Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 18, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | PEDEVCO CORP | |
Entity Central Index Key | 1,141,197 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 49,768,007 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 732 | $ 1,138 |
Accounts receivable | 300 | 406 |
Accounts receivable - oil and gas | 1,098 | 208 |
Accounts receivable - related party | 21 | 19 |
Prepaid expenses and other current assets | 158 | 150 |
Total current assets | 2,309 | 1,921 |
Oil and gas properties: | ||
Oil and gas properties, subject to amortization, net | $ 60,964 | $ 58,767 |
Oil and gas properties, not subject to amortization, net | ||
Total oil and gas properties, net | $ 60,964 | $ 58,767 |
Other assets | 85 | 85 |
Investments - cost method | 4 | 4 |
Total assets | 63,362 | 60,777 |
Current liabilities: | ||
Accounts payable | 3,390 | 3,380 |
Accrued expenses | 7,183 | 2,178 |
Accrued expenses - related parties | 182 | 187 |
Revenue payable | 423 | 475 |
Convertible notes payable - Bridge Notes, net of premiums of $113,000 and $113,000, respectively | $ 588 | 588 |
Notes payable - Secured Promissory Notes, net of debt discount of $-0- and $7,800,000 respectively | 625 | |
Notes payable - Secured Promissory Notes - related party, net of debt discount of $-0- and $1,713,000 respectively | 134 | |
Total current liabilities | $ 11,766 | 7,567 |
Long-term liabilities: | ||
Notes payable - Secured Promissory Notes, net of debt discount of $7,885,000 and $1,861,000, respectively | 23,277 | 19,420 |
Notes payable - Secured Promissory Notes - related party, net of debt discount of $1,705,000 and $409,000 respectively | 5,033 | 4,721 |
Notes payable - Subordinated - related party | 9,192 | 8,918 |
Notes payable - other | 4,925 | 4,925 |
Asset retirement obligations | 208 | 189 |
Total liabilities | $ 54,401 | $ 45,740 |
Shareholders' equity: | ||
Series A convertible preferred stock, $0.001 par value, 100,000,000 shares authorized, 66,625 and 66,625 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | ||
Common stock, $0.001 par value, 200,000,000 shares authorized; 46,986,497 and 45,236,497 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | $ 47 | $ 45 |
Additional paid-in-capital | 97,663 | 97,163 |
Accumulated deficit | (88,690) | (82,112) |
Noncontrolling interests | (59) | (59) |
Total shareholders' equity | 8,961 | 15,037 |
Total liabilities and shareholders' equity | $ 63,362 | $ 60,777 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Convertible notes payable - Bridge Notes, net of premium | $ 113,000 | $ 113,000 |
Notes payable - Secured Promissory Notes, net of debt discount | 0 | 7,800,000 |
Notes payable - Secured Promissory Notes - related party, net of debt discount | 0 | 1,713,000 |
Notes payable - Secured Promissory Notes, net of discounts | 7,885,000 | 1,861,000 |
Notes payable - Secured Promissory Notes - related party, net of debt discount | $ 1,705,000 | $ 409,000 |
Stockholders' equity: | ||
Series A convertible preferred stock, par value | $ 0.001 | $ 0.001 |
Series A convertible preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Series A convertible preferred stock, shares issued | 66,625 | 66,625 |
Series A convertible preferred stock, shares outstanding | 66,625 | 66,625 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 46,986,497 | 45,236,497 |
Common stock, shares outstanding | 46,986,497 | 45,236,497 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenue: | ||
Oil and gas sales | $ 582 | $ 1,488 |
Operating expenses: | ||
Lease operating costs | 264 | 361 |
Exploration expense | 117 | 315 |
Selling, general and administrative expense | $ 1,416 | 2,451 |
Impairment of oil and gas properties | 1,337 | |
Depreciation, depletion, amortization and accretion | $ 1,277 | 1,045 |
Total operating expenses | $ 3,074 | 5,509 |
Gain on sale of oil and gas properties | 275 | |
Gain on sale of equity investment | 566 | |
Loss from equity method investments | (91) | |
Operating loss | $ (2,492) | (3,271) |
Other income (expense): | ||
Interest expense | $ (4,086) | (3,143) |
Other income | 40 | |
Gain on debt extinguishment | 2,192 | |
Total other expense | $ (4,086) | (911) |
Net loss | $ (6,578) | $ (4,182) |
Less: net loss attributable to non-controlling interests | ||
Net loss attributable to PEDEVCO common shareholders | $ (6,578) | $ (4,182) |
Net loss per common share: | ||
Basic and diluted | $ (0.14) | $ (0.12) |
Weighted average number of common shares outstanding: | ||
Basic and diluted | 46,851,882 | 35,586,758 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (6,578) | $ (4,182) |
Net loss attributable to noncontrolling interests | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation expense | $ 502 | $ 1,391 |
Impairment of oil and gas properties | 1,337 | |
Depreciation, depletion and amortization | $ 1,277 | 1,045 |
Gain on sale of oil and gas properties | (275) | |
Gain on sale of equity investment | $ (566) | |
Interest expense deferred and capitalized in debt restructuring | $ 1,490 | |
Gain on debt extinguishment | $ (2,192) | |
Loss from equity method investments | 91 | |
Amortization of debt discount | $ 2,194 | $ 1,504 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 106 | |
Accounts receivable - oil and gas | $ (178) | $ 1,048 |
Accounts receivable - oil and gas - related party | 21 | |
Accounts receivable - related party | $ (2) | 56 |
Prepaid expenses and other current assets | (8) | (24) |
Accounts payable | 118 | (2,239) |
Accrued expenses | 730 | (399) |
Accrued expenses - related parties | (5) | 161 |
Revenue payable | $ (52) | (4) |
Advances for joint operations | (657) | |
Net cash used in operating activities | $ (406) | (3,884) |
Cash Flows From Investing Activities: | ||
Cash paid for drilling costs | (200) | |
Proceeds from sale of equity investment | 500 | |
Net cash provided by investing activities | 300 | |
Cash Flows From Financing Activities: | ||
Repayment of notes payable | (673) | |
Repayment of notes payable - related party | (100) | |
Net cash used in financing activities | (773) | |
Net decrease in cash | $ (406) | (4,357) |
Cash at beginning of period | 1,138 | 6,675 |
Cash at end of period | 732 | 2,318 |
Cash paid for: | ||
Interest | $ 109 | $ 2,634 |
Income Taxes | ||
Noncash Investing and Financing Activities: | ||
Issuance of restricted common stock for services upon vesting maturity | $ 2 | $ 1 |
Issuance of common stock to Bridge Note holders due to conversion | $ 102 | |
Accrual of costs for oil and gas properties | $ 3,582 | |
Changes in estimates of asset retirement obligations | $ 5 | $ 15 |
Accounts receivable from purchase of oil and gas property | 1,678 | |
Accounts payable from purchase of oil and gas property | 751 | |
Note receivable sold for purchase of oil and gas properties | 5,000 | |
Notes payable - Subordinated assumed as part of purchase of oil and gas properties | 8,353 | |
Issuance of Series A Convertible Preferred Stock for purchase of oil and gas properties | 28,402 | |
Issuance of common stock for purchase of oil and gas properties | $ 2,734 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | NOTE 1 BASIS OF PRESENTATION The accompanying consolidated financial statements of PEDEVCO CORP. (PEDEVCO or the Company), have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and the rules of the Securities and Exchange Commission (SEC) and should be read in conjunction with the audited financial statements and notes thereto contained in PEDEVCOs latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate disclosures contained in the audited financial statements for the most recent fiscal year, as reported in the Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 29, 2016, have been omitted. The Companys consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and subsidiaries in which the Company has a controlling financial interest. All significant inter-company accounts and transactions have been eliminated in consolidation. |
2. DESCRIPTION OF BUSINESS
2. DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | NOTE 2 DESCRIPTION OF BUSINESS PEDEVCOs primary business plan is engaging in the acquisition, exploration, development and production of oil and natural gas shale plays in the United States, with a secondary focus on conventional oil and natural gas plays. The Companys principal operating properties are located in the Wattenberg, Wattenberg Extension, and Niobrara formation in the Denver-Julesburg Basin (the D-J Basin) in Weld County, Colorado all of which properties are owned directly by the Company or through its wholly-owned subsidiary, Red Hawk Petroleum, LLC (Red Hawk). The Company plans to focus on the development of shale oil and gas assets held by the Company in the U.S., including its oil and gas working interests in the Wattenberg and Wattenberg Extension in the D-J Basin (the D-J Basin Asset), which the Company acquired in March 2014 from Continental Resources, Inc. (Continental and the Continental Acquisition). Additionally, with the acquisition of additional oil and gas working interests in February 2015 from Golden Globe Energy (US), LLC (GGE) (the GGE Acquisition), the Company significantly increased the working interests owned by the Company in the D-J Basin Asset. The Company previously owned a 20% interest in Condor Energy Technology, LLC (Condor). Condors operations consisted primarily of working interests in oil and gas leases in the Niobrara shale formation located in the D-J Basin in Weld County, Colorado. The remaining interest in Condor is owned by an affiliate of MIE Holdings Corporation (MIE Holdings, Hong Kong Stock Exchange code: 1555.HK). MIE Holdings is one of the largest independent upstream onshore oil companies in China. In addition, the Company made a direct investment into the drilling and completion of the first three wells that Condor drilled and completed. In February 2015, the Company divested its interest in Condor and the wells in which it had a direct working interest. The Company plans to seek additional shale oil and gas and conventional oil and gas asset acquisition opportunities in the U.S. through utilizing its strategic relationships and technologies that may provide the Company a competitive advantage in accessing and exploring such assets. Some or all of these assets may be acquired by existing subsidiaries or equity investees, or other entities that may be formed at a future date. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation and Principles of Consolidation. Equity Method Accounting for Joint Ventures Non-Controlling Interests. Use of Estimates in Financial Statement Preparation. Cash and Cash Equivalents. Concentrations of Credit Risk. Sales to one customer comprised 74% of the Companys total oil and gas revenues for the three months ended March 31, 2016. Sales to one customer comprised 84% of the Companys total oil and gas revenues for the three months ended March 31, 2015. The Company believes that, in the event that its primary customers are unable or unwilling to continue to purchase the Companys production, there are a substantial number of alternative buyers for its production at comparable prices. Accounts Receivable. Bad Debt Expense. Equipment. Oil and Gas Properties, Successful Efforts Method. Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties and subject to impairment review. For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the related well costs are expensed as dry holes. Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above. Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field by field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves. Impairment of Long-Lived Assets. Asset Retirement Obligations. The following table describes changes in our asset retirement obligations during the three months ended March 31, 2016 and 2015 (in thousands): 2016 2015 Asset retirement obligations at January 1, $ 189 $ 89 Accretion expense 5 18 Obligations incurred for acquisition 19 87 Obligations settled - assets sold - (1) Changes in estimates (5) (15) Asset retirement obligations at March 31, $ 208 $ 178 Revenue Recognition. Income Taxes. Stock-Based Compensation. The Company estimates volatility by considering the historical stock volatility. The Company has opted to use the simplified method for estimating expected term, which is generally equal to the midpoint between the vesting period and the contractual term. Loss per Common Share. Fair Value of Financial Instruments. Fair Value Measurement As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value. Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Recently Issued Accounting Pronouncements. Subsequent Events. |
4. OIL AND GAS PROPERTIES
4. OIL AND GAS PROPERTIES | 3 Months Ended |
Mar. 31, 2016 | |
Oil and Gas Property [Abstract] | |
