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 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 developing primarily unconventional natural gas and oil prospects. As of March 31, 2009, we owned properties in Rio Blanco Garfield and Mesa Counties , Colorado, and in the Northern Territory, Australia. 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. In the Southern Piceance Basin, we own 1,074 gross acres and 402 net acres located in Garfield and Mesa Counties, Colorado. During the six months ended March 31, 2009, we sold our working interests in eight wells which were operated by EnCana Oil & Gas USA ("EnCana") with an effective date of December 1, 2008. In March, 2009 we sold our land position in Montana which included 15,991 net undeveloped acres in the Bear Creek area. In Australia, we have an undivided 50% working interest in four exploration permits that comprise 7.0 million net acres. We have drilled one test well on our property in the Northern Territory.

During the six months ended March 31, 2009, Falcon our working interest partner in our Buckskin Mesa property, decided not to exercise its option to obtain an additional 25% interest in the prospect. Falcon's decision not to exercise this option resulted in our recognition of significant impairment expense as the play became economically non-feasible for us. Additionally, Falcon's decision not to exercise this option limited our opportunities, and compelled us to turn our focus on our prospects in Australia.

Results of Operations

The financial information with respect to the three and six months ended March 31, 2009 and March 31, 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 March 31, 2009

The three months ended March 31, 2009 saw weaker natural gas prices. The index price prevailing in the locale of our Piceance Basin project in Colorado, as quoted in Gas Daily as of March 31, 2009, was $3.94 per Mcf versus $10.84 per Mcf as of March 31, 2008 (assuming a BTU factor of 1.1). 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.

In the future, 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, only seismic and drilling activity that is necessary to maintain current licenses in Australia is planned for the remainder of 2009. It is anticipated that these exploration activities together with others that may impose financial requirements which will exceed our

existing working capital. We may raise additional equity and/or debt capital, and we may farm-out certain of our projects to finance our continued participation in planned activities. However, 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 six months ended March 31, 2009 and 2008

Our net losses for the three and six months ended March 31, 2009 were $95.2 million and $110.7 million, respectively. We received only nominal revenues from our oil and natural gas activities while incurring substantial impairment charges and overhead expenses which have resulted in an accumulated deficit through March 31, 2009 of $261 million. We sold our only revenue producing assets during the six months ended March 31, 2009.

Comparison of the results of operations for the three and six months ended March 31, 2009 March 31, 2008

Oil and Gas Revenue. For the three months ended March 31, 2009, oil and gas revenue was nil as compared to $0.65 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 six months ended March 31, 2009, revenue was $0.1 million compared to approximately $1.2 million for the corresponding period in 2008. The decrease in revenue relates to the factors as discussed above as well as the natural production decline in the wells, coupled with decreased pricing.

Costs and Expenses

Lease Operating Expenses. Lease operating expenses were $0.2 million and $0.6 million during the three and six month periods ended March 31, 2009, compared to $0.1 million and $0.2 million in the comparable prior periods. This increase is primarily attributable to compressor rental charges in the Buckskin Mesa.

General and Administrative. During the three and six months ended March 31, 2009, general and administrative expense was $3.4 million and $5.5 million as compared to $2.5 million and $4.8 million in the comparable prior period.

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

                                             Three Months ended March 31,           Six Months ended March 31,
                                               2009                2008              2009                2008
Personnel and contract services            $       1,557       $         909     $       2,996       $       1,793
Legal                                                123                 140               217                 392
Stock based compensation                           1,624                 599             2,105               1,072
Travel                                                 9                  22                18                  74
Other                                                 57                 799               152               1,456

Total                                      $       3,370       $       2,469     $       5,488       $       4,787

We anticipate that in future periods general and administrative expenses will be significantly less. As of March 31, 2009, we began to implement significant reductions in expense through reductions in staffing, and additional cost cutting measures.

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 and six months ended March 31, 2009, we recognized impairment expense of $83.1 million and $93.4 million, respectively, as compared to Nil million and Nil during the corresponding prior periods.

Depreciation, Depletion, Amortization and Accretion. "DD&A" - During the three and six months ended March 31, 2009 we recognized $0.1 million and $0.1 million of DDA, respectively, as compared to $0.2 million and $0.5 during the corresponding prior periods.

Interest Expense. During the three and six months ended March 31, 2009, interest expense was $2.4 million and $4.8 million, respectively, as compared to $2.6 and $ 5.4 million during the corresponding prior periods.

