UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended   December 31, 2003

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  [ ] to  [ ]

Commission file number   001-31444

ALTUS EXPLORATIONS INC.

(Name of small business issuer in its charter)

Nevada

98-361119

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Suite 100 - 8900 Germantown Road
Olive Branch, Mississippi

38654

(Address of principal executive offices)

(Zip Code)

Issuer's telephone number   662.893.7376

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Nil

Name of each exchange on which registered
Nil

Securities registered pursuant to Section 12(g) of the Act:

Common Shares, par value $0.001

(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X]     No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year.   Nil

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State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)

Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.

19,889,600 common shares @ $1.06 (1) = $21,082,976
(1) Average of bid and ask closing prices on March 12, 2004.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes [ ]     No [ ]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of equity stock, as of the latest practicable date.

38,553,600 common shares issued and outstanding as of March 12, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one):   Yes [ ];   No [X].

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PART I

Item 1. Description of Business.

This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things:

    • Uncertainties inherent in the exploration, development and production of natural gas and oil, and in the estimation of technically and commercially recoverable reserves;
    • Ability to raise sufficient capital and financing to fund our exploration, exploitation and development initiatives;
    • Effects of competition, and the impact of gas and oil price fluctuations;
    • Inability to generate sufficient cash flow and earnings to fund continuing operating working capital requirements;
    • The availability (or lack thereof) of gas and oil prospects for exploration, exploitation and development;
    • Impact of current and future federal, state or local governmental regulations including environmental compliance mandates;
    • Success and effectiveness of our risk management activities; and
    • General economic, market or business conditions.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this annual report, the terms "we", "us", "our", "Company" and "Altus" mean Altus Explorations, Inc., unless otherwise indicated.

Corporate History

We are an exploration stage resource company, and are primarily engaged in the exploration and development of the properties in which we have acquired interests.

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We were incorporated in the State of Nevada on November 2, 2001. By resolution of our board of directors, we affected a forward split an 8:1 basis for all shareholders of record on October 29, 2003. Prior to the forward split, we had 1,204,800 shares issued and outstanding. After the forward split, we had 9,638,400 shares issued and outstanding. On November 6, 2003, we filed a Certificate of Amendment of Articles of Incorporation, increasing our authorized capital stock from 25,000,000 shares to 200,000,000 shares, and increasing the then issued and outstanding shares from 1,204,800 to 9,638,400.

On February 2, 2004, by resolution of our Board of Directors, we affected a forward stock split on a 4:1 basis for all shareholders of record on February 2, 2004. After the forward split, we had 38,553,600 shares issued and outstanding. On February 5, 2004, we filed Certificate of Amendment of Articles of Incorporation, increasing our authorized capital stock from 200,000,000 shares to 800,000,000 shares.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

As of October 15, 2003 the address of our principal executive office has changed to Suite 100 - 8900 Germantown Road, Olive Branch, Mississippi 38654. Our telephone number changed to 662.893.7376 and our fax number changed to 662.893.7883.

Our Current Business

We are an independent resource company primarily engaged in the exploration and development of natural gas and oil reserves in the United States lower 48 states and Alaska. Our current core area of attention is the exploration and development of the following prospect opportunities:

  • Development and further exploitation of proved natural gas reserves in the northeastern portion of Texas in Freestone County;
  • Exploration and prospect drilling in the Cherokee basin of Southeast Kansas and Northeastern Oklahoma; and
  • Pursuant to an executed letter of intent, exploration drilling of approximately 17,000 acres onshore Alaska in the upper Cook-inlet Basin.

To effectuate and progress the above opportunities, we undertook a series of financial and organizational restructuring initiatives for the purpose of making us more attractive for prospective financing, and in order to enhance our energy industry depth, knowledge and expertise, together with our energy industry contacts.

We commenced the restructuring with our announcement on August 14, 2003 that the then incumbent directors would return an aggregate of 145,600,000 common shares to treasury for cancellation After the return of these shares, the existing incumbent directors then held an aggregate of 450,000 common shares, which equaled 41.7% of our then issued and outstanding shares.

In October 2003, we announced the appointment of Mr. Milton Cox to President and to the Board of Directors. On October 23, 2003 we announced three exploration and development projects that we had entered into or for which we had signed letters of intent to enter into. These exploration and development prospects are discussed in further detail under the applicable prospect sub-heading in this section.

Additionally and in connection with the organizational restructuring, we expanded our Board of Directors to include Mr. Bassam Nastat, Mr. Andy Kim and Mr. Don Sytsma, and our officers to include Mr. Steve Bajic, Secretary, and Mr. Don Sytsma, Chief Financial Officer and Treasurer. Collectively, these individuals bring many years of upstream and midstream operational and commercial energy industry experience and financing expertise to the Company.

In conjunction with our financial restructuring, the Board of Directors approved an 8:1 stock split for shareholders of record on October 29, 2003. On February 2, 2004 the Board of Directors approved a 4:1 stock split which increased our common shares outstanding to 38,553,600 shares. We are continuing our initiatives to secure

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sufficient financing to fund the continuing exploration and development of our existing oil and gas interests and to fund future opportunities as they arise.

Our current oil and gas initiatives include the exploration and development of the following prospect opportunities:

Freestone County, Texas

On October 22, 2003, we acquired a 10% non-operating working interest in the T.E. Lane gas unit located in Freestone County, Texas. This acquisition was from CodeAmerica Investments, LLC ("Code America") for a price of $200,000. CodeAmerica is a company owned by our President, Milton Cox. The T.E. Lane No. 1 is a 15,400' gas well completed in the Bossier formation. The Bossier wells in this area typically independently produce at 4 to 10 MMCFD with recoverable reserves of 2 to 6 BCF after stimulation. The well commenced production in mid January 2004 and is currently flowing at a rate of approximately 250 Mcf / day. Our consulting reservoir engineer estimate s proved recoverable reserves for the T.E. Lane No. 1 well of approximately 1.3 Bcf.

This acquisition of the initial 10% working interest provides us with the option to participate proportionately in the drilling of additional wells within this unit. To participate in these wells, we will have to pay our proportionate share of costs associated with our 10% working interest. The T.E. Lane gas unit is subject to royalties of 28% of production.

We are in the process of securing funding to drill four 80-acre offset wells to the T.E. Lane No. 1 well in Freestone County, Texas. We anticipate the drilling and completion of the offset wells during the remainder of year 2004 and in the year 2005.

Southeast Kansas and Northeastern Oklahoma Prospects

In early November 2003, we entered into an agreement with Escopeta Oil Company, L.L.C. ("Escopeta"), a Texas based exploration company, to develop a portion of approximately 34 prospect areas within the Cherokee basin of Southeast Kansas and Northeastern Oklahoma. The exploration agreement replaced and superseded the letter of intent that we had entered into with Orbit Energy, LLC on October 22, 2003 in regards to the prospects. Leasing and permitting is currently underway on three prospect areas. We paid $37,500 for our proportionate ownership and use of Escopeta's geological library and $37,500 for our 50% share of the lease acquisition costs for leases on the initial three prospects which total approximately 3,000 acres. The entire approximate 34 prospect areas consist of approximately 195,000 contiguous acres. The prospects are subject to royalties totalling 25% of production. We will also carry Escopeta's 25% working interest in the drilling of the initial well to casing point in each of the initial three prospects.

The initial well East Arbuckle Prospect: Jordan No. 1 was spud on March 17, 2004 and surface casing has been set at 40 feet. Several drill stem tests will be performed to test certain coal seams and favourable looking zones while in route to the target Mississippian / Arbuckle formation at 2,500 +/- feet. We will pay our proportionate share of 50% of drilling costs plus the 25% of Escopeta's carried working interest in the well.

Cook-inlet Basin Prospects, Alaska

We have also signed a letter of intent with B.B.I. Inc. / Escopeta Oil Company, L.L.C. ("B.B.I") dated October 22, 2003 to acquire the oil and gas leases for the 17,122 acre Alexander Creek Prospects located onshore within the upper Cook-inlet Basin, Alaska, which lie along the western margin of the Sustina River drainage. This property is just southeast of the Castle Mountain Fault. It is located six to 10 miles north of the Stump Lake gas field, and 6 to 9 miles east of the Lewis River gas field, both of which have established prolific gas production. We will pay approximately $1.3 million to acquire a 100% working interest in the leases, and we must pay the entire purchase price prior to commencement of drilling. Our agreement will provide B.B.I. the opportunity to back into a 25% working interest in the leases after payout of the first well.

Our intention is to drill the initial test well to a minimum of 10,000 feet, to test the Sterling, Beluga and Tyonek formations, scheduled to be drilled in early 2005. Our preliminary reviews of geological and geophysical studies

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indicate a reasonable possibility of commercial quantities of recoverable gas reserves for this prospect. The purchase will be conditional on due diligence, agreed upon sale documentation and financing.

In regards to our foregoing interests, our "working interest" consists of our share of gross production, revenues, burdens, field operating costs and gathering and processing fees before deduction of royalties. Our "net revenue interest" means our working interest less the royalties that are payable.

Continuing Identification and Evaluation of Oil and Gas Opportunities to Build an Inventory of Prospects and Asset Base

In addition to the above described exploration and development activities of our existing prospects in Texas, Kansas/Oklahoma and Alaska, we proactively seek out and perform technical and commercial evaluations of natural gas and oil opportunities that may be of strategic and/or synergistic interest to us. These opportunities may involve the building of our inventory of exploration and development prospects, the continuing development of a solid producing reserve base, and/or midstream / delivery infrastructure development and investments that will complement our existing activities. These evaluations and opportunity assessments are all made based on rigorous technical and economic criteria, and are made with consideration of prudent constraints on our equity and debt financing capacity and capabilities.

Our British Columbia Property

We own nine mineral claims in British Columbia, Canada. Title to the property is not registered in our name but is registered in the name of Mr. Blake Becher, a free miner and prospector in British Columbia who conveyed title to the claims to us by an unrecorded deed, dated December 13, 2002. Each of the nine claims encompasses 62.5 acres and the claims are more particularly described by the tenure numbers 398933 to 398941 inclusive. The claims are located approximately 82 miles west of Nanaimo, British Columbia, Canada, and approximately 10 miles north from the town of Ucluelet on Vancouver Island. The property is within the Alberni Mining Division.

United States Natural Gas and Oil Industry

The natural gas and oil industry in the United States is highly competitive, experiences significant commodity price volatility and is subject to substantial local, state and federal regulations concerning matters such as permitting, drilling and environmental requirements. We are primarily targeting the exploration, exploitation, development and production of natural gas reserves to meet the U.S. consumers' robust appetite for energy.

Several natural gas forecasts project continuing declining levels of domestic natural gas production and reserves in the lower 48 states while demand for natural gas is forecast to continue to grow. The growth in demand is heavily driven by increasing levels of gas-fired power generation to meet conversion of existing power generation facilities to a cleaner burning fuel source, and by new generation facility construction that are primarily natural gas-fired electric generation units.

Studies indicate that insufficient natural gas reserve development in the U.S., combined with steep production decline rates of existing proved developed reserves have created natural gas consumers and market concerns over the adequacy and reliability of natural gas in the U.S., particularly during peak consumption periods. The United States Department of Energy, Energy Information Agency, projects that substantial increases in the imports of natural gas into the U.S. primarily in the form of liquefied natural gas ("LNG") will be required to supplement the growing gap between demand for natural gas and available domestic supplies to meet that demand within the U.S.

Although there is a role for LNG to supplement domestic gas supply shortfalls in the U.S., due to commercial and operational conditions and characteristics of LNG, we do not believe that LNG imports can adequately offset and compensate for declining natural gas reserve levels in the U.S. Additionally, we do not believe that imports can replace the compelling need to continue natural gas domestic reserve exploration and development. This area of reserve exploration and development is our principal strategic target area.

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The U.S. oil industry is heavily dominated by major integrated oil and gas companies and numerous independent oil companies. Many of these companies possess and employ financial and human resources substantially greater than ours. Prices for oil production and production levels are subject to wide fluctuations and depend on numerous factors beyond a companies control including economic conditions, foreign imports and political condition in the U.S. and in oil producing rich countries, actions of OPEC, and governmental and legislative regulation and policies.

Competition

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Our budget anticipates our acquisition of additional acreage. This acreage may not become available or if it is available for leasing, that we may not be successful in acquiring the leases. There are other competitors that have operations in same areas and the presence of these competitors could adversely affect our ability to acquire additional leases.

Market Prices of Oil and Natural Gas

The market prices of oil and natural gas have historically fluctuated widely and are affected by numerous global factors beyond our control. A decline in such market prices may have an adverse effect on revenues we receive from the sale of oil and gas. A decline in prices will also reduce our exploration efforts and make it more difficult to raise capital. Decreases in natural gas and oil prices could have an adverse effect on the carrying value of our proved reserves and our revenues, profitability and cash flow.

As we build our sustained commodity production levels, we will evaluate and anticipate that we may use various over-the-counter and publicly traded derivative instruments to hedge a portion of our exposure to price fluctuations.

Government Regulations and Supervision

Our oil and gas operations are subject to various United States federal, state and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial and local laws and regulations relating primarily to the protection of human health and the environment. To date, expenditures related to complying with these laws, and for remediation of existing environmental contamination, have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

Product Research and Development

Our business plan is focused on the long-term exploration and development of our recently acquired oil and gas interests, as well as the exploration and development of our mineral properties. We do not anticipate that we will expend any significant funds on product research over the twelve months.

Employees

Currently there are no full time or part-time employees of our company (other than our directors and officers who, at present, have not signed employment or consulting agreements with us). We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.

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However, if we are successful in our initial and any subsequent drilling programs we may retain additional employees as it becomes economically warranted to do so.

Purchase or Sale of Equipment

We do not intend to purchase any significant equipment over the twelve months.

RISK FACTORS

Much of the information included in this current report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".

Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

We have limited operating history and losses that we expect to continue into the future.

We have not yet realized any revenues. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception is $218,389. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the following:

    • Our ability to locate a profitable resource property;
    • Our ability to generate revenues; and
    • Our ability to reduce exploration costs.

Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with exploration of our oil and gas interests. We may not be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.

If we do not raise enough money for exploration, we will have to delay exploration or go out of business.

We are in the very early exploration stage and we need additional financing before we are able to continue our exploration efforts. We are working to arrange financing, but we may be unable to raise financing. If we are not able to raise any financing we will have to delay our exploration or go out of business.

We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations.

