UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-K
 
 (Mark One)þ
                  
                  ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended September 30, 2007oro
                  
                  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from
      ______  to  ______Commission
      File Number 0-24012
 
 DEEP
WELL OIL & GAS, INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                    13-3087510(State
      or other jurisdiction of incorporation or organization)
                    (I.R.S.
      Employer Identification No.)Suite
      700, 10150 – 100 Street, Edmonton, Alberta, Canada
                    T5J
      0P6(Address
      of principal executive offices)
                    (Zip
      Code)
 
 Registrant’s
telephone number, including area code:(780) 409-8144
 
 Securities
registered under Section 12(b) of the Act:
 
 Title
      of each class
                
                Name
      of each exchange on which registeredNone
                
                None
 
 Securities
registered under Section 12(g) of the Act:
 
 Common
      Stock, $0.001 par value per share(Title
      of class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes o    No
þ
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
 Yes o    No
þ
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 Yes o    No
þ
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).                                                                                                                                      
Yes o    No
o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
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-K
or any amendment to this Form 10-K. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer o
                  Accelerated
      filer oNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
                  Smaller reporting
      company þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).          
Yes oNo þ
 
 The
aggregate market value of the registrant’s common stock held by non-affiliates
computed by reference to the price at which the common equity was sold on March
29, 2007 was approximately $24,689,761.
 
 Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.     Yes o    No
þ
 
 As of
August 31, 2009, the Issuer had approximately 106,774,258 shares of common
stock, $0.001 par value per share outstanding.
  
 
 TABLE
OF CONTENTS
 
 Page
                                      NumberGLOSSARY
      AND ABBREVIATIONS
                                    
                                    4CURRENCY
      EXCHANGE RATES
                                    
                                    6PART
      IITEM
      1.
                                    
                                    BUSINESS
                                    
                                    6Business
      Development
                                    
                                    9Principal
      Product
                                    
                                    9Market
      and Distribution of Product
                                    
                                    10Competitive
      Business Conditions
                                    
                                    10Customers
                                    
                                    10Royalty
      Agreements
                                    
                                    10Government
      Approval and Crown Royalties
                                    
                                    10Research
      and Development
                                    
                                    11Environmental
      Laws and Regulations
                                    
                                    11Employees
                                    
                                    12ITEM
      1A.
                                    
                                    RISK
      FACTORS
                                    
                                    12ITEM
      2.
                                    
                                    PROPERTIES
                                    
                                    15Office
      Leases
                                    
                                    15Oil
      & Gas Properties
                                    
                                    16Acreage
                                    
                                    17Reserves,
      Production and Delivery Commitments
                                    
                                    17Drilling
      Activity
                                    
                                    17Present
      Activities
                                    
                                    17Past
      Activities
                                    
                                    18ITEM
      3.
                                    
                                    LEGAL
      PROCEEDINGS
                                    
                                    19ITEM
      4.
                                    
                                    SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                    
                                    21PART
      IIITEM
      5.
                                    
                                    MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES
                                    
                                    22Market
      Price Information for Common Stock
                                    
                                    22Holders
      of Record
                                    
                                    22Dividends
                                    
                                    22Equity
      Compensation Plan Information
                                    
                                    22Performance
      Graph
                                    
                                    23Sales
      of Unregistered Securities
                                    
                                    24ITEM
      6.
                                    
                                    SELECTED
      FINANCIAL DATA
                                    
                                    26ITEM
      7.
                                    
                                    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                    
                                    27
  2
 
 ITEM
      7A.
                        
                        QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                        
                        31REPORT
      OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                        
                        32ITEM
      8.
                        
                        FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
                        
                        32Consolidated
      Balance Sheets
                        
                        33Consolidated
      Statements of Operations
                        
                        34Consolidated
      Statements of Shareholders’ Equity
                        
                        35Consolidated
      Statements of Cash Flows
                        
                        38Notes
      to the Consolidated Financial Statements
                        
                        39ITEM
      9.
                        
                        CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                        
                        55ITEM
      9A.
                        
                        CONTROLS
      AND PROCEDURES
                        
                        55ITEM
      9B.
                        
                        OTHER
      INFORMATION
                        
                        55PART
      IIIITEM
      10.
                        
                        DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                        
                        56ITEM
      11.
                        
                        EXECUTIVE
      COMPENSATION
                        
                        60ITEM
      12.
                        
                        SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                        
                        64ITEM
      13.
                        
                        CERTAIN
      RELATIONSHIP AND RELATED TRANSACTIONS
                        
                        67ITEM
      14.
                        
                        PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                        
                        68ITEM
      15.
                        
                        EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
                        
                        69SIGNATURES
                        
                        73
  3
  GLOSSARY
AND ABBREVIATIONS
 
 The
following are defined terms and abbreviations used herein:
 
 API – a scale developed by the
American Petroleum Institute for measuring the density or gravity (heaviness) of
oil; the higher the number, the lighter the oil.
 
 Barrel – the common unit for
measuring petroleum, including heavy oil. One barrel contains approximately 159
L.
 
 Battery – equipment to process
or store crude oil from one or more wells.
 
 Bbl or Bbls – means barrel or
barrels.
 
 Bitumen – is a heavy, viscous
form of crude oil that generally has an API gravity of less than 10
degrees.
 
 Cdn – means Canadian
dollars.
 
 Celsius – a temperature scale
that registers the freezing point of water as 0 degrees and the boiling point as
100 degrees under normal atmospheric pressure. Room temperature is between 20
degrees and 25 degrees Celsius.
 
 Cold Flow – is a production
technique where the oil is simply pumped out of the sands not using a Thermal
Recovery Technique.
 
 Conventional Crude Oil – Crude
oil that flows naturally or that can be pumped without being heated or
diluted.
 
 Core – a cylindrical rock
sample taken from a formation for geological analysis.
 
 Crude Oil – oil that has not
undergone any refining. Crude oil is a mixture of hydrocarbons with small
quantities of other chemicals such as sulphur, nitrogen and oxygen. Crude oil
varies radically in its properties, namely specific gravity and
viscosity.
 
 Cyclic Steam Stimulation
(“CSS”) – is a thermal in situ recovery method, which consists of a three-stage
process involving high-pressure steam injected into the formation for several
weeks. The heat softens the oil while the water vapor helps to dilute and
separate the oil from the sand grains. The pressure also creates channels and
cracks through which the oil can flow more easily to the well. When a portion of
the reservoir is thoroughly saturated, the steam is turned off and the reservoir
“soaks” for several weeks. This is followed by the production phase, when the
oil flows, or is pumped, up the same wells to the surface. When production rates
decline, another cycle of steam injection begins. This process is sometimes
called “huff-and-puff” recovery.
 
 Darcy (Darcies)– a measure of
rock permeability (the degree to which natural gas and crude oil can move
through the rocks).
 
 Density– the heaviness of
crude oil, indicating the proportion of large, carbon-rich molecules, generally
measured in kilograms per cubic metre (kg/m3) or degrees on the American
Petroleum Institute (API) gravity scale.
 
 Development Well – is a well
drilled within a proven area of a natural gas or oil reservoir to the depth of a
stratigraphic horizon known to be productive.
 
 Diluents– light
petroleum liquids used to dilute bitumen and heavy oil so they can flow through
pipelines.
 
 Drill Stem Test (“DST”)– a
method of formation testing. The basic drill stem test tool consists of a packer
or packers, valves or ports that may be opened and closed from the surface, and
two or more pressure-recording devices. The tool is lowered on the drill string
to the zone to be tested. The packer or packers are set to isolate the zone from
the drilling fluid column.
 
 Drill String– the column, or
string, of drill pipe with attached tool joints that transmits fluid and
rotational power from the kelly to the drill collars and the bit. Often, the
term is loosely applied to include both drill pipe and drill
collars.
 
 Enhanced Oil Recovery – any
method that increases oil production by using techniques or materials that are
not part of normal pressure maintenance or water flooding operations. For
example, natural gas can be injected into a reservoir to “enhance” or increase
oil production.
 
 Exploratory Well – is a well
drilled to find and produce natural gas or oil in an unproven area, to find a
new reservoir in a field previously found to be productive of natural gas or oil
in another reservoir, or to extend a known reservoir.
 
 Farmout – an arrangement
whereby the owner (the “Farmor”) of a lease assigns some portion (or all) of the
lease(s) to another company (the “Farmee”) for drilling in return for the Farmee
paying for the drilling on at least some portion of the lease(s) under the
Farmout.
 
 Gross Acre/Hectare – a gross
acre is an acre in which a working interest is owned. 1 acre = 0.404685
hectares.
  4
 
 Heavy Oil – oil having an API
gravity less than 22.3 degrees.
 
 Horizontal Well – the drilling
of a well that deviates from the vertical and travels horizontally through a
producing layer.
 
 In situ – In the oil sands
context, In situ
methods, In situ means
“in place” in Latin, such as SAGD or CSS through horizontal or vertical wells
are required, if the oil sands deposits are too deep to mine from the
surface.
 
 Lease – a legal document
giving an operator the right to drill for or produce oil or gas; also, the land
on which a lease has been obtained.
 
 License of Occupation (“LOC”)– is a surface crown agreement issued by the Alberta Department of
Sustainable Resources Development granting the mineral producer the right to
occupy public lands for an approved purpose, they are usually issued primarily
for access roads or to construct access roads, but may also be issued for other
purposes.
 
 Light Crude Oil – liquid
petroleum which has a low density and flows freely at room temperature. Also
called conventional oil, has an API gravity of at least 22 degrees and a
viscosity less than 100 centipoise (cP).
 
 Mineral Surface Lease (MSL) –
is a surface crown agreement issued by the Alberta Department of Sustainable
Resources Development granting the mineral producer the right to construct a
well site on publicly owned land.
 
 Net Acre/Hectare – a net acre
is the result that is obtained when fractional ownership working interest is
multiplied by gross acres.
 
 Oil Sands – are naturally
occurring mixtures of bitumen, water, sand and clay that are found mainly in
three areas of Alberta - Athabasca, Peace River and Cold Lake. A typical sample
of oil sand might contain about 12 percent bitumen by weight.
 
 Pay Zone (Net Oil Pay) – the
producing part of a formation.
 
 Permeability – the capacity of
a reservoir rock to transmit fluids; how easily fluids can pass through a rock.
The unit of measurement is the darcy or millidarcy.
 
 Porosity – the capacity of a
reservoir to store fluids, the volume of the pore space within a reservoir,
measured as a percentage.
 
 Primary Recovery – the
production of oil and gas from reservoirs using the natural energy available in
the reservoirs and pumping techniques.
 
 Saturation – the relative
amount of water, oil and gas in the pores of a rock, usually as a percentage of
volume.
 
 SEC – means United States
Securities and Exchange Commission.
 
 Section – in reference to a
parcel of land, meaning an area of land comprising approximately 640
acres.
 
 Solution Gas – natural gas
that is found with crude oil in underground reservoirs. When the oil comes to
the surface, the gas expands and comes out of the solution.
 
 Steam-Assisted Gravity Drainage
(“SAGD”) – pairs of horizontal wells (an upper well and a lower well) are
drilled into an oil sands formation and steam is injected continuously into the
upper well. As the steam heats the oil sands formation, the bitumen softens and
drains into the lower well, from which it is produced to the
surface.
 
 Thermal Recovery – a type of
improved recovery in which heat is introduced into a reservoir to lower the
viscosity of heavy oils and to facilitate their flow into producing wells. The
pay zone may be heated by injecting steam (steam drive) or by injecting air and
burning a portion of the oil in place (in situ combustion).
 
 Upgrading – the process that
converts bitumen and heavy oil into a product with a density and viscosity
similar to conventional light crude oil.
 
 Viscosity – is a measure of a
fluids resistance to flow. To simplify, the oil’s viscosity represents the
measure for which the oil wants to stay put when pushed (sheared) by moving
mechanical components. It varies greatly with temperature. The more viscous the
oil the greater the resistance and the less easy it is for it to flow.
Centipoise (cp) is the common unit for expressing absolute viscosity. Viscosity
matters to producers because the oil’s viscosity at reservoir temperature
determines how easily oil flows to the well for extraction.
  5
  CURRENCY
EXCHANGE RATES
 
 Our
functional currency is the US dollar, therefore our accounts are reported in
United States dollars; however, our Canadian subsidiaries maintain their
accounts and records in Canadian currency (“Cdn”). Therefore, all dollar amounts
herein are stated in United States dollars except where otherwise
indicated.
 
 The
following table sets forth the rates of exchange for Canadian dollars per
US$1.00 in effect at the end of the following periods and the average rates of
exchange during such periods, based on the Bank of Canada average noon spot rate
of exchange.
 
 Year ending September 30,
                            
                            2008
                            
                            
                            2007
                            
                            
                            2006
                            
                            
                            2005Rate
      at end of year
                            
                            $
                            1.0599
                            
                            
                            $
                            0.9963
                            
                            
                            $
                            1.1153
                            
                            
                            $
                            1.1611Average
      rate for the year
                            
                            $
                            1.0107
                            
                            
                            $
                            1.1132
                            
                            
                            $
                            1.1425
                            
                            
                            $
                            1.2231
 
 Unless
the context indicates another meaning, the terms the “Company”, “we”, “us” and
“our” refer to Deep Well Oil & Gas, Inc. and its subsidiaries. For
definitions of some terms used throughout this report, see “Glossary and
Abbreviations”.
 
 PART
I
 
 ITEM
1.                BUSINESS
 
 We are an
emerging independent junior oil and gas exploration and development company
headquartered in Edmonton, Alberta, Canada. Our immediate corporate focus is to
develop the existing oil sands land base that we presently own in the Peace
River oil sands area in North Central Alberta. Our principal office is located
at Suite 700, 10150 – 100 Street, Edmonton, Alberta T5J 0P6, our telephone
number is (780) 409-8144 and our fax number is (780) 409-8146. Deep Well Oil
& Gas, Inc. is a Nevada corporation and trades on the pink sheets under the
symbol DWOG. We maintain a web site at www.deepwelloil.com.
 
 Business
Development
 
 Deep Well
Oil & Gas, Inc. (hereinafter referred to as “Deep Well”) was originally
incorporated on July 18, 1988 under the laws of the state of Nevada as Worldwide
Stock Transfer, Inc. On October 25, 1990, Worldwide Stock Transfer, Inc. changed
its name to Illustrious Mergers, Inc. On June 18, 1991, a company known as
Allied Devices Corporation was merged with and into Illustrious Mergers, Inc.
and its name was at that time changed to Allied Devices Corporation. On August
19, 1996, a company called Absolute Precision, Inc. was merged with and into
Allied Devices Corporation and it retained its name as Allied Devices
Corporation.
 
 On
February 19, 2003, Allied Devices Corporation, filed a Petition for Relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court in
and for the Eastern District of New York titled In re: Allied Devices Corporation,
et al., Chapter 11, Case No. 03-80962-511 (hereinafter referred to as the
“Bankruptcy Action”).
 
 On
September 10, 2003, after notice to all creditors and a formal hearing, U.S.
Bankruptcy Judge Melanie L. Cyganowski issued an “Order Confirming Liquidating
Plan of Reorganization” in the Bankruptcy Action (hereinafter referred to as
“Bankruptcy Order”). In conjunction with that Bankruptcy Order, Allied Devices
Corporation’s (hereinafter referred to as the “Predecessor Company”)
liabilities, among other things, were paid off and extinguished. The Bankruptcy
Order, among other things, implemented a change of control and a group of new
investors took control of the Predecessor Company and changed its name to Deep
Well Oil and Gas, Inc.
 
 Upon
emergence from Chapter 11 proceedings, Deep Well adopted fresh-start reporting
in accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, Financial Reporting By Entities in Reorganization
Under the Bankruptcy Code (SOP 90-7). For financial reporting purposes, Deep
Well adopted the provisions of fresh-start reporting effective September 10,
2003. All periods presented prior to September 10, 2003, have been designated
Predecessor Company.
 
 On April
26, 2004, Northern Alberta Oil Ltd. (formerly known as Mikwec Energy Canada,
Ltd., hereinafter referred to as “Northern” and later acquired by Deep Well)
signed a Joint Operating Agreement with Pan Orient Energy Corp. (formerly known
as Maxen Petroleum Inc. hereinafter referred to as “Pan Orient”) to provide for
the manner of conducting operations on 3 Peace River oil sands development
leases for a total of 32 sections covering 20,243 gross acres (8,192 gross
hectares). The 32 sections were acquired jointly on April 23, 2004, with
Northern having an 80% working interest and Pan Orient having a 20% working
interest in the joint lands.
  6
 
 On August
18, 2004, Deep Well and Pan Orient jointly participated in a public offering of
Crown Oil Sands Rights held by the Alberta Department of Energy, in which the
joint parties successfully bid on 3 Peace River oil sands development leases for
a total of 31 sections covering 19,610 gross acres (7,936 gross hectares). Deep
Well acquired an undivided 80% working interest and Pan Orient acquired an
undivided 20% working interest in the joint property.
 
 On
December 9, 2004, Deep Well signed a Joint Operating Agreement with 1132559
Alberta Ltd. (hereinafter referred to as “1132559”) under which 1132559
acknowledged the terms under which their 10% working interest acquired from Pan
Orient, in the joint lands covering 3 Peace River oil sands development leases
for a total of 31 sections, which Pan Orient acquired on April 23, 2004, would
be governed.
 
 On
February 25, 2005, Deep Well and Northern signed a farmout agreement
(hereinafter referred to as the “Farmout Agreement”) with Surge Global Energy,
Inc. (hereinafter referred to as “Surge US”) and Signet Energy Inc. (formerly
known as Surge Global Energy Canada Ltd., and hereinafter referred to as
“Signet”) (collectively, “Surge”). Signet subsequently merged with 1350826
Alberta Ltd. a wholly owned subsidiary of Andora Energy Corporation (hereinafter
referred to as “Andora”, a company approximately 53% owned by Pan Orient). This
agreement allowed Surge to earn up to a 40% working interest in the farmout
lands (50% of our share). Among other things the agreement called for Surge to
drill 10 wells, pay $2,000,000 (less expenses related to a financing) as a
prospect fee, payable as ninety percent (90%) to Northern and ten percent (10%)
to Deep Well, and grant us, in the same proportions, 33.33% of the shares of
Surge US outstanding on the day the agreement was signed.
 
 On March
3, 2005, Deep Well, Northern and Surge mutually agreed by letter amending
agreement to extend the payment of the prospect fee under Article 13 of the
Farmout Agreement dated February 25, 2005, whereby Surge was granted an
extension for payment of the prospect fee to the closing date of March 18,
2005.
 
 On March
10, 2005, Deep Well, Northern and Surge mutually agreed by letter amending
agreement that Surge US is only a party to the Farmout Agreement for the
purposes of Article 14 of the Farmout Agreement dated February 25,
2005.
 
 On March
10, 2005, Deep Well, Northern and Surge mutually agreed by letter amending
agreement to establish a procedure whereby Signet is to be appointed as the
operator under the existing Joint Operating Agreements in respect of all Farmout
Lands in which Signet earns an interest pursuant to Article 7 of the Farmout
Agreement dated February 25, 2005.
 
 On June
7, 2005, Deep Well acquired 100% of the common shares of Northern in exchange
for 18,208,875 shares of Deep Well’s common stock. Under the terms of the
agreement, Deep Well acquired one hundred percent (100%) of Northern’s issued
and outstanding common stock and obtained exclusive options to acquire one
hundred percent (100%) of Northern’s preferred stock. The agreement provided
that one hundred percent (100%) of Northern’s common and preferred shareholders
would exchange their Northern shares for newly issued shares of Deep Well’s
restricted common stock. Deep Well, through its acquisition of Northern,
acquired a net 80% working interest in 3 Peace River oil sands development
leases, 1 oil sands permit and 1 petroleum and natural gas license for a total
of 38.5 sections covering 24,355 gross acres (9,856 gross hectares). Through
this acquisition we have more than doubled our acreage position in the Peace
River oil sands to 43,965 gross acres (17,792 gross hectares). Of the total
acreage, 6.5 sections are classified as the oil sands permit and petroleum and
natural gas license and were encumbered by an injunction related to a court
proceeding involving Classic Energy Inc., (hereinafter referred to as “Classic”)
the company Northern acquired this acreage from. This permit and license have
now been released and as of November 15, 2005, were transferred to
Northern.
 
 On July
14, 2005, our Company and Surge mutually agreed to amend the Farmout Agreement
dated February 25, 2005 in order to extend the date to spud the first well until
September 25, 2005.
 
 On
September 15, 2005, Deep Well Oil & Gas (Alberta) Ltd. (hereinafter referred
to as “Deep Well Alberta”), a 100% wholly owned subsidiary company of Deep Well,
was incorporated in the province of Alberta, Canada. Deep Well Alberta was
incorporated in order to hold Deep Well’s Canadian oil sands leases it acquired
on August 18, 2004, other than the oil sands leases already held by Northern. At
the time Deep Well owned 100% of the common shares of Northern but not the
preferred shares of Northern.
 
 On
September 21, 2005, Signet was granted a permit by the Energy Resources
Conservation Board (hereinafter referred to as the “ERCB”) for a test well, and
on September 28, 2005, Signet began drilling our first well 1-36-091-13W5
(hereinafter referred to as “1-36”) at Sawn Lake, Alberta Canada. Signet did not
spud the first well by the 25th of
September 2005 and we noted them in default of the Farmout
Agreement.
 
 In
October 2005, the ERCB granted our farmout partner and operator, Signet, an
amendment to the original test well permit at Sawn Lake, Alberta Canada, to
proceed with the drilling of our first well of our Sawn Lake
Project.
  7
 
 On
November 15, 2005, as part of the settlement of the litigation as described in
this report, we agreed to amend the Farmout Agreement signed on February 25,
2005, between our Company and Surge that had previously been terminated by Deep
Well (as previously disclosed on Form 8-K on September 29, 2005). The amendments
to the agreement provided that: 1.) all conditions of the Farmout Agreement will
be deemed to have been satisfied on September 25, 2005; 2.) the earning period
(the period during which Signet has to drill 10 wells) under the agreement will
be extended until February 25, 2008; 3.) Signet will have until September 25,
2006 to drill an option well (the second well); 4.) an additional 6.5 sections
of land will be added to the land subject to the agreement; 5.) Signet will pay
Deep Well $1,000,000 on November 15, 2005 in satisfaction of the prospect fee
outstanding instead of after drilling the second well as stated in the Farmout
Agreement; and 6.) no shares of Surge US will be issued to Deep Well or
Northern, instead we will receive 7,550,000 common shares of Signet, a private
subsidiary company of Surge US.
 
 On July
17, 2006, Signet had received the required licenses by the Government of Alberta
to drill the next 3 horizontal wells in the Bluesky Formation of the Sawn Lake
Heavy oil sands project. The next 3 wells drilled were within less than one mile
(1.6 km) of the first test well that was already drilled. These surface
locations were 4-32-091-12W5 (hereinafter referred to as “4-32”), 7-30-091-12W5
(hereinafter referred to as “7-30”) and 13-29-091-12W5 (hereinafter referred to
as “13-29”). Seismic and reservoir mapping were undertaken to be used to support
and progress work on near and long-term plans of development for the Sawn Lake
heavy oil project. For further information on drilling and results see “Present
Activities” under Item 2 “Oil and Gas Properties” herein described in this
report.
 
 In
October 2006, the 4-32 and 7-30 wells along with the 1-36 well were suspended.
Signet had undertaken a mapping of the reservoir to assist in its delineation
for any future development of the Sawn Lake property. The first three wells were
drilled in the most heavily documented portion of the Sawn Lake lands. Although,
as indicated by Signet, the preliminary results from the last 2 wells indicated
a lack of cold flow production from well 4-32 and 7-30, the compartmentalized
nature of the reservoir and varying characteristics of these compartments may
show different results with further evaluation. Our Company felt that the level
of testing on these wells to determine their complete potential was
deficient.
 
 On
September 11, 2007, we exercised our dissenting rights at Signet’s special
meeting of shareholder's held in Calgary, Alberta with respect to the
amalgamation between Signet and Andora. Our Company reserves its right to file a
Notice of Motion with the Court of Queen’s Bench of Alberta, Canada as a step
towards enforcing our rights to dissent. On November 19, 2008, we entered into
an arrangement whereby Deep Well’s subsidiaries, Deep Well Alberta and Northern,
exchanged their 755,000 and 6,795,000 common shares of Signet respectively into
224,156 and 2,017,402 common shares of Andora respectively.
 
 On
November 26, 2007, we entered into mediation with Signet and resolved our
differences and certain collateral matters. The settlement included but is not
limited to:
 
 ·
              the
      Farmout Agreement dated February 25, 2005, being effectively terminated
      concurrently with the execution of the settlement agreement;
      and
 ·
              Signet
      being regarded as having earned the two sections on which the option wells
      were drilled and 4 additional sections as set out in the Settlement;
      and
 ·
              Signet
      being required to reconvey registered title to 57.5 unearned sections of
      the Farmout Lands, as defined in the Farmout Agreement, back to us;
      and
 ·
              our
      Company having the right to retest, at no cost to Signet, the option wells
      previously drilled.
 
 On March
18, 2008, the 6.5 section oil sands permit, which was originally scheduled to
expire on April 9, 2008, was extended for one year pursuant to an application
submitted to the Alberta Department of Energy by Northern.
 
 On April
2, 2008, our Company participated in a public offering of Crown Petroleum and
Natural Gas Rights held by the Alberta Department of Energy, in which the
Company successfully bid on 1 petroleum and natural gas license covering 3,796
gross acres (1,536 gross hectares) for a total of 6 sections in the Ochre area.
Our Company acquired an undivided 100% working interest in these 6 sections
located in the Peace River oil sands area approximately 14 miles west of our
Sawn Lake properties.
 
 On
September 10, 2008, the ERCB granted us well licenses to drill 6 wells on our
Sawn Lake oil sands properties.
 
 On
December 1, 2008, Deep Well Alberta acquired 6 petroleum and natural gas rights
parcels, of which 2 were expected to immediately expire, covering 11,387 gross
acres (4,608 gross hectares) from Paramount Resources Ltd. (“Paramount”).
Included in this land acquisition, Paramount transferred 7 mineral surface
leases (proposed well sites or “MSLs”) and 4 licenses of occupation, totalling
12 km of access roads on our Sawn Lake oil sands properties (“LOCs”). Along with
this acquisition we acquired 2 wells. Of the 2 wells, one was drilled to a
vertical depth of 737 meters on our existing oil sands lease and subsequent to
the drilling and logging operations; this well was cased for bluesky heavy oil
production.
  8
 
 On
December 4, 2008, we successfully spudded the first well of six wells to be
drilled in our 2008/2009 Sawn Lake winter drilling program in the Peace River
oil sands area of Alberta. By early February of 2009, we successfully drilled
all planned 6 wells of our Sawn Lake oil sands project
 
 On
February 1, 2009, Northern acquired another existing access road on our Sawn
Lake properties from Penn West Petroleum Ltd. adding 8.7 km of roads to its Sawn
Lake infrastructure.
 
 On May 5,
2009, we were informed by the Alberta Department of Energy that they had
approved our application to convert 5 sections of our 5-year oil sands permit to
a 15-year primary lease.
 
 Currently,
Deep Well and its subsidiaries Northern and Deep Well Alberta have a 100%
working interest in 15 sections of petroleum and natural gas licenses
(hereinafter referred to as “P&NG”) in the Peace River area of Alberta,
Canada, an 80% working interest in 56 contiguous sections of oil sands
development leases, and a 40% working interest in an additional 12 contiguous
sections of oil sands development leases in the Peace River oil sands area of
Alberta, Canada. Our P&NG licenses and oil sands development leases cover
52,505 gross acres (21,248 gross hectares). After successfully completing our
winter drilling program and meeting our objectives by drilling 6 wells we are
now evaluating the many options for production now available to us to decide the
best course of action. Drilling on these 80% owned lands has opened new avenues
for testing and further development of the Sawn Lake project. On the 12 sections
of the jointly held lands, in which we have a 40% working interest, our Company
is exploring different plans of action with Andora Energy Corporation, the
operator of these 12 sections. The focus of our Company’s drilling program is to
define the heavy oil reservoir to establish reserves and to determine the best
technology under which oil can be produced from the Sawn Lake project in order
to initiate production and generate a cash flow.
 
 Principal
Product
 
 At this
time, our primary interest is the exploration for and production of oil in the
Peace River oil sands area located in North Central Alberta, Canada. We are
engaged in the identification, acquisition, exploration and development of oil
& gas prospects. Our immediate focus is the oil sands leases we hold in the
Peace River oil sands area. Our main objective is to develop our existing oil
sands land holdings as well as identify and develop other commercially viable
oil & gas properties. Exploration and development for commercially viable
production of any oil and gas company includes a high degree of risk which
careful evaluation, experience and factual knowledge may not eliminate.
Currently we have no production from our properties.
 
 Market and Distribution of
Product
 
 We
anticipate our principal target market to be refiners, remarketers and other
companies, some of which have pipeline facilities near our properties. In the
event pipeline facilities are not conveniently available, we intend to truck our
oil to alternative storage, refining or pipeline facilities. In such a case, if
our production was enough to justify our own pipeline facilities we would
consider building them.
 
 We intend
to sell our oil and gas production under both short-term (less than one year)
and long-term (one year or more) agreements at prices negotiated with third
parties. Under both short-term and long-term contracts, typically either the
entire contract (in the case of short-term contracts) or the price provisions of
the contract (in the case of long-term contracts) are renegotiated from
intervals ranging in frequency from daily to annual. At this time we have no
production and therefore no short-term or long-term contracts. We will adopt
specific sales and marketing plans once production is achieved.
 
 Market
pricing for bitumen is seasonal with lower prices in and around the calendar
year-end being the norm due to lower demand for asphalt and other
bitumen-derived products. By necessity, bitumen is regularly blended with
diluent in order to facilitate its transportation via pipeline to North American
markets. As such, the effective field price for bitumen is also directly
impacted by the input cost of the diluent required, the demand and price of
which is also seasonal in nature (higher in winter as colder temperatures
necessitate more diluent for transportation). Consequently, bitumen pricing is
notoriously weak in and around December 31 and not reflective of the annual
average realized price or the economics of the “business” overall. We have been
advised that, to price bitumen, marketers apply formulas that take as a
reference point the prices published for crude oil of particular qualities such
as “Edmonton light”, “Lloydminster blend”, or the more internationally known
“West Texas Intermediate” (hereinafter referred to as WTI). We also understand
that the price of bitumen fluctuates widely during the course of a year, with
the lowest prices typically occurring at the end of the calendar year because of
decreased seasonal demand for asphalt and other bitumen-derived products coupled
with higher prices for diluents added to facilitate pipeline transportation of
bitumen.
  9
 
 The price
of oil and, natural gas sold is determined by negotiation between buyers and
sellers. An order from the National Energy Board (hereinafter referred to as
“NEB”) is required for oil exports from Canada. Any oil export to be made
pursuant to an export contract of longer than one year, in the case of light
crude, and two years, in the case of heavy crude, requires an exporter to obtain
an export license from the NEB. The issue of such a license requires the
approval of the Government of Canada. Natural gas exported from Canada is also
subject to similar regulation by the NEB. Natural gas exports for a term of less
than two years, or for a term of two to twenty years in quantities of not more
than 20,000 mcf per day, must be made pursuant to an NEB order. Any natural gas
exports to be made pursuant to a contract of larger duration (to a maximum of 25
years) or in larger quantities require an exporter to obtain a license from the
NEB, which requires the approval of the Government of Canada. Exporters are free
to negotiate prices and other terms with purchasers provided that the export
contracts meet certain criteria prescribed by the NEB. The government of Alberta
also regulates the volume of natural gas, which may be removed from the province
for consumption elsewhere based on such factors as reserve availability,
transportation arrangements and market considerations.
 
 Competitive Business
Conditions
 
 We
operate in a highly competitive environment, competing with major integrated and
independent energy companies for desirable oil and natural gas properties as
well as for the equipment, labour and materials required to develop and operate
those properties. Many of our competitors have longer operating histories and
substantially greater financial and other resources greater than ours. Many of
these companies not only explore for and produce crude oil and natural gas, but
also carry on refining operations and market petroleum and other products on a
worldwide basis. Our larger competitors, by reason of their size and relative
financial strength, can more easily access capital markets than we can and may
enjoy a competitive advantage, whereas we may incur higher costs or be unable to
acquire and develop desirable properties at costs we consider reasonable because
of this competition. Larger competitors may be able to absorb the burden of any
changes in laws and regulation in the jurisdictions in which we do business and
handle longer periods of reduced prices of gas and oil more easily than we can.
Our competitors may be able to pay more for productive oil and natural gas
properties and may be able to define, evaluate, bid for and purchase a greater
number of properties and prospects than we can. Our ability to acquire
additional properties in the future will depend upon our ability to conduct
efficient operations, evaluate and select suitable properties, implement
advanced technologies and consummate transactions in a highly competitive
environment.
 
 Competitive
conditions may be substantially affected by various forms of energy legislation
and/or regulation considered from time to time by the government of Canada and
other countries as well as factors that we cannot control, including
international political conditions, overall levels of supply and demand for oil
and gas, and the markets for synthetic fuels and alternative energy
sources.
 
 Customers
 
 As we
remain in the exploration stage, we have not yet generated any revenues from
production, nor do we have any customers at this time. We anticipate our
principal target customers to be refiners, remarketers and other
companies.
 
 Royalty
Agreements
 
 Through
the acquisition of Northern, our Company became a party to the following royalty
agreement:
 
 On
December 12, 2003, Nearshore Petroleum Corporation (hereinafter referred to as
“Nearshore”) entered into a Royalty Agreement with Northern that potentially
encumbers 3 oil sands development leases and 1 oil sands permit located within
our Sawn Lake properties. Nearshore claims a 6.5% gross overriding royalty from
Northern on the leased substances on the land interests in which Northern holds
in the above 3 leases and permit. Nearshore is a private corporation
incorporated in Alberta, Canada, and is owned and controlled by Mr. Steven P.
Gawne and his wife, Mrs. Rebekah J. Gawne, who each own 50% of Nearshore. Mr.
Steven P. Gawne was formerly the President, Chief Executive Officer and Director
of Deep Well from February 6, 2004 to June 29, 2005.
 
