UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 20549

                                FORM 10-KSB

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

                For the fiscal year ended December 31, 2004

                      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:  $ 26,272

State the aggregate market value of the voting stock held by non- affiliates
of the Registrant:  As of March 30, 2005 the Company's stock price was $1.60
bid and $3.00 ask per share.

         Common stock 2,075,284 shares, $6,225,852 Market Value

On March 30, 2005, the Issuer had 10,484,944 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 Company has continued to be active in working interests and royalty
opportunities both domestically and internationally. As necessary, the
Company's President has been active in determining the Company's financial
requirements due to his substantial financial position. The business of ACOR
during 2004 was to make a study of available oil and gas development acreage
in Australia and select and apply for exploration permits on the areas which
demonstrate a high probability of success with the maximum rate of return
for dollars invested.

The Company was organized to engage in the oil and gas industry through the
purchasing, holding and selling of producing and non-producing oil and gas
royalty interests in Australia, Canada and the United States. Since its
organization, principal assets in Australia consist of overriding royalty
interests (ORRIs) under 15,293,450 gross surface acres and interests in
8,900,776 gross acres of working interests.  These are located in Australia
onshore in the Cooper/Eromanga Basin and offshore in the Gippsland Basin in
the Bass Strait.  ACOR has acquired ORRIs under fifteen concessions.
Production has been discovered on five of the properties where ACOR holds
ORRIs. The Company is currently receiving revenues from three of the ORRIs,
Authorities to Prospect 299, 267 and 560. Total gross revenues received from
ATP 299, ATP 267, and ATP 560 for the 2004 were $17,332.

In April 2004, Cooper Energy NL, the operator drilled the Acacia Grove well
on PEL 100, in which ACOR has a 2% Working Interest (carried on the first
well).  No commercial hydrocarbons were discovered and the well was plugged
and abandoned.

On PEL 88, Cooper Energy shot seismic and has future drilling plans
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 applied, along with Holloman Corporation, Ely Sakhai
(individually) and Robert Thorpe (individually) as partners (25% each), for
two Australian concessions in the Bass Strait off Victoria in March 2004:
V03-3 and V03-4.  In November 2004, this group was awarded V03-4 which is
now called VIC/P60.  ACOR holds a 1/4 interest in this concession and
Holloman is the operator.

VIC/P60 is located in a world-class petroleum province with remaining
reserves estimated at 600 million barrels of oil and 5 trillion cubic feet
of gas.  This concession consists of approximately 339,769 acres (1,375
square kilometers). One well was drilled off-structure.  However, the
northeast corner of the area has significant fault structures that have not
been drilled. The Australian government has identified four significant

                                   2

structures on this lease.  The permit has a large undrilled anticline with
400 feet of seismic closure. The anticline is an upper Latrobe prospect. The
Halibut and Kingfish Oil Fields were completed in the upper Latrobe of
Tertiary Age.  The area is in deep water.  A deep water drilling rig has
been moved in from Norway to drill wells west along the Coast.

ACOR has paid its portion of the application fees and seismic costs for each
concession, being $12,500 per application, to Australian Grazing & Pastoral
Co., Pty. Ltd. (the leasing agent). (See Item 12 - Certain Relationships and
Related Transactions for additional information.)  The Company also paid an
additional $12,500 for each successful application and is responsible for
its share of the minimum development expenditure commitments set out in the
applications.

Both ACOR and Sakhai have paid their portion of the first year's seismic
work on this concession to Holloman.  Mr. Roy Whiting, an expert
geophysicist, is now working full time on the reinterpretation of seismic
data. ACOR purchased the KINGDOM Seismic Program at a cost of approximately
$20,000 for 2D and 3D seismic reinterpretation and delivered it to Mr.
Whiting to use specifically for VIC/P60.

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 minimum financial
requirements for exploration and drilling activities.

In March 2001, the Company purchased a 1/20 of 1% overriding royalty
interest under the 214,000-acre VIC/P45.  The Company understands that the
operator plans to drill the Anemone Southeast Structure, which has good
four-way closure.  This structure has not been tested, but, in a government
report, is estimated to contain 30 million barrels of oil and 55 billion
cubic feet of gas.  The IMI Report, by an independent group of engineers,
showed estimated total field potential at 350 million barrels of
oil/condensate and 4 billion cubic feet of gas.  The government report, VIMP
61, recommended the Anemone as the best structure for testing.  The Company
understands drilling should take place in 2005. One test well, the Megamouth
#1, was not on structure and resulted in a dry hole.  However, 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 1.5 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 million barrels per well drilled.  The permeabilities in
the pay section range between 5,000 millidarcies and 40,000 millidarcies,
which is extremely high.

BHP Billiton Ltd. (Australia's largest public company) was the original
operator on VIC/P45.  They conducted a 3D seismic survey over the entire
area at a cost of approximately $10 million.  BHP has assigned part of its
interest to Exoil Limited Oil Exploration Australia and Moby Oil & Gas Ltd.
Exoil became the operator of the concession.

Based on present seismic mapping, there are 14 structures on VIC/P45.  This
includes one proven oil and gas field with 11 pays spread over a total of

                                   3

1,000 feet of pay section.  There is also a second field with one gas pay
section.  Development wells will need to be drilled to bring these fields
into commercial 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 per day.

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

"The Kingfish Southeast Prospect is the largest structural play in VIC/P45.
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 share a common primary
trend. The fault structure through the middle of the Kingfish Field extends
into the Kingfish Southeast Structure on VIC/P45.

In December 2002, the Company purchased an overriding royalty interest of
1/20 of 1% of 8/8ths in VIC/P53 from International Oil Lease Service Corp.
(IOLS) (See Item 12 - Certain Relationships and Related Transactions for
additional information.).  This concession covers 182,858 acres, 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.

VIC/P53 is a complex block but, given its location, is inherently
prospective, provided depth conversion complexities can be addressed using
new 3D seismic data. Importantly, there has not been a well drilled within
the area of VIC/P53 during the last 20 years. A 547 sq. km 3D seismic survey
has been shot in the block and surveys have been shot in adjacent acreage
which peripherally covered the edges of VIC/P53. Over this dormant period,
technology and the ability to deal with the complexities of depth conversion
have improved dramatically. This aspect, when taken with strategic
geological location of VIC/P53, argues well for the development of top and
intra Latrobe plays, once a high resolution 3D seismic survey has been
undertaken.  Cue Energy is the operator of the permit.

ACOR owns 7,568,588 net 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 concessions
with indications of very large anticlines and seismic highs.  These holdings
are located within the states of Queensland and South Australia.  An
additional 84,942 net working interest acres are owned in Victoria offshore
in the Gippsland Basin in the Bass Strait.  The Company also holds 501,001
net royalty acres under 15,293,450 gross surface acres.  (See the tables at
Item 2.  Description of Property.)

In 2002, the Company acquired a 12.5% working interest in a gas play in an
area known as the Park City Gas Field located in Edmonson County, Kentucky.
The gas discovered contains an average of 14% to16% nitrogen. This level
means that a gas plant is required to extract the nitrogen to meet pipeline
specifications.  Funding of the gas plant was arranged, however, the terms
of the funding were not acceptable to two of the larger working interest

                                   4

holders. Alternate funding sources are being sought for building the gas
plant.  See additional discussion regarding this investment at Note 6 to the
financial statements.

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.  ACOR's management
draws no cash salary and ACOR has no long-term debt.

(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 2004 was $US40.05.

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 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 the lease 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 obtain 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%.


                                   5

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 net 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 and is pursing title on ATP 582.

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 plus a 1% overriding royalty.  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

                                   6

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, Queensland or Victoria.   All of the
Company's foreign royalty income currently comes from oil and gas properties
located in Queensland.

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 the natives are completed.  When negotiations
over the release areas discussed below are completed, exploration and
development on the related areas will commence.

South Australia:

The Native Title issue in South Australia was resolved during the first
quarter of 2003.  The successful negotiations, between industry, government,
and a number of the native tribes of Australia, covered areas leased under
the Primary Industries and Resources, South Australia (PIRSA)
Cooper-Eromanga Basins Exploration Opportunities Acreage Releases. The
success of these negotiations was paramount in the completion of all future
negotiations within South Australia.  Since these negations have been
completed, exploration can now commence.