Competition and unforeseen limited sources of supplies and equipment in the energy industry could result in occasional spot shortages of supplies or the lack of availability of required equipment, such as drilling rigs.

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We do not have enough money to complete the explorations proposed in properties and consequently may have to cease or suspend our operations unless we are able to raise additional financing.

We do not have enough money to commence first stages of the exploration and development of all of our prospects. We will require additional funding to complete subsequent phases of exploration and development. Because we are conducting exploration on undeveloped projects, we do not know how much we will have to spend to find out if there is oil and gas on our property. It could cost as little as $1,000,000 and as much as $10,000,000 to find out. If it turns out that we are not able to raise enough money to complete our exploration program, we will try to raise additional funds from a public offering, a private placement or loans. At the present time, we are pursuing initiatives to raise additional money, but there are no assurances that we would be able to raise additional money in the future. If we need additional money and cannot raise it, we will have to suspend or cease operations.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have no history of revenues from operations and hold primarily interests in undeveloped reserves and exploration prospects. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and must be considered in the development stage. Our success is significantly dependent on a successful acquisition, drilling, completion and production program. Our company's operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of our development. We are engaged in the business of exploring and, if warranted, developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.

As our properties are in the exploration and development stage there can be no assurance that we will establish commercial discoveries on our properties.

Exploration for technically and commercially recoverable reserves of oil and gas is subject to a number of risk factors. Few properties that are explored are ultimately developed into producing oil and/or gas wells. Even if reserves located are technically recoverable, they may not be commercially recoverable in the existing market.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other

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deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Our budget anticipates our acquisition of additional acreage. This acreage may not become available or if it is available for leasing, that we may not be successful in acquiring the leases. There are other competitors that have operations in same areas and the presence of these competitors could adversely affect our ability to acquire additional leases.

The marketability of natural resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which it may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.

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We believe that our operations comply, in all material respects, with all applicable environmental regulations.

Our operating partners maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.

We do not own any resource properties. We hold working interests in various oil and gas leases, and have entered into a letter of intent to acquire certain working interests. We own 9 mineral claims

We do not own any resource properties. We own nine mineral claims in British Columbia. Title to our mineral claims is not registered in our name but is registered in the name of Mr. Blake Becher, a free miner and prospector in British Columbia who conveyed title to the claims to us by an unrecorded deed, dated December 13, 2002. We hold working interests in oil and gas leases in Texas, Kansas and Oklahoma, and have entered into a letter of intent with respect to certain leases in Alaska. The letter of intent may not become a formal agreement unless we can finalize the terms with the parties. Even if the letter of intent is finalized into a formal agreement, we will have to pay costs associated with the agreement and we may have insufficient funds. We have working interests in various oil and gas leases. Unless we are able to pay our proportionate share of costs associated with our working interests, our interest in the leases may be diluted or we may lose our interests entirely.

Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.

Our shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket. In particular, prior to selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that: contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the broker/dealers' duties to the customer and of the rights and remedies available to the customer with respect to violations of such duties or other requirements of Federal securities laws; contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask prices; contains the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i); defines significant terms used in the disclosure document or in the conduct of trading in penny stocks; and contains such other information, and is in such form (including language, type size, and format), as the SEC requires by rule or regulation. Further, for sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement before making a sale to you. Because of the imposition of the foregoing

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additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the price of the shares to decline.

Our officers and directors own a total of 12,200,000 shares of our company. They may sell some of their shares in the future, which could cause the price of our common stock to fall, which will reduce the value of your shares.

Our officers and directors own a total of 12,200,000 shares of stock, which is 31.64% of the issued and outstanding number of shares. Subject to all holding periods under applicable securities laws, they will likely sell a portion or all of their stock in the future. If they do sell their stock into the market, the sales may cause the market price of the stock to drop.

Trading of our stock may be restricted by the SEC's Penny Stock Regulations which may limit a stockholder's ability to buy and sell our stock.

The U.S. Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock.

We do not expect to declare or pay any dividends.

We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

Anti-Takeover Provisions

We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

Our By-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or

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administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.

Item 2. Description of Property.

From our inception to October, 2003, our principal offices were located at 1208 - 1030 West Georgia Street, Vancouver, British Columbia V6E 4Y3 and our telephone number was 604.662.7900. We leased that office space from Alpha Beta Developments Inc. on a month to month basis and our monthly rental was $500 Canadian dollars. As of October 2003, we moved our principal offices to Suite 100, 8900 Germantown Road, Olive Branch, Mississippi 38654. Our telephone number is 662-893-7376. We lease our office space from McDowell & Son on a month to month basis and pay our proportionate share of monthly rent totaling $1,600. During the fiscal year ending December 31, 2003, we paid $3,200 for rent.

The properties in which we hold our interests have one productive natural gas well at the date hereof.

Our Texas Property

As of December 31, 2003 we hold a 10% working interest in the T.E. Lane Gas Unit, and working interests in ten leases covering approximately 526.1 gross acres in Freestone County, Texas. The leases are more particularly described as Texas State lease numbers FRTX0001-00 to 01; FRTX0003-00 to 04; and FRTX0004-00 to 01.

Our Kansas Properties

We hold a 50% working interest in leases covering approximately 3,000 acres in the Chatauqua and Elk Counties of Kansas. The property is more particularly described by the following townships and ranges:

T31S; R9E (All) - T32S; R8E (Sec.'s 1-2-3-10-11-12-13-14-15-22-23-24-34-35 & 36) - T32S; R9E (All) - T32S; R10E (All) - T33S; R8E (Sec.'s 1-2-3-10-11-12-13-14-15-22-23-24-25-26-27-34-35 & 36) - T33S; R9E (All) - T34S; R8E (Sec.'s 1-2-3-4-9-10-11-12-13-14-15-16-21-22-23-24-25-26-27-28-33-34-35 & 36) - T34S; R9E (All) - T35S; R8E (Sec.'s 1-2-3-10-11-12-13-14 & 15) and T35S; R9E (Sec.'s 1 through 13 inclusive).

Our Alaska Property

Pursuant to a letter of intent with B.B.I. / Escopeta, we hold a 100% working interest (75% net revenue interest) in leases covering approximately 17,122 net acres in the Cook Inlet Basin in Alaska, comprising the North Alexander Project. Our current agreement to acquire the Alaska property working interest provides that the seller will have the right to back into a 25% working interest in the leases after payout of the first well. The leases are more particularly described as:

Alaska State lease numbers ADL #8212 consisting of 5689 net acres; ADL #38213 consisting of 5670 net acres and ADL #389935 consisting of 5673 net acres, collectively totalling 17,122 net acres.

Our British Columbia Property

We own nine mineral claims in British Columbia, Canada. Title to the property is not registered in our name but is registered in the name of Mr. Blake Becher, a free miner and prospector in British Columbia who conveyed title to the claims to us by an unrecorded deed, dated December 13, 2002. Each of the nine claims encompasses 62.5 acres and the claims are more particularly described by the tenure numbers 398933 to 398941 inclusive. The claims are located approximately 82 miles west of Nanaimo, British Columbia, Canada, and approximately 10 miles north from the town of Ucluelet on Vancouver Island. The property is within the Alberni Mining Division.

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Item 3. Legal Proceedings.

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.

Item 4. Submissions of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of our security holders either through solicitation of proxies or otherwise in the fourth quarter of the fiscal year ended December 31, 2003.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

On January 13, 2003, our common stock received approval for quotation on the National Association of Securities Dealers Inc.'s Over-the-Counter Bulletin Board under the name "Altus Explorations, Inc." and under the symbol "ATUX". The following table reflects the high and low bid information for our common stock for each fiscal quarter during the fiscal years ended December 31, 2002 and 2003. The bid information was obtained from Yahoo! Finance and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

Quarter Ended (1)

High (2)

Low (2)

March 31, 2003

0.01

0.01

June 30, 2003

0.02

0.02

September 30, 2003

0.02

0.02

December 31, 2003

2.00

0.00

(1) Our common stock received approval for quotation on January 13, 2003. The first trade occurred December 10, 2003.

(2) On November 6, 2003, we affected an 8 for 1 forward split of our common stock, as a result all stock prices have been adjusted on a post-split basis.

On March 12, 2004, the closing price for the common stock as reported by the quotation service operated by the OTC Bulletin Board was $1.03.

As of March 12, 2004, there were 48 holders of record of our common stock. As of such date, 38,553,600 common shares were issued and outstanding.

Our common shares are issued in registered form. The Nevada Agency and Trust Company, 50 Liberty Street, Suite 880, Reno, Nevada 89501 (Telephone: 775.322.0626; Facsimile: 775.322.5623 is the registrar and transfer agent for our common shares. We have no other exchangeable securities.

Dividend Policy

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

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Recent Sales of Unregistered Securities

On October 28, 2003, we issued an aggregate of 125,000 (pre 8:1 and 4:1 forward stock splits) units at a deemed price of $8.00 per unit to a private investor. Each unit consist of a one common share and a non-transferable share purchase warrant. Each warrant will entitle the holder to purchase an additional share in our capital at $12.00 per common share for a period one year from the date of closing. The transaction was private in nature, and the shares were issued in reliance upon Regulation S and/or Rule 506 promulgated under the Securities Act of 1933.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Overview

You should read the following discussion of our financial condition and results of operations in conjunction with reading the consolidated audited financial statements and notes attached thereto that are included elsewhere in this filing. The referenced financial statements included in this filing are prepared in accordance with accounting principles generally accepted in the United States. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.

Since inception in November 2001 through mid-year 2003, we engaged primarily in the acquisition of mineral claims located in the Province of British Columbia, Canada. As a result of these efforts we currently hold nine mineral claims that encompass 562.5 acres in British Columbia. In the aggregate, these mineral claims are not considered significant to our financial position as of the end of year 2003.

During 2003 we made the decision to re-direct our efforts and concentrate on oil and gas exploration and development activities to the United States. The exploration and development of oil and gas interests located in the lower 48 states and Alaska continues to be our strategic area of attention, and the area where we intend to invest our financial resources.

During 2003 we acquired three principal oil and gas exploration and development reserve prospects, and during 2004 our efforts are directed toward the further development of these three prospects.

Freestone County, Texas

In October 2003 we acquired a 10% non-operating working interest in the T.E. Lane No. 1 well located in Freestone County, Texas from CodeAmerica Investments, a company owned by our President, Milton Cox. The T.E. Lane No. 1 gas well commenced production in early 2004, and is currently producing approximately 250 Mcf per day. Our consulting reservoir engineer estimates proved developed recoverable natural gas reserves for the Lane No. 1 ell of about 1.3 Bcf.

In March 2004 we increased our 10% working interest in the T.E. Lane No. 1 proved development reserves to 20%, and our working interest in the offsetting acreage proved undeveloped natural gas reserves to 100%. These 2004 acquisitions were made through the issuance of Company common stock to CodeAmerica Investments, the prior working interest holder of the proved reserves. The interest acquisitions principally serve to increase our proved undeveloped reserve base by approximately 5.2 Bcf at a cost of about $0.80 per Mcf. We estimate the total drilling and completion costs for four wells in the acquired offsetting acerage in gross will be approximately $7.2 million for us to reach and develop the target lower Bossier formation.

Southeast Kansas and Northeastern Oklahoma

In November 2003, we entered into an agreement with Escopeta Oil Company, LLC ("Escopeta") to develop a portion of approximately 34 prospect areas within the Cherokee basin of Southeast Kansas and Northeastern Oklahoma. We hold a 50% working interest in the Kansas / Oklahoma prospect, and during 2004 we paid Escopeta $90,000 for our proportionate share of geological, lease acquisition and other costs. Our agreement provides that we will carry Escopeta's 25% working interest in the drilling of the initial three wells in the prospect area.

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The initial well, East Arbuckle: Jordan No. 1 was spud on March 17, 2004; we have set surface casing at 40 feet, and are in the process of testing favourable looking zones while in route to the target Mississippian / Arbuckle formation at approximately 2,500 feet.

Cook-inlet Basin Prospects, Alaska

In October 2003 we entered into a letter of intent with B.B.I. Inc./Escopeta Oil Company, LLC ("Escopeta") dated October 22, 2003 for Altus to acquire the oil and gas leases for the 17,122 acre Alexander Creek Prospects located onshore within the upper Cook-inlet Basin, Alaska, which lies along the western margin of the Sustina River drainage.

We are in the process of expanding the lease acreage and finalizing an agreement with Escopeta for the Alaska prospect.

Plan of Operations

Cash and Funding Requirements

We are proceeding with our initiatives to secure additional financing to fund the continuing drilling and development of our existing oil and gas prospects, and to further effectuate our strategy of:

    • Building an inventory of exploration / development prospects;
    • Developing a solid producing reserve base with sustainable production levels; and
    • Progressing other oil and gas investment opportunities that are strategic or synergistic to our current initiatives and operations.

Cash Requirements

During the year 2004 we plan to expend a total of approximately $4.6 million in connection with the drilling and continued development of our existing oil and gas interests in Texas, Kansas/Oklahoma and Alaska.

More specifically, with regard to the Freestone County, Texas reserves we plan to expand and further develop our proved reserves in the State of Texas during the year 2004 by:

  • The drilling of at least one 80 acre offset well to the T.E. Lane No. 1 gas unit. We expect to expend approximately $2.0 million gross to drill the first well to about 15,000 feet in the offsetting acreage, and to perform to tests of favourable looking zones while in route to the target lower Bossier formation.
  • Spudding a second well in the offsetting acreage by year end.
  • Increasing our working interest in the T.E. Lane No. 1 gas unit and our interest in the offsetting acreage proved undeveloped reserves.

We plan to expend the following amounts in respect the Southeast Kansas and Northeastern Oklahoma Cherokee basin prospect areas during 2004:

  • We intend to expend $450,000 gross to drill and complete three test wells in the initial prospects (gross of $150,000 per well). Altus' proportional share of the drilling and completion costs for the initial three wells will be $337,500.
  • Subject to the three test wells being successful, we will expend funds on the continued development of the prospects at a projected rate of 2 wells per month at a cost of $60,000 each which is $120,000 per month starting in the July or August 2004 time frame. We would expect to expend approximately $650,000 gross for the remainder of the year 2004, and our proportional cost to drill these additional wells would be in the range of $325,000 for the remainder of the year.