 On
February 28, 2005, Deep Well, Northern and Surge agreed that Deep Well would be
responsible for the portion of the claimed 6.5% royalty payable by Surge, if
any, on lands earned under the February 25, 2005 Farmout Agreement. This
liability could arise by virtue of a royalty agreement between Northern and
Nearshore dated December 12, 2003. And on February 28, 2005, Nearshore, Deep
Well, Northern and Surge, mutually agreed that an area of exclusion between
Nearshore and Northern was terminated effective February 17, 2005 since the area
of exclusion could interfere with the area of mutual interest provisions in the
Farmout Agreement with Surge. This obligation of our Company was further
modified on November 26, 2007 where we would not be liable or obligated to pay
any of this claimed portion of the royalty due, if any, on the portion of the
royalty acquired by Andora.
 
 Government Approval and
Crown Royalties
 
 Exploration and
Production. Our operations are subject to Canadian federal and provincial
governmental regulations. Such regulations include requiring licenses for the
drilling of wells, regulating the location of wells and the method and ability
to produce wells, surface usage and the restoration of land upon which wells
have been drilled, the plugging and abandoning of wells and the transportation
of production from wells. Our operations are also subject to various
conservation regulations, including the regulation of the size of spacing units,
the number of wells which may be drilled in a unit, the unitization or pooling
of oil and gas properties, the rate of production allowable from oil and gas
wells, and the ability to produce oil and gas.
  10
 
 The North
American Free Trade Agreement. The North American Free Trade Agreement
(hereinafter referred to as “NAFTA”) grants Canada the freedom to determine
whether exports to the United States or Mexico will be allowed. In making this
determination, Canada must ensure that any export restrictions do not (i) reduce
the proportion of energy exported relative to the supply of the energy resource;
(ii) impose an export price higher than the domestic price; or (iii) disrupt
normal channels of supply. All parties to NAFTA are also prohibited from
imposing minimum export or import price requirements.
 
 Investment Canada
Act. TheInvestment Canada Act
requires notification and/or review by the Government of Canada in certain
cases, including but not limited to, the acquisition of control of a Canadian
Business by a non-Canadian. In certain circumstances, the acquisition of a
working interest in a property, which contains recoverable reserves will be
treated as the acquisition of an interest in a “business” and may be subject to
either notification or review, depending on the size of the interest being
acquired and the asset size of the business.
 
 Crown Royalties
and Incentives.
Each province and the federal government of Canada have legislation and
regulations governing land tenure, royalties, production rates and taxes,
environmental protection and other matters under their respective jurisdictions.
The royalty regime is a significant factor in the profitability of oil and
natural gas production. Royalties payable on production from lands other than
Crown lands are determined by negotiations between the parties. Crown royalties
are determined by government regulation and are generally calculated as a
percentage of the value of the gross production with the royalty rate dependent
in part upon prescribed reference prices, well productivity, geographical
location, field discovery date and the type and quality of the petroleum product
produced. From time to time, the governments of Canada and Alberta have
established incentive programs such as royalty rate reductions, royalty
holidays, tax credits, and more recently drilling royalty credits and a new well
incentive program, which provides a maximum five percent royalty rate for all
new wells that begin producing conventional oil and natural gas between April 1,
2009 and March 31, 2011. These incentives are for the purpose of encouraging oil
and natural gas exploration or enhanced recovery projects. These incentives
generally increase cash flow.
 
 Effective
January 1, 2009 oil sands royalties in Alberta are calculated using a sliding
scale for royalty rates ranging from 1% to 9% pre-payout and 25% to 40%
post-payout depending on the world oil price. Project “payout” refers to the
point in which we earn sufficient revenues to recover all of the allowed costs
for the project plus a return allowance. The base royalty starts at 1% and
increases for every dollar the world oil price, as reflected by the West Texas
Intermediate (hereinafter referred to as “WTI”), is priced above $55 per barrel,
to a maximum of 9% when oil is priced at $120 per barrel or greater. The net
royalty starts at 25% and increases for every dollar oil is priced above $55 per
barrel to 40% when oil is priced at $120 or higher.
 
 Research and
Development
 
 We had no
material research and development costs for the fiscal years ended September 30,
2008, 2007 and 2006
 
 Environmental Laws and
Regulations
 
 The oil
and natural gas industry is subject to environmental laws and regulations
pursuant to Canadian local, provincial and federal legislation. Environmental
legislation provides for restrictions and prohibitions on releases or emissions
of various substances produced or utilized in association with certain oil and
gas industry operations. In addition, legislation requires that well and
facility sites be monitored, abandoned and reclaimed to the satisfaction of
provincial authorities. A breach of such legislation may result in the
imposition of fines and penalties. Under these laws and regulations, we could be
liable for personal injury, clean-up costs and other environmental and property
damages as well as administrative, civil and criminal penalties. Accordingly, we
could be liable, or could be required to cease production on properties if
environmental damage occurs. Although we maintain insurance coverage, the costs
of complying with environmental laws and regulations in the future may harm our
business. Furthermore, future changes in environmental laws and regulations
could occur that result in stricter standards and enforcement, larger fines and
liability, and increased capital expenditures and operating costs, any of which
could have a material adverse effect on our financial condition or results of
operations. We maintain limited commercial property and general liability
insurance coverage on the properties we operate. We also maintain limited
operators extra expense insurance which provides limited coverage for well
control incidents specifically relating to regaining control of a well, seepage,
pollution, clean-up and containment. No coverage is maintained with respect to
any fine or penalty required to be paid due to a violation of the regulations
set out by the federal and provincial regulatory authorities. We are committed
to meeting our responsibilities to protect the environment and anticipate making
increased expenditures of both a capital and expense nature as a result of the
increasingly stringent laws relating to the protection of the
environment.
 
 Alberta’s
new climate change regulation, effective July 1, 2007, requires Alberta
facilities that emit more than 100,000 tonnes of greenhouse gases a year to
reduce emissions intensity by 12 per cent. Companies have four choices to meet
their reductions: 1.) they can make operating improvements to their operations
that will result in greenhouse gas emission reductions; 2.) purchase Alberta
based offset credits; 3.) contribute to the Climate Change and Emissions
Management Fund; and 4.) purchase or use emission performance credits, also
called EPCs, these credits are generated by facilities that have gone beyond the
12% mandatory intensity reduction. EPCs can be banked for future use or sold to
other facilities that need to meet the reduction target.
  11
 
 On June
18, 2009 the Canadian government passed the new Environmental Enforcement Act
(“EEA”). The EEA was created to strengthen and amend nine existing Statutes that
relate to the environment and to enact provisions respecting the enforcement of
certain Statutes that relate to the environment. The EEA amends various
enforcement, offence, penalty and sentencing provisions to deter offenders from
committing offences under the EEA by setting minimum and maximum fines for
serious offences. The EEA also gives enforcement officers new powers to
investigate cases and grants courts new sentencing authorities that ensure
penalties reflect the seriousness of the pollution and wildlife offences. The
EEA also expands the authority to deal with environmental offenders by: 1.)
specifying aggravating factors such as causing damage to wildlife or wildlife
habitat, or causing damage that is extensive, persistent or irreparable; 2.)
providing fine ranges higher for corporate offenders than for individuals; 3.)
doubling fine ranges for repeat offenders; 4.) authorizing the suspension and
cancellation of licenses, permits or other authorizations upon conviction; 5.)
requiring corporate offenders to report convictions to shareholders; and 6.)
mandating the reporting of corporate offences on a public registry.
 
 Employees
 
 Our
Company currently has four prime subcontractors and three full-time employees.
This is an increase of one full-time employee since our last filed Form 10-KSB.
For further information on our subcontractors see “Compensation Arrangements for
Executive Officers” under Item 11 “Executive Compensation”. We expect to hire
from time to time more employees, independent consultants, and contractors
during the stages of implementing our plans.
 
 ITEM
1A.             RISK
FACTORS
 
 An
investment in our common stock is speculative and involves a high degree of risk
and uncertainty. You should carefully consider the risks described below,
together with the other information contained in our reports filed with the SEC,
including the consolidated financial statements and notes thereto of our Company
before deciding to invest in our common stock. The risks described below are not
the only ones facing our Company. Additional risks not presently known to us, or
that we presently consider immaterial may also adversely affect our Company. If
any of the following risks occur, our business, financial condition and results
of operations and the value of our common stock could be materially and
adversely affected.
 
 Any
Development of Our Resources Will Be Subject To Crown Royalties.The royalty regime of Alberta is a
significant factor in the profitability of oil and natural gas production in
Alberta, Canada. Crown royalties are determined by government regulation and are
generally calculated as a percentage of the value of the gross production with
the royalty rate dependent in part upon prescribed reference prices, well
productivity, geographical location, field discovery date and the type and
quality of the petroleum product produced. From time to time, the governments of
Canada and Alberta have established incentive programs such as royalty rate
reductions, royalty holidays, tax credits, and more recently drilling royalty
credits and a new well incentive program, which provides a maximum five percent
royalty rate for all new wells that begin producing conventional oil and natural
gas between April 1, 2009 and March 31, 2011. These incentives are for the
purpose of encouraging oil and natural gas exploration or enhanced recovery
projects. These incentives generally increase cash flow. Penalties andinterest may be charged to
us if we fail to remit royalties on our production to the Crown as prescribed in
the regulation.
 
 We Are An
Exploration Stage Company Implementing A New Business Plan. We are an
exploration stage Company with only a limited operating history upon which to
base an evaluation of our current business and future prospects, and we have
just begun to implement our business plan. Since our inception, we have suffered
recurring losses from operations and have been dependent on new investment to
sustain our operations. During the years ended September 30, 2007 and 2006 we
reported net losses of $1,435,664 and $1,922,282 respectively. In addition, our
consolidated financial statements for the years ended September 30, 2006 and
2005 contained a “going concern” qualification and we cannot give any assurances
that we can achieve profits from any future operations.
 
 The Successful
Implementation Of Our Business Plan Is Subject To Risks Inherent In The Heavy
Oil Business. Our heavy oil operations are subject to the economic risks
typically associated with exploration, development and production activities,
including the necessity of significant expenditures to locate and acquire
properties and to drill exploratory wells. In addition, the cost and timing of
drilling, completing and operating wells is often uncertain. In conducting
exploration and development activities, the presence of unanticipated pressure
or irregularities in formations, miscalculations or accidents may cause our
exploration, development and production activities to be unsuccessful. This
could result in a total loss of our investment in a particular property. If
exploration efforts are unsuccessful in establishing proven reserves and
exploration activities cease, the amounts accumulated as unproven costs will be
charged against earnings as impairments. Our exploitation and development of oil
and gas reserves depends upon access to the areas where our operations are to be
conducted. We conduct a portion of our operations in regions where we are only
able to do so on a seasonal basis. Unless the surface is sufficiently frozen, we
are unable to access our properties, drill or otherwise conduct our operations
as planned. In addition, if the surface thaws earlier than expected, we must
cease our operations for the season earlier than planned. Our operations are
affected by road bans imposed from time to time during the break-up and thaw
period in the Spring. Road bans are also imposed due to spring-break up, heavy
rain, mud, rock slides and periods of high water, which can restrict access to
our well sites and potential production facility sites. Our inability to access
our properties or to conduct our operations as planned will result in a shutdown
or slow down of our operations, which will adversely affect our
business.
  12
 
 We Rely On
Independent Experts And Technical Or Operational Service Providers Over Whom We
May Have Limited Control.The success of our business is dependent upon
the efforts of various third parties that we do not control. We rely upon
various companies to assist us in identifying desirable oil prospects to acquire
and to provide us with technical assistance and services. We also rely upon the
services of geologists, geophysicists, chemists, engineers and other scientists
to explore and analyze oil prospects to determine a method in which the oil
prospects may be developed in a cost-effective manner. In addition, we rely upon
the owners and operators of oil drilling equipment to drill and develop our
prospects to production. Although we have developed relationships with a number
of third-party service providers, we cannot assure that we will be able to
continue to rely on such persons. If any of these relationships with third-party
service providers are terminated or are unavailable on commercially acceptable
terms, we may not be able to execute our business plan. Our limited control over
the activities and business practices of these third parties, any inability on
our part to maintain satisfactory commercial relationships with them or their
failure to provide quality services could materially and adversely affect our
business, results of operations and financial condition.
 
 Our Interests Are
Held In The Form Of Leases That We May Be Unable To Retain.Our Swan Lake
property is held under leases and working interests in leases. These leases we
are a party to are for a fixed term of 15 years, but contain a provision that
allows us to extend the term of the lease so long as we meet the minimum level
of evaluation as set out by the Government of Alberta tenure guidelines. If we
or the holder of a lease fails to meet the specific requirements of the lease
regarding delay or non-payment of rental payments or we or the holder of the
lease fail to meet the minimum level of evaluation some or all of our leases may
terminate or expire. There can be no assurance that any of the obligations
required to maintain each lease will be met. The termination or expiration of
our leases or the working interests relating to leases may reduce our
opportunity to exploit a given prospect for oil production and thus have a
material adverse effect on our business, results of operation and financial
condition.
 
 We Expect Our
Operating Expenses To Increase Substantially In The Future And We May Need To
Raise Additional Funds. We have a history of net
losses and expect that our operating expenses will increase substantially over
the next 12 months as we continue to implement our business plan. In addition,
we may experience a material decrease in liquidity due to unforeseen capital
calls or other events and uncertainties. As a result, we may need to raise
additional funds, and such funds may not be available on favourable terms, if at
all. If we cannot raise funds on acceptable terms, we may not be able to execute
on our business plan, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements. This may seriously harm our
business, financial condition and results of operations.
 
 Our Ability To
Produce Sufficient Quantities Of Oil From Our Properties May Be Adversely
Affected By A Number Of Factors Outside Of Our Control. The business of
exploring for and producing oil and gas involves a substantial risk of
investment loss. Drilling oil wells involves the risk that the wells may be
unproductive or that, although productive, the wells may not produce oil in
economic quantities. Other hazards such as unusual or unexpected geological
formations, pressures, fires, blowouts, loss of circulation of drilling fluids
or other conditions may substantially delay or prevent completion of any well.
Adverse weather conditions can also hinder drilling operations. A productive
well may become uneconomic due to pressure depletion, water encroachment,
mechanical difficulties, etc., which impair or prevent the production of oil
and/or gas from the well. There can be no assurance that oil will be produced
from the properties in which we have interests. Marketability of any oil that we
acquire or discover may be influenced by numerous factors beyond our control.
The marketability of our production will depend on the proximity of our reserves
to and the capacity of, third party facilities and services, including oil and
natural gas gathering systems, pipelines, trucking or terminal facilities, and
processing facilities. The unavailability or insufficient capacity of these
facilities and services could force us to shut-in producing wells, delay the
commencement of production, or discontinue development plans for some of our
properties, which would adversely affect our financial condition and
performance. There may be periods of time when pipeline capacity is inadequate
to meet our oil transportation needs. During periods when pipeline capacity is
inadequate, we may be forced to reduce production or incur additional expense as
existing production is compressed to fit into existing pipelines. Other risk
factors include availability of drilling and related equipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and
environmental protection. We cannot predict how these factors may affect our
business.
 
 We Do Not Control
All Of Our Operations. We do not operate all of our properties and we
therefore have limited influence over the testing, drilling and production
operations of those properties. Andora currently operates 12 of our 68 oil
sections in which we have a working interest. Currently, our Company has a 100%
working interest in 15 sections of petroleum and natural gas licenses in the
Peace River area of Alberta, Canada, an 80% working interest in 56 contiguous
sections of oil sands development leases, and a 40% working interest in an
additional 12 contiguous sections of oil sands development leases in the Peace
River oil sands area of Alberta, Canada. Our P&NG licenses and oil sands
development leases cover 52,505 gross acres (21,248 gross hectares). Our lack of
control of the 12 sections Andora currently operates could result in the
following:
  13
 
 ·
              Andora
      might initiate exploration or development on a faster or slower pace than
      we prefer;
 
 ·
              Andora
      might propose to drill more wells or build more facilities on a project
      than we have funds for or that we deem appropriate, which could mean that
      we are unable to participate in the project or share in the revenues
      generated by the project;
 
 ·
              If
      Andora refuses to initiate a project on these 12 sections, we might be
      unable to pursue the project.
 
 Any of
these events could materially reduce the value of those properties
affected.
 
 We Are Party To
Some Lawsuits And Will Be Adversely Affected If We Are Found To Be Liable In
Connection With Any Legal Proceedings.We are party to some
lawsuits described in this Form 10-K under the heading “Legal Proceedings”. We
intend to vigorously defend ourselves against the claims made in the lawsuits,
but we cannot predict the outcome of these proceedings, the commencement or
outcome of any future proceedings against us, or whether any such proceeding
would lead to monetary damages that would have a material adverse effect on our
financial position.
 
 Aboriginal
Peoples May Make Claims Regarding The Lands On Which Our Operations Are
Conducted. Aboriginal peoples have claimed aboriginal title and rights to
a substantial portion of western Canada. Since aboriginal peoples have filed a
claim claiming aboriginal title or rights to the lands on which some of our
properties are located, and if such a claim is successful, it could have a
material adverse effect on our operations.
 
 The ERCB
governs our operations in Alberta, Canada and they have implemented a new
directive (Directive 056) that the Alberta Government issued its First Nations
Consultation Policy on Land Management and Resource Development on May 16, 2005.
The ERCB expects that all industry applicants must adhere to this policy and the
consultation guidelines. These requirements and expectations apply to the
licensing of all new energy developments and all modifications to existing
energy developments, as covered in Directive 056. In the policy, the Alberta
Government has developed consultation guidelines to address specific questions
about how consultation for land management and resource development should occur
in relation to specific activities. Prior to filing an application, the
applicant must address all questions, objections, and concerns regarding the
proposed development project and attempt to resolve them. This includes concerns
and objections raised by members of the public, industry, government
representatives, First Nations, Métis, and other interested parties. This
process can cause significant delays in obtaining a drilling permit for
exploration and/or a production well license for both oil and gas.
 
 Our Operations
Are Subject To A Wide Range of Environmental Legislation and Regulation From All
Levels Of Government Of Which We Have No Control.Environmental
legislation imposes, among other things, restrictions, liabilities and
obligations in connection with the generation, handling, storage,
transportation, treatment and disposal of hazardous substances and waste and in
connection with spills, releases and emissions of various substances to the
environment. As well, environmental regulations are imposed on the qualities and
compositions of the products sold and imported. Environmental legislation also
requires that wells, facility sites and other properties associated with our
operations be operated, maintained, abandoned and reclaimed to the satisfaction
of applicable regulatory authorities. In addition, certain types of operations,
including exploration and development projects and significant changes to
certain existing projects, may require the submission and approval of
environmental impact assessments. Compliance with environmental legislation can
require significant expenditures and failure to comply with environmental
legislation may result in the imposition of fines and penalties and liability
for clean up costs and damages. We cannot assure that the costs of complying
with environmental legislation in the future will not have a material adverse
effect on our financial condition or results of operations. We anticipate that
changes in environmental legislation may require, among other things, reductions
in emissions to the air from its operations and result in increased capital
expenditures. Future changes in environmental legislation could occur and result
in stricter standards and enforcement, larger fines and liability, and increased
capital expenditures and operating costs, which could have a material adverse
effect on our financial condition or results of operations.
 
 Market
Fluctuations In The Prices Of Oil Could Adversely Affect Our Business.
Prices for oil tend to fluctuate significantly in response to factors beyond our
control. These factors include, but are not limited to, the continued threat of
war in the Middle East and actions of the Organization of Petroleum Exporting
Countries and its maintenance of production constraints, the U.S. economic
environment, weather conditions, the availability of alternate fuel sources,
transportation interruption, the impact of drilling levels on crude oil and
natural gas supply, and the environmental and access issues that could limit
future drilling activities for the industry.
 
 Changes
in commodity prices may significantly affect our capital resources, liquidity
and expected operating results. Price changes directly affect revenues and can
indirectly impact expected production by changing the amount of funds available
to reinvest in exploration and development activities. Reductions in oil and gas
prices not only reduce revenues and profits, but could also reduce the
quantities of reserves that are commercially recoverable. Significant declines
in prices could result in non-cash charges to earnings due to
impairment.
  14
 
 Changes
in commodity prices may also significantly affect our ability to estimate the
value of producing properties for acquisition and divestiture and often cause
disruption in the market for oil producing properties, as buyers and sellers
have difficulty agreeing on the value of the properties. Price volatility also
makes it difficult to budget for and project the return on acquisitions and
development and exploitation of projects. We expect that commodity prices will
continue to fluctuate significantly in the future.
 
 Our Stock Price
Could Decline. Our common stock is traded on the pink sheets. There can
be no assurance that an active public market will continue for the common stock
or that the market price for the common stock will not decline below its current
price. Such price may be influenced by many factors, including but not limited
to, investor perception of us and our industry and general economic and market
conditions. The trading price of the common stock could be subject to wide
fluctuations in response to announcements of our business developments or our
competitors, quarterly variations in operating results, and other events or
factors. In addition, stock markets have experienced extreme price volatility in
recent years. This volatility has had a substantial effect on the market prices
of companies, at times for reasons unrelated to their operating performance.
Such broad market fluctuations may adversely affect the price of our common
stock. Our stock price may decline as a result of future sales of our shares or
the perception that such sales may occur.
 
 Since we
have not filed all reports required to be filed by us with the SEC, none of our
restricted shares of common stock are currently eligible to be resold pursuant
to Rule 144. We are unable to estimate the amount, timing, or nature of future
sales of outstanding common stock. Sales of substantial amounts of our common
stock in the public market may cause the stock’s market price to
decline.
 
 We Could Be
Subject to SEC Penalties For Not Filing All Of Our SEC Reports. We have
not filed all of the annual and quarterly reports required to be filed by us
with the SEC. We are working diligently to make all such filings but until all
such filings are made, it is possible that the SEC could take enforcement
action, including the de-registration of our securities, against us. If the SEC
were to take any such actions, it could adversely affect the liquidity of
trading in our common stock and the amount of information about our Company that
is publicly available.
 
 Broker-Dealers
Are Not Permitted To Solicit Trades In Our Common Stock. Our common stock
is considered to be a “penny stock” because it meets one or more of the
definitions in the Exchange Act Rule 3a51-1, The principal result or effect of
being designated a “penny stock” is that securities broker-dealers cannot
recommend the stock and may only trade in it on an unsolicited
basis.
 
 Risks Related to
Broker-Dealer Requirements Involving Penny Stocks / Risks Affecting Trading and
Liquidity. Section 15(g) of the Securities Exchange Act of 1934, as
amended, and Rule 15g-2 promulgated thereunder by the Commission require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor’s account. These rules may have the effect of
reducing the level of trading activity in the secondary market, if and when one
develops.
 
 Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, Commission Rule 15g-9 requires broker-dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or her
financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor’s financial
situation, investment experience and investment objectives. Pursuant to the
Penny Stock Reform Act of 1990, broker-dealers are further obligated to provide
customers with monthly account statements. Compliance with the foregoing
requirements may make it more difficult for investors in our stock to resell
their shares to third parties or to otherwise dispose of them in the market or
otherwise.
 
 ITEM
2.                PROPERTIES
 
 Office
Leases
 
 We lease
and maintain office space in Edmonton, Alberta for corporate and administrative
operations.
  15
  Oil and Gas
Properties
 
 Acreage
 
 Currently
we own an 80% working interest in 56 contiguous sections of oil sands
development leases, a 40% working interest in 12 sections of oil sands
development leases and a 100% working interest in 15 sections of petroleum and
natural gas licenses in the Peace River oil sands area in North Central Alberta.
The oil sands leases and petroleum and natural gas licenses cover 52,505 gross
acres (21,248 gross hectares). Of the 68 contiguous sections of oil sands
development leases, Andora is the operator of 12 sections where we have a 40%
working interest in and we are the operator on 56 sections where we have an 80%
working interest.
 
 On April
2, 2008, we participated in a public offering of Crown Petroleum and Natural Gas
Rights held by the Alberta Department of Energy, in which we successfully bid on
1 petroleum and natural gas license covering 3,796 gross acres (1,536 gross
hectares) for a total of 6 sections in the Ochre area. We acquired an undivided
100% working interest in these 6 sections located in the Peace River oil sands
area of Alberta, approximately 14 miles west of our Sawn Lake
properties.
 
 In
conjunction with our 2008/2009 winter drilling program, we acquired existing
road infrastructure on our properties as follows: effective December 1, 2008, we
acquired 6 P&NG properties of which 2 were expected to immediately expire,
covering 11,387 gross acres (gross 4,608 hectares) from Paramount Resources Ltd.
(“Paramount”). Included in this land acquisition, Paramount transferred 7
mineral surface leases (proposed well sites or “MSLs”) and 4 licenses of
occupation, totalling 12 km of roads (access roads or “LOCs”).
 
 On May 5,
2009, we were informed by the Alberta Department of Energy that it had approved
our application to convert 5 sections of our oil sands permit to a 15-year
primary lease. By drilling on these lands, where the permits were set to expire,
we have preserved title to 5 sections and now have a primary lease, which is
valid for an additional 15 years.
 
 The
following table summarizes our gross and net developed and undeveloped oil and
natural gas rights under lease as of August 31, 2009.
 
 OIL AND NATURAL GAS RIGHTS as of August 31, 2009Gross
                              Hectares
                            
                            
                            Net
                              Hectares
                            
                            
                            Gross
                              Acres
                            
                            
                            Net
                              AcresOil
      Sands Developed AcreageSawn
      Lake – Peace River oil sands area, Alberta, Canada
                            
                            None
                            
                            
                            None
                            
                            
                            None
                            
                            
                            NoneTotal
                            
                            None
                            
                            
                            None
                            
                            
                            None
                            
                            
                            NoneOil
      Sands Undeveloped AcreageSawn
      Lake – Peace River oil sands area, Alberta, Canada56
      sections (1)
                            
                            
                            14,336
                            
                            
                            
                            11,469
                            
                            
                            
                            35,425
                            
                            
                            
                            28,34012
      sections (2)
                            
                            
                            3,072
                            
                            
                            
                            1,229
                            
                            
                            
                            7,591
                            
                            
                            
                            3,036Total
                            
                            
                            17,408
                            
                            
                            
                            12,698
                            
                            
                            
                            43,016
                            
                            
                            
                            31,376Petroleum
      and Natural Gas License Developed AcreageAlberta,
      Canada
                            
                            None
                            
                            
                            None
                            
                            
                            None
                            
                            
                            NoneTotal
                            
                            None
                            
                            
                            None
                            
                            
                            None
                            
                            
                            NonePetroleum
      and Natural Gas License Undeveloped AcreageSawn
      Lake – within the Peace River oil sands, Alberta, Canada9
      sections (3)
                            
                            
                            2,304
                            
                            
                            
                            2,304
                            
                            
                            
                            5,693
                            
                            
                            
                            5,693Ochre
      – within the Peace River oil sands Area, Alberta, Canada6
      sections (3)
                            
                            
                            1,536
                            
                            
                            
                            1,536
                            
                            
                            
                            3,796
                            
                            
                            
                            3,796Total
                            
                            
                            3,840
                            
                            
                            
                            3,840
                            
                            
                            
                            9,489
                            
                            
                            
                            9,489TOTAL
      ACREAGE
                            
                            
                            21,248
                            
                            
                            
                            16,538
                            
                            
                            
                            52,505
                            
                            
                            
                            40,865
 
 (1) 80%
working interest.
 (2) 40%
working interest.
 (3) 100%
working interest.
 
 A
developed acre is considered to mean those acres spaced or assignable to
productive wells; a gross acre is an acre in which a working interest is owned,
and a net acre is the result that is obtained when fractional ownership working
interest is multiplied by gross acres. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole numbers and
fractions thereof.
  16
 
 Undeveloped
acreage is considered to be those lease acres on which wells have not been
drilled or completed to a point that would permit the production of commercial
quantities of oil or natural gas, regardless of whether or not that acreage
contains proven reserves, but does not include undrilled acreage held by
production under the terms of a lease. As is customary in the oil and gas
industry, we can generally retain our interest in undeveloped acreage by
drilling activity that establishes commercial production sufficient to maintain
the leases or by paying delay rentals during the remaining primary term of such
a lease. The oil and natural gas leases in which we have an interest are for
varying primary terms, and if production continues from our developed lease
acreage beyond the primary term, we are entitled to hold the lease for as long
as oil or natural gas is produced.
 
 Reserves,
Production and Delivery Commitments
 
 In August
2004, Northern commenced oil and gas exploration activities with the first well
being drilled on the project in September 2005. We did not engage in any
sustained production activities during the years ending September 30, 2008,
2007, 2006 and 2005, nor did we have any proven or probable reserves at the end
of such periods and thus were not required to provide any of the production data
required by Statement of Financial Accounting Standards No. 69. We do not have
any obligations under existing delivery commitment contracts or agreements
calling for the provision of fixed and determinable quantities of oil and gas
over the next three years, and have therefore not filed any information or
reports with any federal authority or agency containing estimates of total,
proven developed or undeveloped net oil or gas reserves.
 
 Drilling
Activity
 
 The
following tables summarize the results of our drilling activities during the
years ended September 30, 2008, 2007, 2006 and 2005.
 
 Exploratory Wells year ended September 30
                        
                        2008
                        
                        
                        2007
                        
                        
                        2006
                        
                        
                        2005Gross
                        
                        
                        Net
                        
                        
                        Gross
                        
                        
                        Net
                        
                        
                        Gross
                        
                        
                        Net
                        
                        
                        Gross
                        
                        
                        NetGas
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Oil
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Oil/Gas
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Evaluating
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Drilling
      at end of year
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Suspended
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Abandoned
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –Total
      Exploratory Wells
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
                        
                        
                        
                        –
 
 Development Wells year ended September 30
                          
                          2008
                          
                          
                          2007
                          
                          
                          2006
                          
                          
                          2005Gross
                          
                          
                          Net
                          
                          
                          Gross
                          
                          
                          Net
                          
                          
                          Gross
                          
                          
                          Net
                          
                          
                          Gross
                          
                          
                          NetGas
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Oil
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Oil/Gas
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Evaluating
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Drilling
      at end of year
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Suspended
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          2
                          
                          
                          
                          0.8
                          *
                          
                          
                          1
                          
                          
                          
                          0.4
                          *Abandoned
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Total
      Development Wells
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          2
                          
                          
                          
                          0.8
                          
                          
                          
                          1
                          
                          
                          
                          0.4*40% working
      interest
 
 Present
Activities
 
 We
successfully completed its winter drilling program and met its objectives by
drilling 6 wells, 3 of which were drilled on our oil sands permit in order to
provide technical data to support the required Department of Energy regulation
to convert our 5-year oil sands permit into a 15-year primary lease. In
addition, three wells were drilled further to the North of the above-mentioned 3
wells and the 3 horizontal wells previously drilled by our former Farmout
partner. These three northern wells continued the delineation of the main
reservoir trend and confirmed that the main reservoir continues north. We are
evaluating the many options for production now available to us to decide the
best course of action. Drilling on these 80% owned lands has opened new avenues
for testing and further development of the Sawn Lake project. On the 12 sections
of the jointly held lands, in which we have a 40% working interest, our Company
is exploring different plans of action with Andora Energy Corporation, the
operator of these 12 sections. The focus of our Company’s drilling program is to
define the heavy oil reservoir to establish reserves and to determine the best
technology under which oil can be produced from the Sawn Lake project in order
to initiate production and generate a cash flow.
  17
 
 We are
currently in the process of evaluating various enhanced recovery technologies
for a test well project located on our Sawn Lake oil sands property, which is
subject to regulatory approval, public consultations, Board of Directors
approval, financing, successful reservoir evaluation and modeling, and other
risks associated with the oil sands industry.
 
 On
December 4, 2008, we successfully spudded the first well of six wells to be
drilled in our 2008/2009 winter drilling program. This well is located at
12-14-092-13W5 in North Central Alberta and was drilled to a vertical depth of
680 meters. The well was logged, cased, and completed for bluesky heavy oil
production, with perforated intervals from 644.5m to 649.5m. This well is
currently being tested.
 
 On
December 15, 2008, we successfully spudded the second well of our six well
2008/2009 winter drilling program. This well is located at 9-16-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 680 meters. The
well was logged, cased, and completed for bluesky heavy oil production, with
perforated intervals from 638.5m to 643.5m. This well is currently being
tested.
 
 On
January 8, 2009, we successfully spudded the third well of our six well
2008/2009 winter drilling program. This well is located at 10-33-091-13W5 in
North Central Alberta and was drilled to a vertical depth of 708 meters. This
well determined the southern edge of the Bluesky reservoir of our Sawn Lake
Project.
 
 On
January 16, 2009, we successfully spudded the fourth well of our six well
2008/2009 winter drilling program. This well is located at 7-5-092-13W5 in North
Central Alberta and was drilled to a vertical depth of 718 meters. The well was
logged and cased for bluesky heavy oil production, and is pending further
evaluation.
 
 On
January 25, 2009, we successfully spudded the fifth well of our six well
2008/2009 winter drilling program. This well is located at 8-4-092-13W5 in North
Central Alberta and was drilled to a vertical depth of 725 meters. The well was
logged and cased for bluesky heavy oil production, and is pending further
evaluation.
 
 On
February 2, 2009, we successfully spudded the sixth well of our six well
2008/2009 winter drilling program. This well is located at 6-22-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 660 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation.
 
 Past
Activities
 
 A total
of three horizontal wells were drilled by Signet, our former farmout partner, on
the Sawn Lake Property during 2005 and 2006 and a fourth location was prepared
for drilling.
 
 The
1st
test well drilled under the Farmout Agreement (at surface location
1-36-091-13W5) was successfully drilled and cased in late October of 2005. This
horizontal well was drilled to a total length of 1,583 meters with a vertical
depth of 752 meters within the Bluesky oil sands zone. Currently this well is
pending further evaluation and the development of an exploitation plan with our
joint interest partners.
 
