Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jan. 31, 2015 | Mar. 17, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | HYDROCARB ENERGY CORP | |
Entity Central Index Key | 1425808 | |
Current Fiscal Year End Date | -24 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 21,266,794 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 31-Jan-15 |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Jan. 31, 2015 | Jul. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $266,646 | $144,258 |
Oil and gas revenues receivable | 81,574 | 372,120 |
Accounts receivable - related party | 2,723 | 58,014 |
Other current assets | 171,650 | 446,320 |
Other receivables, net | 190,019 | 38,455 |
Total current assets | 712,612 | 1,059,167 |
Oil and gas properties, accounted for using the full cost method of accounting | ||
Evaluated property, net of accumulated depletion of $3,849,998 and $3,491,420, respectively; and accumulated impairment of $373,335 and $373,335, respectively | 17,148,625 | 15,288,370 |
Unevaluated property | 2,302,098 | 2,119,769 |
Restricted cash | 6,857,002 | 6,877,944 |
Other assets | 392,420 | 219,942 |
Property and equipment, net of accumulated depreciation of $164,927 and $135,590, respectively | 136,752 | 166,963 |
TOTAL ASSETS | 27,549,509 | 25,732,155 |
Current liabilities: | ||
Accounts payable and accrued expenses | 3,693,900 | 2,795,675 |
Short term notes payable | 2,273 | 334,688 |
Asset retirement obligations - short term | 60,000 | 1,133,690 |
Advances | 195,904 | 195,904 |
Due to related parties | 98,585 | 165,542 |
Total current liabilities | 4,050,662 | 4,625,499 |
Notes payable, net of discount | 3,841,420 | 0 |
Notes payable - related party | 600,000 | 600,000 |
Asset retirement obligation - long term | 12,164,789 | 10,582,540 |
Total liabilities | 20,656,871 | 15,808,039 |
Stockholders' Deficit: | ||
Common stock: $001 par value; 333,333,333 shares authorized; 21,266,749 and 21,081,602 shares issued and outstanding as of January 31, 2015 and July 31, 2014, respectively | 21,267 | 21,082 |
Receivable for common stock | -2,184,879 | -2,184,879 |
Additional paid-in capital | 82,929,743 | 82,228,799 |
Accumulated deficit | -73,837,653 | -70,106,351 |
Total stockholders' equity | 6,928,478 | 9,958,651 |
Noncontrolling interests | -35,840 | -34,535 |
Total equity | 6,892,638 | 9,924,116 |
TOTAL LIABILITIES AND EQUITY | $27,549,509 | $25,732,155 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Jan. 31, 2015 | Jul. 31, 2014 |
Assets | ||
Accumulated depletion on evaluated oil and gas property accounted for using the full cost method of accounting | $3,849,998 | $3,491,420 |
Accumulated impairment on evaluated oil and gas property accounted for using the full cost method of accounting | 373,335 | 373,335 |
Accumulated depreciation recorded for property and equipment | $164,927 | $135,590 |
Equity [Abstract] | ||
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized (in shares) | 333,333,333 | 333,333,333 |
Common stock, shares issued (in shares) | 21,266,749 | 21,266,749 |
Common stock, shares outstanding (in shares) | 21,081,602 | 21,081,602 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2015 | Jan. 31, 2014 | Jan. 31, 2015 | Jan. 31, 2014 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) | ||||
Revenues | $646,348 | $989,732 | $1,851,777 | $2,829,943 |
Operating expenses | ||||
Lease operating expense | 913,290 | 811,127 | 2,210,845 | 1,928,459 |
Depreciation, depletion, and amortization | 162,166 | 191,764 | 386,422 | 493,679 |
Accretion | 258,782 | 244,509 | 560,990 | 488,485 |
Consulting fees - related party | 0 | 0 | 0 | 6,754 |
General and administrative expense | 980,480 | 946,325 | 1,923,760 | 2,738,324 |
Total operating expenses | 2,314,718 | 2,193,725 | 5,082,017 | 5,655,701 |
Loss from operations | -1,668,370 | -1,203,993 | -3,230,240 | -2,825,758 |
Consulting and other income (expense) | 2,737 | -4,940 | 6,779 | -30,266 |
Interest income (expense), net | -279,727 | -36,854 | -507,504 | 21,338 |
Foreign currency transaction gain (loss) | -6,401 | -28,971 | -1,642 | -30,626 |
Net loss before income taxes | -1,951,761 | -1,274,758 | -3,732,607 | -2,865,312 |
Income tax provision | 0 | 0 | 0 | -4,599 |
Net loss | -1,951,761 | -1,274,758 | -3,732,607 | -2,869,911 |
Less: Net loss attributable to noncontrolling interests | 18 | -1,888 | -1,305 | -3,360 |
Net loss attributable to Hydrocarb Corporation | -1,951,779 | -1,272,870 | -3,731,302 | -2,866,551 |
Deemed dividend on preferred stock | 0 | -3,019 | 0 | -34,254 |
Net loss attributable to Hydrocarb Energy Corp after dividends | ($1,951,779) | ($1,275,889) | ($3,731,302) | ($2,900,805) |
Basic and diluted loss per common share (in dollars per share) | ($0.09) | ($0.03) | ($0.18) | ($0.10) |
Weighted average shares outstanding (basic and diluted) (in shares) | 21,203,773 | 42,600,075 | 21,178,191 | 27,940,539 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 6 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | ($3,732,607) | ($2,869,911) |
