The following discussion and analysis should be read in conjunction with the accompanying financial statements and related notes included elsewhere in this report. It contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, market prices for natural gas and oil, economic and competitive conditions, regulatory changes, estimates of proved reserves, potential failure to achieve production from exploratory and development drilling projects, capital expenditures and other uncertainties, as well as those factors discussed below, all of which are difficult to predict and which expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. In light of these risks, uncertainties and assumptions, the forward looking events discussed may not occur. We do not have any intention or obligation to update forward-looking statements included in this report after the date of this report, except as required by law.

Executive Summary

We are a global oil and gas exploration and production company committed to acquiring and developing primarily unconventional natural gas and oil prospects.
As of June 30, 2009, we owned properties in Rio Blanco, Garfield and Mesa Counties Colorado, and in the Northern Territory, Australia. We have drilled one test well on our property in the Northern Territory. We have drilled five wells on our 20,000-acre Buckskin Mesa property located in Rio Blanco County, Colorado. All five wells are drilled and cased, and three of the five are completed and shut in. As of June 30, 2009, we owned 1,074 gross acres and 402 net acres located in Garfield and Mesa Counties, Colorado. Subsequent to June 30, 2009 we failed to meet certain drilling obligations on these holdings and as a result we lost our leases on the acreage.

In October 2008, we sold an undivided 50% interest in our four exploration permits comprising approximately seven million acres in the Beetaloo Basin of the Northern Territory, Australia to Falcon Oil & Gas Ltd. ("Falcon"), a related party. In December 2008, we sold our working interests in eight wells which were operated by EnCana Oil & Gas USA ("EnCana"). In March 2009, we sold our land position in Montana which included 15,991 net undeveloped acres in the Bear Creek area. In June 2009, we sold an additional undivided 25% working interest in our four exploration permits in the Beetaloo Basin of the Northern Territory, Australia to Falcon. As a result of the sale we continue to hold a 25% working interest in these permits.

Results of Operations

The financial information with respect to the three months ended June 30, 2009 and June 30, 2008 that is discussed below is unaudited. In the opinion of management, such information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results for such periods. The results of operations for interim periods are not necessarily indicative of the results of operations for the full fiscal years.

Industry Overview for the three months ended June 30, 2009

The three months ended June 30, 2009 continued to see weaker natural gas prices. Natural gas prices have been very volatile during 2009 year to date due to supply concerns earlier in the year, and more recently due to recession concerns arising from the current worldwide financial crisis.

We may need to raise capital, and due to the global credit crisis, funds may not be available, or if available, may be on unfavorable terms. Based on our current financial position, our participation only in seismic and drilling activity that is necessary to maintain current licenses in Australia is planned for the remainder of 2009. We may need to raise additional equity or enter into new borrowing arrangements to finance our continued participation in these planned activities. If additional financing is not available we may be compelled to reduce the scope of our business activities. If we are unable to fund planned expenditures, it may be necessary to:

forfeit our interest in wells that are proposed to be
1. drilled;

2. farm-out our interest in proposed wells;

sell a portion of our interest in prospects and use the sale proceeds to fund our participation for a lesser
3. interest; and

4. reduce general and administrative expenses.

Company Overview for the three and nine months ended June 30, 2009 and 2008

Our net loss for the three months and nine months ended June 30, 2009 was $0.8 million and $111.5 million respectively. We received only nominal revenues from our oil and natural gas properties while incurring substantial impairment charges and overhead expenses which have resulted in an accumulated deficit through June 30, 2009 of $261.0 million. We sold our only revenue producing assets during the nine months ended June 30, 2009.

Comparison of the results of operations for the three and nine months ended June 30, 2009 and 2008

Oil and Gas Revenue. For the three months ended June 30, 2009, oil and gas revenue was $0.0 million as compared to $0.6 million for the corresponding period in 2008. The decrease in revenue relates to the sale of our 8 producing wells effective December 1, 2008.

For the nine months ended June 30, 2009, our revenue was $0.1 million compared to approximately $1.6 million for the corresponding period in 2008.

Costs and Expenses

Lease Operating Expenses. Lease operating expenses were $0.0 million and $0.6 million during the three and nine month periods ended June 30, 2009 compared to $0.2 million and $0.4 million for the comparable 2008 periods. The changes are primarily attributable to compressor rentals and other charges in the Buckskin Mesa.