 The
2nd
well drilled under the Farmout Agreement (at surface location 4-32-091-12W5)
began drilling on August 13, 2006. This was the first of three additional wells
that Signet was to drill in accordance with the Farmout Agreement in the Bluesky
Formation of the Sawn Lake area. This horizontal well was successfully drilled
and cased in August 2006 to a total length of 1,461 meters with a vertical depth
of 668 meters within the Bluesky oil sands zone. Subsequent to the drilling and
logging operations, tubing was run in preparation for potential Bluesky oil
production. Currently this well is pending further evaluation and the
development of an exploitation plan with our joint interest
partners.
 
 The
3rd
well drilled under the Farmout Agreement (at surface location 7-30-091-12W5)
began drilling on August 31, 2006. This was the second of three additional wells
that Signet was to drill in accordance with the Farmout Agreement in the Bluesky
Formation of the Sawn Lake area. This horizontal well was successfully drilled
and cased in September 2006 to a total length of 1,437 meters with a vertical
depth of 654 meters within the Bluesky oil sands zone. Currently this well is
pending further evaluation and the development of an exploitation plan with our
joint interest partners.
 
 The
proposed 4th well to
be drilled under the Farmout Agreement (at surface location 13-29-091-12W5) was
not drilled since it was determined by Signet that it would not provide any
additional geological information in its delineation of the Sawn Lake Reservoir
beyond that of the two recently drilled wells in the same
vicinity.
  18
 
 In
December 2006, we notified Signet that we were disputing Signet earning an
additional 12 sections, as a result of drilling the 4-32 and 7-30 wells, because
Signet failed to properly complete the wells by not conducting the production
testing as reasonably required under the Farmout Agreement. The Farmout
Agreement states that the sustained production test must be of sufficient
duration to establish to the Farmor’s (therefore Deep Well’s) reasonable
satisfaction the initial productivity of the earning well. Signet’s view was
that it had earned the 12 sections pursuant to the terms of the Farmout
Agreement. These 12 sections are subject to selection in accordance with the
provisions of the Farmout Agreement. On November 26, 2007, we entered into
mediation with Signet and resolved our differences on this and certain
collateral matters. The settlement included, but is not limited to:
 
 ·
              the
      Farmout Agreement dated February 25, 2005, being effectively terminated
      concurrently with the execution of the settlement agreement;
      and
 ·
              Signet
      being regarded as having earned the two sections on which the option wells
      were drilled and 4 additional sections as set out in the Settlement;
      and
 ·
              Signet
      being required to reconvey registered title to 57.5 unearned sections of
      the Farmout Lands, as defined in the Farmout Agreement, back to us;
      and
 ·
              our
      Company having the right to retest, at no cost to Signet, the option wells
      previously drilled.
 
 ITEM
3.                LEGAL
PROCEEDINGS
 
 I.G.M. Resources Corp. vs.
Deep Well Oil & Gas, Inc. et al
 
 On March
10, 2005, I.G.M. Resources Corp. (hereinafter referred to as “IGM”) filed
against Classic Energy Inc., 979708 Alberta Ltd. (hereinafter referred to as
“979708”), Deep Well Oil & Gas, Inc., Nearshore Petroleum Corporation,
Steven P. Gawne, Rebekah Gawne, Gawne Family Trust, 1089144 Alberta Ltd., John
F. Brown, Diane Lynn McClaflin, Cassandra Doreen Brown, Elissa Alexandra Brown,
Brown Family Trust, Priority Exploration Ltd., Northern Alberta Oil Ltd. and
Gordon Skulmoski (the “Defendants”) a Statement of Claim in the Court of Queen’s
Bench of Alberta Judicial District of Calgary. This suit is part of a series of
lawsuits or actions undertaken by IGM against some of the other above-named
Defendants.
 
 IGM was
and still is a minority shareholder of 979708. 979708 was purportedly in the
business of discovering, assembling and acquiring oil & gas prospects. In
2002 and 2003, 979708 acquired oil and gas prospects in the Sawn Lake area of
Alberta. On or about the 14th of July
2003, all or substantially all the assets of 979708 were sold to Classic Energy
Inc. IGM claims the value of the assets sold was far in excess of the value paid
for those assets. On April 23, 2004, Northern purchased some of Classic Energy
Inc.’s assets, some of which are under dispute by IGM. On June 7, 2005, Deep
Well acquired all of the common shares of Northern thereby giving Deep Well an
indirect beneficial interest in the assets IGM is claiming an interest
in.
 
 IGM seeks
an order setting aside the transaction and returning the assets to 979708,
compensation in the amount of $15,000,000 Cdn, and a declaration of trust
declaring that Northern and Deep Well hold all of the assets acquired from
979708 and any property acquired by use of such assets or confidential
information of 979708, in trust for IGM.
 
 This
lawsuit has been stayed pending the outcome of the other litigation by IGM
against some of the above defendants other than Deep Well and Northern. The
Company believes the claims are without merit and will vigorously defend against
them.
 
 Hardie & Kelly vs. Brown
et al
 
 On June
2, 2006, Hardie and Kelly (the “Plaintiff”), Trustee of the Estate of John
Forbes Brown, filed against John Forbes Brown, a bankrupt, Diane Lynn McClaflin,
1089144 Alberta Ltd., and Deep Well (the “Defendants”) an Amended Statement of
Claim filed in the Court of Queen’s Bench of Alberta Judicial District of
Calgary. John Forbes Brown was a former officer and then sub-contractor of Deep
Well before and at the time he was assigned into bankruptcy on July 12, 2004.
The Plaintiff claims, in addition to other issues unrelated to Deep Well, that
John Forbes Brown received 4,812,500 Deep Well shares as a result of his
employment in Deep Well and that John Forbes Brown improperly assigned these
shares to the numbered company as a ruse entered into on the eve of insolvency
by John Forbes Brown in order to facilitate the hiding of assets from his
creditors and the trustee of his bankruptcy. The Plaintiff further claims that
on August 23, 2004, John Forbes Brown advised the Plaintiff that he in fact
owned the above shares and did not disclose this ownership in his filed
bankruptcy statement of affairs. The Plaintiff further claims that John Forbes
Brown would lodge the said shares with his lawyer until such time as these
shares could be transferred to the Plaintiff. The Plaintiff further claims that
unbeknownst to them John Forbes Brown surreptitiously removed the shares from
his lawyer’s office and delivered them to Deep Well so that Deep Well could
cancel them. The Plaintiff claims that Deep Well conspired with John Forbes
Brown to defraud the creditors of John Forbes Brown by taking receipt and
canceling the said shares. The Plaintiff claims that consideration paid by Deep
Well for the said shares was invested in the home owned by John Forbes Brown and
his wife. The Plaintiff seeks: 1.) An accounting of the proceeds and benefits
derived by the dealings of the shares; 2.) The home owned by John Forbes Brown
and his wife, to be held in trust on behalf of the Plaintiff and an accounting
of proceeds related to this trust; 3.) Damages from the Defendants because of
their actions; 4.) A judgment for $15,612,645 Cdn; 5.) An order to sell John
Forbes Brown’s home; and 6.) Interest and costs.
  19
 
 We plan
to vigorously defend ourselves against the Plaintiff’s claims.
 
 Menno Wiebe and Jacobean
Resource International vs. Deep Well Oil & Gas, Inc. et
al
 
 On
October 23, 2006, Menno Wiebe and Jacobean Resources International served Deep
Well, Doe individuals and Roe Corporations with a Complaint and Summons filed in
the United States of America, District Court of Clark County, Nevada. The
Complaint alleges a breach of contract in which the Plaintiffs are seeking
monetary damages in excess of $10,000 plus an order directing Defendants to
issue 56,500 shares of Deep Well stock to Plaintiffs. Mr. Menno Wiebe served as
Director and Chief Operating Officer of Deep Well from July 6, 2004 until June
29, 2005. Mr. Wiebe claims he was the Chief Operating Officer until October
2005. Our Company believes that it has meritorious defences to the plaintiff’s
claims and intends to enter into mediation, as called for in the contract with
Menno Wiebe.
 
 Deep Well Oil & Gas,
Inc. vs. Tamm Oil and Gas Corp. et. al.
 
 On April
4, 2008, our Company commenced a lawsuit in the United States District Court for
the District of Nevada against Tamm Oil and Gas Corp. (hereinafter referred to
as “Tamm”) after attempting to clarify Tamm’s position and rectify Tamm’s
violations. Our Company alleges that: Tamm engaged in an unlawful tender offer
for our Company’s shares, violated United States federal and Nevada state law in
connection with the tender offer, made public statements about our Company and
activities related to our Company and our operations that are false and
misleading, and made statements of purported ownership of our shares of common
stock that are false and misleading. On August 22, 2008, our Company filed a
First Amended Complaint in the lawsuit adding the following additional parties
as defendants: Garry Tighe, William Tighe, Craig Auringer, Sean Dickenson, John
Muzzin, Guido Hilekes, Peter Schriber, Olaf Herr, Arthur Sulzer, LB (Swiss)
Private Bank Ltd., and Rahn & Bodmer Banquiers. The First Amended Complaint
also added a civil conspiracy claim. The First Amended Complaint
seeks:
 
 1.)
              injunctive
      relief to include and not be limited to a permanent
      injunction:
 
 a.)
              that
      requires defendants issue appropriate disclosures and retract false and
      misleading statements concerning Deep Well in their prior representations
      through SEC filings, press releases, and all other appropriate
      means;
 b.)
              that
      prohibits defendants from exercising the voting rights or any other rights
      granted through ownership of Deep Well shares on any shares acquired
      pursuant to their unlawful tender offer(s) for Deep Well shares,
      attempting otherwise to influence or control Deep Well or its
      management;
 c.)
              that
      prohibits defendants from transferring their Deep Well shares and/or
      accepting transfer of any Deep Well shares acquired through their tender
      offer(s) for Deep Well shares;
 d.)
              that
      prohibits defendants from acquiring any additional Deep Well shares and/or
      taking any other actions in furtherance of their tender offer(s) for Deep
      Well shares;
 e.)
              that
      prohibits defendants from further conducting the tender offer alleged in
      the First Amended Complaint;
 f.)
              that
      prohibits defendants from issuing any false, misleading or derogatory
      statements about Deep Well, relating to their investments in Deep Well,
      relating to their acquisition of Deep Well shares or relating to their
      control of any Deep Well assets;
 g.)
              that
      requires that the transactions through which defendants acquired Deep Well
      shares pursuant to the tender offer(s) for Deep Well shares be completely
      rescinded and unwound and that any transfers made pursuant to those
      acquisitions be reversed;
 h.)
              that
      requires defendants to comply with legal requirements in the making of any
      future tender offer or otherwise acquiring Deep Well
    shares;
 
 2.)
              damages
      and/or treble damages in an amount to be established at
    trial;
 
 3.)
              attorneys’
      fees and costs; and
 
 4.)
              all
      such other further relief as the Court deems just and
      equitable.
  20
 
 Effective
September 1, 2009, the parties entered into a settlement agreement that fully
and finally resolved their dispute and the lawsuit. An agreed judgment of
dismissal is pending and is set for hearing on September 29, 2009. On September
14, 2009 and effective September 1, 2009, Deep Well and Tamm, Garry Tighe,
William Tighe, Sean Dickenson, John Muzzin, Guido Hilekes, Peter Schriber, Olaf
Herr, Arthur Sulzer, LB (Swiss) Private Bank, Ltd. and Rahn & Bodmer Co.
(collectively, the “TAMM Parties”) entered into a full settlement and release
with all of the defendants in Deep Well Oil & Gas, Inc. v.
Tamm Oil & Gas Corp., et. al.(D. Nev., Case No.
3:08-cv-00173-ECR-RAM) in the United States District Court, District of Nevada.
The settlement provides that the Company will be granted an option (the
“Option”) to purchase Tamm’s interest in the Royalty Agreement between Mikwec
Energy Canada, Ltd. and Nearshore Petroleum Corporation, dated December 12, 2003
(hereinafter the “Royalty Agreement”). The Option price shall be determined by
an independent appraisal of the fair market value of Tamm’s interest in the
Royalty Agreement, and shall reflect a $400,000 reduction from the determined
fair market value. Further, if the Company decides to exercise this Option they
can pay for part of the Option by way of a promissory note, the terms of which
will be determined. The settlement also provides that for the term of the
promissory note Tamm may designate a director to the Company’s board of
directors, and that Tamm’s designee shall thereafter be included on the
Company’s slate of director nominees for any stockholder election of directors,
until such time as the Company repays the debt it owes on the promissory note
related to the Option. A Stipulated Judgment of Dismissal of the case was filed
on September 15, 2009 and entered by the court on the same day.
 
 Northern Alberta Oil Ltd.
vs. 1132559 Alberta Ltd.
 
 On June
27, 2008, our subsidiary, Northern Alberta Oil Ltd.,, filed a Statement of Claim
in the Court of Queen’s Bench of Alberta Judicial District of Edmonton against
1132559 Alberta Ltd. (hereinafter referred to as “113”). In September 2008, Tamm
announced that it had entered into an agreement to acquire 113. The plaintiff
claims that the defendants have not paid their share of the incurred operating
costs for the Sawn Lake project. The plaintiff further claims that they paid the
operating expenses required on behalf of the defendants and invoiced the
defendants for the amounts and that the defendants refused or neglected to
reimburse their proportionate share of the operating costs. The plaintiff seeks:
1.) Payment in full of $74,470.71 in Canadian funds for the amounts invoiced to
the defendants; 2.) Interest pursuant to section 106 of the PASC (“Petroleum
Accountants Society of Canada”) 1996 Accounting Procedure; and 3.) Costs of the
action.
 
 ITEM
4.         
       SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
 
 There was
no matter submitted during the fiscal year 2007 covered by this report to a vote
of security holders, through the solicitation of proxies or
otherwise.
  21
  PART
II
 
 ITEM
      5.
              MARKET
      FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
 
 The
common stock of the Predecessor Company of Deep Well was originally listed on
NASDAQ as of November 17, 1994, however the Predecessor Company no longer met
listing criteria for NASDAQ and its common stock was delisted to the OTC
Bulletin Board on September 16, 2002. Subsequent to this delisting, the
Predecessor Company did not, on a timely basis, file a Form 10-Q for the quarter
ended December 31, 2002 and accordingly, its stock was delisted to the pink
sheets on March 25, 2003.
 
 Market Price Information for
Common Stock
 
 Deep
Well’s stock is currently quoted on the pink sheets under the trading symbol
DWOG. The following table sets forth the high and low sales prices for Deep Well
common stock as reported on the pink sheets for the periods indicated below.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual
transactions:
 
 High
                      
                      
                      LowFiscal
      2006First
      Quarter
                      
                      $
                      1.31
                      
                      
                      $
                      0.37Second
      Quarter
                      
                      $
                      2.98
                      
                      
                      $
                      1.15Third
      Quarter
                      
                      $
                      2.85
                      
                      
                      $
                      1.45Fourth
      Quarter
                      
                      $
                      1.76
                      
                      
                      $
                      0.57Fiscal
      2007First
      Quarter
                      
                      $
                      0.66
                      
                      
                      $
                      0.33Second
      Quarter
                      
                      $
                      0.56
                      
                      
                      $
                      0.23Third
      Quarter
                      
                      $
                      1.05
                      
                      
                      $
                      0.35Fourth
      Quarter
                      
                      $
                      0.84
                      
                      
                      $
                      0.45Fiscal
      2008First
      Quarter
                      
                      $
                      0.58
                      
                      
                      $
                      0.45Second
      Quarter
                      
                      $
                      0.63
                      
                      
                      $
                      0.31Third
      Quarter
                      
                      $
                      0.73
                      
                      
                      $
                      0.42Fourth
      Quarter
                      
                      $
                      0.58
                      
                      
                      $
                      0.20Fiscal
      2009First
      Quarter
                      
                      $
                      0.39
                      
                      
                      $
                      0.13Second
      Quarter
                      
                      $
                      0.29
                      
                      
                      $
                      0.14Third
      Quarter
                      
                      $
                      0.19
                      
                      
                      $
                      0.14
 
 Holders of
Record
 
 As of
August 10, 2009, we had approximately 171 holders of record of our shares of
common stock. Our Company estimates that investment dealers and other nominees
are the record holders for approximately 2,815 beneficial holders.
 
 Dividends
 
 We have
not paid cash dividends since inception. We intend to retain all of our
earnings, if any, for use in our business and do not anticipate paying any cash
dividends in the foreseeable future. The payment of any future dividends will be
at the discretion of the Board of Directors and will depend upon a number of
factors, including future earnings, the success of our business activities,
capital requirements, the general financial condition and our future prospects,
general business conditions and such other factors as the Board of Directors may
deem relevant.
 
 Equity Compensation Plan
Information
 
 The
following table provides information as of September 30, 2007 with respect to
shares of Deep Well common stock that may be issued under our existing equity
compensation plans.
  22
 
 Equity Compensation Plan Category
                        
                        (a)
                          
                          Number of Securities
                          to be issued upon
                          exercise of
                          outstanding options,
                          warrants and rights
                        
                        
                        (b)
                          
                          Weighted-average
                          exercise price of
                          outstanding
                          options, warrants
                          and rights
                        
                        
                        (c)
                          Number of Securities
                          remaining available for
                          future issuance under
                          equity compensation
                          plans (excluding securities
                          reflected in column (a))Equity
      compensation plans approved by security holders
                        
                        None
                        
                        
                        None
                        
                        
                        NoneEquity
      compensation plans not approved by security holders
                        
                        
                        3,378,500
                        
                        
                        $
                        0.69
                        
                        
                        
                        4,985,096
                        *Total
                        
                        
                        3,378,500
                        
                        
                        $
                        0.69
                        
                        
                        
                        4,985,096
                        *
 
 * Based
on 83,635,955 issued and outstanding shares as at September 30, 2007. The
maximum number of common shares that may be reserved for issuance under the
Stock Option Plan may not exceed 10% of our Company’s issued and outstanding
common shares
 
 Stock
Option Plan
 
 On
November 28, 2005, our Board of Directors adopted the Deep Well Oil & Gas,
Inc. Stock Option Plan. The Stock Option Plan, which is administered by the
Board, permits options to acquire shares of Deep Well’s common stock to be
granted to our directors, senior officers and employees, as well as certain
consultants and other persons providing services to our Company. This Stock
Option Plan was adopted to provide an incentive to the retention of our
directors, officers and employees as well as consultants that we may wish to
retain in the future. The maximum number of common shares that may be reserved
for issuance under the Stock Option Plan may not exceed 10% of our issued and
outstanding common shares, subject to adjustment as contemplated by the Stock
Option Plan. On November 28, 2005, the Board granted 375,000 options to acquire
common shares vested over three years to each director of Deep Well and granted
187,500 options to acquire common shares to a director of a subsidiary of Deep
Well. The exercise price of such options is $0.71 per share. In each case, the
vesting of such director options will occur only if the holder of the options
continues to provide services to us during the immediate annual period preceding
the relevant vesting date. The options will terminate at the close of business
five years from the date of grant. In addition, on November 28, 2005, the Board
granted 390,000 options to acquire common shares vested over three years to
certain corporations providing consulting services to us. Each of such
consultants is wholly owned by directors of our Company. The exercise price of
such options is $0.71 per share. In each case, the vesting of such consultant
options will occur only if the holder of the options continues to provide
services to us on the relevant vesting date. The options will terminate at the
close of business five years from the date of grant. No option granted under the
Stock Option Plan may be exercised until the Stock Option Plan has been approved
and ratified by the holders of a majority of the voting stock of our Company at
a shareholders’ meeting or by consent resolution of said majority
shareholders.
 
 On
September 28, 2007, our Board of Directors granted options under the stock
option plan to a certain employee to acquire 36,000 common shares of our Company
at the exercise price of $0.47 per common share, of which 8,000 shall be vested
immediately and 28,000 shall be vested at a rate of 2,000 common shares per
month commencing September 30, 2007, so long as the employee continues to
provide employment services on such vesting dates.
 
 On
October 1, 2007, we entered into a Consulting Agreement, effective September 20,
2007, with R.N. Dell Energy Ltd. (hereinafter referred to as “Contractor”). On
September 28, 2007, under the terms of the Consulting Agreement, our Board of
Directors granted options to the Contractor to acquire 240,000 common shares of
our Company at the exercise price of $0.47 per common share (being the closing
price as of the day before the effective date) which shall be vested at a rate
of 20,000 common shares per month commencing October 31, 2007, so long as the
Contractor continues to provide consulting services on such vesting
dates.
 
 Performance
Graph
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
therefore are not required to provide the information required under this
item.
  23
  Sales of Unregistered
Securities
 
 On March
10, 2005, we closed on a transaction pursuant to a certain Securities Purchase
Agreement (“SPA”), with two accredited investors for an aggregate purchase price
of $750,000 pursuant to which our Company sold an aggregate of: 1) 1,875,000
shares of our common stock, par value $0.001 per share, at a purchase price of
$0.40 per share; and 2) 750,000 warrants, of which each of the warrants is
exercisable from March 10, 2005 until March 9, 2010, at an exercise price equal
to $0.50 per share. Our Company issued the aforementioned securities to the
investors pursuant to Rule 506 of Regulation D as promulgated under the
Securities Act of 1933, as amended, and/or Section 4(2) of the Act. In
connection with the SPA, a finder’s fee of $75,000 was paid and 37,500 warrants
were issued. The exercise price of the warrants will be adjusted from time to
time upon the occurrence of certain events, as provided in the warrants, and as
a result of the issuance of common stock on May 25, 2007, and pursuant to the
SPA and Form of Warrant dated March 10, 2005, entered into by and among our
Company and the investors (the “Warrant Holders”), our Company issued an
adjustment to the Warrant Holders. The original warrant dated March 10, 2005,
contained a price adjustment if our Company sells, issues or grants additional
shares of its common stock at a price per share less than the exercise price. In
the event of a price adjustment, the number of shares exercisable under the
warrant would also increase. Therefore, the exercise price of the original
warrant has been adjusted from $0.50 to $0.40 per common share. Our Company has
granted the Warrant Holders new warrants to purchase an additional 196,875
common shares for a total of 984,375 shares of our Company’s common stock at an
adjusted exercise price of $0.40 per share under the same terms as the original
warrant. Our Company entered into a Registration Rights Agreement (“RRA”) with
the investors dated as of March 10, 2005, pursuant to which our Company was
obligated to prepare and file a registration statement no later than 45 days
after the closing date registering the number of shares of our Company’s common
stock which is at least equal to: 1,) the aggregate number of shares of common
stock issued under the SPA; and 2,) 125% of the aggregate number of shares of
common stock issuable upon exercise of the warrants. Our Company must use its
reasonable best efforts to cause the registration statement to become effective
as soon as practicable following the filing, but in no event later than 120 days
after the closing date. If the registration statement is not filed within 45
days after the closing date or declared effective within the time specified in
the preceding paragraph, our Company was required to make payments to the
investors equal to 2% of the purchase price and an additional 2% of the purchase
price for each subsequent 30-day period as to which the registration statement
was not filed or declared effective. Effective on January 22. 2007, our Company
entered into a Settlement Agreement and Release of All Claims (the “Settlement
Agreement”) with the investors who were in receipt of the above issued shares
with respect to allegations made by the investors that we had breached the SPA
and RRA.
 
 The
Settlement Agreement provides, without any party acknowledging any liability,
for:
 
 ·
              the
      amendment of the SPA to delete certain restrictions on our Company’s
      ability to enter into any future
financing;
 ·
              the
      termination of the RRA;
 ·
              the
      issuance to the Investors of an aggregate of 1,600,000 (one million six
      hundred thousand) shares of common stock of our Company (the "Shares"),
      including the granting of certain piggyback registration rights related
      thereto; and
 ·
              the
      full and final settlement of all existing or potential claims between our
      Company and the Investors arising under the SPA and the
    RRA.
 
 On August
12, 2005, pursuant to subscription agreements, our Company closed a private
placement to three investors of an aggregate of 500,000 units at a price of
$0.40 per unit, for total gross proceeds of $200,000. Each unit consisted of one
common share and one common share purchase warrant, with each warrant entitling
its holder to acquire one share of our common stock at an exercise price of
$0.60. The warrants expired on August 12, 2008. The units were issued pursuant
to Regulation S under the 1933 Act. In addition, on August 12, 2005, pursuant to
a Debt Settlement Agreement, one holder of $84,378.40 of our indebtedness
exchanged its indebtedness for 210,946 units at a deemed exchange price of $0.40
per unit. Each unit consisted of one common share and one common share purchase
warrant, with each warrant entitling its holder to acquire one common share of
Deep Well, at an exercise price of $0.60. The warrants expired on August 12,
2008. The units were issued pursuant to Regulation S under the 1933
Act.
 
 On
October 11, 2005, pursuant to subscription agreements, our Company closed a
private placement to three investors of an aggregate of 3,150,000 units at a
price of $0.40 per unit, for total gross proceeds of $1,260,000. Each unit
consisted of one common share and one common share purchase warrant, with each
warrant entitling its holder to acquire one share of our common stock at an
exercise price of $0.60 per common share. The warrants expired on October 11,
2008. In connection with the private placement, a finder’s fee of $36,000 was
paid, resulting in total net proceeds to our Company from the private placement
of $1,224,000. The units were issued pursuant to Regulation S under the 1933
Act.
 
 On
January 13, 2006, pursuant to subscription agreements, our Company closed a
private placement to three investors of an aggregate of 51,200 units at a price
of $1.50 per unit, for total gross proceeds of $76,800. Each unit consisted of
one common share and one common share purchase warrant, with each warrant
entitling its holder to acquire one share of our common stock at an exercise
price of $2.25 per common share. The warrants expired on January 13, 2009. The
units were issued pursuant to Regulation S under the 1933 Act. In addition, on
January 13, 2006, pursuant to a Debt Settlement Agreement, one holder of $38,293
of our indebtedness exchanged its indebtedness for 21,800 units at a deemed
exchange price of $1.50 per unit. Each unit consisted of one common share and
one common share purchase warrant, with each warrant entitling its holder to
acquire one common share of Deep Well, at an exercise price of $2.25. The
warrants expired on January 13, 2009. In connection with the private placement,
a finder’s fee of $7,680 was paid, resulting in total net proceeds to our
Company from the private placement of $69,120. The units were issued pursuant to
Regulation S under the 1933 Act.
  24
 
 On
February 23, 2006, pursuant to an exercised option agreement our Company entered
into on June 7, 2005, our Company issued 4,707,750 Deep Well common shares in
exchange for 156,925 of the outstanding preferred shares of Northern. The common
shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
 
 On June
13, 2006, further pursuant to an exercised option agreement our Company entered
into on June 7, 2005, our Company issued 2,867,250 Deep Well common shares in
exchange for 95,575 of the outstanding preferred shares of Northern. The common
shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
 
 On July
28, 2006, a warrant holder of our Company acquired 100,000 common shares upon
exercising warrants at an exercise price of $0.60 per common share for total
gross proceeds to our Company of $60,000. The common shares were issued pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
 
 On
September 11, 2006, a warrant holder of our Company acquired 50,000 common
shares upon exercising warrants at an exercise price of $0.60 per common share
for total gross proceeds to our Company of $30,000. The common shares were
issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
 
 On April
4, 2007, pursuant to an option agreement our Company entered into on June 7,
2005, our Company issued 180,000 Deep Well common shares in exchange for
5,400,000 of the outstanding preferred shares of Northern. The common shares
were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.
As a result of this and other exercised option agreements, Northern became a
100% wholly owned subsidiary of our Company. As of April 4, 2007 all of the
holders of such preferred shares of Northern have exercised their options in
exchange for restricted shares of common stock of Deep Well. In accordance with
the terms and conditions of the Agreements, Deep Well has now completed the
acquisition of 100% of the preferred shares of Northern in exchange for
12,975,000 shares of common stock of Deep Well. The shares of common stock of
Deep Well issued in exchange for the Northern preferred shares were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
 
 On May
25, 2007, pursuant to subscription agreements, our Company completed a private
placement of 5,000,000 units at a price of $0.40 per unit for gross proceeds of
$2,000,000. Each unit consisted of one common share and one common share
purchase warrant, with each warrant entitling its holder to acquire one share of
our common stock at a price of $0.60 per share. The exercise price of the
warrants will be adjusted from time to time upon the occurrence of certain
events, as provided in the warrants. The warrants expire on May 25, 2010. In
connection with the private placement a finder's fee of $150,000 was paid,
resulting in total net proceeds to our Company from the private placement of
$1,850,000. The units were issued pursuant to Regulation S under the 1933
Act.
 
 On June
22, 2007, pursuant to subscription agreements, our Company completed a private
placement of 8,333,333 units at a price of $0.60 per unit for $5,000,000. Each
unit consisted of one common share and one common share purchase warrant and
another twelve one-hundredths common share purchase warrant ("Special Warrant").
Each warrant entitles the holder to purchase one additional common share at a
price of $0.90 per common share for a period of three years from the date of
closing. Each Special Warrant entitles the holder to purchase a common share at
a price of $1.20 for a period of five years from the date of closing. The
exercise price of the warrants and the Special Warrants will be adjusted from
time to time upon the occurrence of certain events, as provided in the warrants
and Special Warrants. The warrants expire on June 22, 2010, and the Special
Warrants expire on June 22, 2012.  In connection with the private
placement a finder's fee of $300,000 was paid, resulting in total net proceeds
to our Company from the private placement of $4,700,000. The units were issued
pursuant to Regulation S under the 1933 Act.
 
 On July
11, 2007, pursuant to subscription agreements, our Company completed a private
placement of 323,333 units at a price of $0.60 per unit for $194,000. Each unit
consisted of one common share and one common share purchase warrant and another
twelve one-hundredths common share purchase warrant (“Special Warrant”). Each
warrant entitles the holder to purchase one additional common share at a price
of $0.90 per common share for a period of three years from the date of closing.
Each Special Warrant entitles the holder to purchase a common share at a price
of $1.20 for a period of five years from the date of closing. The exercise price
of the warrants and the Special Warrants will be adjusted from time to time upon
the occurrence of certain events, as provided in the warrants and Special
Warrants. The warrants expire on July 11, 2010, and the Special Warrants expire
on 11, 2012. In connection with the private placement a finder’s fee of $9,700
was paid, resulting in total net proceeds to our Company from the private
placement of $184,300. The units were issued pursuant to Regulation S under the
1933 Act.
 
 In
September 2007, our Company issued an adjustment to three existing warrant
holders. The original warrants, dated March 10, 2005, contained a price
adjustment in the event that our Company sold, issued or granted additional
shares of its common stock at a price per share less than the exercise price of
the warrants. In the event of a price adjustment, the number of shares
exercisable under the warrant would also increase. Therefore, the exercise price
of the original warrant has been adjusted from $0.50 to $0.40 per common share.
Our Company has granted the warrant holders new warrants to purchase an
additional 196,875 common shares for a total of 984,375 shares of our Company's
common stock at an adjusted exercise price of $0.40 per share under the same
terms as the original warrant. The warrants were issued pursuant to Section 4(2)
of the 1933 Act.
  25
 
 On August
14, 2008, pursuant to a subscription agreement, our Company completed a private
placement to one investor, the first tranche being 10,638,297 units at a price
of $0.47 per unit, for total gross proceeds of $5,000,000. Each unit is
comprised of one common share, one common share purchase warrant (“Whole
Warrant”) and 0.188000015 of one common share purchase warrant (“Additional
Fractional Warrant”). Each Whole Warrant entitles the holder to purchase one
common share at a price of $0.71 per common share for a period of three years
from the date of closing. Each Additional Fractional Warrant entitles the holder
to purchase 0.188000015 of one common share at a price of $0.95 for a period of
three years from the date of closing. The Whole Warrants and the Additional
Fractional Warrants expire on August 14, 2011. The units were issued pursuant to
Regulation S under the 1933 Act.
 
 On
October 31, 2008, we completed the second tranche of the private placement
partially completed on August 14, 2008. In connection the second trance, we sold
to one subscriber 12,500,000 units at a price of $0.40 per unit, for total gross
proceeds of $5,000,000. Each unit is comprised of one (1) common share, one (1)
common share purchase warrant and 0.16 of one common share purchase warrant
(“Additional Fractional Warrant”). Each warrant entitles the holder to purchase
one (1) common share at a price of $0.60 per common share for a period of three
years from the date of closing. Each Additional Fractional Warrant entitles the
holder to purchase 0.16 of one common share at a price of $0.80 for a period of
three years from the date of closing. The warrants and the Additional Fractional
Warrants expire on October 31, 2011. The units were issued pursuant to
Regulation S under the Securities Act of 1933.
 
 ITEM
      6.
              SELECTED
      FINANCIAL DATA
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
therefore are not required to provide the information required under this
item.
  26
  ITEM
      7.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 You
should read the following discussion and analysis in conjunction with our
Company’s consolidated financial statements and related notes. For the purpose
of this discussion, unless the context indicates another meaning, the terms:
“Company”, “we”, “us” and “our” refer to Deep Well Oil & Gas, Inc. and its
subsidiaries. This discussion includes forward-looking statements that reflect
our current views with respect to future events and financial performance that
involve risks and uncertainties. Our actual results, performance or achievements
could differ materially from those anticipated in the forward-looking statements
as a result of certain factors including risks discussed in Management’s
Discussion and Analysis of Financial Condition and Results of Operations –
“Forward-Looking Statements” below and elsewhere in this report, and under the
heading “Risk Factors” and “Environmental Laws and Regulations” disclosed in
this report on Form 10-K for the year ended September 30, 2007.
 
 Our consolidated financial
statements and information are reported in U.S. dollars and are prepared based
upon United States generally accepted accounting
principles.
 
 General
Overview
 
 Deep Well
Oil and Gas, Inc. (“Deep Well”), along with its subsidiaries, is an emerging
independent junior oil and gas exploration and development company headquartered
in Edmonton, Alberta, Canada. Our Company’s immediate corporate focus is to
develop the existing land base that it presently controls in the Peace River oil
sands area in Alberta, Canada. Our principal office is located at Suite 700,
10150 - 100 Street, Edmonton, Alberta T5J 0P6, our telephone number is (780)
409-8144, and our fax number is (780) 409-8146. Deep Well Oil & Gas, Inc. is
a Nevada corporation based in Alberta, Canada, and trades on the pink sheets
under the symbol DWOG. We maintain a web site at
www.deepwelloil.com.
 