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With regard to the Cook-inlet Basin Prospects in Alaska, we expect to expend about $1.4 million during the year 2004 comprised of the following:

  • Upon final execution of the Lease Purchase / Sale Agreement and amount of $100,000 plus an additional amount of $50,000;
  • During the year 2004, we expect to expend approximately $125,000 for geological, engineering and permitting associated with the prospect; and
  • On or before December 1, 2004 and prior to Escopeta assignment the Assets under the Lease Purchase / Sale Agreement to Altus, we must pay the balance of the purchase price of $1,134,150.

During the calendar year 2004, we estimate that we will expend approximately $300,000 on general and administrative expenses, and will have working capital requirements of $200,000.

Based on our current plan of operations, we have sufficient funds for the first 6 months of year 2004, after which time we will require additional funds to continue our exploration and development activities. We are currently working to secure financing to fund our requirements for the year 2004 through private placement(s). There are no assurances, however, that we will be able to raise additional money to fund our needs in the future.

In the event that we are unable to raise additional financing, and fail to generate significant operating cash flow, we will be required to modify our reserve drilling and development plan accordingly. We may raise funds through equity financing, debt financing, or other sources, which could result in dilution in the equity ownership of the Company's shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable.

Over the next twelve months we intend to use all available funds to continue the exploration and development of our oil and gas interests, and our estimated funding needs for the year 2004 are summarized below:

Estimated Funding Required During the Twelve Month Period Ending December 31, 2004

General and Administrative

$300,000

 

 

 

Operations (Drilling and Development Costs)

 

 

Southeast Kansas and Northeastern Oklahoma Prospects

$663,000

 

Cook-inlet Basin Prospects, Alaska

$1,410,000

 

Freestone County, Proved Undeveloped Initial Offset Well

$2,000,000

 

 

$4,073,000

 

 

 

Working Capital

$200,000

Total

$4,573,000

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Financial Condition, Liquidity and Capital Resources

At December 31, 2003, we had working capital of $531,163 comprised of $31,163 in cash and $500,000 subscription receivable associated with the October 2003 private placement, for which the funds were received in early February 2004. At December 31, 2002 we had working capital of $29,719.

In addition to the above referenced cash and common stock subscription receivable, at December 31, 2003 we have investments in primarily proven and unproven natural gas reserves totalling $360,650. At December 31, 2002 our total assets were $34,970 comprised entirely of cash.

As of December 31, 2003, our total liabilities were $44,425 which were substantially related to amounts due vendors and service provider incurred in connection with our operating and development activities. This compares to our total liabilities of $5,251 at December 31, 2002.

We have had no revenues from inception. The continuation of our natural gas and oil exploration, drilling and development activities requires substantial capital resources, and we are currently working to obtain sufficient additional financing to fully effect and implement our reserve exploration and development initiatives. If we are unsuccessful in obtaining financing and/or fail to achieve and/or sustain a profitable level of operations, we may be unable to fully implement our business plans. Future financing through equity, debt or other sources could result in the dilution of Company equity, increase our liabilities, and/or restrict the future availability and use of cash resources.

Additionally, there can be no assurance that adequate financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to execute our business plans, and will be required to scale back the pace and magnitude of our oil and gas prospects drilling and development initiatives. We also may not be able to meet our vendor and service provider obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

We have no long-term debt, and the present time do not regard long-term borrowing as the optimal and most effective source of financing for the Company at its current stage of development.

Results of Operations.

For the year ending December 31, 2003 we posted losses of $182,128 as compared to losses of $34,247 for the year ended December 31, 2002. Inception through December 31, 2003 losses total $218,389. General and administrative expenses are the principal component of our losses since inception.

Product Research and Development

Our business plan is focused on the exploration and development of our oil and gas interests.

Purchase of Significant Equipment

We do not expect to purchase any significant equipment over the twelve months ending December 31, 2004.

Employees

Currently the Company has no full time or part-time employees. We utilize short term contractors as necessary. Our directors and officers provide services on a month to month basis pursuant to oral arrangements, but have not signed employment or consulting agreements with us. We do not expect any material changes in the number of employees over the next 12 month period. We may enter formal written service agreements with our directors and officers during the year 2004. We expect to continue to outsource contract employment as needed. Depending on the level of success of our exploration and development initiatives, we may retain full or part-time employees in the future.

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Going Concern

Due to our being a development stage company, the lack of revenues and the substantial capital funding requirements necessary to continue our drilling and development activities, our independent auditor's opinion on the consolidated financial statements (that are included elsewhere in this filing) contains a going concern qualifier. The qualifier explanatory paragraph contained in their audit opinion should be read in connection with the reading of management's discussion of the Company's financial condition, liquidity and capital resources.

While we intend to raise additional financing to fund our capital expenditure and working capital needs during 2004 through private placements, public offerings and/or bank financing and while we have been in discussions with specific investors; no definitive written agreements have yet been reached.

Recently Issued Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, and subsequently revised the Interpretation in December 2003 (FIN 46R). This Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities, which have certain characteristics. As revised, FIN 46R is now generally effective for financial statements for interim or annual periods ending on or after March 15, 2004. We have not identified any variable interest entities. In the event a variable interest entity is identified, we do not expect the requirements of FIN 46R to have a material impact on our consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. An issuer is required to classify a financial instrument that is within the scope of this statement as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted the standard on July 1, 2003, and the adoption did not have a material impact on our consolidated financial statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our balance sheet, the statements of operations and stockholders' equity, and the cash flows statements included elsewhere in this filing.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.

Environmental Requirements

At the report date environmental requirements related to the mineral, and oil and gas leases held by the Company are unknown and therefore any estimate of any future cost cannot be made.

Oil and Gas Properties

Altus follows the full cost method of accounting for its oil and gas properties. Under this method, all productive and non-productive exploration and development costs incurred for the purpose of finding oil and gas reserves are capitalized. Such capitalized costs include lease acquisition, geological and geophysical work, delay rentals,

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drilling, completing and equipping oil and gas wells, together with internal costs directly attributable to property acquisition, exploration and development activities.

The costs of the Company's oil and gas properties, including the estimated future costs to develop proved reserves, are depreciated using a composite units-of-production rate based on estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, then the amount of the impairment is added to the capitalized costs to be amortized. Net capitalized costs are limited to a capitalization ceiling, calculated on a quarterly basis as the aggregate of the present value, discounted at 10%, of estimated future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties, less related income tax effects.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved oil and gas reserves.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid financial instruments with purchased maturities of three months or less.

Revenue Recognition

Revenues from the sale of oil and gas production are recognized upon passage of title, and are presented net of royalty burdens in our statements of operation. When sold production differs from Altus' entitled share of production, a producer imbalance occurs between the interest owners. At December 31, 2003, Altus did not have any producer or transportation imbalances.

Impairment of Long-Lived Assets.

Altus reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. Altus assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.

Impairment of Assets

Management reviews assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management assesses impairment by comparing the carrying amount to individual cash flows. If deemed impaired, measurement and recording of impairment loss is based on the fair value of the assets.

Stock-Based Compensation

Altus accounts for stock-based compensation for employees and non-employee members of our board of directors in accordance with Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion No. 25, compensation expense is based on the intrinsic value on the measurement date, calculated as the difference between the fair value of our common stock and the relevant exercise price. We account for stock-based compensation for non-employees, who are not members of our board of directors, at fair value using a Black-Scholes option-pricing model in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" and other applicable accounting principles. There were no options granted to employees during 2003 and 2002.

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Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Basic and Diluted Loss Per Share

Basic and diluted earnings per share. Basic earnings per share equals net earnings divided by weighted average shares outstanding during the year. Diluted earnings per share include the impact of common stock equivalents using the treasury stock method when the effect is dilutive. There were no dilutive securities during the periods presented.

Item 7. Financial Statements.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

The following consolidated financial statements are filed as part of this annual report:

Independent Auditor's Report, dated March 22, 2004.

Consolidated Balance Sheets as at December 31, 2003 and 2002

Consolidated Statements of Operations for the year ended December 31, 2003, December 31, 2002 and for the period from November 2, 2001 (incorporation) to December 31, 2003

Consolidated Statements of Changes in Stockholders' Equity for the year ended December 31, 2003, December 31, 2002 and for the period from November 2, 2001 (incorporation) to December 31, 2003

Consolidated Statements of Cash Flows for the year ended December 31, 2003, December 31, 2002 and for the period from November 2, 2001 (incorporation) to December 31, 2003

Notes to the Consolidated Financial Statements

 

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Altus Explorations, Inc.
(A Development Stage Company)
Olive Brach, Mississippi

We have audited the accompanying balance sheet of Altus Explorations, Inc. as of December 31, 2003, and the related statements of operations, stockholders' equity, and cash flows for the two years then ended and for the period from November 2, 2001 (Inception) through December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Altus Explorations, Inc. as of December 31, 2003, and the results of its operations and its cash flows for the two years then ended and for the period from November 2, 2001 (Inception) through December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the financial statements, Altus' recurring losses from operations and the need to raise additional financing in order to fund its oil and gas exploration and development activity and satisfy vendors and other creditor obligations, raise substantial doubt about its ability to continue as a going concern. (Management's plans as to these matters are also described in Note 2.) The 2003 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com

March 22, 2004, except for Note 10
dated March 31, 2004

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ALTUS EXPLORATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 2003

 

ASSETS

 

 

 

Current assets

 

Cash

$ 31,163

 

 

Property and equipment, net

3,203

Oil and gas properties, full cost method

 

Unproved properties, not subject to amortization

110,650

Proved properties, net

250,000

 

$ 395,016

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

Accounts payable

$ 28,270

Accounts payable - related party

12,905

Note payable - shareholder

3,250

Total current liabilities

44,425

 

 

Commitments

 

 

 

STOCKHOLDERS' EQUITY:

 

Common stock, $.001 par value, 800,000,000 shares
authorized, 38,553,600 shares issued and outstanding


38,554

Additional paid in capital

1,030,426

Subscription receivable

(500,000)

Deficit accumulated during the development stage

(218,389 )

Total Stockholders' Equity

350,591

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 395,016

See accompanying summary of accounting policies
and notes to financial statements

 

-24-

  ALTUS EXPLORATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Years Ended December 31, 2003 and 2002
and Period from November 2, 2001 (Inception) through December 31, 2003

 

 


Years Ended
December 31,

 

Inception through December 31,

2003

2002

2003

 

 

 

 

 

 

General and administrative

$ 181,877

 

$ 33,846

 

$ 217,737

 

 

 

 

 

 

Interest expense

251

 

401

 

652

 

 

 

 

 

 

Net loss

$ (182,128 )

 

$ (34,247 )

 

$ (218,389 )

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

Basic and diluted

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

Weighted average shares
outstanding:

 

 

 

 

 

Basic and diluted

137,762,367

 

167,489,728

 

 

See accompanying summary of accounting policies
and notes to financial statements

 

-25-

  ALTUS EXPLORATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Period From November 2, 2001 (Inception) through December 31, 2003

 

 




Common Stock

 



Additional paid in capital

 

Deficit accumulated during the development stage

 




Subscription
Receivable

 





Total

 

Shares

 

Amount

 

Issuance of common
stock to founders
for cash



160,000,000

 



$ 160,000

 



$ (155,000)

 



$ -

 



$ (3,000)

 



$ 2,000


Net loss


-

 


-

 


-

 


(2,014 )

 


-

 


(2,014 )


Balance,
December 31, 2001



160,000,000

 



160,000

 



(155,000)

 



(2,014)

 



(3,000)

 



(14)


Issuance of common
stock for cash



20,153,600

 



20,154

 



42,826

 



-

 



-

 



62,980


Expenses paid by
shareholder



-

 



-

 



1,000

 



-

 



-

 



1,000


Net loss


-

 


-

 


-

 


(34,247 )

 


-

 


(34,247 )


Balance,
December 31, 2002



180,153,600



180,154



(111,174)



(36,261)



(3,000)



29,719


Shares returned by officers



(145,600,000)



(145,600)



145,600



-



-



-


Proceeds from subscription receivable



-



-



-



-



3,000



3,000


Issuance of common stock for cash



4,000,000



4,000



996,000



-



(500,000)



500,000


Net loss


-


-


-


(182,128
)


-


(182,128
)

Balance,
December 31, 2003


38,553,600


$ 38,554


$1,030,426


$ (218,389 )


$ (500,000 )


$ 350,591

See accompanying summary of accounting policies
and notes to financial statements

-26-

ALTUS EXPLORATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2003 and 2002
and Period from November 2, 2001 (Inception) through December 31, 2003

 


Years Ended
December 31,

 

Inception
through
December 31,

 

2003

 

2002

 

2003

CASH FLOWS FROM OPERATING
ACTIVITIES

 

 

 

 

 

Net loss

$ (182,128)

 

$ (34,247)

 

$ (218,389)

Adjustments to reconcile net deficit to
cash used by operating activities:

 

 

 

 

 

Expenses paid by shareholder

-

 

1,000

 

1,000

Depreciation

1,573

 

-

 

1,573

Net change in:

 

 

 

 

 

Prepaid expenses

-

 

1,090

 

-

Accounts payable

25,180

 

-

 

25,180

Accounts payable - related party

12,905

 

-

 

12,905

Accrued expenses

(160 )

 

160

 

-

CASH FLOWS USED IN OPERATING
ACTIVITIES


(142,630 )

 


(31,997 )

 


(174,641 )

 

 

 

 

 

 

CASH FLOWS FROM IN INVESTING
ACTIVITIES

 

 

 

 

 

Purchase of property and equipment

(4,776)

 

-

 

(4,776)

Investment in oil and gas properties

(360,650 )

-

(360,650 )

CASH FLOWS USED IN INVESTING
ACTIVITIES


(365,426 )

 


-

 


(365,426 )

 

 

 

 

 

 

CASH FLOWS FROM FINANCING
ACTIVITIES

 

 

 

 

 

Proceed from the sale of common stock

500,000

 

62,980

 

564,981

Proceed from subscription receivable

3,000

 

-

 

3,000

Payment on note payable - shareholder

(2,001)

 

-

 

(2,001)

Proceeds from note payable - shareholder

3,250

 

2,001

 

5,250

CASH FLOWS FROM FINANCING
ACTIVITIES


504,249

 


64,981

 


571,230

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

(3,807)

 

32,984

 

31,163

Cash, beginning of period

34,970

 

1,986

 

-

Cash, end of period

$ 31,163

 

$ 34,970

 

$ 31,163

See accompanying summary of accounting policies
and notes to financial statements

-27-

ALTUS EXPLORATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

Nature of business. Altus Explorations, Inc. ("Altus") was incorporated in Nevada on November 2, 2001, to engage in the acquisition and exploration of mining properties. In August 2003, Altus decided to focus their efforts on the oil and gas resource exploration and development sector.