Adjustments to reconcile net income loss to net cash used in operating activities: | ||
Depreciation, depletion, and amortization | 386,422 | 493,679 |
Accretion | 560,990 | 488,485 |
Amortization of debt discount | 352,807 | 0 |
Debt issuance cost | 94,626 | 0 |
Warrants granted to related party | 388,475 | 6,754 |
Share based compensation | 453,475 | 1,214,213 |
Loss on ERG settlement - shares issued | 65,000 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 290,546 | 491,840 |
Other receivables | -151,564 | 0 |
Accounts receivable - related party | 55,291 | 201,284 |
Payments on borrowings from Related Parties | -66,957 | 0 |
Other assets | 291,021 | 389,566 |
Accounts payable and accrued expenses | 853,435 | -188,738 |
Advances | 0 | 15,100 |
Settlement of asset retirement obligation | 0 | -83,840 |
NET CASH PROVIDED (USED) OPERATIONS | -612,515 | 158,432 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of oil and gas properties | -2,453,592 | -996,985 |
Proceeds from sale of property and equipment | 2,366 | -123,898 |
Change in restricted cash | 20,942 | 0 |
CASH USED IN INVESTING ACTIVITIES | -2,430,284 | -1,120,883 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments on notes payable | -287,625 | -181,498 |
Proceeds from note payable to related party | 0 | 100,000 |
Payments on borrowings from Related Parties | 0 | 1,142,232 |
Proceeds from borrowings | 3,452,812 | 0 |
Proceeds from subsidiary sale of its common stock | 0 | 31,071 |
CASH PROVIDED BY FINANCING ACTIVITIES | 3,165,187 | 1,091,805 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 122,388 | 129,354 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 144,258 | 354,829 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $266,646 | $484,183 |
Description_of_Business_and_Su
Description of Business and Summary of Significant Accounting Policies | 6 Months Ended |
Jan. 31, 2015 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Description of Business and Summary of Significant Accounting Policies | Note 1 – Description of Business and Summary of Significant Accounting Policies |
Description of business and basis of presentation | |
The unaudited consolidated financial statements of Hydrocarb Energy Corp. (“Hydrocarb”, “HEC”, the “Company”, “we”, “us”, “our”) have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report filed with the SEC on Form 10-K for the year ended July 31, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended July 31, 2014, as reported in the Form 10-K, have been omitted. | |
While working towards plans and expectations of being listed on a major stock exchange, we currently trade on the OTCBB under the stock symbol “HECC”. | |
We are a natural resource exploration and production company engaged in the exploration, acquisition, development, and production of oil and gas properties in the United States and onshore in Namibia, Africa. We maintain developed acreage offshore in Texas. As part of our ongoing business strategy, we continue to review and evaluate acquisition opportunities in the continental United States and internationally. | |
Reclassifications | |
Certain prior year amounts have been reclassified to conform with the current presentation. | |
Principles of consolidation | |
We own 100% of the issued and outstanding share capital of (i) Penasco Petroleum Inc. (“Penasco”), a Nevada corporation, (ii) Galveston Bay Energy, LLC (“GBE”), a Texas limited liability company, (iii) SPE Navigation I, LLC, a Nevada limited liability company (“SPE”), (iv) Namibia Exploration, Inc. (“NEI”), a Nevada corporation, (v) Hydrocarb Corporation, a Nevada corporation (“HCN”), (vi) Hydrocarb Texas Corporation, a Texas corporation, and (vii) Hydrocarb Namibia Energy (Pty) Limited (“Namibia”), a company chartered in the Republic of Namibia. In addition, we own 95% of the issued and outstanding share capital of Otaiba Hydrocarb LLC (“Otaiba”), a UAE limited liability corporation. The accompanying consolidated financial statements include the accounts of the entities noted above. All significant intercompany accounts and transactions have been eliminated in consolidation. | |
The acquisition of HCN, an entity under common control, on December 9, 2013 (See Note 2 – HCN Acquisition) has resulted in a change in the reporting entity. The consolidated financial statements presented for the periods subsequent to the acquisition include the accounts of HCN and its subsidiaries. As HEC and HCN are under the common control of same shareholder group, the acquired assets and liabilities were recorded at the historical carrying value and the consolidated financial statements were retroactively restated to reflect the Company as if HCN had been owned since the beginning of the earliest period presented. | |
Noncontrolling interests | |
