Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Oct. 31, 2013 | Feb. 12, 2014 | Apr. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'BLACKSANDS PETROLEUM, INC. | ' | ' |
Entity Central Index Key | '0001308137 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Oct-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--10-31 | ' | ' |
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 | ' | 17,703,792 | ' |
Entity Public Float | ' | ' | $43,279,556.20 |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
Current Assets: | ' | ' |
Cash and cash equivalents | $1,335,237 | ' |
Accounts receivable | 417,597 | 402,162 |
Total Current Assets | 1,752,834 | 1,562,482 |
Oil and gas property costs (successful efforts method of accounting) | ' | ' |
Proved | 2,077,872 | 5,284,597 |
Unproved | ' | 1,934,595 |
Other assets | 50,312 | 220,984 |
TOTAL ASSETS | 3,881,018 | 9,002,658 |
Current Liabilities: | ' | ' |
Note payable | 280,000 | 60,000 |
Accounts payable | 523,365 | 158,131 |
Accrued expenses | 3,121,900 | 2,416,857 |
Total Current Liabilities | 3,925,265 | 2,634,988 |
Notes payable | 4,270,419 | 3,591,866 |
Asset Retirement obligation | 649,233 | 609,502 |
Total Liabilities | 8,844,917 | 6,836,356 |
Stockholders' Equity: | ' | ' |
Preferred stock - $0.001 par value; 10,000,000 shares authorized: | ' | ' |
Series A - $.001 par value, 310,000 shares authorized, 0 and 250,000 shares issued and outstanding | ' | 250 |
Common stock - $0.001 par value; 100,000,000 shares authorized; 17,719,360 and 16,386,443 shares issued and outstanding at October 31, 2013 and October 31, 2012, respectively | 17,720 | 16,387 |
Additional paid-in capital | 23,726,191 | 22,463,501 |
Accumulated deficit | -28,707,810 | -20,313,836 |
Total Stockholders' Equity | -4,963,899 | 2,166,302 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $3,881,018 | $9,002,658 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
Consolidated Balance Sheets Parenthetical | ' | ' |
Preferred stock, par value | $0.00 | $0.01 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Series A Preferred stock, par value | $0.00 | $0.00 |
Series A Preferred stock, authorized shares | 310,000 | 310,000 |
Series A Preferred stock, issued shares | 0 | 250,000 |
Series A Preferred stock, outstanding shares | 0 | 250,000 |
Common stock par value | $0.00 | $0.00 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 17,719,360 | 16,386,443 |
Common stock shares outstanding | 17,719,360 | 16,386,443 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Revenue: | ' | ' |
Oil and gas revenue | $1,690,249 | $1,588,728 |
Expenses: | ' | ' |
Selling, general and administrative | 1,443,223 | 1,842,463 |
Depreciation and depletion | 969,511 | 657,472 |
Accretion | 39,731 | 53,720 |
Lease operating expenses | 765,643 | 769,769 |
Impairment of oil and gas property interest | 4,820,770 | 225,543 |
Oil and gas exploration costs | 699,335 | 952,320 |
Total expenses | 8,738,213 | 4,501,287 |
Loss from Operations | -7,047,964 | -2,912,559 |
Other income and expense: | ' | ' |
Interest expense | -1,401,611 | -449,881 |
Loss on sale of assets | ' | 10,277 |
Other income | 55,601 | 54,000 |
Total Other Income (Expense) | -1,346,010 | -385,604 |
Loss before provision for income taxes | -8,393,974 | -3,298,163 |
Provision for income taxes | ' | ' |
Net Loss | -8,393,974 | -3,298,163 |
Preferred stock Dividends | -200,000 | -200,000 |
Net loss attributable to common shareholders | -8,593,974 | -3,498,163 |
Loss Per Share attributable to common shareholders Basic and diluted | ($0.53) | ($0.21) |
Weighted Average Shares Outstanding Basic and diluted | $16,405,142 | $16,382,660 |
Consolidated_Statement_of_Stoc
Consolidated Statement of Stockholders' Equity (USD $) | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Deficit | Total |
Beginning Balance, Amount at Oct. 31, 2011 | $250 | $16,378 | $21,949,403 | ($17,015,673) | $4,950,358 |
Beginning Balance, Shares at Oct. 31, 2011 | 250,000 | 16,377,068 | ' | ' | ' |
Stock issued to director for services, Shares | ' | 9,375 | ' | ' | 88,000 |
Stock issued to director for services, Amount | ' | 9 | 64,679 | ' | 64,688 |
Stock based compensation | ' | ' | 449,419 | ' | 449,419 |
Net loss | ' | ' | ' | -3,298,163 | -3,298,163 |
Ending Balance, Amount at Oct. 31, 2012 | 250 | 16,387 | 22,463,501 | -20,313,836 | 2,166,302 |
Ending Balance, Shares at Oct. 31, 2012 | 250,000 | 16,386,443 | ' | ' | ' |
Stock issued to director for services, Shares | ' | 6,250 | ' | ' | ' |
Stock issued to director for services, Amount | ' | 6 | 24,787 | ' | 24,793 |
Stock based compensation | ' | ' | 238,980 | ' | 238,980 |
Shares issued in private placement, Shares | ' | 500,000 | ' | ' | ' |
Shares issued in private placement, Amount | ' | 500 | 999,500 | ' | 1,000,000 |
Conversion of preferred shares, Shares | -250,000 | 826,667 | ' | ' | ' |
Conversion of preferred shares, Amount | -250 | 827 | -577 | ' | ' |
Net loss | ' | ' | ' | -8,393,974 | -8,393,974 |
Ending Balance, Amount at Oct. 31, 2013 | ' | $17,720 | $23,726,191 | ($28,707,810) | ($4,963,899) |
Ending Balance, Shares at Oct. 31, 2013 | ' | 17,719,360 | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($8,393,974) | ($3,298,163) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Impairment of oil and gas property costs | 4,820,770 | 225,543 |
Equity compensation expense | 263,773 | 514,107 |
Depreciation, depletion and accretion | 1,009,242 | 711,192 |
Amortization of debt discount | 678,553 | 70,883 |
Gain on sale of assets | ' | -10,277 |
Loss from dry hole | ' | 952,320 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -15,435 | 401,087 |
Prepaid expense and other current assets | 169,611 | -16,359 |
Accounts payable and accrued expenses | 1,070,278 | 691,101 |
Net cash flows provided by (used in) operating activities | -397,182 | 241,434 |
CASH FLOWS FROM INVESTING ACTIVITIES | ' | ' |
Cash paid for oil and gas properties | -647,901 | -2,940,676 |
Cash received from the sale of oil and gas properties | ' | 22,500 |
Cash paid for purchase of fixed assets | ' | -3,252 |
Net cash flows used in investing activities | -647,901 | -2,921,428 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from notes payable | 220,000 | 1,000,000 |
Proceeds from joint venture agreement | ' | 2,600,000 |
Proceeds from sale of common stock | 1,000,000 | ' |
Net cash flows from financing activities | 1,220,000 | 3,600,000 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 174,917 | 920,006 |
CASH AND CASH EQUIVALENTS - Beginning of period | 1,160,320 | 240,314 |
CASH AND CASH EQUIVALENTS - End of period | 1,335,237 | 1,160,320 |
Supplemental Disclosures | ' | ' |
Cash paid for interest | 223,599 | ' |
Cash paid for income taxes | ' | ' |
Supplemental non-cash activities | ' | ' |
Discount on debt | ' | 2,079,017 |
Revision of asset retirement obligation | ' | 33,128 |
Asset retirement obligation transferred through sale of asset | ' | 154,664 |
Oil and gas exploration costs in accrued liabilities | ' | 952,320 |
Conversion of Preferred Stock to Common Stock | $827 | ' |
The_Company_and_Summary_of_Sig
The Company and Summary of Significant Accounting Policies | 12 Months Ended |
Oct. 31, 2013 | |
Notes to Financial Statements | ' |
Note 1. The Company and Summary of Significant Accounting Policies | ' |
Description of business and history | |
Blacksands Petroleum, Inc. (hereinafter referred to as the “Company”) was incorporated in the State of Nevada on October 12, 2004. Since August 2007, the Company has been engaged in the exploration, development, exploitation and production of oil and natural gas. The Company sells its oil and gas products primarily to domestic pipelines and refineries. Its operations are presently focused in the States of Texas and New Mexico. | |
Principles of consolidation | |
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NRG Asset Management LLC, Copano Bay Holdings LLC, APClark LLC and BSPE Texas, LLC.All significant inter-company transactions and balances have been eliminated. | |
Oil and Gas Properties | |
The Company follows the successful efforts method of accounting for its oil and natural gas properties. Oil and gas properties are periodically assessed to determine whether they have been impaired.Any impairment in value of unproved properties is charged to exploration expense. The costs of unproved properties, which are determined to be productive, are transferred to proved oil and gas properties and amortized on an equivalent unit-of-production basis. Exploratory expenses, including geological and geophysical expenses and delay rentals for unevaluated oil and gas properties, are charged to expense as incurred. Exploratory drilling costs are initially capitalized as unproved property but charged to expense if and when the well is determined not to have found proved oil and gas reserves. In accordance with ASC No. 935, exploratory drilling costs are evaluated within a one-year period after the completion of drilling. For proved properties, we compare expected undiscounted future cash flows at a producing filed level to the unamortized capitalized cost of the asset. If the future undiscounted cash flows, based on our estimate of future natural gas and crude oil prices, operating costs, anticipated production from proved reserves and other relevant date, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate. | |
During the years ended October 31, 2013 and 2012, the Company impaired its oil and gas properties by $4,820,770 and $225,543, which is reflected in the consolidated statement of operations (see Note 2). | |
Asset Retirement Obligation | |
The Company follows ASC 410—Asset Retirement and Environmental Obligations which requires entities to record the fair value of a liability for legal obligations associated with the retirement obligations of tangible long-lived assets in the period in which it is incurred. This standard requires the Company to record a liability for the fair value of the dismantlement and plugging and abandonment costs excluding salvage values. When the liability is initially recorded, the entity increases the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized each period and the capitalized cost is amortized over the useful life ofthe related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. | |
Accounting for Derivative Instruments | |
ASC 815-24 (formerly SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,”), requires all derivatives to be recorded on the balance sheet at fair value. The Company’s derivatives are separately valued and accounted for on the balance sheet. Fair values for securities traded in the open market and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates. | |
The pricing model the Company used for determining fair values of its derivatives is the Black-Scholes option-pricing model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates, exchange rates and option volatilities. Selection of these inputs involves management’s judgment and may impact net income. | |
Cash and cash equivalents and short term investments | |
Cash and cash equivalents include cash on account and all highly liquid investments with original maturities of three months or less on the date of acquisition. Investments with original maturities of greater than three months but less than one year are considered short-term investments. | |