General and Administrative. During the three and nine months ended June 30, 2009, general and administrative expense was $0.6 million and $6.1 million, as compared to $2.5 million and $7.2 million in the comparable 2008 periods.

The following table highlights the areas with the most significant changes ($ in thousands):

                                               Three Months ended June 30,             Nine Months ended June 30,
                                              2009                   2008               2009                2008
Personnel and contract services            $       306         $          1,118     $       3,302       $       2,911
Legal                                              101                      265               318                 657
Stock-based compensation                           176                      440             2,283               1,512
Travel                                              22                       91                38                 164
Other                                                2                      597               154               2,054

Total                                      $       607         $          2,511     $       6,095       $       7,298

For the nine months ended June 30, 2009 the decreases in general and administrative expenses in 2009 are the result of decreases in legal expense, travel expense as well as decreases in non-recurring one time other expenses incurred, in fiscal 2008. In addition we experienced significant decreases in stock-based compensation as well as salaries and contract services resulting from reduced staffing levels in the third quarter of fiscal 2009.

We anticipate that in future periods, general and administrative expenses will continue to be significantly less as we continue to implement significant reductions in expenses through reduced staffing, rent expenses, and other infrastructure related charges.

Impairment of Oil and Gas Properties. Costs capitalized for properties accounted for under the full cost method of accounting are subjected to a ceiling test limitation to the amount of costs included in the cost pool by geographic cost center. Costs of oil and gas properties may not exceed the ceiling which is an amount equal to the present value, discounted at 10%, of the estimated future net cash flows from proved oil and gas reserves plus the cost, or estimated fair market value, if lower, of unproved properties. Should capitalized costs exceed this ceiling, impairment is recognized.

During the three months and nine months ended June 30, 2009, we recognized impairment expense of $0.4 million and $93.7 million, respectively, as compared to Nil million and Nil during the corresponding 2008 periods. Impairment expense recorded in 2009 resulted from the fact that our lack or working capital and inhibited our ability to extract minerals associated with the assets in the US full cost pool became non-feasible.

Depreciation, Depletion, Amortization and Accretion "DD&A". - During the three months and nine months ended June 30, 2009, we recognized $0.1 million and $0.2 million of DD&A respectively as compared to $0.3 million and $0.8 million during the 2008 periods.

Interest Expense. During the three and nine month periods ended June 30, 2009, interest expense was $2.4 million and $7.3 million, as compared to $3.2 million and $8.6 million during the corresponding 2008 periods.

The following table highlights interest expense for the three and nine month periods ended June 30, ($ in thousands):

                                    3 Months ended       3 months ended       9 Months ended       9 Months ended
                                    June 30, 2009        June 30, 2008        June 30, 2009        June 30, 2008
Interest expense related
to credit facility, convertible
notes and debt                     $          1,428     $          1,623     $          4,256     $          4,393
Amortization of debt discounts,
deferred financing costs and
accretion                                       995                  923                2,984                3,123
Interest on vendor obligations
and other                                        15                  647                   36                1,036
Total                              $          2,438     $          3,193     $          7,276     $          8,552

We expect that our interest expense will remain constant for the remainder of the fiscal year ending September 30, 2009, due to the fact that interest rate indices underlying the rates attached to the majority of our debt portfolio have stabilized and that we anticipate no new borrowings.

Net Loss. For the three and nine months ended June 30, 2009, we incurred net losses of $0.8 million and $111.5 million as compared to a net losses of $14.2 million and $38.6 million during the corresponding 2008 periods.

Going Concern

The report of our independent registered public accounting firm on the financial statements for the year ended September 30, 2008, includes an explanatory paragraph relating to the substantial doubt of our ability to continue as a going concern. We have an accumulated deficit of $261.0 million and have a working capital deficit of approximately $48.6 million as of June 30, 2009. We are not in compliance with the covenants of several loan agreements, and have significant capital expenditure commitments. We require significant additional funding to sustain our operations and satisfy our contractual obligations for our planned oil and gas exploration and development operations. We are in default on certain obligations. Our ability to establish the Company as a going concern is dependent upon our ability to obtain additional funding in order to finance our planned operations.

Liquidity and Capital Resources

On November 10, 2008, we closed the sale of an undivided 25% interest in five wells drilled in the Buckskin Mesa to Falcon in exchange for a $5.3 million cash work commitment to complete certain of these wells. In December 2008, we completed the sale of our working interests in our eight producing wells operated by EnCana Oil & Gas, for net cash proceeds of $2.3 million. As part of the purchase and sale agreement, Falcon obtained an option to acquire up to a 50% interest in our entire Buckskin Mesa Project, for total consideration of $28.5 million in cash or shares of Falcon common stock, and an $18.0 million work commitment. In February 2009, Falcon elected not to exercise its option.