 Results of Operations for
the Year Ended September 30, 2007
 
 Our
Company is an exploration stage company and as such does not have commercial
production at any of its properties and, accordingly, it currently does not
generate cash from operations. Since the inception of our current business plan,
our operations have consisted primarily of various exploration and start-up
activities relating to our properties, which included acquiring lease holdings
by acquisitions and public offerings, seeking institutional investors, locating
joint venture partners, acquiring and analyzing seismic data, engaging various
firms to comply with leasehold conditions and environmental regulations as well
as project management, and developing our long term business strategies. For
year ended September 30, 2007, and for the comparable period, we generated no
revenues from operations.
 
 Year
                          
                          
                          Year
                          
                          
                          September 10,Ended
                          
                          
                          Ended
                          
                          
                          2003 toSeptember 30,2007
                          
                          
                          September 30, 2006
                          
                          
                          September 30, 2007Revenue
                          
                          $
                          –
                          
                          
                          $
                          –
                          
                          
                          $
                          –ExpensesAdministrative
                          
                          $
                          1,452,958
                          
                          
                          $
                          1,341,713
                          
                          
                          $
                          4,561,287Share
      Based Compensation
                          
                          
                          246,643
                          
                          
                          
                          558,882
                          
                          
                          
                          805,525Net
      Loss from Operations
                          
                          
                          (1,699,601
                          )
                          
                          
                          (1,900,595
                          )
                          
                          
                          (5,366,812
                          )Other
      Income and ExpensesForgiveness
      of Loan Payable
                          
                          
                          287,406
                          
                          
                          
                          –
                          
                          
                          
                          287,406Interest
      Income
                          
                          
                          50,183
                          
                          
                          
                          2,492
                          
                          
                          
                          66,153Interest
      Expense
                          
                          
                          (73,652
                          )
                          
                          
                          (24,179
                          )
                          
                          
                          (207,862
                          )Settlement
      of Debt
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          24,866Net
      Loss and Comprehensive Loss
                          
                          $
                          (1,435,664
                          )
                          
                          $
                          (1,922,282
                          )
                          
                          $
                          (5,196,249
                          )
 
 Our net
loss and comprehensive loss for the year ended September 30, 2007, was
$1,435,664 compared to a net loss and comprehensive loss of $1,922,282 for the
year ended September 30, 2006. This difference was due primarily to a decrease
of $312,239 in share based compensation expense to the comparable period and
forgiveness of a loan payable, for further information on the loan payable see
Note 8 in the consolidated financial statements disclosed in this report on Form
10-K. Part of the reason for the difference in the share based compensation
expense between these two comparable periods was that some of the first stock
options granted under the Plan in the first quarter of 2005 were immediately
vested, compensating for the time a director, employee, or consultant had been
working for our Company prior to the adoption of the Plan. For further
information regarding share based compensation see Note 10 in the consolidated
financial statements disclosed in this report on Form 10-K.
  27
 
 For the
year ended September 30, 2007, interest income increased by $47,691, compared to
the year ended September 30, 2006, due primarily to interest from term deposit
and finance charges related to outstanding accounts receivables. For the year
ended September 30, 2007, interest expense increased by $49,473, compared to the
year ended September 30, 2006, due primarily to accrued interest
payable.
 
 Results of
Operations
 
 Our
Company successfully completed its winter drilling program and met its
objectives by drilling 6 wells, 3 of which were drilled on our oil sands permit
in order to provide technical data to support the required Department of Energy
regulation to convert our oil sands permit into a 15-year primary lease. In
addition, three wells were drilled further to the North of the above-mentioned 3
wells and the 3 horizontal wells previously drilled by our former Farmout
partner. These three northern wells continued the delineation of the main
reservoir trend and confirmed that the main reservoir continues north. We are
evaluating the many options for production now available to us to decide the
best course of action. Drilling on these 80% owned lands has opened new avenues
for testing and further development of the Sawn Lake project. On the 12 sections
of the jointly held lands, in which we have a 40% working interest, our Company
is exploring different plans of action with Andora Energy Corporation, the
operator of these 12 sections. The focus of our Company’s drilling program is to
define the heavy oil reservoir to establish reserves and to determine the best
technology under which oil can be produced from the Sawn Lake project in order
to initiate production and generate a cash flow.
 
 We are
currently in the process of evaluating various enhanced recovery technologies
for a test well project, which is subject to regulatory approval, public
consultations, Board of Directors approval, financing, successful reservoir
evaluation and modeling, and other risks associated with the oil sands
industry.
 
 Deep Well
through its subsidiaries Northern Alberta Oil Ltd. which we refer to as
“Northern”, and Deep Well Oil & Gas (Alberta) Ltd. currently have a 100%
working interest in 15 sections of petroleum and natural gas licenses
(“P&NG”) in the Peace River area of Alberta, Canada, an 80% working interest
in 56 contiguous sections of oil sands development leases, and a 40% working
interest in an additional 12 contiguous sections of oil sands development leases
in the Peace River oil sands area of Alberta, Canada. Our P&NG licenses and
oil sands development leases cover 52,505 gross acres (21,248 gross
hectares).
 
 On April
2, 2008, our Company participated in a public offering of Crown Petroleum and
Natural Gas Rights held by the Alberta Department of Energy, in which we
successfully bid on 1 P&NG license covering 3,796 gross acres (1,536 gross
hectares) for a total of 6 sections in the Ochre area. Our Company acquired an
undivided 100% working interest in these 6 sections located in the Peace River
oil sands area approximately fourteen miles west of our Sawn Lake
properties.
 
 On
December 4, 2008, as operator, we successfully spudded the first well of six
wells to be drilled in our 2008/2009 winter drilling program. This well is
located at 12-14-092-13W5 in North Central Alberta and was drilled to a vertical
depth of 680 meters. The well was logged, cased, and completed for bluesky heavy
oil production, with perforated intervals from 644.5m to 649.5m. This well is
currently being tested.
 
 On
December 15, 2008, as operator, we successfully spudded the second well of our
six well 2008/2009 winter drilling program. This well is located at
9-16-092-13W5 in North Central Alberta and was drilled to a vertical depth of
680 meters. The well was logged, cased, and completed for bluesky heavy oil
production, with perforated intervals from 638.5m to 643.5m. This well is
currently being tested.
 
 On
January 8, 2009, as operator, we successfully spudded the third well of our six
well 2008/2009 winter drilling program. This well is located at 10-33-091-13W5
in North Central Alberta and was drilled to a vertical depth of 708 meters. This
well determined the southern edge of the Bluesky reservoir of our Sawn Lake
Project.
 
 On
January 16, 2009, as operator, we successfully spudded the fourth well of our
six well 2008/2009 winter drilling program. This well is located at 7-5-092-13W5
in North Central Alberta and was drilled to a vertical depth of 718 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation.
 
 On
January 25, 2009, as operator, we successfully spudded the fifth well of our six
well 2008/2009 winter drilling program. This well is located at 8-4-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 725 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation.
  28
 
 On
February 2, 2009, as operator, we successfully spudded the sixth well of our six
well 2008/2009 winter drilling program. This well is located at 6-22-092-13W5 in
North Central Alberta and was drilled to a vertical depth of 660 meters. The
well was logged and cased for bluesky heavy oil production, and is pending
further evaluation.
 
 In
conjunction with our recent drilling program, our Company acquired existing road
infrastructure on our properties as follows: effective December 1, 2008, we
acquired 6 P&NG properties of which 2 were expected to immediately expire,
covering 11,387 gross acres (gross 4,608 hectares) from Paramount Resources Ltd.
(“Paramount”). Included in this land acquisition, Paramount transferred 7
mineral surface leases (proposed well sites or “MSLs”) and 4 licenses of
occupation, totalling 12 km of roads (access roads or “LOCs”). Along with this
acquisition we acquired 2 wells. Of the 2 wells, one was drilled to a vertical
depth of 737 meters on our existing oil sands lease and subsequent to the
drilling and logging operations; this well was cased for bluesky heavy oil
production. Perforated intervals were from 681.5m to 684.5m and 684.5m to
685.0m. This well’s status is still drilled and cased for future bitumen
production. The estimated cost to drill this well would have been approximately
$1.4 million dollars in drilling and completion costs, which does not include
the costs associated to construct the existing access roads that we have
acquired from Paramount. Paramount used these access roads, which our Company
now owns, to access their properties to drill their wells and prepare some of
their MSLs for future drilling.
 
 Effective
February 1, 2009, we also acquired from Penn West Petroleum Ltd. an LOC that
totalled 8.7 km of an existing road.
 
 On May 5,
2009, our Company was informed by the Alberta Department of Energy that they had
approved our application to convert 5 sections of our oil sands permit to a
15-year primary lease. By drilling on these lands, where the permits were set to
expire, we have preserved title to 5 sections and now have a primary lease,
which is valid for an additional 15 years.
 
 Liquidity and Capital
Resources
 
 As of
September 30, 2007, our Company’s total assets were $9,855,076, compared to
$4,528,124 as of September 30, 2006, and our total liabilities as of September
30, 2007, were $318,406 compared with $972,283 as of September 30, 2006. The
increase in our total assets was due primarily to our Company successfully
raising funds through private offerings of our common stock. The decrease in our
total liabilities was due to accounts payable.
 
 Our
working capital (current liabilities subtracted from current assets) is as
follows.
 
 As of
                      
                      
                      As ofSeptember 30, 2007
                      
                      
                      September 30, 2006Current
      Assets
                      
                      $
                      5,497,687
                      
                      
                      $
                      170,973Current
      Liabilities
                      
                      
                      318,406
                      
                      
                      
                      684,877Working
      Capital
                      
                      $
                      5,179,281
                      
                      
                      $
                      (513,904
                      )
 
 As of
September 30, 2007, our Company had a working capital of $5,179,281 compared to
our working capital deficit of $513,904 as of September 30, 2006. Our working
capital increase was due primarily to the increase in cash associated with our
Company successfully raising funds through two separate private offerings of our
common stock. Currently we have no long-term debt and our estimated working
capital surplus, as of July 31, 2009, is estimated to be $1.4
million.
 
 Our cash
and cash equivalents for the year ending September 30, 2007, was 5,244,162,
compared to $50,324 for the comparable year ending September 30, 2006. Our
Company successfully raised sufficient funds to conduct our operations during
the fiscal years 2005, 2006, 2007, and 2008. From the period October 1, 2005 to
July 31, 2009, we financed our business operations through a loan, fees derived
from the farmout of some of our lands, private offerings of our common stock,
and the exercise of certain warrants, realizing gross proceeds of approximately
$19.6 million. In these offerings, we sold units comprised of common stock and
warrants to purchase additional common stock, and as a result of these
offerings, we currently have an aggregate of 42,818,138 warrants outstanding
with exercise prices ranging from $0.40 to $1.20. If all of these warrants are
exercised we may realize aggregate proceeds of approximately $30.9 million.
However, the warrant holders have complete discretion as to when or if the
warrants are exercised before they expire and we cannot guarantee that the
warrant holders will exercise any of the warrants.
 
 On
October 31, 2008, our Company successfully raised another $5,000,000 from one
investor through a private placement offering as filed on Form 8-K dated
November 7, 2008. With this private placement, we have the funds anticipated to
complete our near term business plan.
  29
  For our
long term operations we anticipate that, among other options, we will raise
funds during the next twenty-four months through private placements of our
common stock under exemptions from the registration requirements provided by
Canadian, United States, and state and provincial securities laws. The
purchasers and manner of issuance will be determined according to our financial
needs and the available exemptions. We also note that if we issue more shares of
our common stock, our stockholders may experience dilution in the percentage of
their ownership of common stock. We may not be able to raise sufficient funding
from stock sales for long-term operations and if so, we may be forced to delay
our business plans until adequate funding is obtained. We believe debt financing
will not be an alternative for funding in the exploration stage of our Company
due to the risky nature of this business. However, at this time, because we are
not generating any revenues, our external sources of liquidity are the sale of
our capital stock, and once our Company achieves the production it expects then
we may consider the alternative of debt financings.
 
 Off-Balance Sheet
Arrangements
 
 We do not
have any off-balance sheet arrangements.
 
 Forward-Looking
Statements
 
 This
report on Form 10-K, including all referenced exhibits, contains
“forward-looking statements” within the meaning of the United States federal
securities laws. All statements other than statements of historical facts
included or incorporated by reference in this report, including, without
limitation, statements regarding our future financial position, business
strategy, projected costs and plans and objectives of management for future
operations, are forward-looking statements. The words "may", "believe",
"intend", "will", "anticipate", "expect", "estimate", "project", "future",
"plan", "strategy", or "continue", and other expressions that are predictions of
or indicate future events and trends and that do not relate to historical
matters, identify forward-looking statements. The forward-looking statements in
this report on Form 10-K include, among others, statements with respect
to:
 
 ·
                our
      current business strategy;
 ·
                our
      future financial position and projected
costs;
 ·
                our
      projected sources and uses of
cash;
 ·
                our
      plan for future development and
operations;
 ·
                our
      drilling and testing plans;
 ·
                our
      proposed enhanced oil recovery test well
  project;
 ·
                the
      sufficiency of our working capital in order to execute our business
      plan;
 ·
                resource
      estimates;
 ·
                the
      timing and sources of our future
funding.
 
 Reliance
should not be placed on forward-looking statements because they involve known
and unknown risks, uncertainties, and other factors, which may cause the actual
results to differ materially from the anticipated future results expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those set forward in the forward-looking
statements include, but are not limited to:
 
 ·
                changes
      in general business or economic
conditions;
 ·
                changes
      in legislation or regulation that affect our
  business;
 ·
                our
      ability to obtain necessary regulatory approvals and
    permits;
 ·
                opposition
      to our regulatory requests by various third
  parties;
 ·
                actions
      of aboriginals, environmental activists and other industrial
      disturbances;
 ·
                the
      costs of environmental reclamation of our
lands;
 ·
                availability
      of labor or materials or increases in their
  costs;
 ·
                the
      availability of sufficient capital to finance our business plans on terms
      satisfactory to us;
 ·
                adverse
      weather conditions and natural
disasters;
 ·
                risks
      associated with increased insurance costs or unavailability of adequate
      coverage;
 ·
                volatility
      of oil and natural gas
prices;
 ·
                competition;
 ·
                changes
      in labor, equipment and capital
costs;
 ·
                future
      acquisitions or strategic
partnerships;
 ·
                the
      risks and costs inherent in
litigation;
 ·
                imprecision
      in estimates of reserves, resources and recoverable quantities of oil and
      natural gas;
 ·
                product
      supply and demand;
 ·
                    fluctuations
      in currency and interest rates;
 ·
                    the
      additional risks and uncertainties, many of which are beyond our control,
      referred to elsewhere in this Form 10-K and in our other SEC
      filings.
 
  30
 
 The
preceding bullets outline some of the risks and uncertainties that may affect
our forward-looking statements. For a full description of risks and
uncertainties, see the sections elsewhere in this Form 10-K entitled “Risk
Factors” and “Environmental Laws and Regulations”. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, believed,
estimated or expected. Except as required by law, we undertake no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise. However, any further disclosures made
on related subjects in subsequent reports on Forms 10-K, 10-KSB, 10-Q, 10-QSB,
8-K and any other SEC filing should be consulted.
 
 ITEM
      7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 We are a
smaller reporting company as defined by Rule 12b-2 under the Exchange Act and
therefore are not required to provide the information required under this
item.
  31
 
 ITEM
      8.
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
 
 MADSEN & ASSOCIATES, CPA’S
      INC.
                  684
      East Vine St. Suite 3Certified
      Public Accountants and Business Consultants
                  Murray,
      Utah 84107Telephone
      801 268-2632Fax
      801-262-3978
 
 Board of
Directors
 Deep Well
Oil & Gas, Inc. and Subsidiaries
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 We have
audited the accompanying balance sheets of Deep Well Oil & Gas, Inc. and
Subsidiaries at September 30, 2007 and 2006 and the statement of operations,
stockholders’ equity, and cash flows for the years ended September 30, 2007 and
2006 and the period September 10, 2003 (date of inception of exploration stage)
to September 30, 2007. 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 audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting 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. The company is not required to
have nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness for the company’s internal control over financial
reporting. Accordingly, we express no such opinion. 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
over all financial statement presentation, We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Deep Well Oil & Gas, Inc. and
Subsidiaries at September 30, 2007 and 2006 and the statement of operations, and
cash flows for the years ended September 30, 2007 and 2006 and the period
September 10, 2003 (date of inception of exploration stage) to September 30,
2007 in conformity with accounting principles generally accepted in the United
States of America.
 
 Salt
      Lake City, UtahMay
      5, 2009
                  /s/ Madsen & Associates, CPA’s
      Inc.
  32
 
 DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
 (Exploration
Stage Company)
 Consolidated
Balance Sheets
 September
30, 2007 and 2006
 
 2007
                          
                          
                          
                          2006ASSETSCurrent
      AssetsCash
      and cash equivalents
                          
                          $
                          5,244,162
                          
                          
                          $
                          50,324Accounts
      receivable
                          
                          
                          80,082
                          
                          
                          
                          59,273Prepaid
      expenses
                          
                          
                          173,443
                          
                          
                          
                          61,376Total
      Current Assets
                          
                          
                          5,497,687
                          
                          
                          
                          170,973Oil and gas properties
      (Note 4)
                          
                          
                          4,353,826
                          
                          
                          
                          4,353,826Equipment net of depreciation(Note 5)
                          
                          
                          3,563
                          
                          
                          
                          3,325TOTAL
      ASSETS
                          
                          $
                          9,855,076
                          
                          
                          $
                          4,528,124LIABILITIESCurrent
      LiabilitiesAccounts
      payable
                          
                          $
                          44,065
                          
                          
                          $
                          207,890Accounts
      payable – related parties (Note 7)
                          
                          
                          263,091
                          
                          
                          
                          465,737Note
      payable (Note 6)
                          
                          
                          11,250
                          
                          
                          
                          11,250Total
      Current Liabilities
                          
                          
                          318,406
                          
                          
                          
                          684,877Loan payable(Note
      8)
                          
                          
                          –
                          
                          
                          
                          287,406Total
      Liabilities
                          
                          
                          318,406
                          
                          
                          
                          972,283SHAREHOLDERS’
      EQUITYCommon stock:(Note
      9)Authorized:
      300,000,000 shares at $0.001 par valueIssued
      and outstanding: 83,635,955 shares(September 2006 – 62,979,289)(Note 9)
                          
                          
                          83,635
                          
                          
                          
                          62,979Additional
      paid in capital
                          
                          
                          14,649,284
                          
                          
                          
                          6,513,620Capital
      stock subscriptions received(2006
      – 5,400,000 shares)
                          
                          
                          –
                          
                          
                          
                          739,827Deficit
      (dated September 10, 2003)
                          
                          
                          (5,196,249
                          )
                          
                          
                          (3,760,585
                          )Total
      Shareholders’ Equity
                          
                          
                          9,536,670
                          
                          
                          
                          3,555,841TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
                          $
                          9,855,076
                          
                          
                          $
                          4,528,124
 
 See
accompanying notes to the consolidated financial statements
  33
  DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
 (Exploration
Stage Company)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For
the Years Ended September 30, 2007 and 2006 and 2005 and the Period September
10, 2003
 (Inception
of Exploration Stage) to September 30, 2007
 
 2007
                                
                                
                                2006
                                
                                
                                2005
                                
                                
                                September 10,
                                  2003 to
                                  September 30,
                                  2007Revenue
                                
                                $
                                –
                                
                                
                                $
                                –
                                
                                
                                $
                                –
                                
                                
                                $
                                –ExpensesAdministrative
                                
                                
                                1,452,958
                                
                                
                                
                                1,341,713
                                
                                
                                
                                1,172,417
                                
                                
                                
                                4,561,287Share
      based compensation
                                
                                
                                246,643
                                
                                
                                
                                558,882
                                
                                
                                
                                –
                                
                                
                                
                                805,525Net
      loss from operations
                                
                                
                                (1,699,601
                                )
                                
                                
                                (1,900,595
                                )
                                
                                
                                (1,172,417
                                )
                                
                                
                                (5,366,812
                                )Other
      income and expensesForgiveness
      of loan payable (Note 8)
                                
                                
                                287,406
                                
                                
                                
                                –
                                
                                
                                
                                –
                                
                                
                                
                                287,406Interest
      income
                                
                                
                                50,183
                                
                                
                                
                                2,492
                                
                                
                                
                                13,478
                                
                                
                                
                                66,153Interest
      expense
                                
                                
                                (73,652
                                )
                                
                                
                                (24,179
                                )
                                
                                
                                (103,610
                                )
                                
                                
                                (207,862
                                )Settlement
      of debt
                                
                                
                                –
                                
                                
                                
                                –
                                
                                
                                
                                –
                                
                                
                                
                                24,866Net
      loss and comprehensive loss
                                
                                $
                                (1,435,664
                                )
                                
                                $
                                (1,922,282
                                )
                                
                                $
                                (1,262,549
                                )
                                
                                $
                                (5,196,249
                                )Net
      loss per common shareBasic
      and diluted
                                
                                $
                                (0.02
                                )
                                
                                $
                                (0.03
                                )
                                
                                $
                                (0.03
                                )Weighted
      average outstanding shares–
      stated in 1,000’sBasic
      and Diluted
                                
                                
                                70,836
                                
                                
                                
                                58,839
                                
                                
                                
                                38,117
 
 See
accompanying notes to the consolidated financial statements
  34
  DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
 (Exploration
Stage Company)
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 For
the Period September 10, 2003 (Inception of Exploration Stage) to September 30,
2007
 
 Common Shares
                                            
                                            
                                            
                                            
                                            
                                            CapitalAdditional
                                            
                                            
                                            StockPaid in
                                            
                                            
                                            Subscriptions
                                            
                                            
                                            AccumulatedShares
                                            
                                            
                                            Amount
                                            
                                            
                                            Capital
                                            
                                            
                                            Received
                                            
                                            
                                            Deficit
                                            
                                            
                                            TotalBalance
      atSeptember
      10, 2003
                                            
                                            
                                            991,912
                                            
                                            
                                            $
                                            992
                                            
                                            
                                            $
                                            (992
                                            )
                                            
                                            $
                                            –
                                            
                                            
                                            $
                                            –
                                            
                                            
                                            $
                                            –Issuance
      of common stockpursuant
      to bankruptcyagreement
      September 10, 2003
                                            
                                            
                                            36,019,556
                                            
                                            
                                            
                                            36,019
                                            
                                            
                                            
                                            13,981
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            50,000Net
      operating loss forthe
      period September 10to
      September 30, 2003
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            (50,000
                                            )
                                            
                                            
                                            (50,000
                                            )Balance
      at September 30, 2003
                                            
                                            
                                            37,011,468
                                            
                                            
                                            
                                            37,011
                                            
                                            
                                            
                                            12,989
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            (50,000
                                            )
                                            
                                            
                                            –Return
      and cancellationof
      common shares
                                            
                                            
                                            (5,775,000
                                            )
                                            
                                            
                                            (5,775
                                            )
                                            
                                            
                                            5,775
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –Net
      operating loss for theyear
      ended September 30, 2004
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            (525,754
                                            )
                                            
                                            
                                            (525,754
                                            )Balance
      atSeptember
      30, 2004
                                            
                                            
                                            31,236,468
                                            
                                            
                                            
                                            31,236
                                            
                                            
                                            
                                            18,764
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            (575,754
                                            )
                                            
                                            
                                            (525,754
                                            )Issuance
      of common stockPrivate
      placement March 10, 2005-
      Shares
                                            
                                            
                                            1,875,000
                                            
                                            
                                            
                                            1,875
                                            
                                            
                                            
                                            527,940
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            529,815-
      Warrants (787,500)(Note 9)
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            205,185
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            205,185Share
      exchange June 7, 2005-
      Shares
                                            
                                            
                                            18,208,875
                                            
                                            
                                            
                                            18,209
                                            
                                            
                                            
                                            2,476,497
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            2,494,706-
      Conversion rights of preferredshares
      of subsidiary
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            1,777,639
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            1,777,639Private
      placement August 12, 2005-
      Shares
                                            
                                            
                                            710,946
                                            
                                            
                                            
                                            711
                                            
                                            
                                            
                                            151,638
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            152,349-
      Warrants (710,946)(Note 9)
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            132,030
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            132,030Common
      stock subscription received
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            250,000
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            250,000Net
      operating loss for theyear
      ended September 30, 2005
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            (1,262,549
                                            )
                                            
                                            
                                            (1,262,549
                                            )Balance
      at September 30, 2005
                                            
                                            
                                            52,031,289
                                            
                                            
                                            
                                            52,031
                                            
                                            
                                            
                                            3,512,054
                                            
                                            
                                            
                                            2,027,639
                                            
                                            
                                            
                                            (1,838,303
                                            )
                                            
                                            
                                            3,753,421
 
 See
accompanying notes to the consolidated financial statements
  35
  DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)
 (Exploration
Stage Company)
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
 For
the Period September 10, 2003 (Inception of Exploration Stage) to September 30,
2007
 
 Common
      Shares
                          
                          
                          
                          
                          
                          CapitalAdditional
                          
                          
                          StockPaid
      in
                          
                          
                          Subscriptions
                          
                          
                          AccumulatedShares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          Received
                          
                          
                          Deficit
                          
                          
                          TotalBalance
      carried forwardAt
      September 30, 2005
                          
                          
                          52,031,289
                          
                          
                          
                          52,031
                          
                          
                          
                          3,512,054
                          
                          
                          
                          2,027,639
                          
                          
                          
                          (1,838,303
                          )
                          
                          
                          3,753,421Issuance
      of common stockPrivate
      placement October 11, 2005-
      Shares
                          
                          
                          3,150,000
                          
                          
                          
                          3,150
                          
                          
                          
                          667,266
                          
                          
                          
                          (250,000
                          )
                          
                          
                          –
                          
                          
                          
                          420,416-
      Warrants (3,150,000)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          553,584
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          553,584Private
      placement January 13, 2006-
      Shares
                          
                          
                          73,000
                          
                          
                          
                          73
                          
                          
                          
                          55,345
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          55,418-
      Warrants (73,000)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          46,402
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          46,402Exercise
      option agreementFebruary
      23, 2006-
      Shares
                          
                          
                          4,707,750
                          
                          
                          
                          4,708
                          
                          
                          
                          640,277
                          
                          
                          
                          (644,985
                          )
                          
                          
                          –
                          
                          
                          
                          –Exercise
      option agreementJune
      13, 2006-
      Shares
                          
                          
                          2,867,250
                          
                          
                          
                          2,867
                          
                          
                          
                          389,960
                          
                          
                          
                          (392,827
                          )
                          
                          
                          –
                          
                          
                          
                          –Warrants
      exercisedJuly
      28, 2006
                          
                          
                          100,000
                          
                          
                          
                          100
                          
                          
                          
                          59,900
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          60,000Warrants
      exercisedSeptember
      11, 2006
                          
                          
                          50,000
                          
                          
                          
                          50
                          
                          
                          
                          29,950
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          30,000Options
      granted for services
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          558,882
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          558,882Net
      operating loss for theyear
      ended September 30, 2006
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          (1,922,282
                          )
                          
                          
                          (1,922,282
                          )Balance
      at September 30, 2006
                          
                          
                          62,979,289
                          
                          
                          
                          62,979
                          
                          
                          
                          6,513,620
                          
                          
                          
                          739,827
                          
                          
                          
                          (3,760,585
                          )
                          
                          
                          3,555,841Settlement
      Agreement January 22, 2007-
      Shares
                          
                          
                          1,600,000
                          
                          
                          
                          1,600
                          
                          
                          
                          433,950
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          435,550Exercise
      option agreement April 4, 2007-
      Shares
                          
                          
                          5,400,000
                          
                          
                          
                          5,400
                          
                          
                          
                          734,427
                          
                          
                          
                          (739,827
                          )
                          
                          
                          –
                          
                          
                          
                          –Private
      placement May 25, 2007-
      Shares
                          
                          
                          5,000,000
                          
                          
                          
                          5,000
                          
                          
                          
                          1,086,348
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          1,091,348-
      Warrants (5,000,000)(Note 9)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          758,652
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          758,652Private
      placement June 22, 2007-
      Shares
                          
                          
                          8,333,333
                          
                          
                          
                          8,333
                          
                          
                          
                          2,731,300
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          2,739,633-
      Warrants (8,333,333)(Note 9)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          1,676,492
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          1,676,492-
      Special warrants (1,000,000)(Note 9)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          283,875
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          283,875Private
      placement July 11, 2007-
      Shares
                          
                          
                          323,333
                          
                          
                          
                          323
                          
                          
                          
                          106,559
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          106,882-
      Warrants (323,333)(Note 9)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          66,397
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          66,397-
      Special warrants (38,800)(Note 9)
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          11,021
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          11,021Options
      granted for services
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          246,643
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          246,643Subtotal
      carried forward
                          
                          
                          83,635,955
                          
                          
                          
                          83,635
                          
                          
                          
                          14,649,284
                          
                          
                          
                          –
                          
                          
                          
                          (3,760,585
                          )
                          
                          
                          10,972,334
 
 See
accompanying notes to the consolidated financial statements
  36


DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)


(Exploration
Stage Company)


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)


For
the Period September 10, 2003 (Inception of Exploration Stage) to September 30,
2007





CapitalAdditional
                              
                              
                              StockPaid
      in
                              
                              
                              Subscriptions
                              
                              
                              AccumulatedShares
                              
                              
                              Amount
                              
                              
                              Capital
                              
                              
                              Received
                              
                              
                              Deficit
                              
                              
                              TotalSubtotal
      carried forward fromprevious
      page
                              
                              
                              83,635,955
                              
                              
                              
                              83,635
                              
                              
                              
                              14,649,284
                              
                              
                              
                              –
                              
                              
                              
                              (3,760,585
                              )
                              
                              
                              10,972,334Warrant
      exchange September 4, 2007-
      Share value transferredfrom
      warrants
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              11,467
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              11,467- Warrants
      cancelled(500,000)
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              (130,276
                              )
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              (130,276
                              )- Warrants
      issued(625,000)
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              118,809
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              118,809Warrant
      exchange September 10, 2007-
      Share value transferredfrom
      warrants
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              7,237
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              7,237- Warrants
      cancelled(287,500)
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              (74,909
                              )
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              (74,909
                              )- Warrants
      issued(359,375)
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              67,672
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              67,672Net
      operating loss for the year ended September 30, 2007
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              –
                              
                              
                              
                              (1,435,664
                              )
                              
                              
                              (1,435,664
                              )Balance
      at September 30, 2007
                              
                              
                              83,635,955
                              
                              
                              $
                              83,635
                              
                              
                              $
                              14,649,284
                              
                              
                              $
                              –
                              
                              
                              $
                              (5,196,249
                              )
                              
                              $
                              9,536,670





See
accompanying notes to the consolidated financial statements


37


DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)


(Exploration
Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the Years Ended September 30, 2007, 2006 and 2005 and the Period September 10,
2003


(Inception
of Exploration Stage) to September 30, 2007





2007
                  
                  
                  2006
                  
                  
                  2005
                  
                  
                  September
                    10,
      2003 to
                    September
                    30,
      2007CASH
      PROVIDED BY (USED IN):Operating
      ActivitiesNet
      loss
                  
                  $
                  (1,435,664
                  )
                  
                  $
                  (1,922,282
                  )
                  
                  $
                  (1,262,549
                  )
                  
                  $
                  (5,196,249
                  )Items
      not affecting cash:Stock
      based compensation
                  
                  
                  246,643
                  
                  
                  
                  558,882
                  
                  
                  
                  –
                  
                  
                  
                  805,525Bad
      debts
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  170,084
                  
                  
                  
                  170,084Amortization
                  
                  
                  1,420
                  
                  
                  
                  914
                  
                  
                  
                  –
                  
                  
                  
                  2,334Forgiveness
      of loan payable
                  
                  
                  (287,406
                  )
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (287,406
                  )Settlement
      of lawsuit
                  
                  
                  435,550
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  435,550Commissions
      withheld from loans proceeds
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  121,000Net
      changes in non-cash working capital (Note 11)
                  
                  
                  (499,347
                  )
                  
                  
                  193,643
                  
                  
                  
                  34,006
                  
                  
                  
                  (119,882
                  )(1,538,804
                  )
                  
                  
                  (1,168,843
                  )
                  
                  
                  (1,058,459
                  )
                  
                  
                  (4,069,044
                  )Investing
      ActivitiesPurchase
      of equipment
                  
                  
                  (1,658
                  )
                  
                  
                  (3,637
                  )
                  
                  
                  (333
                  )
                  
                  
                  (5,628
                  )Purchase
      of oil and gas properties
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (111,392
                  )Cash
      from acquisition of subsidiary
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  11,141
                  
                  
                  
                  11,141Return
      of costs from farmout agreement
                  
                  
                  –
                  
                  
                  
                  961,426
                  
                  
                  
                  –
                  
                  
                  
                  961,426(1,658
                  )
                  
                  
                  957,789
                  
                  
                  
                  10,808
                  
                  
                  
                  855,547Financing
      ActivitiesLoan
      payable
                  
                  
                  –
                  
                  
                  
                  1,448
                  
                  
                  
                  274,404
                  
                  
                  
                  275,852Loan
      advance – related parties
                  
                  
                  –
                  
                  
                  
                  11,604
                  
                  
                  
                  (808,445
                  )
                  
                  
                  (811,746
                  )Note
      payable repayment
                  
                  
                  –
                  
                  
                  
                  (31,910
                  )
                  
                  
                  (68,146
                  )
                  
                  
                  (100,056
                  )Debenture
      advance (repayment)
                  
                  
                  –
                  
                  
                  
                  (1,021,463
                  )
                  
                  
                  16,573
                  
                  
                  
                  (1,004,890
                  )Proceeds
      from issuance from common stock
                  
                  
                  6,734,300
                  
                  
                  
                  1,165,820
                  
                  
                  
                  1,269,379
                  
                  
                  
                  9,219,499Proceeds
      from debenture net of commissions
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  879,0006,734,300
                  
                  
                  
                  125,499
                  
                  
                  
                  683,765
                  
                  
                  
                  8,457,659Increase
      (decrease) in cash and cash equivalents
                  
                  
                  5,193,838
                  
                  
                  
                  (85,555
                  )
                  
                  
                  (363,886
                  )
                  
                  
                  5,244,162Cash
      and cash equivalents, beginning of year
                  
                  
                  50,324
                  
                  
                  
                  135,879
                  
                  
                  
                  499,765
                  
                  
                  
                  –Cash
      and cash equivalents, end of year
                  
                  $
                  5,244,162
                  
                  
                  $
                  50,324
                  
                  
                  $
                  135,879
                  
                  
                  $
                  5,244,162Supplemental
      Cash Flow Information:Interest
      Expense
                  
                  $
                  73,652
                  
                  
                  $
                  24,179
                  
                  
                  $
                  103,610





See
accompanying notes to the consolidated financial statements


38


DEEP
WELL OIL & GAS, INC. (AND SUBSIDIARIES)


(Exploration
Stage Company)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2007 and 2006





1.           NATURE
OF BUSINESS





Deep Well
Oil & Gas, Inc. (“Deep Well”) and its former subsidiaries were engaged in
the manufacture and distribution of standard and custom precision mechanical
assemblies and components throughout the United States.