Use of estimates | |
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | |
The most critical estimate is the engineering estimate of proved oil and gas reserves. This estimate affects the application of the successful efforts method of accounting, the calculation of depreciation, depletion and amortization of the oil and gas properties and the estimate of the impairment of the oil and gas properties. It also affects the estimated lives used to determine asset retirement obligations. In addition, the estimates of proved oil and gas reserves are the basis for the related standardized measure of discounted future cash flows. | |
Concentration of credit risks | |
The Company’s consolidated financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintained substantially all of its cash balances in a limited number of financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had $749,965 in excess of this limit at October 31, 2013. | |
Property and equipment | |
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 27 years. The amounts of depreciation provided are sufficient to charge the cost of the related assets to operations over their estimated useful lives. Upon sale or other disposition of a depreciable property, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations. | |
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. | |
Revenue recognition | |
Revenue is recognized when title to the products transfer to the purchaser. The Company uses the “sales method” to account for production revenue, whereby revenue is recognized on all oil, natural gas or other related products sold to our purchasers, regardless of whether the sales are proportionate to our ownership in the property. A receivable or liability is recognized only to the extent that there is an imbalance on a specific property greater than the expected remaining proved reserves. As of October 31, 2013, our aggregate production imbalances were not material. | |
Stock-based compensation | |
The Company follows the provisions of FASB ASC 718—Stock Compensation. The statement requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values on the date of grant. | |
Income taxes | |
The Company accounts for its income taxes in accordance with ASC 740 Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.A valuation allowance is provided for the amount of deferred tax assets that would otherwise be recorded for income tax benefits primarily relating to operating loss carryforwards as realization cannot be determined to be more likely than not. | |
The statement establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns and the adoption of the statement had no material impact to the Company’s consolidated financial statements. The Company files tax returns in the US and states in which it has operations and is subject to taxation. Tax years subsequent to 2009 remain open to examination by U.S. federal and state tax jurisdictions. | |
Net loss per common share | |
The Company computes net income or loss per share in accordance with ASC 260 Earnings Per Share. Under the provisions of the Earnings per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. The weighted average number of potentially dilutive common shares excluded from the calculation of diluted net income (loss) per share totaled 3,103,601 and 3,511,934 for the years ended October 31, 2013 and 2012, respectively. | |
Fair Value of Financial Instruments | |
The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value at October 31, 2013 and October 31, 2012 because of the short period to maturity of these instruments. | |
Going Concern | |
As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $28,707,810 through October 31, 2013. In addition, the Company had a working capital deficit of $2,172,431 and cash and cash equivalents of $1,335,237 at October 31, 2013. A substantial portion of the cash available at October 31, 2013 was used toward the drilling costs for the three new wells drilled in November 2013. In order to complete the wells, the Company must raise additional capital and/or sell down its interest in these wells. However, the Company cannot assure that it will accomplish this task. | |
The current rate of cash usage raises substantial doubt about the Company’s ability to continue as a going concern, absent the raising of additional capital and/or additional significant revenues from new oil production. In an effort to mitigate this near-term concern the Company is seeking to obtain sufficient funds to complete the three new wells drilled on November 2013 and to fund working capital. The Company’s financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue in existence. | |
Reclassification | |
During the quarter ended January 31, 2013, the Company discovered and corrected an error regarding its reporting for certain unvested option costs for a former employee. The error resulted in an overstatement of its general and administrative expenses and net losses and an overstatement of its additional paid in capital during the year ended October 31, 2012 by $145,482. In addition, the change reduced the net loss per share by $.01. | |
Oil_and_Gas_Property_Costs
Oil and Gas Property Costs | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 2. Oil and Gas Property Costs | ' | ||||||||
In the years ended October 31, 2013 and October 31, 2012, the Company incurred property acquisition costs as follows: | |||||||||
Proved Properties | |||||||||
2013 | 2012 | ||||||||
Balance, beginning of year | $ | 5,284,597 | $ | 5,360,478 | |||||
Costs incurred during the year | 647,901 | 862,407 | |||||||
Asset retirement obligation acquired | -- | 33,128 | |||||||
Depletion | (968,451 | ) | -656,411 | ||||||
Impairment of oil and gas property costs | (2,886,175 | ) | (147,370 | ) | |||||
Cost of property sold | -- | (167,635 | ) | ||||||
Balance, end of year | $ | 2,077,872 | $ | 5,284,597 | |||||
Unproved Properties | |||||||||
2013 | 2012 | ||||||||
Balance, beginning of year | $ | 1,934,595 | $ | 2,012,768 | |||||
Costs incurred during the year | -- | -- | |||||||
Impairment of oil and gas property costs | (1,934,595 | ) | (78,173 | ) | |||||
Balance, end of year | $ | -- | $ | 1,934,595 | |||||
Blacksands Projects | |||||||||
Proved Properties | |||||||||
J.E. Pettus Gas Unit (known as “Cabeza Creek Field”) Acquisition in November 2009 | |||||||||
On November 9, 2009, the Company purchased the J.E. Pettus Gas Unit located in Goliad County, Texas for $402,569. The Company also incurred approximately $25,000 in fees associated with the acquisition, which were expensed when incurred. The Gas Unit includes four (4) active gas wells, (1) active oil well and 22 non-producing wells located on 3,689 acres in Goliad County, Texas. The leasehold working interest acquired by BSPE Texas is 100% leasehold working interest (80% net revenue interest) from the surface to 8,500 feet below the surface and 10.67% leasehold working interest (8.536% net revenue interest) below 8,500 feet. | |||||||||
At October 31, 2013 and 2012, the Company compared the expected undiscounted future cash flows on a field by field basis to the unamortized capitalized cost of the asset. The Company determined that based on its analysis, capitalized costs for the field exceeded its fair value. As a result the Company recorded an impairment totaling $4,359 and $147,370, respectively. | |||||||||
In January 2014, the Company sold its interest in all of the wells the Cabeza Creek Field for all depths from the surface to 8,500 feet below the surface in exchange for $50,000 and the assumption of all future liabilities associated with the plugging and abandoning of all wells in the Cabeza Creek Field. | |||||||||
Beech Creek Oil Wells (known as “Beech Creek Field”) Acquisition in April 2010 | |||||||||
On April 5, 2010, the Company purchased different leasehold working interests in the Beech Creek Wells No. 1 and No A-2 located in Hardin County, Texas for $740,798 in cash. These property interests were previously owned by a group of five different working interest owners. A 30.0587% working interest (21.942851% net revenue interest) was acquired in the Beech Creek #1 well. A 24.4337% (18.3253% Net Revenue Interest) working interest was acquired in the Beech Creek A-2 well. Both of these wells are currently producing. | |||||||||
AP Clark Wells (known as “Jo-Mill Field”) Acquisition in August 2010 | |||||||||
On August 10, 2010 the Company purchased aninterest in two operating wells and its leasehold interest in 1,257 acres for $460,000. As a result of the acquisition, the Company has a 25% gross working interest (18.75% net revenue interest) in the two operating wells. The Company also has an 18.875% gross working interest (14.15625% net revenue interest) on the leasehold interests acquired on the 1,257 acres. In addition, the Company agreed to carry Bonanza for a 2.5% gross leasehold working interest (1.875% net revenue interest) for the next well drilled on the property to the sales point. | |||||||||
On November 29, 2010, the Company acquired the leasehold interests and rights in the AP Clark II Prospect from Westerly for $260,000 (ii) the Company paid Westerly $119,000 as advance payment towards 70% of the actual third party costs that will be required to receive an extension of certain leasehold properties included in the AP Clark II Prospect (as defined in the LAPA) (the “Extension Monies”) and (iii) the Company and Westerly agreed to drill the W.D. Everett Well No. 3 located within the AP Clark II Prospect (as defined in the LAPA) whereby all costs of such drilling operation shall be borne 30% by Westerly and 70% by the Company. | |||||||||
The Company incurred $1,342,539 in drilling costs related to the drilling and completion of the W.D. Everett Well No. 3. In addition, during the quarter ended October 31, 2011, the Company drilled the Beaver Valley Ranch 6-1 well. Westerly elected to not participate for its full working interest in this well and has a working interest on this well of 15%. The Company was able to arrange for two unrelated parties to participate for an additional 20%. As a result, the Company has a working interest in this well of 65%. The Company incurred costs relating to the well totaling $1,166,225.These wells are currently Company operated. | |||||||||
During the fiscal year 2012, the Company drilled two wells, the Livestock 7-1 and Livestock 18-1 for a total cost of $1,223,535 and $1,275,699, respectively.Westerly elected to not participate for its full working interest in these wells and has a working interest of 11.4% and 8.55%, respectively. The Company was able to arrange for four unrelated parties to participate in each of these wells for an additional 26%. As a result, the Company has a working interest in these well of 62.8% and 65.65%. These wells began production in November 2012. These wells are currently Company operated. | |||||||||
During November 2013, the Company drilled three additional wells. These wells have not been completed to date. | |||||||||
