment	2009 (AU$) 2008 (AU$)
Revenues from continuing operations Segment result (loss) Segment assets Impairment of Intercompany Receivables Segment liabilities Acquisition of plant & equipment, exploration & evaluation and other non- current assets Depreciation and amortisation	USA Australia Eliminations Consolidated USA Australia Eliminations Consolidated
	28,972 65,403 - 94,375 - 42,797 (25,307) 17,490 (918,636) (8,079,348) 809,074 (8,188,910) (239,775) (864,200) 102,986 (1,000,989) (13,346,064) (11,773,935) 19,406,899 (5,713,101) 3,585,382 10,117,537 (2,635,159) 11,067,760 - 7,478,726 (7,478,726) - - - - - 14,458,361 2,645,829 (13,040,470) 4,063,720 (3,811,066) (388,715) 2,634,077 (1,565,704) (13,167,837) - 8,355,975 4,811,862 1,793,095 - - 1,793,095 2,583 - - 2,583 507 - - 507

All operational activities are located in Texas in the USA. The head office is based in Perth, Australia.

5. REVENUE

	Group Parent Entity
Interest Received Other Revenue	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	110,444 17,489 562,708 42,797 28,972 - - - 139,416 17,489 562,708 42,797

6. EXPENSES

	Group Parent Entity
Loss from continuing operations before income tax has been determined after (a) Depreciation and depletion	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	2,583 -

Depreciation of plant and equipment		537		-
Total depreciation and depletion	2,583	537	-	-
(b) Employee/consultant benefit expense
Directors/key management remuneration	283,465	382,554	283,465	382,554
Share/option based payments	-	-	-	-

7. INCOME TAX

Income tax recognised in profit or loss	Group Parent Entity
Tax expense/(income) comprises: Current tax expense/(income) in respect of the current year Deferred tax expense/(income) relating to the origination and reversal of temporary differences Total tax expense/(income)	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	- - - - - - - - - - - -

The prima facie income tax expense/(income) on pre-tax accounting loss from operations reconciles to the income tax expense/(income) in the financial statements as follows:

	Group Parent Entity
Loss before tax Income tax expense/(income) calculated at 30% Effect of revenue that is not assessable in determining taxable profit Effect of expenses that are not deductible in determining taxable profit Effect of unused tax losses and tax offsets not recognised as deferred tax assets Effect of different tax rates of subsidiaries operating in other jurisdictions Other	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	(8,188,910) (1,000,989) (8,079,349) (864,200) (2,456,673) (300,297) (2,423,805) (259,260) - - (197,720) - 1,861,919 2,478 2,193,857 2,478 2,292,135 345,827 481,683 274,163 67,533 - - - (1,764,914) (48,008) (54,015) (17,381)
	- - - -

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

Income tax recognised directly in equity

		Group			Parent Entity
	2009		2008	2009		2008
	AU$		AU$	AU$		AU$
Deferred Tax Assets

Arising on income and expenses taken directly to equity: Impairment of assets 29,250 - - - 29,250 - - - Unrecognised deferred tax balances

	Group Parent Entity
Deferred tax assets/(liabilities) recognised and un-recognised: Tax losses: Australian tax losses – revenue Foreign tax losses - revenue Temporary differences: Australian - Other Foreign subsidiaries - Capitalised exploration and evaluation Foreign subsidiaries - Other Un-recognised deferred tax assets	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$ 743,357 345,827 743,357 274,163 1,810,452 - - - 10,343 222,034 2,253,962 252,661 (457,503) - - - (19,884) - - -
	2,086,765 567,861 2,997,319 526,824

Net deferred tax assets have not been brought to account as it is not probable that immediate future profits will be available against which deductible temporary differences and tax losses can be utilised.

8. CASH AND CASH EQUIVALENTS

	GROUP PARENT ENTITY
Cash at bank	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	58,560 8,722,683 53,971 7,328,897

Cash at bank earned a floating rate of interest of between 0.01% and 6.90%. The Group’s and the parent entity’s exposure to interest rate risk is discussed in note 2.

9. TRADE AND OTHER RECEIVABLES

	GROUP PARENT ENTITY
Current Other receivables Non current Intercompany receivables Provision for Doubtful Debts Bond to AAG Management Pty Ltd Investment by Subsidiary Total Non Current Receivables	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	493,428 - - 60,000 260,000 552,489 - - - - 319,790 11,079,092 (7,478,726) 60,000 260,000 153,480 2,634,078 - - - 320,000 - 3,920,366 2,634,078

During the reporting period, Loans from subsidiaries are repayable at reasonable call with an interest rate of US prime plus 1.0%, monthly. There is no immediate intention to recall the loan.