Queensland:

In Queensland, the Company is paying annual rentals, but access for
exploration is blocked on ATP 582 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.

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 March 31, 2005 was $1.00 Australian = $0.771 United States.

Personnel

On November 3, 2003, the Company hired a full time employee, Mr. James L.
Lemmon.  Mr. Lemmon has completed his one year contract and is no longer

                                   7

employed by ACOR.  The Company employs two people who serve the Company as
needed on a part-time basis, and an outside consultant.

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 January 27, 2004, 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

                                   8

payments calculated as a percentage of either gross production or the gross
revenues of the working interest (based on the wellhead price) from 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 that 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
his portion of the costs of exploration and operation and is entitled to the
gross production minus royalties retained by the grantor or lessor and 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

              NEWLY ACQUIRED OVERRIDING ROYALTY INTERESTS

                                              Percentage
                                               of 1% of      Net
                                      Gross     Gross      Royalty
 Area     Concession Holder           Acres   Production     Acres   Blocks
-------  ------------------------- ---------- ----------  ---------  ------
Bass Strait
VIC/P53   Cue Petroleum               182,858         5%        731      11
VIC/P54   Apache Energy Ltd.          155,676         5%        623      11

Cooper-Eromanga
PEL 86    Victoria Petroleum        1,066,000        10%      8,528      56
PEL 87    Victoria Petroleum        1,066,000        10%      8,528      56
PEL 88    Cooper Energy             1,230,000        30%     29,520      64
PEL 89    Victoria Petroleum        1,208,000        10%      9,664      66
PEL 111   Victoria Petroleum          292,819        10%      2,343      56
PEL 115   Victoria Petroleum          273,297        10%      2,186      56
                                    ---------                ------
      TOTAL:                        5,474,650                62,123
                                    =========                ======

                                   9

                       WORKING INTEREST HOLDINGS

              Concession          Gross     Percentage of     Net
   Area         Holder            Acres   Working Interest  WI Acres  Blocks
-------  --------------------- ---------- ---------------- ---------  ------
ATP 582  Cooper-Eromanga Oil    6,716,000       100%       6,716,000     365
PEL 100  Cooper Energy            145,659         2%           2,913       8
PEL 108  ACOR/Sakhai              506,811        50%*        253,406      28
PEL 109  ACOR/Sakhai              373,633        50%*        186,817      20
PEL 112  ACOR/Sakhai              818,904        50%*        409,452      45
VIC/P60  ACOR/Sakahi/
          Holloman/Thorpe         339,769        25%          84,942      24
                                ---------                  ---------
           TOTAL                8,900,776                  7,653,530
                                =========                  =========

*ACOR has the option to purchase the other 50% W.I. from ACOR's
President for 400,000 shares.

               NON-PRODUCING OVERRIDING ROYALTY INTERESTS

                                              Percentage
                                               of 1% of      Net
                                      Gross     Gross      Royalty
 Area     Concession Holder           Acres   Production     Acres   Blocks
-------  ------------------------- ---------- ----------  ---------  ------
538      Dyad Australia, Inc.         478,400     3.80%       1,454      26
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  Exoil                        214,000     5.00%         856      12
                                    ---------               -------
           TOTAL                    7,555,600               402,078
                                    =========               =======

                 PRODUCING OVERRIDING ROYALTY INTERESTS

                                                  Percentage
                                                   of 1% of     Net
  Area and                               Gross      Gross     Royalty
No. Of Wells      Concession Holder      Acres   Production    Acres   Blocks
-------------  ----------------------- ---------  ----------  -------  ------
267 -
   21 Wells       Santos                220,800     17.15%      3,029    12
299 -
  65 Wells        Santos                441,600      5.75%      2,031    24
543 -             Vernon E. Faulconer
  1 Well             Australia, Inc.    956,800     25.00%     19,136    52
560 -             First Sourceenergy
  3 Wells            Group Inc.         625,600     25.00%     12,512    34
Patchawarra SW    Santos                 18,400      6.25%         92     1
                                      ---------                ------
      TOTAL                           2,263,200                36,800
                                      =========                ======

The total acreage under which ACOR holds ORRIs in Queensland, South
Australia, and Victoria is 501,001 net royalty acres under 15,293,450 gross
surface acres.

                                   10

ACOR holds ORRIs under fifteen concessions covering 14,740,916 surface acres
in the Eromanga and Cooper Basins.  Production has been discovered on four
of these concessions. The Eromanga Basin encompasses the southwestern
portion of Queensland and the northeast corner of South Australia.  It 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 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 estimated reserves
in excess of 1,056,000,000 barrels of oil equivalent and is making
approximately $A930 million worth of oil, gas and associated hydrocarbons
per year (equivalent to about $771 million per year in U. S. dollars).

Under the 15,293,450 gross surface acres where ACOR holds ORRIs, there are
giant anticlines, large faults and hundreds of seismic highs, all of which
indicate potential for 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 three of its overriding royalty
interests - ATP 267, ATP 299, and ATP 560. 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.  However, the pipeline reduced the price it
was willing to pay for the gas and the well was shut in.

Cooper/Eromanga Basin, South Australia - New Override Acquisition:

In July 2004, ACOR purchased 1/10 of 1% overriding royalty interests (ORRI)
under PEL 111 & PEL 115 from IOLS. (See Item 12 - Certain Relationships and
Related Transactions for additional information.) These concessions, located
in South Australia in the prolific Cooper/Eromanga Basin, are part of a
giant area that was held for almost 40 years by Santos/Exxon.  PEL 115
consists of 1,106 sq. km that surround the major Toolachee, Dullangari and
the Della gas fields with cumulative estimated recoverable reserves of 1.4
trillion cubic feet of gas and 31 million barrels of oil. Some 31 oil and
gas prospects and leads have been defined using 2D and 3D seismic within PEL
115.  All areas of the PEL 115 permit have good access to existing oil and
gas pipelines and production infrastructure.  Four wells, including the
Almonta Prospect, were drilled on PEL 115 during 2004, resulting in two
discoveries:  the Mirage and Ventura wells are reported to be capable of
producing approximately 500 barrels per day.

Impress Ventures NL, a working interest partner in PEL 111 and PEL 115,
states the following:

"The Hornet Prospect, a robust 3D controlled feature in the center of Permit
115, 8 km to the Northeast of the giant Toolachee gas field with reserves
estimated at 1 trillion cubic feet of gas. The Hornet Prospect has
significant upside gas reserves potential if the stratigraphic component of
the target Permian Patchawarra Formation traps hydrocarbons.  The upside
recoverable gas potential is in excess of 25 billion cubic feet (BCF) while
the four-way closure has potential for 11 BCF.  The next well to be drilled
immediately following the Hornet well is expected to be the Ventura
Prospect, a large four-way closed feature to the Southwest of the
Narcoonowie oil field with a potential to hold recoverable reserves of up to
nine million barrels of oil and 58 billion cubic feet of gas.

                                   11

In November 2004, Victoria Petroleum spudded the Canberra-1A located under
PEL 115. The Canberra-1A will test the Canberra Prospect which is
interpreted to have potential within Permian sands to contain up to 161 BCF
of gas and 4 million barrels of oil, if oil and gas are present.

Drilling is expecting to commence in October 2005 on PEL 111 with the
Catalina Prospect located 8 km northeast of the Fly Lake oil & gas field.
The Catalina Prospect is a low risk closed feature with the potential to
contain recoverable reserves of 25 BCF of gas and four million barrels of
oil."

The Company issued 333,333 restricted shares of its common stock to IOLS
based on 18 cents per share for the 1/10 of 1% of 8/8ths overrides in PEL
111 & 115.  (See Item 12 - Certain Relationships and Related Transactions
for additional information.)

