Item
2. Discussion and Analysis or Plan of Operation.
(A) PLAN
OF OPERATION.
The
Company’s sole focus is on the exploration for, development drilling for, and
transmission facilities for the production and sale of oil and
gas. The Company has incorporated a wholly owned Canadian subsidiary
named T.V Oil & Gas Canada Limited. This Company is a Federal Canadian
Registered Company and complies with all applicable laws within
Canada.
Our
financial statements contain the following additional material
notes:
(Note
6-Going Concern) The Company’s financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
is dependent upon raising capital to execute its business plan. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty. It is management's plan to raise capital
in order to execute their business plan, thus creating necessary operating
revenues.
(Note
3-Development Stage Company) The Company is a development stage
company as defined in Financial Accounting Standards Board Statement 7. It
is
concentrating substantially all of its efforts in raising capital and developing
its business operations in order to generate operating revenues.
(B)
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
During
the three months ended September 30, 2007 the Company had $1,121 of royalty
revenues from its working interest in the Strachan property as compared to
$784
for the corresponding period ending September 30, 2006. For the nine
months ended September 30, 2007 the Company had $1,522 of royalty revenues
from
its working interest as compared to $9,612 for the corresponding period ending
September 30, 2006. The reduction in royalty revenue was due to the
special assessment during the nine months ended September 30, 2006 which
resulted in additional revenue for the period.
The
Company’s Operator has indicated that completion and testing of the Strachan
Leduc well has commenced and the Company is awaiting the outcome of the
completion and testing of this well. The Company has paid all
authorizations for expenditure that was presented by the Operator on this
project. All the Company’s properties are geologically and physically
independent of one another. They are all located in the Western
Canadian Geologic Basin centred in Alberta, Canada.
The
Strachan Property
On
August
20, 2003, the Company entered into a purchase agreement to acquire 1% interest
in a producing gas well, located at 2-2-38-9W5 Red Deer, Alberta,
Canada. The gas production rate at the time of the acquisition
fluctuated between 1.5 and 2 MMCF/Day (million cubic feet of gas per
day). The Company’s senior management has
set out a rework program
for this well. The rework program calls for an acid wash and acid
stimulation of the producing formation. The Company has agreed to
participate in the program. The program was completed on October 15,
2003 and as of October 20, 2003, the new production rates have stabilized at
2.66 MMCF/Day, representing a 40% increase over initial production
rates.
In
addition to the preceding acquisition, the Company entered into a purchase
agreement to acquire 0.5% interest in 10 Sections (6,400 acres) of drilling
rights offsetting Sct. 22-38-9W-5. These offsetting sections have
identified seismic anomalies in multiple cretaceous pay zones. The
purchase price of the property was $45,114
The
Strachan Property – Leduc region
On
September 23, 2005 Turner Valley Oil and Gas Inc. through its wholly owned
subsidiary TV Oil and Gas Canada Limited, has entered into a farm-out agreement
with Odin Capital Inc. of Calgary, Alberta.
The
terms
of the Farm-Out agreement are as follows:
In
exchange for our paying 3.00% of all costs associated with drilling,
testing and completing the test well (expected drilling cost – approx. $6.3
million Canadian to the 100% interest) on the property that is referred to
as
the Leduc Formation test well, we will have earned;
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1)
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In
the spacing unit for the Earning Well, a 1.500% interest in the petroleum
and natural gas below the base of the Mannville excluding natural
gas in
the Leduc formation, and a 3.00% interest in the natural gas in the
Leduc
formation before payout subject to payment of an Overriding Royalty
which
is convertible upon payout at the Royalty Owners option to 50% of
our
interest.
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2)
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A
1.200% interest in the rights below the base line of the Shunda formation
in Section 10,Township 38, Range 9W5M
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3)
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A
0.966% interest in the rights below the base of the Shunda formation
in
sections 15 & 16,Township 38,Range 9W5M, down to the base of the
deepest formation penetrated.