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value and no impairment is considered necessary. The group is confident on credit quality from past transaction history.

10. PROPERTY, PLANT AND EQUIPMENT

	GROUP PARENT ENTITY
Plant and equipment – cost Less accumulated depreciation Movements in carrying amounts are reconciled as follows: Balance at the beginning of period Additions Disposals Depreciation expense	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	15,304 6,842 - - (2,583) (537) - -
	12,721 6,305 - -
	6,305 - - - 8,999 6,842 - - - - - - (2,583) (537) - - 12,721 6,305 - -

11. OIL AND GAS PROPERTIES

The ultimate recoupment of these costs is dependent on successful development and commercial exploitation, or alternatively, the sale of the respective areas.

	GROUP PARENT ENTITY
Oil and gas properties – cost¹ Less accumulated depletion Movements in carrying amounts are reconciled as follows: Opening balance Acquired during period Disposal/Write off during period²	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	4,799,141 1,786,283 - - - - - -
	4,799,141 1,786,283 - -
	1,786,283 - - - 9,423,609 1,786,283 - - (6,410,751) - - - 4,799,141 1,786,283 - -

¹ Oil and Gas Properties includes other tangible assets of $1,749,119. During the year no depletion is charged for these assets.

² Costs on the four prospects (Skimmer, Cedar Creek, Vermilion and Boettcher) which were either plugged or abandoned, or had hydrocarbon shows which it was decided not to pursue further at the time.

12. OTHER FINANCIAL ASSETS

	GROUP PARENT ENTITY
Non-Current Shares in subsidiaries (Note 19)	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	- - 1,082 1,082

13. TRADE PAYABLES AND BORROWINGS

	GROUP PARENT ENTITY
TRADE AND OTHER PAYABLES Trade creditors Accruals GST Receivables Other payables/short term borrowings BORROWINGS- RELATED PARTIES Loan from Odin Energy Ltd Loan from AXG Mining Ltd Loan from Palace Resources Ltd	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	1,773,550 1,342,603 394,162 165,615 72,982 291,625 34,478 291,625 (15,140) (98,524) (15,140) (98,524) 70,000 30,000 70,000 30,000 1,901,392 1,565,704 483,501 388,716 1,752,738 - 1,752,738 - 204,795 - 204,795 - 204,795 - 204,795 - 2,162,328 - 2,162,328 -

• 15% interest is charges on Loan from Odin Energy Ltd. During the year, $81,686 is being paid for an interest expense.

• AXG Mining Ltd is charging 6.25% interest to the company. $4,795 is payable for interest component.

• Palace Resources Ltd is charging 6.25% interest to the company. $4,795 is payable for interest component.

• Refer to Note 2 for foreign currency exposure.

• Refer to Note 20 for Related Borrowings.

14. ISSUED CAPITAL

14.1 Ordinary Shares

Ordinary shares	GROUP PARENT ENTITY
110,800,003 fully paid ordinary shares Movements in shares on issue Beginning of year Shares issued during the year 3 Founder’s share @ $1.00 13,000,000 shares issued @ $0.001¢ 9,000,000 shares issued @ $0.010¢ 7,800,000 shares issued @ $0.050¢ 10,000,000 shares issued @ $0.100¢	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	10,592,848 11,493,003 10,592,848 11,493,003 10,592,861 - 10,592,861 - - 3 - 3 - 13,000 - 13,000 - 90,000 - 90,000 - 390,000 - 390,000 - 1,000,000 - 1,000,000

50,000,000 shares issued @$0.20¢	-	10,000,000	-	10,000,000
Total shares issued	-	11,493,003	-	11,493,003
CPS reserve	80	-	80	-
42,000 CPS converted to 21,000,000 fully paid ordinary	-	-	-	-
shares
Less capital raising costs	(93)	(900,142)	(93)	(900,142)
End of the year	10,592,848	10,592,861	10,592,848	10,592,861

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

14.2 Converting Performance Shares The movement in Converting Performance Shares during the year were as follows:

2009 Class		No. At the beginning of period	Issued	Converted into Ordinary Shares	No. At end of period
CPS – A		14,000	-	14,000	-
CPS – B		14,000	-	14,000	-
CPS – C		14,000	-	14,000	-
CPS – D		14,000	-	-	14,000

Each Converting Performance Share (CPS) converts into 500 ordinary shares as follows: CPS-A – upon the Company’s shares being listed on the main board of the ASX; these were converted into ordinary shares on date of listing, being 10/07/08.