Our consolidated financial statements include the accounts of all subsidiaries where we hold a controlling financial interest. We have a controlling financial interest if we own a majority of the outstanding voting common stock and minority shareholders do not have substantive participating rights, we have significant control over an entity through contractual or economic interests in which we are the primary beneficiary or we have the power to direct the activities that most significantly impact the entity’s economic performance. The ownership interest in subsidiaries held by third parties are presented in the consolidated balance sheet within equity, but separate from the parent’s equity, as noncontrolling interest. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Cash and cash equivalents | |
Cash and cash equivalents are all highly liquid investments with an original maturity of three months or less at the time of purchase and are recorded at cost, which approximates fair value. | |
Our functional currency is the United States dollars. Transactions denominated in foreign currencies are translated into their United States dollar equivalents using current exchange rates. Monetary assets and liabilities are translated using exchange rates that prevailed as of the balance sheet date. Non-monetary assets and liabilities are translated using exchange rates that prevailed as of the transaction date. Revenue, if applicable and expenses are translated using average exchange rates over the accounting period. We have had no revenue denominated in foreign currencies. Gains or losses resulting from foreign currency transactions are included in results of operations. | |
Stock Split | |
On May 8, 2014, we effected a 1:3 reverse split of our authorized common stock and a corresponding 3:1 reverse split of our outstanding common stock. All share and per share amounts in this report have been retroactively restated to reflect the reverse split. This presentation is consistent with the guidance in ASC 260-10-55-12, Earnings per Share, which requires retroactive restatement of earnings per share if a capital structure change due to a stock dividend, stock split or reverse split occurs after the date of the latest balance sheet, but before the release of the financial statements. | |
Recent accounting pronouncements | |
In August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial Statements Going Concern (Subtopic 205-40) which requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans and requires an express statement and other disclosures when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, early application is permitted. We are currently evaluating the accounting implication and do not believe the adoption of ASU 2014-15 to have material impact on our consolidated financial statements, although there may be additional disclosures upon adoption. | |
Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on our financial position or results from operations. |
HCN_Acquisition
HCN Acquisition | 6 Months Ended | ||||
Jan. 31, 2015 | |||||
HCN Acquisition [Abstract] | |||||
HCN Acquisition | Note 2 – HCN Acquisition | ||||
The acquisition Agreement provided that HEC would issue 7,470,000 shares of its common stock to the holders of certain rights to acquire HEC stock. These rights were previously issued by HEC as contingent consideration in connection with the acquisition of NEI. The rights had been convertible into HEC common stock based upon HEC market capitalization milestones. The rights were issued to entities deemed related parties to HEC. | |||||
In anticipation of the HCN acquisition, HEC issued 619,960 shares of its common stock to HCN as full payment for HEC’s indebtedness to HCN in the amount of $3,589,567. A condition to the Agreement closing was that HCN will sell the 619,960 shares before closing of the acquisition, which it did (see Note 7 – Capital Stock – Receivables for Common Stock). | |||||
With HCN, we acquired its 100% owned subsidiaries: Hydrocarb Namibia Energy (Pty) Limited, a Namibia Company and Hydrocarb Texas Corporation, a Texas Corporation; and its 95% owned subsidiary Otaiba Hydrocarb LLC, a UAE Limited Liability Company. | |||||
Prior to the acquisition, HCN was directly and indirectly majority-owned and controlled by HEC’s Chairman of the Board and entities related to him and his family. Since HCN and HEC were under common control of a controlling party both before and after the completion of the share exchange, the transaction was accounted for as a business acquired from an entity under common control and the assets and liabilities acquired were recorded at HCN’s historical cost at Acquisition Date following ASC 805-50-30, Business Combinations. Under this accounting treatment, the results of operations for the three months and six months ended January 31, 2015 and assets and liabilities of HCN as of January 31, 2015 are included in these financial statements as if the transaction had occurred at the beginning of the period. Prior reporting periods in these financial statements have been retroactively adjusted to include HCN and its subsidiaries. | |||||
