U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, DC 20549

                               FORM 10-KSB

              Annual Report Under Section 13 of 15(d) of the
                     Securities Exchange Act of 1934

               For the fiscal year ended December 31, 2003

                     Commission file Number: 0-24259


                  AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.
                  --------------------------------------

   British Columbia, Canada                                 75-2712845
-------------------------------                         -------------------
(State or other Jurisdiction of                          (IRS Employer
Incorporation or Organization)                          Identification No.)

                               PO Box 1629
                     1301 Ave. M,  Cisco, Texas 76437
                     --------------------------------
                 (Address of Principal Executive Offices)

                              (254) 442-2638
             ------------------------------------------------
             (Issuer's Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12 (g) of the Act:
          Common Stock, no par value

The registrant (1) has filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act during the preceding 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]  No [  ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB  [X]

State issuer's revenues for its most recent fiscal year:  $7,626

State the aggregate market value of the voting stock held by non-
affiliates of the Registrant:  As of December 31, 2003 the Company's stock
price was $0.17 bid and $1.00 ask per share.

     Common stock 1,885,417 shares, $1,885,417 Market Value

On March 31, 2004, the Issuer had 7,966,239 shares of Common Stock
outstanding with no par value.  The Company's OTC Bulletin Board Symbol is
AUCAF.

                                    1

                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

(a)  Business Development

Australian-Canadian Oil Royalties Ltd. ("ACOR" or "the Company") was
incorporated in British Columbia, Canada, in April of 1997.  The Company's
U.S. office is located at 1301 Avenue M., Cisco, Texas 76437.

The business of ACOR during 2003 was to make a study of available oil and
gas development acreage in Australia and select and apply for the
exploration permits on the areas which demonstrate a high probability of
success with the maximum rate of return for dollars invested.  After
December 31, 2003, ACOR has filed two applications covering 641,124 acres
in Australia with other industry partners for areas V03-3 and V03-4.

The Company was organized to engage in the oil/gas business and to
purchase, hold and sell producing and non-producing oil and gas royalty
interests in Australia, Canada and the United States. Since its
organization, ACOR has acquired overriding royalty interests (ORRIs) under
eleven (11) concessions covering 11,290,800 gross surface acres in
Australia. Production has been discovered on five of the properties where
ACOR holds ORRIs. The Company is currently receiving revenues from two of
the ORRIs, Authorities to Prospect 299 and 267. Total gross revenues
received from ATP 299 and ATP 267 for the 2003 were $5,355.

Drilling is expected to start on approximately April 15, 2004 on PEL 100
in which ACOR has a 2% Working Interest carried through the first well.
Cooper Energy NL, the operator on PEL 100, released the following
information concerning the drilling program on PEL 100 on March 25, 2004.
(This is only a portion of their entire letter.)

   "Cooper Energy NL (Cooper Energy) as the Operator of PEL 100 is pleased
   to announce that the contract for the drilling of the Acacia Grove-1
   exploration well has been executed with OD&E drilling services.

   The Acacia Grove-1 exploration well is expected to spud on
   approximately 15 April 2004. The actual spud date is dependent on wells
   earlier in the drilling sequence.

   Acacia Grove-1 is expected to cost approximately $A1.5 million. Cooper
   Energy is obligated to pay for 100% of the well cost to earn 43.33% of
   PEL 100. To offset the well cost and manage the risk, Cooper Energy has
   entered into a farm-in agreement with Enterprise Energy NL who will
   earn 15% of PEL 100, contingent on Enterprise Energy NL successfully
   raising capital.

   The Acacia Grove structure is a four way dip closure with an estimated
   most likely oil-in-place of 1.0 million barrels in the basal Jurassic
   Poolawanna Formation and 1.6 million barrels in the Triassic Tinchoo
   Formation   a total of 2.6 million barrels in place. Acacia Grove-1 is
   being drilled up-dip of Walkillie-1, a well drilled in 1984 that had
   minor shows at numerous levels. Acacia Grove-1 is close to the Keleary
   Field and the Telopea Field, that have produced 1.5 million barrels
   from the Poolawanna Formation and 0.6 million barrels from the Tinchoo
   formation respectively.

                                    2

   Recent seismic processing and interpretation demonstrates that
   Walkillie-1 was drilled off the crest of the Acacia Grove structure,
   which is the target for Acacia Grove-1.

   Acacia Grove-1 is the first well of Cooper Energy's 2004 national
   drilling program."

This 146,659-acre oil and gas concession adjoins the Keleary Oil Field. A
special pipeline was built to handle the Keleary #2 well.  This pipeline
runs 84 miles to the Moomba plant and passes through PEL 100.  It should
provide pipeline and market access for oil and condensate.

On PEL 88, Cooper Energy plans seismic and future drilling depending on
the results of seismic analysis.  The area contains a large anticline near
the middle of the block with a fault on the west side similar to one on
the Inland Refineries Oil Field ENE in Queensland where the well came in
with an initial potential of 1,000 to 4,000 barrels of oil per day.  ACOR
has a 3/10ths of 1% overriding royalty Interest in this concession.

The Company has applied with Holloman Corporation, Ely Sakhai
(individually) and Robert Thorpe (individually) as partners (25% each) for
two Australian concessions in the Bass Straits as of March 25, 2004, V03-3
and V03-4.

Both the V03-3 and V03-4 concessions are located in a world-class
petroleum province with remaining reserves estimated at 600 million
barrels of oil and 5 trillion cubic feet of gas. Both areas are adjacent
to giant producing fields and proximal to existing infrastructure and an
expanding gas market. Proven petroleum exists with a variety of untested
play types, which include potential in deeper stratigraphic levels. These
bids were timely filed on March 25, 2004 from Offshore Release 2003.

V03-3 is 301,469 acres (1,220 square kilometers).  The Angler-1, drilled
by Petrofina in 1989, showing two zones with oil shows and a gas bearing
reservoir. The well was not commercial at that time.  Calculations suggest
that the Angler discovery could yield in excess of 350 billion cubic feet
of gas and approximately 3 million barrels of condensate.

V03-4 is 339,769 acres (1,375 square kilometers). One well was drilled
off-structure, however, the northeast corner has significant fault
structures that have not been drilled. The Australian Government has
identified four (4) significant structures on this lease.

No assurances of the granting of either application to ACOR and its
partners can be made.

ACOR is to pay its portion of the application fees and seismic costs for
each concession, being $12,500 for each concession, to Australian Grazing
& Pastoral Co., Pty. Ltd. (the leasing agent).  If granted, the Company
must pay an additional $12,500 each for either or both concessions and
will also be obligated to the development program described in the
application.  Any successful application will be subject a requirement to
assign out a   of 1% Overriding Royalty Interest.

The Company plans to further develop its business by forming consortiums
of oil and gas entities with the necessary financial strength to apply for
Australian oil and gas concessions, which involve certain financial
requirements for exploration and drilling activities.

                                    3

On March 27, 2001, the Company purchased a .05% overriding royalty
interest under the 214,000-acre VIC/P45.  BHP Billiton Ltd., Australia's
largest public company, is conducting the exploration.  BHP owns one-half
(1/2) interest under the Kingfish Field on the adjoining block, with Exxon
owning the other one-half (1/2) working interest.  The Company understands
BHP plans to drill the Anemone Southeast Structure, which has good four-
way closure.  This structure is un-drilled, but is estimated in a
Government report to contain 30,000,000 barrels of oil and 55 billion
cubic feet of gas.  The IMI Report by an independent group of engineers
estimated the total estimated potential at 350,000,000 barrels of
oil/condensate and 4,000,000,000 cubic feet of gas when all structures are
completed and tested.  The Government Report VIMP 61 recommends it to be
drilled first. The Company understands drilling should take place in 2004.
One test well, the Megamouth #1, was not on structure and resulted in a
dry hole.  The Megamouth structure was not one of the structures included
in the IMI reserve report

The VIC/P45 area is offshore in the most prolific oil-producing basin in
Australia, approximately 1 1/2 miles east of the Kingfish Oil Field in
the southern Gippsland Basin in the Bass Straits.  The Kingfish Oil
Field, the largest oil field in Australia, has produced over one billion
barrels of oil since its discovery. There are currently 23 producing
wells and 41 total wells were drilled in this field. Present cumulative
production figures are approximately 26,000,000 barrels per well
drilled.  The permeabilities in the pay section range between 5,000
millidarcies and 40,000 millidarcies, which is extremely high.

The production from the Kingfish Oil Field amounts to approximately
$US845,122,000 gross return per well drilled, at a crude price of $34.65
per barrel. The cost of drilling a Kingfish well is approximately
$US5,500,000, therefore the production is approximately 154 times the
drilling and completion costs. During flush production, the wells were
making 6,400 barrels of oil per day.

On present seismic mapping there are 14 structures on VIC/P45, which
includes one oil and gas field with 11 pays with a total of over 1,000
feet of pay section, and a second field with one gas pay section.
Development wells will need to be drilled to bring these fields into
production. The Company could receive significant income and reserves from
this successful location. After 32 years, The Kingfish Field is still
producing 17,000 barrels/day.

Quoting from VIMP Report 61, published by the Victorian Government:

   "The Kingfish Southeast Prospect is the largest structural play in
   V99-2. It has a four-way dip (fault, independent closure) mapped at
   several intra-Latrobe horizons and at the top of the Golden Beach
   Subgroup. This play is estimated to contain 117 million barrels of
   recoverable oil.

   The Archer/Anemone/Anemone Southeast areas could be developed together.
   Total developable reserves are potentially 35.5 million barrels of oil
   and 117 billion cubic feet of gas."

The Breem, Kingfish and Kingfish Southeast Structures are in the same
primary trend. The fault structure, through the middle of the Kingfish
Field, extends into the Kingfish Southeast Structure on VIC/P45. Drilling

                                    4

a well on the Kingfish Southeast Anticline is included in the first three
years work program, as well as other drilling.

On December 9, 2002 the Company entered into an agreement with
International Oil Lease Service Corp. to purchase an overriding royalty of
1/20th of 1% of 8/8ths in VIC/P53.  This concession covers 185,000 acres
and is situated in the Bass Strait of Australia and is totally surrounded
by huge offshore oil and gas fields that have produced in excess of 2.8
billion barrels of oil and 5 trillion cubic feet of gas to date. See Item
2 "Description of Property" for additional information.

ACOR owns 7,568,607 net 100% working interest acres in the Cooper-Eromanga
oil producing basin, Australia's main onshore oil and gas producing basin.
There have been several leads and prospects identified on these net
working interest acres with very large anticlines and seismic highs.  The
Company also holds 451,605 net royalty acres under 11,290,800 gross
surface acres.  These holdings are all located within the states of
Queensland and South Australia.

On one of these areas, PEL 108, ACOR's technical staff has identified a
huge anticline consisting of over 122,000 acres with approximately 500
feet of maximum closure.