On
February 19, 2003, Deep Well filed a petition for bankruptcy in the United
States Bankruptcy Court under Chapter 11 in the Eastern District of New York
titled “Allied Devices Corporation, Case No. 03-80962-511”. The Company emerged
from bankruptcy pursuant to a Bankruptcy Court Order entered on September 10,
2003, with no remaining assets or liabilities.





The terms
of the bankruptcy settlement included: (1) a reverse common stock split of 30
shares of outstanding stock for 1 share; (2) increasing the authorized common
capital stock from 25,000,000 to 50,000,000 shares with a par value of $0.001;
(3) a change in the name of the Company from “Allied Devices Corporation” to
“Deep Well Oil & Gas, Inc.”; and (4) the authorization for the issuance of
2,000,000 post split restricted common shares and 4,000,000 post split common
shares in exchange for $50,000, which was paid into the bankruptcy court by the
recipients of the shares.





Restated
and amended articles of incorporation completing the terms of the bankruptcy
have been filed in the state of Nevada.





Upon
emergence from Chapter 11 proceedings, Deep Well adopted fresh-start reporting
in accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code (SOP 90-7). In connection with the adoption of
fresh-start reporting, a new entity was deemed created for financial reporting
purposes. For financial reporting purposes, Deep Well adopted the provisions of
fresh-start reporting effective September 10, 2003. In adopting the requirements
of fresh-start reporting as of September 10, 2003, the company was required to
value its assets and liabilities at fair value and eliminate any accumulated
deficit as of September 10, 2003. Deep Well emerged from Chapter 11 proceedings
with no assets and liabilities pursuant to the Bankruptcy Order. Because the
current business, heavy oil and gas exploration has no relevance to the
predecessor company, there is no basis for financial comparisons between the
Deep Well’s current operations and the predecessor company.





Subsequent
to the bankruptcy on February 27, 2004, the Company completed a forward stock
split of two shares for each outstanding share.





This
report has been prepared showing the name “Deep Well Oil & Gas, Inc. (and
Subsidiaries)” (“the Company”) and the post split common stock, with $0.001 par
value, from inception. The accumulated deficit has been restated to zero and
dated September 10, 2003, with the statement of operations to begin on that
date.





2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation





These
consolidated financial statements are expressed in U.S. dollars and are prepared
in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).





Basis of
Consolidation





These
consolidated financial statements include the accounts of (1) Northern Alberta
Oil Ltd. (“Northern”), from the date of acquisition, being June 7, 2005,
incorporated under the Business Corporations Act (Alberta), Canada; and (2) Deep
Well Oil & Gas (Alberta) Ltd., incorporated under the Business Corporations
Act (Alberta), Canada on September 15, 2005. As of September 30, 2007, Deep Well
owned 100% (2006 – 100%) of the Northern common shares and owns 100% (2006 –
58%) of the Northern preferred shares. All inter-company balances and
transactions have been eliminated. The Company has received “Capital stock
subscriptions” (2006 - $739,827) relating to the Northern preferred shares for
which Deep Well has exclusive rights to call in the future. These rights were
called on April 4, 2007. The information furnished includes the financial
results of Northern, with effect from June 7, 2005 (see Note 3 – “Business
Combination” to the Notes to the Consolidated Financial
Statements).


39


Cash and Cash
Equivalents





The
Company considers all highly liquid instruments with a maturity of three months
or less at the time of issuance to be cash equivalents. Cash also consists of
cash held in trust.





Equipment





Equipment
are stated at cost. Amortization expense is computed using the declining balance
method over the estimated useful life of the asset. The following is a summary
of the estimated useful life used in computing amortization
expense:





Equipment
                  
                  
                  -
      30
                  %Software
                  
                  
                  -
      100
                  %Furniture
                  
                  
                  - 20
                  %





Expenditures
for major repairs and renewals that extend the useful life of the asset are
capitalized. Minor repair expenditures are charged to expense as
incurred.





Long-Lived
Assets





The
Company reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition is less than its carrying amount.





Asset Retirement
Obligations





The
Company accounts for asset retirement obligations by recording the estimated
future cost of the Company’s plugging and abandonment obligations when incurred,
which is at the time the well is completely drilled. Upon initial recognition of
an asset retirement obligation, the Company increases the carrying amount of the
long-lived asset by the same amount as the liability. Over time, the liabilities
are accreted for the change in their present value, through charges to oil and
gas production and well operations costs. The initial capitalized costs are
depleted over the useful lives of the related assets, through charges to
depreciation, depletion and amortization. If the fair value of the estimated
asset retirement obligation changes, an adjustment is recorded to both the asset
retirement obligation and the asset retirement cost. Revisions in estimated
liabilities can result from revisions of estimated inflation rates, escalating
retirement costs and changes in the estimated timing of settling asset
retirement obligations. As at September 30, 2007, no asset retirement
obligations exist.





Foreign Currency
Translation





The
functional currency of the Canadian subsidiaries is the United States dollar,
however the Canadian subsidiaries transact in Canadian dollars. Consequently,
monetary assets and liabilities are remeasured into United States dollars at the
exchange rate on the balance sheet date and non-monetary items are remeasured at
the rate of exchange in effect when the assets are acquired or obligations
incurred. Revenues and expenses are remeasured at the average exchange rate
prevailing during the period. Foreign currency transaction gains and losses are
included in results of operations.





Accounting
Methods





The
Company recognizes income and expenses based on the accrual method of
accounting.





Dividend
Policy





The
Company has not yet adopted a policy regarding payment of
dividends.





Financial and Concentrations
Risk





The
Company does not have any concentration or related financial credit risk except
that cash is maintained in banks over the insured amounts of $100,000 CDN,
however, the amounts are maintained in banks of high quality.


40


Income
Taxes





The
Company utilizes the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are determined based on
the differences between financial reporting and the tax bases of the assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.





Due to
the uncertainty regarding the Company’s profitability, the future tax benefits
of its losses have been fully reserved for and no net benefit has been recorded
in the financial statements.





Revenue
Recognition





The
Company is in the business of exploring for, developing, producing and selling
crude oil and natural gas. Crude oil revenue is recognized when the product is
taken from the storage tanks on the lease and delivered to the purchaser.
Natural gas revenues are recognized when the product is delivered into a third
party pipeline downstream of the lease. Occasionally the Company may sell
specific leases and the gain or loss associated with these transactions will be
shown separately from the profit or loss from the operations or sales of oil and
gas products.





Advertising and Market
Development





The
Company expenses advertising and market development costs as
incurred.





Basic and Diluted Net Income
(Loss) Per Share





Basic net
income (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding. Diluted net income (loss) per share
amounts are computed using the weighted average number of common shares and
common equivalent shares outstanding as if shares had been issued on the
exercise of the common share rights, unless the exercise becomes antidilutive
and then only the basic per share amounts are shown in the report.





Financial
Instruments





Fair
Values





The fair
values of the Corporation’s accounts receivable, accounts payable, accounts
payable – related parties, note and accrued interest payable and loan payable
approximate their carrying values due to the short-term nature of these
financial instruments.





Environmental
Requirements





At the
report date environmental requirements related to the mineral claims acquired
are unknown and therefore an estimate of any future cost cannot be
made.





Recently Adopted Accounting
Standards





Effective
October 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payment (revised
2004). Pursuant to SFAS No. 123R the Company is required to recognize in
the financial statements, based on fair value, compensation expense for all
vested stock options and other equity-based awards as of October 1, 2005. For
equity-based compensation awards granted or modified subsequent to October 1,
2005, compensation expense, based on the fair value on the date of grant or
modification, will be recognized in the financial statements on a straight-line
basis over the vesting period for the entire award.





Recently Issued Accounting
Standards





In July
2006, the FASB issued FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income
Taxes – an Interpretation of FASB Statement 109, which prescribes a
comprehensive model for accounting for uncertainty in tax positions. FIN No. 48
provides that the tax effects from an uncertain tax position can be recognized
in the financial statements, only if the position is more likely than not of
being sustained on audit by the Internal Revenue Service (“IRS”), based on the
technical merits of the position. The provisions of FIN No. 48 become effective
for the Company on October 1, 2007 is not expected to result in any change to
the consolidated financial statements.


41


In May
2007, the FASB issued FASB Staff Position FIN No. 48-1, Definition of Settlement in FASB
Interpretation No. 48 (“FIN No. 48-1”). FIN No. 48-1 amends FIN No. 48 to
provide guidance on how an entity should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits. The term “effectively settled” replaces the term “ultimately settled”
when used to describe recognition, and the terms “settlement” or “Settled”
replace the terms “ultimate settlement” or “ultimately settled” when used to
describe measurement of a tax position under FIN No. 48. FIN No. 48-1 clarifies
that a tax position can be effectively settled upon the completion of an
examination by a taxing authority without being legally extinguished. For tax
positions considered effectively settled, an entity would recognize the full
amount of tax benefit even if the tax position is not considered more likely
than not to be sustained based solely on the basis of its technical merits and
the statute of limitations remains open. The adoption of FIN No. 48-1, becomes
effective October 1, 2007 and is not expected to have an effect on the
consolidated financial statements.





In
September 2006, the FASB issued SFAS No. 157, Accounting for Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value within generally accepted accounting principles and
expands required disclosure about fair value measurements. SFAS No. 157 does not
expand the use of fair value in any new circumstances. SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007. However, on February 12, 2008, the FASB issued FASB Staff Position (“FSP”)
SFAS No. 157-2, Effective Date
of FASB Statement No.157, which delayed the effective date of SFAS No.
157 for all non-financial assets and non-financial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). This FSP partially defers the effective
date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years for items within the scope of this
FSP. Effective October 1, 2009, the Company will adopt SFAS No. 157 except as it
applies to those nonfinancial assets and nonfinancial liabilities as noted in
FSP FAS No. 157-b. The Company is evaluating the effect that these new standards
will have, if any, in the consolidated financial statements when
adopted.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.SFAS No. 159 permits entities to choose
to measure, at fair value, many financial instruments and certain other items
that are not currently required to be measured at fair value. The objective is
to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS No. 159 establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. The
statement will be effective as of the beginning of the entity’s first fiscal
year beginning after November 15, 2007. The Company is evaluating the effect
that SFAS No. 159 will have, if any, in the consolidated financial statements
when it is adopted in 2008.





Estimates and
Assumptions





Management
uses estimates and assumptions in preparing financial statements in accordance
with generally accepted accounting principles. Those estimates and assumptions
affect the reported amounts of the assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were assumed in preparing
these financial statements.





3.           BUSINESS
COMBINATION





On June
7, 2005, Deep Well completed its acquisition of Northern Alberta Oil Ltd. by way
of a share exchange agreement where by Deep Well would acquire all the
outstanding common shares of Northern by giving up newly issued restricted
shares of Deep Well common stock. In addition Deep Well also has the exercised
options to acquire all of the preferred shares of Northern through a similar
share exchange. As consideration Northern shareholders will receive three (3)
shares of Deep Well common stock for every one (1) share of Northern common
stock and each preferred Northern stock holder will receive thirty (30) shares
of Deep Well common stock for every one (1) preferred Northern share held. The
Northern preferred shares were converted into 12,975,000 Deep Well common
shares.





The
acquisition of Northern allows Deep Well to consolidate its oil sands holdings
in the Sawn Lake oil sands project in North - Central Alberta,
Canada.





The
acquisition of Northern Alberta Oil Ltd. has been accounted for using the
purchase method in accordance with SFAS No. 141 "Business Combinations" ("SFAS
No. 141). Under the purchase method of accounting, the assets and liabilities of
Northern are recorded at their fair values at the acquisition date. The
financial statements and reported results of operations of Deep Well issued
after the completion of the acquisition reflect these fair values, with the
results of Northern being included within the Consolidated Statement of
Operations from June 7, 2005.


42


As per
SFAS No. 141 the measurement of the consideration is based on the fair value of
the consideration given or the fair value of the net assets acquired, whichever
is more clearly evident and, thus, more reliably measurable. In this case the
quoted market price of the equity security issued (Deep Well shares) to effect
the business combination has been used to estimate the fair value of the net
assets of the entity after recognizing the possible effects of price
fluctuations, quantities traded, issue costs, and the like. In this case the
Company examined two private placements on March 10, 2005 and August 12, 2005 to
determine if a discount to the share price would be needed. Both of the private
placements consisted of shares and attached warrants therefore the Black Scholes
pricing model was used to determined how to allocate the private placement
proceeds to the shares and warrants. The results showed that a discount rate
between 37% and 65% would need to be used. The Deep Well share price on June 7,
2005 was $0.39 and with a discount rate of 65% the price per share would be
$0.14.





Included
in the consideration is the possible conversion of each Northern preferred share
into 30 Deep Well shares. This contingent consideration was determinable at the
date of acquisition and has been included as part of the consideration given up
as it was determined, beyond a reasonable doubt, that these shares would be
converted in the future. The exchange agreement stipulated that Deep Well had
the option to 'call' the shares after 35 months and the preferred shareholders
had the option to 'put' those shares to Deep Well anytime within 36 months. It
was Deep Well's intention to 'call' the shares if the preferred shareholders did
not exercise their 'put' within the 36 months. As of April 4, 2007, all Northern
preferred shares have been converted into Deep Well common shares resulting in
Deep Well owning 100% of the Northern preferred shares.





Total
consideration, including the option to acquire Northern preferred shares in a
share exchange was approximately $4.3 million at the price of $0.14 per share of
Deep Well’s common stock, as analyzed below:





$’0006,069,625
      of Northern common shares exchanged 3 for 1 at $0.14
                    
                    $
                    2,495432,500
      of Northern preferred shares exchanged 30 for 1 at $0.14
                    
                    
                    1,777$
                    4,272





The
following table presents Deep Well’s allocation of the purchase price to the
assets acquired and liabilities assumed, based on their fair
values.





$’000ASSETSCurrent
      Assets:Cash
                  
                  $
                  11Accounts
      receivable
                  
                  
                  18Prepaid
                  
                  
                  16Total
      current assets
                  
                  
                  45Loans
      receivable – related parties
                  
                  
                  241Oil
      and gas properties
                  
                  
                  5,205Total
      assets
                  
                  
                  5,491LIABILITIESCurrent
      Liabilities:Accounts
      payable
                  
                  
                  124Accounts
      payable – related parties
                  
                  
                  96Loan
      payable
                  
                  
                  11Loan
      payable – related parties
                  
                  
                  988Total
      liabilities
                  
                  
                  1,219Net
      assets acquired with no goodwill allocated in the
    acquisition
                  
                  $
                  4,272





4.           OIL
AND GAS PROPERTIES





The
Company has acquired an 80% interest in certain oil and gas properties which
after a farmout agreement entered into on February 25, 2005, the Company's
interest was reduced to 40% on twelve sections as described below in the
November 26, 2007 settlement. These certain properties are located in North
Central Alberta, Canada with a life of 15 years from the start dates which range
from April 2003 to August 2004. The terms include certain commitments related to
oil sand leases which require the payments of rents as long as the leases are
non-producing. As of September 30, 2007, the payments due in Canadian dollars
under this commitment are as follows:


43





2008
                  
                  $
                  46,2332009
                  
                  $
                  46,2332010
                  
                  $
                  41,5742011
                  
                  $
                  41,574Subsequent
                  
                  $
                  313,242





The
Government of Alberta owns this land and the Company has acquired the rights to
perform oil and gas activities on these lands. If the Company meets the
conditions of the 15-year leases the Company will then be permitted to drill on
and produce oil from the land into perpetuity. These conditions give the Company
until the expiration of the leases to meet the following
requirements:





a)
            drill
      70 wells throughout the 69.5 sections;
or





b)
            drill
      42 wells within the 69.5 sections with the balance of the undrilled
      sections having acquired and processed 2 miles of seismic on each
      undrilled section.





The
Company plans to meet at least the second of these conditions.





The
Company follows the successful efforts method of accounting for costs of oil and
gas properties. Under this method, acquisition costs of oil and gas properties
and costs of drilling and equipping development wells are capitalized. Costs of
drilling exploratory wells are initially capitalized and, if subsequently
determined to be unsuccessful, are charged to expenses. All other exploration
costs, including geological and geophysical costs and carrying and maintenance
costs, are charged to exploration expenses when incurred. Producing properties,
non-producing and unproven properties are assessed annually, or more frequently
as economic events indicate, for potential impairment.





This
consists of comparing the carrying value of the asset with the asset's expected
future undiscounted cash flows without interest costs. Estimates of expected
future cash flows represent management's best estimate based on reasonable and
supportable assumptions. Proven oil and gas properties are reviewed for
impairment on a field-by-field basis. In addition, management evaluates the
carrying value of non-producing properties and may deem them impaired for lack
of drilling activities. No impairment losses were recognized for the year ended
September 30, 2007 (2006 - $nil).





Capitalized
costs of proven oil and gas properties are depleted using the unit-of-production
method when the property is placed in production.





Substantially
all of the Company's oil and gas activities are conducted jointly with others.
The accounts reflect only the Company's proportionate interest in such
activities.





On
November 15, 2005, the Company’s subsidiary received an additional 6.5 sections
which consist of a five year oil sand permit rights which were part of the
subsidiaries original purchase agreement.





On
November 15, 2005, the Company and its subsidiary entered into an agreement to
amend a farmout agreement with Signet Energy Inc. (“Signet”), a private company
owned by Surge Global Energy, Inc. (“Surge”). Under this new amended farmout
agreement, Signet Energy Inc., as operator, assumed the farmout obligations,
including completing, at its expense, the drilling of 10 well to earn up to a
40% working interest in the Sawn Lake oil sands project.





On
November 15, 2005, as part of the settlement of a legal action the Company, and
its subsidiary, and Surge agreed to amend a farmout agreement signed on February
25, 2005, between the Company, and Surge that had previously been terminated by
the Company (disclosed on Form 8-K on September 29, 2005). The amendments to the
agreement provided that: (1) all conditions of the farmout agreement will be
deemed to have been satisfied on September 25, 2005; (2) the earning period
(i.e. the period during which Signet has to drill 10 wells) under the agreement
will be extended until February 25, 2008; (3) Signet will have until September
25, 2006 to drill an option well; (4) an additional 6.5 sections of land will be
added to the land subject to the agreement; (5) Signet will pay the Company
$1,000,000 on November 15, 2005, in satisfaction of the prospect fee
outstanding, instead of after drilling the second well as stated in the farmout
agreement; and (6) no shares of Surge will be issued to the Company. Instead,
the Company or its subsidiaries will receive 7,550,000 common shares of Signet
Energy Inc.





The
Company currently owns an 80% working interest in 51 contiguous sections of oil
sands development leases and 6.5 sections of oil sands permits in the Sawn Lake
heavy oil area in North Central Alberta. The Company has an additional 40%
working interest in another 12 sections of oil sands development leases of which
Signet has earned 40% from the Company.





On
November 26, 2007, the Company entered into a settlement with Signet and Andora
Energy Corporation and resolved their differences and certain collateral
matters. The settlement includes but is not limited to:


44





a)
            the
      Farmout Agreement dated February 25, 2005, being effectively terminated
      concurrently with the execution of the settlement in regards to the
      Settlement Agreement;


b)
            Signet
      being regarded as having earned an 40% working interest in a total of
      twelve sections;


c)
            Signet
      will reconvey registered title to 57.5 unearned sections of the Farmout
      Lands, as defined in the Farmout Agreement, back to the
      Company.





5.           EQUIPMENT





2007Accumulated
                  
                  
                  Net
      BookCost
                  
                  
                  Amortization
                  
                  
                  ValueEquipment
                  
                  $
                  4,775
                  
                  
                  $
                  1,764
                  
                  
                  $
                  3,011Software
                  
                  
                  809
                  
                  
                  
                  539
                  
                  
                  
                  270Furniture
                  
                  
                  313
                  
                  
                  
                  31
                  
                  
                  
                  282$
                  5,897
                  
                  
                  $
                  2,334
                  
                  
                  $
                  3,563





2006Accumulated
                  
                  
                  Net
      BookCost
                  
                  
                  Amortization
                  
                  
                  ValueEquipment
                  
                  $
                  3,970
                  
                  
                  $
                  645
                  
                  
                  $
                  3,325Software
                  
                  
                  269
                  
                  
                  
                  269
                  
                  
                  
                  –$
                  4,239
                  
                  
                  $
                  914
                  
                  
                  $
                  3,325





6.           NOTE
PAYABLE





The
Company has loans outstanding of $11,250 (2006 - $11,250) due on demand, is
unsecured and bears no interest.





7.           SIGNIFICANT
TRANSACTIONS WITH RELATED PARTIES





Accounts
payable – related parties of $263,091 (2006 - $465,737) results from directors
fees payable by the Company. Accounts payable – related parties are unsecured,
non-interest bearing and have no fixed terms of repayment.





Officers,
directors, their families and their controlled entities have acquired 6.29% of
the Company’s outstanding common capital stock.





8.           LOAN
PAYABLE





Loan
payable consisted of an amount due to a former director of the Company and a
company controlled by the former director. This amount was in dispute for over
three years and given the statute of limitations rules, the Company is no longer
legally liable to repay the amount. The Company has treated the debt as
forgiven.





9.           SHARE
CAPITAL





On
February 27, 2004, the Board of Directors unanimously approved a forward stock
split of common stock at a ratio of two (2) shares for every one (1) share held.
The forward split became effective March 10, 2004.  After the split,
the Company had 12,337,156 shares of common stock issued and outstanding. Prior
to the effective date of the split, the Company had 6,168,578 shares of common
stock outstanding.





In
connection with the stock split the Company increased its authorized common
shares in proportion to the forward stock split. The Company authorized common
stock after the forward stock split which consists of 100,000,000 shares of
common stock. Prior to the split, the Company was authorized to issue 50,000,000
shares of common stock. In connection with the forward split, the Company
amended its articles of incorporation with the state of Nevada. The Company did
not obtain a shareholder vote of the forward stock split and a shareholder vote
was not required by Nevada law.


45


On May 7,
2004, the Company filed a Form 8-K that reported that on May 4, 2004, the Board
of Directors unanimously approved a forward stock split of common stock at a
ratio of three (3) shares for every one (1) share held. The forward split became
effective on May 14, 2004. After the split, the Company had 37,011,468 shares of
common stock issued and outstanding. Prior to the effective date of the split,
the Company had 12,337,156 shares of common stock outstanding. In connection
with the stock split, the Company increased the authorized common shares in
proportion to the forward stock split. The authorized common stock after the
forward stock split consists of 300,000,000 shares of common stock. Prior to the
split, the Company was authorized to issue 100,000,000 shares of common stock.
In connection with the forward split, the articles of incorporation were amended
with the State of Nevada. The Company did not obtain a shareholder vote of the
forward stock split and a shareholder vote was not required by Nevada
law.





On March
10, 2005, the Company closed on a transaction pursuant to a certain Securities
Purchase Agreement ("SPA"), with two accredited investors for an aggregate
purchase price of $735,000 pursuant to which the Company sold an aggregate of
(1) 1,875,000 shares of the Company’s common stock, par value $0.001 per share,
at a purchase price of $0.40 per share; and (2) 750,000 warrants, of which each
of the warrants is exercisable from March 10, 2005 until March 9, 2010, at an
exercise price equal to $0.50 per share. The Company issued the aforementioned
securities to the investors pursuant to Rule 506 of Regulation D as promulgated
under the Securities Act of 1933, as amended, and/or Section 4(2) of the Act. In
connection with the SPA, a finder's fee of $75,000 was paid and 37,500 warrants
were issued. The exercise price of the warrants will be adjusted from time to
time upon the occurrence of certain events, as provided in the warrants, and as
a result of the issuance of common stock on May 25, 2007, and pursuant to the
SPA and Form of Warrant dated March 10, 2005, entered into by and among the
Company and the investors (the "Warrant Holders"), the Company issued an
adjustment to the Warrant Holders. The original warrant dated March 10, 2005,
contained a price adjustment if the Company sells, issues or grants additional
shares of its common stock at a price per share less than the exercise price. In
the event of a price adjustment, the number of shares exercisable under the
warrant would also increase. Therefore, the exercise price of the original
warrant has been adjusted from $0.50 to $0.40 per common share. The Company has
granted the Warrant Holders new warrants to purchase an additional 196,875
common shares for a total of 984,375 shares of the Company’s common stock at an
adjusted exercise price of $0.40 per share under the same terms as the original
warrant. The Company entered into a Registration Rights Agreement (“RRA”) with
the investors, dated as of March 10, 2005, pursuant to which the Company was
obligated to prepare and file a registration statement no later than 45 days
after the closing date registering the number of shares of the Company’s common
stock which was at least equal to (1) the aggregate number of shares of common
stock issued under the SPA; and (2) 125% of the aggregate number of shares of
common stock issuable upon exercise of the warrants. The Company must use its
reasonable best efforts to cause the registration statement to become effective
as soon as practicable following the filing, but in no event later than 120 days
after the closing date. If the registration statement is not filed within 45
days after the closing date or declared effective within the time specified in
the preceding paragraph, the Company was required to make payments to the
investors equal to 2% of the purchase price and an additional 2% of the purchase
price for each subsequent 30-day period as to which the registration statement
was not filed or declared effective. Effective on January 22, 2007, the Company
entered into a Settlement Agreement and Release of All Claims (the "Settlement
Agreement") with the investors who were in receipt of the above issued shares
with respect to allegations made by the investors that the Company had breached
the SPA and the RRA.





The
Settlement Agreement provides, without any party acknowledging any liability,
for:





-
            the
      amendment of the SPA to delete certain restrictions on the Company’s
      ability to enter into any future
financing;


-
            the
      termination of the RRA;


-
            the
      issuance to the Investors of an aggregate of 1,600,000 (one million six
      hundred thousand) shares of common stock of the Company (the “Shares”),
      including the granting of certain piggyback registration rights related
      thereto; and


-
            the
      full and final settlement of all existing or potential claims between the
      Company and the Investors arising under the SPA and the
    RRA.





On June
7, 2005, pursuant to the share exchange agreement entered into on that date (see
Note 3), the Company issued 18,208,875 common shares in exchange for 6,069,625
common shares of Northern. As at June 7, 2005, all Northern common shares have
been converted into Deep Well common shares resulting in Deep Well owning 100%
of Northern common shares. The value of the Deep Well common shares issued was
calculated to be $2,494,706.





On June
7, 2005, pursuant to an exercise option agreement entered into on that date (see
Note 3), the Company calculated the value of its 12,975,000 common shares to be
given up as consideration for the exchange to be $1,777,639 and included the
amount as a capital stock subscription received.


46


On August
12, 2005, the Company completed a private placement of 500,000 units at a price
of $0.40 per unit, for $200,000. Each unit consists of one common share and one
common share purchase warrant, with each warrant entitling its holder to acquire
one share of its common stock at an exercise price of $0.60. The exercise price
of the warrants will be adjusted from time to time upon the occurrence of
certain events, as provided in the warrants. The warrants expire on August 12,
2008. In addition, on August 12, 2005, pursuant to a Debt Settlement Agreement,
one holder of $84,378.40 of the Company's indebtedness exchanged its debt for
210,946 units at a price of $0.40 per unit. Each unit consists of one common
share and one common share purchase warrant, with each warrant entitling the
holder to acquire one common share of the Company at $0.60 per share. The
exercise price of the warrants will be adjusted from time to time upon the
occurrence of certain events, as provided in the warrants. The warrants expire
on August 12, 2008.





On
October 11, 2005, the Company completed a private placement of 3,150,000 units
at a price of $0.40 per unit for $1,260,000. Each unit consists of one common
share and one common share purchase warrant, with each warrant entitling its
holder to acquire one share of its common stock at a price of $0.60 per share.
The exercise price of the warrants will be adjusted from time to time upon the
occurrence of certain events, as provided in the warrants. The warrants expire
on October 11, 2008. In connection with the private placement a finder’s fee of
$36,000 was paid.





On
January 13, 2006, the Company completed a private placement of 51,200 units at a
price of $1.50 per unit, for $76,800. Each unit consists of one common share and
one common share purchase warrant, with each warrant entitling its holder to
acquire one share of its common stock at an exercise price of $2.25 per common
share. The exercise price of the warrants will be adjusted from time to time
upon the occurrence of certain events, as provided in the warrants. The warrants
expire on January 13, 2009. In addition, on January 12, 2006, pursuant to a Debt
Settlement Agreement, one holder of $38,293 of the Company’s indebtedness
exchanged its debt for 21,800 units at a price of $1.50 per unit valued at
$32,700. Each unit consists of one common share and one common share purchase
warrant, with each warrant entitling its holder to acquire one common share of
the Company at a price of US$2.25. The exercise price of the warrants will be
adjusted from time to time upon the occurrence of certain events, as provided in
the warrants. The warrants expire on January 13, 2009. In connection with the
private placement a finder’s fee of $7,680 was paid.





On
February 23, 2006, pursuant to an exercise option agreement the Company entered
into on June 7, 2005 (see Note 3), the Company issued 4,707,750 of its common
shares in exchange for 156,925 of the outstanding preferred shares of
Northern.


On June
13, 2006, pursuant to an exercise option agreement the Company entered into on
June 7, 2005 (see Note 3), the Company issued 2,867,250 common shares in
exchange for 95,575 of the outstanding preferred shares of
Northern.





On July
28, 2006, a warrant holder of the Company acquired 100,000 common shares, upon
exercising warrants, at an exercise price of $0.60 per common share for total
gross proceeds to the Company of $60,000.





On
September 11, 2006, a warrant holder of the Company exercised 50,000 warrants
for 50,000 common shares at an exercise price of $0.60 per common share for
total gross proceeds to the Company of $30,000.





On
January 22, 2007, the Company reached a settlement and a release of all claims
with Grey K Fund LP, Grey K Offshore Fund Ltd., Provident Premier Master Fund
Ltd., Atlas Master Fund Ltd. and Gemini Master Fund, Ltd. for 1,600,000 units at
a price of approximately $0.27 per unit for $435,550. Each unit consists of one
common share.





On April
4, 2007, pursuant to an exercise option agreement the Company entered into on
June 7, 2005 (see Note 3), the Company issued 5,400,000 common shares in
exchange for 180,000 of the outstanding preferred shares of Northern. As of
April 4, 2007, all Northern preferred shares have been converted into Deep Well
common shares resulting in Deep Well owning 100% of Northern preferred
shares.





On May
25, 2007, the Company completed a private placement of 5,000,000 units at a
price of $0.40 per unit for $2,000,000. Each unit consists of one common share
and once common share purchase warrant, with each warrant entitling its holder
to acquire one share of the Company’s common stock at a price of $0.60 per
share. The exercise price of the warrants will be adjusted from time to time
upon the occurrence of certain events, as provided in the warrants. The warrants
expire on May 25, 2010. In connection with the private placement a finder’s fee
of $150,000 was paid.





On June
22, 2007, the Company completed a private placement of 8,333,333 units at a
price of $0.60 per unit for $5,000,000. Each unit consists of one common share
and one common share purchase warrant and another twelve one-hundredths common
share purchase warrant (“Special Warrant”). Each warrant entitles the holder to
purchase one additional common share at a price of $0.90 per common share for a
period of three years from the date of closing. Each Special Warrant entitles
the holder to purchase a common share at a price of $1.20 for a period of five
years from the date of closing. The exercise price of the warrants and the
Special Warrants will be adjusted from time to time upon the occurrence of
certain events, as provided in the warrants. The warrants expire on June 22,
2010, and the Special Warrants expire on June 22, 2012. In connection with the
private placement a finder’s fee of $300,000 was paid.


47


On July
11, 2007, the Company completed a private placement of 323,333 units at a price
of $0.60 per unit for $194,000. Each unit consists of one common share and one
common share purchase warrant and another twelve one-hundredths common share
purchase warrant (“Special Warrant”). Each warrant entitles the holder to
purchase one additional common share at a price of $0.90 per common share for a
period of three years from the date of closing. Each Special Warrant entitles
the holder to purchase a common share at a price of $1.20 for a period of five
years from the date of closing. The exercise price of the warrants and the
Special Warrants will be adjusted from time to time upon the occurrence of
certain events, as provided in the warrants. The warrants expire on July 11,
2010, and the Special Warrants expire on July 11, 2012. In connection with the
private placement a finder’s fee of $9,700 was paid.





On
September 4, 2007, pursuant to the warrant issuance on March 10, 2005, 500,000
common share warrants with an exercise price of $0.50 per common share were
exchanged for 625,000 common share warrants with an exercise price of $0.40 per
common share. The warrants were revalued as at September 4, 2007 to reflect the
new terms.