According to ASC 805-50-30, the net assets of HCN are to be recorded at historical cost, therefore, the value of the 8,396,667 common shares is deemed to be the same as the historical value of HCN net assets of $1,398,127 with excess of $3,874,609 recorded as additional paid in capital by HEC. | |||||
Summary of the accounting entry to record this acquisition in December 2013 is as follows. | |||||
Assets acquired | $ | 1,529,246 | |||
Liabilities assumed | (161,599 | ) | |||
Noncontrolling interest in 95% owned HCN subsidiary | 30,480 | ||||
$ | 1,398,127 | ||||
Common stock, at par | 8,397 | ||||
Receivable for common stock | (2,484,879 | ) | |||
Additional paid-in capital | 3,874,609 | ||||
$ | 1,398,127 | ||||
HCN had 51% working-interest rights in and operated an unevaluated Namibian concession described in Note 3 – Oil and Gas Properties, below, and provided international oilfield consulting services. Prior to this acquisition, HEC owned 39% working-interest right in this concession. With the HCN acquisition, we now own 90% working interest (100% cost responsibility) in the concession. This 5.3 million-acre concession is located in northern Namibia in Africa. The concession specifies the following minimum cost responsibilities on an 8/8ths basis: | |||||
1) | Initial Exploration Period (expires September 2015): Perform a hydrocarbon potential study, gather and review existing technical data including reprocessing of available seismic lines, and acquire and process 750 kilometers of new 2D seismic data. The minimum expenditure is $4,505,000. | ||||
2) | First Renewal Exploration Period (two years from end of the Initial Exploration Period): Acquire 200 square kilometers of 3D seismic data, interpret and map the data, design a drilling program, drill one well, conduct an environmental study, and relinquish 25% of the exploration license area. The minimum expenditure is $17,350,000. | ||||
3) | Second Renewal (Production License) Exploration Period (25 years): Report on reserves and production and conduct an environmental study. The minimum expenditure is $300,000. | ||||
In conjunction with the HCN acquisition, the HEC Board of Directors authorized the immediate issuance of 7,470,000 shares of our common stock to the former owners of NEI. We previously acquired NEI on August 7, 2012 and these 7,470,000 shares had been contingently-issuable consideration for the acquisition of NEI. We issued these shares on December 9, 2013. The original agreement contained market conditions for the issuance of this stock. | |||||
In connection with certain recent due diligence undertaken by the Company, it has come to the attention of management, that although the Company previously believed, on advice of prior counsel, that the Board of Directors of the Company had the authority under the Company’s Articles of Incorporation, as amended, to unilaterally authorize preferred stock, including the designation of the Series A Preferred, under applicable Nevada law, unless such preferred stock is specifically authorized in a Nevada corporation’s articles no preferred stock can be designated or issued. As such, our Board of Directors did not have authority under the Articles of Incorporation, as amended, and applicable Nevada law to designate the Series A Preferred or to file such certificate of designations with the Secretary of State of Nevada. Consequently, we now believe that the Series A Preferred is not validly issued or outstanding and the filing of the Series A Preferred designation with the consent of the Board of Directors and without shareholder approval, was invalid and had no legal effect. We are in the process of seeking shareholder approval, at our 2015 Annual Meeting of stockholders, to ratify and approve the designation of the Series A Preferred Stock. As a result, we removed Series A 7% Convertible Voting Preferred Stock (“Series A Preferred”) from the accompanying financial statements for current and prior periods. |
Supplemental_Cash_Flow_Informa
Supplemental Cash Flow Information | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||
Supplemental Cash Flow Information | Note 3 – Supplemental Cash Flow Information | ||||||||
NONCASH INVESTING AND FINANCING ACTIVITIES | |||||||||
Asset retirement obligation sold | $ | - | $ | 4,381 | |||||
Asset retirement obligations incurred | $ | - | $ | 100,932 | |||||
Asset retirement obligations - change in estimate | $ | (52,431 | ) | $ | - | ||||
Accounts payable for oil and gas properties | $ | - | $ | 11,373 | |||||
Note payable for prepaid insurance | $ | - | $ | - | |||||
Settlement of HCN debt with HCN preferred stock | $ | - | $ | 1,585,200 | |||||
Common stock exchanged for HCN common stock for acquisitin of HCN | $ | - | $ | 25,190 | |||||