OIL AND GAS PROPERTIES | NOTE 4 OIL AND GAS PROPERTIES The following table summarizes the Companys oil and gas activities by classification for the three months ended March 31, 2016: December 31, March 31, 2015 Additions Disposals Transfers 2016 Oil and gas properties, subject to amortization $ 64,655 $ 3,455 $ - $ - $ 68,110 Oil and gas properties, not subject to amortization - - - - - Asset retirement costs 137 14 - - 151 Accumulated depreciation, depletion and impairment (6,025) (1,272 ) - - (7,297 ) Total oil and gas assets $ 58,767 $ 2,197 $ - $ - $ 60,964 The depletion recorded for production on proved properties for the three months ended March 31, 2016 and 2015, amounted to $1,272,000 and $1,027,000, respectively. The Company did not record any impairment expense for unproved leasehold costs for the three months ended March 31, 2016. The Company recorded impairment expense of $1,337,000 for all unproved leasehold costs for the three months ended March 31, 2015, as a result of a revision of managements plans to our re-leasing program due to the decrease in commodity pricing. The Company did not record any impairment of properties subject to amortization for the three months ended March 31, 2016 or 2015. Acquisition of Properties from Dome Energy, Inc. During the three months ended March 31, 2016, net additions to oil and gas properties subject to amortization were $3,455,000, comprised of additions to existing properties of $9,000 and completion costs of $3,446,000 of non-operating well costs which included eight wells drilled by a third party operator. On November 19, 2015, the Company entered into a Letter Agreement with Dome Energy pursuant to which Dome Energy agreed to acquire the Companys interests in these eight wells and fully fund the Companys proportionate share of all the corresponding working interest owner expenses with respect to these eight wells. The Company assigned its interests in these wells to Dome Energy effective on November 18, 2015, and Dome Energy assumed all amounts owed for the drilling and completion costs, corresponding to these interests acquired from the Company. On March 29, 2016, the Company entered into a Settlement Agreement with Dome Energy, pursuant to which Dome Energy re-conveyed to the Company the interests assigned to Dome Energy by the Company on November 18, 2015, with the Company becoming responsible for its proportionate share of all the working interest owner expenses, and having the right to receive all corresponding revenues with respect to these eight wells, from the initial production date of the wells. As part of this transaction, the Company also settled $659,000 of outstanding payables with Dome Energy that was accounted for as a purchase price adjustment to the value of the oil and gas properties acquired. The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired (in thousands): Assets Acquired Accounts receivable oil and gas $ 712 Oil and gas properties, subject to amortization 3,582 Total assets $ 4,294 Liabilities Assumed Accounts payable $ (4,275 ) Asset retirement obligation (19 ) Total liabilities $ (4,294 ) Acquisition of Properties from Golden Globe Energy (US) LLC. On February 23, 2015 (the Closing), the Companys wholly-owned subsidiary, Red Hawk, completed the acquisition of approximately 12,977 net acres of oil and gas properties and interests in 53 gross wells located in the Denver-Julesburg Basin, Colorado (the GGE Acquired Assets) from GGE. As consideration for the acquisition of the GGE Acquired Assets, the Company (i) issued to GGE 3,375,000 restricted shares of the Companys common stock and 66,625 restricted shares of the Companys newly-designated Amended and Restated Series A Convertible Preferred Stock (the Series A Preferred) (see Note 11), (ii) assumed approximately $8.35 million of subordinated notes payable from GGE, and (iii) provided GGE with a one-year option to acquire the Companys interest in its Kazakhstan opportunity for $100,000 payable upon exercise of the option pursuant to a Call Option Agreement. The effective date of the transaction was January 1, 2015, with the exception of all revenues and refunds attributable to GGEs approximate 49.7% interest in each of the Loomis 2-1H, Loomis 2-3H and Loomis 2-6H wells, which revenues and refunds the Company owns from the date of first production, and which were approximately $467,000 through January 1, 2015. The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired (in thousands): Purchase price on February 23, 2015 Fair value of common stock issued $ 2,734 Fair value of Series A Preferred stock issued 28,402 Assumption of subordinated notes payable 8,353 Kazakhstan option issued 5,000 Total purchase price $ 44,489 Fair value of net assets at February 23, 2015 Accounts receivable oil and gas $ 1,578 Oil and gas properties, subject to amortization 43,562 Prepaid expenses and other assets 100 Total assets 45,240 Accounts payable (664) Asset retirement obligations (87) Total liabilities (751) Net assets acquired $ 44,489 Disposition of Oil and Gas Properties In February 2015, the Company sold to MIE Jurassic Energy Corp. (MIEJ) all of the direct interests in approximately 945 net acres and interests in three wells owned by the Company, resulting in a gain on sale of oil and gas properties of $275,000. |
5. OTHER CURRENT ASSETS
5. OTHER CURRENT ASSETS | 3 Months Ended |
Mar. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
OTHER CURRENT ASSETS | NOTE 5 OTHER CURRENT ASSETS On September 11, 2013, the Company entered into a Shares Subscription Agreement (SSA) to acquire an approximate 51% ownership in Asia Sixth Energy Resources Limited (Asia Sixth), which held an approximate 60% ownership interest in Aral Petroleum Capital Limited Partnership (Aral), a Kazakhstan entity. In August 2014 the SSA and related documents were restructured (the Aral Restructuring), in connection with which the Company received a promissory note in the principal amount of $10.0 million from Asia Sixth (the A6 Promissory Note), which would be converted into a 10.0% interest in Caspian Energy, Inc. (Caspian Energy), an Ontario, Canada company listed on the NEX board of the TSX Venture Exchange, upon the consummation of the Aral Restructuring. We entered into an agreement with GGE to convey 50% of our interests in Asia Sixth in connection with the Continental Acquisition in March 2014. The Aral Restructuring was consummated on May 20, 2015, upon which date the A6 Promissory Note was converted into 23,182,880 shares of common stock of Caspian Energy. In addition, on the date of conversion of the A6 Promissory Note, Mr. Frank Ingriselli, our Chairman and former Chief Executive Officer, was appointed as a non-executive director of Caspian Energy. In connection with our GGE Acquisition, on February 23, 2015, we provided GGE a one-year option to acquire our interest in Caspian Energy for $100,000 payable upon exercise of the option recorded in prepaid expenses and other current assets. As a result, the carrying value of the 23,182,880 shares of common stock of Caspian Energy which were issued upon conversion of the A6 Promissory Note at December 31, 2015 was $100,000. The option provided to GGE was not exercised and expired on February 23, 2016, resulting in the Company retaining ownership of the 23,182,880 shares of Caspian Energy. As noted in Footnote 16 Subsequent Events |
6. ACCOUNTS RECEIVABLE
6. ACCOUNTS RECEIVABLE | 3 Months Ended |
Mar. 31, 2016 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | NOTE 6 ACCOUNTS RECEIVABLE On November 19, 2015, the Company entered into a Letter Agreement with Dome Energy pursuant to which Dome Energy agreed to acquire the Companys interests in eight wells drilled by a third party operator and fully fund the Companys proportionate share of all the corresponding working interest owner expenses with respect to these eight wells. The Company assigned its interests in these wells to Dome Energy effective November 18, 2015, and Dome Energy assumed all amounts owed for the drilling and completion costs of $3,851,000 corresponding to these interests acquired from the Company. Dome Energy also agreed to pay an additional $250,000 to the Company in the event the anticipated merger with Dome Energy was not consummated. In connection with the assignment of these well interests to Dome Energy, Dome Energy issued a contingent promissory note to the Company, dated November 19, 2015 (the Dome Promissory Note), with a principal amount of $250,000, which note was due and payable to the Company on December 29, 2015, upon the termination of the anticipated merger with Dome Energy. To guarantee payment of the Dome Promissory Note, Dome Energy deposited $250,000 into an escrow account and as of March 31, 2016, the Company has recorded a receivable of $250,000 related to this transaction, included in accounts receivable as of March 31, 2016 (and collected on April 28, 2016). On March 24, 2015, Red Hawk and Dome Energy entered into a Service Agreement (the Service Agreement), pursuant to which Red Hawk agreed to provide certain human resource augmentation and accounting services to Dome, of which $156,000 remained due and payable by Dome to Red Hawk as of December 31, 2015. On March 29, 2016, the Company entered into a Settlement Agreement (the Settlement Agreement) with Dome Energy and certain of its affiliated entities. Dome Energy agreed to settle and resolve a number of outstanding matters including that Service Agreement. The Settlement Agreement provided for the termination and cancellation of the Service Agreement, with Dome Energy agreeing to pay to Red Hawk $50,000 on May 2, 2016, in full satisfaction of the amounts due under the Service Agreement, with all remaining amounts owed forgiven by Red Hawk. As of March 31, 2016, the receivable due from Dome Energy totaled $300,000, and was comprised of the $250,000 escrow deposit described above and the $50,000 owed to Red Hawk as a part of the Settlement Agreement. As of December 31, 2015, the receivable due from Dome Energy totaled $406,000. During the three months ended March 31, 2016, the receivable due from Dome Energy was reduced by $106,000 as a result of the Settlement Agreement, and was recognized as bad debt expense in selling, general and administrative expense on the Companys income statement. |
7. EQUITY METHOD INVESTMENTS
7. EQUITY METHOD INVESTMENTS | 3 Months Ended |
Mar. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENTS | NOTE 7 EQUITY METHOD INVESTMENTS Condor Energy Technology, LLC In October 2011, the Company formed a new subsidiary, Condor. The Company owned 20% of Condor and a subsidiary of MIE Holdings owned 80%. The Company accounted for its 20% ownership in Condor using the equity method. The Company evaluated its relationship with Condor to determine if Condor was a variable interest entity (VIE) as defined in ASC 810-10, and whether the Company was the primary beneficiary of Condor, in which case consolidation with the Company would be required. The Company determined that Condor qualified as a VIE, however, the Company concluded that MIE Holdings was the primary beneficiary as a result of being in control of the Board and its ability to control the funding commitments to Condor. Settlement Agreement with MIEJ On February 19, 2015, the Company entered into a Settlement Agreement with MIEJ, the 80% partner in Condor and the lender under the Amended and Restated Secured Subordinated Promissory Note, dated March 25, 2013, in the principal amount of $6,170,065 (the MIEJ Note). The Settlement Agreement and related agreements for the disposition of the Companys interest in Condor contained the following terms: ● The Company and MIEJ entered into a new Amended and Restated Secured Subordinated Promissory Note, dated February 19, 2015 (the New MIEJ Note), with a principal amount of $4.925 million, extinguishing the original MIEJ Note; ● The Company sold to MIEJ (i) its 20% interest in Condor, and (ii) all of the direct interests in approximately 945 net acres and working interests in three wells separately owned by the Company; ● The Companys employees were removed as officers of Condor, and the Company agreed to assist with Condors accounting and audits and perform joint interest billing accounting for a monthly fee of $55,000 for January 2015, $0 for February 2015, $10,000 for March 2015 and $30,000 per month thereafter, pro-rated for partial months, for up to six months; ● MIEJ paid $500,000 to the Companys senior loan investors as a principal reduction on the Companys senior notes; ● Condor forgave approximately $1.8 million in previous working interest expenses related to the drilling and completion of certain wells operated by Condor that the Company owed to Condor; ● The Company paid MIEJ $100,000 as a principal reduction under the original MIEJ Note; and ● The parties fully released each other from every claim, demand or cause of action arising on or before February 19, 2015. The net effect of these transactions with MIEJ was to reduce approximately $9.4 million in aggregate liabilities due from the Company to MIEJ and Condor to $4.925 million, which was the new principal amount of the New MIEJ Note. The following table reflects the activity related to the Companys settlement with MIEJ (in thousands): Items Issued / Sold New MIEJ note $ 4,925 Note receivable with Condor 1,272 Oil and gas property operated by Condor 620 Total items issued or sold 6,817 Items Received Accrued liabilities 3,280 Original debt with MIE net of cash payments 6,070 Proceeds from cash payments made by MIE to RJ Credit and BAM 500 Total items received 9,850 Net gain on settlement $ 3,033 The following table presents the allocation of the gain on settlement with MIEJ described above (in thousands): Allocated Value Historical Cost Gain on Settlement Oil and gas properties $ 895 $ 620 $ 275 Investment in Condor 1,838 1,272 566 Note payable MIEJ 7,117 4,925 2,192 Total $ 9,850 $ 6,817 $ 3,033 The Company recognized a gain on sale of equity investments during the year ended December 31, 2015 in the amount of $566,000. |
8. NOTES PAYABLE
8. NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 8 NOTES PAYABLE Note Purchase Agreement and Sale of Secured Promissory Notes On March 7, 2014, the Company entered into a $50 million financing facility (the Notes Purchase Agreement) between the Company, BRe BCLIC Primary, BRe BCLIC Sub, BRe WNIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, and RJ Credit LLC (RJC), as investors (collectively, the Investors), and BAM Administrative Services LLC, as agent for the Investors (the Agent). The Company issued the Investors Secured Promissory Notes in the aggregate amount of $34.5 million (the Initial Notes or Senior Notes) and provided for an additional $15.5 million available under the financing agreement to fund the Companys future drilling costs to be evidenced by notes with substantially similar terms as the Initial Notes (the Subsequent Notes). On March 19, 2015, BRe WNIC 2013 LTC Primary transferred a portion of its Initial Note to HEARTLAND Bank, and effective April 1, 2015, BRe BCLIC Primary transferred its Initial Note to Senior Health Insurance Company of Pennsylvania (SHIP), with each of HEARTLAND Bank and SHIP becoming an Investor for purposes of the discussion below. The Initial Notes bear interest at the rate of 15% per annum, payable monthly in arrears, on the first business day of each month beginning April 1, 2014 (in connection with the Initial Notes), provided that upon the occurrence of an event of default, the Initial Notes bear interest at the lesser of 30% per annum and the maximum legal rate of interest allowable by law. The Initial Notes are due and payable on March 7, 2017 (the Maturity Date), and may be repaid in full without premium or penalty at any time. Additionally, the Company is required on the third business day of each month, commencing on April 1, 2014, to prepay the Initial Notes in an amount equal to the lesser of (a) the outstanding principal amount of the Initial Notes or (b) twenty-five percent (25%) of the aggregate of all net revenues actually received by us and our subsidiaries for the immediately preceding calendar month (or such pro rata portion of the first month the payment is required). The Initial Notes also provide that RJC is to be repaid (i) accrued interest, only after all of the other Investors are repaid any accrued interest due and (ii) principal, only after all of the other Investors are repaid the full amount of principal due under their Initial Notes, and (iii) that any funding in connection with Subsequent Notes will be made solely by RJC. See below and Note 16 for information related to recent agreements to defer certain principal and interest payments. The amount outstanding under the Initial Notes is secured by a first priority security interest in all of the Companys subsidiaries, assets, property, real property, intellectual property, securities and proceeds therefrom, granted in favor of the Agent for the benefit of the Investors. Additionally, the Company granted a mortgage and security interest in all of its real property located in the state of Colorado and the state of Texas. Additionally, the Companys obligations under the Initial Notes, Note Purchase Agreement and related agreements were guaranteed by its wholly-owned and majority-owned direct and indirect subsidiaries. On April 24, 2015, certain of the Investors in our Initial Notes agreed to defer certain mandatory principal repayments and interest payments that would otherwise be payable in the months of May and June 2015, with such deferred amounts to be used by us solely to renew, extend, re-lease or otherwise acquire leases which will then become additional collateral under the Initial Notes. The aggregate principal and interest that was deferred was approximately $354,000, which amount has been added to the principal due under the Initial Notes as of July 31, 2015 and is due upon maturity ($320,000 of which was expensed as additional interest expense). The Company was also charged an additional deferral fee of $354,000, the amount of the principal and interest deferred under this agreement, which was added to the principal and due upon maturity. As consideration for the deferral, on September 10, 2015, the Company granted warrants exercisable for an aggregate of 349,111 shares of our common stock to the Investors participating in the deferral. Each warrant has a 3-year term and is exercisable on a cashless basis at an exercise price of $1.50 per share. The fair value of these warrants of approximately $40,000 was recorded as additional deferred financing costs. On August 28, 2015, the Company entered into agreements with the holders of the Senior Notes to (i) defer until the maturity date of the Senior Notes the mandatory principal payments that would otherwise be due and payable by the Company on payment dates occurring during the six month period of August 1, 2015 through January 31, 2016, (ii) HEARTLAND Bank agreed to change the frequency of payment of accrued interest and mandatory principal repayments from monthly to semi-annually, with the next interest payment due February 1, 2016 and the next mandatory principal repayment due August 3, 2016, and with the Company agreeing to place an amount equal to 1/6th of the semi-annual principal and interest payments due into a sinking fund starting in February 2016 which the Company shall pay to HEARTLAND Bank every six months when due and owing, (iii) RJC agreed to defer all interest payments otherwise due and payable by the Company to RJC during the period commencing on August 1, 2015 through January 31, 2016 (the Waiver Period), which deferred interest is added to principal each month during the Waiver Period, (iv) certain other holders agreed to (a) defer until the maturity date of their Senior Notes 12/17ths of the interest payments that would otherwise be due and payable by the Company to them on payment dates occurring during the six month period of August 1, 2015 through January 31, 2016, and (b) have the Company pay in cash 5/17ths of such interest payments per month, with all deferred interest being added to principal each month until the maturity date of the Senior Notes, and (v) SHIP, BRe BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub and RJC increased the interest rate under their Senior Notes from 15% to 17% per annum on all outstanding principal under their Senior Notes during the Waiver Period. These deferrals agreed upon with our Investors (the August-January Deferrals), reduced the Companys monthly cash interest payments and mandatory principal repayments from approximately $600,000 per month prior to these agreements, to approximately $100,000 per month during the Waiver Period. As additional consideration for these agreements and related note amendments and deferrals, on September 10, 2015, the Company issued warrants exercisable on a cash-only basis for an aggregate of 1,201,004 shares to the lenders, proportionately based on their individual principal. The warrants have a three year term and are exercisable on a cash-only basis at a price of $0.75 per share. The fair value of these 1,201,004 warrants of approximately $120,000 was recorded as additional deferred financing costs. In addition, in the event the aggregate total of principal and interest deferred in connection with the August-January deferrals exceeds $900,000 over the Waiver Period, within thirty days of February 1, 2016, and subject to NYSE MKT additional listing approval, the Company will proportionately grant additional warrants such that the total aggregate number of shares of Company common stock exercisable under all warrants granted will equal the total principal and interest deferred by such Investors divided by $0.75, provided that such obligation has been further extended as discussed below. As of December 31, 2015, the amount of deferred interest and deferred principal was $2,527,000 and $519,000, respectively. The number of warrants to be issued as of December 31, 2015 was approximately 3.1 million. As the fair value of the warrants is minimal, due to the exercise price being out-of-the money, as of December 31, 2015, no liability was accrued. These warrants will not be issued and were settled as part of the debt restructuring, discussed in more detail in the subsequent events footnote. The Company did not borrow any proceeds under the Notes Purchase Agreement during the year ended December 31, 2015 and the three months ended March 31, 2016. As of March 31, 2016, there was approximately $13.5 million gross ($11.0 million net, after origination-related fees and expenses) available to draw down under Subsequent Notes from RJC. During the three months ended March 31, 2016, there were no payments made to reduce the outstanding principal due under the Initial Notes. All debt discount amounts are amortized using the effective interest rate method. The amount of the debt discount reflected on the accompanying balance sheet as of March 31, 2016 was $9,706,000. Amortization of debt discount and interest expense, related to the Initial Notes and the first advance, was $2,194,000 and $1,477,000 for the three months ended March 31, 2016, respectively. As a result of the issuance of common and preferred shares in the acquisition of the assets from GGE in 2015, GGE became a related party of the Company. 2016 Senior Note Deferrals On January 29, 2016, the Company entered into a Letter Agreement (the Letter Agreement) with the Investors and the Agent. The Letter Agreement extended by one (1) month, through February 29, 2016, the deferral of the payment of interest and principal due under the Senior Notes (the Deferral Extension). Specifically, pursuant to the Letter Agreement, (i) all Investors agreed to further defer until the maturity date of their Senior Notes the mandatory principal payments that would otherwise be due and payable by the Company to them on payment dates occurring through February 29, 2016, (ii) HEARTLAND Bank agreed to change the next scheduled semi-annual interest payment due from February 1, 2016 to March 1, 2016 (with interest due and payable thereafter on a semi-annual basis) and to change the next mandatory principal repayment due date to September 3, 2016, and the Company agreed to place an amount equal to 1/6th of the semi-annual principal and interest payments due into a sinking fund which the Company shall pay to HEARTLAND Bank every six months when due and owing, and (iii) SHIP (as successor-in-interest to BRe BCLIC Primary), BRe BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, and RJC agreed to (a) defer until the maturity date of their Senior Notes and the junior note held by RJC (the RJC Junior Note) all of the interest payments that would otherwise be due and payable by the Company to them in February 2016; (b) return the interest rate under each of their Senior Notes to 15% per annum, and the interest rate under the RJC Junior Note to 12% cash pay per annum, effective January 31, 2016; and (c) delay the issuance of any Subsequent Warrants issuable pursuant thereto to within 30 days of March 1, 2016, subject to NYSE MKT additional listing approval. On March 7, 2016, the Company entered into a Letter Agreement, dated March 1, 2016 (the March Letter Agreement), with SHIP, BRe BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, and RJC (collectively, the Original Lenders), and the Agent, which extended the Deferral Extension by one (1) month, through March 31, 2016. Pursuant to the March Letter Agreement, the Original Lenders agreed to (i) further defer until the maturity date of their Senior Notes the mandatory principal payments that would otherwise be due and payable by the Company to them on payment dates occurring through March 31, 2016, (ii) defer until the maturity date of their Senior Notes and the RJC Junior Note all of the interest payments that would otherwise be due and payable by the Company to them in March 2016, with all interest amounts deferred being added to principal on the first business day of the month following the month in which such deferred interest is accrued; and (iii) delay the issuance of any Subsequent Warrants issuable pursuant thereto to within 30 days of April 1, 2016, subject to NYSE MKT additional listing approval. For the three-month period ending March 31, 2016, principal and interest deferred amounted to $1,577,000. An aggregate of approximately $4,415,000 in total interest and principal payments has been deferred pursuant to these agreements through March 2016, in which event warrants exercisable solely on a cash basis for approximately an additional 4.0 million shares of Company common stock at an exercise price of $0.75 per share will be granted pro rata to the Investors (other than to HEARTLAND Bank) in May 2016. These warrants will not be issued and were settled as part of the debt restructuring, discussed in more detail in the subsequent events footnote. The Deferral Extension was further extended in April 2016 as described below under Note 15 - Subsequent Events. Bridge Note Financing As of March 31, 2016, the Company had Bridge Notes with an aggregate principal amount of $475,000 remain outstanding, plus accrued interest of $130,000 and additional payment-in-kind (PIK) of $48,000. The aggregate principal and accrued and unpaid interest and PIK amounts are available for conversion into common stock pursuant to the terms of the Bridge Notes into common stock of the Company, subject to no more than 19.99% of the Companys outstanding common stock on the date the Second Amended Notes were entered into. Upon a conversion, the applicable holder shall receive that number of shares of common stock as is determined by dividing the Conversion Amount by a conversion price (the Conversion Price) as follows: (A) prior to June 1, 2014, the Conversion Price was $2.15 per share; and (B) following June 1, 2014, the denominator used in the calculation described above is the greater of (i) 80% of the average of the closing price per share of the Companys publicly-traded common stock for the five (5) trading days immediately preceding the date of the conversion notice provided by the holder; and (ii) $0.50 per share. Additionally, each Amended Bridge Investor entered into a Subordination and Intercreditor Agreement in favor of the Agent, subordinating and deferring the repayment of the Bridge Notes until full repayment of certain senior notes. The Subordination and Intercreditor Agreements also prohibit the Company from repaying the Bridge Notes until certain senior notes have been paid in full, except that we are allowed to repay the Bridge Notes from net proceeds received from the sale of common or preferred stock (i) in calendar year 2014 if such net proceeds received in such calendar year exceeds $35,000,000, (ii) in calendar year 2015 if such net proceeds received in such calendar year exceeds $50,000,000, and (iii) in calendar year 2016 if such net proceeds actually received in such calendar year exceeds $50,000,000. The interest expense related to these notes for the three months ended March 31, 2016 and 2015 was $14,000 and $15,000, respectively. The unamortized debt premium on the Convertible Bridge Notes as of March 31, 2016 and December 31, 2015, was $113,000. MIE Jurassic Energy Corporation On February 14, 2013, PEDCO entered into a Secured Subordinated Promissory Note, as amended on March 25, 2013 and July 9, 2013 (the MIEJ Note, as amended through December 31, 2014) with MIEJ. In February 2015, the Company