On
September 10, 2007, pursuant to the warrant issuance on March 10, 2005, 287,500
common share warrants with an exercise price of $0.50 per common share were
exchanged for 359,375 common share warrants with an exercise price of $0.40 per
common share. The warrants were revalued as at September 10, 2007 to reflect the
new terms.





The
warrants outstanding as of September 30, 2007 were 19,463,787 (2006 – 4,571,446)
and are valued at $3,714,934 (2006 - $937,201).





10.         STOCK
OPTIONS





On
November 28, 2005, the Board of Directors (the “Board’) of Deep Well adopted the
Deep Well Oil & Gas, Inc. Stock Option Plan (the “Plan”). The Plan has not
yet been ratified by the shareholders, which it must be to become effective. The
Plan, which will be administered by the Board, permits options to acquire shares
of the Company’s common stock (the “Common Shares”) to be granted to directors,
senior officers and employees of the Company and its subsidiaries, as well as
certain consultants and other persons providing services to the Company or its
subsidiaries.





The
maximum number of shares, which may be reserved for issuance under the Plan, may
not exceed 10% of the Company’s issued and outstanding Common Shares, subject to
adjustment as contemplated by the Plan. The aggregate number of Common Shares
with respect to which options may be granted to any one person (together with
their associates) in any one year, together with all other incentive plans of
the Company, may not exceed 500,000 Common Shares, and in total may not exceed
2% of the total number of Common Shares outstanding.





On
November 28, 2005, the Company granted its directors, Donald E. H. Jones and
Cyrus Spaulding, options to purchase 375,000 shares each of common stock at an
exercise price of $0.71 per share 75,000 vesting immediately and the remaining
vesting one-third on June 29, 2006, one-third on June 29, 2007 and one-third on
June 29, 2008, with a five-year life.





On
November 28, 2005, the Company granted its directors, Horst A. Schmid and Curtis
James Sparrow, options to purchase 375,000 shares each of common stock at an
exercise price of $0.71 per share, 175,000 vesting immediately and the remaining
vesting one-half on February 6, 2006 and one-half on February 6, 2007, with a
five-year life.





On
November 28, 2005, the Company granted a director of a subsidiary of the
Company, Moses Ling, options to purchase 187,500 shares each of common stock at
an exercise price of $0.71, per share 37,500 vesting immediately and the
remaining vesting one-third on June 6, 2006, one-third on June 6, 2007 and
one-third on June 6, 2008, with a five-year life.





On
November 28, 2005, the Company granted Trebax Projects Ltd., a corporation
providing consulting services to the Company or its subsidiary and wholly owned
by a director, options to purchase 390,000 shares of common stock at an exercise
price of $0.71, per share vesting one-third on September 1, 2006, one-third on
September 1, 2007 and one-third on September 1, 2008, with a five-year life. On
September 21, 2007, 130,000 of the remaining non-vested stock options were
terminated as Cyrus Spaulding resigned as the Chief Operating Officer of the
Company.





On
November 28, 2005, the Company granted Portwest Investments Ltd., a corporation
providing consulting services to the Company or its subsidiary and wholly owned
by a director, options to purchase 390,000 shares of common stock at an exercise
price of $0.71, per share vesting one-third on July 1, 2006, one-third on July
1, 2007 and one-third on July 1, 2008, with a five-year life.





On
November 28, 2005, the Company granted Concorde Consulting, a corporation
providing consulting services to the Company or its subsidiary and wholly owned
by a director, options to purchase 390,000 shares of common stock at an exercise
price of $0.71, per share vesting one-third on July 1, 2006, one-third on July
1, 2007 and one-third on July 1, 2008, with a five-year life.





On
October 25, 2006, the Company granted its director David Roff options to
purchase 375,000 shares of common stock at an exercise price of $0.71 per share,
75,000 vesting immediately and the remaining one-third on April 6, 2007,
one-third on April 6, 2008 and one-third on April 6, 2009 with a five-year
life.


48


On
September 20, 2007, the Company granted R.N. Dell Energy Ltd., a corporation
providing consulting services to the Company or its subsidiary, options to
purchase 240,000 shares of common stock at an exercise price of $0.47 per share,
vesting at a rate of 20,000 per month commencing October 31, 2007, with a
five-year life.





On
September 20, 2007, the Company granted one of its employees, Maureen Griffiths,
options to purchase 36,000 shares of common stock at an exercise price of $0.47
per share, 8,000 vesting immediately and the remainder vesting at a rate of
2,000 per month commencing September 30, 2007, with a five-year
life.





For the
year ended September 30, 2007, the Company recorded $246,643 (2006 - $558,882)
of compensation expense based on its use of the Black Scholes model to estimate
the grant-date fair value of these unit option awards. No options were exercised
during the year ended September 30, 2007; therefore, the intrinsic value of the
options exercised during 2007 is nil. As of September 30, 2007, there was a
total of $149,153 of unrecognized compensation cost related to the non-vested
portion of these unit option awards. At September 30, 2007, this cost was
expected to be recognized over a weighted-average period of 3.41 years.
Compensation expense is based upon straight-line amortization of the grant-date
fair value over the vesting period of the underlying unit option. Since the
Company is a relatively new public company and has minimal trading history, it
has used an estimated volatility of approximately 158% for 2007 based on the
trading history available.





Shares Underlying
                    Options Outstanding
                  
                  
                  Shares Underlying
                    Options ExercisableRange of Exercise Prices
                  
                  Shares
                    Underlying
                    Options
                    Outstanding
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual
                    Life
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Shares
                    Underlying
                    Options
                    Exercisable
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price$0.47
      at September 30, 2007
                  
                  
                  276,000
                  
                  
                  
                  4.97
                  
                  
                  $
                  0.47
                  
                  
                  
                  10,000
                  
                  
                  $
                  0.47$0.71
      at September 30, 2007
                  
                  
                  3,102,500
                  
                  
                  
                  3.27
                  
                  
                  
                  0.71
                  
                  
                  
                  2,392,500
                  
                  
                  
                  0.713,378,500
                  
                  
                  
                  3.41
                  
                  
                  $
                  0.69
                  
                  
                  
                  2,402,500
                  
                  
                  $
                  0.71





The
aggregate intrinsic value of exercisable options as of September 30, 2007, was
$900 (2006 – $nil).





The
Company has used a weighted average risk free rate of 4.27% in its Black Scholes
calculation of grant-date fair value, which is based on U.S. Treasury interest
rates at the time of the grant whose term is consistent with the expected life
of the stock options. Expected life represents the period of time that options
are expected to be outstanding and is based on the Company’s best estimate. The
Company has also discounted the fair value of the stock options calculated using
the Black Scholes model using a discount rate determined by comparing the
trading price of the shares with the deemed price of shares on private
placements closed during the year. The following table represents the weighted
average assumptions used for the Black Scholes option-pricing
model:





2007Average
      risk-free interest rates
                  
                  
                  4.27
                  %Average
      expected life (in years)
                  
                  
                  5Volatility
                  
                  
                  158
                  %


49


The
following is a summary of stock option activity for 2007:





Number of
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average Fair
                      Market
                      ValueBalance,
      September 30, 2005
                    
                    
                    –
                    
                    
                    $
                    –
                    
                    
                    $
                    –Options
      granted November 28, 2005
                    
                    
                    2,857,500
                    
                    
                    
                    0.71
                    
                    
                    
                    0.27Balance,
      September 30, 2006
                    
                    
                    2,857,500
                    
                    
                    
                    0.71
                    
                    
                    
                    0.27Options
      cancelled September 21, 2007
                    
                    
                    (130,000
                    )
                    
                    
                    0.71
                    
                    
                    
                    0.27Options
      granted October 25, 2006
                    
                    
                    375,000
                    
                    
                    
                    0.71
                    
                    
                    
                    0.38Options
      granted September 20, 2007
                    
                    
                    276,000
                    
                    
                    
                    0.47
                    
                    
                    
                    0.45Balance,
      September 30, 2007
                    
                    
                    3,378,500
                    
                    
                    $
                    0.69
                    
                    
                    $
                    0.30Exercisable,
      September 30, 2007
                    
                    
                    2,402,500
                    
                    
                    $
                    0.71
                    
                    
                    $
                    0.28





The
following table summarizes the status of the Company’s non-vested stock options
since October 1, 2005:





Non-Vested OptionsNumber of
                    Shares
                  
                  
                  Weighted
                    Average
                    Exercise
                    PriceNon-vested
      at October 1, 2005
                  
                  
                  –
                  
                  
                  $
                  –Granted
                  
                  
                  2,857,500
                  
                  
                  
                  0.71Vested
                  
                  
                  (1,377,500
                  )
                  
                  
                  0.71Non-vested
      at September 30, 2006
                  
                  
                  1,480,000
                  
                  
                  
                  0.71Cancelled
                  
                  
                  (130,000
                  )
                  
                  
                  0.71Granted
                  
                  
                  651,000
                  
                  
                  
                  0.61Vested
                  
                  
                  (1,025,000
                  )
                  
                  
                  0.71Non-vested
      at September 30, 2007
                  
                  
                  976,000
                  
                  
                  $
                  0.64





Measurement
Uncertainty





The
Black-Scholes option pricing model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. Stock options and the warrants attached to the units issued by the
Company are non-transferable. Option pricing models require the input of
subjective assumptions including expected share price volatility. The fair value
estimate can vary materially as a result of changes in the
assumptions.





11.         CHANGES
IN NON-CASH WORKING CAPITAL





2007
                  
                  
                  2006
                  
                  
                  2005Accounts
      receivable
                  
                  $
                  (20,809
                  )
                  
                  $
                  (10,546
                  )
                  
                  $
                  (12,435
                  )Prepaid
      expenses
                  
                  
                  (112,067
                  )
                  
                  
                  (33,475
                  )
                  
                  
                  22,786Accounts
      payable
                  
                  
                  (366,471
                  )
                  
                  
                  237,664
                  
                  
                  
                  23,655$
                  (499,347
                  )
                  
                  $
                  193,643
                  
                  
                  $
                  34,006


50


12.         INCOME
TAXES





As of
September 30, 2007, the Company has approximately $1,731,992 (2006 – $1,450,032)
of net operating losses expiring through 2027 that may be used to offset future
taxable income but are subject to various limitations imposed by rules and
regulations of the Internal Revenue Service. The net operating losses are
limited each year to offset future taxable income, if any, due to the change of
ownership in the Company's outstanding shares of common stock. In addition, at
September 30, 2007, the Company had an unused Canadian net operating loss
carry-forward of approximately $5,087,469 (2006 – $3,440,416), expiring through
2028. These operating loss carry-forwards may result in future income tax
benefits of approximately $2,240,292; however, because realization is uncertain
at this time, a valuation reserve in the same amount has been established.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.





The
components of the net deferred tax asset, the statutory tax rate, the effective
rate and the elected amount of the valuation allowance are as
follows:





Year Ended
                    September
                    30, 2007
                  
                  
                  Year Ended
                    September
                    30, 2006Statutory
      and effective tax rateDomesticStatutory
      U.S. federal rate
                  
                  
                  35.00
                  %
                  
                  
                  35.00
                  %Foreign
                  
                  
                  32.12
                  %
                  
                  
                  32.87
                  %Income
      taxes recovered at the statutory and effective tax rateDomesticStatutory
      U.S. federal rate
                  
                  $
                  184,870
                  
                  
                  $
                  308,457Foreign
                  
                  
                  291,476
                  
                  
                  
                  342,169Timing
      differences:Non-deductible
      expenses
                  
                  
                  (91,707
                  )
                  
                  
                  (320,122
                  )Financing
      fees
                  
                  
                  61,351
                  
                  
                  
                  61,184Other
      deductible charges
                  
                  
                  43,256
                  
                  
                  
                  54,517Benefit
      of tax losses not recognized in the year
                  
                  
                  (489,246
                  )
                  
                  
                  (446,205
                  )Income
      tax recovery (expense) recognized in the year
                  
                  $
                  –
                  
                  
                  $
                  –





The
approximate tax effects of each type of temporary difference that gives rise to
deferred tax assets are as follows:





September 30,
                    2007
                  
                  
                  September 30,
                    2006Deferred
      income tax assets (liabilities)Net
      operating loss carry-forwards
                  
                  $
                  2,240,292
                  
                  
                  $
                  1,638,376Oil
      and gas properties
                  
                  
                  108,731
                  
                  
                  
                  (92,002
                  )Finance
      fee deductible in future years
                  
                  
                  70,246
                  
                  
                  
                  126,881Equipment
                  
                  
                  904
                  
                  
                  
                  379Valuation
      allowance
                  
                  
                  (2,420,173
                  )
                  
                  
                  (1,673,634
                  )Net
      deferred income tax assets
                  
                  $
                  –
                  
                  
                  $
                  –


51


13.         COMMITMENTS





Compensation to
Directors





Since the
acquisition of Northern Alberta Oil Ltd., the Company and Northern have entered
into the following contracts with the following companies for the services of
their officers:





1)
            Portwest
      Investments Ltd., a company owned 100% by Dr. Horst A. Schmid, for
      providing services to the Company as Chief Executive Officer and President
      for $12,500 Cdn per month.





2)
            Concorde
      Consulting, a company owned 100% by Mr. Curtis J. Sparrow, for providing
      services as Chief Financial Officer to the Company for $15,000 Cdn per
      month.





3)
            Brave
      Consulting, a company 50% owned by Mr. David Roff, for providing
      consulting services to the Company for $8,000 Cdn per month. As of August
      2007 the amount has increased to $12,000 per
  month.





Compensation to
Contractor





R.N. Dell
Energy Ltd. has been contracted to provide geological services to the Company
for $17,700 Cdn per month.





14.         SUBSEQUENT
EVENTS





On
December 4, 2007, Deep Well amicably resolved all outstanding issues with their
Sawn Lake heavy oil project partner, Andora Energy Corporation (“Andora”), to
both company’s operational and commercial satisfaction. The settlement includes
the following key points:


·
            Deep
      Well has confirmed that Andora has earned a 40% working interest (“WI”) in
      12 sections (the “Earned Sections”) of oil sands development leases by way
      of the 2005 farmout agreement entered into between Deep Well and Signet
      Energy Inc. (Signet was subsequently acquired by Andora in September
      2007). Six of these sections have already been conveyed to Andora (Signet
      at the time) with the final six sections to be
  transferred.


·
            Andora
      has been confirmed as the operator of the 12 sections earned under the
      farmout agreement. Deep Well will be the operator on its other
      sections.


·
            Andora
      has acknowledged that Deep Well is not responsible for any royalty assumed
      by Deep Well on behalf of Signet in the Farmout
  Agreement.


·
            A
      joint discontinuance of the remaining minor litigation issues amongst the
      two parties.





On March
18, 2008, the 6.5 section oil sands permit which was originally scheduled to
expire on April 9, 2008 was extended for one year pursuant to an application
made by Northern.





On April
7, 2008, Deep Well announced that it has filed a complaint (the “Complaint”)
with the United States District Court for the District of Nevada alleging that
Tamm Oil and Gas Corp. (“Tamm”) has violated United States federal and Nevada
state law in connection with Tamm’s recent public statements and activities
related to Deep Well, its operations and the ownership of its common
shares.





Since
December 2007, Tamm and its agents have issued multiple public statements with
respect to Tamm’s acquisition of a significant interest in Deep Well and the
Sawn Lake heavy oil region of North Central Alberta.





Deep Well
is not, and has not been, a party to any of Tamm’s public statements or
purported acquisition of Deep Well common shares. Deep Well alleges that Tamm’s
recent public statements contain materially false or misleading statements about
Tamm’s ownership interests in Deep Well and Sawn Lake, and that such statements
and Tamm’s activities with respect to Deep Well and its common shares violate
United States federal and Nevada state law.





In order
to assist in protecting Deep Well and its shareholders, Deep Well commenced the
Complaint, which alleges that:





·
            Tamm’s
      public statements about and purported acquisitions of Deep Well common
      shares constitute an illegal tender offer in violation of Section 14(d) of
      the United States Securities Exchange Act of 1934, as amended (the
      “Exchange Act”);


·
            Tamm’s
      public statements about Deep Well and the acquisition of Deep Well common
      shares contain materially false and/or misleading statements or omissions,
      in violation of United States federal securities laws and Nevada state
      law;


·
            Tamm
      failed to timely file with the Securities and Exchange Commission a
      required statement of beneficial ownership on Schedule 13D, and
      subsequently filed a materially deficient Schedule 13D;
  and


52


·
            Tamm
      has defamed Deep Well by making false statements concerning Deep Well and
      its interests in Sawn Lake that were published to the public and/or third
      parties without permission by Deep Well; and Tamm has violated the Lanham
      Act by making false and misleading representations of fact in connection
      with its and Deep Well’s business in the oil and gas industry and its
      tender offer for Deep Well shares or solicitation of shareholders in favor
      of its tender offer.





Deep Well
is seeking injunctive relief and/or other damages in connection with the
Complaint, however the amount of damages received or the likelihood of success
is indeterminable.





On April
2, 2008, Deep Well participated in a public offering of Crown Petroleum and
Natural Gas Rights held by the Alberta Department of Energy, in which the
Company successfully bid on 1 petroleum and natural gas license covering 3,795
gross acres (1,536 gross hectares) for a total of six sections in the Ochre
area.  Deep Well acquired an undivided 100% working interest in these
six sections located in the Peace River oil sands area approximately fourteen
miles west of the Sawn Lake properties.





On August
14, 2008, the Company completed a private placement of 10,638,297 units at a
price of $0.47 per unit for $5,000,000. Each unit consists of one common share,
one common share purchase warrant and a fractional warrant for an aggregate of
2,000,000 common shares. Each warrant entitled the holder to purchase one
additional common share at a price of $0.71 per common share for a period of
three years from the date of closing. Each of the 2,000,000 fractional warrants
entitles the holder to purchase one additional common share at a price of $0.95
per common share for a period of three years from the date of closing. The
warrants and fractional warrants expire on August 14, 2011.





On
October 31, 2008, the Company completed a private placement of 12,500,000 units
at a price of $0.40 per unit for $5,000,000. Each unit consists of one common
share, one common share purchase warrant and a fractional warrant for an
aggregate of 2,000,000 common shares. Each warrant entitles the holder to
purchase one additional common share at a price of $0.60 per common share for a
period of three years from the date of closing. Each of the 2,000,000 fractional
warrants entitles the holder to purchase one additional common share at a price
of $0.80 per common share for a period of three years from the date of closing.
The warrants and fractional warrants expire on October 31, 2011.





15.         LEGAL
ACTIONS





I.G.M. Resources Corp vs.
Deep Well Oil & Gas, Inc., et al





On March
10, 2005, I.G.M. Resources Corp. ("the Plaintiff") filed against Classic Energy
Inc., 979708 Alberta Ltd., Deep Well Oil and Gas, Inc., Nearshore Petroleum
Corporation, Mr. Steven P. Gawne, Rebekah Gawne, Gawne Family Trust, 1089144
Alberta Ltd., John F. Brown, Diane Lynn McClaflin, Cassandra Doreen Brown,
Elissa Alexandra Brown, Brown Family Trust, Priority Exploration Ltd., Northern
Alberta Oil Ltd. and Gordon Skulmoski (“the Defendant”) a Statement of Claim in
the Court of Queen's Bench of Alberta Judicial District of
Calgary.  This suit is a part of a series of lawsuits or actions
undertaken by the Plaintiff against some of the other above
defendants.





The
Plaintiff was and still is a minority shareholder of 979708 Alberta Ltd.
("979708"). 979708 was in the business of discovering, assembling and acquiring
oil and gas prospects. In 2002 and 2003, 979708 acquired oil and gas prospects
in the Sawn Lake area of Alberta. On or about the 14th of
July, 2003 all or substantially all the assets of 979708 were sold to Classic
Energy Inc. The Plaintiff claims the value of the assets sold was far in excess
of the value paid for those assets. On April 23, 2004 Northern Alberta Oil Ltd.,
purchased Classic Energy Inc.'s assets some of which are under dispute by the
Plaintiff. On June 7, 2005 Deep Well acquired all of the common shares of
Northern thereby giving Deep Well an indirect beneficial interest in the assets
the Plaintiff is claiming an interest in.





The
Plaintiff seeks an order setting aside the transaction and returning the assets
to 979708, compensation in the amount of $15,000,000 Cdn, a declaration of trust
declaring that Northern and Deep Well hold all of the assets acquired from
979708 and any property acquired by use of such assets, or confidential
information of 979708, in trust for the Plaintiff.





This
lawsuit has been stayed pending the out come of the other litigation by the
Plaintiff against some of the above defendants other than Deep Well and
Northern. The Company believes the claims are without merit and will vigorously
defend against them.


53


Hardie & Kelly vs. Brown
et al





On June
2, 2006, Hardie and Kelly (“the Plaintiff”), Trustee of the Estate of John
Forbes Brown filed against John Forbes Brown, a bankrupt, Diane Lynn McClaflin,
1089144 Alberta Ltd., and Deep Well (“the Defendants”) an Amended Statement of
Claim in the Court of Queen's Bench of Alberta Judicial District of
Calgary.  John Forbes Brown was a former officer and then
sub-contractor of Deep Well before and during the time he was assigned into
bankruptcy on July 12, 2004. The Plaintiff claims, in addition to other issues
unrelated to Deep Well, that John Forbes Brown received a 4,812,500 Deep Well
shares as a result of his employment in Deep Well and that John Forbes Brown
improperly assigned these shares to the numbered company as a ruse entered into
on the eve of insolvency by John Forbes Brown in order to facilitate the hiding
of assets from his creditors and the trustee of his bankruptcy. The Plaintiff
further claims that on August 23, 2004 John Forbes Brown advised the Plaintiff
that he in fact owned the above shares and did not disclose this ownership in
his bankruptcy statement of affairs. The Plaintiff further claims that John
Forbes Brown would lodge the said shares with his lawyer until such time as
these shares could be transferred to the Plaintiff. The Plaintiff further claims
that unbeknownst to them John Forbes Brown surreptitiously removed the shares
from his lawyer's office and delivered them to Deep Well so that Deep Well could
cancel them.  The Plaintiff claims that Deep Well conspired with John
Forbes Brown to defraud the creditors of John Forbes Brown by taking receipt and
cancelling the said shares. The Plaintiff claims that consideration paid by Deep
Well for the said shares was invested in the home owned by John Forbes Brown and
his wife. The Plaintiff seeks; (1) an accounting of the proceeds and benefits
derived by the dealings of the shares; (2) the home owned by John Forbes Brown
and his wife, to be held in trust on behalf of the Plaintiff and an accounting
of proceeds related to this trust; (3) damages from the Defendants because of
their actions; (4) a judgement for $15,612,645 Cdn; (5) an order to sell John
Forbes Brown's home; and (6) interest and costs.





Deep Well
believes it did not conspire with John Forbes Brown to defraud John Forbes
Brown's creditors and further Deep Well did not receive nor give John Forbes
Brown any consideration in regards to the cancelling of said shares. Deep Well
plans to vigorously defend itself against the Plaintiff's claims.





16.         COMPARATIVE
FIGURES





Certain
of the comparative figures have been reclassified to conform with the
presentation adopted in the current year.


54


ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE




During
the fiscal years ended September 30, 2007 and 2006, there were no changes in, or
disagreements with, our independent accountant on accounting and financial
disclosure matters.





ITEM
9A.             CONTROLS
AND PROCEDURES





Disclosure Controls and
Procedures





As of the
end of our fiscal year ended September 30, 2007, an evaluation of the
effectiveness of our “disclosure controls and procedures” (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934), as amended was carried out under the supervision and with the
participation of our principal executive officer and principal financial
officer. Based upon that evaluation, our principal executive officer and
principal financial officer have concluded that as of the end of that fiscal
year, our disclosure controls and procedures were not effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms and (ii) accumulated
and communicated to our management, including our principal executive officer
and principal financial officer, to allow timely decisions regarding required
disclosure.





Changes in Internal Control
Over Financial Reporting





During
the fiscal year ended September 30, 2007, there were changes and improvements in
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting. During the fiscal year we continued to implement the formalization
and centralization of our accounts payable functions and multi-currency
accounting software.





ITEM
9B.             OTHER
INFORMATION





Deep Well
reported all information that was required to be disclosed during the fourth
quarter of the fiscal year covered by this Form 10-K in a Form 10-QSB report
filed with the SEC on October 30, 2007.





Subsequent
Events Not Reported on Form 8-K during the fourth quarter covered by this Form
10-K report but were reported on a Form 10-QSB filed with the SEC on October 30,
2007 are as follows:





On July
11, 2007, our Company completed a private placement of 323,333 units at a price
of $0.60 per unit for $194,000. Each unit consisted of one common share and one
common share purchase warrant and another twelve one-hundredths common share
purchase warrant (“Special Warrant”). Each warrant entitles the holder to
purchase one additional common share at a price of $0.90 per common share for a
period of three years from the date of closing. Each Special Warrant entitles
the holder to purchase a common share at a price of $1.20 for a period of five
years from the date of closing. The exercise price of the warrants and the
Special Warrants will be adjusted from time to time upon the occurrence of
certain events, as provided in the warrants. The warrants expire on July 11,
2010 and the Special Warrants expire on July 11, 2012. In connection with the
private placement a finder’s fee of $9,700 was paid. The units were issued
pursuant to Regulation S under the 1933 Act.





On
September 4th and
10th
of 2007, as a result of the issuance of common stock on May 25, 2007 and
pursuant to a security purchase agreement and form of warrant dated March 10,
2005 entered into by and among our Company and two accredited investors (the
“Warrant Holders”) our Company issued an adjustment to the Warrant Holders. The
original warrant, dated March 10, 2005, contained a price adjustment if our
Company sells, issues or grants additional shares of its common stock at a price
per share less than the exercise price. In the event of a price adjustment, the
number of shares exercisable under the warrant would also increase. Therefore,
the exercise price of the original warrant has been adjusted from $0.50 to $0.40
per common share. Our Company has granted the Warrant Holders new warrants to
purchase 984,375 shares of our Company's common stock at an adjusted exercise
price of $0.40 per share under the same terms as the original
warrant.





On
September 7, 2007, the claims of Star Capital Inc. were dismissed in its
entirety against our Company pursuant to an Order granted by the court. Star
Capital Inc.’s claims were originally filed with the Court of Queen’s Bench of
Alberta in the Judicial District of Calgary pursuant to an Amended Originating
Notice which was filed on March 29, 2007 against Deep Well, Deep Well Alberta,
Northern and some of the directors of our Company in addition to other
individuals as set out in its Amended Originating Notice. The parties later
implemented an Amending Agreement and Mutual General Release. Subsequent to the
Amending Agreement and Mutual General Release, Star Capital Inc. filed an
additional Originating Notice of Motion on February 26, 2008. The settlement of
this further claim was completed in March of 2008, whereby the parties agreed
upon a Full and Final Mutual Release.


55


On
September 21, 2007, Mr. Cyrus James Spaulding, Chief Operating Officer of our
Company, resigned from his position as Chief Operating Officer. Mr. Spaulding’s
existing employment agreement with our Company has been terminated in connection
with his resignation. Mr. Spaulding has retained his position as Director our
Company.





On
October 1, 2007, our Company through its wholly-owned subsidiary, Northern
entered into a Consulting Agreement, effective September 20, 2007, with R.N.
Dell Energy Ltd. (hereinafter referred to as “Contractor”), whose primary
consultant is Mr. Edward A. Howard, to assist us in the further exploitation and
development of our Sawn Lake project. Under the terms of the Consulting
Agreement, the Contractor will be paid $17,700 Cdn per month, options to
purchase shares of our common stock and reimbursement of certain expenses
incurred by the Contractor.





On
September 28, 2007, our Board of Directors granted options to R.N. Dell Energy
Ltd. as a Contractor of the Company to acquire 240,000 common shares of our
Company at the exercise price of $0.47 per common share (being the closing price
as of the day before the discussions with the Contractor) which shall be vested
at a rate of 20,000 common shares per month commencing October 31, 2007 so long
as the Contractor continues to provide consulting services to us, on such
vesting dates.





On
September 28, 2007, our Board of Directors granted options to one employee to
acquire 36,000 common shares of our Company at the exercise price of $0.47 per
common share, of which 8,000 shall be vested immediately and 28,000 shall be
vested at a rate of 2,000 common shares per month commencing September 30, 2007
so long as the employee continues to provide employment services to us, on such
vesting dates.





PART
III





ITEM
10.              DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Directors and Executive
Officers





The
directors and executive officers of Deep Well are as follows:





As
      at September 30, 2007Name
                                
                                Age
                                
                                Position/OfficeDr.
      Horst A. Schmid
                                
                                74
                                
                                Director
      and Chairman of the Board, President and Chief Executive
      OfficerMr.
      Donald E. H. Jones
                                
                                54
                                
                                DirectorMr.
      David Roff
                                
                                36
                                
                                DirectorMr.
      Cyrus Spaulding
                                
                                51
                                
                                DirectorMr.
      Curtis James Sparrow
                                
                                50
                                
                                Director
      and Chief Financial Officer, Secretary and Treasurer





As
      at September 16, 2009Name
                                
                                Age
                                
                                Position/OfficeDr.
      Horst A. Schmid
                                
                                76
                                
                                Director
      and Chairman of the Board, President and Chief Executive
      OfficerMr.
      Christian Demoyen
                                
                                69
                                
                                DirectorMr.
      Donald W. Hryhor
                                
                                53
                                
                                DirectorMr.
      Donald E. H. Jones
                                
                                56
                                
                                DirectorMr.
      David Roff
                                
                                38
                                
                                DirectorMr.
      Cyrus Spaulding
                                
                                53
                                
                                DirectorMr.
      Curtis James Sparrow
                                
                                52
                                
                                Director
      and Chief Financial Officer, Secretary and TreasurerMr.
      Malik Youyou
                                
                                56
                                
                                Director





Biographies of Directors and
Executive Officers





Brief
biographies of the directors and executive officers of Deep Well are set forth
below. All directors hold office until the next annual stockholders’ meeting or
until their death, resignation, retirement, removal, disqualification or until
their successors have been elected and qualified. Vacancies in the existing
Board may be filled by majority vote of the remaining directors. Officers of our
Company serve at the will of the Board of Directors. As of September 30, 2007
there are no written employment contracts outstanding, but there are consulting
contracts as disclosed herein.


56


Dr. Horst
A. Schmid has served as director and Chairman of the Board since February 6,
2004 to present. Since June 29, 2005 to present he has been the Chief Executive
Officer and President of Deep Well. From September 1996 to present, Dr. Schmid
has been director, President and Chief Executive Officer of Portwest Investment
Ltd., a private firm, located in Edmonton, Alberta, Canada. Prior to that, Dr.
Schmid spent 15 years as Cabinet Minister for the Government of Alberta and 10
years as Commissioner General for Trade and Tourism. During that time he was
involved in numerous successful overseas negotiations for the Alberta Oil &
Gas Industry, achieving major contracts for Alberta Equipment/Production/Service
Companies. He is the recipient of many Canadian and International Awards for his
accomplishments. Dr. Schmid received an Honorary Law Degree from the University
of Alberta.





Mr.
Curtis James Sparrow served as director of Deep Well from February 6, 2004 until
June 29, 2005. On July 1, 2005, Mr. Sparrow accepted a reappointment back to the
Board of Directors. From February 9, 2004 to present Mr. Sparrow has been the
Chief Financial Officer, Corporate Secretary and Treasurer of Deep Well. Since
before May 1994, Mr. Sparrow has been a self-employed management consultant. Mr.
Sparrow has been involved in the oil and gas industry in various capacities for
over 30 years. He held directorships and senior officer positions with junior
exploration and development companies before becoming a self-employed
consultant. He has since participated in the marketing side of the oil and gas
industry, and was part of an acquisition team formed to assess and develop a bid
for a multi-billion dollar integrated oil company. His experience also includes
corporate and project management, international businesses and mining. Mr.
Sparrow received his Bachelor of Science Degree in Engineering and Masters
Degree in Business Administration from the University of Alberta. Mr. Sparrow is
also a registered Professional Engineer.





Mr. Cyrus
Spaulding has served as director of Deep Well from June 29, 2005 to present.
Early in his career he joined Husky Oil Operations Ltd. as a
reservoir-engineering technologist where he provided data analysis on secondary
recovery schemes for heavy oil projects. In the mid 1990’s he joined Colt
Engineering Corporation as the lead engineer for the Amoco Primrose Commercial
SAGD project. He is a registered Professional Engineer with over 17 years
experience in the oil and gas industry. He has worked on projects in Canada as
well as overseas. His experience includes gas plants, hydrocarbon liquids
fractionation plants, heavy oil pilot plants and heavy oil commercial plants. He
has also worked with a major oil and gas company in Alberta providing
forecasting and analysis on heavy oil projects. Mr. Spaulding is a graduate of
Lakehead University. Mr. Spaulding served our Company as Chief Operating Officer
from September 1, 2005 to September 21, 2007.





Mr.
Donald E. H. Jones has been a director of Deep Well from June 29, 2005 to
present. Mr. Jones brings over 30 years of broad oil, natural gas and
petrochemical experience to our Company. His experience spans the manufacturing
and service sectors, as well as engineering and project management in the EPC
environment. He has also worked at a senior management level for companies with
both new and established oil and gas properties. At one time, Mr. Jones was
Project Manager, including field construction, commissioning, and optimization
for a SAGD Pilot Facilities, which laid the groundwork for commercial scale
production and processing of heavy oil. A graduate of the University of Calgary,
Mr. Jones is a registered Professional Engineer. He has significant domestic and
international experience having worked in Canada, Africa, Russia, Kazakhstan,
South East Asia and Columbia, where he is currently manager for a Calgary based
exploration and development Company.





Mr. David
Roff is currently serving as a director of Deep Well since his reappointment on
April 3, 2006. He was the former President and Sole Director of Deep Well from
September 10, 2003 until February 6, 2004. Mr. Roff is the co-president of,
Brave Consulting, a private consulting and investment corporation and has held
this position since 2001. Brave Consulting was engaged by Deep Well in July 2005
until March 2009. Mr. Roff has extensive experience working with small cap
public companies for more than ten years. Prior to that, Mr. Roff was a
management consultant for Coopers & Lybrand Consulting where he advised
large financial institutions, investment fund complexes and other organizations
on technology and internal control strategies. Mr. Roff is an officer and
director of Arkson Nutraceuticals and Hudson’s Grill International. Mr. Roff is
a Chartered Accountant with a B.A. degree from the University of Western
Ontario.