In October 2008, we entered into a secured loan agreement with Falcon. Under the terms of the loan agreement, Falcon agreed to advance to us $5.0 million. This loan was secured by 14.5 million shares of Falcon common stock we had received as consideration in relation to the sale of a 50% working interest in our four exploration permits in Australia conveyed to Falcon in October 2008.

In June 2009, we sold an additional 25% interest in our four exploration permits in the Beetaloo Basin to Falcon, in exchange Falcon relieved the $5 million note payable and assumed trade accounts payable related to the Beetaloo prospect in the amount of approximately $1.3 million. The relief of this note allows us to access the shares of Falcon that served as collateral on the $5 million note subject to restrictions set forth in an escrow agreement.

Working Capital. Working capital is the amount by which current assets exceed current liabilities. Our working capital is impacted by changes in prices of oil and gas along with other business factors that affect our net income and cash flows. Our working capital is also affected by the timing of operating cash receipts and disbursements, borrowings of and payments of debt, additions to oil and gas properties and increases and decreases in other non-current assets.

As of June 30, 2009, we had a working capital deficit of $48.6 million and unrestricted cash of $0.06 million, while at September 30, 2008 we had a working capital deficit of $3.9 million and unrestricted cash of $1.0 million. The decreases in working capital are primarily attributable to the fact that we have disposed of our revenue producing assets and continue to incur expenses related to operations. In addition, during the fiscal year ended September 30, 2008, we had completed several significant property conveyances that temporarily reduced our working capital deficit.

Cash Flow. Net cash used in or provided by operating, investing and financing activities for the nine months ended June 30, 2009 and 2008 were as follows ($ in thousands):

                                              Nine Months Ended
                                                   June 30,
                                              2009         2008

Net cash (used in) operating activities     $ (7,178 )   $ (22,216 )
Net cash provided by investing activities   $  1,462     $  14,376
Net cash provided by financing activities   $  4,807     $   8,415

Net Cash Used in Operating Activities. The changes in net cash used in operating activities are attributable to our net loss adjusted for non-cash charges as presented in the consolidated statements of cash flows and changes in working capital as discussed above.

Net Cash Provided by Investing Activities. Net cash provided by investing activities of approximately $1.5 million for the nine months ended June 30, 2009 was primarily related to net proceeds of $2.3 million received from the sale of our 8 producing wells, as well as $0.8 million in proceeds from the sale of marketable securities offset by additions to oil and gas properties of $2.0 million. Net cash provided by investing activities for the nine months ended June 30, 2008 related to cash received from the sale of oil and gas properties of $26.9 million and proceeds from the sale of marketable securities of $2.5 million offset by cash used for oil and gas properties additions of $14.8 million.

Net Cash Provided by Financing Activities. Net cash provided by financing activities of $4.8 million for the nine months ended June 30, 2009 was comprised primarily of proceeds of a $5.0 million related party note payable and proceeds of additional related party notes of $0.3 million net of repayments of related party notes of $0.4 million. Net cash provided by financing activities for the nine months ended June 30, 2008 of $8.4 million primarily consisted of proceeds $23.5 million net of repayments of short term debt.

Plan of Operation

Colorado
We will continue to seek opportunities related to our interests and or upon our acreage. We cannot say with any reasonable probability what the outcome of our ongoing efforts will be.

Australia
We plan to continue to fund exploration, seismic and drilling activity related to our undivided 25% working interest in four exploration permits in the Beetaloo Basin project area located in the northern territory of Australia. Based on our current financial position only required funding that is necessary to maintain our interest in these licenses is planned for the remainder of 2009. We anticipate that these costs will aggregate approximately $1.8 million, including $0.3 million in refundable deposits.

Capital Requirements

As of June 30, 2009 and for the remainder of the calendar year 2009, we have obligations to drill and or commence drilling a total of 8 wells in Colorado for which our ownership interests and corresponding obligations vary from 37.5% to 100%. Due to liquidity concerns we do not anticipate having the cash to meet these obligations.

Negotiations with the Australian Land council to reduce the drilling commitments related to the Beetaloo project have commenced, the outcome of these negotiations are not yet known. We plan to participate in the deepening of our well in the Beetaloo Basin project in calendar 2009 and anticipate expenditures related to this will aggregate approximately $1.5 million.