During 2002, the Company made a significant change in its operations by
including domestic oil and gas exploration in its program.  The Company
entered into an agreement with Resource and Energy Technologies Company
for the drilling and development of oil and gas in the Park City Field
Prospect in Edmonson County, Kentucky.  This field is located in the
Highland Rim Physiographic Province that extends over portions of central
Kentucky and middle Tennessee.  The Company participates in the program
with 1/8th of the working interest.  Through December 2003, thirty-five
(35) wells have been drilled and completed as gas wells and are awaiting
further testing and pipeline connection.  Twenty-one (21) of these wells
were drilled in 2003.  As of April 5, 2004 a total of 47 wells of the 50-
well program have been drilled.  The remaining 3 wells are staked and
awaiting a drilling rig.  All drilling and completion costs have been
paid. The Company's President, Ely Sakhai, also participates with an equal
1/8 working interest in this project.  (See Item 12 "Certain Relationships
and Related Transactions" for additional information.)

Since its organization in 1997, the Company has not been involved in any
bankruptcy, receivership, or similar proceeding and has undergone no
material reclassification, merger, or consolidation.

(b) Business of Issuer

As a purchaser and holder of overriding royalty interests, ACOR's business
is related to the principal products of oil and gas, and is dependent on
various factors, which are discussed below.  The average sales price per
barrel of oil from Australia during 2003 was $US31.97.

The acquisition, exploration, development, production and sale of oil and
gas are subject to many factors that are outside the Company's control.
These factors include: market prices; national and international economic
conditions; import and export quotas; availability of drilling rigs,
casing, pipe, and other equipment and supplies; availability of and

                                    5

proximity to pipelines and other transportation facilities; the supply and
price of competitive fuels; and the regulation of prices, production,
transportation, and marketing by domestic and foreign governmental
authorities.  Additionally, the Company generally has no control over
whether the owner or operator of leases to which its overriding royalty
interests are attributable will elect to explore for oil and gas on such
properties, or to develop them following discoveries that may occur.  Each
of these factors may affect the rate at which oil and gas are produced on
properties in which the Company has an interest or affect whether wells
will be drilled on such properties, and could otherwise materially affect
ACOR's earnings.

Competition and Markets

The Company is competing with other oil companies for oil and gas leases
and concessions. The oil and gas industry is highly competitive in all of
its phases, with competition for favorable producing royalties, overriding
royalties, and good oil and gas leases being particularly intense.  The
Company believes that the exploration program, promised expenditures,
geological and geophysical skill, and familiarity with an area of
operations are the primary competitive factors in the identification,
selection, and acquisition of desirable leases.  When attempting to
purchase interests in such properties, the Company competes with
independent operators and major oil companies.

Foreign Taxes and United States Tax Credits

As a result of its overriding royalty interests attributable to properties
outside the United States, the Company is subject to the imposition of
taxes by foreign governments upon the Company's income derived from such
foreign jurisdictions.  These taxes are of various types, with differing
tax rates, and are subject to change.  Generally, the Company's income
from a foreign jurisdiction will be taxed in the same manner as that for
other companies operating in the jurisdiction, but discriminatory taxation
by a particular jurisdiction may occur.  The current non-resident
corporate income tax rate in Australia, for overriding royalty interests,
is 30%.

As a Canadian corporation, the Company is liable for income taxes under
the laws of Canada.  Under Canadian law the Company's Australian-source
income is subject to a 46% tax (on Canadian income).  We believe the 30%
Australian tax should be a credit toward the payment of the 46% Canadian
tax under double taxation treaties between the countries.

The Company is taxable in the U.S. on U.S. source income.  Because there
has been neither U.S. source net income nor any income effectively
connected with a U.S. trade or business, there have been no U.S. taxes
incurred to date.

Governmental Regulation

Oil and gas operations are subject to federal, state and local laws and
regulations governing waste, environmental quality, pollution control,
conservation and other measures regarding environmental and ecological
matters.  It is impossible to predict the impact of environmental
legislation and regulations on the Company's operations and earnings in
the future. The Company has cleared Native Title on PEL 108, PEL 109 and
PEL 112 since the former Annual Report and are pursing title on ATP 582.

                                    6

Native title claims over oil and gas areas by native aboriginal groups
have become commonplace in Australia since the mid-1990's. Native title is
the activity of aboriginal groups' land claims over existing and potential
oil and gas exploration and development areas. Although native Australians
are claiming certain areas, they have not, as yet, proven actual
ownership. However, any recognized native title claim must be dealt with
under the provisions of the Native Title Act of 1993, and overseen by the
state governments, which manage specific areas within state boundaries.
Due to native title claims, a certain level of risk can be expected which
could have a detrimental effect on the timing of projects.

Both the South Australian and Queensland State governments have initiated
negotiations between industry and native title claimants.  These
negotiations are being managed independently by each state and could have
independent outcomes. The Company has no involvement in these
negotiations.  ACOR has cleared Native Title on all of its South
Australian acreage at a cost of thousands of dollars and a 1% overriding
royalty of that so that the areas can now be drilled and developed.

The Company's operations could also be affected from time to time by other
federal, state and local laws and regulations and by political
developments, such as the Native Title issue in onshore Australia. The
domestic production and sale of oil and gas are subject to federal
regulation by the Department of Energy and the Federal Energy Regulation
Commission.  Rates of production of oil and gas have for many years been
subject to federal and state conservation laws and regulations. In
addition, oil and gas operations are subject to extensive federal and
state regulations concerning exploration, development, production,
transportation, and pricing, and even to interruption or termination by
governmental authorities.

In foreign countries, the Company may be subject to governmental
restrictions on production, pricing and export controls.  Regulations
existing or imposed upon the Company or its properties at the time of
their acquisition may change to an unpredictable extent.  The Company will
have little or no control over the change of regulations or imposition of
new regulations and restrictions, expropriation or nationalization by
foreign governments or the imposition of additional foreign taxes.
Management believes that these actions are unlikely to be undertaken by
the state governments of South Australia or Queensland, where all of the
foreign oil and gas properties from which the Company receives royalty
income are currently located. The same belief applies for the government
of Victoria, since ACOR has acquired an overriding royalty under VIC/P45
and VIC/P53.

Native Title

As discussed above, Native Title can delay or interfere with concession
access and/or initiation of exploration on concessions.

While title to permits is assured, there can be no exploration on the
permit areas until negotiations with native are completed.  When
negotiations over the release areas discussed below are completed,
exploration and development on the related areas will commence.



                                    7

South Australia

The Company received notice during 2003 that Native Title negotiations had
been completed on the South Australian areas and exploration can now
commence.

The Native Title issue in South Australia was resolved during the first
quarter of 2003. The successful negotiation, between Industry, Government,
and a number of native tribes of Australia, covered areas leased under the
Primary Industries and Resources, South Australia (PIRSA) Cooper-Eromanga
Basins Exploration Opportunities Acreage Release, 1998, (also known as the
"CO-98 Release"). The success of this negotiation was paramount in the
completion of all future negotiations within South Australia. A well was
drilled on CO-98, which was drilled to 8,000 feet and was a dry hole. The
area has a number of other structures, which should be drilled.

Queensland

In Queensland, the Company is paying annual rentals, but access for
exploration is blocked until successful Native Title negotiations are
completed. It is not clear at the time of this report how long the
negotiations will take to settle with the local natives on ATP 582.

Foreign Currency

Due to the nature of the Company's activities in Australia, portions of
the Company's operating capital may at times be held in various foreign
currencies.  This subjects the Company to the risk of currency
fluctuations and changes in rates of conversion for different currencies.
The Company does not engage or expect to engage in any hedging or other
transactions, which are intended to manage risks relating to foreign
currency fluctuations. Additionally, revenues generated in foreign
countries in which the Company has or may acquire interests may be subject
to governmental regulations, which restrict the free convertibility of
such funds, and all remittances of funds out of these countries might
require the approval of the applicable government's exchange control
agency.  Presently, the Company experiences no difficulties with the free
convertibility of funds from Australia.  In the Company's opinion, the
foreign exchange control laws currently in effect in Australia, do not
unreasonably delay the remittance of funds generated in Australia to the
United States. The exchange rate on April 9, 2004 was $1.00 Australian =
$0.7623 United States.

Personnel

On November 3, 2003, the Company hired a full time employee, Mr. James L.
Lemmon, who has legal and banking experience. He has a Law Degree from
Southern Methodist University in Dallas, Texas.  Mr. Lemmon was a Vice
President of Republic National Bank (now Bank of America) and has been
active in the oil and gas business since 1980 as well as participating in
other business ventures. The Company expects an increase in personnel now
that it is conducting an exploration program on 7,568,607 net 100% working
interest acres. The Company employs two people who serve the Company as
needed on a part-time basis, and an outside consultant.



                                    8

Definitions

The following definitions are provided to clarify certain terms used in
this report:

Application Area - An area for which the Company has applied for the grant
of an Exploration Permit.

Authority to Prospect ("ATP") - a concession granted by the State of
Queensland, Australia, which entitles its holders to an exclusive right to
explore for oil and natural gas in Queensland in the particular area
covered by the ATP.  Each ATP has an initial term of four years.  The area
covered by an ATP is reduced by relinquishment of approximately one-fourth
of the area at the start of the third year of its effectiveness and an
additional one-fourth of the original area at the start of the fourth year
of its effectiveness.  The area to be relinquished is chosen by the holder
of the ATP.  An ATP will require some kind of geological and/or
geophysical operations, such as new seismic or seismic interpretation,
drilling or other operations during the term of the tenure.  The amount of
work to be performed depends upon the expenditures required for each
specific year of the tenure.  Holders are only required to expend those
amounts as set out in the original concession document. Applications for
renewal may be filed at the time of expiration of an ATP.

Developmental Wells - oil and gas wells drilled within the proven area of
an oil or gas reservoir to the depth of a stratigraphic horizon known to
be productive.

Dry Hole - a well found to be incapable of producing oil or gas in
sufficient quantities to justify completion.

Exploration Permit   an exclusive offshore exploration permit with a term
of six years. Said permit is managed by the Victorian State Government.

Exploratory Well - a well drilled to find and produce oil and gas in an
unproved area or to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir.

Gross Production  - the total production of oil, gas, or natural gas
liquids from a property or group of properties for any specified period of
time.

MCF - thousand cubic feet of natural gas

MMCF - million cubic feet of natural gas

Net Royalty Acre - generally, a measurement of royalty or overriding
royalty and the equivalent of the full customary one-eighth royalty of the
gross production of revenue free and clear of exploration, drilling and
production costs from one acre of land.  The number of net royalty acres
used in this report applies to figures as of March 25, 2002 and the number
will change as relinquishments take place on the ATPs, as an ATP expires
or is canceled, or any new areas are added.