Bass Strait, Australia - New Override Acquisition:

In July 2004, ACOR purchased a 1/20 of 1% ORRI under VIC/P54 located in the
prolific offshore Gippsland basin of Victoria.  The operator is Apache
Energy Ltd.  Apache is a well-known operator in offshore Western Australia,
operating approximately 143 offshore wells in the past 5 years.  This has
been Apache's first move into the Gippsland Basin and VIC/P54 was Apache's
first choice.  Nexus Energy Ltd. has farmed out a 62.5% interest in VIC/P54
to Apache.  Apache has funded 94% of the costs to undertake a two well
drilling program upon execution of the farm-in agreement.  The concession
has proven reserves from a previous well. The Longtom #1 was drilled in the
1980s, with gas reserves estimates at 87 to 482 BCF of gas.

In November 2004, Apache spudded the Longtom #2 in the Bass Strait.  The
well was drilled to further evaluate the gas sands that were encountered in
the Longtom #1 and the Longtom ST #1 (drilled by BHP Petroleum in 1995).
The well also was to test the potential for deeper reservoirs not reached by
previous wells.

In December 2004, Apache reported the results of the first drill-stem test
(DST) on the Longtom #2.  The well flowed gas at a stabilized rate of 18 to
19 MMCF per day through a 1" choke over an 11 hour period. Well head
pressure at the end of the test remained at approximately 965 psi.  The
Longtom #2 was tested over two intervals: 2184.0-2192.5 meters and
2212.5-2243.5 meters. These intervals will be isolated and the well prepared
for the second DST. The flowing gas had a condensate to gas ratio of
approximately 3 barrels/MMCF.

The original wells encountered a 1,246 foot gross gas column in the Emperor
Formation without reaching the base of the gas. The operator indicates that
the field has the potential to contain estimated gas reserves of 270 BCF
with an upside potential of over 500 BCF of reserves. The Longtom #2 will be
immediately followed by the Grayling #1 exploration well.  The Grayling will
be drilled to a depth of 9,514 feet.  The prospect has the potential to
contain estimated reserves of 104 million barrels.

This successful test is a major discovery in the Gippsland Basin.  It
represents the first significant gas flow from the Emperor Formation. The
majority of the Gippsland Basin wells have been completed in the upper
Latrobe Formation.  Reserves in excess of four billion barrels of
oil/condensate and 12 trillion cubic feet of gas have been discovered in the
Basin since exploration drilling began in 1964, with remaining reserves
estimated at 600 million barrels of oil and 5 trillion cubic feet of gas.

                                   12

Despite its long history of extensive exploration, much of the basin's areas
and depths are still poorly understood. For such a prolific basin, the
Gippsland Basin is relatively unexplored and ACOR's management believes
there is still considerable potential for significant discoveries like the
Longtom #2.

The Company issued 711,111 restricted shares of its common stock to IOLS
based on 18 cents per share for the 1/20 of 1% of 8/8ths override under
VIC/P54.  (See Item 12 - Certain Relationships and Related Transactions for
additional information.)

Bass Strait, Australia - Application Awarded:

In March 2004, the Company applied, along with Holloman Corporation, Ely
Sakhai (individually) and Robert Thorpe (individually) as partners (25%
each), for two Australian concessions in the Bass Straits in March 2004:
V03-3 and V03-4.  In November 2004, the Company announced that this group
had been awarded V03-4, now called VIC/P60.

VIC/P60 is 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.

VIC/P60 consists of approximately 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 significant structures on this lease.  The
permit has a large untested anticline with 400 feet of seismic closure.  The
anticline is an upper Latrobe prospect.  The Halibut and Kingfish Oil Fields
have wells which were completed in the upper Latrobe.  This area is in deep
water.  A deep water drilling rig has been moved in from Norway.

Mr. Roy Whiting, an expert geophysicist, is now working full time on the
reinterpretation of seismic data collected on VIC/P60. ACOR has purchased
seismic interpretation software for 2D and 3D seismic reinterpretation and
delivered it to Mr. Whiting to use specifically for VIC/P60.

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 its proportional
share of the exploration program costs on its 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.

                                   13

Domestic - Kentucky Park City Gas Field:

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.

Gas analysis has been completed on a portion of the wells.  The results show
relatively good, clean gas except for the presence of nitrogen.  There is no
sulfur.  The gas in these wells contains an average of 14% to 16% nitrogen.
A gas plant is needed to extract the excess nitrogen from the gas.  The
pipeline companies require that the presence of nitrogen in the gas be
reduced to less than 4% before it may be injected into the commercial
pipeline system.  A gas plant would extract nitrogen and distillate from the
gas to meet pipeline specifications.  However, a pipeline company must
conduct a feasibility and cost study in order to create a gathering system
and gas plant for interconnect with a commercial pipeline.

The funding of the Kentucky gas plant, as previously reported in the
Company's Press Releases, Shareholder Letters, and 2003 SEC Form 10-KSB, did
not occur, and, as of March 24, 2005, had not occurred.  The terms of the
reported funding were not acceptable to two of the major working interest
holders.  Alternate funding sources are being sought to fund the planned
5MMCFPD Gas Plant. No assurances can be made that the Company will find
funding on acceptable terms to all of the working interest holders.

The Company participated in the drilling and development of the Park City
Gas Field through the issuance of its restricted common stock.  Shares were
issued on the basis of one share for each dollar of the Company's portion of
the budgeted expenditures on the wells.  To date, 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 and for its share
of the drilling and completion costs incurred.  See additional discussion
regarding this investment at Note 6 to the financial statements.


ITEM 3. LEGAL PROCEEDINGS

The Company was not a party to any legal proceedings as of December 31,
2004.  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 future royalty payments as well as past royalty payments of
approximately $36,081.  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.



                                   14

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

Not Applicable



                                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, 2004 and 2003,
respectively. These quotations reflect inter-dealer prices, without retail
mark-up, mark- down or commissions, and may not represent actual
transactions.

                                2004                  2003
                          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, 2004 was 310.

(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

Australian-Canadian Oil Royalties Ltd. (ACOR) is developing from a royalty
company to an exploration company.  The Company is being transformed into an
oil exploration company because of several events such as the giant oil
discoveries adjoining PEL 112 to the North and East with no dry holes in
between, the price of crude oil being above $US50 per barrel, and the 52%
"wildcat" drilling exploration success rate by new junior oil companies in
the Cooper-Eromanga Basin.

ACOR holds working interests under approximately 8,900,766 gross acres in
the most prolific basins in Australia, located onshore in the
Cooper-Eromanga Basin and offshore in the Gippsland Basin.


                                   15

The Company has hired the best seismic and geophysical team available in the
Cooper-Eromanga Basin in order to begin a detailed exploration program on
PELs 112 and 108.  ACOR hired Andy McGee, a highly respected Geophysicist
and Steven Tobin of Terrex Seismic.  A crew of approximately 32 personnel
will be working this spring and summer to shoot and interpret 190 kilometers
of seismic on PELs 112 and 108.  The plan is to shoot 155 kilometers of
seismic on PEL 112 and 35 kilometers on PEL 108.

ACOR management has negotiated with the South Australian Government on PELs
108, 109 and 112. The negotiations included the right to meet the minimum
exploration requirements for all three of these areas only on PELs 108 and
112, with PEL 109 to be delayed for future exploration.

PEL 112 is adjoined by fields producing approximately 4,000 barrel of oil
per day (the Christies and the Sellicks) to the north and a field producing
approximately 4,000 barrels of oil per day (the Warrior Field) to the east.
The Company, along with Mr. McGee and Mr. Tobin, is excited about the
current prospects that have been mapped on PEL 112 as well as with the
seismic being shot during 2005 on the best prospects in this area.  ACOR
owns a 50% Working Interest under PELs 112, 108 and 109.

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

The Company owns a 3/10 of 1% ORRI in PEL 88.  Cooper Energy, the operator,
kicked off its 2005 drilling program with the Kitson #1, which has mean
estimated undiscovered reserves of 5 millions barrels of oil.  The Kitson #1
is located approximately 200 km north-northeast of Moomba in South
Australia.  The Kitson #1 is expected to spud in April 2005, take 18 days to
reach the planned depth of 2,205 meters, and to cost $AU1.8 million.