Environmental Requirements

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid financial instruments with purchased maturities of three months or less.

Property and Equipment.

Property and equipment is valued at cost. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are three years for computers and seven years for furniture.

Impairment of Long-Lived Assets.

Altus reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. Altus assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.

-28-

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Basic and Diluted Loss Per Share

Basic and diluted earnings per share. Basic earnings per share equals net earnings divided by weighted average shares outstanding during the year. Diluted earnings per share include the impact of common stock equivalents using the treasury stock method when the effect is dilutive. There were no dilutive securities during the periods presented.

Oil and Gas Properties

Altus follows the full cost method of accounting for its oil and gas properties. Under this method, all productive and nonproductive exploration and development costs incurred for the purpose of finding oil and gas reserves are capitalized. Such capitalized costs include lease acquisition, geological and geophysical work, delay rentals, drilling, completing and equipping oil and gas wells, together with internal costs directly attributable to property acquisition, exploration and development activities.

The costs of the Company's oil and gas properties, including the estimated future costs to develop proved reserves, are depreciated using a composite units-of-production rate based on estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, then the amount of the impairment is added to the capitalized costs to be amortized. Net capitalized costs are limited to a capitalization ceiling, calculated on a quarterly basis as the aggregate of the present value, discounted at 10%, of estimated future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties, less related income tax effects.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved oil and gas reserves.

In July 2003, an issue was brought before the Financial Accounting Standards Board (FASB) regarding whether or not contract-based oil and gas mineral rights held by lease or contract ("mineral rights") should be recorded or disclosed as intangible assets. The issue presents a view that these mineral rights are intangible assets as defined in Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and, therefore, should be classified separately on the balance sheet as intangible assets. SFAS No. 141 and SFAS No. 142, "Goodwill and Other Intangible Assets," became effective for transactions subsequent to June 30, 2001, with the disclosure requirements of SFAS No. 142 required as of January 1, 2002.

-29-

SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method and that intangible assets be disaggregated and reported separately from goodwill. SFAS No. 142 established new accounting guidelines for both finite lived intangible assets and indefinite lived intangible assets. Under the statement, intangible assets should be separately reported on the face of the balance sheet and accompanied by disclosure in the notes to financial statements. SFAS No. 142 does not apply to accounting utilized by the oil and gas industry as prescribed by SFAS No. 19, and is silent about whether or not its disclosure provisions apply to oil and gas companies. The Emerging Issues Task Force (EITF) has added the treatment of oil and gas mineral rights to an upcoming agenda, which may result in a change in how Altus classifies these assets.

Should such a change be required, the amounts related to business combinations and major asset purchases that would be classified as "intangible undeveloped mineral interest" are immaterial as of December 31, 2003. The amounts related to business combinations and major asset purchases that would be classified as "intangible developed mineral interest" are also immaterial as of December 31, 2003.

Revenue Recognition

Revenues from the sale of oil and gas production are recognized upon passage of title, net of royalty interests. When sold production differs from Altus' entitled share of production, a producer imbalance occurs between the interest owners. Should a situation ever arise wherein Altus' imbalance due other interest owners exceeds its remaining share of reserves for a given property, Altus would record a liability for such. At December 31, 2003, Altus had no producer or transportation imbalances.

Impairment of Assets

Management reviews assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management assesses impairment by comparing the carrying amount to individual cash flows. If deemed impaired, measurement and recording of an impairment loss is based on the fair value of the assets.

Stock-Based Compensation

Altus accounts for stock-based compensation for employees and non-employee members of our board of directors in accordance with Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion No. 25, compensation expense is based on the intrinsic value on the measurement date, calculated as the difference between the fair value of our common stock and the relevant exercise price. We account for stock-based compensation for non-employees, who are not members of our board of directors, at fair value using a Black-Scholes option-pricing model in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" and other applicable accounting principles. There were no options granted to employees during 2003 and 2002.

-30-

Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, and subsequently revised the Interpretation in December 2003 (FIN 46R). This Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities, which have certain characteristics. As revised, FIN 46R is now generally effective for financial statements for interim or annual periods ending on or after March 15, 2004. We have not identified any variable interest entities. In the event a variable interest entity is identified, we do not expect the requirements of FIN 46R to have a material impact on our consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. An issuer is required to classify a financial instrument that is within the scope of this statement as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted the standard on July 1, 2003, and the adoption did not have a material impact on our consolidated financial statements.

NOTE 2 - GOING CONCERN

Altus' financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Altus has incurred net losses of $182,128 and $36,261 for the years ended December 31, 2003 and 2002. This condition raises substantial doubt about Altus' ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

Altus is working to secure additional financing to fund its oil and gas exploration and development activities and to meet its obligations and working capital requirements over the next twelve months.

There are no assurances that Altus will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support Altus' working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, Altus will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to Altus. If adequate working capital is not available Altus may be required to curtail its operations.

NOTE 3 - PROPERTY

Property consisted of the following as of December 31, 2003:

-31-

Computers and furniture

3-5 years

$ 4,776

Less: accumulated depreciation

 

(1,573 )

Net book value

 

$ 3,203

Depreciation expense totaled $1,573 for 2003.

NOTE 4 - INCOME TAXES

For the year ended December 31, 2003 and 2002, Altus has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $218,000 at December 31, 2003, and will expire in the years 2021 through 2023.

Deferred income taxes consist of the following at December 31, 2003:

 

 

Long-term:

 

Deferred tax assets

$ 74,000

Valuation allowance

(74,000 )

 

$ -

NOTE 5 - RELATED PARTY TRANSACTIONS

Altus had outstanding loans due to shareholders of $3,250 and $2,000 at December 31, 2003 and 2002, respectively.

Altus has month-to-month service agreements with related parties. Currently, two directors each receive $6,000 per month and one officer receives $2,000 per month for services performed on behalf of Altus.

Oil and Gas Property Purchase

In October 2003, Altus acquired a 10% working interest in the T.E. Lane gas unit located in Freestone County, Texas from CodeAmerica Investments, L.L.C. ("CodeAmerica"), a company owned by the Director, CEO and President of Altus, for a price of $200,000. See Note 7 below.

Note 6 - Oil and Gas INVESTMENTS

Investments in oil and gas properties consist of the following:

 

 

 

December 31,
2003

 

Oil and gas properties:

 

 

Proved

 

$ 250,000

Unproved

 

110,650

 

 

360,650

Less: accumulated depreciation, depletion
and amortization

 


-

 

 

$ 360,650

-32-

Costs incurred for unproved oil and gas properties were $110,650 in 2003.

NOTE 7 - ACQUISITIONS OF OIL AND GAS PROPERTIES

Freestone County, Texas

In October 2003, Altus acquired a 10% working interest in the T.E. Lane gas unit located in Freestone County, Texas from CodeAmerica Investments, L.L.C. ("CodeAmerica"), a company owned by the Director, CEO and President of Altus, for a price of $200,000. The acquisition of this initial 10% working interest provides Altus with the option to proportionately participate in additional wells within this unit. To participate in these wells, Altus will have to pay its proportionate share of costs associated with its working interest percentage. The T.E. Lane gas unit is subject to royalties of 28% of production revenue.

Southeast Kansas and Northeastern Oklahoma

In early November 2003, Altus entered into an agreement with Escopeta Oil Company, L.L.C. ("Escopeta"), a Texas based exploration company, to develop a portion of approximately 34 prospect areas within the Cherokee basin of Southeast Kansas and Northeastern Oklahoma. Leasing and permitting is currently underway on three prospect areas. Altus paid $37,500 for its proportionate ownership and use of Escopeta's geological library and $37,500 for Altus' 50% share of the lease acquisition costs for leases on the initial three prospects. The entire approximate 34 prospect areas consist of approximately 195,000 contiguous acres. Pursuant to its agreement with Escopeta, Altus will carry their 25% working interest in the drilling of the initial wells to casing point in each of the three prospects to be drilled. The prospects are subject to royalties totalling 25% of production.

NOTE 8 - COMMITMENTS

Altus entered into an oral month to month agreement with a related party for office space in Mississippi. Altus has agreed to pay $1,600 per month for the space.

NOTE 9 - COMMON STOCK AND WARRANTS

On February 10, 2004 Altus approved a 4 for 1 stock split. The financial statements and footnotes have both been adjusted to show this split as well as the after mentioned split. The articles of incorporation were also amended to bring the authorized shares from 200,000,000 to 800,000,000. All share and per share amounts have been restated to reflect the retroactive effect of the stock split.

On October 23, 2003 Altus approved an 8 for 1 stock split. The articles of incorporation were also amended to bring the authorized shares from 25,000,000 to 200,000,000.

On October 29, 2003 Altus signed an agreement to issue 4,000,000 shares of common stock along with 4,000,000 stock warrants for $1,000,000. $500,000 was paid up front while the

-33-

second $500,000 was paid in February 2004. The stock warrants have an exercise price of $0.375 and expire one year from the agreement date or October 29, 2004. As of December 31, 2003 none of the stock warrants were exercised.

On August 14, 2003, Altus' directors returned 145,600,000 in order to make the company more attractive for prospective financing or other transactions. The 145,600,000 common shares were cancelled. Our directors still hold an aggregate of 12,200,000 common shares, which now equals approximately 31.6% of our issued and outstanding shares.

In September 2002, Altus sold 20,153,600 shares of its common stock for total net proceeds of $62,980.

At inception, Altus issued 160,000,000 shares of stock to its two founding shareholders for cash.

NOTE 10 - SUBSEQUENT EVENT

Stock Option Plans

In January of 2004, our Board of Directors approved the "2004 Stock Option Plan." The Board of Directors reserved 5,483,040 shares of Altus' common stock to be issued in the form of incentive and/or non-qualified stock options for employees, directors and consultants to Altus. As of March 22, 2004 no options have been issued to employees, directors or consultants.

Oil and Gas Acquisition

On March 31, 2004, we entered into a Lease Purchase and Sale Agreement (the "Agreement") with CodeAmerica Investments, L.L.C. ("CodeAmerica") to purchase CodeAmerica's undivided working interests' in certain oil and gas leases located in Freestone County, Texas for approximately $4.2 million. In connection with the acquisition, the Company issued 4,040,726 common shares to CodeAmerica, oil and gas company owned by our President, Milton Cox.

Prior to the Agreement we held a 10% undivided working interest in the T.E. Lane gas unit proved developed reserves and in the offsetting acreage proved undeveloped reserves. With this acquisition, the Company has increased its undivided working interest in the T.E. Lane gas unit to 20%, and the Company's undivided interest in the offsetting acreage to 100%.

-34-

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED)

The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows.

Proved Developed and Undeveloped Gas Reserves, at year end (net):

 

 

For the Years Ended December 31,

 

 

2003
(Mcf)

 

2002
(Mcf)

Beginning of year

 

-

 

-

Purchases of minerals in place

 

130,000

 

-

Improved recovery

 

-

 

-

Production

 

-

 

-

Revision of previous estimates

 

-

 

-

 

 

 

 

 

End of Year

 

130,000

 

-

 

 

 

 

 

Proved Developed Reserves at End of Year

 

130,000

 

-

Standardized Measure of Discounted Future Net Cash Flows:

 

December 31,

 

2003

 

2002

Future cash inflows

$ 532,160

 

$ -

Future production and development costs

(156,555)

 

-

Future income taxes

-

 

-

Future net cash flows

-

 

-

10% annual discount for estimated
timing of cash flows


(63,438 )

 


-

 

 

 

 

Standardized Measure of Discounted Future Net Cash Flows


$ 312,167

 


$ -

Changes in Standardized Measure of Discounted Future Net Cash Flows:

 

For the Years Ended December 31,

 

2003

 

2002

Beginning of the year

$ -

 

$ -

Purchase of mineral in place

262,167

 

-

Extensions, discoveries and improved recovery, less related costs


-

 


-

Development costs incurred during the year

50,000

 

-

Sales of oil and gas produced, net of production costs


-

 


-

Accretion of discount

-

 

-

Net changes in prices and production costs

-

 

-

Net change in estimated future development costs

-

 

-

Revision of previous quantity estimates

-

 

-

Revision in estimated timing of cash flows

-

 

-

Net change in income taxes

-

 

-

 

 

 

 

End of the Year

$ 312,167

 

$ -

-35-

Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 8A. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by the annual report, being December 31, 2003, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's president and our company's chief financial officer. Based upon that evaluation, our company's president and our company's chief financial officer concluded that our company's disclosure controls and procedures are effective as at the end of the period covered by this report. There has been no significant changes in our company's internal controls or in other factors, which could significantly affect internal control subsequent to the date we carried out our evaluation.

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our president and secretary as appropriate, to allow timely decisions regarding required disclosure.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.

DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

As at March 12, 2004, our directors and executive officers, their ages, positions held, and duration of such, are as follows:

Name

Position Held with our Company

Age

Date First
Elected or Appointed

Milton Cox

Director, CEO and President

56

October 1, 2003

Steve Bajic

Secretary

33

January 21, 2004

Bassam Nastat

Director

35

November 22, 2003

Don Sytsma

Director, CFO and Treasurer

46

November 22, 2003

Andy Kim

Director

40

February 20, 2004

Business Experience

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

-36-

Milton Cox

Mr. Cox became a director, our CEO and President on October 1, 2003.

Mr. Cox holds an MBA in Finance from the University of Mississippi. From 1982 to the present Mr. Cox has been the President and CEO of National Diamond Corporation of Memphis, Tennessee, a company with interests in the mining, cutting and distribution of cut and polished diamonds worldwide. In addition, Mr. Cox is also presently the President and CEO of CodeAmerica Investments, LLC, an oil and gas exploration company.

Steve Bajic

Mr.Bajic became our Secretary on January 21, 2004.

Mr. Bajic is the president of LF Ventures Inc., a private company which offers financial and business services to public and private companies, since 1996.