Overriding Royalty Interest ("ORRI") - an interest assigned out of the
lessee's leasehold or working interest.  The amounts payable from ORRIs
are payments calculated as a percentage of either gross production or the
gross revenues of the working interest (based on the wellhead price) from

                                    9

a concession or lease, usually free and clear of all exploration, drilling
and development and production costs, except for any applicable taxes and
federal levies.  In calculating the wellhead price, pipeline and trucking
costs have already been deducted from the refinery price.  The overriding
royalties discussed herein are generally expressed as a percent of the
gross production.

Petroleum Exploration License ("PEL") - an exclusive oil and gas
exploration permit issued by the South Australian Department of Primary
Industries and Resources.  The initial term of the tenure is for a five
(5) year period.

Producing Wells - wells capable of producing oil or gas in commercial
quantities, including those wells capable of producing in commercial
quantities that are shut in, or wells which are not currently producing in
commercial quantities but have been commercially productive in the past.

Royalty - generally, a share of the production reserved by the grantor of
an oil or gas lease or concession.  The royalty interest is customarily
free of cost or expense incident to exploration, development or
production, except for production or gathering taxes.

Working Interest ("WI") - all or a fractional part of the ownership rights
granted by a concession or lease.  The owner of a WI or a part thereof
pays all costs of exploration and is entitled to the gross production,
less royalties retained by the grantor or lessor, and less ORRIs or other
non-operating interests created and assigned from the WI. The owner of a
WI may incur operating expenses in excess of income.

Petroleum Resource Rent Tax   a tax on net income in Australia reduced by
indexing on offshore production, which replaces the royalty and is a
deduction from Australian income tax.


ITEM 2.  DESCRIPTION OF PROPERTY

The following table shows working interests holdings for the year ended
December 31, 2003.

     Concession           Number         % Working         Net
         #               of Acres         Interest       WI Acres
     ----------         ---------        ---------     -----------
     PEL 108              506,811           50%          253,405.5
     PEL 109              373,633           50%          186,816.5
     PEL 112              818,904           50%          409,452.0
     ATP 582            6,716,000          100%        6,716,000.0
     PEL 100              146,659            2%*           2,933.2

*Carried through first well

The following table sets forth the ATP number of each Australian
concession in which the Company had an ORRI as of January 21, 2004 (date
of the title searches on most of the properties), and upon which
productive wells had been drilled, the percentage interest of the Company
therein, the number of such wells, the gross acreage of each concession,
and the net royalty acres held in each concession.


                                    10

                                                  Percentage
                                                   of 1% of    Net
  Area and                                Gross      Gross    Royalty
No. Of Wells      Concession Holder       Acres   Production  Acres   Blocks
-------------  ----------------------- ---------  ----------  ------- ------
267 21 wells   Santos Producing Block    367,800     17.15%     5,046    20
299 68 wells   Santos Producing Block    441,600     05.75%     2,031    24
543  1 well    Vernon E. Faulconer
                 Australia, Inc.       1,232,800     25.00%    24,656    67
560  3 wells   First Sourcenergy
                 Group Inc.              625,600     25.00%    12,512    34
PEL 88         Cooper Energy           1,232,000     00.03%     3,696    64
Patchawarra
     SW        Santos Producing Block     18,400     06.25%        92     1

The following table sets forth the undeveloped acreage in which the
Company had an ORRI in Australia as of January 14, 2003, the date of the
title searches on the Queensland properties.

                                              Percentage
                                               of 1% of      Net
                                      Gross     Gross      Royalty
 Area     Concession Holder           Acres   Production     Acres   Blocks
-------  ------------------------- ---------- ----------  ---------  ------
554      DyAd Australia, Inc.         110,400    25.00%       2,208      6
582      Cooper-Eromanga Oil, Inc.  6,716,000    67.10%     360,515    365
616      East Jackson Oil, Inc.       147,200   333.33%      39,253      8
VIC/P45  BHP Billiton Ltd.            214,000     5.00%         856     12
VIC/P53  Australia Crude Oil
           Company                    185,000     5.00%         740     10

The estimated number of non-producing wells on the above areas is included
below:

                                   Estimated number of
                Area               non-producing wells
                ----              --------------------
                 267                              5
                 299                              8
                 543                             10
                 560                              8
                 554                              2
                 582                              1
                 616                              3
             VIC/P45                              5
             VIC/P53                              5

The total acreage under which ACOR holds overriding royalty interests in
Queensland and South Australia is 451,605 net royalty acres under
11,290,800 gross surface acres.

ACOR holds overriding royalty interests in eleven concessions covering
11,290,800 surface acres in the Eromanga and Cooper Basins in Australia.
Production has been discovered on five of the concessions. The Eromanga
Basin encompasses the southwestern portion of the province of Queensland
and the northeast corner of South Australia, and is Australia's main
onshore producing oil and gas basin.  The Cooper Basin is located in the
northeast part of the province of South Australia.  Management believes

                                    11

ACOR's overrides are in a prime location since the majority of ACOR's
interests form nearly continuous blocks adjoining the producing block of
Santos et al. which has reserves in excess of 1,056,000,000 barrels of oil
equivalent and is making approximately $A930,000,000 worth of oil, gas and
associated hydrocarbons per year (equivalent to about $771 million in U.
S. dollars).

On the 11,290,800 surface acres where ACOR holds overriding royalty
interests, there are giant anticlines, large faults and hundreds of
seismic highs, all of which indicate possibilities of oil and gas
reserves.  In addition, about $27 million worth of seismic information has
been completed and is available on the areas.

ACOR is currently receiving revenues from two of its overriding royalty
interests - ATP 267 and ATP 299. A successful gas well was completed on
ATP 543 in 1996. After completion of a gas pipeline gas began to be
marketed in August, 1999, but the pipeline reduced the gas price and the
well was shut in.

Bass Strait, Australia   New Override Acquisition:

In December 2002, the Company purchased an overriding royalty of 1/20th of
1% of 8/8ths in VIC/P53 from International Oil Lease Service Corp. for
407,000 restricted shares of its common stock.  This concession covers
185,000 acres and is situated in the Bass Strait of Australia and is
totally surrounded by huge offshore oil and gas fields that have produced
in excess of 2.8 billion barrels of oil and 5 trillion cubic feet of gas
to date.  This concession, VIC/P53 has seven structures with estimated
reserves of 167,000,000 are reported by The Australian government
publication "Victorian Initiative for Mineral and Petroleum (VIMP) Report
67" allocated as follows:

        Structure Name          Estimated Barrels
        --------------          -----------------
          Knifejaw                 50,000,000
          Catfish                  49,000,000
          Hake                     35,000,000
          Spineback                33,000,000

The Company issued 407,000 restricted shares of its common stock to
International Oil Lease Service Corp. based on 28.6 cents per shares for
the 1/20th of 1% of 8/8ths override.  Robert Kamon, Secretary of the
Company is also President of International Oil Lease Service Corp. (See
Item 12 Certain Relationships and Related Transactions for additional
information.)

Bass Strait, Australia   New Application:

The Company has filed two applications with a strong consortium for areas
V03-3 and V03-4, covering 301,469 acres and 339,769 acres, respectively,
dated March 25, 2004. The consortium consists of three oil and/or pipeline
companies and one individual who are active in the oil and gas business.
The following shows the consortium members and their allocations, if
granted:

        Holloman Corporation                         25%
        Australian-Canadian Oil Royalties Ltd.       25%
        Robert Thorpe                                25%
        Ely Sakhai                                   25%

                                    12

The estimated gas reserves on the 301,469 acres of V03-3 are 350 billion
cubic feet of natural gas and 3 million barrels of condensate. At today's
market price is worth approximately 2 billion dollars.

V03-3 is located 6 miles east of the Kingfish Oil Field, which has to date
produced 1.1 billion barrels of oil from 41 wells or 26 million barrels
per well ($700,000,000) worth of oil at today's price per well.

There are 7 additional structures and leads on the area which have already
been located.

V03-4 covers 339,769 acres and has a very large structure with small highs
identified. There are 4 oil structures and 5 leads identified by the
Australian Governments.

The consortium has ordered all available 2D and 3D seismic for both V03-3
and V03-4.

The area between the Kingfish Oil Field and V03-3 is Permit 45, under
which ACOR holds an overriding royalty interest. The Operator is BHP
Billiton, the ninth largest oil company in the world.  BHP has announced
plans to drill the Anemone SE Structure within 2004.  The Australian
Government reports rate this structure at 32,000,000 barrels of oil and 53
billion cubic feet of gas.

The Company plans to continue to acquire oil and gas exploration
properties both domestically and internationally plus make trades and
deals for their exploration and development, as well as actively conduct
exploration. When necessary to meet financial requirements, the Company
will apply for oil and gas properties in conjunction with the Company's
President, Ely Sakhai, due to his substantial financial position.

Plans for the next 12 months on overriding royalties in Queensland, South
Australia and Victoria are at the discretion of the working interest
holders. All exploration costs on overriding royalties are borne by the
working interest holders. The Company is responsible for one-half (1/2) of
the exploration program costs on working interest holdings. The Company's
portion of the minimum exploration commitments under PEL 108, PEL 109 and
PEL 112 total $145,000 in Year 1, $275,000 in Year 2 and $1,450,000 in
Year 3. The Company is responsible for all the exploration and drilling
costs on ATP 582.

Domestic   Kentucky Park City Gas Field:

During the year the Company entered into an operating agreement to develop
the Park City Gas Prospect in Kentucky.  The Company's ownership is 12.5%
working interest in the drilling and development of this Park City area.
As of December 31, 2003, thirty-five (35) wells had been drilled with an
additional 12 wells drilled through April 5, 2004.

The following is a list of the wells drilled, completed, and awaiting
further testing and pipeline connection as of December 31, 2003.



                                    13

      Lease Name        Wells # Drilled and Completed on Lease
    ---------------     --------------------------------------
    Alton Parsley            #1, #2, #3, #4, # 5, #6 and #7
    Edward Parsley           #1, #2, #3, #4, #5, #6 and #7
    Honeycutt                #1
    Randall Houchin          #1 and #2
    Houchin-Honeycutt        #1
    Thomas Tarter            #1 and #2
    Jackie McComb            #2 and #3
    Mollie Kersey            #1 and #3
    Earl Dean Parsons        #1
    Enda Sanders             #1 and #2
    Harvey Davis             #1
    Perry Seabaugh           #1
    David Dennison           #1
    Bufford Hatler           #1
    Charles Johnson          #1
    Timmy Davis              #1
    Mildred Bryant           #1
    Frank Prather            #1

As of April 5, 2004 a total of 47 wells have been drilled. Carl A. Davies,
PE has estimated 13,121,000 MCF of total gas in place for the 35 wells
drilled before December 31, 2003.  ACOR has a 1/8th working interest in
all of these wells.  The additional wells will add additional potential
reserves.  The Company is not using this number as proved reserves until
the gas processing plant and gathering system have been producing for six
months.