At October 31, 2013, the Company compared the expected undiscounted future cash flows on a field by field basis to the unamortized capitalized cost of the asset. The Company determined that based on its analysis, capitalized costs for the field exceeded its fair value. As a result the Company recorded an impairment totaling $2,881,816. | |||||||||
Copano Bay | |||||||||
Effective November 1, 2010, a newly organized subsidiary of the Company acquired a 50% working interest (37.5% net revenue interest) in certain operating oil and gas leases in and around Aransas County, Texas for $100,000. There are currently four active wells on the property. NRG Assets Management LLC, a Texas LLC and Texas registered operating company owned by the Company is the operator at all depths. In connection with the acquisition, the Company recorded an asset retirement obligation totaling $126,040. Effective July 1, 2012, the Company disposed of its interest in the property in exchange for $25,000. The Company reported a gain of $10,277 on the sale of this field. | |||||||||
The following is a summary of the proforma information assuming the sale of the Copano Bay field had occurred as of the beginning of each fiscal year presented: | |||||||||
2013 | 2012 | ||||||||
Oil and gas revenues | $ | 1,690,249 | $ | 1,343,951 | |||||
Expenses | |||||||||
Selling, general and administrative | 1,443,223 | 1,829,078 | |||||||
Depreciation and depletion | 969,511 | 644,110 | |||||||
Accretion | 39,731 | 38,136 | |||||||
Lease operating expense | 765,643 | 581,344 | |||||||
Impairment of oil and gas properties | 4,820,770 | 225,543 | |||||||
Oil and gas exploration costs | 699,335 | 952,320 | |||||||
Total expenses | 8,738,213 | 4,270,531 | |||||||
Loss from operations | (7,047,964 | ) | (2,926,580 | ) | |||||
Other income (expense) | (1,346,010 | ) | (449,881 | ) | |||||
Net income | $ | (8,393,974 | ) | $ | (3,376,461 | ) | |||
Unproved Properties | |||||||||
Pedregosa Basin Field Acquisition in June 2010 | |||||||||
On June 18, 2010, the Company acquired a 50% undivided leasehold working interest (with an associated 40% net revenue interest) in and to approximately 147,262 acres of land, located in the Pedregosa Basin (SW New Mexico) for an initial acquisition cost of $1.5 million (the “Exploration Agreement”). Pursuant to the agreement, $1 million was paid at purchase and the remaining $500 thousand was due and subsequently paid on November 1, 2010. This remaining $500 thousand was reflected in the financial statements at October 31, 2010 as accounts payable. The property has no production and was accounted for as an acquisition of unproved property. In addition, the Companywasresponsible for acquiring 37 linear miles of 2-D seismic data. As a result of this acquisition, the Company recorded $1.5 million in unproved properties. Pursuant to an agreement, the Company is obligated to carry the drilling costs for a test well up to $1.2 million. Costs in excess of $1.2 million are to be split based upon the parties working interest. During the quarter ended April 30, 2011, the Company began drilling on a test well. The Company incurred $1,665,142 in capitalized exploration costs. During the quarter ended October 31, 2011, the Company determined that there were not economically feasible hydrocarbons at the test well site and expensed the costs of the well as exploration costs. During 2012, the Company determined that it owed an additional $952,320 for the drilling of this test well based on cost over runs reported to the Company by the operator of the well. During 2013, the Company was informed that an additional $171,790 was due on the drilling of the test well. This amount is reported in the statement of operations as exploration costs. The current leases are being held by production. As a result of the Company’s focus on developing the AP Clark Field, we will not have sufficient capital for the development of the Pedregosa Field. Accordingly, an impairment charge totaling $1,781,214 has been recorded during the year ended October 31, 2013. | |||||||||
Del Norte Acquisition in September 2010 | |||||||||
On September 9, 2010, the Company acquired a 50% undivided leasehold working interest in and to approximately 3,200 acres of land located in Rio Grande County in Colorado from Dan A. Hughes Company for an initial acquisition cost of $200,000. The property has no production and was accounted for as an acquisition of unproved property. Pursuant to the agreement, the Company has the option to participate in the drilling of a test well. If the Company participates in the drilling of this test well, all costs associated with the well will be borne equally. As a result of this acquisition, the Company recorded $200,000 in unproved properties. In August 2011, leases covering approximately 1,240 of these acres expired. As a result, the Company reported an impairment charge of $77,703 for the year ended October 31, 2012 for the expired leases. As a result of the Company’s focus on developing the AP Clark Field, we will not have sufficient capital for the development of the Del Norte prospect. Accordingly, an impairment charge totaling $153,381 has been recorded during the year ended October 31, 2013. | |||||||||
Cometa Ranch | |||||||||
In September 2010, the Company acquired an undivided interest leased in approximately 1102 acres of land for approximately $78,000. As a result of the Company being unable to resolve title and ownership issues on this property, it has been determined the Company will not be able to develop this property. As such, a full impairment on the property was reported during the year ended October 31, 2012. |
Debt
Debt | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 3. Debt | ' | ||||||||
The following is a summary of the debt outstanding at October 31, | |||||||||
2013 | 2012 | ||||||||
Silver Bullet Properties | $ | 3,220,000 | $ | 3,000,000 | |||||
PIE Energy | 60,000 | 60,000 | |||||||
KP-RAHR Ventures III, LLC, net | |||||||||
of discount of $1,329,581 and $2,008,134 | 1,270,419 | 591,866 | |||||||
Total | 4,550,419 | 3,651,866 | |||||||
Less current maturities | 280,000 | 60,000 | |||||||
Long-term debt | $ | 4,270,419 | $ | 3,591,866 | |||||
On June 18, 2010, the Company entered into a bridge loan agreement (the “Bridge Loan Agreement”) with Talras Overseas S.A. (“Talras”). On such date, Talras made a bridge loan to the Company in the amount of $1,000,000 (the “Bridge Loan”). Under the Bridge Loan Agreement, the principal face amount of $1,000,000 was provided in the first tranche and subsequent tranches of $500,000 or more were permitted up to $2,500,000 in the aggregate to be funded by June 30, 2010. The Company had borrowed the total amount under the agreement of $2,500,000. This Bridge Loan was unsecured. | |||||||||
The Bridge Loan bears interest at a rate of 6.0% per annum which amount shall, at the option of the Company, be payable either (i) in cash or (ii) by adding such interest to the accreted principal amount which is the outstanding principal amount including all PIK amounts (the “Accreted Principal Amount”). | |||||||||
Under the original terms, the Company must pay the principal together with all interest accrued and unpaid at the earliest of (i) June 30, 2011 or (ii) the closing date of an investment or series of related investments in equity securities of the Company in an aggregate amount of at least $10 million including the Accreted Principal Amount and interest outstanding under the Bridge Loan Agreement and any other bridge loan agreements. Should an aggregate $10 million investment or series of related investments in equity securities of the Company occur prior to June 30, 2011, then all of the obligations due under this note will be converted automatically into equity shares of the Company. The Company evaluated the conversion feature under ASC 815 and determined that is was not a derivative. | |||||||||
On October 29, 2010, the Company and Talrus entered into an exchange agreement, whereby the amount then outstanding on the Bridge Loan Agreement were exchanged for 250,000 shares of the Company’s Series A convertible preferred stock and warrants to purchase 333,333 shares of the Company’s common stock. The convertible preferred shares provide for dividends at the rate of 8% per annum of the stated value of the shares. The dividends are cumulative and payable in cash or in additional Series A Convertible Preferred shares. The shares are convertible at any time at the option of the holder into common stock at a conversion price of $3.75 per common share. If not previously converted, all outstanding shares of the Series A preferred stock, including any unpaid dividends, convert to shares of common stock on October 29, 2013. The warrants are exercisable at an exercise price of $6 per share through October 29, 2013. The preferred shares and accumulated dividends were converted into 826,667 shares of common stock on October 29, 2013. The warrants expired unexercised. | |||||||||
Silver Bullet Properties | |||||||||
On November 19, 2010, the Company entered into a loan agreement with Silver Bullet Property Holdings for a promissory note totaling $1,500,000. The note bears interest at the rate of 10% per annum and is due on the earlier of the date the Company closes on an offering with gross proceeds of at least $5 million or November 19, 2011. On September 27, 2011, the Company entered into an amendment to the promissory note dated November 19, 2010 (the “Note”) issued by the Company to Silver Bullet Property Holdings SDN BHD (the “Investor”). Pursuant to the amendment, the maturity date of the Note was amended from November 19, 2011 to February 1, 2013. In addition, the Investor loaned the Company an additional $1 million, with $500,000 loaned prior to October 31, 2011 and the remaining $500,000 received in two installments in November and December 2011. Pursuant to a security agreement, dated September 27, 2011, as security for the repayment of the Note, the Company granted the Investor a first priority lien on the Company’s oil and gas mineral leases in the ApClark Field. In April 2012, the parties agreed to further extend the note to May 1, 2014 and the investor agreed to an additional loan of $500,000 to the Company. The Company also granted a net proceeds interest (9% but reduced to 4.5% if the note is repaid prior to May 1, 2013) in the AP Clark properties included in the security agreement. The net proceeds interest represents the amount remaining from the proceeds of the sale of the property after deducting the related costs. The amendment was reviewed to determine its accounting treatment as a restructuring, extinguishment or modification and determined to be a modification. The Company received the additional $500,000 in June 2012. In September 2013, the parties agreed to further extend the Note to November 1, 2014. | |||||||||
On August 29, 2013, the Company entered into an additional loan agreement with the Investor for a promissory note totaling $220,000 (the “Second Note”). The Second Note bears interest at the rate of 12% and is due on August 29, 2014. | |||||||||
PIE Energy | |||||||||