CPS-B – upon the Company achieving proven reserves of 2Bcfe. CPS-C – upon the Company achieving proven reserves of 4Bcfe. CPS-D – upon the Company achieving proven reserves of 8Bcfe.

The convertible performance shares are not transferable. The CPS shareholder does have the same right as holders of shares to receive notice, reports and audited accounts and to attend general meetings of the company but are not entitled to vote. Further, CPS shareholders are not entitled to receive any dividend on their Convertible Performance Shares.

15. RESERVES

	GROUP PARENT ENTITY
Foreign currency translation reserve ¹ Equity reserve ² Investment Revaluation Reserve³ (1) Foreign currency translation Opening balance	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	148,852 (89,975) - - 80 160 80 160 97,500 - - -
	246,432 (89,815) 80 160 (89,975) - - -

Currency translation differences arising during the year (2) Equity reserve Opening balance Issue of CPS Conversion into ordinary shares Value of conversion right convertible note Deferred tax component (3) Investment Revaluation Reserve Opening balance Investment Revaluation Reserve during the year	238,827 (89,975)	- -
	148,852 (89,975) 160 - - 160 (80) - - - - -	- - 160 - - 160 (80) - - - - -
	80 160 - - 97,500 -	80 160 - - - -
	97,500 -	- -

Nature and purpose of reserves

( 1) Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve as described in note 1(d). The reserve is recognised in profit and loss when the net investment is disposed of.

(2) Equity reserve

The equity reserve is used to recognise the amortised portion of the fair value of CPS’s issued and the equity component of the convertible note issued during the year.

(3) Investment Revaluation Reserve

The investment reserve is used to revalue the subsidiary’s (Jetstrike Pty Ltd) investment in Advance Energy Ltd.

16. ACCUMULATED LOSSES

	GROUP PARENT ENTITY
Accumulated losses at the beginning of the year Net loss attributable to the members of the parent entity Accumulated losses at the end of the financial year	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	(1,000,990) - (864,200) - (8,188,910) (1,000,990) (8,079,348) (864,200) (9,189,900) (1,000,990) (8,943,548) (864,200)

17. LOSS PER SHARE

	GROUP
Reconciliation of earnings to net loss Net loss Earnings/(loss) used in the calculation of basic and dilutive EPS Weighted average number of ordinary shares outstanding during the year used in calculation of basic and dilutive EPS	2009 AU$ 2008 AU$
	(8,189,910) (1,000,990) (0.078) (0.055) Number 104,432,880 Number 18,216,441

Details of the shares issued are included under notes 14 and 15. Dilutive EPS is not reflected as the CPS would result in the reduction of the loss per share.

18. CASH FLOW INFORMATION

Reconciliation of cash flow from operations with loss from continuing operations after income tax

	GROUP PARENT ENTITY
Loss after income tax Non cash flows in loss Depreciation Interest income not received Foreign exchange gain/losses Investment revaluation reserve Exploration Write off Changes in assets and liabilities Increase/(decrease) in trade creditors and accruals (Increase)/decrease in trade and other receivables Impairment of intercompany loan (Increase)/decrease in other assets (Increase)/decrease in deferred tax Cash flows from (used in) operations	2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$
	(8,188,910) (1,000,990) (8,079,348) (864,200) 2,583 537 - - - - - (25,308) - - (206,804) 102,090 97,500 - - - 6,410,751 - - - 91,275 127,051 91,275 127,051 (135,259) (3,480) (58,599) (3,480) - - 7,478,726 - (45,040) - (413,920) - (29,250) - - - (1,796,350) (876,882) (1,188,670) (663,847)

19. SUBSIDIARIES

The Company has the following Subsidiaries at all times during the year.

	Place of	Percentage held	Percentage held
Name of Subsidiary
	Incorporation	2009	2008
Kilgore Exploration, Inc.	Texas USA	100%	100%
Jetstrike Pty Ltd	Perth Australia	100%	-

Kilgore Exploration, Inc was incorporated on 26 September 2007 with initial issued capital of US$1,000 (A$1,081).There is no movement during the year.