The Park City Gas Field is located in Edmonson County, Kentucky, which is
geographically located on the Highland Rim Physiographic Province, a
geological feature that extends over portions of central Kentucky and
middle Tennessee.  Well records indicate that the primary oil and gas
formations in the Park City area are in the Fort Payne, Sellersburg, Dutch
Creek and Clear Creek formations.

Of the thirty-five wells drilled in the Park City Gas Field through
December 31, 2003, all have been logged and completed as gas wells.  Only
one of these wells has been acidized and tested.  However, the remaining
wells each flowed gas.  The Jackie McCombs #3 penetrated 2 feet into the
Fort Payne formation and encountered high gas pressure.  This well was
tested by Swager Engineering at 985 MCF per day with flowing wellhead
pressure of 100 psi.

Gas analysis has been completed on about half the wells.  The results show
relatively good, clean gas except for the presence of nitrogen.  There is
no sulfur.  The gas in these wells averages 14 to 16% nitrogen.  The
pipeline companies require that the presence of nitrogen in the gas be
reduced down to less than 4% before it may be injected into the commercial
pipeline system.

The gas from each well will need to be tested for composition, flow rates,
reserves and analyzed by an independent testing laboratory.  Most of this
testing has been completed on about half of the wells.  However, long-term
flow rate tests still need to be performed.


                                    14

Of the 47 drilled wells (to date of this report), only two have been
treated with an acid treatment.  The first well showed a 17-fold increase
in flow rates after treatment indicating the need to stimulate the
remaining wells with acid. Results on the second well have not been
received to date.

A pipeline company must conduct a feasibility and cost study in order to
create a gathering system for interconnect with a commercial pipeline. The
closest and least expensive route to connect to the nearest pipeline is
from the southern most edge of the Edward Parsley farm directly south to
the Texas Gas Pipeline, a distance of 1.2 miles. Negotiations are now in
progress, with one or more pipeline gathering companies to conduct their
due diligence for laying a line to the leases on which we have established
gas production. The final negotiations are being completed.

The Operator has indicated there is 5,000,000 cubic feet per day for
pipeline production, which is currently available in the Texas Gas
Pipeline.  A contract has been signed by a private investor to build the
gathering system and the nitrogen removal plant, which has not been
funded. Holloman Corporation of Odessa, Texas may participate in some
portion of engineering and the pipeline portion of the project.

Three additional wells are planned to further develop the Park City Gas
Field.  No gas sales have been made during 2003, and, at this time, it is
not certain when gas sales will begin from the wells that have already
been drilled and completed.  More production testing and a gathering
system need to be in place to initiate gas sales. The timing of both of
these events is not certain at the present time.  Therefore, no definitive
tests of pressures and gas flow have been undertaken to establish future
cash flows and revenues.

The Company participates in the drilling and development of the Park City
Gas Field through the issuance of its common restricted stock.  Shares are
issued based on $1.00 per share for each dollar of budgeted for
expenditure on the wells. The Company has issued a total of 829,697 shares
of its restricted common stock for the acquisition of its 12.5% working
interest in the Park City Gas Field for its share of the drilling and
completion incurred following the acquisition.


ITEM 3. LEGAL PROCEEDINGS

The Company was not a party to any legal proceedings as of December 31,
2003. However, the Company plans to work with legal counsel in Australia
to undertake necessary litigation to perfect its title in an overriding
royalty interest in the Patchawarra Southwest Block of PEL 5 and PEL 6.
The overriding royalty interest was created in June 1971, and since that
time has been assigned to six different companies with the last assignee
being ACOR.  The Company has determined that due to the extensive time
elapsing between assignments and the failure of some intermediate
assignees to properly assign title, it will be necessary to engage in
litigation in order to collect past royalty payments of approximately
$36,081, and royalty payments in the future.  The expected cost of the
barrister's fees for ACOR's part will be approximately $15,750 in addition
to any stamp duty, which may be required, or other potential fees.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Not Applicable

                                    15



                            PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

  (a)     Market Information

The principal trading market for the common equity securities of the
Company is the National Association of Securities Dealers OTC Bulletin
Board quotation system.  The symbol is:  AUCAF.  The following are the
highs and lows for each quarter for fiscal year ended December 31, 2003
and 2002, respectively.  These quotations reflect inter-dealer prices,
without retail mark-up, mark- down or commissions, and may not represent
actual transactions.

                                2003                  2002
                          High      Low         High       Low
                         -----     -----       -----      -----
     1st Quarter         $0.25     $0.05       $3.00      $0.51
     2nd Quarter          0.60      0.05        1.01       0.21
     3rd Quarter          1.01      0.15        0.55       0.12
     4th Quarter          0.30      0.15        1.00       0.07

(b) Holders

The approximate number of securities holders of record of Australian-
Canadian Oil Royalties Ltd. on December 31, 2003 was 307.

  (c)     Dividends

The Company does not anticipate the payment of cash dividends in the
foreseeable future.  Payment of cash dividends is within the discretion of
the Company's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition
of the Company.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION

In 2004, the Company, along with other industry partners, is applying for
two offshore concessions being V03-3 and V03-4. As described in Part I,
the total value could gross $US2,000,000,000 when tested and fully
developed with $US500,000,000 for ACOR's quarter.

The applications for V03-3 and V03-4 are assigned for the following
interests:

     Holloman Corporation                         25%
     Australian-Canadian Oil Royalties Ltd.       25%
     Ely Sakhai, Individually                     25%
     Robert Thorpe, Individually                  25%

As mentioned, these applications are timely filed and are of great
interest to our Company.

                                    16

The Kentucky wells, 47 drilled to date, have gas and possible
consequentially oil. The 35 wells drilled through December 31, 2003 have,
according to Mr. Carl Davies, PE, 13,121 BCU in place; however, other
wells have been drilled with more prolific production in the northwest
portion of the field.

The Company expects revenues of approximately $US400,000 after the gas
plant is built and the gathering system is completed. This is based on a
current annual product price of $US5.50 per MCF.

These wells, when the plant and gathering system are completed, should
represent significant revenues and reserves for the Company.

Revenues for our Company will increase after payout of the plant and
gathering system the potential is greater then $400,000 as the plant
payout is $1.35/MCF until paid.

The gas charges are reduced to $0.74 with a 3% escalation per year for the
plant and gathering owners annually after payout.

Gas prices are dependent upon market prices, again, demand for natural gas
is increasing annually.


Liquidity and Capital Resources

The Company's Total Current Assets as of December 31, 2003 was $270,785
compared to $262,185 on December 31, 2002.  Total Current Liabilities as
of December 31, 2003 were $364,717 placing the Company's liquidity ratio
at 0.74.  A large portion of the $270,785 in current assets is $250,000 in
certificates of deposit which are restricted as to use.  Cash on hand as
of December 31, 2002 was $16,933 as compared to $8,622 on hand as of
December 31, 2003.

The Company plans to meet its operating expenditures from loans from two
of its principal shareholders, who have loaned to the Company as of
December 31, 2003 $109,050.  On January 20, 2004, the directors of the
Company resolved to retire this debt by issuing 606,112 restricted shares
of common stock at the current bid price, $0.18 per share.  The Company is
seeking exploration partners on its various oil and gas concessions
located in Australia.


Results of Operations

The Company's oil and gas revenues have remained approximately the same
for the past two years.  In 2003 the revenues were $7,626 compared to
$6,807 in 2002.  Other income for the Company includes interest earned in
2003 of $3,054 compared to $4,919 for 2002.  This decline in interest
income is attributable to a decline in interest rates.

The net loss for the year ended December 31, 2002 was $71,632 compared to
a net loss of $108,777 for the year ended December 31, 2003.  The $37,145
increase in loss incurred is directly related to the additional
expenditures in shareholder relations ($3,702), personnel costs ($32,503)
and professional fees ($4,243).  Total operating expenses were $105,855
for the year ended December 2003 compared to $69,420 for the previous

                                    17

year.  This increase in expenses is attributable to an increase in
personnel costs.

Management is optimistic about the drilling planned on its Australian
interests and the new applications planned for the year 2004.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). This statement
standardized the accounting for derivative instruments including certain
derivative instruments embedded in other contracts, requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement generally
provides for matching the timing of gain or loss recognition on the hedged
instrument with the recognition of (a) the changes in fair value of the
hedged assets or liabilities that are attributable to the hedged risk, or
(b) the earnings effect of the hedged transaction. The statement is
effective for all fiscal quarters of all fiscal years beginning after June
15, 1999, with earlier application encouraged, and shall be applied
retroactively to financial statements of prior periods. Adoption of SFAS
133 is expected to have no effect on the Company's financial statements.

Disclosure Regarding Forward-Looking Statements

The forward-looking statements in this Form 10-KSB reflect the Company's
current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ from those
anticipated.  In the Form 10-KSB, the words "anticipates," "believes,
"expects," "intends," "future" and similar expressions identify forward-
looking statements.  The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances
that may arise after the date hereof.  All subsequent written and oral
forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by this section.


ITEM 7. FINANCIAL STATEMENTS

The following financial statement information for Australian-Canadian Oil
Royalties Ltd., begins following the signature page of this form.  The
Index to the Financial Statements is on page F-1.

     Report of Independent Certified Public Accountants
     Balance Sheets
     Statement of Operations
     Statement of Stockholders' Equity
     Statement of Cash Flows
     Notes to Financial Statements


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None


                                    18

ITEM 8A.   CONTROLS AND PROCEDURES

(a)   Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our President and
Chief Financial Officer, we conducted an evaluation of the effectiveness
of the design and operations of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as of December 31, 2003.  Based on this evaluation, our President
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective such that the material information required to
be included in our Securities and Exchange Commission ("SEC") reports is
recorded, processed, summarized and reported within the time periods
specified in applicable SEC rules and forms relating to our reporting
obligations, and was made known to them by others within the Company,
particularly during the period when this report was being prepared.

(b) Changes in internal controls over financial reporting.

There was no change in our internal control over financial reporting
during the period covered by this report that has materially affected, or
is reasonably likely to materially affect our internal control over
financial reporting.


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors - The Board of Directors of the Company presently consists of
five members. Each director is elected at the annual meeting of
shareholders to hold office until the next annual meeting of shareholders
and until his successor has been elected and qualified.  The following
table sets forth information concerning the persons currently serving as
directors of the Company.