and PEDCO entered into a Settlement Agreement with MIEJ (the MIEJ Settlement Agreement). As part of the MIEJ Settlement Agreement, the Company entered into a new Secured Subordinated Promissory Note, which extinguished the original MIEJ Note, and reduced the principal amount owed from $6.17 million to $4.925 million (the New MIEJ Note). As of March 31, 2016, the amount outstanding under the New MIEJ Note was $4,925,000. The Company recognized a gain on debt extinguishment during the three months ended March 31, 2015 related to these transactions of $2,192,000. The New MIEJ Note has an interest rate of 10.0%, with no interest due until maturity, is secured by all of the Companys assets, and is subordinated to the Secured Promissory Notes. MIEJ also agreed to subordinate its note up to an additional $60 million of new senior lending, with any portion of new senior lending in excess of this amount requiring to be paid first to MIEJ until the New MIEJ Note is paid in full. Further, for every $20 million in new senior lending the Company raises, MIEJ shall be paid all interest and fees accrued to date on the New MIEJ Note. The New MIEJ Note is due and payable on March 8, 2017, subject to automatic extensions upon the occurrence of a Long Term Financing or PEDEVCO Senior Lending Restructuring (each as defined below). On a onetime basis, the Secured Promissory Notes may be refinanced by a new loan (Long-Term Financing) by one or more third party replacement lenders (Replacement Lenders), and in such event the Company shall undertake commercially reasonable best efforts to cause the Replacement Lenders to simultaneously refinance both the Secured Promissory Notes and the New MIEJ Note as part of such Long-Term Financing. If the Replacement Lenders are unable or unwilling to include the New MIEJ Note in such financing, then the Long-Term Financing may proceed without including the New MIEJ Note, and the New MIEJ Note shall remain in place and shall be automatically subordinated, without further consent of MIEJ, to such Long-Term Financing. Furthermore, upon the occurrence of a Long-Term Financing, the maturity of the New MIEJ Note is automatically extended to the same maturity date of the Long-Term Financing, but to no later than March 8, 2020. Additionally, in connection with the Long-Term Financing: ● The Long-Term Financing must not exceed $95 million; ● The Company must make commercially reasonable best efforts to include adequate reserves or other payment provisions whereby MIEJ is paid all interest and fees accrued on the New MIEJ Note commencing as of March 8, 2017 and annually thereafter, and to allow for quarterly interest payments starting March 31, 2017 of not less than 5% per annum on the outstanding balance of the New MIEJ Note, plus a one-time payment of accrued interest (not to exceed $500,000) as of March 31, 2017; and ● Commencing on March 8, 2017, MIEJ shall have the right to convert the balance of the New MIEJ Note into the Companys common stock at a price equal to 80% of the average closing price per share of our stock over the then previous 60 days, subject to a minimum conversion price of $0.30 per share. MIEJ shall not be permitted to convert if the conversion would result in MIEJ holding more than 19.9% of the Companys outstanding common stock without approval from the Companys shareholders, which the Company has agreed to seek at its 2016 annual shareholder meeting or, if not approved then, at its 2017 annual shareholder meeting. In the event the Secured Promissory Notes are not refinanced, restructured or extended by the existing Investors, the maturity of both the New MIEJ Note and the Secured Promissory Notes may be extended to no later than March 8, 2019, without requiring the consent of MIEJ. However, (i) any such maturity extension of the New MIEJ Note will give MIEJ the right to convert the note into our common stock as described above, commencing on March 8, 2017, and (ii) such extension agreement must provide that MIEJ is paid all interest and fees accrued on the New MIEJ Note as of March 8, 2018. The New MIEJ Note may be prepaid any time without penalty, and if we repay the New MIEJ Note on or before December 31, 2015, 20% of the principal of the New MIEJ Note amount will be forgiven by MIEJ, and if we repay the New MIEJ Note on or before December 31, 2016, 15% of the principal of the New MIEJ Note amount will be forgiven by MIEJ. The interest expense related to this note for the three months ended March 31, 2016 and 2015 was $124,000 and $120,000, respectively. For financial reporting purposes, MIEJ was considered a related party for all periods presented prior to the MIEJ Settlement Agreement signed in February 2015. After that date, MIEJ is no longer considered a related party. Related Party Financings Subordinated Note Payable Assumed In 2015, the Company assumed approximately $8.35 million of subordinated note payable from GGE in the acquisition of the GGE Acquired Assets, which amount is outstanding as of March 31, 2016. The lender under the subordinated note payable is RJC, which is one of the lenders under the Senior Notes and is an affiliate of GGE. The note is due and payable on December 31, 2017, and bears interest at a rate of 12% per annum (24% upon an event of default). The accrued interest is payable on a monthly basis in cash. The assumed note payable is subordinate and subject to the terms and conditions of the Senior Notes, as well as any future secured indebtedness from a lender with an aggregate principal amount of at least $20,000,000. Should the Company repay the Senior Notes or replace them with secured indebtedness from a lender with an aggregate principal amount of at least $20,000,000, RJC agreed to further amend the subordinated note payable to adjust the frequency of interest payments or to eliminate the payments and replace them with a single payment of the accrued interest to be paid at maturity. The subordinated note payable contains customary representations, warranties, covenants and requirements for the Company to indemnify RJC and its affiliates, related parties and assigns. The note payable also includes various covenants (positive and negative) binding the Company, including requiring that the Company provide RJC with quarterly (unaudited) and annual (audited) financial statements, restricting our creation of liens and encumbrances, or sell or otherwise disposing, the collateral under the note. On April 24, 2015, RJC agreed to defer all mandatory principal repayments and interest payments that would otherwise be payable to RJC in May and June 2015 under the subordinated note, with such deferred amounts to be used solely to renew, extend, re-lease or otherwise acquire leases which will then become additional collateral under the subordinated note. The aggregate principal and interest that was deferred was approximately $170,000, which amount has been capitalized and added to the principal due under the subordinated note effective July 31, 2015 and due upon maturity. As consideration for the deferral, we granted warrants exercisable for an aggregate of 113,237 shares of our common stock to RJC (which are included in the aggregate total of 349,111 shares issuable upon exercise of warrants issued to the Investors as described above under Note Purchase Agreement and Sale of Secured Promissory Notes in this Note 8 above). The warrant has a 3 year term and will be exercisable on a cashless basis at an exercise price of $1.50 per share, with a grant date fair value of $13,000. On August 28, 2015, the Company entered into agreements with RJC pursuant to which (i) RJC agreed to defer until the maturity date of the subordinated note the mandatory principal payments that would otherwise be due and payable by the Company on payment dates occurring during the six month period of August 1, 2015 through January 31, 2016, and (ii) RJC agreed to defer all interest payments otherwise due and payable by the Company to RJC under the subordinated note during the Waiver Period, which deferred interest is added to principal each month during the Waiver Period. As of December 31, 2015, the total amount of deferred interest and principal related to this note was $565,000. As additional consideration for these agreements and related note amendments and deferrals, on September 10, 2015, the Company granted RJC warrants exercisable on a cash-only basis for an aggregate of 265,241 shares (which are included in the aggregate total of 1,201,004 shares issuable upon exercise of warrants issued to the Investors as described above under Note Purchase Agreement and Sale of Secured Promissory Notes in this Note 8 above). The warrants have a three year term and are exercisable on a cash-only basis at a price of $0.75 per share. In addition, in the event the aggregate total of principal and interest deferred by all Investors in connection with the August-January Deferrals exceeds $900,000 over the Waiver Period as described above under Note Purchase Agreement and Sale of Secured Promissory Notes, within thirty days of February 1, 2016, and subject to NYSE MKT additional listing approval, the Company will proportionately grant additional warrants such that the total aggregate number of shares of Company common stock exercisable under all warrants granted to the Investors will equal the total principal and interest deferred by such Investors divided by $0.75, provided such obligation has been extended as discussed below. As of December 31, 2015, the total amount (for all Investors) of deferred interest and deferred principal was $2,527,000 and $519,000, respectively. These warrants will not be issued and were settled as part of the debt restructuring, discussed in more detail in the subsequent events footnote. The interest expense related to this note for the three months ended March 31, 2016 and 2015 was $276,000 and $222,000, respectively. 2016 RJC Subordinated Note Deferrals On January 29, 2016 and March 7, 2016, the Company entered into agreements with RJC to defer until maturity the payment of interest and principal due under the subordinated note through March 31, 2016, return the interest rate to 12% per annum effective January 31, 2016, and delay the issuance of any Subsequent Warrants issuable pursuant thereto to within 30 days of April 1, 2016, subject to NYSE MKT additional listing approval. For the three-month period ended March 31, 2016, interest deferred amounted to $273,000. An aggregate of approximately $838,000 in total interest has been deferred pursuant to these agreements through March 2016, The deferral period was further extended in April 2016 as described below under Subsequent Events. |
9. INCOME TAXES
9. INCOME TAXES | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 9 INCOME TAXES Due to the Companys net losses, there was no provision for income taxes for the three months ended March 31, 2016 and 2015. The difference between the income tax expense of zero shown in the statement of operations and pre-tax book net loss times the federal statutory rate of 34% is principally due to the increase in the valuation allowance. Deferred income tax assets as of March 31, 2016 and December 31, 2015 are as follows (in thousands): For the Three Months Ended March 31, For the Year Ended December 31, 2016 2015 Deferred Tax Assets (Liabilities) Difference in depreciation, depletion, and capitalization methods oil and natural gas properties $ 120 $ 1,863 Net operating losses 1,766 4,131 Impairment oil and natural gas properties - (1,122 ) Other 110 753 Total deferred tax asset 1,996 5,625 Less: valuation allowance (1,996 ) (5,625) Total deferred tax assets $ - $ - In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at March 31, 2016. The net change in the total valuation allowance for the three months ended March 31, 2016 was an increase of $1,996,000. The Companys policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of March 31, 2016, the Company did not have any significant uncertain tax positions or unrecognized tax benefits. The Company did not have associated accrued interest or penalties, nor were any interest expense or penalties recognized during the period from February 9, 2011 (Inception) through March 31, 2016. As of March 31, 2016, the Company had gross net operating loss carryforwards (NOLs) of approximately $117,670,000 of which $49,922,000 are subject to limitations for federal and state tax purposes. If not utilized, these losses will begin to expire beginning in 2032 and 2023, respectively, for both federal and state purposes. Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the Code), as amended, as well as similar state provisions. In general, an ownership change as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders or public groups. Due to the impact of temporary and permanent differences between the book and tax calculations of net loss, the Company experiences an effective tax rate above the federal statutory rate of 34%. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 COMMITMENTS AND CONTINGENCIES Office Lease In July 2012, the Company entered into a non-cancelable lease agreement with an initial term of two years ending in July 2014, which has been extended for an additional two years with the term now ending in July 2016, for its corporate office space located in Danville, California. The obligation under this lease for the remainder of 2016 is $17,000. In September 2014, the Company entered into a lease agreement with a term of five years ending on March 1, 2020, which location served as the Companys operations office space in Houston, Texas. Effective April 1, 2016, the Company terminated this lease agreement and issued the landlord 700,000 shares of common stock valued at $161,000, with no further obligations due thereunder (see further discussion in subsequent events footnote). Leasehold Drilling Commitments The Companys oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production. In the D-J Basin Asset, 330 net acres are due to expire during the nine months remaining in 2016 (4,297 net acres did expire during the three months ended March 31, 2016), 584 net acres expire in 2017, 392 net acres expire in 2018, 127 net acres expire in 2019, and 1,290 net acres expire thereafter. Where the Company is not able to drill and complete a well before lease expiration, the Company may seek to extend leases where able. In March 2015, the Company fully impaired its unproved leasehold costs based on managements revised re-leasing program, however, it continues to retain its rights to the unexpired leases. Other Commitments On December 18, 2015, a complaint was filed against Red Hawk, our wholly-owned subsidiary, in the District Court, County of Weld, State of Colorado (Case Number: 2015CV31079) (the Court), pursuant to which Liberty Oilfield Services, LLC (Liberty) made various claims against Red Hawk in connection with certain completion services provided by Liberty to Red Hawk in November and December 2014, and accrued in accounts payable as of December 31, 2014. The complaint alleges causes of action for foreclosure of lien, breach of contract, quantum meruit and account stated, and seeks payment of amounts allegedly owed, pre- and post-judgment interest, attorneys fees and court costs in connection with Red Hawks alleged failure to pay Liberty approximately $2.9 million in fees due for completion services provided by Liberty. On May 12, 2016, the Company and Liberty entered into a settlement agreement, pursuant to which the Company paid to Liberty $750,000 and issued 2,450,000 fully-vested shares of the Companys restricted common stock, valued at $588,000, based on the market price on the grant date, as full settlement of all amounts due for the services previously rendered, for which the Company owed approximately $2.6 million. As of December 31, 2015 and March 31, 2016, the Company had accrued $2,620,000 in accounts payable. As a result of the settlement, the Company will recognize a gain on settlement of payables of $1,282,000 during the quarter ended June 30, 2016. Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, other than the Liberty matter described above, we are not currently a party to any material legal proceeding. In addition, other than the Liberty matter, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us. As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters. Although the Company provides no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Companys financial condition or results of operations. |
11. SHAREHOLDERS' EQUITY
11. SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE 11 SHAREHOLDERS EQUITY PREFERRED STOCK At March 31, 2016, the Company was authorized to issue 100,000,000 shares of preferred stock, $0.001 par value per share, of which 66,625 shares have been designated Series A Convertible Preferred Stock (the Series A Preferred). On February 23, 2015, the Company issued 66,625 Series A Preferred to GGE as part of the consideration paid for the GGE Acquired Assets. The fair value of the Series A Preferred was $28,402,000 based on a calculation using the binomial lattice model. See Note 14. The 66,625 shares of Series A Preferred issued to GGE are redeemable and contingently convertible in 4 tranches as follows: (i) 15,000 shares in Tranche One; (ii) 15,000 shares in Tranche Two; (iii) 11,625 shares in Tranche Three; and (iv) 25,000 shares in Tranche Four. In addition, the 66,625 shares of Series A Preferred issued to GGE originally had the following features: ● a liquidation preference senior to all of the Companys common stock equal to $400 per share; ● a dividend, payable annually, of 10% of the liquidation preference; ● voting rights on all matters, with each share having 1 vote; and ● a conversion feature at GGEs option, which must be approved by a majority of the shareholders of the Company which will allow the Series A Preferred to be converted into shares of the Companys common stock on a 1,000:1 basis. However, following the October 7, 2015 approval of the Company shareholders of the issuance of shares of common stock upon the conversion of the Series A Preferred, the Series A Preferred features have been modified as follows: ● the Series A Preferred ceased accruing dividends and all accrued and unpaid dividends have been automatically forfeited and forgiven; and ● the liquidation preference of the Series A Preferred has been reduced to $0.001 per share from $400 per share. GGE was also subject to a lock-up provision that prohibits it from selling the shares of common stock through the public markets for less than $1 per share (on an as-converted to common stock basis) until February 23, 2016, and in no event may GGE convert shares of Series A Preferred stock if upon such conversion it would beneficially own more than 9.99% of our outstanding common stock or voting stock. The Series A Preferred ceased being redeemable on November 23, 2015, per the Series A Certification of Designations, if the Company did not repurchase any shares within nine months of the initial Series A issuance, the Company lost the right to redeem any of the Series A Preferred and the holder also lost the right to force any redemption. As of March 31, 2016 and December 31, 2015, there were 66,625 shares of the Companys Series A Preferred outstanding. COMMON STOCK At March 31, 2016, the Company was authorized to issue 200,000,000 shares of its common stock with a par value of $0.001 per share. During the three months ended March 31, 2016, the Company issued shares of common stock or restricted common stock as follows: On January 7, 2016, the Company issued 1,750,000 shares of its restricted common stock with a fair value of $385,000, based on the market price on the date of issuance, to certain of its employees, including 600,000 shares to its Chairman and then Chief Executive Officer, Frank C. Ingriselli, 600,000 shares to its President and then Chief Financial Officer, Michael L. Peterson, and 550,000 shares to its Executive Vice President and General Counsel, Clark R. Moore, all pursuant to the Companys 2012 Amended and Restated Equity Incentive Plan and in connection with the Companys 2015 annual equity incentive compensation review process. 50% of the shares vest on the six month anniversary of the grant date, 30% vest on the twelve month anniversary of the grant date and 20% vest on the eighteen month anniversary of the grant date, all contingent upon the recipients continued service with the Company. As of March 31, 2016, there were 46,986,497 shares of the common stock outstanding. Stock-based compensation expense recorded related to the vesting of restricted stock during the three months ended March 31, 2016 and 2015 was $371,000 and $853,000, respectively. The remaining unamortized stock-based compensation expense at March 31, 2016 related to restricted stock was $762,000. Vesting Agreements In connection with our entry into the reorganization agreement with Dome Energy, each of Mr. Ingriselli, Mr. Peterson, and Mr. Moore, our executive officers, entered into Vesting Agreements on May 21, 2015 (the 2015 Vesting Agreements) which delayed the vesting of all restricted common stock they held which was subject to vesting prior to the Dome Energy reorganization being consummated (the 2015 Delayed Vesting) until the earlier of (A) the 2nd business day following either (x) the closing of the Dome Energy reorganization, or (y) our public disclosure of the termination of the reorganization, or, (B) if the Dome reorganization did not close on or before December 29, 2015, then January 7, 2016. Because the contemplated merger with Dome Energy did not close on or before December 29, 2015, the vesting of shares of restricted common stock held by Messrs. Ingriselli, Peterson and Moore subject to the 2015 Delayed Vesting was scheduled to occur on January 7, 2016 in accordance with the terms of such 2015 Vesting Agreements. However, in connection with our entry into the Agreement and Plan of Merger and Reorganization entered into by the Company, White Hawk and GOM Holdings, LLC (GOM) on December 29, 2015 (as amended to date, the GOM Merger Agreement and the transactions contemplated therein, the GOM Merger), on December 29, 2015, as amended on January 6, 2016, each of Messrs. Ingriselli, Peterson and Moore entered into new Vesting Agreements with the Company (as amended, the Vesting Agreements), pursuant to which they each individually agreed that the future vesting of restricted common stock held by such officers from January 1, 2016 through June 1, 2016 (the Delay Period), including all restricted common stock that was subject to vesting on January 7, 2016 pursuant to the terms of 2015 Vesting Agreements, were delayed until the 2nd trading day following the Companys public announcement of the Vesting Event, defined as the later to occur of the receipt of (A) shareholder approval of (i) the issuance of the shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock issuable upon the closing of the GOM Merger Agreement, (ii) an increase of shares available for issuance under the Companys 2012 Equity Incentive Plan equal to 12.0% of the Companys issued and outstanding capital stock (calculated post-closing), and (iii) such other matters that are required to be approved by the shareholders of the Company pursuant to applicable rules and requirements of the SEC and NYSE MKT or which in the reasonable determination of the Company, shall be approved by the stockholders of the Company; and (B) NYSE MKT approval of the listing of the Company upon the conversion of the Series B Convertible Preferred Stock into common stock, if and as necessary pursuant to applicable NYSE MKT rules and regulations, upon which Vesting Event all vesting with respect to such shares shall be accelerated and all such shares shall be fully vested (the Acceleration) (each as defined in the Vesting Agreements). The aggregate number of shares of restricted common stock subject to the Delay Period is 1,354,000 shares (collectively, the Subject Shares). The Acceleration will occur even if the executives are not then employees or directors of the Company on such date. Notwithstanding the above, in the event the GOM Merger Agreement is terminated or the GOM Merger is not consummated by June 1, 2016 (unless otherwise agreed upon in writing by the parties to the GOM Merger Agreement), all the Subject Shares will vest on the 2nd trading day following the Companys public disclosure of the termination of the GOM Merger (in the event the GOM Merger Agreement is terminated prior to June 1, 2016), or, in the event the GOM Merger is not terminated by, or consummated by, June 1, 2016, on June 1, 2016, the original vesting terms for all future unvested stock will be reinstated to the terms in effect prior to the parties entry into the Vesting Agreements. Notwithstanding the above, nothing in the Vesting Agreements amends or waives any acceleration of vesting of unvested restricted stock or options currently provided under any executive officers current employment agreement with the Company, which provides for acceleration upon termination of such executives employment under certain circumstances detailed therein. The Company and each of Messrs. Ingriselli, Peterson and Moore further amended their Vesting Agreements in April 2016 as discussed below in Subsequent Events. |
12. STOCK OPTIONS AND WARRANTS
12. STOCK OPTIONS AND WARRANTS | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
STOCK OPTIONS AND WARRANTS | NOTE 12 STOCK OPTIONS AND WARRANTS Blast 2003 Stock Option Plan and 2009 Stock Incentive Plan As of March 31, 2016, 3,424 shares of common stock granted under the 2003 Stock Option Plan and 2009 Stock Incentive Plan approved when the Company was known as Blast Energy Services, Inc. (Blast) remain outstanding and exercisable at a weighted average exercise price of $35.05. No options were issued under these plans during the three months ended March 31, 2016. 2012 Incentive Plan On July 27, 2012, the shareholders of the Company approved the 2012 Equity Incentive Plan (the 2012 Incentive Plan), which was previously approved by the Board of Directors on June 27, 2012, and authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the 2012 Incentive Plan, to the Companys employees, officers, directors and consultants. The 2012 Incentive Plan was amended on June 27, 2014 and October 7, 2015 to increase by 5,000,000 and 3,000,000, respectively, the number of shares of common stock reserved for issuance under the Plan. A total of 10,000,000 shares of common stock are eligible to be issued under the 2012 Incentive Plan, of which 6,507,660 shares have been issued as restricted stock, 3,477,000 shares are subject to issuance upon exercise of issued and outstanding options, and 15,340 remain available for future issuance as of March 31, 2016. PEDCO 2012 Equity Incentive Plan As a result of the July 27, 2012 merger by and between the Company, Blast Acquisition Corp., a wholly-owned Nevada subsidiary of the Company (MergerCo), and Pacific Energy Development Corp., a privately-held Nevada corporation (PEDCO) pursuant to which MergerCo was merged with and into PEDCO, with PEDCO continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company, in a transaction structured to qualify as a tax-free reorganization (the Merger), the Company assumed the PEDCO 2012 Equity Incentive Plan (the PEDCO Incentive Plan), which was adopted by PEDCO on February 9, 2012. The PEDCO Incentive Plan authorized PEDCO to issue an aggregate of 1,000,000 shares of common stock in the form of restricted shares, incentive stock options, non-qualified stock options, share appreciation rights, performance shares, and performance units under the PEDCO Incentive Plan. As of March 31, 2016, options to purchase an aggregate of 310,137 shares of the Companys common stock and 551,670 shares of the Companys restricted common stock have been granted under this plan (all of which were granted by PEDCO prior to the closing of the merger with the Company, with such grants being assumed by the Company and remaining subject to the PEDCO Incentive Plan following the consummation of the merger). The Company does not plan to grant any additional awards under the PEDCO Incentive Plan. Options On January 7, 2016, the Company granted options to purchase an aggregate of 1,660,000 shares of common stock to certain of its consultants and employees at an exercise price of $0.22 per share, including an option to purchase 280,000 shares to its Chairman and Chief Executive Officer (prior to subsequent title change) Frank C. Ingriselli, an option to purchase 300,000 shares to its President and Chief Financial Officer (prior to subsequent title change) Michael L. Peterson, and an option to purchase 280,000 shares to its Executive Vice President and General Counsel Clark R. Moore, all pursuant to the Companys 2012 Amended and Restated Equity Incentive Plan and in connection with the Companys 2014 annual equity incentive compensation review process. The options have terms of five years and fully vest in January 2018. 