20. RELATED PARTY TRANSACTIONS

(a) Transactions with related parties

Directors and officers, or their personally-related entities, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

Entity		Amount Owing/ (Owed)	Relationship
		AU$
AAG Management Pty Ltd	2009	142,149	AAG Management Pty Ltd is a management company which provides
			facilities, human resources, and other administration and consulting
			services. Anthony Short and Gordon Sklenka are directors of AAG
			Management Pty Ltd.
	2008	-
Odin Energy Ltd	2009	1,752,739	Anthony Short was previously a director of Odin Energy Ltd. This
			secured facility will be repaid from future production revenues. During
			the reporting year the company has paid $71,868 interest expense and
			remaining balance is payable at the rate of 15% per annum by 30 June
			2010.
	2008	-
AXG Mining Ltd	2009	204,795	Gordon Sklenka is a director of AXG Mining Ltd. Interest is payable at
			the rate of 12% per annum.
	2008	-
Palace Resources Ltd	2009	204,795	Anthony Short is a director of Palace Resources Ltd. Interest is
			payable at the rate of 12% per annum.
	2008	-
Advance Energy Ltd	2009	(316,310)	Anthony Short and and Gordon Sklenka are directors of Advance
			Energy Ltd. Interest is receivable at the rate of 12% per annum and the
			balance is due on or before 30 September 2009.
	2008	(150,000)	The company loaned Advance Energy at an interest rate of 12 % per
			annum.
		118,964	During the reporting year 2009 the company has paid $118,964 for
			corporate and advisory serviced provided on/before 30/06/2008.
		185,210	Advance Energy Ltd was transacted with the company in the reporting
			period 2008. The company was recharged for travel, accommodation,
			corporate advisory, general administrative etc cost.

(b) Transactions with related subsidiaries

At the end of the year the following loans were owed by subsidiaries:

	Entity	Amount Owed	Relationship
		AU$
Kilgore Exploration Inc.		11,079,093	A wholly owned subsidiary.
Jet Strike Pty Ltd		260,000	A wholly owned subsidiary.

Jet Strike acquired $260,000 in shares in Advance Energy Ltd during the year which is allocated as noncurrent receivables on balance sheet (note 9). Mr Short and Mr Sklenka are directors of Advance Energy Ltd.

Details of interests in wholly owned controlled entities are set out in Note 19.

Loans between entities in the wholly owned group are denominated in US$, bear interest at prime +1%, are unsecured and are repayable upon reasonable notice having regard to the financial stability of the Company. During the year advances of $7,785,947 were made, and interest of $452,264 was charged and unrealised FX gain of $148,851 was brought to account. In 2009 there were no repayments.

The aggregate amounts recognised during the year relating to specified directors/officers and their personally-related entities are included in the primary benefits component of remuneration of directors by the consolidated entity in the remuneration report (refer page 16 of this Annual Report).

• c) Details of the transactions including amounts accrued but unpaid at the end of the year are as follows:

			2009	2008
Specified Director/Officer	Transaction	Note
			AU$	AU$
Bryan Ayers	Consulting fees	(i)	7,603	20,000
David Ballantyne	Consulting fees	(ii)	4,950	20,000
Gordon Sklenka	Consulting fees	(iv)	66,000	-
Anthony Short	Consulting fees	(iii)	121,000	-

• i. The director fees for Bryan Ayers are accrued from amounts were billed based on normal market rates for such services and were due and payable under normal payment terms.

ii. The Company used the management consulting services of Sandgroper Pty Ltd, a company of which Mr David Ballantyne is a director.

• iii. The Company used the management consulting services of Formaine Pty Ltd, a company for which Mr Gordon Sklenka is a director.

• iv. The Company used the management consulting services of Cumberland Investment Pty Ltd, a company for which Mr Anthony Short is a director.

Spartan Nominees Pty Ltd, a company of whom Mr Alex Bajada is a director, provided administration personnel and consulting to the Company which was reimbursed at cost. The amount reimbursed for year is $131,329(2008: $87,025) out of which $45,832 (2008: Nil) is outstanding as on 30/06/09.

(d) Share and Option holdings

Refer to page 17 of the Directors’ Report for further information.