In November 2009, the Company received an interest-free advance from an unrelated third party totaling $60,000. In January 2011, the interest-free advances were converted into a note payable, which is due on January 11, 2012 and has a stated annual interest rate of 6%. In January 2012, the parties amended the agreement to extend the due date to January 11, 2013. All other terms and conditions remained unchanged. The note has not been extended further nor has the Company received a notice of default. | |||||||||
Joint Venture Agreement | |||||||||
On July 20, 2012, Blacksands Petroleum, Inc. (the “Company”) entered into a Contribution Agreement (the “Contribution Agreement”), between APClark, LLC, a wholly-owned subsidiary of the Company (“APClark”) and KP-RAHR Ventures III, LLC (“KP Ventures”). Pursuant to the Contribution Agreement (i) the Company contributed $1,000 and certain of the Company’s oil and gas assets to APClark in exchange for 1,000 shares of Class A Membership Units of ApClark (the “Class A Membership Units”) and (ii) KP Ventures contributed approximately $2,600,000 (the “KP Ventures Cash Consideration”) to APClark in consideration of 1,000 shares of Class B Non-Voting Convertible Preferred Membership Units of APClark (the “Class B Membership Units” and the transaction, the “Asset Transaction”). KP Ventures has the option to contribute additional funds to APClark, up to an aggregate of $7,600,000, for no further equity consideration. | |||||||||
In connection with the Contribution Agreement, the Company entered into a Company Agreement (the “Operating Agreement”) governing the operations of APClark and defining various rights of the Company and KP Ventures. | |||||||||
Pursuant to the Operating Agreement, KP Ventures shall receive a preferred return of 12% per annum (the “Preferred Return”) on the unrecovered KP Ventures Cash Consideration until such time as the KP Ventures Cash Consideration is repaid. In addition, KP Ventures receives a 1% overriding royalty from the production of the APClark oil and gas properties. Once the KP Ventures Cash Consideration is repaid, including all accrued Preferred Returns, the Class B Membership Units shall automatically convert into Class C Non-Voting Net Profit Membership Units (the “Class C Membership Units”), which represent a non-dilutable “Net Profits” interest (“NPI”) in APClark and the assets owned by APClark and a percentage of all outstanding membership units of APClark initially equal to the NPI. The amount of the NPI granted depends on when the KP Ventures Cash Consideration and Preferred Return is paid, as follows: | |||||||||
Date of Repayment in Full | NPI % | ||||||||
On or prior to six month anniversary | 7.5 | % | |||||||
After six months but on or prior to two year anniversary | 15 | % | |||||||
After two years but on or prior to three year anniversary | 20 | % | |||||||
After three years | 50 | % | |||||||
The Company will be responsible for the operations of APClark and has the right to appoint the sole director of APClark, The consent of KP Ventures is required in certain situations, including, but not limited to: expanding the scope of the business; admitting additional members or transfer of membership units; approve annual budget; any merger or sale of all or substantially all of the assets of APClark; voluntary liquidation, dissolution or winding up of APClark; and to make any cash distributions. | |||||||||
In addition, the Company entered into a Pledge Agreement (the “Pledge Agreement”) pursuant to which it pledged the Class A Membership Units to KP Ventures to secure the Company’s obligations and performance thereunder and under the Contribution Agreement and Operating Agreement, which such Class A Membership Units shall be held pursuant to an escrow agreement. | |||||||||
Previously, the Company entered into a security agreement, dated as of September 27, 2011, pursuant to which, as security for the repayment of promissory notes in the principal face amount of $3,000,000 (the “Notes”), issued to Silver Bullet Property Holdings SDN BHD (“Silver Bullet”) a first priority security interest (the “Security Interest”) in certain of the assets of the Company that were contributed to APClark pursuant to the Contribution Agreement (the “Pledged Assets”). In connection with the Asset Transaction, the Company, APClark, Silver Bullet and KP Ventures entered into a subordination agreement (the “Subordination Agreement”), pursuant to which Silver Bullet subordinated its Security Interest to KP Ventures, so that KP Ventures would have a first priority interest in the Pledged Assets until KP Ventures is repaid the KP Ventures Cash Consideration and Preferred Return. In addition, the Company previously granted Silver Bullet a “net proceeds” interest of 9% on the Pledged Assets (the “Silver Bullet NPI”), which Silver Bullet NPI was capped at 25% of the outstanding principal and accrued interest owed under the Notes (the “Silver Bullet NPI Limitation”). | |||||||||
As consideration for Silver Bullet to enter into the Subordination Agreement, the Company agreed to increase the interest on the Notes to 12% per annum and remove the Silver Bullet NPI Limitation so there is no cap on the maximum amount of Silver Bullet NPI that Silver Bullet can receive. | |||||||||
As a result of the required repayment of the equity to KP Ventures, the amount of the contribution has been reflected as a liability on the balance sheet. The Company has also recorded a discount on this liability relating to the relative fair value of the overriding royalties totaling $163,786 and net profits interest totaling $1,915,231. These discounts reduced the carrying value of the proved oil and gas costs. The carrying value of the discounts totaled $1,329,581 at October 31, 2013. The Company amortized $678,553 and $70,883 as additional interest expense in the fiscal years ended October 31, 2013 and 2012, respectively. |
Asset_Retirement_Obligation
Asset Retirement Obligation | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 4. Asset Retirement Obligation | ' | ||||||||
The following table summarizes the change in the asset retirement obligation (“ARO”) for the years ended October 31, | |||||||||
2013 | 2012 | ||||||||
Beginning balance at November 1 | $ | 609,502 | $ | 677,318 | |||||
Liabilities settled | -- | -- | |||||||
Liabilities incurred through acquisition of assets | -- | -- | |||||||
Liabilities transferred through sale of assets | -- | (154,664 | ) | ||||||
Change in estimate of well life | -- | 33,128 | |||||||
Accretion expense | 39,731 | 53,720 | |||||||
Ending balance at October 31 | $ | 649,233 | $ | 609,502 | |||||
The ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with the Company’s oil and gas properties. Inherent in the fair value calculation of the ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. | |||||||||
Stockholders_Equity
Stockholders' Equity | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 5. Stockholders' Equity | ' | ||||||||
Preferred Stock | |||||||||
The Company is authorized to issue 10,000,000 shares of preferred stock at a par value of $.001. | |||||||||
In October 2010, the Board of Directors designated 310,000 shares of the Company’s preferred stock as Series A Convertible Preferred Stock (“Series A Preferred”). The Series A Preferred are convertible into shares of common stock at a conversion price of $3.75. The shares are entitled to dividends at a rate of 8% of the stated value per share per annum. The dividends are payable annually on December 31 in cash or additional shares of the Series A Preferred, at the option of the Company. The Series A Preferred and any accrued and unpaid dividends will mandatorily convert into common shares on October 29, 2013. The outstanding Series A Preferred and accumulated unpaid dividends were converted into 826,667 shares of the Company’s common stock on October 29, 2013. | |||||||||
Issuance of Common Stock | |||||||||
In October 2013, the Company issued 500,000 shares of its common stock to Silver Bullet in exchange for $1,000,000. The base price paid by Silver Bullet will be reduced and additional shares issued if there is an issuance of securities or repricing of an existing right to a price less than the base share price paid by Silver Bullet within one year from the original issuance. | |||||||||
Stock Options | |||||||||
As of June 26, 2006, the Company’s Board of Directors approved, and a majority of the Company’s stockholders ratified, the adoption of the Company’s 2006 Stock Option Plan (the “Plan”), pursuant to which the Board of Directors has the ability to provide incentives through the issuance of options, stock, restricted stock, and other stock-based awards, representing up to 2,000,000 shares of the Company’s common stock, to certain employees, outside directors, officers, consultants and advisors. The 2006 Stock Option Plan allows the term of options granted to be determined by the Board of Directors not to exceed ten years. The Board of Directors is authorized to determine the vesting requirements of the options granted. | |||||||||
During the Fiscal year ended October 31, 2012, stock options were granted to a director of the Company for options representing 88,000 common shares. The exercise price of the option is $4.50, with a ten year term, vesting equally over four years. The fair value of the option grants were estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected volatility of 134%, risk free interest rate of 0.77%; and expected lives of 3.7 years. During the years ended October, 31, 2013 and 2012, the Company recorded stock based compensation totaling $238,980 and $449,419 as a result of the stock option grants. | |||||||||
A summary of the Company’s stock option activity and related information is as follows: | |||||||||
Number of Shares | Weighted Average Exercise Price | ||||||||
Outstanding at November 1, 2011 | 1,033,333 | 3 | |||||||
Granted | 88,000 | $ | 4.5 | ||||||
Exercised | - | - | |||||||
Cancelled | (75,000 | ) | 3 | ||||||
Outstanding at October 31, 2012 | 1,046,333 | $ | 3.13 | ||||||
Granted | -- | -- | |||||||
Exercised | - | - | |||||||
Cancelled | - | -- | |||||||
Outstanding at October 31, 2013 | 1,046,333 | $ | 3.13 | ||||||
Exercisable at October 31, 2013 | 1,046,333 | $ | 3.13 | ||||||
The intrinsic value of the exercisable options at October 31, 2013 totaled $0. At October 31, 2013, the weighted average remaining life of the stock options is 6.35 years. At October 31, 2013, there was $63,204 of total unrecognized compensation cost related to the stock options granted under the plan. This cost is expected to be recognized over a weighted average period of 0.92 years. | |||||||||
Warrants | |||||||||
A summary of the Company’s stock warrant activity and related information for the years ended October 31, 2013 and 2012 is as follows: | |||||||||
Warrants | Weighted Average Exercise Price | ||||||||
Outstanding at November 1, 2011 | 2,390,601 | $ | 4.71 | ||||||
Granted | -- | -- | |||||||
Cancelled | -- | -- | |||||||
Outstanding at October 31, 2012 | 2,390,601 | $ | 4.71 | ||||||
Granted | -- | $ | -- | ||||||
Cancelled | (333,333 | ) | $ | 6 | |||||
Outstanding at October 31, 2013 | 2,057,268 | $ | 4.5 | ||||||
The intrinsic value for the outstanding warrants at October 31, 2013 totaled $0. The remaining term of the warrants is 0.42 years. | |||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended |
Oct. 31, 2013 | |
Notes to Financial Statements | ' |