The Kitson Prospect consists of a large two-fault closed structure which, at
its crest, contains two four- way dip closed structures. Five zones of
potential production are targeted in the Namur, Birkhead, Hutton, Poolowanna
and Tinchoo Formations. Should a reservoir be discovered in the Namur, then
the fault closed structure is estimated to contain recoverable oil reserves
in the range of between 5 to 42 million barrels, with an estimated mean of
20 million barrels.

Cooper Energy's CEO, Mike Scott, said his company's exploration portfolio
always has room for a few high-risk/reward wells like Kitson. "With the
possibility of discovering up to an estimated 42 million recoverable barrels
in a single reservoir plus the enormous upside of discovering multiple
reservoir zones, this undoubtedly has to be classed as a company-making
target. Should there be a discovery at Kitson, there is an even larger
target in PEL 88 - The Lancier Prospect. The Lancier lies 15 km to the west
of Kitson.  Cooper intends following up on this as soon as feasibly possible
following a success on the Kitson".

Concerning ACOR's ORRI under ATP 299, the Mulberry #2, located in the
Cooper-Eromanga Basin has been announced as a successful oil appraisal well.
The well encountered four meters of oil pay in the 12- 5 sand of the
Birkhead Formation and has extended the Birkhead 12-5 oil pool 450 meters
northwest of the Mulberry #1 discovery.  The Mulberry #2 is the first of a
three-well appraisal drilling program designed to test the extent of, and
develop the reserves in, the Mulberry Pool.  Mud logs indicated good shows
and subsequent wire-line logging indicated that the well is likely to be
productive.  It has been cased and suspended as a potential future oil
producer and the rig released to prepare to drill the Mulberry #3 appraisal
well.

                                   16

During 2004, the Company purchased ORRIs located in South Australia under
PELs 115, 111, 86, 87, and 89, as well as an ORRI under VIC/P54, located
Offshore Australia in the Bass Strait.  ACOR, in conjunction with other
industry partners, was granted the offshore concession, V03-4 (now known as
VIC/P60). ACOR owns a 25% Working Interest in VIC/P60.

PEL 115 consists of 1,106 sq. km that surround the major Toolachee,
Dullangari and the Della gas fields with cumulative estimated recoverable
reserves of 1.4 trillion cubic feet of gas and 31 million barrels of oil.
The Operator, Victoria Petroleum, has discovered the Murta oil trend from
the drilling of the Ventura #1 and Mirage #1 wells. Combined initial
potential from these wells is approximately 850 barrels of oil per day.
Production testing on the Mirage #1 commenced in January 2005. The Almonta
#1 is expected to be tested soon with two more wells planned by May.  The
Company holds a 1/10 of 1% ORRI under PEL 115.

Concerning PEL 111, drilling is expected to commence in October 2005 on the
Catalina Prospect, located 8 km northeast of the Fly Lake oil and gas field.
The Catalina Prospect is a low risk closed feature with possible estimated
reserves at 56 billion cubic feet of gas. The Company holds a 1/10 of 1%
ORRI under PEL 111.

VIC/P54 is located in the prolific Gippsland Basin. ACOR owns a 1/20 of 1%
ORRI under VIC/P54.  The drilling of the Longtom #2 as an appraisal well was
accomplished in 2004 using the Ocean Patriot drilling rig. The drilling
program ensures the rapid appraisal of the field, which if successful, will
lead to its early development. The well was designed such that it could be
suspended as a future commercial gas producer and rapidly brought into
production.  Final permeability results from the core samples recovered from
Longtom #2 were very positive.  Nexus Energy Ltd.'s analysis indicated that
the upper sands at Longtom will flow at commercial rates in an appropriately
drilled and completed well. Mapping and engineering studies indicate that
the Longtom Field contains commercial quantities of gas with potentially
large reserves on the upside.

Nexus has revised its recoverable gas volume estimates based on geological
data obtained from the Longtom #2 (including the core data recovered from
the sidetrack).  Current indications, based upon the successful Longtom #2
appraisal well, are that estimated potential proved plus probable
recoverable gas volumes at Longtom could be in excess of 300 BCF, with
estimated potential proved, probable and possible gas volumes of up to 500
BCF. Victoria annually consumes 220 BCF of gas per year at a wholesale value
of around $600 million.

The permeabilities obtained from special core analysis indicate the upper
sands of the Longtom #2 well could potentially produce gas at rates in
excess of that recovered from the lower sands which flowed at approximately
19 million cubic feet per day during the initial test.  Reservoir damage
through drilling could have been the reason these sands did not flow well.
Alternatively, analysis of pressure data from the #2 test by Nexus indicates
that the well may not have produced gas due to a mechanical malfunction of
the testing tools.  Reservoir simulation studies completed by Nexus indicate
that Longtom development wells will produce at commercial rates for a period
of up to 10 years with out intervention.  Nexus is considering several
different development options for Longtom Gas Field including the
possibility of a stand-alone development similar to the nearby Patricia
Baleen Field, approximately 12 km away.

                                   17

The objectives of the Longtom #3 well are to confirm the commercial gas flow
and reserve potential of the upper sands of the Longtom reservoirs and the
lateral extent of the lower sands by drilling horizontally through the
reservoir.  It is planned to suspend the well as a producer.

VIC/P60 is located in the Gippsland Basin and consists of 339,769 acres.
Reserves in excess of four billion barrels of oil/condensate and 12 trillion
cubic feet gas have been discovered in the basin since exploration began in
1964.  Mr. Roy Whiting, an expert geophysicist, is now working full time on
seismic reinterpretation.  Mr. Whiting has reported to ACOR management that
he has already identified several promising structures on VIC/P60.

Liquidity and Capital Resources

The Company's Total Current Assets as of December 31, 2004 were $1,016,478
compared to $270,785 on December 31, 2003. Total Current Liabilities as of
December 31, 2004 were $1,024,999 placing the Company's liquidity ratio of
current assets to current liabilities at 1.01 to 1.00.  A large portion of
the $1,016,478 in current assets is $1,000,000 in certificates of deposit
which are restricted as to use.  Cash on hand as of December 31, 2003 was
$8,622 as compared to $9,803 on hand as of December 31, 2004.

The Company plans to meet its operating expenditures from loans from two of
its principal shareholders, who are also officers and directors of the
Company.  In addition, the Company plans to undertake a private placement in
order to finance its part the costs of seismic operations.  The cost of the
current seismic reprocessing efforts on VIC/P60 has already been paid.  The
total amount due under the loans from officers was $20,000 as of December
31, 2004.  During 2004, the Company issued a total of 1,814,306 restricted
shares (1,269,306 shares based on 18 cents per share and 545,000 shares
based on 20 cents per share) to repay funds loaned to the Company by its
officers.  These funds were used to pay for administrative costs and for
efforts to promote the Company.  The Company is seeking exploration partners
on its various oil and gas concessions located in Australia.

Total assets of the Company increased from $1,048,809 on December 31, 2003
to $1,828,270 on December 31, 2004, an increase of $779,461, representing a
74% increase in assets from 2003 to 2004. The increase is mostly
attributable to a $750,000 certificate of deposit that is restricted as to
use.

Results of Operations

The Company's oil and gas revenues have increased when comparing 2003 to
2004.  In 2004 the revenues were $26,272 compared to $7,626 in 2003.  Other
income for the Company includes interest earned in 2004 of $8,426 compared
to $3,054 for 2003.  This increase in interest income is attributable to the
addition of a $750,000 certificate of deposit that is restricted as to use.

The net loss for the year ended December 31, 2003 was $108,777 compared to a
net loss of $393,053 for the year ended December 31, 2004.  The $284,276
increase in loss incurred is directly related to the additional expenditures
in shareholder relations ($18,102 vs. $14,004), personnel costs ($84,484 vs.
$61,448), professional fees ($18,903 vs. $16,499), other expenses ($24,307
vs. $7,023) and an adjustment for excess costs and impairment ($234,733
vs. $3,882).  Total operating expenses were $381,041 for the year ended
December 2004 compared to $103,176 for the previous year. This increase in

                                   18

expenses is attributable to an increase in personnel costs and excess
costs and impairments. The increase in excess costs and impairments was
due to a reduction in the carrying value of oil and gas properties due to
a determination by management of the impairment of the Company's working
interests in Kentucky. (Refer to Note 6 of the Financial Statements under
United States Properties for more information).