Mr. Bajic obtained a Financial Management diploma majoring in Finance and Securities from the British Columbia Institute of Technology. After spending a year as an Investment Broker with Georgia Pacific Securities Corp., he took a position as Vice President of a marketing and investor relations firm, Corporation X Inc. While there, he worked with numerous public and private companies in the areas of corporate finance, strategic planning, and investor relations. From 1996 to 1998, he was Vice President of Corporate Communications of Getchell Resources Inc., a resource exploration company based in Kamloops, B.C. Mr. Bajic has been Vice President of Investor Relations for Cassidy Gold Corp., a resource exploration company listed on the TSX Venture Exchange since October 1999. Additionally since 1999, Mr. Bajic was President, Chief Executive Officer and director of four venture capital pool companies that completed qualifying transactions: 1) Duke Capital Corp. which acquired CCC Internet Solutions Inc. (in the process of changing its name to Armada Data Corp); 2) New Xavier Capital Corp. which acquired RET Internet Services Inc.; 3) Marquette Capital Corp. which acquired On-Track Learning Systems Ltd; and. 4) Tulane Capital Corp. which acquired Fibre-Crown Manufacturing Inc. He is currently still a director of Fibre-Crown.

Bassam Nastat

Mr. Nastat became a director on November 22, 2003.

Since 2000, Mr. Nastat has been the vice-president of project development and finance of CodeAmerica Investments, LLC., Olive Branch. Mr. Nastat works with CodeAmerica Investments to liase with their investor base and develops financing strategies to take advantage of exploration opportunities in Texas, Wyoming and Alaska. Mr. Nastat also prepares and presents proposals to industry partners and private investor for development of oil and gas properties.

From 1997 to 2000, Mr. Nastat was a financial consultant in the Private Client Group of Merrill Lynch, Toronto, Ontario. Mr. Nastat enrolled in the Midland Walwyn Financial (currently, Merrill Lynch) advisor program and became a broker at their Mississauga Carriage House Branch. From 1996 to 1997, Mr. Nastat worked in the International Settlements Department of Midland Walwyn (currently, Merrill Lynch) in Toronto, Ontario. Mr. Nastat was responsible for reconciliation of the Midland Walwyn's US and European transactions that were cleared through the firm's International Settlement Department.

Don Sytsma

Mr. Sytsma became a director, our CFO and Treasurer on November 22, 2003.

Since 1996, Mr. Sytsma has provided business consulting and advisory services to clients located in the United States and clients in Europe, Russia, Australia and Latin and South America. In 1996, Mr. Sytsma was a director with Harrington and Hrehor Energy Consulting based in Houston. In 1999, he became president and principal of H&H Energy, Inc., and in 2001 he became Vice President of R.J. Rudden Associates.

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Mr. Sytsma currently serves as president of DLS Energy Associates, LLC,. He also serves on the North American Energy Standards Board Executive Committee and Co-Chairs an Industry Sub-Committee responsible for developing common standards and model business practices for the U.S. natural gas and power markets.

Andy Kim

Mr. Kim became a director on February 20, 2004.

Mr. Kim has been a Vice President, Investment Advisor with CIBC with Wood Gundy since, January, 2002. Prior to this he was with Merrill Lynch Canada, as a Vice President, Financial Consultant from June 2000. He was also with Midland Walwyn as a Financial Advisor from 1994 to 2000. All of these changes resulted from the companies being bought out and taken over. For all intents and purposes Mr. Kim has been with the same firm since 1994.

Mr. Kim holds a Bachelor of Arts, Honours Degree from the University of Toronto in Commerce and Economics and is a fully licensed Registered Representative. Mr. Kim has also completed the Officers and Directors exam through the Canadian Securities Institute and has a Certified Investment Management designation.

Committees of the Board

Currently our company has the following committees:

    • Audit Committee;
    • Nominating and Corporate Governance Committee; and
    • Compensation Committee.

Our Audit Committee is currently made up of Bassam Nastat, Andy Kim and Don Sytsma. The Audit Committee is governed by the Audit Committee Charter adopted by the board of directors on February 27, 2004.

Our Nominating and Corporate Governance Committee is currently made up of Andy Kim and Milton Cox. The Nominating and Corporate Governance Committee is governed by the Nominating and Corporate Governance Committee Charter adopted by the board of directors on February 27, 2004.

Our Compensation Committee is currently made up of Andy Kim and Milton Cox. The Compensation Committee is governed by the Compensation Committee Charter adopted by the board of directors on February 27, 2004.

Family Relationships

There are no family relationships between any of our directors or executive officers.

Involvement in Certain Legal Proceedings

Other than as discussed below, none of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

3. being subject to any order, judgment, 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; or

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4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Audit Committee Financial Expert

Our Board of Directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 401(e) of Regulation S-B, and is "independent" as the term is used in Tem 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2003, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.

Code of Ethics

Effective February 27, 2004, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our Board of Directors, our company's officers including our president (being our principal executive officer) and our company's chief financial officer (being our principal financial and accounting officer), contractors, consultants and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

(3) compliance with applicable governmental laws, rules and regulations;

(4) the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

(5) accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel shall be accorded full access to our president and secretary with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company's personnel are to be accorded full access to our company's board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our Company officers.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who

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becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's president or secretary. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president or secretary, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is filed herewith with the Securities and Exchange Commission as Exhibit 14.1 to this annual report. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Altus Explorations, Inc., Suite 100, 8900 Germantown Road, Olive Branch, Mississippi 38654.

Item 10. Executive Compensation.

Other than as set out below, there has not been any compensation awarded to, earned by, or paid to our directors and executive officers for the last three completed financial years.

Employment/Consulting Agreements

We have oral month-to-month service agreements with some of our directors and officers. Currently two of our directors each receive $6,000 per month, and one officer receives $2,000 per month for services provided on our behalf.

Long-Term Incentive Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

Stock Option Plan

Subsequent to the year ended December 31, 2003 we established a stock option plan pursuant to which 5,483,040 common shares were reserved for issuance.

Stock options become exercisable at dates determined by the Board of Directors at the time of granting the option and have initial terms of ten years.

Stock Options/SAR Grants

There were no grants of stock options or stock appreciation rights to any officers, directors, consultants or employees of our company during the fiscal year ended December 31, 2003.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values

There were no stock options outstanding as at December 31, 2003.

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Directors Compensation

We reimburse our directors for expenses incurred in connection with attending board meetings but did not pay director's fees or other cash compensation for services rendered as a director in the year ended December 31, 2003.

We have no present formal plan for compensating our directors for their service in their capacity as directors, although in the future, such directors are expected to receive compensation and options to purchase shares of common stock as awarded by our board of directors or (as to future options) a compensation committee which may be established in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. Other than indicated in this annual report, no director received and/or accrued any compensation for his or her services as a director, including committee participation and/or special assignments.

Report on Executive Compensation

Our compensation program for our executive officers is administered and reviewed by our board of directors. Historically, executive compensation consists of a combination of base salary and bonuses. Individual compensation levels are designed to reflect individual responsibilities, performance and experience, as well as the performance of our company. The determination of discretionary bonuses is based on various factors, including implementation of our business plan, acquisition of assets, development of corporate opportunities and completion of financing.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as at March 12, 2004, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Name and Address of Beneficial Owner

Amount and Nature of
Beneficial Ownership (1)

Percentage
of Class (1)

Milton Cox
7227 Winchester Road, #258
Memphis, TN 38118
USA

6,000,000 common shares

15.56%

Bassam Nastat
5831 Winch Street
Burnaby, BC V5B 2J4
Canada

5,200,000 common shares

13.49%

Donald Sytsma
3107 Greenbriar
Houston, TX 77098
USA

1,000,000 common shares

2.59%

Steve Bajic
5523 Oben Street
Vancouver, BC V5R 4P2
Canada

Nil

N/A

Andy Kim
1408 Stonecutter Drive
Oakville, ON L6M 3C3
Canada

Nil

N/A

Cede & Co
Box #20
Bowling Green Station
New York, NY 10274

2,464,000

6.39%

Sterling Management of Belize
5 Park Avenue
Orange Walk Town
Belize City, Belize

4,000,000

10.38%

Directors and Executive Officers as a Group (5 people)

12,200,000 common shares

31.64%

(1) Based on 38,553,600 shares of common stock issued and outstanding as of March 12, 2004. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person

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Cancellation of Shares, Cancelled Debt

On August 14, 2003, our then incumbent directors returned 145,600,000 of our common shares to treasury for cancellation in order to make our company more attractive for prospective financing or other transactions.

Future Changes in Control

We are unaware of any contract or other arrangement, the operation of which may, at a subsequent date, result in a change in control of our company.

Equity Compensation Plan Information

During the year ended December 31, 2003 we did not have any equity compensation plans in place.

 

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

 

(a)

(b)

(c)

Equity compensation plans approved by security holders

N/A

N/A

N/A

Equity compensation plans not approved by security holders

N/A

N/A

N/A

Total

N/A

N/A

N/A

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Item 12. Certain Relationships and Related Transactions.

Other than as described under the heading "Executive Compensation", or as set forth below, there are no material transactions with any of our directors, officers or control person that have occurred during the last fiscal year.

We have oral month-to-month service agreements with some of our directors and officers. Currently two of our directors each receive $6,000 per month, and one officer receives $2,000 per month for services provided on our behalf.

None of our directors, executive officers, future directors, 5% shareholders, or any members of the immediate families of the foregoing persons have been indebted to us during the last fiscal year or the current fiscal year in an amount exceeding $60,000.

Item 13. Exhibits and Reports on Form 8-K.

Exhibits

Exhibit Number and Exhibit Title

(3) Articles of Incorporation and Bylaws

3.1 Articles of Incorporation (incorporated by reference to our SB2 Registration Statement filed January 29, 2002).

3.2 Bylaws (incorporated by reference to our SB2 Registration Statement filed January 29, 2002).

3.3 Certificate of Forward Stock Split filed with Nevada Secretary of State on November 6, 2003.

3.4 Certificate of Change Pursuant to NRS 78.209 filed with the Nevada Secretary of State on February 2, 2004.

(10) Material Contracts

10.1 Harrison 1 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.2 Harrison 2 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.3 Harrison 3 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.4 Harrison 4 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.5 Harrison 5 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.6 Harrison 6 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.7 Harrison 7 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

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10.8 Harrison 8 Claim dated August 6, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.9 Warranty Deed dated November 27, 2001 (incorporated by reference from our Registration Statement on Form SB-2, filed on January 29, 2002).

10.10 Letter of Intent between Orbit Energy, LLC and Altus Explorations Inc. dated October 22, 2003 (incorporated by reference from our Current Report on Form 8-K, filed on November 6, 2003 and amended on November 26, 2003).

10.11 Letter of Intent between B.B.I. Inc./Escopeta Oil Company, L.L.C. and Altus Explorations Inc. dated October 22, 2003 (incorporated by reference from our Current Report on Form 8-K, filed on November 6, 2003 and amended on November 26, 2003).

10.12 Assignment of Bill and Sale between CodeAmerica Investments, LLC and Altus Explorations Inc. dated October 22, 2003 (incorporated by reference from our Current Report on Form 8-K, filed on November 6, 2003 and amended on November 26, 2003).

10.13 Exploration Agreement between Escopeta Oil Company, L.L.C and Altus Explorations Inc. dated November 12, 2003.

10.14 2004 Stock Option Plan (incorporated by reference from our Registration Statement of Form S-8, filed on February 27, 2004)

(14) Code of Ethics

14.1 Code of Business Conduct and Ethics

(23) Consents of Experts & Counsel

23.1 Consent of Independent Auditor (Malone & Bailey, PLLC)

(31) Section 302 Certifications

31.1 Certification of Milton Cox
31.2 Certification of Don Sytsma

(32) Section 906 Certification

32.1 Certification of Milton Cox
32.2 Certification of Don Sytsma

Reports on Form 8-K

On November 6, 2003, as amended on November 26, 2003 reporting the letters of intent entered into with Orbit Energy, LLC and BBI Inc/Escopeta Oil Company, LLC and the 10% working interest in T.E. Lane.

Item 14. Principal Accountants Fees and Services

Audit Fees

The aggregate fees billed by Malone & Bailey, PLLC for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-KSB for the fiscal years ended December 31, 2003 and 2002 and for the review of quarterly financial statements included in our Quarterly Reports on Form 10-QSB for the quarters ending September 30, 2003, June 30 and March 31, 2003 were $16,860.

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Audit Related Fees

For the fiscal years ended December 31, 2003 and 2002, the aggregate fees billed for assurance and related services by Malone & Bailey, PLLC relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above, was $0.

Tax Fees

For the fiscal years ended December 31, 2003 and 2002, the aggregate fees billed by Malone & Bailey, PLLC for other non-audit professional services, other than those services listed above, totalled $0.

We do not use Malone & Bailey, PLLC for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage Malone & Bailey, PLLC to provide compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Malone & Bailey, PLLC is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

  • approved by our audit committee (which consists of Bassam Nastat, Andy Kim and Don Sytsma); 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.

The audit committee pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules, and therefore, the audit committee does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the audit committee either before or after the respective services were rendered.

The audit committee has considered the nature and amount of fees billed by Malone & Bailey, PLLC and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Malone & Bailey PLLC's independence.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ALTUS EXPLORATIONS INC.


By: /s/ Milton Cox
Milton Cox, President and Chief Executive Officer
(Principal Executive Officer)


By: /s/ Don Sytsma
Don Sytsma, Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)


By: /s/ Steve Bajic
Steve Bajic, Secretary


By: /s/ Andy Kim
Andy Kim, Director


By: /s/ Bassam Nastat
Bassam Nastat, Director

Date: April 13, 2004

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Milton Cox
Milton Cox


President and Chief Executive Officer


April 13, 2004

 

 

 

/s/ Don Sytsma
Don Sytsma


Chief Financial Officer and Treasurer


April 13, 2004

 

 

 

/s/ Steve Bajic
Steve Bajic


Secretary


April 13, 2004

 

 

 

/s/ Bassam Nastat
Bassam Nastat


Director


April 13, 2004

 

 

 

/s/ Andy Kim
Andy Kim


Director


April 12, 2004

In the office of
Dean Heller
Secretary of State

FILED # C29353 01

Nov 06 2003

In the Office of
Dean Heller, Secretary of State

 

CERTIFICATE OF FORWARD STOCK SPLIT
FOR
ALTUS EXPLORATION INC.