Financing. During the nine months ended June 30, 2009, we entered into the following financing arrangements:

In October 2008, we entered into a secured loan agreement with Falcon, whereby Falcon agreed to advance us up to $5.0 million. During October and November 2008, we received advances aggregating $5.0 million. The loan was secured by 14.5 million shares of Falcon common stock we received in consideration for our sale of a 50% working interest in four exploration permits in Australia. These shares were pledged to Falcon under a pledge and security agreement. The loan carried interest at 10% payable in monthly installments and was due in full on April 30, 2009. Funds were used to satisfy various vendor obligations. In June 2009, we sold an additional 25% interest in our four exploration permits in the Beetaloo Basin to Falcon in exchange for the relief of this loan.

In December 2008, we issued $0.2 million in convertible debentures to three related parties. The debentures bore interest at interest at 15%. The debenture holders were issued 0.5 million warrants to purchase our common stock. Funds borrowed were used to fund the operations.

In December 2008, we borrowed $0.1 million from Global, a related party, under short term promissory notes which were unsecured and bore interest at 15%. Funds borrowed were used to fund operations.

In January 2009, we converted $.025 million in trade accounts payable into a convertible promissory note. This note bore interest at 18%. The noteholder was issued 0.07 million warrants to purchase our common stock.

The continuation and future development of our business will require substantial additional capital expenditures. Meeting capital expenditure, operational, and administrative needs for the remainder of the fiscal year ending September 30, 2009 and for future fiscal periods will depend on our success in farming out or selling portions of our remaining working interests in our properties for cash and/or funding of our share of development expenses, the availability of debt or equity financing, and the results of our activities. To limit capital expenditures, we may form

industry alliances and exchange an appropriate portion of our interest for cash and/or a carried interest in our exploration projects using farm-out arrangements. We may need to raise additional funds to cover capital expenditures. These funds may come from equity or debt financings, a credit facility, or sales of interests in our properties, although there is no assurance additional funding will be available or that it will be available on satisfactory terms. The global credit crisis may impact our ability to raise additional funds. If we are unable to raise capital through the methods discussed above, our ability to execute our development plans will be greatly impaired. See the Going Concern section above.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared by management in accordance with U.S. GAAP. We refer you to the corresponding section in Part II Item 7 and the notes to the consolidated financial statements of our Annual Report on Form 10K for the year ended September 30, 2008 for the description of critical accounting policies and estimates

Recently Issued Accounting Pronouncements

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 - "Recognition and Presentation of Other-Than-Temporary Impairments." This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. Management believes that this FSP, will not have material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 157-4 - "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly." This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, "Fair Value Measurements," when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. Management believes that this FSP, will not have material impact on our financial statements.

On May 28, 2009, the FASB issued SFAS No. 165, Subsequent Events. Under SFAS No. 165, companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities. SFAS No. 165 requires entities to recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities shall not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. SFAS No. 165 also requires entities to disclose the date through which subsequent events have been evaluated. SFAS No. 165 was effective for interim and annual reporting periods ending after June 15, 2009. We adopted the provisions of SFAS No. 165 for the quarter ended June 30, 2009, as required, and adoption did not have a material impact on the Company's financial statements taken as a whole. We evaluated all events or transactions that occurred from June 30, 2009 to August 13, 2009, the date that we issued these financial statements. During this period we did not have any material recognizable or non recognizable subsequent events.

On June 12, 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, and SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which change the way entities account for securitizations and special-purpose entities as follows:

SFAS No. 166 is a revision to FASB SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS No. 166 also eliminates the concept of a "qualifying special-purpose entity", changes the requirements for derecognizing financial assets and requires additional disclosures.

SFAS No. 167 is a revision to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance.

Both SFAS No. 166 and SFAS No. 167 will be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of SFAS No. 166 shall be applied to transfers that occur on or after the effective date. We adopt both SFAS No. 166 and SFAS No. 167 on January 1, 2010, as required. We have not determined the impact adoption may have on our consolidated financial statements.

On June 29, 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162. SFAS No. 168 establishes the FASB Accounting Standards Codification TM as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with US GAAP. SFAS No. 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superseded. We will adopt SFAS No. 168 for the quarterly period ended September 30, 2009, as required, and adoption is not expected to have a material impact on the Company's financial statements taken as a whole.