Management is optimistic about the drilling planned on its Australian
interests and the new applications planned for the year 2005.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (revised 2004)
Share-Based Payment. This statement addresses the accounting for
transactions in which an entity exchanges its equity instruments for goods
or services. The Statement eliminates the ability to account for share-based
compensation transactions under the intrinsic-value method utilizing APB
Opinion No. 25, Accounting for Stock Issued to Employees, and generally
requires that such transactions are accounted for using the fair-value
method.  Adoption of this standard will have no impact on the Company's
activities because it has consistently used the fair value method to record
its stock issuances.

Disclosure Regarding Forward-Looking Statements

Where this Form 10-KSB includes "forward looking" statements within the
meaning of Section 27A and Section 21E of the Securities Act, the Company
desires to take advantage of the "safe harbor" provisions thereof.
Therefore, the Company is including this statement for the express purpose
of availing itself of the protections of such safe harbor provisions with
respect to all of such 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.  These risks include, but
are not limited to, economic conditions, changes in environmental
regulations, the market for venture capital, etc.  In this 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 statements for Australian-Canadian Oil Royalties
Ltd. are presented 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

                                   19

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

None


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, 2004.  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 8B. OTHER INFORMATION

None


                                 PART III

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
       --------------------   ----  ----------------  -------------
       Kenneth W. Campbell     75       Director          1997
       Robert Kamon            77       Director &        1997
                                        Secretary
       William A. Randall      64       Director          1997
       Ely Sakhai              54       Director &        1997
                                        President
       Andre Sakhai            24       Director          2004

                                   20

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.

                                                        Date First
                                      Position With      Elected
             Name              Age     the Company      as Officer
       --------------------   ----  ----------------  -------------
       Robert Kamon            77     Secretary and       1997
                                        Director
       Ely Sakhai              53     President and       1997
                                        Director

In regards to family relations between the officers and directors of the
Company, Ely Sakhai is the father of Andre Sakhai.

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, IOLS 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.

Andre Sakhai, Director, attended Arizona State University, which included a
curriculum of financial accounting and microeconomics, as well as money and
banking. Mr. Sakhai is a licensed real estate salesperson in the state of
New York and has other experience in computer functions as well as
experience in all aspects of the financial markets.


ITEM 10.  EXECUTIVE COMPENSATION

Value of the office space used by ACOR was $1,200* for 2004. Value of the
time provided by ACOR executives $1,200* for 2004.

*These have been recorded as expenses and contributed capital in the books
of the Company in their respective periods.


                                   21

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, 2005 by each 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
       ----------------------------------       ------------    ----------
       Ken Campbell                                 250,000         2.384%
       307 Triune Bay
       Calgary, Alberta T1X 1G4
       Canada

       Robert Kamon*                              3,581,420       34.158%
       1304 Avenue L
       Cisco, Texas  76437

       William A. Randall                            20,000        0.191%
       10th Floor
       938 Howe Street
       Vancouver, British Columbia V6Z 1N9
       Canada

       Ely Sakhai***                              2,584,426       24.649%
       10 Windsor Dr.
       Old Westbury, New York   11568

       Andre Sakhai**                                50,100        0.478%
       10 East 29th Street, Apt. 12J
       New York, New York 10016

       All officers and directors as a group      6,485,946       61.860%


       Tensleep Oil & Production, Inc.**            908,000        8.660%
       1304 Avenue L
       Cisco, Texas   76437

       International Oil Lease Service Corp.**      744,444        7.100%
       U.S. representative at
       1304 Avenue L
       Cisco, Texas   76437

       Jan Soleimani                                800,000        7.630%
       21 Windsor Dr.
       Old Westbury, New York   11568

       Robert Thorpe                                829,967        7.916%
       1811 Sullivan Lane
       Bardstown, KY 40004

                                   22

       *Robert Kamon's (1,776,426 shares), Tensleep's (908,000 shares),
       IOLS's (744,444 shares), and Australian Grazing & Pastoral Co., Pty.
       Ltd.'s (152,550 shares) holdings are all attributed to Robert Kamon
       for purposes of presenting his beneficial ownership percentage.
       Robert Kamon is President of these companies.

       **See Item 12. - Certain Relationships and Related Transactions

No officers, directors or related entities have rights to acquire additional
shares through options, warrants, rights, or conversion privileges within
the next sixty days.

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
in Kentucky on similar terms and at the same times as the Company acquired
its 12.5% interest. Ely Sakhai is the father of Andre Sakhai, who is also a
Director of the Company.

Two of the directors of the Company, Robert Kamon and Ken Campbell, 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, their activities may
involve a conflict of interest with the Company.  During 2004, the Company
issued 1,044,444 restricted shares of its common stock to IOLS based on 18
cents per shares for the 1/20 of 1% override in VIC/P54 and 1/10 of 1%
overrides in PEL 111 and 115.  Also, the Company issued 166,667 restricted
shares of its common stock to AGP based on 18 cents per share for 1/10 of 1%
overrides in PEL 86, PEL 87, and PEL 89. See Item 2  "Description of
Property".

Tensleep Oil and Production, Inc. 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 the Sarbanes-Oxley Act of 2002.

        32.2        *Certification of Chief Financial Officer pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002.
-----------------
*Filed herewith.
                                   23

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company has appointed Andre Sakhai and Kenneth Campbell as members to an
audit committee. 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, 2004 and 2003.  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 included in our Form 10-QSB
during the years ending December 31, 2004 and 2003 were $12,243 and $10,035,
respectively.  No other accounting related fees were incurred in 2004 and
2003.

Tax Fees:  The Company incurred fees of $424 and $220 for tax compliance
with the Company's principal accountant for 2004 and 2003, respectively.

All Other Fees:  The Company paid its principal accountant $2,780 and $2,300
in 2004 and 2003, respectively, for the services of converting its SEC
filings to, and filing them in, EDGAR format.


                                   24

                                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, 2005            /s/    Ely Sakhai
                                 --------------------------------
                                 Ely Sakhai, President & Director


Dated:  April 14, 2005            /s/    Robert Kamon
                                 --------------------------------
                                 Robert Kamon, Secretary & Director


Dated:  April 14, 2005            /s/    Ken Campbell
                                 --------------------------------
                                 Ken Campbell, Director


Dated:  April 14, 2005            /s/    Andre Sakhai
                                 --------------------------------
                                 Andre Sakhai, Director

Dated:  April 14, 2005            /s/    William A. Randall
                                 --------------------------------
                                 William A. Randall, Director














                                   25






               AUSTRALIAN-CANADIAN OIL ROYALTIES LTD.




                   INDEX TO FINANCIAL STATEMENTS



                                                                     Page
                                                                     ----

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

  Balance Sheets as of December 31, 2004 and 2003  .  .  .  .  .  .   F-3

  Statements of Operations and Comprehensive Income for
            December 31, 2004 and 2003 .  .  .  .  .  .  .  .  .  .   F-4

  Statement of Stockholders' Equity for the years ended
            December 31, 2004 and 2003 .  .  .  .  .  .  .  .  .  .   F-5

  Statements of Cash Flows for the years ended
            December 31, 2004 and 2003 .  .  .  .  .  .  .  .  .  .   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, 2004 and 2003, and the related
statements of operations, stockholders' equity and comprehensive income,
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 the standards of the Public
Company Accountancy Oversight Board (United States).  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 audits provide 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, 2004, and 2003, 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 14 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 14.  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 24, 2005





                                   F-2

                  Australian-Canadian Oil Royalties Ltd.
                              Balance Sheets
                     As of December 31, 2004 and 2003