Receivable for common stock - related party | $ | - | $ | 1,000,000 | |||||
Receivable for common stock - related party | $ | - | $ | 1,859,879 | |||||
Common stock issued to satisfy contingently issuable shares from 2012 acquisition of Namibia Exploration , Inc. | $ | - | $ | 22,410 | |||||
Value of shares issued to lenders as part of debt financing | $ | 247,655 | $ | - |
Oil_and_Gas_Properties
Oil and Gas Properties | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Oil and Gas Properties [Abstract] | |||||||||
Oil and Gas Properties | Note 4 – Oil and Gas Properties | ||||||||
Oil and natural gas properties as of January 31, 2015 and July 31, 2014 consisted of the following: | |||||||||
31-Jan-15 | July 31, | ||||||||
2014 | |||||||||
Evaluated Properties | |||||||||
Costs subject to depletion | $ | 21,371,958 | $ | 19,153,125 | |||||
Accumulated impairment | (373,335 | ) | (373,335 | ) | |||||
Accumulated depletion | (3,849,998 | ) | (3,491,420 | ) | |||||
Total evaluated properties | 17,148,625 | 15,288,370 | |||||||
Unevaluated properties | 2,302,098 | 2,119,769 | |||||||
Net oil and gas properties | $ | 19,450,723 | $ | 17,408,139 | |||||
Evaluated properties | |||||||||
Additions to evaluated oil and gas properties during the six months ended January 31, 2015 consisted mainly of exploration costs, specifically, geological and geophysical costs of approximately $2,271,263. | |||||||||
Unevaluated Properties | |||||||||
Namibia, Africa | |||||||||
We own 90% (100% cost responsibility) of our Namibia concession, as described above in Note 2 –Acquisitions. | |||||||||
Additions to unevaluated properties of approximately $182,000 during the Six months ended January 31, 2015 primarily of: | |||||||||
· | Approximately $182,000 of leasehold costs, specifically payment of the annual concession fee to the Government of Namibia. As of January 31, 2015, approximately $2.2 million has been expended towards the initial exploration period. |
Impairment
Impairment | 6 Months Ended |
Jan. 31, 2015 | |
Impairment [Abstract] | |
Impairment | Note 5 - Impairment |
Oil and Gas Properties | |
We account for our oil and natural gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (“SEC”). Under this method, subject to a limitation based on estimated value, all costs incurred in the acquisition, exploration, and development of proved oil and natural gas properties, including internal costs directly associated with acquisition, exploration, and development activities, the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized within a cost center. | |
We evaluated our capitalized costs using the full cost ceiling test as prescribed by the Securities and Exchange Commission at the end of each reporting period. As of January 31, 2015 and July 31, 2014, the net book value of oil and gas properties did not exceed the ceiling amount and thus, no impairment of the properties was required. Changes in production rates, levels of reserves, future development costs, and other factors will determine our actual ceiling test calculation and impairment analyses in future periods. |
Asset_Retirement_Obligations
Asset Retirement Obligations | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Asset Retirement Obligations [Abstract] | |||||||||
Asset Retirement Obligations | Note 6 – Asset Retirement Obligations | ||||||||
The following is a reconciliation of our asset retirement obligation liability as of January 31, 2015 and July 31, 2014: | |||||||||
31-Jan-15 | July 31, | ||||||||
2014 | |||||||||
Liability for asset retirement obligation, beginning of period | $ | 11,716,230 | $ | 10,933,398 | |||||
Asset retirement obligations sold | - | (33,195 | ) | ||||||
Asset retirement obligations incurred on properties drilled | - | - | |||||||
Accretion | 560,990 | 1,043,928 | |||||||
Revisions in estimated cash flows | (52,431 | ) | (104,237 | ) | |||||
Costs incurred | - | (123,664 | ) | ||||||
Liability for asset retirement obligation, end of period | $ | 12,224,789 | $ | 11,716,230 | |||||
Current portion of asset retirement obligation | $ | 60,000 | $ | 1,133,690 | |||||
Noncurrent portion of asset retirement obligation | 12,164,789 | 10,582,540 | |||||||
Total liability for asset retirement obligation | $ | 12,224,789 | $ | 11,716,230 |
Notes_Payable
Notes Payable | 6 Months Ended |
Jan. 31, 2015 | |
Notes Payable [Abstract] | |
Notes Payable | Note 7 – Notes Payable |
Installment Notes Payable | |
In May 2012, we entered into a note payable of $18,375 to purchase a vehicle. The note is collateralized by the vehicle. The note carries an interest rate of 6.93% and is payable beginning in June 2012, in 36 installments of $567 per month. The principal balance owed on the note payable was approximately $2,273 and $7,100 as of January 31, 2015 and July 31, 2014, respectively. | |