50% vest six months from the date of grant, 30% vest one year from the date of grant and 20% vest eighteen months from the date of grant, all contingent upon the recipients continued service with the Company. The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $183,000. Variables used in the Black-Scholes option-pricing model for the options issued include: (1) a discount rate of 1.61%, (2) expected term of 3.5 years, (3) expected volatility of 69 %, and (4) zero expected dividends. During the three months ended March 31, 2016 and 2015, the Company recognized stock option expense of $131,000 and $145,000, respectively. The remaining amount of unamortized stock options expense at March 31, 2016, was $171,000. The intrinsic value of outstanding and exercisable options at March 31, 2016 was $-0- and $-0-, respectively. The intrinsic value of outstanding and exercisable options at December 31, 2015 was $-0- and $-0-, respectively. Option activity during the three months ended March 31, 2016 was: Weighted Average Weighted Remaining Average Contract Number of Exercise Term Shares Price (# years) Outstanding at January 1, 2016 3,058,890 $ 0.80 4.8 Granted 1,660,000 0.22 5.0 Exercised - - - Forfeited and cancelled - - - Outstanding at March 31, 2016 4,718,890 $ 0.59 4.6 Exercisable at March 31, 2016 2,770,340 $ 0.74 4.7 Warrants During the three months ended March 31, 2016 and 2015, the Company recognized warrant expense of $-0- and $393,000, respectively. The remaining amount of unrecognized warrant expense at March 31, 2016 was $-0-. The intrinsic value of outstanding as well as exercisable warrants at March 31, 2016 and December 31, 2015 was $-0- and $-0-, respectively. Warrant activity during the three months ended March 31, 2016 was: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at January 1, 2016 7,803,282 $ 1.78 3.0 Granted - - Exercised - - Forfeited and cancelled - - Outstanding at March 31, 2016 7,803,282 $ 1.78 2.7 Exercisable at March 31, 2016 7,803,282 $ 1.78 2.7 |
13. RELATED PARTY TRANSACTIONS
13. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 13 RELATED PARTY TRANSACTIONS Note Amendments and Warrant Issuances to RJC See Note 8 for a discussion of certain amendments to the Senior Note and subordinated note held by RJC. See Note 8 for a discussion of certain warrants issued to RJC by the Company in connection with the amendment of the Senior Note and subordinated note held by RJC. GGE Acquisition As a result of the 66,625 restricted shares of the Companys Series A Convertible Preferred issued to GGE which can be converted into shares of the Companys common stock on a 1,000:1 basis as described in greater detail in Note 11 above) and the appointment by GGE, and election, of a GGE representative to the Companys Board of Directors, GGE became a related party to the Company as of that date. The following table reflects the related party amounts for GGE included in the March 31, 2016 balance sheet (in thousands): As of March 31, 2016 Accounts receivable $ 21 Current deferred financing costs - Long-term deferred financing costs - Accrued expenses (182) Current notes payable-Secured Promissory Notes, net of discount Long-term notes payable-Secured Promissory Notes, net of discount (14,588) Net assets $ (14,749) |
14. FAIR VALUE
14. FAIR VALUE | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | NOTE 14 FAIR VALUE As defined in our accounting policy on the fair value of financial instruments, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The following table sets forth by level within the fair value hierarchy our financial instruments that were accounted for at fair value as of March 31, 2016 (in thousands): Fair Value Measurements At March 31, 2016 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total Carrying Value (Level 1) (Level 2) (Level 3) Series A Convertible Preferred Stock $ - $ - $ 28,402 $ 28,402 The Company believes there is no active market or significant other market data for the Series A Preferred as it is held by a limited number of closely held entities, therefore the Company has determined it should use Level 3 inputs. The Series A Convertible Preferred was valued using the binomial lattice model of which the significant assumptions were expected term and expected volatility. The binomial lattice model used a probablistic approach in which the Company assigned percentages to each scenario based on the chance of repayment. The percentages used were as follows: the non-repayment scenario was assigned a 25% probability and the repayment scenario was assigned a 75% probability. |
15. SUBSEQUENT EVENTS
15. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 15 SUBSEQUENT EVENTS Stock Issuance to Houston Lease Landlord On April 5, 2016, the Company issued 700,000 shares of Companys common stock to the Companys Houston office landlord in connection with the termination of the Companys Houston office lease, valued at $161,000, based on the market price on the date of grant. Consulting Agreement and Separation Agreement In connection with the Companys contemplated merger with GOM, and the Companys efforts to reduce its general and administrative expenses, the Companys Chairman and then-current Chief Executive Officer, Frank C. Ingriselli, agreed to retire from the Company and step down from the offices of Chief Executive Officer and Executive Chairman of the Company and all of its subsidiaries, effective April 30, 2016. Mr. Ingriselli continues as the Non-Executive Chairman of the Companys Board of Directors, and continues to work with the Company in a transitional consulting capacity for a period of three (3) months commencing May 1, 2016 (the Transition Period) through his wholly-owned consulting firm, Global Ventures Investments Inc. (GVEST), pursuant to a Consulting Agreement dated April 25, 2016, entered into by and between the Company and GVEST (the GVEST Consulting Agreement). Pursuant to the Consulting Agreement, through GVEST, Mr. Ingriselli provides the Company with oil and gas development and strategic consulting services through the Transition Period in exchange for a lump sum payment of $150,000. In addition, the Company and Mr. Ingriselli entered into an Employee Separation and Release dated April 25, 2016 (the Separation Agreement), pursuant to which Mr. Ingriselli agreed to (i) waive all severance benefits to which he is entitled under his Executive Employment Agreement dated June 10, 2011, as amended to date (the Ingriselli Employment Agreement), including, but not limited to, waiver of any payments by the Company to Mr. Ingriselli of a lump sum payment equal to up to four (4) years salary and 30% bonus, and continued medical benefits for up to four (4) years, in the event of Mr. Ingrisellis termination under certain circumstances, (ii) waive any and all accrued and unpaid vacation time, sick time and paid time off, equal in value to approximately $58,000, and (iii) fully-release the Company from all claims, in exchange for the Company agreeing to (x) fully accelerate the vesting of all of Mr. Ingrisellis unvested options exercisable for 391,000 shares of Company common stock, (y) allow Mr. Ingriselli to transfer all 1,496,500 shares of his unvested restricted Company common stock to GVEST and then fully accelerate the vesting of the same, and (z) extend the exercise period for all of Mr. Ingrisellis options to purchase Company common stock for a period of five (5) years from the date of Mr. Ingrisellis termination of employment with the Company. Vesting Agreements On April 25, 2016, the Company and each of Mr. Michael L. Peterson and Mr. Clark R. Moore, the Companys Executive Vice President and General Counsel, entered into Amended and Restated Vesting Agreements (the Amended Vesting Agreements), which amend and restate in their entirety those certain Vesting Agreements entered into by the Company and each of Messrs. Peterson and Moore on December 29, 2015, as amended January 6, 2016 (the December Vesting Agreements). Pursuant to the Amended Vesting Agreements, the Company agreed, effective April 28, 2016, to fully accelerate the vesting of all unvested restricted Company common stock which each of Messrs. Peterson and Moore had delayed pursuant to the December Vesting Agreements, which vesting had been voluntarily delayed for the benefit of the Company by each executive since May 2015, and reinstate the original remaining vesting schedules with respect to all other stock grants received by the Company prospectively. As a result of the Amended Vesting Agreements, on April 28, 2016, Mr. Peterson vested an aggregate of 481,000 shares of restricted Company common stock, and Mr. Moore vested into an aggregate of 354,000 shares of restricted Company common stock. Senior Debt Restructuring On May 12, 2016 (the Closing Date), the Company entered into an Amended and Restated Note Purchase Agreement (the Amended NPA), with SHIP, BRe BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, Heartland Bank, BHLN-Pedco Corp. (BHLN), BBLN-Pedco Corp. (BBLN), and RJC (together with BHLN and BBLN, the Tranche A Investors) (collectively, the Lenders), and the Agent, as agent for the Lenders. The Amended NPA amended and restated the Senior Notes, in which the Company issued new Senior Secured Promissory Notes to each of the Lenders (collectively, the Tranche B Notes) in a transaction that qualifies as a troubled debt restructuring. RJC is also a party to the RJC The Amended NPA amends the Senior Notes as follows: · Creates new Tranche A Notes, in substantially the same form and with similar terms as the Tranche B Notes, except as discussed below, consisting of a term loan issuable in tranches with a maximum aggregate principal amount of $25,960,000, with borrowed funds accruing interest at 15% per annum, and maturing on May 11, 2019 (the Tranche A Maturity Date) (the Tranche A Notes, and together with the Tranche B Notes, the New Senior Notes); · The Company will capitalize all accrued and unpaid interest under the Tranche B Notes as a term loan with a current aggregate outstanding principal balance of $39,064,530. The Tranche B Notes mature on June 11, 2019 except for The Tranche B Note issued to RJC which matures July 11, 2019. · Amends the provisions of the Senior Notes which required mandatory prepayments from our revenues, replacing them with a Net Revenue Sweep as described below; and · Provides that interest on the Tranche B Notes will continue to accrue at the rate of 15% per annum, but all accrued interest through December 31, 2017 shall be deferred until due and payable on the maturity date, with all interest amounts deferred being added to the principal of the Tranche B Notes on a monthly basis and that following December 31, 2017, all interest accrues and is paid monthly in arrears in cash to the Tranche B Note holders. The Tranche A Notes are substantially similar to the Tranche B Notes, except that such notes are senior to the Tranche B Notes, accrue interest until maturity and have priority to the payment of Monthly Net Revenues as discussed below. On the Closing Date, the Tranche A Investors loaned the Company their pro rata share of an aggregate of $6,422,124 (the Initial Tranche A Funding). The Initial Tranche A Funding net proceeds (also amounting to $6,422,124) are to be used by the Company to (i) fund up to $5.1 million due to a third party operator for drilling and completion expenses related to the acquired working interests in 8 wells from Dome Energy, (ii) pay up to $750,000 of the Companys past due payables to Liberty, (iii) pay $444,681 of unpaid interest payments due to Heartland Bank under its Tranche B Note through February 29, 2016, and (iv) pay fees and expenses incurred in connection with the transactions contemplated by the Amended NPA and related documents. Subject to the terms and conditions of the Amended NPA, the Company may request each Tranche A Investor, from time to time, to advance to the Company additional amounts of funding, provided that: (i) the Company may not request a Subsequent Tranche A Funding more than one time in any calendar month; (ii) Agent shall have received a written request from the Company at least 15 business days prior to the requested date of such advance (the Advance Request); (iii) no Event of Default or event that with the passage of time or the giving of notice, or both, would become an Event of Default (a Default) shall have occurred and be continuing or would result therefrom; and (iv) the Company shall provide to the Agent such documents, instruments, certificates and other writings as the Agent shall reasonably require in its sole and absolute discretion. The advancement of all or any portion of the Subsequent Tranche A Funding is in the sole and absolute discretion of the Agent and the Investors and no Investor is obligated to fund all or any part of the Subsequent Tranche A Funding. Each Subsequent Tranche A Funding shall be in a minimum amount of $500,000 and multiples of $100,000 in excess thereof. The aggregate amount of Subsequent Tranche A Fundings made by the Investors under the Amended NPA shall not exceed $18,577,876 and any Subsequent Tranche A Funding repaid may not be re-borrowed. In addition, subject to the terms and conditions of the Amended NPA, RJC has agreed to loan to the Company $240,000, within 30 days of