The undersigned Secretary and Director of ALTUS EXPLORATION INC., a Nevada corporation (the "Corporation"), hereby certifies for the purposes of Nevada Revised Statute 78.209 as follows:

  1. The Board of Directors of the Corporation has unanimously approved, by written consent, dated October 29th, 2003, eight (8) for one (1) forward stock split (the "Forward Stock Split") of the Corporation's authorized, issued and outstanding common stock.
  2. The total authorized number of shares of the Corporation before the effective date of the Forward Stock Split was Twenty-Five Million (25,000,000) shares of common stock with a par value of $0.001.
  3. The total authorized number of shares after the effective date of the Forward Stock Split shall be Two Hundred Million (200,000,000) shares of common stock with a par value of $0.001.
  4. The Corporation shall issue eight (8) shares of common stock in exchange for every one (1) share of common stock issued and outstanding immediately prior to the effective date of the Forward Stock Split.
  5. The approval of the stockholders of the Corporation is not required to effect the Forward Stock Split.
  6. The Forward Stock Split shall be effective on the date that this Certificate is filed with the Nevada Secretary of State.

Dated this 3rd day of November, 2003.

/s/ Andrew Stewart
ANDREW STEWART
SECRETARY AND DIRECTOR

This instrument was acknowledged before me on November 3, 2003, by ANDREW STEWART, known or proved to be the person executing the above instrument.

/s/ William L. Macdonald
WILLIAM L. MACDONALD
A Notary Public in and for the Province of British Columbia

WILLIAM L. MacDONALD
Barrister & Solicitor
800-885 WEST GEORGIA STREET
VANCOUVER, B.C. V6C 3H1
TELEPHONE (604) 687-5700

DEAN HELLER
Secretary of State
204 North Carson Street, Suite 1
Carson City, Nevada 88701-4299
(775) 684 5706
Website: secretaryofstate.biz

FILED # C29353-01

FEB 05 2004

IN THE OFFICE OF
DEAN HELLER, SECRETARY OF STATE

Certificate of Change Pursuant
to NRS 78.209

Certificate of Change filed Pursuant to NRS 78.209
For Nevada Profit Corporations

1. Name of corporation:

ALTUS EXPLORATIONS INC.

2. The board of directors have adopted a resolution pursuant to NRS 78.207 and have obtained any required approval of the stockholders.

3. The current number of authorized shares and the par value, if any, of each class or series, if any, of shares before the change:

200,000,000 shares of common stock with a par value of $0.001

4. The number of authorized shares and the par value, if any, of each class or series, if any, of shares after the change:

800,000,000 shares of common stock with a par value of $0.001

5. The number of shares of each affected class or series, if any, to be issued after the change in exchange for each issued share of the same class or series:

The Corporation shall issue four (4) shares of common stock for every one (1) share of common stock issued and outstanding immediately prior to the effective date of the forward stock split.

6. The provisions, if any, for the issuance of fractional shares, or for the payment of money or the issuance of scrip to stockholders otherwise entitled to a fraction of a share and the percentage of outstanding shares affected thereby:

N/A

7. Effective date of filing (optional):

8. Officer Signature:

/s/ Milton Cox
Signature

PRESIDENT
Title

IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.

EXPLORATION AGREEMENT

THIS AGREEMENT ("Agreement") is made this November 12, 2003

BETWEEN:

ALTUS EXPLORATIONS, INC. , whose address is 8900 Germantown Road, Suite 100, Olive Branch, Mississippi 38654

(herein referred to as "Altus Explorations")

OF THE FIRST PART

AND:

ESCOPETA OIL COMPANY, L.L.C. , whose address is 5005 Riverway, Suite 440, Houston, Texas 77056

(herein referred to as "Escopeta")

OF THE SECOND PART

WHEREAS:

A. Escopeta is the owner of in-house proprietary geological information covering a minimum of 34 oil and gas prospects in portions of Chataugua and Elk Counties, Kansas which consists of approximately 195,000 contiguous acres (the "Prospect Area") as depicted in Exhibit "B" of this Agreement.

B. Escopeta and Altus Explorations desire to purchase oil and gas rights on an initial three of the generated oil and gas exploration prospects in the Prospect Area (collectively, the "Initial Three Prospects" and individually, the "Prospect") and cause a test well (the "Test Well") to be drilled on each of the three prospects.

C. The Initial Three Prospects areas consist of approximately 1,500 to 3,000 acres and include tracts located in Chataugua and Elk Counties, Kansas and Oklahoma which are depicted in Exhibit "A" of this Agreement.

2

NOW, THEREFORE, in consideration of the premises and of the mutual covenants, agreements, conditions, and obligations herein between Altus Explorations and Escopeta (hereinafter collectively referred to as the "Parties") the Parties hereby agree as follows:

1. DEFINITIONS

In this Agreement:

"AFE" means authority or authorization for expenditure regarding exploration and drilling costs as set out in this Agreement;

"Closing Date" means November 1, 2003 or any other date as agreed upon in writing by the Parties;

"Lease" means the lease or similar legal interest acquired by Escopeta in the Prospect Area under this Agreement providing for the right to explore, develop and produce oil and gas;

"log" means a record obtained by a prudent operator of all formations penetrated by a well, their depth, thickness and sonic, electrical, radiological and all other physical properties of the formation and its water and oil and gas (if any), including but not limited to mud logs;

"oil and gas" includes all minerals and hydrocarbon substances regardless of gravity or phase (including coal and coalbed gas) including, but not limited to condensate and helium, hydrogen, nitrogen and other gases; and

"paying quantities" means paying quantities of oil and gas.

2. TEST WELL

Escopeta shall drill, or cause to be drilled, in each of Initial Three Prospect areas a well of sufficient depth to penetrate the entire bottom most formation identified as a potential oil and gas reservoir (the "Contract Depth Interval") in each individual prospect. In the event Escopeta is unable to drill, complete and obtain a test sufficient to establish paying quantities on the Test Well for any reason prior to the expiration of a Lease, then Escopeta shall have the right to drill a Substitute Well or a Subsequent Test Well as hereinafter defined, at any legal location on the Lease.

3. SUBSTITUTE WELL

If during the drilling of the Test Well, Escopeta shall encounter granite or any other practically impenetrable substance or encounter mechanical difficulties or if the hole is lost for any reason not reasonably within the control of Escopeta, Escopeta shall have and is hereby granted the right to abandon said Test Well and Escopeta may within thirty (30) days after such abandonment or within 30 days of receiving applicable governmental approval and written consent of Altus Exploration, commence the actual drilling of a substitute well at a location which would, under the terms of this Agreement have been

3

permissible for the location of the abandoned Test Well (the "Substitute Well"). If such Substitute Well is commenced, it shall thereafter be drilled to the Contract Depth Interval and Escopeta's duties and obligations herein and the provisions hereof regarding the Test Well shall apply to such Substitute Well, and such Substitute Well shall be deemed to be the Test Well for all purposes of this Agreement.

4. SUBSEQUENT WELLS

In the event that the Test Well is drilled to the Contract Depth Interval and is plugged and abandoned as a dry hole, Escopeta shall have the right but not the obligation to commence actual drilling of a replacement well or recompletion of an existing well on the Lease (the "Subsequent Test Well") within 30 days from the plugging of the Test Well as a dry hole provided Altus Exploration has provided, in advance, written consent of such drilling to Escopeta. If Escopeta should complete the Subsequent Test Well as the first producer in paying quantities, it shall be deemed to be the Test Well for all purposes of this Agreement.

5. WORKING INTEREST AND CONSIDERATION

Escopeta assigns to Altus Exploration an undivided 50% working interest in all Leases acquired by Escopeta in the Prospect Area, including Test Wells, as well as the pro-rata shares of the rights and obligations relative thereto (including the drilling, testing, completing, plugging, abandoning and oil and gas production).

(a) Cash Consideration. Altus Explorations will pay and deliver to Escopeta on or before the Closing Date the sum of $75,000.00, by cheque or similar form of instrument, which amount includes:

(i) Library. $37,500.00 for Altus Explorations' proportionate ownership and use of Escopeta's geological library (the "Library") which includes geology reports, logs and other information and data relevant to oil and gas exploration in the AMI Area. Altus Explorations may for any purpose inspect, copy, and use or assign the share of its rights to all or part of the Library with the exception of any proprietary geological reports or maps as Altus Explorations and Escopeta may, in its sole discretion, determine; and

(ii) Lease acquisition and prospect generation. $37,500.00 for Altus Explorations 50% share of the acquisition costs for the Leases on the Initial Three Prospects, together with Altus Explorations' share of all costs for Escopeta's generation of the Initial Three Prospects.

(b) Costs of Drilling. Altus Explorations' share of estimated drilling and completion costs shall be 50% and will be billed to Altus Explorations at actual invoice and will be due and payable to Escopeta 30 days prior to commencement of all Test Wells. If such drilling and/or completion costs are more or less than the AFE, Altus Explorations shall bear its pro-rata share of any actual excess invoiced costs paid by Escopeta; in the event the AFE is greater than actual costs, Altus

4

Explorations will be entitled to and will receive its pro-rata refunded share of any excess monies .

(c) Burdens and Encumbrances. Subject to the matters of title described above, Altus Explorations is acquiring its title from Escopeta subject to the royalties provided for in the Lease and additional royalties, the aggregate of which are 25% of production of oil and gas from the Lease. Except for the foregoing described burdens on production, Altus Explorations' share shall be free and clear of any additional overriding royalty or other burden payable out of or measured by production from any well on the Lease or lands pooled therewith. Each of the Leases, or the interests therein being acquired by Altus Explorations are free and clear of any lien or encumbrance imposed thereon to secure any obligation of Escopeta or Altus Explorations to pay any money or to perform any act relative to the Leases.

(d) No Title Warranty. Except as set forth in this subsection, the title in the Leases to be conveyed to Altus Explorations by Escopeta is without warranty, either express or implied.

(e) Carried Interest. Escopeta will be carried by Altus Explorations, Inc. for 25% of Lease acquisition costs and 25% of the working interest to casing point in each of the Initial Three Prospects and the initial well drilled on each.

(f) Assignment. Within 30 days of Altus Explorations' execution and delivery of this Agreement, Escopeta will deliver to Altus Explorations a recordable assignment of Altus Explorations' interest in the subject Leases acquired by Escopeta.

6. OPERATIONS AND DRILLING

On or before February 1, 2004, Escopeta shall initiate operations to drill a Test Well on the first of the Initial Three Prospects. If the drilling of the first Test Well is successful, Escopeta will then attempt to complete the well to produce oil and gas therefrom and otherwise equip the well for production and connect it to the tanks or to the pipeline of the purchaser of production therefrom. The drilling of the second and third wells in the Initial Three Prospects shall be commenced no later than one year before expiry of the applicable Lease.

In the drilling of the Test Well, Escopeta shall conduct its operations as a reasonable and prudent operator and shall test all zones or formations penetrated in the Test Well which Escopeta believes to have a reasonable possibility of producing in paying quantities. Escopeta shall restore the surface of the land to the condition required by law, and in absence of law, then as nearly as possible to its original condition.

All operations in the Prospect Area will be governed by the terms and provisions of an operating agreement (the "Operating Agreement") which will be circulated by Escopeta for signature by the Parties at least 30 days prior to the commencement of the first Test Well. The Operating Agreement will be on a A.A.P.L. Form 610 - 1982 Model Form

5

Operating Agreement which shall be modified to delete portions of the printed language and to add certain provisions as are usual and customary among independent oil and gas exploration operators. Escopeta shall be designated the Operator in the Operating Agreement.

7. TAKEOVER OPTION

If after drilling any Test Well to the Contract Depth Interval, Escopeta is not able to complete the Test Well as a well capable of producing in paying quantities, Escopeta shall not plug and abandon the Test Well without first notifying Altus Explorations under Section 0 hereof of Escopeta's intention to do so, in which event Altus Explorations shall have the right to take over said Test Well as provided in Section 0. In the event Altus Explorations elects to take over said Test Well and completes same as a well capable of producing in paying quantities, all rights of Escopeta to earn an interest in the spacing unit for the Test Well shall thereupon cease and terminate unless Escopeta has elected to drill a Subsequent Test Well under Section 0 above. Escopeta shall not be relieved of any obligation under this Agreement previously accrued or which thereafter accrues with respect to Escopeta's operations upon the Leases previously conducted excepting the plugging and abandoning of the Test Well taken over by Altus Explorations.

8. AREA OF MUTUAL INTEREST

(a) Area of Mutual Interest. There shall be deemed to be an Area of Mutual Interest (the "AMI") surrounding each Prospect. The AMI shall cover and include all lands located within one mile of the boundaries of all Leases and be effective for the primary term of the Lease(s) or the duration of any oil and gas production therefore, whichever is the greater. In the event a Party acquires or proposes to acquire any interest in the lands within the AMI, the acquiring Party shall be required promptly to notify the other Party of the acquisition or proposed acquisition and the actual costs and expenses related thereto. The Party receiving the notice shall have 10 business days within which to pay its share of the actual cost of the interest acquired or to be acquired. Upon the acquiring Party's receipt of such payment and closing of its acquisition of the interest, it shall execute and deliver to the joining party a recordable assignment of its proportionate share in the interest, determined in accordance with this Section and Section 5 above. Unless the Party receiving the notice of an AMI acquisition shall have made a timely response in accordance with this Section, it shall be deemed to have elected not to acquire the interest so offered by the acquiring Party.

(b) Additional Area of Mutual Interest. In addition to and including the above described AMI, there shall be deemed to be a further AMI covering all of the lands located within the following townships and ranges as described on the attached Exhibit "B-1" and shown on the plat attached as Exhibit "B":

The duration of this additional AMI shall be for two calendar years from the date of execution of this Agreement.

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9. COST INFORMATION

If the Test Well is productive in paying quantities, Escopeta shall, as soon as possible after completion, furnish to Altus Explorations reasonably detailed information showing the cost of drilling, completing, and equipping the same. Further, Escopeta shall during the payout period furnish to Altus Explorations a monthly statement showing gross production from such well and showing Escopeta's progress towards payout of the same. Altus Explorations shall have access at all times at the Notice address stated in this Agreement during reasonable business hours to Escopeta's cost, production and other records relating to such well.

10. PARTICIPATION IN SUBSEQUENT WELLS

Should either Party decline to participate in the drilling of a well for their interest, then the declining Party shall be subject to the applicable non-consent provisions of the Operating Agreement. Any election to not participate in the drilling of a well shall be deemed to be an election to not participate in the completion of that well.