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On
July
6
th
,
2006, the Company purchased an additional 2% from its Chairman & CEO for a
total cost of $190,882. This transaction was completed on a dollar
paid for dollar spent.
Additionally,
the Company incurred $44,405 of further costs associated with the exploration
of
the well during the quarter.
The
total
costs are to date are $525,544 for our interest, under the terms of our
agreement.
The
Strachan Prospect is located 80 miles NW of Calgary, Alberta.
Mississippi
Prospect
On
August
23
rd
,
2006, the Company entered into a joint venture agreement with Griffin &
Griffin Exploration, LLC. to acquire an interest in a drilling program
comprising 50 natural gas and/or oil wells. The area in which the proposed
wells are to be drilled is comprised of approximately 300,000 gross acres of
land located between Southwest Mississippi and North East Louisiana. The
proposed wells will be targeting the Frio and Wilcox Geological
formations. The first 20 proposed wells are located within tie-in range of
existing pipeline infrastructures. Turner Valley has agreed to pay 10% of
all prospect fees, mineral leases, surface leases and drilling and completion
costs to earn a net 8% share of all production zones to the base of the Frio
formation and 7.5% of all production to the base of the Wilcox
formation. Total Costs to date are $400,000.
After
evaluating the Company’s future interest in this project, the Company has
decided to assign all of its working interest to third parties for
$400,000. From the outset, the Company’s intention was to fully
participate in this project; however, the diminution in value of the Company’s
investment in Win Energy determined that the Company could not continue in
the
Mississippi project.
General
& Administrative Costs
General
and administrative costs for the three months ended September 30, 2007 decreased
to $57,212, when compared to $230,335 for the corresponding period last
year. The decrease was caused by costs relating to common stock
issued for services of $15,000 for the period ended September 30, 2007, while
the charge for stock issued in the corresponding period ended September 30,
2006
was $128,000. The total costs including depletion for the three
months ended September 30, 2007 was $59,712 (September 30, 2006:
$232,835).
Net
Loss
for the three months ended September 30, 2007 was $(15,168) as compared to
a Net
Income of $104,651 for the corresponding period ending September 30,
2006. The increase in Net Loss was caused by the decrease in the
Company’s investment in Win Energy Corp. (‘WIN”).
General
and Administrative expenses for the 9 months ended September 30, 2007 was
$157,031 (September 30, 2006: $565,739). The decrease in General and
Administrative expenses was related to a reduction in charge for common stock
issued for services in the corresponding quarter ended September 30,
2006.
Net
Loss
for the nine months ended September 30, 2007 was $(65,210) as compared to a
Net
Loss of $(166,764) for the corresponding period ended September 30,
2006. The reduction in Net Loss was caused by reduction is charge for
common stock issued for services which was partially offset by an increase
in
revenue resulted from a special assessment by the Operator.
Liquidity
The
Company’s net working capital deficit for the quarter ended September 30, 2007
decreased to $(14,025), from a deficit for the year ended December 31, 2006
of
$(418,555). The decrease in working capital deficit was caused by
reductions in general overhead and the assignment of the Mississippi prospect
which reduced current liabilities by $400,000.
To
date,
we have not invested in derivative securities or any other financial instruments
that involve a high level of complexity or risk. We expect that in the future,
any excess cash will continue to be invested in high credit quality,
interest-bearing securities.
We
believe cash from operating activities, and our existing cash resources may
not
be sufficient to meet our working capital requirements for the next 12 months.
We will likely require additional funds to support the Company’s business
plan. Management intends to raise additional working capital through
debt and equity financing. There can
be no assurance that
additional financing will be available on acceptable terms, if at all. If
adequate funds are not available, we may be unable to take advantage of future
opportunities, respond to competitive pressures, and may have to curtail
operations.
There
are
no legal or practical restrictions on the ability to transfer funds between
parent and subsidiary companies. There are no known trends or uncertainties
excepting those herein disclosed, that will have a material impact on
revenues.