Note 6. Commitments and Contingencies | ' |
The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks. The Company is not aware of any environmental claims existing as of October 31, 2013, which have not been provided for, covered by insurance or otherwise have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties. | |
In January 2012, the Company appointed a new director to the Board of Directors. In conjunction with this appointment, the Company entered into a compensation agreement with the director. Pursuant to this agreement, the director will receive cash compensation totaling $20,000 (paid quarterly) along with payment for attendance at Board meetings. In addition, the director will receive 25,000 shares of restricted Common Stock of the Company, of which 6,250 shares vest immediately and the remaining shares vest in semi-annual amounts of 3,125 shares. The Company also granted the director an option to purchase up to 88,000 shares of the Company’s common stock at an exercise price of $4.50 per share. The options vest equally over four years. During the year ended October 31, 2013, the Company recorded director expenses for the vesting of these shares totaling $24,793. | |
Operating leases | |
The Company leases its offices Texas on a month to month basis. Rent expense for the years ended October 31, 2013 and 2012 was $47,832 and $33,600, respectively. |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 7. Income Taxes | ' | ||||||||
The reconciliation between the expected income tax benefit, computed using the statutory federal rate of 34%, and the actual income tax benefit is as follows: | |||||||||
October 31, | |||||||||
2013 | 2012 | ||||||||
Expected tax benefit at 34% | $ | 2,853,951 | $ | 1,170,839 | |||||
Stock option expenses | (89,672 | ) | (202,260 | ) | |||||
Miscellaneous | 1,762 | 571,312 | |||||||
Amortization of debt discount | (230,708 | ) | (24,100 | ) | |||||
Change in valuation allowance | (2,535,333 | ) | (1,515,791 | ) | |||||
Actual tax benefit | $ | -- | $ | - | |||||
The composition of deferred tax assets/liability is as follows: | |||||||||
October 31, | |||||||||
2013 | 2012 | ||||||||
Deferred Tax Asset | |||||||||
Net operating loss | $ | 5,234,969 | $ | 4,692,316 | |||||
Oil and gas properties | 1,211,160 | ||||||||
Other | 382,311 | 237,471 | |||||||
Total deferred tax assets | $ | 6,828,440 | $ | 4,929,787 | |||||
Deferred Tax Liability | |||||||||
Oil and gas property interests | -- | 636,679 | |||||||
Net deferred tax assets | 6,828,440 | 4,293,108 | |||||||
Valuation allowance | (6,828,440 | ) | (4,293,108 | ) | |||||
Net | $ | -- | $ | - | |||||
The valuation allowance increased by $2,535,333 during the year ended October 2013. The Company established a valuation allowance to fully offset the net deferred income tax assets due to the uncertainty of the Company's ability to generate future taxable income necessary to realize these net deferred income tax assets, considering the Company's history of significant operating losses. In addition, future utilization of the available net operating loss carryforwards may be limited under Internal Revenue Code Section 382 as a result of any future changes in ownership. | |||||||||
For federal income tax purposes, the Company has net operating losses of approximately $15,322,609 at October 31, 2013. These losses expire as follows: | |||||||||
2026 | $ | 291,662 | |||||||
2027 | 1,739,955 | ||||||||
2028 | 1,265,101 | ||||||||
2029 | 769,546 | ||||||||
2030 | 588,394 | ||||||||
2031 | 5,153,072 | ||||||||
2032 | 3,748,939 | ||||||||
2033 | 1,765,940 | ||||||||
$ | 15,322,609 |
Supplemental_Oil_and_Gas_Discl
Supplemental Oil and Gas Disclosures | 12 Months Ended | ||||||||||||||||
Oct. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Note 8. Supplemental Oil and Gas Disclosures (Unaudited) | ' | ||||||||||||||||
The following supplemental information regarding the oil and gas activities of the Company for 2013and 2012 is presented pursuant to the disclosure requirements promulgated by the Securities and Exchange Commission and ASC 932, "Disclosures About Oil and Gas Producing Activities." Capitalized costs relating to oil and gas activities and costs incurred in oil and gas property acquisition, exploration and development activities for each year are shown below. | |||||||||||||||||
CAPITALIZED COST OF OIL AND GAS PRODUCING ACTIVITIES | |||||||||||||||||
As of October 31 | 2013 | 2012 | |||||||||||||||
United States | United States | ||||||||||||||||
Unproved properties not being amortized | $ | -- | $ | 1,934,595 | |||||||||||||
Proved property being amortized | 8,387,479 | 7,739,578 | |||||||||||||||
Accumulated depreciation, depletion amortization and impairment | (6,309,607 | ) | (2,454,981 | ) | |||||||||||||
Net capitalized costs | $ | 2,077,872 | $ | 7,219,192 | |||||||||||||
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | |||||||||||||||||
As of October 31 | 2013 | 2012 | |||||||||||||||
Property acquisition costs—proved and unproved properties | $ | -- | $ | 112,085 | |||||||||||||
Exploration costs | $ | 699,335 | $ | 952,320 | |||||||||||||
Development costs | $ | 649,003 | $ | 2,799,268 | |||||||||||||
OIL AND GAS RESERVES | |||||||||||||||||
Users of this information should be aware that the process of estimating quantities of “proved” and “proved developed” oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial statement disclosures. | |||||||||||||||||
Proved reserves represent estimated quantities of natural gas, crude oil and condensate that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions in effect when the estimates were made. Proved developed reserves are proved reserves expected to be recovered through wells and equipment in place and under operating methods used when the estimates were made. | |||||||||||||||||
The following table illustrates the Company’s estimated net proved reserves, including changes, and proved developed reserves for the periods indicated, as estimated by Hite & Associates and by Hamilton Group for the years ended October 31, 2013 and 2012, respectively. The oil and natural gas price as of October 31, 2013 and 2012 is based on the 12-month unweighted average of the first of the month prices of the West Texas Intermediate posted price. The oil and natural gas prices were adjusted by lease for quality, transportation fees, and regional price differentials. The gas price as of October 31, 2013 and 2012 is based on the 12-month unweighted average of the first of the month prices of the Henry Hub spot price. All prices are adjusted by lease for energy content, transportation fees, and regional price differentials. All prices are held constant in accordance with SEC guidelines. All proved reserves are located in the United States. | |||||||||||||||||
Oil BBls | Gas Mcf | ||||||||||||||||
31-Oct-11 | 1,644,390 | 1,843,660 | |||||||||||||||
Revisions of previous estimates | (1,018,181 | ) | (500,057 | ) | |||||||||||||
Acquisition of minerals in place | -- | -- | |||||||||||||||
Sales of minerals in place | (24,863 | ) | (800,620 | ) | |||||||||||||
Production | (15,046 | ) | (32,893 | ) | |||||||||||||
31-Oct-12 | 586,300 | 510,090 | |||||||||||||||
Revisions of previous estimates | (511,801 | ) | (296,245 | ) | |||||||||||||
Acquisition of minerals in place | -- | -- | |||||||||||||||
Sales of minerals in place | -- | -- | |||||||||||||||
Production | (16,139 | ) | (18,285 | ) | |||||||||||||
31-Oct-13 | 58,360 | 195,560 | |||||||||||||||
The Company's proved developed reserves are as follows: | |||||||||||||||||
Developed | Undeveloped | ||||||||||||||||
Oil BBls | Gas Mcf | Oil BBls | Gas Mcf | ||||||||||||||
31-Oct-13 | 58,360 | 195,560 | -- | -- | |||||||||||||
31-Oct-12 | 76,000 | 234,526 | 510,300 | 275,564 | |||||||||||||
31-Oct-11 | 82,300 | 1,062,610 | 1,562,090 | 781,050 | |||||||||||||
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOW | |||||||||||||||||
The following Standardized Measure of Discounted Future Net Cash Flow information has been developed utilizing ASC 932, Extractive Activities —Oil and Gas, (ASC 932) procedures and based on oil and natural gas reserve and production volumes estimated byHite & Associates. It can be used for some comparisons, but should not be the only method used to evaluate the Company or its performance. Further, the information in the following table may not represent realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flow be viewed as representative of the current value of the Company. | |||||||||||||||||
The Company believes that the following factors should be taken into account when reviewing the following information: | |||||||||||||||||
• | future costs and selling prices will probably differ from those required to be used in these calculations; | ||||||||||||||||
• | due to future market conditions and governmental regulations, actual rates of production in future years may vary significantly from the rate of production assumed in the calculations; | ||||||||||||||||
• | a 10% discount rate may not be reasonable as a measure of the relative risk inherent in realizing future net oil and natural gas revenues; and | ||||||||||||||||
• | future net revenues may be subject to different rates of income taxation. | ||||||||||||||||
Under the Standardized Measure, for the years ended October 31, 2013 and 2012 the future cash inflows were estimated by applying the 12 month average of the oil and natural gas prices on the first day of the month ($92.60 and $91.06 for oil and $2.34 and $4.79 for natural gas for the years ended October 31, 2013 and 2012, respectively) to the estimated future production of year-end proved reserves. Estimates of future income taxes are computed using current statutory income tax rates including consideration for estimated future statutory depletion and tax credits. The resulting net cash flows are reduced to present value amounts by applying a 10% discount factor. Use of a 10% discount rate and year-end prices were required. At October 31, 2013 and 2012, as specified by the SEC, the prices for oil and natural gas used in this calculation were the unweighted 12-month average of the first day of the month (12-month unweighted average) cash price quotes, except for volumes subject to fixed price contracts. | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Future cash inflows | $ | 6,077,480 | $ | 55,667,980 | |||||||||||||
Future development costs | (321,400 | ) | (20,458,060 | ) | |||||||||||||
Future production costs | (2,940,800 | ) | (14,983,390 | ) | |||||||||||||
Future income tax expenses | - | - | |||||||||||||||
Future net cash flows before 10% discount | 2,815,280 | 20,226,530 | |||||||||||||||
10%Annual discount for estimated timing of cash flows | (713,950 | ) | (12,543,920 | ) | |||||||||||||
Standardized measure discounted future net cash flows | $ | 2,101,330 | $ | 7,682,610 | |||||||||||||
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS | |||||||||||||||||
The following is a summary of the changes in the Standardized Measure of discounted future net cash flows for the Company’s proved oil and natural gas reserves during each of the years in the two year period ended October 31, 2013: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Beginning of the year | $ | 7,682,610 | $ | 17,017,670 | |||||||||||||