Mr. Malik
Youyou has been a director of Deep Well from August 20, 2008 to present. Mr.
Youyou is an experienced international entrepreneur, investor and director of
several companies.





Mr.
Christian Demoyen has been a director of since January 8, 2009 to present.Mr.
Demoyen is the Senior Partner of the law firm Demoyen & Associés. He is also
a visiting Professor at the Paris University of Law and the Conservatoire
National des Arts et Métiers. He received his Doctor in Law (PhD) degree from
the University of Paris. He also attended the School of Political Sciences in
Paris.





Mr.
Donald Wayne Hryhor has been appointed to our board of directors as of September
16, 2009. Mr. Hryhor currently acts as President and Chief Executive Officer of
Thunder River Energy Inc. (and Thunder’s subsidiary, CIMA Holdings Inc. in New
Mexico), and operates privately as President and Chief Executive Officer of both
Canadian Wildcat Corporation and Western Crown Corporation. Mr. Hryhor is a
director of Thunder River Energy Inc., Canadian Wildcat Corporation and Western
Crown Corporation.


57


Significant
Employees





Other
than the current executive officers of our Company the following are expected to
make a significant contribution to our Company:





Effective
September 20, 2007, our Company entered into a Consulting Agreement with R.N.
Dell Energy Ltd. whose primary consultant is Mr. Edward A. Howard, to assist our
Company in the further exploitation and development of our Company’s Sawn Lake
project. Mr. Howard is a Geologist and Palynologist with over 40 years of heavy
oil experience. Most recently Mr. Howard was Vice President of Exploration and
Development for Signet (recently acquired by Andora). Mr. Howard has also worked
with several companies in the heavy oil sector including Sceptre Resources
(since taken over by CNRL) at their Tangleflags field and Shell Canada at their
Peace River Project. Mr. Howard was credited with the discovery and early
development of the first successful Steam Assisted Gravity Drainage (“SAGD”)
heavy oil extraction project for Sceptre at the Tangleflags field. While at
Shell from 1967 to 1977 Mr. Howard was instrumental in developing Shell’s Peace
River strategy from the early inception through to the pilot plant stage. This
project continues to be one of the most successful in situ oil sands producers.
Also, Mr. Howard has implemented noteworthy Cyclical Stream Simulation (“CSS”)
projects in Alberta. Some of these projects have proven to increase recovery
rates between/from 50% - 60%. Mr. Howard has extensive experience with the
primary and secondary recovery of heavy oil as well as his direct knowledge of
the Peace River oil sands area, specifically the Sawn Lake project.





Family
Relationships





There are
no family relationships among the directors and executive officers.





Involvement in Certain Legal
Proceedings





No
bankruptcy petition has been filed by or against any business of which any
director was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time.





No
current director has been convicted in a criminal proceeding and is not subject
to a pending criminal proceeding (excluding traffic violations and other minor
offences).





No
current director has been subject to any order, judgments, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities.





No
current director has been subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in paragraph (f)(3)(i) of this
section, or to be associated with persons engaged in any such
activity.





No
current director has been found by a court of competent jurisdiction in a civil
action or by the Commission to have violated a Federal or State securities law,
that has not been reversed, suspended, or vacated.





No
current director has been found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
Federal commodities law that has not been subsequently reversed, suspended or
vacated.





Section 16 (a) Beneficial
Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires our Company’s officers, directors and persons
who beneficially own more than 10% of a registered class of our Company’s equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission, and to furnish to our Company copies of such
reports. Based solely on the review of copies of the forms received, by our
Company, during the September 30, 2007 fiscal year, as required under Section
16(a)(2) of the Securities Exchange Act of 1934 by Mr. David Roff, a director of
our Company, filed one Form 4 late; Mr. Cyrus Spaulding, a director and former
officer of our Company, filed three Form 4s late; Mr. Donald E. H. Jones, a
director of our Company, filed one Form 4 late; and Mr. Malik Youyou, a 10% or
more beneficial owner of our Company, filed a Form 3 late.





On May
25, 2007, we completed a private placement pursuant to which LB (Swiss) Private
Bank Ltd. purchased, as principal, 5,000,000 units, each unit consisting of one
common share and one common share purchase warrant. Following this private
placement, LB (Swiss) Private Bank Ltd. became a greater than 10% beneficial
owner of our Company’s issued and outstanding stock, and therefore may have been
required to prepare and file reports pursuant to Section 16(a) of the Exchange
Act.


58


Code of
Ethics





As of
September 30, 2008, our Company had not yet adopted a formal code of ethics
governing its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions and directors. We have not adopted a code of ethics because we have
limited operations. Our Board of Directors will address this issue in the future
to determine the adoption of a code of ethics. In the meantime, our management
intends to promote honest and ethical conduct, full and fair disclosure in our
reports to the SEC, and compliance with applicable governmental laws and
regulations.





Corporate
Governance





Director
Independence





We have
not adopted standards for director independence, but in making a determination
on director independence under the standards for independence set forth by the
NASDAQMarketplace
rules, we determined thatas of our September 30, 2007 fiscal year end,
our Board of Directors consisted of one independent and four non-independent
directors. As of September 16, 2009, our Board of Directors consisted of four
independent and four non-independent directors. The directors are as
follows:





As at September 30, 2007Name
                                          
                                          Year When Appointed,
                                            Elected or Re-Elected as
                                            DirectorDr.
      Horst A. Schmid
                                          
                                          2004
                                          
                                          Non-independent
      directorMr.
      Donald E. H. Jones
                                          
                                          2005
                                          
                                          Independent
      directorMr.
      David Roff
                                          
                                          2006
                                          
                                          Non-independent
      directorMr.
      Cyrus Spaulding
                                          
                                          2005
                                          
                                          Non-independent
      directorMr.
      Curtis James Sparrow
                                          
                                          2005
                                          
                                          Non-independent
      director





As at September 16, 2009Name
                                      
                                      Year When Appointed,
                                        Elected or Re-Elected as
                                        DirectorDr.
      Horst A. Schmid
                                      
                                      2004
                                      
                                      Non-independent
      directorMr.
      Christian Demoyen
                                      
                                      2009
                                      
                                      Independent
      directorMr.
      Donald W. Hryhor
                                      
                                      2009
                                      
                                      Independent
      directorMr.
      Donald E. H. Jones
                                      
                                      2005
                                      
                                      Independent
      directorMr.
      David Roff
                                      
                                      2006
                                      
                                      Non-independent
      directorMr.
      Cyrus Spaulding
                                      
                                      2005
                                      
                                      Non-independent
      directorMr.
      Curtis James Sparrow
                                      
                                      2005
                                      
                                      Non-independent
      directorMr.
      Malik Youyou
                                      
                                      2008
                                      
                                      Independent
      director





Board
Meetings, Committees and Annual Meeting Attendance





In the
September 30, 2007 fiscal year our Board of Directors had sixteen meetings. Each
director of our Company attended at least 75% of all meetings held by the Board
of Directors. We did not have an annual stockholders meeting for the fiscal
years ended September 30, 2007 or September 30, 2006.





Our
Company currently does not have any Board committees. Our entire Board is
currently acting as Board committees but is reviewing this situation to
potentially adopt some committees.





Nominating
Committee





Our
Company currently does not have a standing nominating committee or a nominating
committee charter or policy due to the relatively small size of our Company. Our
Board believes that our entire Board of Directors can adequately perform the
functions of the committee, including considering potential director nominees,
therefore fulfilling the role of a nominating committee. It is anticipated that
in preparation for any annual meeting of stockholders our Board will review
stockholder proposals for nominations to the Board of Directors. Any such
stockholder proposal must comply with the proxy rules under the Exchange Act,
including Rule 14a-8.


59


Audit
Committee





We are
currently reviewing our audit committee to ensure its director independence and
its charter; therefore we do not have an active independent audit committee at
this time. Our management along with our independent third party chartered
accounting firm, Collins Barrow, performed all work relating to the preparation
of the audit of our financial statements for the 2007 fiscal year.





We do not
have an audit committee financial expert, on our Board of Directors. We believe
that the cost related to retaining an audit committee financial expert at this
time is prohibitive and that, because, of our limited operations the services of
an independent audit committee financial expert are not warranted at this
time.





Compensation
Committee





Our
Company currently does not have a standing compensation committee, charter or a
committee performing similar functions due to the relatively small size of our
Company.





Shareholder
Communications





We
currently do not have a process for stockholders to send communications to our
Board of Directors, however all shareholder communications received by us are
forwarded to the Chairman of the Board. Our Board of Directors will address this
issue in the future to determine a process for stockholders to communicate
directly with the Board of Directors of our Company. We did not have an annual
stockholders meeting for the fiscal years ended September 30, 2007 or September
30, 2006.





ITEM
11.              EXECUTIVE
COMPENSATION





Summary Compensation
Table





The
following table provides information about the compensation paid to, earned or
received during the last two fiscal years ended September 30, 2007 and September
30, 2006 the executive officers listed below (the “Named Executive
Officers”).





Executive
Compensation Summary





Name and Principal Position
                            Fiscal
                              Year
                              Sept. 30
                            
                            Salary
                              $Cdn(1)(2)
                            
                            
                            Bonus $
                            
                            
                            Stock
                              Awards $
                            
                            
                            Option
                              Awards $
                              (If approved
                              by the
                              shareholders)
                              (32)
                            
                            
                            Non-Equity
                              Incentive
                              Plan
                              Compen-
                              sation $
                            
                            
                            Non-
                              qualified
                              Deferred
                              Compen-
                              sation
                              Earnings $
                            
                            
                            All Other
                              Compen-
                              sation $
                            
                            
                            Total $USDr. Horst A. Schmid (3)
                            2007
                            
                            $
                            150,000
                            (4)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            38,394
                            (5)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            16,000
                            (6)
                            
                            $
                            204,949
                            (1)President
      and
                            2006
                            
                            
                            150,000
                            (7)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            159,304
                            (8)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            7,000
                            (9)
                            
                            
                            300,794
                            (2)Chief
      Executive OfficerMr. Curtis James Sparrow (10)
                            2007
                            
                            $
                            180,000
                            (11)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            38,394
                            (12)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            8,000
                            (13)
                            
                            $
                            227,060
                            (1)Chief
      Financial Officer
                            2006
                            
                            
                            180,000
                            (14)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            159,304
                            (15)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            3,500
                            (16)
                            
                            
                            324,192
                            (2)Mr. Cyrus Spaulding (17)
                            2007
                            
                            $
                            121,420
                            (18)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            54,283
                            (19)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            7,000
                            (20)
                            
                            $
                            183,152
                            (1)Chief
      Operating Officer
                            2006
                            
                            
                            125,265
                            (21)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            133,695
                            (22)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            3,500
                            (23)
                            
                            
                            249,508
                            (2)Mr. David Roff (24)
                            2007
                            
                            $
                            96,000
                            (25)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            75,334
                            (26)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            8,000
                            (27)
                            
                            $
                            179,689
                            (1)Consultant
                            2006
                            
                            
                            96,000
                            (28)
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            2,000
                            (29)
                            
                            
                            88,074
                            (2)Mr. Edward Howard (30)
                            2007
                            
                            $
                            6,638
                            (31)
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            –
                            
                            
                            $
                            6,663
                            (1)Geologist
                            2006
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –





(1) Cdn to
US dollar conversion is based on the exchange rate of 1.0037 at the end of the
2007 fiscal year.





(2) Cdn to
US dollar conversion is based on the exchange rate of 0.8966 at the end of the
2006 fiscal year





(3) Dr.
Horst A. Schmid has served our Company as director and Chairman of the Board
since February 6, 2004 to present. From June 29, 2005 to present he has been the
President and Chief Executive Officer of our Company.


60


(4)
Portwest Investments Ltd., a company owned 100% by Dr. Horst A. Schmid, was paid
Cdn $150,000 for providing services as Chief Executive Officer and President to
our Company for the 2007 fiscal year.





(5) On
November 28, 2005, our Company granted Dr. Horst A. Schmid options to purchase
375,000 shares of our common stock on becoming a director of our Company, at an
exercise price of $0.71 per share, of which 175,000 vested immediately upon
grant and another 100,000 vested on February 6, 2006 and another 100,000 vested
on February 6, 2007. Based on the Black-Scholes valuation method Dr. Schmid’s
estimated amortized value vested in 2007 was $8,062. In addition to Dr. Schmid’s
director’s options, Portwest Investments Ltd., a company owned 100% by Dr.
Schmid, was granted options to purchase 390,000 shares of our common stock for
providing consulting services as President and Chief Executive Officer of our
Company, of which 130,000 vested on July 1, 2006, another 130,000 vested on July
1, 2007 and another 130,000 vested on July 1, 2008. Based on the Black-Scholes
valuation method Portwest Investment Ltd.’s estimated amortized value vested in
2007 was $30,332.





(6) Dr.
Horst A. Schmid was paid $16,000 for director’s fees for his services on the
Board of Directors as Chairman of the Board of our Company for the 2007 fiscal
year.





(7)
Portwest Investments Ltd., a company owned 100% by Dr. Horst A. Schmid, was paid
Cdn $150,000 for providing services as Chief Executive Officer and President to
our Company for the 2006 fiscal year.





(8) On
November 28, 2005, our Company granted Dr. Horst A. Schmid options to purchase
375,000 shares of our common stock on becoming a director of our Company, at an
exercise price of $0.71 per share, of which 175,000 vested immediately upon
grant and another 100,000 vested on February 6, 2006 and another 100,000 vested
on February 6, 2007. Based on the Black-Scholes valuation method Dr. Schmid’s
estimated amortized value vested in 2006 was $93,885. In addition to Dr.
Schmid’s director’s options, Portwest Investments Ltd., a company owned 100% by
Dr. Schmid, was granted options to purchase 390,000 shares of our common stock
for providing consulting services as President and Chief Executive Officer of
our Company, of which 130,000 vested on July 1, 2006, another 130,000 vested on
July 1, 2007 and another 130,000 vested on July 1, 2008. Based on the
Black-Scholes valuation method Portwest Investment Ltd.’s estimated amortized
value vested in 2006 was $65,419.





(9) Dr.
Horst A. Schmid was paid $7,000 for director’s fees for his services on the
Board of Directors as Chairman of the Board of our Company for the 2006 fiscal
year.





(10) Mr.
Curtis James Sparrow served as Director of our Company from February 6, 2004
until June 29, 2005. On July 1, 2005, Mr. Sparrow accepted a reappointment back
to the Board of Directors. From February 9, 2004 to present Mr. Sparrow has been
the Chief Financial Officer, Corporate Secretary and Treasurer of our
Company.





(11)Concorde Consulting, a company owned 100% by Mr. Curtis James Sparrow,
was paid Cdn $180,000 for providing services as Chief Financial Officer to our
Company for the 2007 fiscal year.





(12) On
November 28, 2005, our Company granted Mr. Curtis James Sparrow options to
purchase 375,000 shares of our common stock on becoming a director of our
Company, at an exercise price of $0.71 per share, of which 175,000 vested
immediately upon grant and another 100,000 vested on February 6, 2006 and
another 100,000 vested on February 6, 2007. Based on the Black-Scholes valuation
method Mr. Sparrow’s estimated amortized value vested in 2007 was $8,062. In
addition to Mr. Sparrow’s director’s options, Concorde Consulting, a company
owned 100% by Mr. Sparrow, was granted options to purchase 390,000 shares of our
common stock for providing consulting services as Chief Financial Officer of our
Company, of which 130,000 vested on July 1, 2006, another 130,000 vested on July
1, 2007 and another 130,000 vested on July 1, 2008. Based on the Black-Scholes
valuation method Concorde Consulting’s estimated amortized value vested in 2007
was $30,332.





(13) Mr.
Curtis James Sparrow was paid $8,000 for director’s fees for his services on the
Board of Directors as director of our Company for the 2007 fiscal
year.





(14)
Concorde Consulting, a company owned 100% by Mr. Curtis James Sparrow, was paid
Cdn $180,000 for providing services as Chief Financial Officer to our Company
for the 2006 fiscal year.





(15) On
November 28, 2005, our Company granted Mr. Curtis James Sparrow options to
purchase 375,000 shares of our common stock on becoming a director of our
Company, at an exercise price of $0.71 per share, of which 175,000 vested
immediately upon grant and another 100,000 vested on February 6, 2006 and
another 100,000 vested on February 6, 2007. Based on the Black-Scholes valuation
method Mr. Sparrow’s estimated amortized value vested in 2006 was $93,885. In
addition to Mr. Sparrow’s director’s options, Concorde Consulting, a company
owned 100% by Mr. Sparrow, was granted options to purchase 390,000 shares of our
common stock for providing consulting services as Chief Financial Officer of our
Company, of which 130,000 vested on July 1, 2006, another 130,000 vested on July
1, 2007 and another 130,000 vested on July 1, 2008. Based on the Black-Scholes
valuation method Concorde Consulting’s estimated amortized value vested in 2006
was $65,419.





(16) Mr.
Curtis James Sparrow was paid $3,500 for director’s fees for his services on the
Board of Directors as director of our Company for the 2006 fiscal
year.





(17) Mr.
Cyrus Spaulding has served our Company as director since June 29, 2005 to
present. Mr. Spaulding also served as Chief Operating Officer of our Company
from September 1, 2005 until September 21, 2007.





(18)
Trebax Projects Ltd., a company owned 100% by Mr. Cyrus Spaulding, was paid Cdn
$121,420 for providing services as Chief Operating Officer to our Company for
the 2007 fiscal year.





(19) On
November 28, 2005, our Company granted Mr. Cyrus Spaulding options to purchase
375,000 shares of our common stock, on becoming a director of our Company, at an
exercise price of $0.71 per share, of which 75,000 vested immediately upon grant
and another 100,000 vested on June 29, 2006, another 100,000 vested on June 29,
2007 and another 100,000 vested on June 29, 2008. Based on the Black-Scholes
valuation method Mr. Spaulding’s estimated amortized value vested in 2007 was
$23,305. In addition to Mr. Spaulding’s director’s options, Trebax Projects
Ltd., a company owned 100% by Mr. Cyrus Spaulding, was granted options to
purchase 390,000 shares of our common stock for providing consulting services as
Chief Operating Officer of our Company, of which 130,000 vested on September 1,
2006, another 130,000 vested on September 1, 2007 and another 130,000 would have
vested on September 1, 2008 but Trebax Projects Ltd. resigned as of September
21, 2007. Based on the Black-Scholes valuation method Trebax Projects Ltd.’s
estimated amortized value vested in 2007 was $30,978.





(20) Mr.
Cyrus Spaulding was paid $7,000 for director’s fees for his services on the
Board of Directors as director of our Company for the 2007 fiscal
year.


61


(21)
Trebax Projects Ltd., a company owned 100% by Mr. Cyrus Spaulding, was paid Cdn
$125,265 for providing services as Chief Operating Officer to our Company for
the 2006 fiscal year.





(22) On
November 28, 2005, our Company granted Mr. Cyrus Spaulding options to purchase
375,000 shares of our common stock, on becoming a director of our Company, at an
exercise price of $0.71 per share, of which 75,000 vested immediately upon grant
and another 100,000 vested on June 29, 2006, another 100,000 vested on June 29,
2007 and another 100,000 vested on June 29, 2008. Based on the Black-Scholes
valuation method Mr. Spaulding’s estimated amortized value vested in 2006 was
$70,780. In addition to Mr. Spaulding’s director’s options, Trebax Projects
Ltd., a company owned 100% by Mr. Cyrus Spaulding, was granted options to
purchase 390,000 shares of our common stock for providing consulting services as
Chief Operating Officer of our Company, of which 130,000 vested on September 1,
2006, another 130,000 vested on September 1, 2007 and another 130,000 would have
vested on September 1, 2008 but Trebax Projects Ltd. resigned as of September
21, 2007. Based on the Black-Scholes valuation method Trebax Projects Ltd.’s
estimated amortized value vested in 2006 was $62,915.





(23) Mr.
Cyrus Spaulding was paid $3,500 for director’s fees for his services on the
Board of Directors as director of our Company for the 2006 fiscal
year.





(24) Mr.
David Roff was the former President and sole director of our Company from
September 10, 2003 until February 6, 2004. Mr. Roff was reappointed as a
director of our Company on April 3, 2006. Brave Consulting Corporation, a
company 50% owned by Mr. David Roff, has been a consultant to our Company since
July 15, 2005 to April 1, 2009. Brave Consulting Corporation, a private
corporation 50% owned by Mr. Roff and the other 50% is owned by a non-related
third party.





(25) Brave
Consulting Corporation, a company owned 50% by Mr. David Roff, and the other 50%
is owned by a non-related party, was paid Cdn $96,000 for providing consulting
services to our Company for the 2007 fiscal year.





(26) On
October 25, 2006, our Company granted Mr. David Roff options to purchase 375,000
shares of our common stock, on becoming a director of our Company, at an
exercise price of $0.71 per share, of which 75,000 vested immediately and
another 100,000 vested on April 6, 2007, another 100,000 vested on April 6, 2009
and another 100,000 vested on April 6, 2009. Based on the Black-Scholes
valuation method Mr. Roff’s estimated amortized value vested in 2007 was
$75,334, which includes the value of the options back until Mr. Roff first
became a director. Mr. Roff has not exercised any of his stock
options.





(27) Mr.
David Roff was paid $8,000 for director’s fees for his services on the Board of
Directors as director of our Company for the 2007 fiscal year.





(28) Brave
Consulting Corporation, a company owned 50% by Mr. David Roff, and the other 50%
is owned by a non-related party, was paid Cdn $96,000 for providing consulting
services to our Company for the 2006 fiscal year.





(29) Mr.
David Roff was paid $2,000 for director’s fees for his services on the Board of
Directors as director of our Company for the 2006 fiscal year.





(30) On
October 1, 2007, we entered into a Consulting Agreement, effective September 20,
2007, with R.N. Dell Energy Ltd. whose primary consultant is Mr. Edward A.
Howard, to assist us in the further exploitation and development of our Sawn
Lake project. Under the terms of the Consulting Agreement, R.N. Dell Energy Ltd.
will be paid $17,700 Cdn per month.





(31) R.N.
Dell Energy, a company 100% owned by Mr. Edward Howard, was paid Cdn $6,638 for
providing consulting services to our Company for the 2007 fiscal
year.





(32) No
option granted under the Stock Option Plan may be exercised until the Stock
Option Plan has been approved and ratified by the holders of a majority of the
voting stock of our Company at a shareholders' meeting or by a properly
constituted consent resolution of said majority shareholders. These estimated
valuations include the value of the options back until each executive officer
first became a director. No named director or executive officer, or contractor
has exercised any of his/its stock options because the Stock Option Plan has not
yet been ratified by our Company’s shareholders.





The Board
regularly reviews all compensation paid to officers of our Company.





Compensation Arrangements
for Executive Officers





Our
Company has entered into the following contracts with the following companies
for services of certain officers and/or directors of our Company:





1.
            Portwest
      Investments Ltd., a company owned 100% by Dr. Horst A. Schmid for
      providing services as Chief Executive Officer and President for Cdn
      $12,500 per month.





2.
            Concorde
      Consulting, a company owned 100% by Mr. Curtis James Sparrow for providing
      services as Chief Financial Officer for Cdn $15,000 per
    month.





3.
            Trebax
      Projects Ltd., a company 100% owned by Mr. Cyrus Spaulding for providing
      services as Chief Operating Officer for Cdn $130 per hour. On September
      21, 2007, Trebax Projects Ltd. resigned as Chief Operating Officer of our
      Company.





On
November 28, 2005, the Board of Directors of our Company granted 390,000 options
to acquire common shares to the above corporations providing consulting services
to our Company.


62





Outstanding
Equity Awards Granted to Executive Officers at September 30, 2007





Options Awards(1)(If approved by the shareholders)
                
                Stock AwardsName
                
                Number of
                  Securities
                  Underlying
                  Unexercised
                  Options (#)
                  Exercisable
                
                
                Number of
                  Securities
                  Underlying
                  Unexercised
                  Options (#)
                  Unexercisable
                
                
                Equity
                  Incentive Plan
                  Awards:
                  Number of
                  Securities
                  Underlying
                  Unexercised
                  Unearned
                  Options (#)
                
                
                Option
                  Exercise
                  Price ($)
                
                Option
                  Expiration
                  Date
                
                Number of
                  Shares or
                  Units of
                  Stock That
                  Have Not
                  Vested (#)
                
                
                Market
                  Value of
                  Shares or
                  Units of
                  Stock That
                  Have Not
                  Vested ($)
                
                
                Equity
                  Incentive
                  Plan
                  Awards:
                  Number of
                  Unearned
                  Shares,
                  Units or
                  Other
                  Rights That
                  Have Not
                  Vested (#)
                
                
                Equity
                  Incentive Plan
                  Awards:
                  Market or
                  Payout Value
                  of Unearned
                  Shares, Units
                  or Other
                  Rights That
                  Have Not
                  Vested ($)Portwest Investments Ltd. (2)
                
                
                260,000
                
                
                
                130,000
                
                
                
                –
                
                
                $
                0.71
                
                11/28/2010
                
                
                –
                
                
                
                –
                
                
                
                –
                
                
                
                –Concorde Consulting (3)
                
                
                260,000
                
                
                
                130,000
                
                
                
                –
                
                
                $
                0.71
                
                11/28/2010
                
                
                –
                
                
                
                –
                
                
                
                –
                
                
                
                –Trebax Projects Ltd. (4)
                
                
                260,000
                
                
                
                130,000
                
                
                
                –
                
                
                $
                0.71
                
                11/28/2010
                
                
                –
                
                
                
                –
                
                
                
                –
                
                
                
                –





(1) No
option granted under the Stock Option Plan may be exercised until the Stock
Option Plan has been approved and ratified by the holders of a majority of the
voting stock of our Company at a shareholders' meeting or by a properly
constituted consent resolution of said majority shareholders. As of the date of
this report no executive officer or contractor has exercised his or its stock
options.





(2)
Portwest Investments Ltd., a company owned 100% by Dr. Horst A. Schmid, was
granted options to purchase 390,000 shares of common stock for providing
consulting services as President and Chief Executive Officer of our Company, of
which 130,000 vested on July 1, 2006, another 130,000 vested on July 1, 2007 and
another 130,000 vested on July 1, 2008. See the Executive Compensation table for
more disclosure.





(3)
Concorde Consulting, a company owned 100% by Mr. Curtis James Sparrow, was
granted options to purchase 390,000 shares of common stock for providing
consulting services as Chief Financial Officer of our Company, of which 130,000
vested on July 1, 2006, another 130,000 vested on July 1, 2007 and another
130,000 vested on July 1, 2008. See the Executive Compensation table for more
disclosure.





(4) Trebax
Projects Ltd., a company owned 100% by Mr. Cyrus Spaulding, was granted options
to purchase 390,000 shares of common stock for providing consulting services as
Chief Operating Officer of our Company, of which 130,000 vested on September 1,
2006, another 130,000 vested on September 1, 2007 and another 130,000 would have
vested on September 1, 2008 but Trebax Projects Ltd. resigned as of September
21, 2007.  See the Executive Compensation table for more
disclosure.





Compensation Arrangement for
Contractors





1.
            Brave
      Consulting, a company 50% owned by Mr. David Roff, for providing
      consulting services to our Company for Cdn $8,000 per month. As of August
      2007 the amount has increased to $12,000 per
  month.





2.
            R.N.
      Dell Energy Ltd., a company 100% owned by Mr. Edward Howard has been
      contracted to provide geological services to our Company for Cdn $17,700
      per month. On September 28, 2007, under the terms of the Consulting
      Agreement, our Board of Directors granted options to the Contractor to
      acquire 240,000 common shares of our Company at the exercise price of
      $0.47 per common share (being the closing price as of the day before the
      effective date) which shall be vested at a rate of 20,000 common shares
      per month commencing October 31, 2007, so long as the Contractor continues
      to provide consulting services on such vesting
  dates.





Compensation of
Directors





On
November 28, 2005, our Company adopted a cash compensation plan where each
director is paid the amount of $500 for each meeting of the Board of Directors
or committee meeting that they attend, or resolution participated in, plus, we
reimburse each director for actual expenses incurred in connection with Board
meeting attendance. The Chairman of the Board is paid $1,000 for each Board
event as described above plus reimbursement for actual expenses incurred in
connection with Board meeting attendance.





On
November 28, 2005, the Board of Directors of Deep Well adopted the Deep Well Oil
& Gas, Inc. Stock Option Plan. The Stock Option Plan, which if administered
by the Board, permits options to acquire shares of Deep Well’s common stock to
be granted to directors of our Company. The vesting of such director options
will occur only if the holder of the options continues to provide services to us
during the immediate annual period preceding the relevant vesting date. The
options will terminate at the close of business five years from the date of
grant. No option granted under the Stock Option Plan may be exercised until the
Stock Option Plan has been approved and ratified by the holders of a majority of
the voting stock of our Company at a shareholders' meeting or by consent
resolution of said majority shareholders.


63


For the
year ended September 30, 2007, the Company recorded $246,643 of compensation
expense based on its use of the Black-Scholes model to estimate the grant-date
fair value of these unit option awards. No options were eligible to be exercised
during the year ended September 30, 2007, therefore, the intrinsic value of all
of the options vested during 2007 is nil. As of September 30, 2007, there was a
total of $149,153 of unrecognised compensation cost related to the non-vested
portion of these unit option awards. At September 30, 2007, this cost was
expected to recognize over a weighted-average period of 3.41 years. Compensation
expense is based upon straight-line amortization of the grant-date fair value
over the vesting period of the underlying unit option. Since the Company is a
relatively new public company and has minimal trading history, it has used an
estimated volatility of approximately 158% for 2007 based on the trading history
available. As of August 31, 2009, no stock options have been exercised by a
director.





Director Compensation at September 30, 2007Name
                  
                  Fees Earned or
                    Paid in Cash ($)
                  
                  
                  Stock Awards
                    ($)
                  
                  
                  Option Awards
                    (If approved by
                    the
                    shareholders)
                    ($)(1)
                  
                  
                  Non-Equity
                    Incentive Plan
                    Compensation
                    ($)
                  
                  
                  Nonqualified
                    Deferred
                    Compensation
                    Earnings ($)
                  
                  
                  All Other
                    Compensation ($)
                  
                  
                  Total ($)Dr.
      Horst A. Schmid
                  
                  Disclosed
      in the Executive Compensation Summary under Item 11.Mr.
      Curtis James Sparrow
                  
                  Disclosed
      in the Executive Compensation Summary under Item 11.Mr.
      Cyrus Spaulding
                  
                  Disclosed
      in the Executive Compensation Summary under Item 11.Mr. Donald E. H. Jones (2)
                  
                  $
                  7,000
                  (3)
                  
                  
                  –
                  
                  
                  $
                  23,305
                  (4)
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  $
                  31,305Mr.
      David Roff
                  
                  Disclosed
      in the Executive Compensation Summary under Item 11.





(1) No
option granted under the Stock Option Plan may be exercised until the Stock
Option Plan has been approved and ratified by the holders of a majority of the
voting stock of our Company at a shareholders' meeting or by a properly
constituted consent resolution of said majority shareholders. These estimated
valuations include the value of the options back until when each director first
became a director.





(2) Mr.
Donald E. H. Jones has served our Company as Director since June 29, 2005 to
present.





(3) Mr.
Donald E. H. Jones was paid $7,000 for director’s fees for his services on the
Board of Directors as director of our Company for the 2007 fiscal
year.





(4) On
November 28, 2005, our Company granted Mr. Donald E. H. Jones options to
purchase 375,000 shares of our common stock, on becoming a director of our
Company, at an exercise price of $0.71 per share, of which 75,000 vested
immediately and another 100,000 vested on June 29, 2006, another 100,000 vested
on June 29, 2007 and another 100,000 vested on June 29, 2008. Based on the
Black-Scholes valuation method Mr. Jones’ estimated amortized value vested in
2007 was $23,305, which includes the value of the options back until Mr. Jones
first became a director. Mr. Jones has not exercised any of his stock
options.





ITEM 12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED
      STOCKHOLDER MATTERS





Equity Compensation Plan
Information





As of
September 30, 2007 with respect to shares of Deep Well common stock that may be
issued under our existing equity compensation plan, see Item 5 “Equity
Compensation Plan Information” of this report on Form 10-K.





Security Ownership of
Certain Beneficial Owners and Management





The
following table sets forth the number and percentage of the beneficial ownership
of shares of our Company’s outstanding common stock as of August 31, 2009 by
each person or group known by us to be the beneficial owner of more than 5% and
all of our directors and executive officers individually and as a
group.