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company     as Director
  --------------------   ----  ----------------  -------------
  Larry Braun             60       Director            1997
  Kenneth W. Campbell     74       Director            1997
  Robert Kamon            76       Director &          1997
                                  Secretary
  William A. Randall      63       Director            1997
  Ely Sakhai              52       Director &          1997
                                  President

Executive Officers - Unless otherwise specified by the Board, all
executive officers are elected for a term of one year, commencing with the
date of the first meeting of the Board following the annual meeting of
shareholders, and serve until their successors are elected or appointed
and qualified, or until their respective death, resignation, removal or
disqualification. All of the Company's officers are executive officers.
The following table sets forth certain information with respect to the
persons currently serving as executive officers of the Company.


                                    19

                                                   Date First
                                 Position With      Elected
        Name              Age     the Company      as Officer
  --------------------   ----  ----------------  -------------
     Robert Kamon         76     Secretary and        1997
                                   Director
     Ely Sakhai           52     President and        1997
                                   Director

There are no family relationships between any of the officers or directors
of the Company.

Larry Braun, Director, is a business graduate of the University of Texas
at Austin, Texas. He is President and Owner of Cordoba Resources Ltd., a
private oil and gas company.

Kenneth W. Campbell, Director, is a graduate of the University of Brandon
(Manitoba, Canada).  He is President of Solar Energy Resources, Ltd., a
privately held independent Canadian oil and gas producer.

Robert Kamon, Director and Secretary, is a petroleum-engineering graduate
of the University of Texas at Austin, Texas.  Mr. Kamon has been President
of three NASDAQ listed companies.  He is currently the President of
several private companies - Australian Grazing and Pastoral Co. Pty. Ltd.
since 1954, International Oil Lease Service Corp. since 1961, and Tensleep
Oil and Production, Inc. since 1989.

William A. Randall, Director, is a graduate of the University of British
Columbia and has an LLB degree from the University of British Columbia.
He has been a practicing commercial attorney for the last thirty years,
and is currently an associate counsel in the Vancouver firm of McLachlan
Brown Anderson.

Ely Sakhai, Director and President, is a civil engineering graduate of
First New York City Community College in New York.  He has been engaged in
the art gallery business in New York City for the past seventeen years.


ITEM 10.  EXECUTIVE COMPENSATION

Value of the office space used by ACOR was $1,200* for 2003.

Value of the time cost by ACOR executives $ 1,200* for 2003.

*These have been recorded as expenses and contributed capital in the
financial statements in their respective periods.

The executive officers of ACOR have received no salary, bonus or stock
compensation since the organization of the Company.  The Company has no
bonus, pension, or profit sharing plans.  The Company pays for copies,
phone usage, travel expenses, and other labor to non-related parties.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of the common stock of the Company as of April 8, 2004 by each

                                    20

of the Company's officers and directors, each person who is known by the
Company to own beneficially more than 5% of the outstanding common stock
and all officers and directors of the Company as a group.  The title of
class is common stock, no par value.

                                             # of Shares
              Name and                      Beneficially    Percent of
         Address of Stockholder                Owned          Class
   ----------------------------------       ------------    ----------
   Tensleep Oil & Production, Inc.*            908,000        11.398%
   1304 Avenue L
   Cisco, Texas   76437

   Larry Braun                                     -0-        00.00%
   226 Lake Fraser Place, SE
   Calgary, Alberta, T2J 3T5
   Canada

   Ken Campbell                                150,000        01.883%
   307 Triune Bay
   Calgary, Alberta T1X 1G4
   Canada

   Robert Kamon**                            2,507,329        31.474%
   1304 Avenue L
   Cisco, Texas  76437

   William A. Randall                           20,000        00.251%
   2100-1075 W. Georgia St.
   Vancouver, British Columbia V6E 3G2
   Canada

   Ely Sakhai                                1,981,129        24.869%
   10 Windsor Dr.
   Old Westbury, New York   11568

   All officers and directors as a group     4,608,458        57.850%

   Jan Soleimani                               800,000        10.042%
   21 Windsor Dr.
   Old Westbury, New York   11568

   Robert Thorpe                               829,967        10.419%
   1811 Sullivan Lane
   Bardstown, KY 40004

   *Tensleep Oil & Production, Inc. (Tensleep) is controlled by Robert
    Kamon.  Robert Kamon owns 50% of the shares of Tensleep.

   **Robert Kamon's (1,172,329 shares), Tensleep's (908,000 shares),
     International Oil Lease Service Corp.'s (247,000 shares), and
     Australian Grazing & Pastoral Co., Pty. Ltd.'s (180,000 shares)
     holdings are all attributed to Robert Kamon for purposes of
     presenting his beneficial ownership percentage.  Robert Kamon is
     President of these companies.

Note: The stockholders identified in this table have sole voting and
investment power with respect to the shares beneficially owned by them.

                                    21

The owners have no rights to acquire additional shares through options,
warrants, rights, or conversion privileges within the next sixty days.
The present principal owners have not sold any of the original 4,000,000
shares since incorporation, except that International Oil Lease Service
Corp., an original shareholder, sold 592,000 shares on December 1, 1997,
to Robert Kamon, prior to the Company initiating its 504 Regulation D
issue. During 2001, Australian Grazing & Pastoral Co., Pty. Ltd. sold
their 1,008,000 shares to Tensleep Oil & Production, Inc.  During February
2002 Tensleep Oil & Production, Inc. sold 100,000 shares to a non-
affiliate of the Company.

Management is not aware of any current arrangements, which would result in
a change of control of the Company.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company and Ely Sakhai, currently President of ACOR, each own 50%
working interest in Areas PEL 108, PEL 109, and PEL 112 in Australia.  Ely
Sakhai acquired an equal 12.5% working interest in the Park City Gas Field
on the same basis as the Company acquired its 12.5 % interest.

Three of the directors of the Company, Robert Kamon, Ken Campbell and
Larry Braun, are active in the oil and gas industry personally.  The
activities of each could result in a conflict of interest between their
other oil and gas activities and those of the Company.

Robert Kamon is President of Tensleep Oil & Production, Inc.,
International Oil Lease Service Corp. (IOLS), and Australian Grazing &
Pastoral Co., Pty. Ltd. (AGP).  IOLS and AGP. are in the business of
applying for and acquiring oil and gas concessions in Australia;
therefore, activities may involve a conflict of interest with the Company.
During 2002, the Company issued 407,000 restricted shares of its common
stock to IOLS based on 28.6 cents per shares for the 1/20th of 1% of
8/8ths override.  In 2003, the Company issued 180,000 restricted shares to
AGP for a 0.003% ORRI interest in PEL 88.  See Item 2  "Description of
Property".

Tensleep is also in the business of oil and gas exploration and its
activities may involve a conflict of interest with the Company.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     Exhibit No.         Description
     -----------    ------------------------------------------------------

         31         * Certification of Chief Financial Officer pursuant to
                      Section 302 of the Sarbanes-Oxley Act of 2002.

        32.1        * Certification of Chief Executive Officer pursuant to
                      Section 906 of Sarbanes- Oxley Act

        32.2        * Certification of Chief Financial Officer pursuant to
                      Section 906 of Sarbanes-Oxley Act

     ----------------
     * Filed herewith.

                                    22



ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

As of the date of this Report, the Company has not appointed members to an
audit committee and, therefore, the respective role of an audit committee
has been conducted by the board of directors of the Company.  When
established, the audit committee's primary function will be to provide
advice with respect to the Company's financial matters and to assist the
board of Directors in fulfilling its oversight responsibilities regarding
finance, accounting, tax and legal compliance.  The audit committee's
primary duties and responsibilities will be to: (i) serve as an
independent and objective party to monitor the Company's financial
reporting process and internal control system; (ii) review and appraise
the audit efforts of the Company's independent accountant's; (iii)
evaluate the Company's quarterly financial performance as well as its
compliance with laws and regulations; (iv) oversee management's
establishment and enforcement of financial policies and business
practices; and (v) provide an open avenue of communication among the
independent accountants, management and the board of directors.

The firm of Robert Early & Company, P.C., served as the Company's
independent auditors for the years ended December 31, 2003 and 2002.  The
Board of Directors of the Company, in its discretion, may direct the
appointment of different public accountants at any time during the year,
if the Board believes that a change would be in the best interests of the
stockholders.  The Board of Directors has considered the audit fees,
audit-related fees, tax fees and other fees paid to the Company's
accountants, as disclosed below, and had determined that the payment of
such fees is compatible with maintaining the independence of the
accountants.

Audit and Audit-Related Fees:  The aggregate fees, including expenses,
billed by the Company's principal accountant in connection with the audit
of our consolidated financial statements for the most recent fiscal year
included in our Annual Report on Form 10-KSB; and for the review of our
financial information and our quarterly reports on Form 10-QSB during the
years ending December 31, 2003 and 2002 were $10,035 and $8,565,
respectively.  No other accounting related fees were incurred in 2003 and
2002.

Tax Fees:  The Company incurred fees of $220 and $340 for tax compliance
with the Company's principal accountant for 2003 and 2002, respectively.

All Other Fees:  The Company paid its principal accountant $2,300 and
$1,340 in 2003 and 2002, respectively, for the services  of converting its
SEC filings to and filing them in EDGAR format.


                                    23


                           SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                 AUSTRALIAN-CANADIAN OIL
                                 ROYALTIES LTD.

Dated:  April 14, 2004            /s/    Ely Sakhai
                                 --------------------------------
                                 Ely Sakhai, President & Director


Dated:  April 14, 2004            /s/    Robert Kamon
                                 --------------------------------
                                 Robert Kamon, Secretary & Director


Dated:  April 14, 2004            /s/    Ken Campbell
                                 --------------------------------
                                 Ken Campbell, Director


Dated:  April 14, 2004            /s/     Larry Braun
                                 --------------------------------
                                 Larry Braun, Director


Dated:  April 14, 2004            /s/    William A. Randall
                                 --------------------------------
                                 William A. Randall, Director



                                    24






                  Australian-Canadian Oil Royalties Ltd.




                      INDEX TO FINANCIAL STATEMENTS


                                                                     Page
                                                                     ----

  Report of Independent Certified Public Accountants  .  .  .  .  .   F-2

  Balance Sheets as of December 31, 2003 and 2002  .  .  .  .  .  .   F-3

  Statements of Operations and Comprehensive Income for
            December 31, 2003 and 2002 .  .  .  .  .  .  .  .  .  .   F-4

  Statement of Stockholders' Equity for the years ended
            December 31, 2003 and 2002 .  .  .  .  .  .  .  .  .  .   F-5

  Statements of Cash Flows for the years ended
            December 31, 2003 and 2002 .  .  .  .  .  .  .  .  .  .   F-7

  Notes to Financial Statements  .  .  .  .  .  .  .  .  .  .  .  .   F-8








                                    F-1

            REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Australian-Canadian Oil Royalties Ltd.
Cisco, Texas

We have audited the accompanying  balance sheets of Australian-Canadian
Oil Royalties Ltd. as of December 31, 2003 and 2002, and the related
statements of operations, stockholders' equity, and cash flows for the
years then ended.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing
the accounting principles  used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Australian-Canadian
Oil Royalties Ltd. as of December 31, 2003, and 2002, and the results of
its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 13 to the
financial statements, the Company currently has limited disposable cash
and its revenues are not sufficient to fund operations at historical
levels.  These facts raise substantial doubts about the Company's ability
to continue as a going concern.  Management's plans in regard to these
matters are also discussed in Note 13.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.