11. WELL DATA

With respect to the Test Well and any Subsequent Well, Escopeta shall comply with the well information requirements by Altus Explorations set out on Exhibit "C" attached hereto, by furnishing the reports, documents, samples, data and other information and by giving the notices indicated thereon. Further, with respect to drilling and completion operations, Escopeta shall (I) furnish Altus Explorations daily drilling reports and make available portions of all samples, cores and fluids collected; (ii) at Escopeta's sole discretion conduct such tests, run such logs, make such surveys and take such cores as would be made by a prudent operator; and (iii) furnish Altus Explorations copies of all logs, surveys and tests. Altus Explorations and its representatives and employees shall at all times have access, at their sole cost, risk and expense, to the well(s) and well site(s) located on the Lease.

12. ABANDONMENT

No well drilled by Escopeta pursuant to this Agreement shall be plugged or abandoned until Escopeta shall have given Altus Explorations notice of its intention to do so. Altus Explorations shall have twenty-four (24) hours from the receipt of said abandonment notice and a copy of all logs, drillstem and other tests and all other information obtained in connection with such well in the case of a well on which a drilling rig is located, and tens (10) days from receipt of said abandonment notice in all other cases, to notify Escopeta whether or not Altus Explorations consents to such plugging or abandonment or whether Altus Explorations elects to take over the well. If Altus Explorations elects to take over the well, Escopeta shall immediately deliver to Altus Explorations the well and all material and physical equipment therein in the same condition as when drilling operations were terminated. Further, Escopeta shall forthwith execute and deliver all necessary instruments to convey to Altus Explorations, Escopeta's entire interest in and to the well, all such physical equipment therein and, the Leases comprising the spacing unit in which said well is located. Altus Explorations will pay for all expenses and

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discharge all obligations incurred after it takes possession of the well and will assume any and all obligations under any farmout agreements Escopeta may have with other persons owning an interest in the spacing unit for such well. Altus Explorations shall pay Escopeta the reasonable salvage value of all recoverable in-the-well and surface equipment owned by Escopeta which is taken over by Altus Explorations less than the estimated cost of salvage and less Escopeta's estimated cost of plugging and abandoning said well.

13. MINIMUM ROYALTIES/SHUT-IN GAS WELL PAYMENTS

Escopeta agrees to pay any minimum royalties or shut-in gas well payments necessary to maintain the Leases in full force and effect. Escopeta further agrees to give Altus Explorations immediate notice when any well is shut-in and the date thereof and furnish proof of proper payment of minimum or shut-in gas royalties at least one month in advance of the payment date.

14. COMPLIANCE WITH LAW

During the course of all operations conducted pursuant to this Agreement, the Parties shall abide by all applicable laws and all lawful orders, rules and regulations of governmental authorities having jurisdiction. Escopeta shall notify Altus Explorations of any application to any governmental body for the establishment of units for the spacing of wells with respect to a Lease. Escopeta and Altus Explorations shall attempt to agree upon the size and location of units; however, in the event they are unable to agree, Escopeta may proceed before the proper governmental authority for the establishment of such units, but Altus Explorations shall have the right to participate in any proceedings to protect its interest.

15. RELATIONSHIP OF PARTIES

It is not the intent or purpose of the parties to this Agreement to create hereunder any partnership, joint venture, or association or the relationship of agency or employer-employee, and neither this Agreement nor any of the operations hereunder shall be construed or considered as creating any such relationship.

16. INDEMNITY AND INSURANCE

The Parties agree to indemnify, defend and hold each other harmless from any and all liens, encumbrances, suits, claims, judgements, obligations and liabilities of any kind caused or created by or arising out of the other Party's ownership or operations pursuant to this Agreement.

In connection with all operations conducted hereunder, Escopeta shall carry, and cause its subcontractors to carry, the insurance in amounts and with a scope of coverage that a prudent operator in the same or similar circumstance as Escopeta under this Agreement as specified on Exhibit "D". Further Escopeta agrees to carry all necessary governmental bonds required for operations on the Leases.

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17. EXTENSIONS AND RENEWALS

This Agreement shall apply in all respects to any extension of a Lease and any renewals thereof taken within one (1) year of the expiration of a prior lease.

18. NOTICES

All notices, statements and communications (the "Notices") required or permitted to be given or made hereunder shall be deemed to be so given or made when deposited in the United States Mail, postage prepaid directed to the parties at the following addresses or such other addressees as they may from time to time designated in writing:

Altus Explorations:

Altus Explorations, Inc.
8900 Germantown Road, Suite 100
Olive Branch, MI 38654
Attn: William M. Cox, President

Telephone: 662-893-7376

 

 

Escopeta:

Escopeta Oil Company, L.L.C.
5005 Riverway, Suite 440
Houston, TX 77056
Attn: Danny Davis, President

Telephone: 713-623-2219

19. FURTHER ASSURANCE

Each of the parties shall, from time to time and at all times, do all such other and further acts and deliver and execute such other and further instruments and documents as may be reasonably required in order to fully perform and carry out the terms and provisions of this Agreement.

20. TIME

Time is of the essence with respect to all matters contained in this Agreement.

21. EXHIBITS

All exhibits referred to and attached to this Agreement are hereby incorporated by reference and made a part of this Agreement. In the event any of the provisions of any exhibit conflict with this Agreement, then the provisions of the Agreement itself shall prevail. However, the inclusion herein of provisions relating to any particular subject matter shall not be deemed an attempt to deal with such subject matter to the exclusion of provisions in the Operating Agreement or other exhibits relating to such matter unless the context clearly otherwise requires.

9

(b) The parties agree that with respect to the subject matter hereof this Agreement together with all Exhibits shall constitute the full and complete understanding and agreement of the parties, and there are no other understandings, obligations, relationships or agreements, written or oral.

(c) The terms and definitions used herein shall have the same meaning in the Exhibits unless the context otherwise requires.

23. ENUREMENT

The terms, covenants, conditions and provisions of this Agreement shall be binding upon and enure to the benefit of the respective successors land assigns of the parties, and said terms, covenants, conditions and provisions shall be deemed to be real covenants burdening and running with the Leases.

24. LAW AND JURISDICTION

The law governing this Agreement shall be the law of the State of Texas. The Parties exclusively and irrevocably attorn to the jurisdiction of the courts Harris County of the State of Texas regarding any matter or dispute arising from this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective for all purposes as of the day and year first above written.

ALTUS EXPLORATIONS, INC.

By: /s/ Milton Cox

Signature Date:   11/12/2003

ESCOPETA OIL COMPANY, L.L.C.

By: /s/ Danny Davis

Signature Date:   11/11/03

 

 

EXHIBIT "A"

Attached to and made a part of that Exploration Agreement dated November 1, 2003, between Altus Explorations, Inc., and Escopeta Oil Company, L.L.C.

  1. INITIAL THREE DRILLING PROSPECTS
  2. 1.) EAST ARBUCKLE

    2.) WEST PRAIRIE SPRINGS

    3.) LAKE CREEK

  3. ADDITIONAL PROSPECTS

1. BULLSEYE

2. NORTH MALONE

 

EXHIBIT "B-1"

Attached to Confidentiality Agreement dated November 1, 2003 by and between

ALTUS EXPLORATIONS, INC. and ESCOPETA OIL COMPANY, L.L.C.

The restricted area and contained prospects is described as follows:

1.

T31S; R9E -

all in Elk County, Kansas

2.

T32S; R8E -

(Secs. 1, 2, 3, 10, 11, 12, 13, 14, 15, 22, 23, 24, 25, 26, 27, 34, 35 & 36) - all in Chautauqua County, Kansas

3.

T32S; R9E -

all in Chautauqua County

4.

T3S2; R10E -

all in Chautauqua County

5.

T33S; R8E -

(Secs. 1, 2, 3, 10, 11, 12, 13, 14, 15, 22, 23, 24, 25, 26, 27, 34, 35 & 36) - in Chautauqua County

6.

T33S; R9E -

all in Chautauqua County

7.

T34S; R8E -

(Secs. 1, 2, 3, 10, 11, 12, 13, 14, 15, 22, 23, 24, 25, 26, 27, 34, 35 & 36) - all in Chautauqua County

8.

T34S; R9E -

all in Chautauqua County

9.

T35S; R8E -

(Secs. 1, 2, 3, 10, 11, 12, 13, 14 & 15) - all in Chautauqua County

10.

T35S; R9E -

(Secs. 1 through 13, inclusive) - all in Chautauqua County

11.

T33S; R10E -

(Secs. 18, 19 & 30) - all in Chautauqua County

12.

All of the above containing 264 (±) sections and totaling 168,960 (±) acres.

 

 

EXHIBIT "C"

Attached to and made part of that certain Exploration Agreement dated November 1, 2003, between Altus Explorations, Inc. and Escopeta Oil Company, L.L.C.

WELL DATA REQUIREMENTS

PRE-DRILL INFORMATION: AFE, SURVEY PLAT, REGULATORY APPLICATIONS AND APPROVALS, GEOLOGICAL / ENGINEERING PROGNOSIS, DRILLING, COMPLETION, & TESTING PROGRAMS:

Mail one (1) copy of each of the above to:

Altus Explorations, Inc.
8900 Germantown Road, Suite 100
Olive Branch, MI 38654
Attention: William M. Cox, President

DRILLING / COMPLETION OPERATIONS: DAILY REPORTS INCLUDING: DRILLING, DIRECTIONAL SURVEYS, MUD LOG, GEOLOGICAL, AND COMPLETION REPORTS

Fax daily and mail one (1) copy weekly to:

Altus Explorations, Inc.
8900 Germantown Road, Suite 100
Olive Branch, MI 38654
Attention: William M. Cox, President
Phone Number: 662-890-7377
Fax Number: 662-893-7883

PRIOR NOTICE & RESULTS: DSTS, LOGS, CORES, TESTS, COMPLETIONS, P&A, AND ANY OTHER SIGNIFICANT OPERATIONS.

NOTICES REQUIRED:

Call

Fax

Advance Notice Time Required

Notice Given to:

Spud

x

 

48 Hours

Land

Log

x

 

24 Hours

Geology

Test

x

 

24 Hours

Geology

Core

x

 

24 Hours

Geology

P&A

x

 

48 Hours

Land

Completion

x

 

48 Hours

Engineering

CONTACTS

NAME

OFFICE

CELLULAR

E-Mail

Land:

*<>

662-893-7377

 

 

Engineering:

*<>

662-893-7377

 

 

Note: * = Primary Contacts

FOLLOWING ITEMS TO BE MAILED ATLUS EXPLORATIONS AT ADDRESS ABOVE:

 

COPIES

Drilling Samples (wet/dry cuts)

1 Set Dry Cuts

DST Reports

2

Gas, Oil & Water Analyses

2

Core Analyses

2

Directional Surveys

1

Digital Log Data (LIS 3 1/2" diskette)

1

Field Print of Logs

Fax to: 662-893-7883

Final Print of Logs

4

Half scale Print of Final Logs

2

Mud Logs

4

Geological Report

2

Final Composite Drilling Report

1

Completion Plan

1

Fracture Stimulation Quality Control Record

1

Final Composite Completion Report

1

Flow Back Test Reports

1

 

 

EXHIBIT "D"

Attached to and made a part of that Exploration Agreement dated November 1, 2003, between Altus Explorations, Inc., and Escopeta Oil Company, L.L.C. (the "Operator")

INSURANCE

To protect against some liability, loss or expense arising from damage to property, injury or death of any person or persons incurred out of, in connection with, or resulting from the operations provided hereunder, Operator shall obtain, and whenever practicable, may require subcontractors to obtain insurance as provided below from a financially sound and reliable insurance company authorized to do business in the state in which the operations are to be performed. Each policy may provide a waiver of subrogation rights against the signatory parties other than Operator. Operator shall maintain in force during the entire period of this agreement, the following schedule of insurance coverage for the benefit of the joint account. Any non-operator may elect not to participate in any coverage listed below (except coverage listed in A.) and its associated cost by providing evidence of operator of insurance coverage of the same limits and similar terms from a reliable, financially sound insurance company.

 

COVERAGE

LIMITS OF LIABILITY

A.

Worker's Compensation

Statutory Benefits

 

Employers' Liability

$500,000 per occurrence

B.

General Liability including Personal Injury, Property Damage, Contractors Protective Liability, Contractual Liability, Products

$ 1,000,000 per occurrence

Any insurance which any party may carry which exceeds or adds to that listed on this Exhibit "B", either as to type of coverage or as to limits of liability, shall be for the benefit of the party acquiring only and shall not be for the benefit of the joint account or any signatory party other than the party acquiring such insurance.

Operator shall furnish signatory parties upon request with Certificates from insurers evidencing that satisfactory coverage as set forth herein is in force.

If any party provides evidence of insurance so as to elect out of any coverage, such insurance shall include the following provisions:

1. All signatory parties hereto shall be named as additional insured.

2. Each policy shall include a waiver of any rights of subrogation against the other signatory parties hereto.

3. Each policy shall contain a provision obligating insurer to give Operator written notice of change or cancellation not less than thirty (30) days prior to the effective date of such change or cancellation.

ALTUS EXPLORATIONS INC.

CODE OF BUSINESS CONDUCT AND ETHICS AND
COMPLIANCE PROGRAM

Adopted February 27, 2004

The upholding of a strong sense of ethics and integrity is of the highest importance to Altus Explorations Inc. (the " Company ") and critical to its success in the business environment. The Company's Code of Business Conduct and Ethics and Compliance Program embodies the Company's commitment to such ethical principles and sets forth the responsibilities of the Company to its shareholders, employees, consultants, customers, lenders and other stakeholders. The Company's Code of Business Conduct and Ethics and Compliance Program addresses general business ethical principles, conflicts of interests, special ethical obligations for employees with financial reporting responsibilities, insider trading laws, reporting of any unlawful or unethical conduct, political contributions and other relevant issues.

GENERAL PRINCIPLES

It is the Company's firm belief that effective business relationships can only be built on mutual trust and fair dealing. The Company and all its directors, officers, employees and consultants, to whom the Company's Code of Business Conduct and Ethics and Compliance Program is applicable, will conduct themselves in accordance with the standards established herein.

The Company's Code of Business Conduct and Ethics and Compliance Program outlines the fundamental principles of legal and ethical business conduct as adopted by the Board of Directors of the Company. It is not intended to be a comprehensive list addressing all legal or ethical issues, which may confront the Company's personnel. Hence, it is essential that all personnel subject to the Company's Code of Business Conduct and Ethics and Compliance Program employ good judgment in the application of the principles contained herein.