the Closing Date and within 30 days of each of July 1, 2016, October 1, 2016 and January 1, 2017 (collectively, the RJC Fundings and collectively with the Investor Tranche A Fundings, the Fundings), provided that no Event of Default or Default shall have occurred and be continuing or would result therefrom. The aggregate amount of the RJC Fundings made by RJC under the Amended NPA shall not exceed $960,000 and any Funding repaid may not be re-borrowed. To guarantee RJCs obligation in connection with the RJC Fundings as required under the Amended NPA, GGE entered into a Share Pledge Agreement with the Company, dated May 12, 2016 (the GGE Pledge Agreement), pursuant to which GGE agreed to pledge an aggregate of 10,000 shares of the Companys Series A Convertible Preferred Stock held by GGE (convertible into 10,000,000 shares of Company common stock), which pledged shares are subject to automatic cancellation and forfeiture based on a schedule set forth in the GGE Share Pledge Agreement, in the event RJC fails to meet each of its RJC Funding obligations pursuant to the Amended NPA. As additional consideration for the entry into the Amended NPA and transactions related thereto, the Company has granted to BHLN and BBLN, warrants exercisable for an aggregate of 5,962,800 shares of common stock of the Company (the Investor Warrants). The warrants have a 3 year term, are transferrable, and are exercisable on a cashless basis at any time at $0.29 per share, subject to receipt of additional listing approval of such underlying shares of common stock from the NYSE MKT. The Investor Warrants include a beneficial ownership limitation that prohibits the exercise of the Investor Warrants to the extent such exercise would result in the holder, together with its affiliates, holding more than 9.9% of the Companys outstanding voting stock (the Blocker Provision). The estimated fair value of the Investor Warrants issued is approximately $660,000 based on the Black-Scholes option pricing model. Other than the Investor Warrants, no additional warrants exercisable for common stock of the Company are due, owing, or shall be granted to the Lenders pursuant to the Senior Notes. In addition, warrants exercisable for an aggregate of 349,111 shares of the Companys common stock at an exercise price of $1.50 per share and warrants exercisable for an aggregate of 1,201,004 shares of the Companys common stock at an exercise price of $0.75 per share previously granted by the Company to certain of the Lenders on September 10, 2015 in connection with prior interest payment deferrals have been amended and restated to provide that all such warrants are exercisable on a cashless basis and include a Blocker Provision (the Amended and Restated Warrants). Additionally, the Company also agreed to (a) provide to the Agent and the Investors a monthly projected general and administrative expense report (the Projected G&A) and a monthly comparison report of the Projected G&A provided for the preceding month, with an explanation of any variances, provided that in no event shall such variances exceed $150,000, and (B) pay to the Agent within 2 business days following the end of each calendar month all of the Companys oil and gas revenue received by the Company during such month (the Net Revenue Sweep), less (i) lease operating expenses, (ii) interest payments due to Investors under the New Senior Notes, (iii) general and administrative expenses not to exceed $150,000 per month unless preapproved by the Agent (the G&A Cap), and (iv) preapproved extraordinary expenses (together the Monthly Net Revenues). Amounts paid to the Agent through the Net Revenue Sweep are applied first to the repayment of principal and interest due under the Tranche A Notes until such notes are paid in full and then to the repayment of principal and interest amounts due under the Tranche B Notes. The amounts outstanding under the New Senior Notes are secured by a first priority security interest in all of the Companys and its subsidiaries assets, property, real property, intellectual property, securities and proceeds therefrom, granted in favor of the Agent for the benefit of the Lenders, pursuant to a Security Agreement and a Patent Security Agreement, each entered into as of March 7, 2014, as amended on May 12, 2016 (the Amended Security Agreement and Amended Patent Agreement, respectively). Additionally, the Agent, for the benefit of the Lenders, was granted a mortgage and security interest in all of the Companys and its subsidiaries real property as located in the State of Colorado and the State of Texas pursuant to (i) a Leasehold Deed of Trust, Fixture Filing, Assignment of Rents and Leases, and Security Agreements, dated March 7, 2014, as amended May 12, 2016, filed in Weld County and Morgan County, Colorado; and (ii) a Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production to be filed in Matagorda County, Texas (collectively, the Amended Mortgages). Additionally, the Companys obligations under the New Senior Notes, Amended NPA and related agreements were guaranteed by the Companys direct and indirect subsidiaries, Pacific Energy Development Corp., White Hawk Petroleum, LLC (White Hawk), Pacific Energy & Rare Earth Limited, Blackhawk Energy Limited, Pacific Energy Development MSL, LLC and Red Hawk Petroleum, LLC pursuant to a Guaranty Agreement, entered into on March 7, 2014, as amended on May 12, 2016 (the Amended Guaranty Agreement). Other than as described above, the terms of the Amended NPA (including the covenants and obligations thereunder) are substantially the same as the Senior Notes, and the terms of the Tranche A Notes and Tranche B Notes (including the events of default, interest rates and conditions associated therewith) are substantially the same as the original notes sold pursuant to the terms of the Senior Notes. Junior Debt Restructuring On May 12, 2016, the Company entered into an Amendment No. 2 to Note and Security Agreement with RJC (the Second Amendment). The Company and RJC agreed to amend the RJC Junior Note to (i) capitalize all accrued and unpaid interest under the RJC Junior Note as of the May 12, 2016, and add it to the note principal, making the current outstanding principal amount of the RJC Junior Note $9,379,432, (ii) extend the maturity date (Termination Date) from December 31, 2017 to July 11, 2019, (iii) provide that all future interest accruing under the RJC Junior Note is deferred until payable on the Termination Date, with all future interest amounts deferred being added to the principal on a monthly basis, and (iv) subordinate the RJC Junior Note to the New Senior Notes. Settlement Agreement with Liberty On May 12, 2016, the Company and Liberty entered into a settlement agreement, pursuant to which the Company paid to Liberty $750,000 and issued 2,450,000 fully-vested shares of the Companys restricted common stock, valued at $588,000, based on the market price on the grant date, as full settlement of all amounts due for the services previously rendered, for which the Company owed approximately $2.6 million. As of December 31, 2015 and March 31, 2016, the Company had accrued $2,620,000 in accounts payable. As a result of the settlement, the Company will recognize a gain on settlement of payables of $1,282,000 during the quarter ended June 30, 2016. |
3. SUMMARY OF SIGNIFICANT ACC21
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation. |
Equity Method Accounting for Joint Ventures | Equity Method Accounting for Joint Ventures |
Non-Controlling Interests | Non-Controlling Interests. |
Use of Estimates in Financial Statement Preparation | Use of Estimates in Financial Statement Preparation. |
Cash and Cash Equivalents | Cash and Cash Equivalents. |
Concentrations of Credit Risk | Concentrations of Credit Risk. Sales to one customer comprised 74% of the Companys total oil and gas revenues for the three months ended March 31, 2016. Sales to one customer comprised 84% of the Companys total oil and gas revenues for the three months ended March 31, 2015. The Company believes that, in the event that its primary customers are unable or unwilling to continue to purchase the Companys production, there are a substantial number of alternative buyers for its production at comparable prices. |
Accounts Receivable | Accounts Receivable. |
Bad Debt Expense | Bad Debt Expense. |
Equipment | Equipment. |
Oil and Gas Properties, Successful Efforts Method | Oil and Gas Properties, Successful Efforts Method. Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties and subject to impairment review. For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the related well costs are expensed as dry holes. Exploration and evaluation expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above. Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field by field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets. |
Asset Retirement Obligations | Asset Retirement Obligations. The following table describes changes in our asset retirement obligations during the three months ended March 31, 2016 and 2015 (in thousands): 2016 2015 Asset retirement obligations at January 1, $ 189 $ 89 Accretion expense 5 18 Obligations incurred for acquisition 19 87 Obligations settled - assets sold - (1) Changes in estimates (5) (15) Asset retirement obligations at March 31, $ 208 $ 178 |
Revenue Recognition | Revenue Recognition. |
Income Taxes | Income Taxes. |
Stock-Based Compensation | Stock-Based Compensation. The Company estimates volatility by considering the historical stock volatility. The Company has opted to use the simplified method for estimating expected term, which is generally equal to the midpoint between the vesting period and the contractual term. |
Loss per Common Share | Loss per Common Share. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments. (ASC 820), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value. As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value. Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements. |
Subsequent Events | Subsequent Events. |
3. SUMMARY OF SIGNIFICANT ACC22
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Asset retirement obligation | The following table describes changes in our asset retirement obligations during the three months ended March 31, 2016 and 2015 (in thousands): 2016 2015 Asset retirement obligations at January 1, $ 189 $ 89 Accretion expense 5 18 Obligations incurred for acquisition 19 87 Obligations settled - assets sold - (1) Changes in estimates (5) (15) Asset retirement obligations at March 31, $ 208 $ 178 |
4. OIL AND GAS PROPERTIES (Tabl
4. OIL AND GAS PROPERTIES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Oil and gas interests | The following table summarizes the Companys oil and gas activities by classification for the three months ended March 31, 2016: December 31, March 31, 2015 Additions Disposals Transfers 2016 Oil and gas properties, subject to amortization $ 64,655 $ 3,455 $ - $ - $ 68,110 Oil and gas properties, not subject to amortization - - - - - Asset retirement costs 137 14 - - 151 Accumulated depreciation, depletion and impairment (6,025) (1,272 ) - - (7,297 ) Total oil and gas assets $ 58,767 $ 2,197 $ - $ - $ 60,964 |
Summary of Purchase Price | The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired (in thousands): Assets Acquired Accounts receivable oil and gas $ 712 Oil and gas properties, subject to amortization 3,582 Total assets $ 4,294 Liabilities Assumed Accounts payable $ (4,275 ) Asset retirement obligation (19 ) Total liabilities $ (4,294 ) |
Golden Globe Energy [Member] | |
Summary of Purchase Price | The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired (in thousands): Purchase price on February 23, 2015 Fair value of common stock issued $ 2,734 Fair value of Series A Preferred stock issued 28,402 Assumption of subordinated notes payable 8,353 Kazakhstan option issued 5,000 Total purchase price $ 44,489 Fair value of net assets at February 23, 2015 Accounts receivable oil and gas $ 1,578 Oil and gas properties, subject to amortization 43,562 Prepaid expenses and other assets 100 Total assets 45,240 Accounts payable (664) Asset retirement obligations (87) Total liabilities (751) Net assets acquired $ 44,489 |
7. EQUITY METHOD INVESTMENTS (T
7. EQUITY METHOD INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity Method Investments Tables | |
Activity related to settlement | The following table reflects the activity related to the Companys settlement with MIEJ (in thousands): Items Issued / Sold New MIEJ note $ 4,925 Note receivable with Condor 1,272 Oil and gas property operated by Condor 620 Total items issued or sold 6,817 Items Received Accrued liabilities 3,280 Original debt with MIE net of cash payments 6,070 Proceeds from cash payments made by MIE to RJ Credit and BAM 500 Total items received 9,850 Net gain on settlement $ 3,033 |
Shedule of allocation of gain on settlement | The following table presents the allocation of the gain on settlement with MIEJ described above (in thousands): Allocated Value Historical Cost Gain on Settlement Oil and gas properties $ 895 $ 620 $ 275 Investment in Condor 1,838 1,272 566 Note payable MIEJ 7,117 4,925 2,192 Total $ 9,850 $ 6,817 $ 3,033 |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Deferred income taxes assets | Deferred income tax assets as of March 31, 2016 and December 31, 2015 are as follows (in thousands): For the Three Months Ended For the Year Ended 2016 2015 Deferred Tax Assets (Liabilities) Difference in depreciation, depletion, and capitalization methods oil and natural gas properties $ 120 $ 1,863 Net operating losses 1,766 4,131 Impairment oil and natural gas properties - (1,122 ) Other 110 753 Total deferred tax asset 1,996 5,625 Less: valuation allowance (1,996 ) (5,625) Total deferred tax assets $ - $ - |
12. STOCK OPTIONS AND WARRANTS