                                                      2004           2003
                                                   ----------     ----------
                              Assets
CURRENT ASSETS
  Cash                                             $    9,803      $  16,931
  Cash-restricted                                   1,000,000        250,000
  Accounts receivable                                   4,101          3,854
  Prepaid expenses and other                            2,574             -
                                                   ----------     ----------
          Total Current Assets                      1,016,478        270,785
                                                   ----------     ----------
PROPERTY AND EQUIPMENT
  Oil and gas properties                              832,439        809,017
  Office equipment and software                        18,421             -
  Accumulated depreciation and depletion              (39,222)       (31,047)
                                                   ----------     ----------
          Net Property and Equipment                  811,638        777,970
                                                   ----------     ----------
OTHER ASSETS
  Investment in equity method investee                    154             54
                                                   ----------     ----------

     TOTAL ASSETS                                  $1,828,270     $1,048,809
                                                   ==========     ==========

                Liabilities & Stockholders' Equity

CURRENT LIABILITIES
  Accounts payable                                 $    4,025     $    3,029
  Accrued expenses                                        974          2,638
  Loans from officers                                  20,000        109,050
  Notes payable to bank                             1,000,000        250,000
                                                   ----------     ----------
          Total current liabilities                 1,024,999        364,717
                                                   ----------     ----------
STOCKHOLDERS' EQUITY
  Preferred stock no par (50,000,000 shares
   authorized, none outstanding)                           -              -
  Common stock, no par (50,000,000 shares
   authorized, 10,484,944 and 7,359,527 shares,
   respectively, issued and  outstanding)           1,592,572      1,133,471
  Additional paid in capital                           82,547         29,700
  Accumulated deficit                                (871,850)      (478,797)
  Other comprehensive income:
   Foreign currency translation adjustment                  2           (282)
                                                   ----------     ----------
          Total Stockholders' Equity                  803,271        684,092
                                                   ----------     ----------

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $1,828,270     $1,048,809
                                                   ==========     ==========


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, 2004 and 2003





                                                      2004           2003
                                                   ----------     ----------
OPERATING REVENUES
     Oil & gas revenues                            $   26,272     $    7,626

COSTS OF REVENUES
     Lease operating expenses                           7,927             -
     Production taxes                                     402            102
     Depletion                                          7,663          2,577
                                                   ----------     ----------
          GROSS PROFIT                                 10,280          4,947
                                                   ----------     ----------
OPERATING EXPENSES
     Personnel costs                                   84,484         61,448
     Professional fees                                 18,903         16,499
     Promotion and advertising                         18,102         14,004
     Adjustment for excess costs and impairment       234,733          3,882
     Deprecation and amortization                         512            320
     Other                                             24,307          7,023
                                                   ----------     ----------
          Total Operating Expenses                    381,041        103,176
                                                   ----------     ----------
(LOSS) FROM OPERATIONS                              (370,761)       (98,229)

OTHER INCOME
     Interest income                                    8,426          3,054
     Interest expense                                (26,292)       (11,995)
                                                   ----------     ----------
(LOSS) BEFORE INCOME TAXES                          (388,627)      (107,170)

Australian income taxes                                 4,426          1,607
                                                   ----------     ----------

          NET LOSS                                  (393,053)      (108,777)


OTHER COMPREHENSIVE INCOME:
     Foreign currency translation adjustment               -              12
                                                   ----------     ----------
          TOTAL COMPREHENSIVE LOSS                 $(393,053)     $(108,765)
                                                   ==========     ==========
Net loss per weighted average share outstanding    $   (0.04)     $   (0.02)
                                                   ==========     ==========
Weighted average shares outstanding                 9,138,068      6,800,333
                                                   ==========     ==========




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, 2004 and 2003
<CAPTION>
                                                                             Accumulated
                                                      Additional              Other Com-
                                     Common Stock      Paid In  Accumulated   prehensive
                                   Shares    Amount    Capital    Deficit       Income       Totals
                                 --------- ---------- ---------  ---------    ---------    ---------
<S>                              <C>       <C>        <C>        <C>          <C>          <C>
BALANCES, December 31, 2002      6,391,742 $  986,711 $  27,300  $(370,020)   $    (294)   $ 643,697

Stock issued for:
  Cash                             150,000     22,50         -           -           -        22,500
  Oil & gas property costs         681,001    92,812         -           -           -        92,812
  Services                         136,784    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      7,359,527  1,133,471    29,700   (478,797)        (282)     684,092

Stock issued for:
  Notes payable to officers      1,814,306    341,101        -           -            -      341,101
  Oil & gas property costs       1,211,111    109,000        -           -            -      109,000
  Services                         100,000      9,000        -           -            -        9,000
Other contributed capital               -          -     50,447          -            -       50,447
Additional contributed capital          -          -      2,400          -            -        2,400
Net loss                                -          -         -    (393,053)           -     (393,053)
Other comprehensive income:
  Foreign currency translation
    adjustment                          -          -         -          -           284          284
                                ---------- ---------- ---------  ---------    ---------    ---------

BALANCES, December 31, 2004     10,484,944 $1,592,572 $  82,547  $(871,850)   $       2    $ 803,271
                                ========== ========== =========  =========    =========    =========











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

                  Australian-Canadian Oil Royalties Ltd.
                         Statements of Cash Flows
                    Increases/(Decreases) in Cash Flow
              For the years ended December 31, 2004 and 2003


                                                      2004           2003
                                                   ----------     ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                           $ (393,053)    $ (108,777)
Adjustments to reconcile net (loss) to net cash
  provided by operations:
  Depreciation, depletion, and amortization             8,175          2,897
  Value of expenses contributed by officers             2,400          2,400
  Stock issued for services                             9,000         31,448
  Stock issued for interest                             3,676             -
  Adjustment for foreign currency translation             284             12
  Adjustment for excess costs and impairment          234,733          3,882
Changes in:
  Receivables                                            (247)          (611)
  Prepaid expenses                                     (2,574)            -
  Accounts payable                                       (668)           780
                                                   ----------     ----------
NET CASH USED BY OPERATING ACTIVITIES                (138,274)       (67,969)
                                                   ----------     ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Costs of oil & gas properties                      (149,155)       (55,272)
  Costs of other fixed assets                         (18,421)            -
  Investment in subsidiary                               (100)            -
                                                   ----------     ----------
NET CASH USED IN INVESTING ACTIVITIES                (167,676)       (55,272)
                                                   ----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Stock issued for cash                                    -          22,500
  Proceeds from notes payable to officers             248,375        109,050
  Other contributed capital                            50,447             -
  Purchase of restricted certificates of deposit     (750,000)      (250,000)
  Proceeds from bank notes                            750,000        250,000
                                                   ----------     ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES             298,822        131,550
                                                   ----------     ----------
  Increase/(Decrease) in cash for period               (7,128)         8,309

  Cash and cash equivalents, beginning of period       16,931          8,622
                                                   ----------     ----------
Cash and cash equivalents, end of period           $    9,803     $   16,931
                                                   ==========     ==========
SUPPLEMENTAL DISCLOSURES:
Cash payments for:
 Interest                                         $   24,329     $    9,357
 Australian income taxes                               3,578          2,274
Noncash Investing and Financing Activities:
 Contributed expenses                                  2,400          2,400
 Stock issued for services                             9,000         31,448
 Stock issued for oil & gas properties & drilling    109,000         92,812
 Stock issued for related party notes & interest     341,101             -


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

                  Australian-Canadian Oil Royalties Ltd.
                      Notes to  Financial Statements
                        December 31, 2004 and 2003


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
Australia.  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.  The wells for this prospect have been drilled and
gas has been found.  However, efforts are still underway to identify a
funding source for the construction of a gathering system and gas processing
plant.  Two of the leases are producing a small amount of oil.


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 incurs 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 records 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.

Stock-Based Compensation

The Company accounts for services acquired (and other expenses paid) using
stock as compensation (or payment) based on the fair value of the shares
issued.  Fair value is determined based on the closing price of the stock on
the date the Company becomes obligated to issue the shares.  Due to thin
trading volume of the Company's stock, most stock issuances are recorded at
a discount to the market price because of the effective limitations on
disposal by the recipient of the shares.  Restricted shares issued for
services are discounted at a greater discount because of the added
limitation on the tradability of the restricted shares.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas
producing activities and, accordingly, capitalizes all costs incurred in the

                                   F-7

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 treated as expenses 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 had 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 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.