The following table highlights interest expense for the three and six months ended March 31, ($ in thousands):

                                             3 Months          3 months          6 Months          6 Months
                                            ended March       ended March       ended March       ended March
                                             31, 2009          31, 2008          31, 2009          31, 2008
Interest expense related to credit
facility, convertible notes and other
notes                                      $       1,354     $       1,354     $       2,828     $       2,770
Amortization of debt discounts, deferred
financing costs and accretion                        990               885             1,989             2,200
Interest on vendor obligations and other              11               335                22               389

Total                                      $       2,355     $       2,574     $       4,839     $       5,359

We expect that interest expense will decrease during the remainder of the fiscal year ending September 30, 2009, due to the fact that the interest rates on the majority of our debt portfolio are linked to indices that continue to benefit and enjoy lower interest rates as a result of the global credit crisis. In addition, issuances of our stock purchase warrants in connection with penalties and defaults will continue to yield lower interest expense as the value of our stock has continued to drop.

Net Loss. For the three and six months ended March 31, 2009 we incurred net losses of $95.2 million and $110.7 million as compared to net losses of $7.7 million and $24.5 million during the corresponding prior 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 uncertainty of our ability to continue as a going concern. We have an accumulated deficit of $261 million and have a working capital deficit of approximately $56.4 million as of March 31, 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 Buckskin Mesa, in exchange for a $5.3 million cash work commitment to complete certain of these wells. In addition, in December 2008, we completed the sale of our working interests in our eight producing wells operated by EnCana Oil & Gas (USA), Inc., for net cash proceeds of $2.3 million. As of March 31, 2009, we had a working capital deficit of $57 million.

As part of the Purchase and Sale Agreement with Falcon relating to our Buckskin Mesa property, 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.

We have currently entered into a non-binding letter of intent with a related party, Falcon to sell an additional 25% interest in our four exploration permits in the Beetaloo Basin in Australia. In consideration for the sale of the 25% interest Falcon would relieve a $5 million note payable we currently owe to them. The relief of this note allows us to access the shares of Falcon that currently serve as collateral on this note. As a component of the transaction, Falcon will also assume certain trade liabilities related to these permits and become the operator of record on the project. This transaction would allow us to continue our work in the Beetaloo Basin in Australia, and it provides us with working capital.

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 March 31, 2009, we had a working capital deficit of $56.4 million and cash of $0.9 million, while at September 30, 2008 we had a working capital deficit of $3.9 million and cash of $1.0 million. The decrease in working capital is primarily attributable to the majority of our debt being reclassified from long term to current.

Cash Flow. Net cash used in or provided by operating, investing and financing activities for the six months ended March 31, 2009 and 2008 were as follows ($ in thousands):

                                                        Six Months Ended
                                                            March 31,
                                                        2009         2008

          Net cash (used in) operating activities     $ (6,269 )   $ (4,062 )
          Net cash provided by investing activities   $  1,369     $  1,107
          Net cash provided by financing activities   $  4,807     $  4,427

Net Cash Used in Operating Activities. The changes in net cash used in operating activities are attributable to our net income 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 for the six months ended March 31, 2009 was primarily related to net proceeds of $2.3 million received from the sale of our 8 producing "Jolley" wells. Net cash provided by investing activities for six months ended March 31, 2008 related to cash received from the sale of oil and gas properties of $7.5 million and the sale of trading securities of $2.5 million.

Plan of Operation

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

We plan to explore and develop portions of our undivided 50% working interest in our 7.0 million acre position in four exploration permits in the Beetaloo Basin project area located in the Northern Territory of Australia. Based on our current financial position only seismic and drilling activity that is necessary to maintain current license status in Australia is planned for the remainder of 2009. We anticipate that costs related to seismic acquisition, development of operational infrastructure, and the drilling and completion of wells over the nine months, will aggregate approximately $18.5 million relating to our 50% working interest. We have requested an extension and or reduction in commitments from the Australian government.

Capital Requirements.

As of March 31, 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. We are currently exploring all potential opportunities related to these commitments.

In Australia we have commitments to drill 4 wells in our Beetaloo Basin project during the remainder of the calendar year.

Subsequent to March 31, 2009, we entered in negotiations with the Australian Land authorities to reduce the drilling commitments that we had originally entered into related to our Beetaloo Basin Project. The outcome of these negotiations is not yet known; therefore a significant reduction in future capital expenditures may not necessarily result.

Financing. During the six months ended March 31, 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 to us up to $5.0 million. During October and November 2008, we received advances aggregating $5.0 million. The loan is 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 have been pledged to Falcon under a pledge and security agreement. The loan carries interest at 10% payable in monthly installments and was due in full on April 30, 2009. Funds were used to satisfy various vendor obligations. As we have entered into a non-binding letter of intent to sell an additional 25% interest in our four exploration permits in the Beetaloo Basin in exchange for the relief of this loan amount, the repayment of the loan has been suspended until the outcome of the negotiations becomes known.

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 the operations.

In January, 2009 we converted $.025 in trade accounts payable into a convertible promissory note. This note bore interest at 18%. The noteholders were 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 fiscal year ending September 30, 2009 will depend on our success in farming out or selling portions of 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 cash flow, 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. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009. Management is currently evaluating the impact that the adoption of this FSP will have 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 shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Management is currently evaluating the impact that the adoption of this FSP will have on our financial statements.