Sales and transfers of oil and gas produced, net of production costs | (924,607 | ) | (818,959 | ) | |||||||||||||
Net changes in prices and production costs | (6,104,363 | ) | 503,507 | ||||||||||||||
Net changes in income taxes | - | - | |||||||||||||||
Development costs incurred | 647,901 | 2,817,119 | |||||||||||||||
Changes in estimated future development costs, net of current development costs | 16,571,027 | 20,444,800 | |||||||||||||||
Acquisition of minerals in place | -- | (789,570 | ) | ||||||||||||||
Revision of previous estimates | (12,918,359 | ) | (33,359,836 | ) | |||||||||||||
Change of discount | 768,261 | 1,701,767 | |||||||||||||||
Change in production rate and other | (3,621,140 | ) | 166,112 | ||||||||||||||
End of year | $ | 2,101,330 | $ | 7,682,610 |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Oct. 31, 2013 | |
Notes to Financial Statements | ' |
Note 9 - Subsequent Events | ' |
Adwar II Development Agreement | |
In February 2014, the Company amended its development agreement with Adwar Drilling Fund II, LP. (“Adwar II”). Pursuant to the amendment, Adwar II agreed to purchase up to a 37.5% working interest in the three wells drilled in November 2013 in the AP Clark Field, and up to a 18.75% working interest in a well to be drilled in the future. In February 2014, Adwar II delivered $300,000 toward the purchase of a working interest in the three wells, along with $30,000 of upfront monies. Adwar II has until March 31, 2014 to raise additional funds to increase its working interest in the project. Their final ownership percentage in the wells will be calculated at that time. |
The_Company_and_Summary_of_Sig1
The Company and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Oct. 31, 2013 | |
Company And Summary Of Significant Accounting Policies Policies | ' |
Description of business and history | ' |
Blacksands Petroleum, Inc. (hereinafter referred to as the “Company”) was incorporated in the State of Nevada on October 12, 2004. Since August 2007, the Company has been engaged in the exploration, development, exploitation and production of oil and natural gas. The Company sells its oil and gas products primarily to domestic pipelines and refineries. Its operations are presently focused in the States of Texas and New Mexico. | |
Principles of consolidation | ' |
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NRG Asset Management LLC, Copano Bay Holdings LLC, APClark LLC and BSPE Texas, LLC.All significant inter-company transactions and balances have been eliminated. | |
Oil and Gas Properties | ' |
The Company follows the successful efforts method of accounting for its oil and natural gas properties. Oil and gas properties are periodically assessed to determine whether they have been impaired.Any impairment in value of unproved properties is charged to exploration expense. The costs of unproved properties, which are determined to be productive, are transferred to proved oil and gas properties and amortized on an equivalent unit-of-production basis. Exploratory expenses, including geological and geophysical expenses and delay rentals for unevaluated oil and gas properties, are charged to expense as incurred. Exploratory drilling costs are initially capitalized as unproved property but charged to expense if and when the well is determined not to have found proved oil and gas reserves. In accordance with ASC No. 935, exploratory drilling costs are evaluated within a one-year period after the completion of drilling. For proved properties, we compare expected undiscounted future cash flows at a producing filed level to the unamortized capitalized cost of the asset. If the future undiscounted cash flows, based on our estimate of future natural gas and crude oil prices, operating costs, anticipated production from proved reserves and other relevant date, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate. | |
During the years ended October 31, 2013 and 2012, the Company impaired its oil and gas properties by $4,820,770 and $225,543, which is reflected in the consolidated statement of operations (see Note 2). | |
Asset Retirement Obligation | ' |
The Company follows ASC 410—Asset Retirement and Environmental Obligations which requires entities to record the fair value of a liability for legal obligations associated with the retirement obligations of tangible long-lived assets in the period in which it is incurred. This standard requires the Company to record a liability for the fair value of the dismantlement and plugging and abandonment costs excluding salvage values. When the liability is initially recorded, the entity increases the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized each period and the capitalized cost is amortized over the useful life ofthe related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. | |
Accounting for Derivative Instruments | ' |
ASC 815-24 (formerly SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,”), requires all derivatives to be recorded on the balance sheet at fair value. The Company’s derivatives are separately valued and accounted for on the balance sheet. Fair values for securities traded in the open market and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates. | |
The pricing model the Company used for determining fair values of its derivatives is the Black-Scholes option-pricing model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates, exchange rates and option volatilities. Selection of these inputs involves management’s judgment and may impact net income. | |
Cash and cash equivalents and short term investments | ' |
Cash and cash equivalents include cash on account and all highly liquid investments with original maturities of three months or less on the date of acquisition. Investments with original maturities of greater than three months but less than one year are considered short-term investments. | |
Use of estimates | ' |
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | |
The most critical estimate is the engineering estimate of proved oil and gas reserves. This estimate affects the application of the successful efforts method of accounting, the calculation of depreciation, depletion and amortization of the oil and gas properties and the estimate of the impairment of the oil and gas properties. It also affects the estimated lives used to determine asset retirement obligations. In addition, the estimates of proved oil and gas reserves are the basis for the related standardized measure of discounted future cash flows. | |
Concentration of credit risks | ' |
The Company’s consolidated financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintained substantially all of its cash balances in a limited number of financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company had $749,965 in excess of this limit at October 31, 2013. | |
Property and equipment | ' |
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 27 years. The amounts of depreciation provided are sufficient to charge the cost of the related assets to operations over their estimated useful lives. Upon sale or other disposition of a depreciable property, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations. | |
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. | |
Revenue recognition | ' |
Revenue is recognized when title to the products transfer to the purchaser. The Company uses the “sales method” to account for production revenue, whereby revenue is recognized on all oil, natural gas or other related products sold to our purchasers, regardless of whether the sales are proportionate to our ownership in the property. A receivable or liability is recognized only to the extent that there is an imbalance on a specific property greater than the expected remaining proved reserves. As of October 31, 2013, our aggregate production imbalances were not material. | |
Stock-based compensation | ' |
The Company follows the provisions of FASB ASC 718—Stock Compensation. The statement requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values on the date of grant. | |
Income taxes | ' |
The Company accounts for its income taxes in accordance with ASC 740 Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.A valuation allowance is provided for the amount of deferred tax assets that would otherwise be recorded for income tax benefits primarily relating to operating loss carryforwards as realization cannot be determined to be more likely than not. | |
The statement establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns and the adoption of the statement had no material impact to the Company’s consolidated financial statements. The Company files tax returns in the US and states in which it has operations and is subject to taxation. Tax years subsequent to 2009 remain open to examination by U.S. federal and state tax jurisdictions. | |
Net loss per common share | ' |
The Company computes net income or loss per share in accordance with ASC 260 Earnings Per Share. Under the provisions of the Earnings per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. The weighted average number of potentially dilutive common shares excluded from the calculation of diluted net income (loss) per share totaled 3,103,601 and 3,511,934 for the years ended October 31, 2013 and 2012, respectively. | |
Fair Value of Financial Instruments | ' |
The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value at October 31, 2013 and October 31, 2012 because of the short period to maturity of these instruments. | |
Going Concern | ' |
As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $28,707,810 through October 31, 2013. In addition, the Company had a working capital deficit of $2,172,431 and cash and cash equivalents of $1,335,237 at October 31, 2013. A substantial portion of the cash available at October 31, 2013 was used toward the drilling costs for the three new wells drilled in November 2013. In order to complete the wells, the Company must raise additional capital and/or sell down its interest in these wells. However, the Company cannot assure that it will accomplish this task. | |
The current rate of cash usage raises substantial doubt about the Company’s ability to continue as a going concern, absent the raising of additional capital and/or additional significant revenues from new oil production. In an effort to mitigate this near-term concern the Company is seeking to obtain sufficient funds to complete the three new wells drilled on November 2013 and to fund working capital. The Company’s financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue in existence. | |
Reclassification | ' |
During the quarter ended January 31, 2013, the Company discovered and corrected an error regarding its reporting for certain unvested option costs for a former employee. The error resulted in an overstatement of its general and administrative expenses and net losses and an overstatement of its additional paid in capital during the year ended October 31, 2012 by $145,482. In addition, the change reduced the net loss per share by $.01. |
Oil_and_Gas_Property_Costs_Tab
Oil and Gas Property Costs (Tables) | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Oil And Gas Property Costs Tables | ' | ||||||||