/s/ Robert Early & Company, P.C.
Robert Early & Company, P.C.
Abilene, Texas

March 28, 2004

                                   F-2

                  Australian-Canadian Oil Royalties Ltd.
                              Balance Sheets
                     As of December 31, 2003 and 2002


                                                      2003           2002
                                                   ----------     ----------
                              Assets
CURRENT ASSETS
  Cash                                             $   16,931     $    8,622
  Cash-restricted                                     250,000        250,000
  Accounts receivable                                   3,854          3,243
  Accrued interest receivable                              -              -
  Prepaid expenses                                         -             320
                                                   ----------     ----------
     Total Current Assets                             270,785        262,185
                                                   ----------     ----------
PROPERTY AND EQUIPMENT
  Oil and gas properties                              809,017        664,815
  Accumulated depletion                               (31,047)       (28,470)
                                                   ----------     ----------
     Net Property and Equipment                       777,970        636,345
                                                   ----------     ----------
OTHER ASSETS
  Investment in equity method investee                     54             54
                                                   ----------     ----------
TOTAL ASSETS                                       $1,048,809     $  898,584
                                                   ==========     ==========

                Liabilities & Stockholders' Equity

CURRENT LIABILITIES
  Accounts payable                                 $    3,029     $    4,887
  Accrued expenses                                      2,638             -
  Loans from officers                                 109,050             -
  Notes payable to bank                               250,000        250,000
                                                   ----------     ----------
    Total current liabilities                         364,717        254,887
                                                   ----------     ----------
STOCKHOLDERS' EQUITY
  Preferred stock no par (50,000,000 shares
    authorized, none outstanding)                          -              -
  Common stock, no par (50,000,000 shares
    authorized, 7,359,527 and 6,391,742 shares
    respectively outstanding)                       1,133,471        986,711
  Additional paid in capital                           29,700         27,300
  Accumulated deficit                                (478,797)      (370,020)
  Other comprehensive income:
    Foreign currency translation adjustment              (282)          (294)
                                                   ----------     ----------
      Total Stockholders' Equity                      684,092        643,697
                                                   ----------     ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $1,048,809     $  898,584
                                                   ==========     ==========



The accompanying notes are an integral part of these financial statements.
                                   F-3

                  Australian-Canadian Oil Royalties Ltd.
            Statements of Operations and Comprehensive Income
              For the years ended December 31, 2003 and 2002


                                                      2003           2002
                                                   ----------     ----------
OPERATING REVENUES
  Oil & gas revenues                               $    7,626     $    6,807

OPERATING EXPENSES
  Depletion and amortization                            2,897          2,033
  Production taxes                                        102             -
  Personnel costs                                      61,448         28,945
  Professional fees                                    16,499         12,256
  Adjustment for excess costs                           3,882          6,355
  Shareholder relations                                14,004         10,302
  Other                                                 7,023          9,529
                                                   ----------     ----------
    Total Operating Expenses                          105,855         69,420
                                                   ----------     ----------
(LOSS) FROM OPERATIONS                                (98,229)       (62,613)

OTHER INCOME
  Interest income                                       3,054          4,919
  Interest expense                                    (11,995)       (11,896)
                                                   ----------     ----------
(LOSS) BEFORE INCOME TAXES                           (107,170)       (69,590)

Australian income taxes                                 1,607          2,042
                                                   ----------     ----------
     NET LOSS                                        (108,777)       (71,632)

OTHER COMPREHENSIVE INCOME:
  Foreign currency translation adjustment                  12             -
                                                   ----------     ----------
     TOTAL COMPREHENSIVE LOSS                      $ (108,765)    $  (71,632)
                                                   ==========     ==========
Net loss per weighted average share outstanding    $    (0.02)    $    (0.01)
                                                   ==========     ==========
Weighted average shares outstanding                 6,800,333      5,422,556
                                                   ==========     ==========





The accompanying notes are an integral part of these financial statements.
                                   F-4

<TABLE>
                  Australian-Canadian Oil Royalties Ltd.
                    Statement of Stockholders' Equity
              For the years ended December 31, 2003 and 2002
<CAPTION>
                                                                             Accumulated
                                                     Additional Accumulated    Other
                                     Common Stock      Paid In   Earnings/   Comprehensive
                                   Shares    Amount    Capital   (Deficit)      Income       Total
                                 --------- ---------- ---------  ---------    ---------    ---------
<S>                              <C>       <C>        <C>        <C>          <C>          <C>
BALANCES, December 31, 2001      5,201,500 $  620,473 $  24,100  $(298,388)   $    (294)   $ 345,891

Stock issued for:
  Oil & gas properties             735,696    264,348        -          -            -       264,348
  Notes payable & interest         454,546    101,890        -          -            -       101,890
Additional contributed capital          -          -      3,200         -            -         3,200
Net loss                                -          -         -     (71,632)          -       (71,632)
Other comprehensive income:
  Foreign currency translation
    adjustment                          -          -         -          -            -            -
                                 --------- ---------- ---------  ---------    ---------    ---------

BALANCES, December 31, 2002      6,391,742    986,711    27,300   (370,020)        (294)     643,697

Stock issued for:
  Cash                             150,000     22,500        -          -            -        22,500
  Oil & gas properties             681,001     92,812        -          -            -        92,812
  Services                          63,917     31,448        -          -            -        31,448
Additional contributed capital          -          -      2,400         -            -         2,400
Net loss                                -          -         -    (108,777)          -      (108,777)
Other comprehensive income:
  Foreign currency translation
    adjustment                          -          -         -          -            12           12
                                 --------- -=-------- ---------  ---------    ---------    ---------

BALANCES, December 31, 2003      7,286,660 $1,133,471 $  29,700  $(478,797)   $    (282)   $ 684,092
                                 ========= ========== =========  =========    =========    =========





</TABLE>
The accompanying notes are an integral part of these financial statements.
                                   F-5

                  Australian-Canadian Oil Royalties Ltd.
                         Statements of Cash Flows
              For the years ended December 31, 2003 and 2002

                                                      2003           2002
                                                   ----------     ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                           $ (108,777)    $  (71,632)
Adjustments to reconcile net (loss) to net cash
  provided by operations:
  Depletion and amortization                            2,897          2,033
  Value of expenses contributed by officers             2,400          3,200
  Stock issued for services                            31,448             -
  Stock issued for interest                                -           1,890
  Adjustment for foreign currency translation              12             -
  Adjustment for excess costs                           3,882          6,355
Changes in:
  Receivables                                            (611)        (1,326)
  Prepaid expenses                                         -             905
  Accounts payable                                        780          3,287
                                                   ----------     ----------
NET CASH (USED) BY OPERATING ACTIVITIES               (67,969)       (55,288)
                                                   ----------     ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Oil & Gas Properties                                (55,272)       (23,150)
                                                   ----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Stock issued                                         22,500             -
  Proceeds from notes payable to officers             109,050         80,000
  Repayment of bank loans                            (250,000)      (250,000)
  Proceeds from bank notes                            250,000        250,000
                                                   ----------     ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES             131,550         80,000
                                                   ----------     ----------

  Increase/(Decrease) in cash for period                8,309          1,562

  Cash and cash equivalents, beginning of period        8,622          7,060
                                                   ----------     ----------
  Cash and cash equivalents, end of period         $   16,931     $    8,622
                                                   ==========     ==========

SUPPLEMENTAL DISCLOSURES:
  Cash payments for:
  Interest                                         $   9,357      $   10,005
  Australian income taxes                              2,274           1,333

  Noncash Investing and Financing Activities:
    Contributed expenses                               2,400           3,200
    Stock issued for services                         31,448              -
    Stock issued for oil & gas properties
      and drilling                                    92,812         264,348
    Stock issued for related party notes
      and interest                                        -          101,890



The accompanying notes are an integral part of these financial statements.
                                    F-6

                  Australian-Canadian Oil Royalties Ltd.
                      Notes to  Financial Statements
                        December 31, 2003 and 2002


NOTE 1:   DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Australian-Canadian Oil Royalties Ltd. (the Company) was incorporated
April 28, 1997 in Vancouver, British Columbia, Canada.  Its primary
business plan is the purchase of overriding royalty interests for long-
term passive income and capital gains, with sales of these interests as
deemed in the best interest of the Company. Current primary income sources
are royalties earned on overriding royalty interests held by the Company.
The Company also engages related entities and third parties for leasing
operations in various countries.  The primary producing properties held by
the Company are located in Australia's main onshore oil and gas producing
basin.

During 2002, the Company acquired a working interest in a gas field being
developed in Kentucky.  Through the end of 2003, the activity in this
field has consisted of drilling wells while working to identify a funding
for the construction of a gathering system and gas processing plant.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Foreign Currency Transactions

These financial statements are prepared in U.S. dollars for use in U.S.
securities filings.  However, the Company conducts transactions in
Canadian, Australian, and U.S. dollars.  Transactions denominated in
Canadian or Australian dollars are translated to equivalent U.S. dollars
for recording in the financial statements based on the currency exchange
rates existing at the dates of the transactions.  Ending balances of
accounts that are denominated in Canadian dollars are translated to U.S.
dollars based on the currency exchange rates existing at December 31.  The
exchange gains and losses that result from translating these amounts to
U.S. dollars are accumulated and reported as Other Comprehensive Income, a
separate component of the Company's stockholders' equity.

Property and Equipment

The Company follows the full cost method of accounting for oil and gas
producing activities and, accordingly, capitalizes all costs incurred in
the acquisition, exploration, and development of proved oil and gas
properties, including the costs of abandoned properties, dry holes,
geophysical costs, and annual rentals.  All general corporate costs are
expensed as incurred.  In general, sales or other dispositions of oil and
gas properties are accounted for as adjustments to capitalized costs with
no gain or loss recorded. Capitalized costs are recorded in cost centers
on a country-by-country basis.  Most of the Company's oil and gas
properties consist of overriding royalty interests that are located in
Australia.  The Company has not participated in the exploration and
development of proved oil and gas properties until 2002.  Capitalized
costs are subject to a "ceiling test," which basically limits such costs

                                   F-7

to the aggregate of the "estimated present value," discounted at a 10%
interest rate of future net revenues from proved reserves, based on
current economic and operating conditions, plus the lower of cost or fair
market value of unproved properties.  Costs in excess of the ceiling test
are adjusted against income.

