Note 1 Basis of Presentation

Presentation

Magellan Petroleum Corporation (the “Company” or “Magellan” or “MPC” or “we” or “us”) is an independent energy company engaged in the acquisition, exploration, exploitation, development, production and sale of crude oil and natural gas. At December 31, 2011, MPC had two reporting segments: (1) 100% equity interest in its subsidiary, Magellan Petroleum Australia Limited (“MPAL”) headquartered in Brisbane, Australia and (2) 100% membership interest in Nautilus Poplar, LLC (“NP”), based in Denver, Colorado. Please refer to Note 4 for more details on corporate restructuring.

The accompanying unaudited condensed consolidated financial statements include the accounts of MPC and its subsidiaries, MPAL and NP. All intercompany transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended December 31, 2011, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2011.

All amounts presented are in United States dollars, unless otherwise noted. Amounts expressed in Australian currency are indicated as “AUD.”

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Use of Estimates

Certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes have been made.  Although management believes these estimates are reasonable, changes in facts and circumstances or discovery of new information may result in revised estimates. Actual results could differ from those estimates.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired net of the fair value of liabilities assumed in an acquisition. ASC 350, Intangibles—Goodwill and Other (ASC 350) requires that intangible assets with indefinite lives, including goodwill, be evaluated on an annual basis for impairment or more frequently if events occur or circumstances change that could potentially result in impairment.  The goodwill impairment test requires the allocation of goodwill and all other assets and liabilities to reporting units. The Company has determined that it has two reporting units, MPAL and NP. Historical goodwill in the amount of $4,020,704 relates to the acquisition of additional ownership interest in MPAL and $674,500 relates to the acquisition of a majority ownership stake in NP prior to the corporate restructuring as set forth in Note 4.  The Company performs its goodwill test annually for both MPAL (during June) and NP (during October), or more often if circumstances require.  No goodwill impairment was deemed necessary for the six months ended December 31, 2011 and 2010, respectively.

Securities available for sale

The Company classifies securities that have a readily determinable fair value and are not bought and held principally for the purpose to be sold in the near term, as securities available for sale. As of December 31, 2011, and June 30, 2011, securities available for sale consisted of a stock investment. Unrealized holding gains and losses related to securities available for sale are excluded from earnings and reported in accumulated other comprehensive income until realized. Net unrealized losses related to these securities was $91,102 for the six months ended December 31, 2011, and is included in accumulated other comprehensive income.