In February 2014, we financed our commercial insurance program using a note payable for $403,104. Under the note, we are obligated to make nine payments of $45,718 per month, which include principal and interest, beginning in March 2014. As of January 31, 2015, the note payable balance was approximately $45,000. | |
Related Party Installment Note Payable | |
In November 2013, we issued a promissory note for funds received from Mr. Kent P. Watts, Our Chairman, of $100,000. Under the terms of the note, principal on the note was due after one year and incurred interest at 5% per annum payable on a monthly basis. Accrued interest is payable monthly beginning in May 2014, and beginning in August 2014 the principal is due in 36 monthly payments through July 2017. The note is secured by the Company’s assets owned by GBE, subject to any other lien holder's superior rights, if any. In April 2014, the Company entered into a new debt agreement whereby Mr. Watts agreed to loan the Company up to $600,000 at an interest rate of 6.25%. The previous debt of $100,000 was rolled into this new note. Additionally, we borrowed $200,000 from Mr. Watts during April 2014 and $300,000 from Mr. Watts in May 2014. The total balance on the note was $600,000 as of January 31, 2015. As part of the financing agreement with Shadow Tree Capital Management, LLC (as discussed below), this note has been subordinated, and no payments will be made until the Shadow Tree debt has been repaid. | |
Credit Agreement | |
Effective August 15, 2014, we entered into a Credit Agreement (the “Credit Agreement”) as borrower, along with Shadow Tree Capital Management, LLC, as agent (the “Agent”), and certain lender parties thereto (the “Lenders”). Pursuant to the Credit Agreement, the Lenders loaned us $4.0 million, which was represented by Term Loan Notes in an aggregate amount of $4,545,454 (the “Notes”), representing an original issue discount of 12%. We also paid the Lenders a structuring fee of $90,909 equal to 2% of the principal amount of the Notes (the “Structuring Fee”) and agreed to reimburse the Lenders for all reasonable and documented fees, costs and expenses associated with the Credit Agreement, which totaled $172,824 in aggregate. Finally, we paid ROTH Capital Partners, LLC, a placement fee of 5% of the total value of the Loans ($227,273), as placement agent and Gary W. Vick, a consulting fee of 1% of the face value of the Loans ($45,455) for consulting services rendered. As a result of the payments above, the net amount of funding received from the Loans was $3,463,539. | |
Pursuant to the Credit Agreement, we have the right, at any time prior to the one year anniversary of the Credit Agreement, to borrow up to an additional $1,000,000 under the Credit Agreement (the “Additional Loan”), subject to certain pre-requisites and requirements as set forth in the Credit Agreement, including, but not limited to us raising $750,000 through the sale of equity subsequent to the closing of the transactions contemplated by the Credit Agreement (which we agreed to obtain within 150 days of the date of the Credit Agreement). We also agreed to pay a 2% Structuring Fee on the Additional Loan. The proceeds of the Additional Loan may only be used for the Oil and Gas Activities. | |
The amount owed pursuant to the Notes (and any amount borrowed pursuant to the Additional Loan) is guaranteed by our wholly-owned subsidiary, Hydrocarb Corporation (“HC”) and its subsidiaries, and our other wholly-owned subsidiaries and is secured by a first priority security interest in substantially all of our assets (including, but not limited to the securities of our subsidiaries and HC and its subsidiaries) evidenced by a Guarantee and Collateral Agreement, various pledge agreements and a deed of trust providing the Agent, as agent for the Lenders, a security interest over our oil and gas assets and rights. | |
The Notes do not accrue any interest for the first nine months after their issuance date (August 15, 2014), provided thereafter they accrue interest at the rate of (a) 16% per annum where the average net monthly oil and gas production revenues of Galveston Bay Energy LLC, our wholly-owned subsidiary, for the trailing three month period (the “Trailing Three Month Revenues”) is less than $900,000; or (b) 14% per annum, where the Trailing Three Month Revenues are equal to or greater than $900,000, payable monthly in arrears through the maturity date of such Notes, August 15, 2016. The Additional Loan, if any, will bear interest at the rate of 14% per annum, payable monthly in arrears, and will have the same maturity date as the Notes. Upon the occurrence of an event of default, the Notes (and any amount outstanding under the Additional Loan) will bear interest at the rate of 24% per annum until paid in full. | |