21. KEY MANAGEMENT PERSONNEL DISCLOSURES

• (a) Names and positions of key management personnel at any time during the financial period are:

Name of the Key Management Personnel	Invoiced company	Position Held	Summary for consulting 2009 AU$	Summary for consulting 2008 AU$
Mr B Ayers	-	Director	32,471	51,788
Mr D Ballantyne	Sandgropers Pty Ltd	Company Secretary	69,548	52,711
Mr G Sklenka	Formaine Pty Ltd	Chairman	144,000	110,000
Mr A Short	Cumberland Investments Pty Ltd	Managing Director	220,000	168,055

• (b) Equity instrument disclosures relating to key management personnel.

Ordinary Shares

Holder		Held at beginning of period	Acquired	Sold	Converted CPS	Balance at end of period
Brian Ayers -Direct	2009	-	-	-	3,000,000	3,000,000
	2008	-	-	-	-	-
David Ballantyne -	2009	-	200,000	-	-	200,000
Direct/Indirect
	2008	-	-	-	-	-
Gordon Sklenka -Indirect	2009	3,000,001	-	-	3,000,000	6,000,001
	2008	1	3,000,000	-	-	3,000,001
Anthony Short-Indirect	2009	3,000,001	-	-	3,000,000	6,000,001
	2008	1	-	-	-	3,000,001

Converting Performance shares (CPS)

Holder		Held at beginning of period	Acquired	Sold	Converted to shares	Balance at end of period
Brian Ayers-Direct	2009	8,000	-	-	6,000	2,000
	2008	-	8,000	-	-	8,000
David Ballantyne	2009	-	-	-	-	-
-Direct/Indirect	2008	-	-	-	-	-
Gordon Sklenka-Indirect	2009	8,000	-	-	6,000	2,000
	2008	-	8,000	-	-	8,000
Anthony Short-Indirect	2009	8,000	-	-	6,000	2,000
	2008	-	8,000	-	-	8,000

22. REMUNERATION OF AUDITORS

	GROUP PARENT ENTITY 2009 AU$ 2008 AU$ 2009 AU$ 2008 AU$ 47,713 23,663 47,713 23,663 5,326 9,207 5,326 9,207 53,039 32,870 53,039 32,870 2009 US$ 2008 US$ 2009 US$ 2008 US$ 29,883 18,000 - - 29,883 18,000 - - 82,923 51,000 - -
Amounts received or due and receivable by BDO Kendalls Audit and Assurance (WA) Pty Ltd for: Audit and audit review services of the year end financial reports Other non audit charges for BDO Kendalls Corporate Finance (WA) Pty Ltd Amounts received or due and receivable by FCP CPA in relation to the US based subsidiary companies for: Audit and audit review services of the financial reports

No other services were provided by Ferguson & Camp & Poll for the year ending 30 June 2009.

23. COMMITMENTS

The company had no commitments other than those mentioned in Note 24.

24. JOINT VENTURE OPERATIONS

		GROUP
	2009		2008
	AU$		AU$
The Group holds interests in a number of unincorporated joint ventures, in Texas, USA.
Other joint venture information
Oil and gas revenues	28,792		-
Contingent liabilities	-		-
Capital commitments	909,596		6,217,944

The principal activities of these joint ventures are oil and gas exploration, development and production.

The detailed capital commitments for drilling and costs are provided in the below schedule, minimum anticipated commitments. The total drilling commitments is converted to $747,688 by year end conversation rate.

The assets and liabilities of the group include the following items which represent the group’s interest in the assets and liabilities employed in unincorporated joint ventures, recorded in accordance with the accounting policies described in note 1 to these financial statements.

	GROUP
Current assets Trade and other receivables Non-current assets Property, plant and equipment Oil and gas properties Current liabilities Payables Net investment in joint venture operations	2009 $’000 2008 $’000
	173,638 399,008 12,721 6,305 4,799,141 1,786,283 4,811,862 1,792,588 4,985,500 2,191,596 1,379,388 1,176,988 1,379,388 1,176,988 1,058,915 1,014,608

Minimum Anticipated Commitments:

Summary of Drilling Prospects -Kilgore Oil and Gas Ltd

				Prospect	Net Revenue Interest	Commitments (US$)
Snipe*					4.500%	205,667
Sandpiper*					4.500%	205,667

Sandpiper *

UpMach	16.425%	21,000
Stary	25.310%	109,688
Joshua-Alford	50.625%	-
Egret*	4.500%	205,666
Total		747,687

• 4.5% post Odin Energy Ltd earn-in

25. EVENTS SUBSEQUENT TO BALANCE SHEET DATE

On 22 September the Company announced plans to undertake a three-stage $4.1m capital raising by way of the following:

• A non-renounceable rights Issue of 110,800,003 Shares at an issue price of one cent ($0.01) on the basis of one (1) share for every one (1) share held on the record date together with one (1) free attaching option for every two (2) shares applied for and allotted for to raise $1,108,000 before costs (Rights Issue);

• A share and option placement comprising 250,000,000 shares at an issue price of one cent ($0.01) together with one (1) free attaching option for every two (2) shares applied for to raise $2,500,000 before costs (Share and Option Placement); and

• An option placement comprising the issue of 275,000,000 options at an issue price of 0.2 cents ($0.002) to raise $550,000 before costs (Option Placement).

All options will have an exercise price of five cents ($0.05) and an expiry date 30 months from the date of issue.

The Share and Option Placement and the Option Placement are subject to shareholder approval. The Company will seek to obtain the required shareholder approval and a Notice of Meeting will be sent to shareholders in due course.

It is proposed that the three phases will be completed successively with the record date for the Rights Issue being before either the Share and Option Placement or the Option Placement. Consequently, placees will not be entitled to participate in the Rights Issue. The record date for the Rights Issue will be advised in due course.

The funds raised will be used to complete the Galveston 307 Block offshore production facilities and sales pipeline which will be used for its Snipe, Egret and Sandpiper discoveries. Funds will also be utilised to retire debt, to fund new acquisitions and for working capital purposes.

26. CONTINGENCIES

There were no contingent assets or liabilities at 30 June 2009.

27. SHARE BASED PAYMENTS

Other than referred in note14, there were no share or option based payments during the year.

28. DIVIDENDS

There were no dividends paid or payable in respect of the current financial year.

DIRECTORS’ DECLARATION

The directors of the Company declare that:

• 1) The financial statements and notes, as set out on pages 20 to 51, are in accordance with the Corporations Act 2001 and:

• a) comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• b) give a true and fair view of the financial position as at 30 June 2009 and of the performance for the year ended on that date of the company and Group;

• 2) The Directors have declared that:

• a) the financial records of the company for the financial period have been properly maintained in accordance with section 286 of the Corporations Act 2001

• b) the financial statements and notes for the financial period comply with the Accounting Standards; and

• c) the financial statements and notes for the financial period give a true and fair view.

• 3) The remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration Report); for the year ended 30 June 2009, comply with section 300A of the Corporations Act 2001.

• 4) In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

==> picture [101 x 74] intentionally omitted <==

==> picture [131 x 53] intentionally omitted <==

G Sklenka Chairman

A Short Managing Director

West Perth, Western Australia 30th September 2009

==> picture [153 x 32] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KILGORE OIL AND GAS LIMITED

Report on the Financial Report

==> picture [172 x 151] intentionally omitted <==

We have audited the accompanying financial report of Kilgore Oil and Gas Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 would be in the same terms if it had been given to the directors at the time that this auditor’s report was made.

BDO Kendalls is a national association of separate partnerships and entities. Liability limited by a scheme approved under Professional Standards Legislation.

==> picture [153 x 32] intentionally omitted <==

Auditor’s Opinion

In our opinion:

• (a) the financial report of Kilgore Oil and Gas Limited is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a).

Material Uncertainty Regarding Going Concern

Without qualifying our opinion, we draw attention to Note 1(a)(i) in the financial report which indicates that the company incurred a net loss of $8,188,910 during the year ended June 30, 2009 and, as of that date the Company’s current liabilities exceeded its current assets by $3,511,732. These conditions, along with other matters as set forth in Note 1(a)(i), indicate the existence of material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern and therefore whether it will realize its assets and extinguish its liabilities in the ordinary course of business and at the amounts stated in the financial report.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the Remuneration Report included in the Directors’ Report of Kilgore Oil and Gas Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001.