Property acquisition costs | ' | ||||||||
In the years ended October 31, 2013 and October 31, 2012, the Company incurred property acquisition costs as follows: | |||||||||
Proved Properties | |||||||||
2013 | 2012 | ||||||||
Balance, beginning of year | $ | 5,284,597 | $ | 5,360,478 | |||||
Costs incurred during the year | 647,901 | 862,407 | |||||||
Asset retirement obligation acquired | -- | 33,128 | |||||||
Depletion | (968,451 | ) | -656,411 | ||||||
Impairment of oil and gas property costs | (2,886,175 | ) | (147,370 | ) | |||||
Cost of property sold | -- | (167,635 | ) | ||||||
Balance, end of year | $ | 2,077,872 | $ | 5,284,597 | |||||
Unproved Properties | |||||||||
2013 | 2012 | ||||||||
Balance, beginning of year | $ | 1,934,595 | $ | 2,012,768 | |||||
Costs incurred during the year | -- | -- | |||||||
Impairment of oil and gas property costs | (1,934,595 | ) | (78,173 | ) | |||||
Balance, end of year | $ | -- | $ | 1,934,595 | |||||
Proforma information | ' | ||||||||
The following is a summary of the proforma information assuming the sale of the Copano Bay field had occurred as of the beginning of each fiscal year presented: | |||||||||
2013 | 2012 | ||||||||
Oil and gas revenues | $ | 1,690,249 | $ | 1,343,951 | |||||
Expenses | |||||||||
Selling, general and administrative | 1,443,223 | 1,829,078 | |||||||
Depreciation and depletion | 969,511 | 644,110 | |||||||
Accretion | 39,731 | 38,136 | |||||||
Lease operating expense | 765,643 | 581,344 | |||||||
Impairment of oil and gas properties | 4,820,770 | 225,543 | |||||||
Oil and gas exploration costs | 699,335 | 952,320 | |||||||
Total expenses | 8,738,213 | 4,270,531 | |||||||
Loss from operations | (7,047,964 | ) | (2,926,580 | ) | |||||
Other income (expense) | (1,346,010 | ) | (449,881 | ) | |||||
Net income | $ | (8,393,974 | ) | $ | (3,376,461 | ) |
Debt_Tables
Debt (Tables) | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Debt Tables | ' | ||||||||
Debt outstanding | ' | ||||||||
The following is a summary of the debt outstanding at October 31, | |||||||||
2013 | 2012 | ||||||||
Silver Bullet Properties | $ | 3,220,000 | $ | 3,000,000 | |||||
PIE Energy | 60,000 | 60,000 | |||||||
KP-RAHR Ventures III, LLC, net | |||||||||
of discount of $1,329,581 and $2,008,134 | 1,270,419 | 591,866 | |||||||
Total | 4,550,419 | 3,651,866 | |||||||
Less current maturities | 280,000 | 60,000 | |||||||
Long-term debt | $ | 4,270,419 | $ | 3,591,866 | |||||
Date of Repayment | ' | ||||||||
Date of Repayment in Full | NPI % | ||||||||
On or prior to six month anniversary | 7.5 | % | |||||||
After six months but on or prior to two year anniversary | 15 | % | |||||||
After two years but on or prior to three year anniversary | 20 | % | |||||||
After three years | 50 | % |
Asset_Retirement_Obligation_Ta
Asset Retirement Obligation (Tables) | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Asset Retirement Obligation Tables | ' | ||||||||
Change in the asset retirement obligation | ' | ||||||||
The following table summarizes the change in the asset retirement obligation (“ARO”) for the years ended October 31, | |||||||||
2013 | 2012 | ||||||||
Beginning balance at November 1 | $ | 609,502 | $ | 677,318 | |||||
Liabilities settled | -- | -- | |||||||
Liabilities incurred through acquisition of assets | -- | -- | |||||||
Liabilities transferred through sale of assets | -- | (154,664 | ) | ||||||
Change in estimate of well life | -- | 33,128 | |||||||
Accretion expense | 39,731 | 53,720 | |||||||
Ending balance at October 31 | $ | 649,233 | $ | 609,502 |
Stockholders_Equity_Tables
Stockholders Equity (Tables) | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Stockholders Equity Tables | ' | ||||||||
Stock Options Activity | ' | ||||||||
A summary of the Company’s stock option activity and related information is as follows: | |||||||||
Number of Shares | Weighted Average Exercise Price | ||||||||
Outstanding at November 1, 2011 | 1,033,333 | 3 | |||||||
Granted | 88,000 | $ | 4.5 | ||||||
Exercised | - | - | |||||||
Cancelled | (75,000 | ) | 3 | ||||||
Outstanding at October 31, 2012 | 1,046,333 | $ | 3.13 | ||||||
Granted | -- | -- | |||||||
Exercised | - | - | |||||||
Cancelled | - | -- | |||||||
Outstanding at October 31, 2013 | 1,046,333 | $ | 3.13 | ||||||
Exercisable at October 31, 2013 | 1,046,333 | $ | 3.13 | ||||||
Stock Warrant Activity | ' | ||||||||
A summary of the Company’s stock warrant activity and related information for the years ended October 31, 2013 and 2012 is as follows: | |||||||||
Warrants | Weighted Average Exercise Price | ||||||||
Outstanding at November 1, 2011 | 2,390,601 | $ | 4.71 | ||||||
Granted | -- | -- | |||||||
Cancelled | -- | -- | |||||||
Outstanding at October 31, 2012 | 2,390,601 | $ | 4.71 | ||||||
Granted | -- | $ | -- | ||||||
Cancelled | (333,333 | ) | $ | 6 | |||||
Outstanding at October 31, 2013 | 2,057,268 | $ | 4.5 | ||||||
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Oct. 31, 2013 | |||||||||
Income Taxes Tables | ' | ||||||||
Reconciliation between the expected income tax benefit and statutory federal rate | ' | ||||||||
The reconciliation between the expected income tax benefit, computed using the statutory federal rate of 34%, and the actual income tax benefit is as follows: | |||||||||
October 31, | |||||||||
2013 | 2012 | ||||||||
Expected tax benefit at 34% | $ | 2,853,951 | $ | 1,170,839 | |||||
Stock option expenses | (89,672 | ) | (202,260 | ) | |||||
Miscellaneous | 1,762 | 571,312 | |||||||
Amortization of debt discount | (230,708 | ) | (24,100 | ) | |||||
Change in valuation allowance | (2,535,333 | ) | (1,515,791 | ) | |||||
Actual tax benefit | $ | -- | $ | - | |||||
Deferred tax assets/liability | ' | ||||||||
The composition of deferred tax assets/liability is as follows: | |||||||||
October 31, | |||||||||
2013 | 2012 | ||||||||
Deferred Tax Asset | |||||||||
Net operating loss | $ | 5,234,969 | $ | 4,692,316 | |||||
Oil and gas properties | 1,211,160 | ||||||||
Other | 382,311 | 237,471 | |||||||
Total deferred tax assets | $ | 6,828,440 | $ | 4,929,787 | |||||
Deferred Tax Liability | |||||||||
Oil and gas property interests | -- | 636,679 | |||||||
Net deferred tax assets | 6,828,440 | 4,293,108 | |||||||
Valuation allowance | (6,828,440 | ) | (4,293,108 | ) | |||||
Net | $ | -- | $ | - | |||||
Net operating losses | ' | ||||||||
For federal income tax purposes, the Company has net operating losses of approximately $15,322,609 at October 31, 2013. These losses expire as follows: | |||||||||
2026 | $ | 291,662 | |||||||
2027 | 1,739,955 | ||||||||
2028 | 1,265,101 | ||||||||
2029 | 769,546 | ||||||||
2030 | 588,394 | ||||||||
2031 | 5,153,072 | ||||||||
2032 | 3,748,939 | ||||||||
2033 | 1,765,940 | ||||||||
$ | 15,322,609 |
Supplemental_Oil_and_Gas_Discl1
Supplemental Oil and Gas Disclosures (Unaudited) (Tables) | 12 Months Ended | ||||||||||||||||
Oct. 31, 2013 | |||||||||||||||||
Supplemental Oil And Gas Disclosures Tables | ' | ||||||||||||||||
Capitalized Cost Of Oil And Gas Producing Activities | ' | ||||||||||||||||
CAPITALIZED COST OF OIL AND GAS PRODUCING ACTIVITIES | |||||||||||||||||
As of October 31 | 2013 | 2012 | |||||||||||||||
United States | United States | ||||||||||||||||
Unproved properties not being amortized | $ | -- | $ | 1,934,595 | |||||||||||||
Proved property being amortized | 8,387,479 | 7,739,578 | |||||||||||||||
Accumulated depreciation, depletion amortization and impairment | (6,309,607 | ) | (2,454,981 | ) | |||||||||||||
Net capitalized costs | $ | 2,077,872 | $ | 7,219,192 | |||||||||||||
Costs Incurred In Oil And Gas Property Acquisition, Exploration, And Development Activities | ' | ||||||||||||||||
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | |||||||||||||||||
As of October 31 | 2013 | 2012 | |||||||||||||||
Property acquisition costs—proved and unproved properties | $ | -- | $ | 112,085 | |||||||||||||
Exploration costs | $ | 699,335 | $ | 952,320 | |||||||||||||
Development costs | $ | 649,003 | $ | 2,799,268 | |||||||||||||
Oil And Gas Reserves | ' | ||||||||||||||||
Oil BBls | Gas Mcf | ||||||||||||||||
31-Oct-11 | 1,644,390 | 1,843,660 | |||||||||||||||
Revisions of previous estimates | (1,018,181 | ) | (500,057 | ) | |||||||||||||
Acquisition of minerals in place | -- | -- | |||||||||||||||
Sales of minerals in place | (24,863 | ) | (800,620 | ) | |||||||||||||
Production | (15,046 | ) | (32,893 | ) | |||||||||||||
31-Oct-12 | 586,300 | 510,090 | |||||||||||||||
Revisions of previous estimates | (511,801 | ) | (296,245 | ) | |||||||||||||
Acquisition of minerals in place | -- | -- | |||||||||||||||
Sales of minerals in place | -- | -- | |||||||||||||||
Production | (16,139 | ) | (18,285 | ) | |||||||||||||
31-Oct-13 | 58,360 | 195,560 | |||||||||||||||
Proved developed reserves | ' | ||||||||||||||||
The Company's proved developed reserves are as follows: | |||||||||||||||||
Developed | Undeveloped | ||||||||||||||||
Oil BBls | Gas Mcf | Oil BBls | Gas Mcf | ||||||||||||||
31-Oct-13 | 58,360 | 195,560 | -- | -- | |||||||||||||
31-Oct-12 | 76,000 | 234,526 | 510,300 | 275,564 | |||||||||||||
31-Oct-11 | 82,300 | 1,062,610 | 1,562,090 | 781,050 | |||||||||||||
Standardized Measure Of Discounted Future Net Cash Flow | ' | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Future cash inflows | $ | 6,077,480 | $ | 55,667,980 | |||||||||||||
Future development costs | (321,400 | ) | (20,458,060 | ) | |||||||||||||
Future production costs | (2,940,800 | ) | (14,983,390 | ) | |||||||||||||
Future income tax expenses | - | - | |||||||||||||||
Future net cash flows before 10% discount | 2,815,280 | 20,226,530 | |||||||||||||||
10%Annual discount for estimated timing of cash flows | (713,950 | ) | (12,543,920 | ) | |||||||||||||
Standardized measure discounted future net cash flows | $ | 2,101,330 | $ | 7,682,610 | |||||||||||||
Changes In Standardized Measure Of Discounted Future Net Cash Flows | ' | ||||||||||||||||
The following is a summary of the changes in the Standardized Measure of discounted future net cash flows for the Company’s proved oil and natural gas reserves during each of the years in the two year period ended October 31, 2013: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Beginning of the year | $ | 7,682,610 | $ | 17,017,670 | |||||||||||||
Sales and transfers of oil and gas produced, net of production costs | (924,607 | ) | (818,959 | ) | |||||||||||||
Net changes in prices and production costs | (6,104,363 | ) | 503,507 | ||||||||||||||
Net changes in income taxes | - | - | |||||||||||||||
Development costs incurred | 647,901 | 2,817,119 | |||||||||||||||
Changes in estimated future development costs, net of current development costs | 16,571,027 | 20,444,800 | |||||||||||||||
Acquisition of minerals in place | -- | (789,570 | ) | ||||||||||||||
Revision of previous estimates | (12,918,359 | ) | (33,359,836 | ) | |||||||||||||
Change of discount | 768,261 | 1,701,767 | |||||||||||||||
Change in production rate and other | (3,621,140 | ) | 166,112 | ||||||||||||||
End of year | $ | 2,101,330 | $ | 7,682,610 |
The_Company_and_Summary_of_Sig2
The Company and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Company And Summary Of Significant Accounting Policies Details Narrative | ' | ' |