Office Equipment and Software

Office equipment and software are carried at depreciated cost.  Acquisitions
are recorded at cost.  Expenditures for major renewals and betterments that
extend the useful lives are capitalized.  Expenditures for maintenance and
repairs are charged to expense as incurred.  The cost of software and
equipment is depreciated over the estimated useful lives of the related
asset.  Depreciation is computed on the straight-line method for financial
reporting purposes

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 2004 or 2003.

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 unused operating loss
carry- forwards at December 31, 2004 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.

                                   F-8

       Amount of Unused Operating    Expiring During Year Ended
           Loss Carryforward               December 31,
         -----------------------     --------------------------
              $   36,557                       2005
                  18,543                       2006
                  52,866                       2007
                 163,410                       2008
                  65,277                       2009
                 104,895                       2010
                 158,320                       2011
              -----------
              $  599,868
              ===========

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
$275,939 and $205,022 in 2004 and 2003, 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 did not generate net U.S. source income during 2004 or 2003.
Although it has begun to have income effectively connected with a U.S. trade
or business, expenses have continued to be greater.  When U.S. revenues
exceed U.S. expenses, U.S. tax liabilities or benefits related to those
activities will accrue.

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 $4,426 and
$1,607 in 2004 and 2003, 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 reflect 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 9,138,068 and 6,800,333 for 2004
and 2003, respectively.

Cash Flows

The Company considers unrestricted cash and cash investments with initial
maturity or marketability of three months or less to be cash equivalents for
purposes of presenting its Statement of Cash Flows.  Cash investments whose
use is limited through collateral restrictions are not considered to be cash
for Cash Flows.


                                   F-9

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.

Financial Instruments

Unless otherwise specified, Management believes the carrying value of its
financial instruments approximates their fair value due to the short term to
maturity.  Investments in marketable securities are carried at market value.


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.


NOTE 3:   ACCOUNTS RECEIVABLE

At December 31, 2004 and 2003 the Company has accrued receivables for oil
and gas production from its Australian overriding royalty interests totaling
$4,101 and $1,686, 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 2004, the Company entered into a contract for promotion and advisory
services to be provided over a one-year period.  Restricted stock issued in
payment for these services was valued at $9,000.  This amount is being
amortized over the year of the contract.  The balance of $2,250 shows as
prepaid expenses in the financial statements.  Amortization of $6,750 is
included under the caption "Promotion and advertising."


NOTE 5:   PROPERTY AND EQUIPMENT

The following table presents costs of property and equipment at December 31,
2004 and 2003.




                                   F-10

                                                      2004           2003
                                                   ----------     ----------
     Oil and gas properties                        $  832,439     $  809,017
     Office equipment                                   2,870             -
     Seismic analysis software                         15,551             -
                                                   ----------     ----------
          Total costs                                 850,860        809,017

          Accumulated depletion                      (38,710)       (31,047)
          Accumulated depreciation                      (512)             -
                                                   ----------     ----------
     Net Property and Equipment                    $  811,638     $  777,970
                                                   ==========     ==========

Depreciation expense was $512 for 2004.  Depletion is discussed at Note 6.
The office  equipment and the software are being depreciated on a
straight-line basis over three years.


NOTE 6:   OIL AND GAS PROPERTIES

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

                                           2004                2003
                                    ------------------  ------------------
                                    Australia   U.S.    Australia    U.S.
                                    --------- --------  --------- --------
Acquisition cost                    $ 734,559 $235,647  $ 538,059 $235,647
Assignments, transfers, and rentals   130,066       -      68,411       -
  Less allowance for excess costs     (34,064)(233,769)   (33,100)      -
                                    --------- --------   -------- --------
       Total                          830,561    1,878    573,370  235,647
  Less accumulated depletion         (36,833)  (1,877)   (31,047)       -
                                    --------- --------   -------- --------
Net Oil and Gas Properties          $ 793,728 $      1   $542,323 $235,647
                                    ========= ========   ======== ========

The costs of producing Australian 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
quantities produced.  These producing properties are ATP 267, ATP 299, ATP
543, and ATP 560.  Other interests have not produced marketable oil or gas
from which the Company has received revenues.  The costs associated with
such properties are not being amortized pending determination of reserve
quantities and commencement of production.  Depletion expense totaled $7,663
and $2,577 for 2004 and 2003.

In addition to depletion, 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, 2004 and 2003.  Adjustments to reduce the
carrying values based on the ceiling test were $ 964 in 2004 and $3,882 in
2003.  Additionally, as discussed below, the U.S. investment was determined
to be impaired.

Australia

During 1997, the Company acquired a package of overriding royalty interests
consisting of 1,005,143 net royalty acres beneath 28,572,609 gross surface

                                   F-11

acres in Australia's main onshore oil and gas producing basin.  These
interests were acquired through the issuance of 4,000,000 new shares of its
common stock.  In addition to the acquisition cost, the Company incurred
costs associated with preparation of assignments, transfer taxes, and
registration of title 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, a
100% interest in ATP 582, was assigned to the Company.  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 an assigned total of
11.5% in overriding royalty interests (including the 2% interest) in
addition to the standard 10% mineral royalty retained by the Queensland
government.  During 2003, the Company paid $2,950 in rental costs.  Rental
costs for 2004 were deferred until 2005.

During September 2000, the Company was successful in applications for three
Australian oil and gas concessions in South Australia, PELs 108, 109 and
112.  The Company 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 the first year,
$275,000 in the second year, and $1,450,000 in the third year. These
concessions lie beneath 1,698,348 surface acres.  During 2003, the
Australian government completed negotiations 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 2004, total costs of $61,655 were incurred
reviewing these concessions.  Subsequent to year end, a geophysicist has
drawn up plans for a seismic study to be performed during 2004.

During 2001, the Company purchased a 0.05% overriding royalty interest under
permit VIC/P45 for $19,000. This is an area offshore from the state of
Victoria.

During 2002, the Company paid $20,750 to International Oil Lease Service
(IOLS) (See related party discussion below.) for unsuccessful application
fees for areas V01-4 and V02-2 in South Australia.  Additionally, 407,000
shares were issued to IOLS for a 0.05% interest in Permit 53.  This
acquisition was valued at $100,000 based on cash sales of comparable
interests by IOLS.

During 2003, a 0.3% overriding royalty interest was purchased in PEL 88 for
$27,000.

During 2004, the Company purchased a 2% working interest in PEL 100 for
$50,000 from IOLS.  A dry hole was drilled on this prospect, but additional
seismic was run (at a cost of $10,280 to the Company) and the operator plans
to drill a second test well.  In addition, 0.1% overriding royalty interests
in PELs 86, 87, 89, 111, and 115 were purchased for $45,000 from IOLS and
Australian Grazing and Pastoral Co. Pty., Ltd. (AGP). (See related party
discussion below.)  A 0.05% interest in VIC/P45 was purchased for $64,000
from IOLS.  The Company also paid $37,500 in application fees for VIC/P60,
V03-3 and V03-4.  V03-3 was unsuccessful and V03-4 became VIC/P60.

                                   F-12

United States

In 2002, the Company purchased a 12.5% working interest in the Park City Gas
Field in Kentucky with stock. In 2002 and 2003, it has paid for its share of
drilling costs with additional stock issuances.  The Company's President has
acquired an equal interest in this field.  The operator drilled a total of
50 wells during the development of this field.  Gas was found during the
drilling of the wells and geological analysis has indicated that the
completed wells have significant potential.  However, production tests have
not been completed and a gathering system has not been constructed.  The gas
tested to contain very high levels of nitrogen.  A gas plant will have to be
constructed to remove excess nitrogen from the gas before it can be injected
into existing pipelines.  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 porosities and zone sizes
indicated during the drilling process.  Minimal tests on a limited number of
wells have been performed to validate the wells and the  feasibility of a
gas processing plant.

At the end of 2004, the Company reviewed its investment in this gas field in
accordance with accounting rules for oil and gas investments and long-lived
assets and determined that there is currently no support to calculate
recovery of the investment recorded on the books.  Pursuant to this
determination, the investment was deemed to be impaired and it was written
off.