Costs of the producing royalty interests acquired in 1997 are being
amortized over the estimated reserves reported by the Queensland,
Australia government at June 30, 1997; as revised by subsequent reports
for discoveries, changes in estimates, etc.; based on actual quantities
sold.  (These reports are generally released one year after the end of the
reporting period.)  Costs of non-producing interests are not being
amortized pending development or production and sale of oil or gas, but
they are assessed for impairment on an aggregate country-by-country basis.

Investments in Equity Method Investee

The Company's investment in 20% of the common stock of Cooper Basin Oil
and Gas, Inc. is carried at cost. CBOG had no activity during 2002 or
2003.

Intangible Assets and Amortization

Intangible assets consist of organization costs.  These costs, which were
incurred in the formation of the Company, were amortized over a period of
60 months on a straight-line basis.  Amortization totaled $132 for 2002.

Income Taxes

Deferred tax liabilities and assets result from temporary differences
between the financial statement and income tax bases of assets and
liabilities.  The Company records and adjusts any deferred tax asset
valuation based on judgment as to future realization of the deferred tax
benefits supported by demonstrated trends in the Company's operating
results.

As a Canadian corporation, the Company is liable for income taxes under
the laws of Canada.  Under Canadian law the Company's Canadian-source
income is subject to a 46% tax (denominated in Canadian dollars).
Operating losses can be carried forward for seven years.  The Company has
available at December 31, 2003, unused operating loss carry-forwards that
may be applied against future Canadian taxable income.  These expire as
presented below.  Because the timing of realization of the tax benefit
from these loss carry-forwards cannot be currently projected, a valuation
allowance has been established to completely offset this asset.

       Amount of Unused Operating    Expiring During Year Ended
           Loss Carryforward               December 31,
         -----------------------     --------------------------
              $     4,151                   2004
                   36,557                   2005
                   18,543                   2006
                   52,866                   2007
                  163,410                   2008
                   65,277                   2009
                  104,895                   2010
              -----------
              $   445,699
              ===========

                                   F-8

The difference between taxable income and net income for financial
reporting is the write-down of the oil and gas properties due to the
ceiling test that is not deductible for tax purposes.

The potential tax benefit from these operating loss carry forwards is
$205,022 and $156,770 in 2003 and 2002, respectively.  The Company has
recognized a valuation allowance against these deferred tax assets due the
inability to foresee when such benefits will be realized.

The Company has no net U.S. source income although during 2003 it has
begun to have income effectively connected with a U.S. trade or business.
As a result, it will begin to create U.S. tax liabilities or benefits
related to its activities.

The Company is subject to a 30% Australian income tax on Australian source
royalty income.  This tax is withheld by the payer.  The Company incurred
Australian income taxes on its oil and gas production totaling $1,607 and
$2,042 in 2003 and 2002, respectively.

Earnings Per Share

U.S. accounting rules provide for the calculation of "Basic" and "Diluted"
earnings per share.  Basic earnings per common share are computed by
dividing net income available to common stockholders by the weighted
average number of common shares outstanding for the period.  Diluted
earnings per common share reflects the potential dilution of securities
that could share in the earnings of the entity on an "as if converted"
basis.  This is computed by dividing net income available to common
shareholders, as adjusted if necessary, by the weighted average number of
common shares outstanding plus potentially dilutive securities.

Weighted average shares outstanding were 6,800,333 and 5,422,556 for 2003
and 2002, respectively.

Cash Flows

The Company considers cash and cash investments with an initial maturity
or marketability of three months or less to be cash equivalents for
purposes of presenting its Statement of Cash Flows.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.


NOTE 2:   RESTRICTED CASH

These financial statements report restricted cash.  This amount consists
of certificates of deposit that serve as collateral for the short-term
bank notes.  The Company's ability to use  these funds is restricted under
the terms of the collateral agreement.

                                   F-9

NOTE 3:   ACCOUNTS RECEIVABLE

At December 31, 2003 and 2002 the Company has accrued receivables for oil
and gas production from its Australian overriding royalty interests
totaling $1,686 and $3,243, respectively. Collection of the accrued
Australian production generally occurs during the quarter following the
quarter of production.

At December 31, 2003, the Company had a receivable of $2,166 for oil sold
from the  wells on the Kentucky leases.

The cost bases of the receivables are believed to approximate their fair
values.  No allowance for bad debts has been established because the
Company has not experienced any significant inability to collect its
receivables.


NOTE 4:   PREPAID EXPENSES

During 1997, the Company advanced $C5,000 to Dales, Matheson, Carr-Hilton,
Chartered Accountants of Vancouver, British Columbia for services rendered
in connection with the formation of the Company and the initial public
offering.  The excess of the advance over costs has been being used to pay
for services as they arise.  During 2003 and 2002,  fees of $US906 and
$US904 were billed.  Adjustments in the year-end balance occur with
fluctuations in the exchange rates.  During 2003, costs consumed the
balance.  The balance at December 31, 2002 was $US320.


NOTE 5:   OIL AND GAS PROPERTIES

During 1997, the Company acquired a package of overriding royalty
interests comprising 1,005,143 net royalty acres under 28,572,609 gross
surface acres in Australia's main onshore oil and gas producing basin in
exchange for 4,000,000 shares of its common stock.  In addition to the
acquisition cost, the Company incurred costs associated with preparation
of assignments and registering chain of title transactions in Australia.

During December 2000, the Company purchased all of the outstanding stock
of Cooper Eromanga Oil, Inc. (CEO).  Subsequently, the sole asset of CEO,
an interest in ATP 582, was assigned to the Company.  The interest
assigned represents 100% of the working interest in Queensland concession
582.  ATP 582 consists of 6,700,000 surface acres and will require minimum
annual exploration expenditures (which are yet to be determined) after an
agreement has been reached with the Aboriginal Tribes regarding ingress
and egress on the concession.  The Company acquired its interest in
exchange for paying certain legal costs and delay rentals totaling $3,373
and agreeing to assign a 2% of all production overriding royalty interest
to CEO's previous owner.  The out-of-pocket costs have been included in
capitalized oil and gas acquisition costs.  This concession is subject to
a total of 11 1/2% in assigned overriding royalty interests (including the
2% interest) in addition to the standard 10% royalty retained by the
Queensland government.  During 2002 and 2003, the Company paid $2,950 and
$2,400 in rental costs.

During September 2000, the Company was successful in applications for
three Australian oil and gas concessions in South Australia.  The Company

                                   F-10

submitted these applications on a 50/50 basis with its President, Ely
Sakhai.  The Company's portion of the minimum exploration commitments
under these three applications total $145,000 in year 1, $275,000 in year
2, and $1,450,000 in the third year. These concessions lie under 1,698,348
surface acres.  During 2003, the Australian government completed negations
with native Aborigines regarding surface damages.  In accordance with the
settlement reached, the Company was required to pay $32,500 into a fund
for the Aborigines and $14,335 in legal fees.

During 2001, the Company purchased a 0.05% overriding royalty interest
under permit VIC/P45 for $19,000. This is an offshore prospect that the
Company believes has high production potential.

During 2002, the Company paid a $20,750 leasing fee for the successful
application for South Australian areas. Additionally, 407,000 shares were
issued to International Oil Lease Service (IOLS) (See related party
discussion.) for a 0.05% interest in Permit 53.  This acquisition was
valued at $100,000 based on cash sales of comparable interests by IOLS.

In the U.S., the Company has entered into an operating agreement with
regard to the Park City Gas Field in Kentucky.  In 2002, the Company
purchased a 12.5% working interest in this field and has been paying for
its share of drilling costs with stock.  The Company's President has
acquired an equal position in this field. Significant drilling has taken
place, with 35 wells drilled on the property through December 31, 2003.
The operator expects to drill a total of 50 wells during the development
of this field.  The Company has the ability to terminate its participation
in undrilled wells at any time.  Geological analysis has indicated that
the completed wells have identified producible zones with significant
potential.  However, production tests have not been completed and a
gathering system has not been constructed.  The gas tested to contain high
levels of nitrogen. A gas plant will have to be constructed to remove
excess nitrogen from the gas before it can be sold.  The lack of
facilities has precluded marketable production.  As a result, estimating
the timing and quantities of producible gas is solely a volumetric
calculation based on assumed porosities and zone sizes.  Minimal tests on
fifteen wells have been performed to validate the wells and the
feasibility of a gas processing plant.

Below is a summary of capitalized costs related to oil and gas properties:

                                             2003                 2002
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------   --------   --------
Acquisition cost                     $538,059   $235,647   $511,059   $164,348
Assignments, transfers, and rentals    68,411         -      18,626         -
Less allowance for excess costs       (33,100)        -     (29,218)        -
                                     ---------  --------   --------   --------
    Total                             573,370    235,647    500,467    164,348
Less accumulated depletion            (31,047)        -     (28,470)        -
                                     ---------  --------   --------   --------
    Net Oil and Gas Properties       $542,323   $235,647   $471,997   $164,348
                                     =========  ========   ========   ========

The costs of producing properties are being amortized over reserve
estimates reported by the Queensland, Australia government for June 30,
1997, as adjusted for subsequently reported information, based on

                                   F-11

quantities produced.  These producing properties are ATP 267, ATP 299, and
ATP 543.  Other interests have not produced saleable oil or gas from which
the Company has received revenues.  The costs associated with these
properties are not being amortized pending determination of reserve
quantities and commencement of production. Depletion expense totaled
$2,577 and $1,901 for 2003 and 2002.

Additionally, these costs are subjected to a "ceiling" test based on
reported reserves.  It has been determined that book values exceed the
ceiling test at December 31, 2003 and 2002.  Adjustments to reduce the
carrying values according to the ceiling test were $3,882 in 2003 and
$6,355 in 2002.


NOTE 6:   NOTES PAYABLE

During the last quarter of 2001, the Company borrowed a total of $20,000
from its President and Secretary. These funds were used to meet operating
obligations incurred by the Company.  This series of four $5,000 notes
bore interest at 4.5% and each note was due one year from its date of
origination.  During 2002, the Company borrowed another $80,000 from its
President and Secretary under notes that also bore interest at 4.5%.  In
November 2002, the Company issued 454,546 shares of stock to retire all of
these notes plus accrued interest of $1,890.

During 2003, the Company borrowed $109,050 from its President and
Secretary on 12-month notes bearing interest at 4.5%.  These notes have
maturity dates that vary with the origination date of the notes.  Interest
of $1,968 has accrued on these notes at December 31, 2003.  These notes
have been retired in 2004 through the issuance of 606,112 shares of stock.

The Company has outstanding loans of $250,000 from the First National Bank
of Cisco.  These notes are six month notes and have been renewed in April
and December each year since 2001.  The balances outstanding at December
31, 2003, bear interest at 3% and are due March 31, 2004.  These notes are
secured by the certificates of deposit shown as restricted cash on the
balance sheet.  Total interest incurred on these bank notes during 2003
and 2002 was $9,358 and $10,005.