CONFLICTS OF INTEREST

Directors, officers and employees of the Company are expected to make decisions and take actions based on the best interests of the Company, as a whole, and not based on personal relationships or benefits. Generally, a "conflict of interest" is an activity that it inconsistent with or opposed to the best interest of the Company or one which gives the appearance of impropriety. As conflicts of interest can compromise the ethical behavior of Company personnel, they should be avoided.

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Employees should avoid any relationship which would create a conflict of interest. Employees are expected to disclose such relationships and conflicts to their immediate supervisors. Conflicts of interest involving those with whom the Company does business should also be disclosed in writing to such third parties. Any waivers of conflicts of interest must be approved by the Board of Directors or an appropriate committee.

Members of the Board of Directors are to disclose any conflicts of interest and potential conflicts of interest to the entire Board of Directors as well as the committees on which they serve. Directors are to recuse themselves from participation in any decision of the Board or a committee thereof in any matter in which there is a conflict of interest or potential conflict of interest.

Set forth below is specific guidance in respect to certain conflicts of interest situations. As it is not possible to list all conflicts of interest situations, it is the responsibility of the individual, ultimately, to avoid and properly address any situation involving a conflict of interest or potential conflict of interest. Company personnel who wish to obtain clarification of the Company's conflicts of interest principles or further guidance with respect to the proper handling of any specific situation should consult his or her immediate supervisor, the Company's corporate secretary or the Company's outside legal counsel.

Interest in Other Businesses : All Company's directors, officers and employees and their family members must avoid any direct or indirect financial relationship with third parties with whom the Company has relationships which would involve a conflict of interest or a potential conflict of interest or compromise the individual's loyalty to the Company. Permission must be obtained from the Company's president before any such individual commences an employment, business or consulting relationship with third parties with whom the Company has relationships.

Outside Directorships : All Company's directors, officers and employees may serve on the boards of directors of other profit-making organizations so long as those other companies are not in direct competition with the Company. Direct competition does not include being in the same type of resource industry business as the Company, and directors, officers and employees are not obliged to refer to the Company every opportunity they may have in the Company's area of the resource industry.

Individuals who serve as directors of other companies may retain any compensation earned from that outside directorship without accounting for same to the Company. Individuals may receive compensation (whether in the form of cash, stock or options) for service on a board of director of another business organization if such service is at the request of the Company or in connection with the investment of the Company in such business organization, so long as the individual discloses the compensation to the Company. All individuals must excuse themselves from any matters pertaining to the Company and the business organization of which they are directors.

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Proper Payments : All individuals should pay for and receive only that which is proper. Company personnel should not make improper payments for the purposes of influencing another's acts or decisions and should not receive any improper payments or gifts from others for the purposes influencing the decisions or actions of Company's personnel. No individual should give gifts beyond those extended in the context of normal business circumstances. Company personnel must observe all government restrictions on gifts and entertainment.

Supervisory Relationships : Supervisory relationships with family members present special workplace issues. Accordingly, Company personnel should where possible avoid a direct reporting relationship with a family member. If such a relationship exists or occurs, the individuals involved must report the relationship in writing to the Board of Directors.

FINANCIAL REPORTING RESPONSIBILITIES

As a public company, it is of critical importance that the Company's filings with the Securities and Exchange Commission and other relevant regulatory authorities be accurate and timely. Hence, all Company personnel are obligated to provide information to ensure that the Company's publicly filed documents be complete and accurate. All Company personnel must take this responsibility seriously and provide prompt and accurate answers and responses to inquiries related to the Company's public disclosure requirements.

The Chief Executive Officer/President and the Chief Financial Officer of the Company have the ultimate responsibilities of ensuring the integrity of the filings and disclosure made by the Company as required by the rules and regulations of the Securities and Exchange Commission and other relevant regulatory authorities. In the performance of their duties relating to the Company's public disclosure obligations, the Chief Executive Officer/President, the Chief Financial Officer and all Company personnel must:

  • Act with honesty and integrity
  • Provide information that is accurate, complete, objective, fair and timely
  • Comply with rules and regulations of federal, state and local governments and other relevant public and private regulatory authorities
  • Act in good faith with due care, competence and due diligence
  • Respect the confidentiality of information acquired in the course of the performance of one's duties
  • Promote ethical and proper behavior in the work environment
  • Report to the Chairman of the Audit Committee any conduct that the individual believes to be a violation of law of the Company's Code of Business Conduct and Ethics

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INSIDER TRADING

It is the policy of the Company to prohibit the unauthorized disclosure of any nonpublic information acquired in the workplace and the misuse of material nonpublic information in securities trading. It is not possible to define all categories of material information. However, information should be regarded as material if there is a reasonable likelihood that it would be considered important to an investor in making an investment decision regarding the purchase or sale of the Company's securities. Nonpublic information is information that has not been previously disclosed to the general public and is otherwise not available to the general public. While it may be difficult to determine whether particular information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. In addition, material information may be positive or negative. Examples of such information may include:

  • Financial results
  • Projections of future earnings or losses
  • Major contract awards, cancellations or write-offs
  • Joint ventures with third parties
  • Research, exploration or development milestones
  • News of a pending or proposed merger or acquisition
  • News of the disposition of material assets
  • Impending bankruptcy or financial liquidity problems
  • Gain or loss of a substantial customer or supplier
  • New product announcements or resource discoveries of a material nature
  • Significant pricing changes
  • Stock splits
  • New equity or debt offerings
  • Significant litigation exposure due to actual or threatened litigation
  • Changes in senior management
  • Capital investment plans
  • Changes in dividend policy

Trading on Material Nonpublic Information: With certain limited exceptions, no officer or director of the Company, no employee of the Company or its subsidiaries and no consultant or contractor to the Company or any of its subsidiaries and no members of the immediate family or household of any such person, shall engage in any transaction involving a purchase or sale of the Company's securities, including any offer to purchase or offer to sell, during any period commencing with the date that he or she possesses material nonpublic information concerning the Company, and ending at the close of business on the second trading day following the date of public disclosure of that information, or at such time as such nonpublic information is no longer material. The term "trading day" shall mean a day on which national stock exchanges and the NASDAQ National Market are open for trading.

-5-

Tipping: No insider shall disclose ("tip") material nonpublic information to any other person (including family members) where such information may be used by such person to his or her profit by trading in the securities of companies to which such information relates, nor shall such insider or related person make recommendations or express opinions on the basis of material nonpublic information as to trading in the Company's securities.

Regulation FD (Fair Disclosure) implemented by the Securities and Exchange Commission provides that when the Company, or person acting on its behalf, discloses material nonpublic information to certain enumerated persons (in general, securities market professionals and holders of the Company's securities who may well trade on the basis of the information), it must make public disclosure of that information. The timing of the required public disclosure depends on whether the selective disclosure was intentional or unintentional; for an intentional selective disclosure, the Company must make public disclosures simultaneously; for a non-intentional disclosure the Company must make public disclosure promptly. Under the regulation, the required public disclosure may be made by filing or furnishing a Form 8-K, or by another method or combination of methods that is reasonably designed to effect broad, non-exclusionary distribution of the information to the public.

It is the policy of the Company that all communications with the press be handled through the Company president.

Confidentiality of Nonpublic Information: Nonpublic information relating to the Company is the property of the Company and the unauthorized disclosure of such information is strictly forbidden.

Applicability of Insider Trading Regulations to Securities of Other Companies : The insider trading guidelines described herein also apply to material nonpublic information relating to other companies, including the Company's customers, vendors or suppliers ("business partners"), when that information is obtained in the course of employment with, or other services performed on behalf of the Company. All employees and consultants should treat material nonpublic information about the Company's business partners with the same care as is required with respect to information relating directly to the Company.

Duty to Report Inappropriate and Irregular Conduct

All employees and consultants, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within the Company, consistent with generally accepted accounting principles and both federal and state securities laws. Any employee or consultant who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to their immediate supervisor and to the Company's Audit Committee. Any failure to report in appropriate or irregular conduct of others is a severe disciplinary matter. It is against Company policy to retaliate against any individual who

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reports in good faith the violation or potential violation of the Company's Code of Business Conduct and Ethics and Compliance Program of another.

Please refer to the Company's Insider Trading Compliance Manual. Any further inquiries relating to insider trading laws should be directed to the Company's corporate secretary or the Company's outside counsel.

ENVIRONMENTAL AND OPERATIONAL ISSUES

The Company will use reasonable efforts to comply with best practices as they relate to resource and oil and gas exploration environmental issues. In particular Company officials will where practical seek guidance from knowledgeable participants and obtain governmental or other regulatory guidelines on environmental conduct of oil and gas operations so as to be familiar with and follow as much as practicable such guidelines.

All employees, consultants and subcontractors of the Company will be given strict instructions to follow all environmental laws applicable to the operations of the Company at all times. All employees, consultants and subcontractors will be encouraged to report any violation of such laws to the President upon their first opportunity.

POLITICAL CONTRIBUTIONS

No assets of the Company, including the time of Company personnel, the use of Company premises or equipment and direct or indirect monetary payments, may be contributed to any political candidate, political action committees, political party or ballot measure without the written permission of the president of the Company.

COMPLIANCE PROGRAM

In order to implement the principles of the Company's Code of Business Conduct and Ethics and to establish a Compliance Program, the Company has adopted the following policies:

Size of the Board : The Board will periodically review the appropriate size of the Board.

Independent Directors : It is the policy of the Company that where possible at least one of the directors will be non-employees and non-officers of the Company and will otherwise meet the appropriate standards of independence. In determining independence, the Board will consider the definition of "independence" under the relevant rules and regulations of the Securities and Exchange Commission and the stock exchange or market on which the Company's shares are listed for trading. The Company acknowledges that as a small, venture stage company it may be difficult to attract independent directors and may operate with non-independent directors.

-7-

Management Directors : The Board anticipates that the Company's Chief Executive Officer/President will be nominated annually to serve on the Board. The Board may also nominate other members of management.

Chair; Lead Independent Director : The Board will periodically appoint a Chair. Both independent and management directors, including the Chief Executive Officer/President, are eligible for appointment as the Chair. The Chair or one of the independent directors (if the Chair is not an independent director) may be designated by the Board to be the "lead independent director." The lead independent director may periodically help schedule or conduct separate meetings of the independent directors.

Selection of Board Nominees : The Board will be responsible for the selection of candidates for the nomination of all Board members. The Nominating and Corporate Governance Committee, if constituted, shall recommend candidates for election to the Board.

Board Membership Criteria: The Board's policy is to encourage selection of directors who will contribute to the Company's overall corporate goals of responsibility to its shareholders and other stakeholders.

Independent Directors' Discussions : It is the policy of the Board that the independent directors, under the direction of the lead independent director, may meet separately without management directors at least once per year to discuss such matters as the independent directors may consider appropriate. The Company's independent auditors, outside legal counsel, finance staff, legal staff and other employees may be invited to attend.

Access to Information : The Board encourages the presentation at meetings by managers who can provide additional insight into matters being discussed. The Company's executive management will afford each Board member full access to the Company's records, information, employees, outside auditors and outside counsel.

Board Committees : The Board shall have three standing committees: the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee. From time to time, the Board may establish additional committees.

Committee Member Selection : The Board will designate the members and Chairs of each committee. The membership of the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee shall meet all applicable criteria of the rules and regulations of the Securities and Exchange Commission and the stock exchange or market on which the Company's shares are listed for trading.

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Committee Functions : The Board of Directors shall adopt a Committee Charter for each of the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee which shall provide the structure and guiding principles of such committees. The full authority and responsibilities of each committee are fixed by resolution of the full Board of Directors and the Committee Charter. The following is a brief summary of the authority of each committee:

    • Audit Committee . Review the Company's financial procedures and controls; monitor financial reporting and select and meet with independent auditors.
    • Compensation Committee . Review and approve compensation arrangements for the Company's executive officers and awards under employee benefit plans, including the Company's stock option plans.
    • Nominating and Corporate Governance Committee . Recommend to the full Board candidates for election to the Board and changes to governance policies.

Insider Trading Compliance : The Board of Directors shall adopt an Insider Trading Compliance Program for the purposes of educating and ensuring the all subject persons are fully aware of the rules and regulations of the Securities and Exchange Commission with respect to insider trading. The Company will, within reason, endeavor to make the Company's outside legal counsel available to Company personnel with respect to any insider trading questions or issues.

Financial Reporting; Legal Compliance and Ethics : The Board's governance and oversight functions do not relieve the Company's executive management of its primary responsibility of preparing financial statements which accurately and fairly present the Company's financial results and condition, the responsibility of each executive officer to fully comply with applicable legal and regulatory requirements or the responsibility of each executive officer to uphold the ethical principles adopted by the Company.

Corporate Communications : Management has the primary responsibility to communicate with investors, the press, employees and other stakeholders on a timely basis and to establish policies for such communication.

Access to Outside Counsel : The Company will, within reason, endeavor to provide Company personnel access to the Company's outside legal counsel with respect to any matter which may arise relating to the Company's Code of Business Conduct and Ethics and Compliance Program.

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of Altus Explorations Inc. of our report dated March 22, 2004, except for Note 10 dated March 31, 2004 which appears in the Registrant's Form 10-KSB for the period ended December 31, 2003.

 

/s/ Malone & Bailey, PLLC

Malone & Bailey, PLLC
www.malone-bailey.com
Houston, Texas

April 12, 2004

CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Milton Cox, certify that:

1. I have reviewed this annual report on Form 10-KSB of Altus Explorations Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to date a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this annual report;

4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's control over financial reporting; and.

5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls and procedures for financial reporting.

Date: April 13, 2004

/s/ Milton Cox
Signature:  Milton Cox
Title:   President and Director
(Principal Executive Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Don Sytsma, certify that:

1. I have reviewed this annual report on Form 10-KSB of Altus Explorations Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to date a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this annual report;

4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's control over financial reporting; and.

5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls and procedures for financial reporting.

Date: April 13, 2004

/s/ Don Sytsma
Signature:  Don Sytsma
Title:   Chief Financial Officer, Treasurer and Director
(Principal Financial Officer and Principal Accounting Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Altus Explorations Inc. (the "Company") on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Milton Cox, the President and Director (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: April 13, 2004

Milton Cox

/s/ Milton Cox ______________________
President and Director
(Principal Executive Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Altus Explorations Inc. (the "Company") on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Don Sytsma, the Chief Financial Officer, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: April 13, 2004

Don Sytsma

/s/ Don Sytsma ______________________
Chief Financial Officer, Treasurer and Director
(Principal Financial Officer and Principal Accounting Officer)