Pursuant to the Credit Agreement, we agreed to issue the Lenders their pro rata share of (a) 60,000 restricted shares of common stock on the effective date of the Credit Agreement, August 15, 2014 (the “Effective Date”); (b) 32,500 restricted shares in the event any amount of the Loans (or other obligations outstanding under agreements entered into in connection with the Loans, the “Loan Documents”) are outstanding on the 12 month anniversary of the Effective Date; (c) 32,500 restricted shares in the event any amount is outstanding under the Loan Documents on the 18 month anniversary of the Effective Date; and (d) 25,000 restricted shares in the event any amount is outstanding under the Loan Documents on the 21 month anniversary of the Effective Date. The shares are to be issued pursuant to the terms and conditions of a Stock Grant Agreement, pursuant to which each of the Lenders made certain representations to the Company regarding their financial condition and other items in order for the Company to confirm that an exemption from registration existed and will exist for such issuances. | |
The Credit Agreement contains customary representations, warranties, covenants and requirements for the Company to indemnify the Lenders, Agent and their affiliates. The Credit Agreement also includes various covenants (positive and negative) binding upon the Company (and its subsidiaries), including but not limited to, requiring that the Company comply with certain reporting requirements, and provide notices of material corporate events and forecasts to Agent, and prohibiting us from (i) incurring any additional debt; (ii) creating any liens; (iii) making any investments; (iv) materially changing our business; (v) repaying outstanding debt; (vi) affecting a business combination, sale or transfer; (vii) undertaking transactions with affiliates; (viii) amending our organizational documents; (ix) forming subsidiaries; or (x) taking any action not in the usual course of business, in each case except as set forth in the Credit Agreement. | |
The Credit Agreement includes customary events of default for facilities of a similar nature and size as the Credit Agreement, including, but not limited to, if any breach or default occurs under the Loan Documents, the failure of the Company to pay any amount when due under the Loan Documents, if the Company (or its subsidiaries) is subject to any judgment in excess of $250,000 which is not discharged or stayed within 30 days, or if a change in control of the Company, any subsidiary or any guarantor should occur, defined for purposes of the Credit Agreement as any transfer of 25% or more of the voting stock of such entity. | |
For the six months ended January 31, 2015, the Company has recognized $352,807 of amortization expense of the original issuance discount, with a net payable balance of $3,841,420 and unamortized original issuance discount of $704,035 as of January 31, 2015. In addition, we have recognized $283,455 of debt issuance cost related to professional fees and expenses, which we have classified within other non-current assets, related to the issuance of this debt. We are amortizing these cost over the term of the loan of two years. During the six months ended January 31, 2015, we recognized $94,626 of amortization expense classified as interest expense, and have $188,829 in unamortized debt issuance cost as of January 31, 2015. |
Capital_Stock
Capital Stock | 6 Months Ended | ||||||||||||||||
Jan. 31, 2015 | |||||||||||||||||
Capital Stock [Abstract] | |||||||||||||||||
Capital Stock | Note 8 – Capital Stock | ||||||||||||||||
Common Stock Issuances | |||||||||||||||||
Pursuant our Credit Agreement, as noted in Note 6 – Notes Payable, during August 2014, we issued 60,000 shares of restricted common stock to the Lenders. The shares were issued pursuant to the terms and conditions of a Stock Grant Agreement, pursuant to which each of the Lenders made certain representations to the Company regarding their financial condition and other items in order for the Company to confirm that an exemption from registration existed and will exist for such issuances. | |||||||||||||||||
Additionally, during the six months ended January 31, 2015, 122,000 shares of restricted common stock to certain vendors for services rendered during the period for legal and professional services. 22,000 shares were used to settle the litigation with ERG. The value of this settlement is 65,000. | |||||||||||||||||
Receivables for Common Stock | |||||||||||||||||
On September 6, 2013, HCN sold 191,667 shares of HEC common stock to an employee of HCN (the nephew of our Chairman and Chief Executive Officer) in exchange for a note receivable in the amount of $1,000,000. HEC acquired this receivable upon its acquisition of HCN. The note is non-interest bearing and is payable only upon the sale of the common stock to a third party or HEC stock being listed on either the NASDAQ or NYSE stock exchanges. We will receive 95% of the proceeds up to $1,000,000 if the underlying stock is sold to a third party. Within 90 days of HEC stock being listed on a major stock exchange, we will receive up to $1,000,000, or the note can be paid earlier at the discretion of the other party. These shares of common stock are held in the name of the investors and are beneficially owned by the investors and the shares are not retrievable by the Company. | |||||||||||||||||