BDO Kendalls Audit & Assurance (WA) Pty Ltd

==> picture [136 x 38] intentionally omitted <==

Glyn O’Brien Director

Signed in Perth, Western Australia Dated this 29[th] day of September 2009

SHAREHOLDER INFORMATION

TWENTY LARGEST SHAREHOLDERS

SHAREHOLDERS (Fully Paid Ordinary)	NUMBER OF SHARES	%
Formaine Pty Ltd	6,000,000	5.415
Fay Holdings Pty Ltd	6,000,000	5.415
Rulston Pty ltd	6,000,000	5.415
Spartan Nominees Pty Ltd	6,000,000	5.415
Corridor Nominees Pty Ltd	4,500,000	4.061
Icerig Nominees Pty Ltd	4,480,000	4.043
Carl M Carter III	3,500,000	3.159
Embry Canterbury	3,500,000	3.159
Bryan Ayers	3,000,000	2.708
Mr Michael David James	2,819,905	2.545
BLUEBASE PTY LTD	2,500,000	2.256
QUEENSWAY INVESTMENTS PTY LTD	2,000,000	1.805
MR STEPHEN ANTHONY BROADHEAD & MRS DENISE BEVERLEY	1,500,000	1.354
BROADHEAD
MANDEVILLA PTY LTD	1,250,000	1.128
Merrill Lynch (Australia) Nominees Pty Ltd	1,050,000	0.948
NUMBER 7 INVESTMENTS PTY LTD	1,000,000	0.903
Geoffrey William Evans	1,000,000	0.903
Imperial Nominees (WA) Pty Ltd	1,000,000	0.903
Summerset Investments Pty Ltd	1,000,000	0.903
Eevo Pty Ltd	1,000,000	0.903
TOP 20 SHAREHOLDERS	59,099,905	53.339
TOTAL ISSUED SHARES	110,800,003	100

Distribution schedule of the number of holders in each class of equity security.

By Class	Holder of Ordinary shares	Number of Ordinary shares	%
1 – 1,000	4	103	0.000%
1,001 - 5,000	7	23,949	0.022%
5,001 – 10,000	41	404,000	0.365%
10,001 – 100,000	351	17,879,180	16.136%
100,001 and over	145	92,492,771	83.477%
Totals	548	110,800,003	100.000%

ADDITIONAL SHAREHOLDER INFORMATION

A. CORPORATE GOVERNANCE

A statement disclosing the extent to which the Company has followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period is previously contained in this document as item 6.

B. SHAREHOLDING

1. Substantial Shareholders

There were no substantial shareholders for the company.

1. Unquoted Securities

Names of persons holding greater than 20% of a class of unquoted securities:

Holder				Class of Equity Security	Number of Shares
Rulston Pty Ltd, Ground Floor,	168	Stirling Highway, Nedlands, WA	6009	Convertible performance	4,000
				shares

1. Number of holders in each class of equity securities and the voting rights attached.

There are 548 holders of ordinary shares. Each Shareholder is entitled to one vote per share held. On a show of hands every Shareholder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

There are 7 holders of convertible performance shares. There are no voting rights attached to these convertible performance shares.

By Class	Holders of Convertible Notes	Number of Convertible Notes	%
1 – 1,000	-	-	-
1,001 - 5,000	7	14,000	100
5,001 – 10,000	-	-	-
10,001 – 100,000	-	-	-
100,001 and over	-	-	-
Totals	7	14,000	100.00

1. Marketable parcel

There are 82 Shareholders with less than a marketable parcel as at 24 September 2009.

C. OTHER DETAILS

1. Company Secretary

David Ballantyne

1. Address and telephone details of the entity’s registered and administrative office

The address and telephone details of the registered and administrative office:

Suite 2 16 Ord Street WEST PERTH Western Australia 6005

Telephone: + (61) 08 9486 1122 Facsimile: + (61) 08 9486 1011

1. Address and telephone details of the office at which a register of securities is kept

The address and telephone number of the office at which a registry of securities is kept:

Advanced Share Registry Services 150 Stirling Highway NEDLANDS Western Australia 6009

Telephone: + (61) 08 9389 8033 Facsimile: + (61) 08 9389 7871

1. Stock exchange on which the Company’s securities are quoted

The Company’s listed equity securities are quoted on the Australian Stock Exchange.

1. Restricted Securities

The Company has the following restricted securities on issue at 30 September 2009:

Class of Equity Security	Number	Date Ceasing to be Restricted Securities
Ordinary shares	42,550,000	10/07/2010
C.P.S	14,000	10/07/2010

1. Review of operations

A review of operations is included in this report under Review of operations.

1. Consistency with business objectives

The company has used its cash and assets in a form readily convertible to cash that it had at the time of listing in a way consistent with its stated business objectives.

8. Exploration Projects

All leases and operations, with the exception of the Vermillion 141 project which is located in federal offshore waters off the state of Louisiana, are located in the state of Texas in USA, as at the end of June 2009. Further details can be found in Review of Operations and in note 24 to the financial statements.