Impairment of oil and gas property interest | $4,820,770 | $225,543 |
Potentially dilutive common shares excluded from the calculation of diluted net income (loss) | 3,103,601 | 3,511,934 |
Accumulated deficit | -28,707,810 | -20,313,836 |
Working capital deficit | 2,172,431 | ' |
Cash and cash equivalents | 1,335,237 | ' |
Overstatement Additional paid in capital | ' | $145,482 |
Oil_and_Gas_Property_Costs_Det
Oil and Gas Property Costs (Details) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Proved Properties [Member] | ' | ' |
Balance, beginning of year | $5,284,597 | $5,360,478 |
Costs incurred during the year | 647,901 | 862,407 |
Asset retirement obligation acquired | ' | 33,128 |
Depletion | -968,451 | -656,411 |
Impairment of oil and gas property costs | -2,886,175 | -147,370 |
Cost of property sold | ' | -167,635 |
Balance, end of year | 2,077,872 | 5,284,597 |
Unproved Properties [Member] | ' | ' |
Balance, beginning of year | 1,934,595 | 2,012,768 |
Costs incurred during the year | ' | ' |
Impairment of oil and gas property costs | -1,934,595 | -78,173 |
Balance, end of year | ' | $1,934,595 |
Oil_and_Gas_Property_Costs_Det1
Oil and Gas Property Costs (Details 1) (Copano Bay [Member], USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Copano Bay [Member] | ' | ' |
Oil and gas revenues | $1,690,249 | $1,343,951 |
Expenses | ' | ' |
Selling, general and administrative | 1,443,223 | 1,829,078 |
Depreciation and depletion | 969,511 | 644,110 |
Accretion | 39,731 | 38,136 |
Lease operating expense | 765,643 | 581,344 |
Impairment of oil and gas properties | 4,820,770 | 225,543 |
Oil and gas exploration costs | 699,335 | 952,320 |
Total expenses | 8,738,213 | 4,270,531 |
Loss from operations | -7,047,964 | -3,072,062 |
Other income (expense) | -1,346,010 | -449,881 |
Net income | ($8,393,974) | ($3,376,461) |
Oil_and_Gas_Property_Costs_Det2
Oil and Gas Property Costs (Details Narrative) (USD $) | 12 Months Ended | ||||||||
Oct. 30, 2012 | Oct. 30, 2012 | Oct. 31, 2013 | Oct. 31, 2012 | Oct. 31, 2013 | Oct. 31, 2013 | Oct. 31, 2012 | Oct. 31, 2013 | Oct. 31, 2013 | |
Livestock 7-1 [Member] | Livestock 18-1 [Member] | Unproved Properties [Member] | Unproved Properties [Member] | Unproved Properties [Member] | Proved Properties [Member] | Proved Properties [Member] | Proved Properties [Member] | Proved Properties [Member] | |
Del Norte Acquisition [Member] | AP Clark Wells [Member] | Cabeza Creek Field [Member] | |||||||
Impairment | ' | ' | $1,934,595 | $78,173 | $153,381 | $2,886,175 | $147,370 | $2,881,816 | $4,359 |
Drilled wells cost | $1,223,535 | $1,275,699 | $171,790 | $952,320 | ' | ' | ' | ' | ' |
Debt_Details
Debt (Details) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
Total | $4,550,419 | $3,651,866 |
Less current maturities | 280,000 | 60,000 |
Long-term debt | 4,270,419 | 3,591,866 |
KP-RAHR Ventures III, LLC | ' | ' |
Total | 1,270,419 | 591,866 |
Silver Bullet Properties [Member] | ' | ' |
Total | 3,220,000 | 3,000,000 |
PIE Energy [Member] | ' | ' |
Total | $60,000 | $60,000 |
Debt_Details_1
Debt (Details 1) | 12 Months Ended |
Oct. 31, 2013 | |
Date of Repayment in Full | ' |
On or prior to six month anniversary | 7.50% |
After six months but on or prior to two year anniversary | 15.00% |
After two years but on or prior to three year anniversary | 20.00% |
After three years | 50.00% |
Debt_Details_Narrative
Debt (Details Narrative) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Debt Details Narrative | ' | ' |
Fair value of the overriding royalties | $163,786 | ' |
Net profits interest | 1,915,231 | ' |
Carrying value of the discounts | 1,329,581 | ' |
Amortization of interest expense | $678,553 | $70,883 |
Asset_Retirement_Obligation_De
Asset Retirement Obligation (Details) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Asset Retirement Obligation Details | ' | ' |
Beginning balance | $609,502 | $677,318 |
Liabilities settled | ' | ' |
Liabilities incurred through acquisition of assets | ' | ' |
Liabilities transferred through sale of assets | ' | -154,664 |
Change in estimate of well life | ' | 33,128 |
Accretion expense | 39,731 | 53,720 |
Ending balance | $649,233 | $609,502 |
Stockholders_Equity_Details
Stockholders Equity (Details) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Number of Shares | ' | ' |
Beginning Balance | 1,046,333 | 1,033,333 |
Granted | ' | 88,000 |
Exercised | ' | ' |
Cancelled | ' | -75,000 |
Ending Balance | 1,046,333 | 1,046,333 |
Exercisable at October 31, 2013 | 1,046,333 | ' |
Weighted Average Exercise Price | ' | ' |
Beginning Balance | $3.13 | $3 |
Granted | ' | $4.50 |
Exercised | ' | ' |
Cancelled | ' | $3 |
Ending Balance | $3.13 | $3.13 |
Exercisable at October 31, 2013 | $3.13 | ' |
Stockholders_Equity_Details_1
Stockholders' Equity (Details 1) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Warrants, Outstanding at November 1, 2011 | 2,390,601 | 2,390,601 |
Warrants Granted | ' | ' |
Warrants Cancelled | -333,333 | ' |
Warrants, Outstanding at October 31, 2012 | 2,057,268 | 2,390,601 |
Weighted Average Exercise Price, Beggining Balance | $4.71 | $4.71 |
Granted Weighted Average Exercise Price | ' | ' |
Cancelled Weighted Average Exercise Price | $6 | ' |
Outstanding at October 31, 2013 | 4.5 | 4.71 |
Stockholders_Equity_Details_Na
Stockholders Equity (Details Narrative) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Stockholders Equity Details Narrative | ' | ' |
Preferred stock, par value | $0.00 | $0.01 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Series A Preferred stock, outstanding shares | 826,667 | ' |
Stock options were granted to a director | ' | 88,000 |
Exercise price of the options | ' | $4.50 |
Expected volatility | ' | 134.00% |
Risk free interest rate | ' | 0.77% |
Expected lives | ' | '3 years 8 months 12 days |
Stock-based compensation expenses | $238,980 | $449,419 |
Intrinsic value of the exercisable options | 0 | ' |
Weighted average remaining life of the stock options | '6 years 4 months 6 days | ' |
Total unrecognized compensation cost related to the stock options granted | 63,204 | ' |
Weighted average period | '11 months 1 day | ' |
Intrinsic value for the outstanding warrants | $0 | ' |
Remaining term of the warrants | '5 months 1 day | ' |
Commitments_and_Contingencies_
Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Commitments And Contingencies Details Narrative | ' | ' |
Director expenses | $24,793 | ' |
Rent expense | $47,832 | $33,600 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Income Taxes Details | ' | ' |
Expected tax benefit at 34% | $2,853,951 | $1,170,839 |
Stock option expenses | -89,672 | -202,260 |
Miscellaneous | 1,762 | 571,312 |
Amortization of debt discount | -230,708 | -24,100 |
Change in valuation allowance | 2,535,333 | -1,515,791 |
Actual tax benefit | ' | ' |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
Deferred Tax Asset | ' | ' |
Net operating loss | $5,234,969 | $4,692,316 |
Oil and gas properties | 1,211,160 | ' |
Other | 382,311 | 237,471 |
Total deferred tax assets | 6,828,440 | 4,929,787 |
Deferred Tax Liability | ' | ' |
Oil and gas property interests | ' | 636,679 |
Net deferred tax assets | 6,828,440 | 4,293,108 |
Valuation allowance | -6,828,440 | -4,293,108 |
Net | ' | ' |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | Oct. 31, 2013 |
Operating Loss Carry forwards | $15,322,609 |
2026 | ' |
Operating Loss Carry forwards | 291,662 |
2027 | ' |
Operating Loss Carry forwards | 1,739,955 |
2028 | ' |
Operating Loss Carry forwards | 1,265,101 |
2029 | ' |
Operating Loss Carry forwards | 769,546 |
2030 | ' |
Operating Loss Carry forwards | 588,394 |
2031 | ' |
Operating Loss Carry forwards | 5,153,072 |
2032 | ' |
Operating Loss Carry forwards | 3,926,547 |
2033 | ' |
Operating Loss Carry forwards | $1,765,940 |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Income Taxes Details Narrative | ' | ' |
Statutory federal rate | 34.00% | ' |
Change in valuation allowance | $2,535,333 | ($1,515,791) |
Supplemental_Oil_and_Gas_Discl2
Supplemental Oil and Gas Disclosures (Unaudited) (Details) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
United States | ||
CAPITALIZED COST OF OIL AND GAS PRODUCING ACTIVITIES | ' | ' |
Unproved properties not being amortized | ' | $1,934,595 |
Proved property being amortized | 8,387,479 | 7,739,578 |
Accumulated depreciation, depletion amortization and impairment | -6,309,607 | -2,454,981 |
Net capitalized costs | $2,077,872 | $7,219,192 |
Supplemental_Oil_and_Gas_Discl3
Supplemental Oil and Gas Disclosures (Unaudited) (Details 1) (USD $) | Oct. 31, 2013 | Oct. 31, 2012 |
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | ' | ' |
Property acquisition costs proved and unproved properties | ' | $112,085 |
Exploration costs | 699,335 | 952,320 |
Development costs | $649,003 | $2,799,268 |
Supplemental_Oil_and_Gas_Discl4
Supplemental Oil and Gas Disclosures (Unaudited) (Details 2) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
bbl | bbl | |
Oil BBls Member | ' | ' |
Begnning Balance | 586,300 | 1,644,390 |
Revisions of previous estimates | -511,801 | -1,018,181 |
Sales of minerals in place | ' | -24,863 |
Production | 16,139 | -15,046 |
Ending Balance | 58,360 | 586,300 |
Gas Mcf Member | ' | ' |
Begnning Balance | 510,090 | 1,843,660 |
Revisions of previous estimates | -296,245 | -500,057 |
Sales of minerals in place | ' | -800,620 |
Production | -18,285 | -32,893 |
Ending Balance | 195,560 | 510,090 |
Supplemental_Oil_and_Gas_Discl5
Supplemental Oil and Gas Disclosures (Unaudited) (Details 3) | Oct. 31, 2013 | Oct. 31, 2012 | Oct. 31, 2011 |
bbl | bbl | bbl | |
Oil BBls Member | ' | ' | ' |
Developed Reserves | 58,360 | 76,000 | 82,300 |
Undeveloped Reserves | ' | 510,300 | 1,562,090 |
Gas Mcf Member | ' | ' | ' |
Developed Reserves | 195,560 | 234,526 | 1,062,610 |
Undeveloped Reserves | ' | 275,564 | 781,050 |
Supplemental_Oil_and_Gas_Discl6
Supplemental Oil and Gas Disclosures (Unaudited) (Details 4) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Future cash inflows | $6,077,480 | $55,667,980 |
Future development costs | -321,400 | -20,458,060 |
Future production costs | -2,940,800 | -14,983,390 |
Future income tax expenses | ' | ' |
Future net cash flows before 10% discount | 2,815,280 | 20,226,530 |
10%Annual discount for estimated timing of cash flows | -713,950 | -12,543,920 |
Standardized measure discounted future net cash flows | $2,101,330 | $7,682,610 |
Supplemental_Oil_and_Gas_Discl7
Supplemental Oil and Gas Disclosures (Unaudited) (Details 5) (USD $) | 12 Months Ended | |
Oct. 31, 2013 | Oct. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Beginning of the year | $7,682,610 | $17,017,670 |
Sales and transfers of oil and gas produced, net of production costs | -924,607 | -818,959 |
Net changes in prices and production costs | -6,104,363 | 503,507 |
Net changes in income taxes | ' | ' |
Development costs incurred | 647,901 | 2,817,119 |
Changes in estimated future development costs, net of current development costs | 16,571,027 | 20,444,800 |
Acquisition of minerals in place | ' | -789,570 |
Revision of previous estimates | -12,918,359 | -33,359,836 |
Change of discount | 768,261 | 1,701,767 |
Change in production rate and other | -3,621,140 | 166,112 |
End of year | $2,101,330 | $7,682,610 |