NOTE 7:   TRANSACTIONS WITH RELATED PARTIES

An officer provided office space and services with no cash cost by the
Company.  These contributed costs had estimated unpaid values of $2,400
and $3,200 during 2003 and 2002.  These amounts have been recorded as
operating expenses and as additional paid-in capital in their respective
years.

During 2002 and 2003, the Company reimbursed commonly-controlled entities
for personnel and office expenses totaling $21,680 and $12,674,
respectively.  These entities, Tensleep Oil and Production Inc. and
Secretarial Services, Inc., are within the control of the Company's
Secretary.

As discussed at Note 6, the Company borrowed $109,050 and $100,000 from
two of its officers during 2003 and 2002 in order to fund administrative
costs and efforts to promote the Company's name and availability.  As
discussed in Note 6, the first $100,000 borrowed was repaid through the
issuance of 456,546 new shares by the Company during 2002.

                                   F-12

In December 2002, the Company acquired a 0.05% interest in Australian
Permit 53 from IOLS in exchange for the issuance of 128,000 shares of
stock.  IOLS is an entity within the control of the Company's Secretary.

In 2003, the Company acquired a 0.003% interest in PEL 88 from Australian
Grazing and Pastoral Co., Pty. Ltd. (AGP) for 180,000 shares of restricted
stock.  AGP is an entity within the control of the Company's Secretary.


NOTE 8:   FOREIGN OPERATIONS

As noted above, the Company was incorporated in Canada.  Additionally, the
Company operates primarily in Australia where, at present, all of its
producing properties are located.  Approximately 70% of all operating
revenues reported by the Company during 2003 and 2002 were received from
Australian oil and gas royalty interests.  Depletion expense and
Australian income taxes reported by the Company during 2003 and 2002 are
also related to the revenue received from the Australian royalties.
Australian revenues were $5,355.

Oil was produced and sold from the property in Kentucky during 2003.
However, this is a limited production amount and was an unexpected benefit
of the gas well drilling program.  These revenues totaled $2,270.

The Company also incurred personnel and office expenses in the United
States.  All of the U.S. costs and expenses were general and
administrative in nature.


NOTE 9:   INVESTMENT IN EQUITY METHOD INVESTEE

In 1999, the Company contributed $2,100 of the creation capital of Cooper
Basin Oil & Gas, Inc. (CBOG) for a 20% ownership interest.  CBOG was
created to pursue Australian oil and gas concessions.  As the owner of a
20% interest in CBOG, the Company has agreed that it will fund 20% of new
concession costs or forfeit its ownership interest.  There was no activity
in this entity during 2003 and the Company has no current commitments with
CBOG.


NOTE 10:   STOCK TRANSACTIONS

During July 2002, the Company issued 250,000 shares for the acquisition of
its interest in the Park City Gas Field in Kentucky discussed above.
During 2002, 78,696 shares were issued for drilling costs incurred in that
field.  During 2003, another 501,001 shares were issued which were to pay
the Company's portion of the costs to complete the drilling program.

As discussed at Notes 6 and 7, during 2002, the Company issued 454,546
shares to its President and Secretary as repayment for loans to the
Company.  Also, an 0.05% overriding royalty interest in Permit 53 was
acquired through the issuance of 407,000 shares to IOLS.

During 2003, besides the shares issued for the Kentucky project discussed
above, the Company has issued 180,000 shares to Australian Grazing &
Pastoral Co., Pty. Ltd. (See discussion of related party transactions
above.) for a 0.003% overriding royalty interest in PEL 88.  Directors

                                   F-13

were allowed to purchase 150,000 restricted shares for $22,500.  A
consultant was issued 136,784 shares for services rendered to the Company
during 2002 and 2003.


NOTE 11:   CONTINGENCY

The original package of Australian overriding royalty interests acquired
by the Company in 1997 included a 1/8 of 1% interest in all production
from the Patchawarra Southwest Block of PEL's 5 & 6.  This overriding
royalty comprises approximately 5,348 net royalty acres under 1,069,717
surface acres.  The Patchawarra Southwest Block became productive in June
1989 and has produced approximately $A67,119,716 in revenues from oil, gas
and LPG since that time.  This overriding royalty was first created in
June 1971 as a 1/4 of 1% interest out of a 10% working interest.   Since
that time, this interest has been assigned to six different companies with
the last assignee being Australian-Canadian Oil Royalties Ltd.  During
1997, the Company determined that, due to the extensive time elapsing
between assignments and the failure of some intermediate assignees to
properly assign title, it will be necessary to engage in litigation in
order to collect both past and future royalty payments. In addition to the
legal costs incurred in this litigation, the Company will be required to
pay any unpaid stamp duty, charged by the Australian government, for any
previously unrecorded assignment.

The Company is working with legal counsel in Australia to undertake the
necessary litigation to perfect its title in this royalty interest.  As of
December 31, 2003, no litigation has been undertaken.  Legal counsel has
advised the Company that the expected cost of the litigation process will
be in a range around $A25,000 plus any stamp duty (transfer tax) that may
be required.  The required stamp duty will be based on the state's
determination of value and will be required to be paid for each
unregistered transfer in the chain of title.  At this time no estimate of
this cost can be made.  Upon successfully clearing title to the property,
the Company expects to collect approximately $A42,000 in royalties on
previous production.


NOTE 12:   CONCENTRATION OF RISK

The producing oil and gas assets of the Company are primarily located in
Australia.  These continue to be the primary source of operating revenues
for the Company.

Accounts at the bank are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000 per depositor.  Combined balances at
December 31, 2003 at the Company's primary bank exceeded federally insured
limits by $116,931.


NOTE 13:   GOING CONCERN CONSIDERATIONS

As of December 31, 2003, the Company has limited disposable cash and its
revenues are not sufficient to cover operating expenses and expansion by
the Company.  These factors raise substantial doubt as to the ability of
the Company to continue as a going concern.  Management's plans include
attempting to find a drilling company to farm out the working interest it

                                   F-14

holds in Australia, raising funds from the public through a stock
offering, and attempting to acquire additional producing interests in
exchange for stock.  Management intends to make every effort to identify
and develop sources of funds.  There is no assurance that Management's
plans will be successful.  The Company is effectively debt free (due to
the certificates of deposit offsetting notes payable) and could continue
to operate at subsistence levels pending development of funding sources.


NOTE 14:   SUBSEQUENT EVENTS

In January 2004, the Company has issued 606,112 shares to its two lending
officers to retire their loans plus accrued interest.


NOTE 15:   SUPPLEMENTARY DATA - RESERVES OF OIL AND GAS  (UNAUDITED)

The following schedules set out available information about the Company's
oil and gas activities at December 31, 2003 and 2002 and for the years
then ended.

            Reserves of oil and gas - Royalty Interests

The current quantities of proved reserves of oil and gas relating to
royalty interests are not presented because the necessary information is
not available or the Company's interests are not large enough to
economically and reasonably obtain this information.  The Company's share
of oil and gas produced from the producing interests is presented in the
following schedule.  No estimates of reserves have been reported to or
filed with any Federal authority or agency during the year presented.  All
of these royalty interests are in Australia.  The gas wells on ATP 543
were shut in for all of 2002.

                                           Gas (mcf)        Oil (bbls)
                                         2003     2002     2003    2002
                                        ------   ------   ------  ------
Reserves reported by the Queensland
  government as of June 30, 1997            -        -     3,962   3,962
Additions or adjustments after 1997     15,272   15,272       -       -
Discoveries                                 -        -        -       -
Cumulative previous production          (4,232)  (4,232)  (2,650) (2,287)
Current year production                     -        -      (255)   (363)
                                        ------   ------   ------  ------
Unrecovered reserves                    11,040   11,040    1,057   1,312
                                        ======   ======   ======  ======





                                   F-15

            Results of Operations for Producing Activities (1)
              For the Years Ended December 31, 2003 and 2002

                                             2003                 2002
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Sales of oil and gas                 $   5,355  $  2,270  $   6,807  $      -

Production costs (including taxes)          -         -          -          -
Acquisition, exploration, development   76,785    71,299    123,150    164,348
Depletion                                2,577        -       1,901         -
                                     ---------  --------  ---------  ---------
Results of operations from producing
  activities (excluding corporate
  overhead)                          $ (74,007) $(69,029) $(118,244) $(164,348)
                                     =========  ========  =========  =========

All sales were to unaffiliated entities.  Amortization of Australian costs
were $10.11 per equivalent barrel for 2003 and 2002.  No amortization
costs were charged against U.S. revenues as oil sales were an unexpected
event.

    Capitalized Costs Relating to Oil and Gas Producing Activities (1)
                      At December 31, 2003 and 2002

                                             2003                 2002
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Unproved properties (not
    being amortized)                 $ 482,898  $235,647  $ 406,113  $ 164,348
Proved properties (being amortized)    123,572        -     123,572         -
Capitalized pre-acquisition costs           -         -          -          -
                                     ---------  --------  ---------  ---------
   Total Capitalized Costs             606,470   235,647    529,685    164,348

Allowance for excess costs             (33,100)       -     (29,218)        -
Accumulated depletion                  (31,047)       -     (28,470)        -
                                     ---------  --------  ---------  ---------
   Net Capitalized Costs             $ 542,323  $235,647  $ 471,997  $ 164,348
                                     =========  ========  =========  =========

                  Costs Incurred in Oil and Gas Property
               Acquisition, Exploration and Development (1)
              For the Years Ended December 31, 2003 and 2002

                                             2003                 2002
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Property acquisition costs:
   Proved                            $      -   $     -   $      -   $ 125,000
   Unproved                             76,785        -     123,150         -
   Exploration costs                        -         -          -          -
   Development costs                        -     71,299         -      39,348
                                     ---------  --------  ---------  ---------
Total                                $  76,785  $ 71,299  $ 123,150  $ 164,348
                                     =========  ========  =========  =========

                                   F-16

  (1)  As mentioned at Note 5, the Company has acquired a working interest
in the Park City Gas Field in the U.S. that is being drilled but is not in
production.  The operator's petroleum engineer has done an estimated
calculation of gas in place.  However, reserve information (and value) for
this property is highly subjective at the time of preparation of these
financial statements because the field has opened a previously unexplored
area in Kentucky and there has been no way to predict production rates or
decline curves.  Producible reserves are relatively shallow and there has
not been a substantive test of the production rates and rate of decline of
the estimated reserves.  Because of these facts, a reliable estimate of
the timing of production and future cash flows has not been determined.
Since reliable information is not available at the time of preparation of
these financial statements, the Company has not presented disclosures of
reserve information normally required for working interests for this
property based on information that management believes could prove to be
unreliable or unsupportable.





                                   F-17