12. STOCK OPTIONS AND WARRANTS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Schedule of Stock Option and Warrant Activity | Option activity during the three months ended March 31, 2016 was: Weighted Average Weighted Remaining Average Contract Number of Exercise Term Shares Price (# years) Outstanding at January 1, 2016 3,058,890 $ 0.80 4.8 Granted 1,660,000 0.22 5.0 Exercised - - - Forfeited and cancelled - - - Outstanding at March 31, 2016 4,718,890 $ 0.59 4.6 Exercisable at March 31, 2016 2,770,340 $ 0.74 4.7 |
Warrant [Member] | |
Schedule of Stock Option and Warrant Activity | Warrant activity during the three months ended March 31, 2016 was: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contract Term (# years) Outstanding at January 1, 2016 7,803,282 $ 1.78 3.0 Granted - - Exercised - - Forfeited and cancelled - - Outstanding at March 31, 2016 7,803,282 $ 1.78 2.7 Exercisable at March 31, 2016 7,803,282 $ 1.78 2.7 |
13. RELATED PARTY TRANSACTIONS
13. RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Schedule Of Related Party Transactions | The following table reflects the related party amounts for GGE included in the March 31, 2016 balance sheet (in thousands): As of March 31, 2016 Accounts receivable $ 21 Current deferred financing costs - Long-term deferred financing costs - Accrued expenses (182) Current notes payable-Secured Promissory Notes, net of discount Long-term notes payable-Secured Promissory Notes, net of discount (14,588) Net assets $ (14,749) |
14. FAIR VALUE (Tables)
14. FAIR VALUE (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Level within the fair value hierarchy our financial instruments | The following table sets forth by level within the fair value hierarchy our financial instruments that were accounted for at fair value as of March 31, 2016 (in thousands): Fair Value Measurements At March 31, 2016 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total Carrying Value (Level 1) (Level 2) (Level 3) Series A Convertible Preferred Stock $ - $ - $ 28,402 $ 28,402 |
3. SUMMARY OF SIGNIFICANT ACC29
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Summary Of Significant Accounting Policies Details | ||
Asset retirement obligation, beginning | $ 189 | $ 89 |
Accretion expense | 5 | 18 |
Obligations incurred for acquisition | $ 19 | 87 |
Obligations settled - assets sold | (1) | |
Changes in estimates | $ (5) | (15) |
Asset retirement obligation, ending | $ 208 | $ 178 |
3. SUMMARY OF SIGNIFICANT ACC30
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Uninsured cash | $ 457 | |
Potentially issuable shares of common stock related to options | 2,770,340 | 1,403,898 |
Potentially issuable shares of common stock related to warrants | 7,803,282 | 6,594,129 |
Potentially issuable shares of common stock related to conversion | 1,305,794 | 1,179,928 |
Customer 1 [Member] | ||
Percentage total oil and gas revenues | 74.00% | 84.00% |
4. OIL AND GAS PROPERTIES (Deta
4. OIL AND GAS PROPERTIES (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Oil and gas properties, subject to amortization | $ 68,110 | $ 64,655 |
Oil and gas properties, not subject to amortization | ||
Asset retirement costs | $ 151 | $ 137 |
Accumulated depreciation, depletion and impairment | (7,297) | (6,025) |
Total oil and gas assets | 60,964 | $ 58,767 |
Additions [Member] | ||
Oil and gas properties, subject to amortization | $ 3,455 | |
Oil and gas properties, not subject to amortization | ||
Asset retirement costs | $ 14 | |
Accumulated depreciation, depletion and impairment | (1,272) | |
Total oil and gas assets | $ 2,197 | |
Disposals [Member] | ||
Oil and gas properties, subject to amortization | ||
Oil and gas properties, not subject to amortization | ||
Asset retirement costs | ||
Accumulated depreciation, depletion and impairment | ||
Total oil and gas assets | ||
Transfers [Member] | ||
Oil and gas properties, subject to amortization | ||
Oil and gas properties, not subject to amortization | ||
Asset retirement costs | ||
Accumulated depreciation, depletion and impairment | ||
Total oil and gas assets |
4. OIL AND GAS PROPERTIES (De32
4. OIL AND GAS PROPERTIES (Details 1) - USD ($) $ in Thousands | Mar. 29, 2016 | Feb. 23, 2015 |
Purchase price on February 23, 2015 | ||
Fair value of common stock issued | $ 2,734 | |
Fair value of Series A Preferred stock issued | 28,402 | |
Assumption of subordinated notes payable | 8,353 | |
Kazakhstan option issued | 5,000 | |
Total purchase price | 44,489 | |
Fair value of net assets at February 23, 2015 | ||
Accounts receivable - oil and gas | $ 712 | 1,578 |
Oil and gas properties, subject to amortization | 3,582 | 43,562 |
Prepaid expenses and other assets | 100 | |
Total assets | 4,294 | 45,240 |
Accounts payable | (4,275) | (664) |
Asset retirement obligations | (19) | (87) |
Total liabilities | $ (4,294) | (751) |
Net assets acquired | $ 44,489 |
4. OIL AND GAS PROPERTIES (De33
4. OIL AND GAS PROPERTIES (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Oil And Gas Properties Details Narrative | ||
Depletion | $ 1,272 | $ 1,027 |
Impairment expense for expired leasehold costs | 0 | $ 1,337 |
Completion costs | 3,446 | |
Net additions to oil and gas properties subject to amortization | 3,455 | |
Comprised of additions to existing properties | $ 9 |
6. ACCOUNTS RECEIVABLE (Details
6. ACCOUNTS RECEIVABLE (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Accounts receivable | $ 250 | |
Bad debt expense | $ 106 | |
Condor [Member] | ||
Accounts receivable | $ 406 |
7. EQUITY METHOD INVESTMENTS (D
7. EQUITY METHOD INVESTMENTS (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Items issued or sold | $ 6,817 |
Items received | 9,850 |
Net gain on settlement | 3,033 |
New MIEJ note [Member] | |
Items issued or sold | 4,925 |
Note receivable with Condor [Member] | |
Items issued or sold | 1,272 |
Oil and gas property operated by Condor [Member] | |
Items issued or sold | 620 |
Accrued Liabilities [Member] | |
Items received | 3,280 |
Original debt with MIE net of cash payments [Member] | |
Items received | 6,070 |
Proceeds from cash payments made by MIE to RJ Credit and BAM [Member] | |
Items received | $ 500 |
7. EQUITY METHOD INVESTMENTS 36
7. EQUITY METHOD INVESTMENTS (Details 1) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Gain on Settlement | $ 275 | |
Total [Member] | ||
Allocated Proceeds | $ 9,850 | |
Historical Cost | 6,817 | |
Gain on Settlement | 3,033 | |
Note payable - MIEJ [Member] | ||
Allocated Proceeds | 7,117 | |
Historical Cost | 4,925 | |
Gain on Settlement | 2,192 | |
Investment in Condor [Member] | ||
Allocated Proceeds | 1,838 | |
Historical Cost | 1,272 | |
Gain on Settlement | 566 | |
Oil and gas properties [Member] | ||
Allocated Proceeds | 895 | |
Historical Cost | 620 | |
Gain on Settlement | $ 275 |
7. EQUITY METHOD INVESTMENTS 37
7. EQUITY METHOD INVESTMENTS (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Equity Method Investments Details Narrative | |||
Gain on sale of equity investments | $ 566 | $ 566 |
8. NOTES PAYABLE (Details (Narr
8. NOTES PAYABLE (Details (Narrative) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Gross procedds | $ 9,192 | $ 8,918 | |
Note Purchase Agreement and Sale of Secured Promissory Notes [Member] | |||
Available borrowings | 0 | 0 | |
Gross procedds | 13,500 | ||
Origination-related fees and expenses | 11,000 | ||
Principal and interest balance | $ 519 | ||
Warrant issued | 3,100,000 | ||
Deferred interest | $ 2,527 | ||
Debt discount and deferred financing costs | 9,706 | ||
Amortization of debt discount | 2,194 | ||
Interest expense | 1,477 | ||
Bridge Note Financing [Member] | |||
Accrued Interest | 130 | ||
Unamortized debt premium | 113 | 113 | |
Aggregate principal amount | 475 | ||
Interest expense | 14 | $ 15 | |
Additional PIK | 48 | ||
MIE Jurassic Energy Corporation [Member] | |||
Available borrowings | 4,925 | ||
Gain on debt extinguishment | 2,192 | ||
Interest expense | 124 | 120 | |
Subordinated Note Payable Assumed [Member] | |||
Deferred principal | 519 | ||
Deferred interest | 2,527 | ||
Debt discount and deferred financing costs | $ 565 | ||
Interest expense | 276 | $ 222 | |
2016 RJC Subordinated Note Deferrals [Member] | |||
Deferred interest | $ 273 |
9. INCOME TAXES (Details)
9. INCOME TAXES (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Deferred Tax Assets (Liabilities) | ||
Difference in depreciation, depletion, and capitalization methods - oil and natural gas properties | $ 120 | $ 1,863 |
Net operating losses | $ 1,766 | 4,131 |
Impairment - oil and natural gas properties | (1,122) | |
Other | $ 110 | 753 |
Total deferred tax asset | 1,996 | 5,625 |
Less: valuation allowance | $ (1,996) | $ (5,625) |
Total deferred tax assets |
9. INCOME TAXES (Details Narrat
9. INCOME TAXES (Details Narrative) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Net change in valuation allowance | $ 1,996 |
Federal net operating loss carryforwards | 117,670 |
State net operating loss carryforwards | $ 49,922 |
Federal net operating loss carryforwards, expiration date | expire beginning in 2032 |
State net operating loss carryforwards, expiration date | expire beginning in 2023 |
10. COMMITMENTS AND CONTINGEN41
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Commitments And Contingencies Details Narrative | ||
Accrued accounts payable | $ 2,620 | $ 2,620 |
Remainder of 2016 | $ 17 |
11. SHAREHOLDERS' EQUITY (Detai
11. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Preferred stock shares authorized | 100,000,000 | 100,000,000 | |
Preferred stock shares par value | $ 0.001 | $ 0.001 | |
Preferred stock shares outstanding | 66,625 | 66,625 | |
Common stock, par value | $ 0.001 | $ 0.001 | |
Common stock, shares authorized | 200,000,000 | 200,000,000 | |
Common stock, shares outstanding | 46,986,497 | 45,236,497 | |
Stock compensation expense recorded related to restricted stock | $ 371 | $ 853 | |
Unamortized stock compensation expense | $ 762 | ||
Series A Preferred Stock | |||
Preferred stock shares outstanding | 66,625 | 66,625 |
12. STOCK OPTIONS AND WARRANT43
12. STOCK OPTIONS AND WARRANTS (Details) - Stock Options [Member] | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Number of Shares | |
Number of Options Outstanding, Beginning | shares | 3,058,890 |
Number of Options Granted | shares | 1,660,000 |
Number of Options Exercised | shares | |
Number of Options Forfeited and cancelled | shares | |
Number of Options Outstanding, Ending | shares | 4,718,890 |
Number of Options Exercisable | shares | 2,770,340 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 0.80 |
Weighted Average Exercise Price Granted | $ / shares | $ 0.22 |
Weighted Average Exercise Price Exercised | $ / shares | |
Weighted Average Exercise Price Forfeited and cancelled | $ / shares | |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 0.59 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 0.74 |
Weighted Average Remaining Contractual Life (in years) | |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | 4 years 9 months 18 days |
Weighted Average Remaining Contractual Life (in years) Granted | 5 years |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 4 years 7 months 6 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | 4 years 8 months 12 days |
12. STOCK OPTIONS AND WARRANT44
12. STOCK OPTIONS AND WARRANTS (Details 1) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Number of Shares | |
Number of Options Outstanding, Beginning | shares | 7,803,282 |
Number of Options Granted | shares | |
Number of Options Exercised | shares | |
Number of Options Forfeited and cancelled | shares | |
Number of Options Outstanding, Ending | shares | 7,803,282 |
Number of Options Exercisable | shares | 7,803,282 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 1.78 |
Weighted Average Exercise Price Granted | $ / shares | |
Weighted Average Exercise Price Exercised | $ / shares | |
Weighted Average Exercise Price Forfeited and cancelled | $ / shares | |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 1.78 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 1.78 |
Weighted Average Remaining Contractual Life (in years) | |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | 3 years |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 2 years 8 months 12 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 8 months 12 days |
12. STOCK OPTIONS AND WARRANT45
12. STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Recognized stock option based compensation expense | $ 131 | $ 145 | |
Unamortized stock options expense | 171 | ||
Intrinsic value of options outstanding | 0 | $ 0 | |
Intrinsic value of options exercisable | $ 0 | 0 | |
Warrant [Member] | |||
Shares issued upon exercise | |||
Recognized stock option based compensation expense | $ 0 | $ 393 | |
Unamortized stock options expense | 0 | ||
Intrinsic value of options outstanding | 0 | 0 | |
Intrinsic value of options exercisable | $ 0 | $ 0 | |
PEDCO 2012 Equity Incentive Plan | |||
Common stock authorized to issue | 310,137 | ||
Restricted stock issued | 551,670 | ||
Blast 2003 Stock Option Plan and 2009 Stock Incentive Plan | |||
Common stock authorized to issue | 3,424 | ||
Outstanding and exercisable weighted average exercise price | $ 35.05 | ||
2012 Incentive Plan | |||
Common stock authorized to issue | 10,000,000 | ||
Restricted stock issued | 6,507,660 | ||
Shares issued upon exercise | 3,477,000 | ||
Shares remain available for future issuancce | 15,340 |
13. RELATED PARTY TRANSACTION46
13. RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Mar. 29, 2016 | Feb. 23, 2015 |
Accounts receivable | $ 712 | $ 1,578 | |
GGE [Member] | |||
Accounts receivable | $ 21 | ||
Current deferred financing costs | |||
Long-term deferred financing costs | |||
Accrued expenses | $ (182) | ||
Current notes payable-Secured Promissory Notes, net of discount | |||
Long-term notes payable-Secured Promissory Notes, net of discount | $ (14,588) | ||
Net assets | $ (14,749) |
14. FAIR VALUE (Details)
14. FAIR VALUE (Details) $ in Thousands | Mar. 31, 2016USD ($) |
Series A Convertible Preferred Stock | $ 28,402 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |
Series A Convertible Preferred Stock | |
Significant Other Observable Inputs (Level 2) | |
Series A Convertible Preferred Stock | |
Significant Unobservable Inputs (Level 3) | |
Series A Convertible Preferred Stock | $ 28,402 |