64





SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                              As of August 31, 2009Name and Address of Beneficial Owner
                                            
                                            Title of Class
                                            
                                            Number of Shares
                                              Beneficially Owned
                                              (1) (2)
                                            
                                            
                                            Percentage of Class
                                              Beneficially Owned
                                            
                                            
                                            Nature of OwnershipMalik
      Youyou
                                              Director
                                              Sadovnicheskeya
      nab 69
                                              Moscow
      115035, Russia
                                            
                                            Common
                                            
                                            
                                            75,776,883
                                            
                                            
                                            
                                            52.90
                                            % (3)
                                            
                                            DirectLB
      (Swiss) Private Bank Ltd.
                                              Boersenstrasse
      16 Postfach
                                              Zurich
      CH-8022, Switzerland
                                            
                                            Common
                                            
                                            
                                            10,000,000
                                            
                                            
                                            
                                            8.95
                                            (4)
                                            
                                            DirectDr.
      Horst A. Schmid
                                              Director
      and Chairman of the Board
                                              Suite
      700, 10150 - 100 Street
                                              Edmonton,
      Alberta  T5J 0P6 Canada
                                            
                                            Common
                                            
                                            
                                            2,715,000
                                            
                                            
                                            
                                            2.52
                                            % (5)
                                            
                                            Direct
      and IndirectMr.
      Curtis James Sparrow
                                              Director,
      Chief Financial Officer, Corporate Secretary and Treasurer
                                              Suite
      700, 10150 - 100 Street
                                              Edmonton,
      Alberta  T5J 0P6 Canada
                                            
                                            Common
                                            
                                            
                                            765,000
                                            
                                            
                                            
                                            *
                                            (6)
                                            
                                            Direct
      and IndirectMr.
      Cyrus Spaulding
                                              Director
      and Chief Operating Officer
                                              416
      Scenic View Bay
                                              Calgary,
      Alberta  T3L 1Z4 Canada
                                            
                                            Common
                                            
                                            
                                            930,300
                                            
                                            
                                            
                                            *
                                            (7)
                                            
                                            Direct
      and IndirectMr.
      Donald E. H. Jones
                                              Director
                                              Calle
      113, Numero 7-21
                                              Officina
      706, Edificio Teleport, Torre A
                                              Bogota,
      Colombia
                                            
                                            Common
                                            
                                            
                                            505,000
                                            
                                            
                                            
                                            *
                                            (8)
                                            
                                            Direct
      and IndirectMr.
      David Roff
                                              Director
                                              27
      Chicora Avenue
                                              Toronto,
      Ontario  M5R 1W7 Canada
                                            
                                            Common
                                            
                                            
                                            354,886
                                            
                                            
                                            
                                            *
                                            (9)
                                            
                                            DirectMr. Christian Demoyen (10)
                                              Director
                                              81
      Avenue Raymond Poincaré
                                              Paris
      75116, France
                                            
                                            Common
                                            
                                            
                                            263,201
                                            
                                            
                                            
                                            *
                                            
                                            
                                            DirectMr. Donald W. Hryhor (11)
                                              Director
                                              P.O.
      Box 636 Station M
                                              Calgary,
      Alberta  T2P 2J3 Canada
                                            
                                            Common
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –Mr. Edward Howard (12)
                                              Geologist
                                              201,
      2323 – 32 Avenue NE
                                              Calgary,
      Alberta  T2E 6Z3 Canada
                                            
                                            Common
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –
                                            
                                            
                                            
                                            –All
      Officers and Directors as a Group
                                            
                                            Common
                                            
                                            
                                            81,310,270
                                            
                                            
                                            
                                            55.67
                                            %
                                            
                                            Indirect
  *
      Less than 1%(1)
      Under the rules of the Securities and Exchange Commission, a person or
      entity, beneficially owns stock of a company if such person or entity
      directly or indirectly has or shares the power to vote or direct the
      voting, or the power to dispose or direct the disposition of such stock,
      whether through any contract, arrangement, understanding, relationship or
      otherwise. A person or entity is also deemed to be the beneficial owner,
      of stock if such person or entity has the right to acquire either of such
      powers at any time within 60 days through the exercise of any option,
      warrant, right or conversion privilege or pursuant to the power to revoke
      a trust, a discretionary account or similar arrangement or pursuant to the
      automatic termination of a trust, discretionary account or similar
      arrangement.




65




(2) Based
on 106,774,258 of our common shares issued and outstanding on August 31, 2009.
For calculating the percentage of beneficial ownership separately for each
person, his or her options, warrants or both that can be acquired within 60 days
are included in both the numerator and the denominator. For the directors as a
group, their collective options and warrants that can be acquired within 60 days
are included in both the numerator and the denominator when calculating their
group percentage ownership.





(3) Mr.
Malik Youyou has served our Company as director from August 20, 2008 to present.
As of August 31, 2009, Mr. Malik Youyou beneficially owns 75,776,883 shares of
our common stock, 33,146,472 of which are held directly, 6,158,781 of which are
held by Westline Enterprises Limited, a corporation 100% owned by Mr. Youyou,
and 36,471,630 of which are issuable pursuant to presently exercisable warrants
held by Mr. Youyou.  Assuming the issuance of 36,471,630 shares of our
common stock, pursuant to the exercise of Mr. Youyou’s presently exercisable
warrants, Mr. Youyou would beneficially own 52.9% of our Company’s outstanding
common stock. As of the date of this report, Mr. Youyou has not exercised any
warrants and without the exercise of Mr. Youyou’s warrants, Mr. Youyou has a
36.8% ownership of our issued and outstanding common stock.





(4) LB
(Swiss) Private Bank Ltd.’s ownership is based solely on a private placement
entered into with our Company on May 25, 2007. LB (Swiss) Private Bank Ltd.
beneficially owns 10,000,000 shares of our common stock. In connection with the
May 25, 2007 private placement, LB (Swiss) Private Bank Ltd., as principal,
acquired 5,000,000 shares and warrants to purchase up to 5,000,000 shares of
additional common stock of our Company. Assuming the issuance of 5,000,000
shares of our common stock pursuant to the exercise of LB (Swiss) Private Bank
Ltd.’s presently exercisable warrants, LB (Swiss) Private Bank Ltd. would
beneficially own 8.95% of our Company’s outstanding common stock. As of the date
of this report, LB (Swiss) Private Bank Ltd. has not exercised any warrants and
without the exercise of LB (Swiss) Private Bank Ltd.’s warrants, they have an
4.68% ownership of our issued and outstanding common stock. In addition to the
10,000,000 beneficial shares owned by LB (Swiss) Private Bank Ltd. an additional
7,115,276 shares are held of record by LB (Swiss) Private Bank Ltd., and it is
not known by us whether LB (Swiss) Private Bank Ltd. is the beneficial owner of
these additional shares.





(5)Dr.
Horst A. Schmid has served our Company as director and Chairman of the Board
since February 6, 2004 to present. Dr. Schmid has also served our Company as
President and Chief Executive Officer since June 29, 2005 to present. Dr.
Schmid’s beneficial ownership consists of Portwest Investment Ltd. owning
1,950,000 shares of our common stock. Portwest Investment Ltd. is a private
corporation registered in Alberta, Canada, which is 100% owned and controlled by
Dr. Schmid. On November 28, 2005, Dr. Schmid was granted options to purchase
375,000 options of common stock on becoming a director of our Company, and as of
February 6, 2007 all 375,000 shares to purchase common stock of our Company are
fully vested. Dr. Schmid also has an indirect beneficial ownership, which
consists of 390,000 stock options granted to Portwest Investment Ltd., and as of
July 1, 2008 all 390,000 options to purchase common stock of our Company are
fully vested. No option granted under the Stock Option Plan may be exercised
until the Stock Option Plan has been approved and ratified by a majority of our
shareholders. As of the date of this report, Dr. Schmid has not exercised any of
his beneficially owned stock options.





(6)Mr.
Sparrow has served our Company as director and Chief Financial Officer since
February 9, 2004 to present. On November 28, 2005, Mr. Sparrow was granted
options to purchase 375,000 shares of common stock on becoming a director of our
Company, and as of February 6, 2007 all 375,000 options to purchase common stock
of our Company are fully vested. Mr. Sparrow also has an indirect beneficial
ownership, which consists of 390,000 stock options granted to Concorde
Consulting, a company owned 100% by Mr. Sparrow, and as of July 1, 2008 all
390,000 options to purchase common stock of our Company are fully vested. No
option granted under the Stock Option Plan may be exercised until the Stock
Option Plan has been approved and ratified by a majority of our shareholders. As
of the date of this report, Mr. Sparrow has not exercised any of his
beneficially owned stock options.





(7)Mr.
Cyrus Spaulding has served our Company as director from June 29, 2005 to present
and Chief Operating Officer from September 1, 2005 to September 21, 2007. Mr.
Spaulding directly owns 45,300 shares of our Company stock. Mr. Spaulding’s
beneficial ownership consists of 250,000 common shares owned by his spouse. On
November 28, 2005, Mr. Spaulding was granted options to purchase 375,000 shares
of common stock on becoming a director of our Company, and as of June 29, 2008
all 375,000 options to purchase common stock of our Company are fully vested.
Mr. Spaulding also has an indirect beneficial ownership, which consists of
390,000 stock options granted to Trebax Projects Ltd., a company owned 100% by
Mr. Cyrus Spaulding, and as of September 1, 2007 260,000 of such options to
purchase common stock of our Company are fully vested. Another 130,000 would
have vested on September 1, 2008 but Trebax Projects Ltd. resigned as of
September 21, 2007. No option granted under the Stock Option Plan may be
exercised until the Stock Option Plan has been approved and ratified by a
majority of our shareholders. As of the date of this report, Mr. Spaulding has
not exercised any of beneficially owned stock options.





(8)Mr.
Donald E. H. Jones has served our Company as director from June 29, 2005 to
present. Mr. Jones’ beneficial ownership consists of 130,000 common shares owned
by his spouse. On November 28, 2005, Mr. Jones was granted options to purchase
375,000 shares of common stock on becoming a director of our Company and as of
June 29, 2008 all 375,000 options to purchase common stock of our Company are
fully vested. No option granted under the Stock Option Plan may be exercised
until the Stock Option Plan has been approved and ratified by the a majority of
our shareholders. As of the date of this report, Mr. Jones has not exercised any
of his beneficially owned stock options.





(9)Mr.
David Roff has served our Company as director from April 3, 2006 to present. Mr.
Roff’s beneficial ownership consists of 79,886 shares of our common stock. On
October 25, 2006, Mr. Roff was granted options to purchase 375,000 shares of
common stock of our Company and as of April 6, 2009 all 375,000 shares to
purchase common stock of our Company are fully vested. No option granted under
the Stock Option Plan may be exercised until the Stock Option Plan has been
approved and ratified by a majority of our shareholders. As of the date of this
report, Mr. Roff has not exercised any of his beneficially owned stock
options.





(10)Mr.
Christian Demoyen has served our Company as director from January 8, 2009 to
present.





(11)Mr.
Donald W. Hryhor has been appointed to our board of directors as of September
16, 2009.





(12)Mr.
Edward Howard has served our Company as our consulting geologist from September
20, 2007 to present.


66


Changes
in Control





Except as
described below, Deep Well is not aware of any arrangement that may result in a
change in control of Deep Well or its subsidiary companies.





Since
December 2007, Tamm Oil and Gas Corp. (hereinafter referred to as “Tamm”) and
its agents have issued multiple public statements claiming that Tamm has
acquired, or agreed to acquire, a significant and controlling interest in our
Company and our properties. On April 4, 2008, our Company commenced a lawsuit in
the United States District Court for the District of Nevada against Tamm after
attempting to clarify Tamm’s position and rectify Tamm’s violations. Our Company
alleges that: Tamm engaged in an unlawful tender offer for our Company’s shares,
violated United States federal and Nevada state law in connection with the
tender offer, made public statements about our Company and activities related to
our Company and our operations that are false and misleading, and made
statements of purported ownership of our shares of common stock that are false
and misleading. On August 22, 2008, our Company filed a First Amended Complaint
in the lawsuit adding the following additional parties as defendants: Garry
Tighe, William Tighe, Craig Auringer, Sean Dickenson, John Muzzin, Guido
Hilekes, Peter Schriber, Olaf Herr, Arthur Sulzer, LB (Swiss) Private Bank Ltd.,
and Rahn & Bodmer Banquiers. The First Amended Complaint also added a civil
conspiracy claim. On March 6, 2009, the court granted in part and denied in part
Tamm’s motion for partial summary judgment. The defendants have filed motions to
dismiss the case that challenge the court’s jurisdiction and assert that the
First Amended Complaint fails to state a cause of action. Effective September
14, 2009 and effective September 1, 2009, the parties entered into a settlement
agreement that fully and finally resolved their dispute and the lawsuit. A
Stipulated Judgment of Dismissal of the case was filed on September 15, 2009 and
entered by the court on the same day.. For more information about the foregoing,
you should refer to “Item 3. Legal Proceedings” in this Form 10-K.





As of
April 30, 2009, Mr. Malik Youyou, a director of our Company, beneficially owns
75,776,883 shares of common stock and warrants for common stock of our Company
of which 33,146,472 shares were directly acquired by Mr. Youyou through open
market transactions and pursuant to three subscription agreements dated June 22,
2007, August 14, 2008 and October 31, 2008 for a total aggregate price of
$15,000,000 for all three private placement transactions. Pursuant to these
three private placements Mr. Youyou also received warrants to acquire 36,471,630
shares of our common stock. In addition, Mr. Youyou indirectly owns 6,158,781
shares of our common stock through Westline Enterprises Limited, a company of
which Mr. Youyou is the sole shareholder. As of the date of this report on Form
10-K, Mr. Youyou has 36.8 percent of the issued and outstanding common stock of
.. If Mr. Youyou were to exercise all of his warrants to acquire an additional
36,471,630 shares of our common stock, and if nobody else exercised their
warrants, Mr. Youyou would have 52.9 percent of our issued and outstanding
common stock. As of the date of this report Mr. Youyou has not exercised any of
his warrants. Mr. Malik Youyou became a director of our Company on August 20,
2008.





ITEM
13.             CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





On
February 23, 2006, pursuant to option agreements our Company entered into on
June 7, 2005, Mr. Steven P. Gawne and Nearshore partially exercised their rights
under those option agreements, in which our Company issued 300,000 Deep Well
common shares to each of Mr. Gawne and Nearshore in exchange for 20,000 of the
outstanding preferred shares of Northern. The common shares were issued pursuant
to Section 4(2) of the 1933 Act. Mr. Steven P. Gawne had served our Company as
President and Chief Executive Officer from February 6, 2004 until June 29, 2005.
Nearshore, is a private company owned 50% by Mr. Steven P. Gawne and 50% by his
wife, Rebekah Gawne.





Pursuant
to a subscription agreement dated August 12, 2005, Mrs. Barbara Spaulding the
wife of Mr. Cyrus Spaulding our current director and former Chief Operating
Officer, subscribed for 250,000 units of our Company, pursuant to a private
placement transaction, for an aggregate price of $100,000. Each unit consisted
of one common share and one common share purchase warrant, with each warrant
entitling its holder to acquire one share of our common stock at an exercise
price of $0.60. The warrants expired on August 12, 2008 and Mrs. Spaulding did
not exercise any of her warrants. The units were issued pursuant to Regulation S
under the 1933 Act. As of the date of this report Mrs. Spaulding directly owns
250,000 common shares of our Company.





As of
April 30, 2009, Mr. Malik Youyou, a director of our Company since August 20,
2008, beneficially owns 75,776,883 shares of common stock and warrants for
common stock of our Company of which 33,146,472 shares were directly acquired by
Mr. Youyou through open market transactions and pursuant to three subscription
agreements dated June 22, 2007, August 14, 2008 and October 31, 2008 for a total
aggregate price of $15,000,000 for all three private placement transactions.
Pursuant to these three private placements Mr. Youyou also received warrants to
acquire 36,471,630 shares of our common stock. In addition, Mr. Youyou
indirectly owns 6,158,781 shares of our common stock through Westline
Enterprises Limited, a company of which Mr. Youyou is the sole shareholder. As
of the date of this report on Form 10-K, Mr. Youyou has acquired 36.8 percent of
our issued and outstanding common stock. If Mr. Youyou were to exercise all of
his warrants to acquire an additional 36,471,630 shares of Deep Well’s common
stock, and if nobody else exercised their warrants, Mr. Youyou would have 52.9
percent of our issued and outstanding common stock. As of the date of this
report Mr. Youyou has not exercised any of his warrants.


67


ITEM
14.              PRINCIPAL
ACCOUNTANT FEES AND SERVICES





In the
fiscal years ended September 30, 2007 and September 30, 2006, we paid, Collins
Barrow, an independent third party, PCAOB registered, chartered accounting firm
fees of Cdn $49,382 and Cdn $84,396, respectively, relating to the preparation
of the annual consolidated financial statements which were audited by Madsen
& Associates, CPA’s Inc.





The
following table is a summary of the fees billed to us by Madsen &
Associates, CPA’s Inc. for professional services for the fiscal years ended
September 30, 2007 and September 30, 2006:





Fee Category
                      
                      Fiscal
                        2007
                        Fees
                      
                      
                      Fiscal
                        2006
                        FeesAudit
      Fees
                      
                      $
                      9,200
                      
                      
                      $
                      11,200Audit
      Related Fees
                      
                      
                      2,750
                      
                      
                      
                      2,775Tax
      Fees
                      
                      Nil
                      
                      
                      NilAll
      Other Fees
                      
                      Nil
                      
                      
                      NilTotal
      Fees
                      
                      $
                      11,950
                      
                      
                      $
                      13,995





Audit
Fees





Our board
of directors appointed Madsen & Associates, CPA’s Inc. as independent
auditors to audit our consolidated financial statements for the fiscal years
ending September 30, 2007 and September 30, 2006. The aggregate fees billed by
Madsen & Associates, CPA’s Inc. for the audit of our annual consolidated
financial statements for the years ended September 30, 2007 and September 30,
2006 was $9,200 and $11,200, respectively.





Audit Related
Fees





For the
fiscal years ended September 30, 2007 and September 30, 2006, audit related fees
billed by Madsen & Associates, CPA’s Inc. were for the review of the
quarterly financial statements.





Audit Committee Pre-Approval
Policies and Procedures





The audit
and audit related services and permitted non-audit services were pre-approved by
the Board.





The
Securities and Exchange Commission has adopted rules that require that before
Madsen & Associates, CPA’s Inc. is engaged by our Company to render any
audit or permitted non-audit service, the engagement be:





·
            approved
      by our Board of Directors acting as our audit committee, as specified
      under section 3(a)(58)(B) of the Exchange Act;
  or


·
            entered
      into pursuant to pre-approval policies and procedures established by the
      audit committee, provided the policies and procedures are detailed as to
      the particular service, the audit committee is informed of each service,
      and such policies and procedures do not include delegation of the audit
      committee’s responsibilities to
management.





Our Board
of Directors pre-approves all services provided by Madsen & Associates,
CPA’s Inc. and has considered the nature and amount of the fees billed by Madsen
& Associates, CPA’s Inc., and believes that the provision of the services
for activities unrelated to the audit is compatible with maintaining Madsen
& Associates, CPA’s Inc.


68


ITEM
15.              EXHIBITS,
FINANCIAL STATEMENT SCHEDULES





Financial Statements filed
with this report on Form 10-K





The
following listed financial statements and report of independent registered
public accounting firm are filed as part of this Annual Report on Form 10-K (see
“Item 8 - Consolidated Financial Statements” of this report on Form
10-K):





1.
            Consolidated
      Balance Sheets for September 30, 2007 and
2006


2.
            Consolidated
      Statements of Operations For the Years Ended September 30, 2007 and 2006
      and 2005 and the Period September 10, 2003 (Inception of Exploration
      Stage) to September 30, 2007


3.
            Consolidated
      Statements of Shareholders’ Equity For the Period September 10, 2003
      (Inception of Exploration Stage) to September 30,
  2007.


4.
            Consolidated
      Statements of Cash Flows For the Years Ended September 30, 2007, 2006 and
      2005 and the Period September 10,2003 (Inception of Exploration Stage) to
      September 30, 2007.


5.
            Notes
      to the Consolidated Financial
Statements.


6.
            Madsen
      & Associates, CPA’s Inc.’s Report of Independent Registered Public
      Accounting Firm.





Financial Statement
Schedules filed with this report on Form 10-K





None.





Exhibits





The
following exhibits have been or are being filed herewith and are numbered in
accordance with Item 601 of Regulation S-K:





Exhibit No.
              
              Description2.1
              
              
              Liquidating
      Plan of Reorganization of Allied Devices Corporation, now known as Deep
      Well Oil & Gas, Inc. filed with Form 10-K/A on January 28, 2004, and
      incorporated herein by reference.2.2
              
              
              Order
      and Plan of Reorganization of the U.S. Bankruptcy Court in and for the
      Eastern District of New York, In re: Allied Devices Corporation, Chapter
      11, Case No. 03-80962-511, dated September 10, 2003 filed with Form 10K/A
      on January 28, 2004, and incorporated herein by
  reference.3.1
              
              
              Restated
      and Amended Articles of Incorporation filed with and accepted by the
      Secretary of State of Nevada on October 22, 2003 filed with Form 10-K/A on
      January 28, 2004, and incorporated herein by reference.3.2
              
              
              Amended
      Articles of Incorporation filed with the State of Nevada on February 27,
      2004 filed with Form 8-K on March 5, 2004, and incorporated herein by
      reference.3.3
              
              
              Amended
      Articles of Incorporation filed with the State of Nevada on May 5, 2004
      filed with Form 8-K on May 7, 2004, and incorporated herein by
      reference.3.4
              
              
              Registrant’s
      By-laws, filed with Form 10-KSB on February 23, 2007, and incorporated
      herein by reference.3.5
              
              
              Registrant’s
      Amended and Restated By-laws, filed with Form 8-K on September 3, 2009,
      and incorporated herein by reference.4.1
              
              
              Form
      of Warrant issued pursuant to the Securities Purchase Agreement and
      Registration Rights Agreement dated March 10, 2005, filed with Form 8-K on
      March 14, 2005, and incorporated herein by reference.4.2
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated August 12,
      2005 by and among our Company with three investors related to the Private
      Placement offering and Debt Settlement Agreement, filed with Form 8-K on
      August 17, 2005, and incorporated herein by reference.4.3
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated October 11,
      2005 by and among our Company with three investors related to the Private
      Placement offering, filed with Form 8-K on October 19, 2005, and
      incorporated herein by reference.4.4
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated January 13,
      2006 by and among our Company with three investors related to the Private
      Placement offering and Debt Settlement Agreement, filed with Form 8-K on
      March 6, 2006, and incorporated herein by reference.4.5
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated May 25,
      2007 by and among our Company with one investor related to the Private
      Placement offering, and filed with Form 8-K on June 13, 2007, and
      incorporated herein by reference.4.6
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated June 22,
      2007 by and among our Company with one investor related to the Private
      Placement offering, filed with Form 8-K on July 5, 2007, and incorporated
      herein by reference.




69





4.7
              
              
              Form
      of Special Warrant issued pursuant to the Subscription Agreement dated
      June 22, 2007 by and among our Company with one investor related to the
      Private Placement offering, filed with Form 8-K on July 5, 2007, and
      incorporated herein by reference4.8
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated July 11,
      2007 by and among our Company with two investor related to the Private
      Placement offering, and filed with Form 10-QSB on October 30, 2007 and
      incorporated herein by reference.4.9
              
              
              Form
      of Special Warrant issued pursuant to the Subscription Agreement dated
      July 11, 2007 by and among our Company with two investor related to the
      Private Placement offering, and filed with Form 10-QSB on October 30, 2007
      and incorporated herein by reference.4.10
              
              
              Form
      of adjusted Warrant issued in September 2007 pursuant to the original
      Warrant dated March 10, 2005 by and among our Company with two investors
      related to the Securities Purchase Agreement and Registration Rights
      Agreement, and filed with Form 10-QSB on October 30, 2007 and incorporated
      herein by reference.4.11
              
              
              Form
      of Warrant issued pursuant to the Subscription Agreement dated August 14,
      2008 by and among our Company with one investor related to the Private
      Placement offering, filed with Form 8-K on August 15, 2008, and
      incorporated herein by reference.4.12
              
              
              Form
      of Fractional Warrant issued pursuant to the Subscription Agreement dated
      August 14, 2008 by and among our Company with one investor related to the
      Private Placement offering, filed with Form 8-K on August 15, 2008, and
      incorporated herein by reference.4.14
              
              
              Form
      of Fractional Warrant issued pursuant to the Subscription Agreement dated
      October 31, 2008 by and among our Company with one investor related to the
      Private Placement offering, filed with Form 8-K on November 7, 2008, and
      incorporated herein by reference.10.1
              
              
              Gross
      Overriding Royalty Agreement dated December 12, 2003 between Mikwec Energy
      Canada Limited (now known as Northern Alberta Oil Ltd.) and Nearshore
      Petroleum Corporation, filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.2
              
              
              Joint
      Operating Agreement dated April 26, 2004 between Mikwec Energy Canada
      Limited (now known as Northern Alberta Oil Ltd.) and Maxen Petroleum Inc.
      (now known as Pan Orient Energy Corp.), filed with Form 10-KSB on February
      23, 2007, and incorporated herein by reference.10.3
              
              
              Exchange
      Agreement between our Company and Mikwec Energy Canada Limited (now known
      as Northern Alberta Oil Ltd.) dated as of July 8, 2004, and filed with
      Form 8-K on November 5, 2004 and incorporated herein by reference. Form of
      Amending Agreement, dated as of April 25, 2005 and Form of Termination,
      Option and Put Agreement, both filed with Form 8-K on June 10, 2005, and
      incorporated herein by reference.10.4
              
              
              Joint
      Operating Agreement dated December 9, 2004 between our Company and 1132559
      Alberta Ltd., filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.5
              
              
              Farmout
      Agreement dated February 25, 2005 by and between the Deep Well Oil &
      Gas, Inc., Northern Alberta Oil Ltd., and Surge Global Energy, Inc., Surge
      Global Energy (Canada) Ltd. (now known as Andora Energy Corporation
      formerly known as Signet Energy, Inc.), filed with Form 10-KSB on February
      23, 2007, and incorporated herein by reference.10.6
              
              
              Assumption
      of Liabilities and Indemnity Agreement dated February 28, 2005 by and
      between Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd. and Surge
      Global Energy (Canada) Ltd. (now known as Andora Energy Corporation
      formerly known as Signet Energy, Inc.), filed with Form 10-KSB on February
      23, 2007, and incorporated herein by reference.10.7
              
              
              Termination
      Agreement dated February 28, 2005 by and between Nearshore Petroleum
      Corporation, Northern Alberta Oil Ltd. and Surge Global Energy (Canada)
      Ltd. (now known as Andora Energy Corporation formerly known as Signet
      Energy, Inc.), filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.8
              
              
              Farmout
      Amending Agreement dated March 3, 2005 by and between our Company, Deep
      Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
      Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global Energy
      (Canada) Ltd., now known as Andora Energy Corporation), filed with Form
      10-KSB on February 23, 2007, and incorporated herein by
      reference.10.9
              
              
              Two
      Farmout Amending Agreements dated March 10, 2005 by and between our
      Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
      Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as Surge
      Global Energy (Canada) Ltd., now known as Andora Energy Corporation),
      filed with Form 10-KSB on February 23, 2007, and incorporated herein by
      reference.


70





10.11
              
              
              Form
      of Amending Agreement dated as of April 25, 2005, filed with Form 8-K on
      June 10, 2005, and incorporated herein by reference.10.12
              
              
              Form
      of Termination, Option and Put Agreement, filed with Form 8-K on June 10,
      2005, and incorporated herein by reference.10.13*
              
              
              Consulting
      agreement by and between Northern and Portwest Investments Ltd., dated
      July 1, 2005, filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.14*
              
              
              Consulting
      agreement by and between Northern and Concorde Consulting, dated July 1,
      2005, filed with Form 10-KSB on February 23, 2007, and incorporated herein
      by reference.10.15
              
              
              Farmout
      Amending Agreement dated July 14, 2005 by and between our Company, Deep
      Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
      Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global Energy
      (Canada) Ltd.), filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.16
              
              
              Form
      of Subscription Agreement dated August 12, 2005 by and among our Company
      with three investors related to the Private Placement offering, and Debt
      Settlement Agreement, filed with Form 8-K on August 17, 2005, and
      incorporated herein by reference.10.17
              
              
              Consulting
      agreement by and between the Northern and Trebax Projects Ltd., effective
      September 1, 2005, filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.18*
              
              
              Form
      of Subscription Agreement dated October 11, 2005, by and among our Company
      with three investors related to the Private Placement offering, filed with
      Form 8-K on October 19, 2005, and incorporated herein by
      reference.10.19
              
              
              Farmout
      Amending Agreement dated November 15, 2005 by and between our Company,
      Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and Surge Global
      Energy, Inc., Signet Energy, Inc. (formerly known as Surge Global Energy
      (Canada) Ltd.), filed with Form 10-KSB on February 23, 2007, and
      incorporated herein by reference.10.20
              
              
              Farmout
      Acknowledgement Agreement dated November 15, 2005 by and between our
      Company, Deep Well Oil & Gas, Inc., Northern Alberta Oil Ltd., and
      Surge Global Energy, Inc., Signet Energy, Inc. (formerly known as Surge
      Global Energy (Canada) Ltd.), filed with Form 10-KSB on February 23, 2007,
      and incorporated herein by reference.10.21
              
              
              Deep
      Well Oil & Gas, Inc. Stock Option Plan (“The Plan”), effective
      November 28, 2005, filed with Form 8-K on March 3, 2006, and incorporated
      herein by reference.10.22*
              
              
              Sample
      Stock Option Agreements with all Directors, filed with Form 10-KSB on
      February 23, 2007, and incorporated herein by
reference.10.23*
              
              
              Sample
      Stock Option Agreements with all Contractors, filed with Form 10-KSB on
      February 23, 2007, and incorporated herein by
reference.10.24
              
              
              Sample
      Indemnity Agreement with all Directors, filed with Form 10-KSB on February
      23, 2007, and incorporated herein by reference.10.25
              
              
              Form
      of Subscription Agreement dated January 13, 2006 by and among our Company
      with three investors related to the Private Placement offering and Debt
      Settlement Agreement, filed with Form 8-K on March 6, 2006, and
      incorporated herein by reference.10.26
              
              
              Settlement
      Agreement & Release of All Claims, dated as of January 22, 2007, by
      and among our Company and Grey K Fund LP, Grey K Offshore Fund Ltd.,
      Provident Premier Master Fund Ltd., Atlas Master Fund Ltd. and Gemini
      Master Fund, Ltd., filed with Form 8-K on January 31, 2007, and
      incorporated herein by reference.10.27*
              
              
              Form
      of Non-Qualified Stock Option Agreement issued to director on April 3,
      2006, filed with Form 10-KSB on February 23, 2007, and incorporated herein
      by reference.10.28
              
              
              Form
      of Subscription Agreement dated May 25, 2007 by and among our Company with
      one investor, filed with Form 8-K on June 13, 2007, and incorporated
      herein by reference.10.29
              
              
              Form
      of Subscription Agreement dated June 22, 2007 by and among our Company
      with one investor, filed with Form 8-K on July 5, 2007, and incorporated
      herein by reference.10.30
              
              
              Form
      of Subscription Agreement dated July 11, 2007 by and among our Company
      with two investors, and filed with Form 10-QSB on October 30, 2007 and
      incorporated herein by reference.10.31
              
              
              Order
      granted by the court dated September 7, 2007 between our Company and Star
      Capital Inc., and filed with Form 10-KSB on April 22, 2008 and
      incorporated herein by reference.10.32
              
              
              Form
      of Agreement dated as of September 10, 2007 between our Company and Star
      Capital Inc., and filed with Form 10-KSB on April 22, 2008 and
      incorporated herein by
reference.




71





10.33
              
              
              Form
      of Amending Agreement dated as of September 10, 2007, between our Company
      and Star Capital Inc., and filed with Form 10-KSB on April 22, 2008 and
      incorporated herein by reference.10.34
              
              
              Consulting
      agreement by and between our Company and R.N. Dell Energy Ltd., effective
      September 20, 2007, and filed with Form 10-QSB on October 30, 2007
      incorporated herein by reference.10.35
              
              
              Non-Qualified
      Stock Option Agreement issued to R.N. Dell Energy Ltd. effective September
      20, 2007, and filed with Form 10-QSB on October 30, 2007 incorporated
      herein by reference.10.36
              
              
              Non-Qualified
      Stock Option Agreement issued to Employee, effective September 20, 2007
      and filed with Form 10-QSB on October 30, 2007 incorporated herein by
      reference.10.37
              
              
              Consulting
      agreement by and between our Company and Picoplat Consulting Inc.,
      effective October 15, 2007, and filed with Form 10-KSB on April 22, 2008
      and incorporated herein by reference.10.38
              
              
              Minutes
      of Settlement dated November 26, 2007 by and between Deep Well Oil &
      Gas, Inc. and its subsidiaries and 1350826 Alberta Ltd. and Andora Energy
      Corporation, filed with Form 8-K on December 14, 2007, and incorporated
      herein by reference.10.39
              
              
              Form
      of Subscription Agreement dated August 14, 2008 by and among our Company
      with one investor, filed with Form 8-K on August 15, 2008, and
      incorporated herein by reference.10.40
              
              
              Form
      of Subscription Agreement dated October 31, 2008 by and among our Company
      with one investor, filed with Form 8-K on November 7, 2008, and
      incorporated herein by reference.10.41
              
              
              Settlement
      Agreement effective September 1, 2009, by and among our Company and Tamm
      Oil & Gas Corp et al, filed with Form 8-K on September 17, 2009, and
      incorporated herein by reference.16.1
              
              
              Changes
      in registrant’s certifying accountant, Letter of Madsen & Associates,
      CPA’s Inc. filed with Form 8-K on August 16, 2004, and incorporated herein
      by reference.16.2
              
              
              Changes
      in registrant’s certifying accountant, Letter of Deloitte & Touche LLP
      filed with Form 8-K on August 10, 2005, and incorporated herein by
      reference.21.1
              
              
              Subsidiaries
      of Registrant, filed herewith.31.1
              
              
              Certification
      of President and Chief Executive Officer pursuant to Rule 13a-14(a), filed
      herewith.31.2
              
              
              Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a), filed
      herewith.32.1
              
              
              Certification
      of President and Chief Executive Officer pursuant to 18 U.S.C. Section
      1350, filed herewith.32.2
              
              
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed
      herewith.





*
Management contract or compensatory plan or arrangement.


72


SIGNATURES





Pursuant
to the requirements of  Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




DEEP WELL OIL & GAS,
      INC.By:
              /s/ Horst
      A. SchmidDr.
      Horst A. SchmidChairman
      of the BoardDate:
              September
      21, 2009




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.




By:
              /s/ Horst
      A. SchmidDr.
      Horst A. SchmidChief
      Executive Officer and President(Principal
      Executive Officer)Date:
              September
      21, 2009








By:
              /s/ Curtis
      James SparrowMr.
      Curtis James SparrowChief
      Financial Officer(Principal
      Financial and Accounting Officer)Date:
              September
      21, 2009




73