NOTE 7:   NOTES PAYABLE

During 2003, the Company borrowed $109,050 from its President and Secretary
on 12-month notes bearing interest at 4.5%.  These notes had maturity dates
that varied with the origination date of the notes.  Interest of $1,968 was
accrued on these notes at December 31, 2003.  During 2004, the Company
borrowed $248,375 for these officers on the same basis as in 2003.  Interest
incurred on all of these notes during 2004 totaled $1,830.  Except for
$20,000 borrowed in October 2004, all of these notes were retired during
2004 through the issuance of 1,814,306 shares of restricted stock.

The Company has outstanding loans of $1,000,000 from the First National Bank
of Cisco, an increase of $750,000 from 2003.  These notes are six month
notes and have been renewed in April and December each year since the
Company started borrowing in 2001.  The balances outstanding at December 31,
2004, bear interest at 3.35% and are due in March 2005.  These notes are
secured by certificates of deposit shown as restricted cash on the balance
sheet.  Total interest incurred on these bank notes during 2004 and 2003 was
$25,132 and $9,358.


NOTE 8:   TRANSACTIONS WITH RELATED PARTIES

An officer provided office space and services with no cash cost to the
Company.  These contributed costs had estimated unpaid values of $2,400
during 2004 and 2003.  These amounts have been recorded as operating
expenses and as additional paid-in capital in their respective years.

During 2003 and 2004, the Company reimbursed commonly-controlled entities
for personnel and office expenses totaling $84,232 and $12,674,

                                   F-13

respectively.  These entities, Tensleep Oil and Production Inc., Secretarial
Services, Inc., and AGP are within the control of the Company's Secretary.
Additionally, the Company paid filing fees and purchased Australian oil and
gas properties from AGP and IOLS during 2004. These amounts totaled
$101,875.

As discussed at Note 6, the Company borrowed $248,375 and $109,050 from two
of its officers during 2004 and 2003.  These funds were used to pay for
administrative costs and efforts to promote the Company's name and
availability.  As discussed in Note 6, the bulk of these notes were repaid
through the issuance of the Company's restricted common stock

In 2003, the Company acquired a 0.3% interest in PEL 88 from AGP for 180,000
shares of restricted stock valued at $27,000.

Various Australian oil and gas properties were acquired from AGP and IOLS
during 2004 for 1,211,111 restricted common shares valued at $109,000.

At December 31, 2004 and 2003, the Company's accounts payable included $ and
$ , respectively payable to related parties.


NOTE 9:   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 2004 and 2003 were received from
Australian oil and gas royalty interests.  Depletion expense and Australian
income taxes reported by the Company during 2004 and 2003 are also related
to the revenue received from the Australian royalties.  Australian revenues
were $17,332 and $5,355 in 2004 and 2003.

Oil was produced and sold from the property in Kentucky.  These revenues
totaled $8,940 and $2,270 in 2004 and 2003.

Essentially all of the Company's administrative costs are incurred in the
United States.  Lease operating expenses and taxes have been incurred in the
U.S. and taxes have been paid to Australia.


NOTE 10:   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 11:   STOCK TRANSACTIONS

During 2003, 501,001 restricted shares were issued to pay the Company's
portion of the costs to complete the drilling program in Kentucky.


                                   F-14

During 2003, besides the shares issued for the Kentucky project discussed
above, the Company issued 180,000 shares to AGP (See discussion of related
party transactions above.) for a 0.3% overriding royalty interest in PEL 88.
Directors 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.

During 2004, the Company issued 1,814,306 shares of restricted stock valued
at $341,101 in payment of loans from two officers along with accrued
interest.  Oil and gas interests in Australia were acquired by issuing
1,211,111 restricted shares valued at $109,000.  A promotional consultant
was employed and compensated by the issuance of 100,000 restricted shares
valued at $9,000.


NOTE 12:   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 beneath 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
(transfer tax), charged by the Australian government, for each previously
unrecorded assignment.

The Company is considering the appropriate timing and costs which will be
required to undertake the necessary litigation to perfect its title in this
royalty interest.  As of December 31, 2004, 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 $A30,000 plus any stamp
duty 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.  A six-year statute of limitations runs on unpaid
royalty revenue.


NOTE 13:   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

                                   F-15

December 31, 2004 at the Company's primary bank exceeded federally insured
limits by $909,803.


NOTE 14:   GOING CONCERN CONSIDERATIONS

As of December 31, 2004, the Company has limited disposable cash and its
revenues are not sufficient to, and cannot be projected 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 interests it 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 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, 2004 and 2003 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
from its 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 2003 and 2004.

                                           Gas (mcf)        Oil (bbls)
                                         2004     2003     2004    2003
                                        ------   ------   ------  ------
 Reserves reported by the Queensland
    government as of June 30, 1997          -        -     3,962   3,962
 Additions or adjustments after 1997    15,272   15,272    2,350      -
    Discoveries                             -        -        -       -
    Cumulative previous production      (4,232)  (4,232)  (2,905) (2,650)
    Current year production                 -        -      (542)   (255)
                                        ------   ------   ------  ------
 Unrecovered reserves                   11,040   11,040    2,865   1,057
                                        ======   ======   ======  ======






                                   F-16

        Results of Operations for Producing Activities (1)
          For the Years Ended December 31, 2004 and 2003

                                             2004                2003
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Sales of oil and gas                 $  16,973  $  8,940  $   5,355  $   2,270

Production costs (including taxes)          -      8,329         -          -
Acquisition, exploration & development 258,155        -      76,785     71,299
Depletion                                5,786     1,877      2,577         -
                                     ---------  --------  ---------  ---------
Results of operations from producing activities
  (excluding corporate overhead)     $(246,968) $ (1,266) $ (74,007) $ (69,029)
                                     =========  ========  =========  =========

All sales were to unaffiliated entities.  Amortization of Australian costs
was $11.33 and $10.11 per equivalent barrel for 2004 and 2003.  Amortization
of U.S. costs was $8.08 per barrel.

     Capitalized Costs Relating to Oil and Gas Producing Activities (1)
                       At December 31, 2004 and 2003

                                             2004                 2003
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Unproved properties (not
     being amortized)                $ 711,053  $235,647  $ 482,898  $ 235,647
Proved properties (being amortized)    153,572        -     123,572         -
Capitalized pre-acquisition costs           -         -          -          -
                                     ---------  --------  ---------  ---------
    Total Capitalized Costs            864,625   235,647    606,470    235,647

 Allowance for excess costs           (34,064) (233,769)   (33,100)         -
 Accumulated depletion                (36,833)   (1,877)   (31,047)         -
                                     ---------  --------  ---------  ---------
Net Capitalized Costs                $ 793,728  $      1  $ 542,323  $ 235,647
                                     =========  ========  =========  =========

            Costs Incurred in Oil and Gas Property Acquisition,
                       Exploration and Development (1)
               For the Years Ended December 31, 2004 and 2003

                                             2004                 2003
                                     -------------------  --------------------
                                     Australia    U.S.    Australia     U.S.
                                     ---------  --------  ---------  ---------
Property acquisition costs:
   Proved                            $      -   $     -   $      -   $      -
   Unproved                            247,875        -      76,785         -
   Exploration costs                    10,280        -          -          -
   Development costs                        -         -          -      71,299
                                     ---------  --------  ---------  ---------
Total                                $ 258,155  $     -   $  76,785  $  71,299
                                     =========  ========  =========  =========

                                   F-17

   (1)   As mentioned at note 5, the company acquired a working interest in
   the park city gas field in the U.S. That has been drilled but is not in
   production, except for a small amount of oil.  The operator's petroleum
   engineer has performed a volumetric calculation of  estimated gas in
   place. However, reliable 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
   the disclosures of reserve information that are normally required for
   working interests based on information that management believes could
   prove to be unreliable or unsupportable.

   Additionally, because of the high nitrogen content in the gas found in
   the field, the gas is not marketable without being processed to remove
   excess nitrogen.  Finding a funding source for the gas plant has proven
   to be problematic and, at present, causes projections of the potential to
   recover the Company's investment to be highly questionable.  Based on
   this analysis, the Company has recorded an impairment for the full
   carrying value of its U.S. investment.











                                   F-18