On December 4, 2013 HCN sold 619,960 shares of unregistered and restricted HEC common stock in return for a $1,859,879 non-interest bearing note receivable from an entity in which Michael Watts has a minority interest. HEC acquired this receivable upon its acquisition of HCN. The 619,960 HEC common stock shares were previously issued by HEC to HCN to settle liabilities due by HEC related to the consulting services agreement described below in Note 6 – Notes Payable. The receivable from the individual is due to HEC upon the following conditions: 1) 100% of the proceeds payable from the sale of all or part of the shares by the owner of the shares to a third party; 2) within sixty days of the six month anniversary of the December 4, 2013 stock sale or within sixty days from the date that the shares become unrestricted (whichever is first); or 3) 100% of any remaining balance due within 90 days of HEC being listed on a major stock exchange and whereby the share price is above $6.00 per share. As with the above receivable for common stock, this receivable for the sale of HEC common stock is classified as a receivable for common stock within equity. These shares of common stock are held in the name of the investors and are beneficially owned by the investors and the shares are not retrievable by the Company. | |||||||||||||||||
This note receivable was extended on August 4, 2014, for an extension fee of $50,000, payable in the future, with $750,000 due to be repaid by December 31, 2014, with the remaining balance to be repaid by March 31, 2015. These repayment terms may be changed if the Company is successful in being up-listed to either the NYSE or NASDAQ. If this occurs, the entire balance is due within 60 days after an up-listing occurs. | |||||||||||||||||
Stock Options and Warrants | |||||||||||||||||
As of January 31, 2015, HEC could grant up to 737,706 shares of common stock under the 2013 Stock Incentive Plan (“2013 Plan”). The Plan is administered by the Compensation Committee of the Board of Directors, or in the absence of a Compensation Committee, the full Board of Directors, which has substantial discretion to determine persons, amounts, time, price, exercise terms, and restrictions of the grants, if any. | |||||||||||||||||
Options granted to non-employees | |||||||||||||||||
We account for options granted to non-employees under the provisions of ASC 505-50, Equity-Based Payments to Non-employees, and record the associated expense at fair value on the final measurement date. Because there is no disincentive for nonperformance for these awards, the final measurement date occurs when the services are complete, which is the vesting date. For the options granted to non-employees on a graded vesting schedule, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete. There were 25,000 options granted to non-employees during the six months ended January 31, 2015. Compensation expense of $112,500 was recognized during the six months ended January 31, 2015. No options have been exercised, and 92,000 expired during the six months ended January 31, 2015. | |||||||||||||||||
Options granted to employees | |||||||||||||||||
The following table provides information about options granted to employees under our stock incentive plans during the six months ended January 31, 2015 and 2014: | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Number of options granted | 25,000 | - | |||||||||||||||
Compensation expense recognized | $ | 112,500 | $ | 56,208 | |||||||||||||
Weighted average exercise price of options granted | $ | 4.5 | $ | N/A | |||||||||||||
Summary information regarding stock options issued and outstanding as of January 31, 2015 is as follows: | |||||||||||||||||
Options | Weighted | Aggregate | Weighted | ||||||||||||||
Average | intrinsic | average | |||||||||||||||
Share Price | value | remaining | |||||||||||||||
contractual | |||||||||||||||||
life (years) | |||||||||||||||||
Outstanding at July 31, 2014 | 265,333 | $ | 6.81 | $ | 7.95 | ||||||||||||
Granted | 25,000 | 4.5 | 5 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Expired | (92,000 | ) | 6.85 | ||||||||||||||
Outstanding at January 31, 2015 | 198,333 | $ | 6.52 | $ | 7.51 | ||||||||||||
No non-vested stock options existed as of January 31, 2015. | |||||||||||||||||
Warrants | |||||||||||||||||
Summary information regarding common stock warrants issued and outstanding as of January 31, 2015, is as follows: | |||||||||||||||||
Warrants | Weighted | Aggregate | Weighted | ||||||||||||||
Average | intrinsic | average | |||||||||||||||
Share Price | value | remaining | |||||||||||||||
contractual | |||||||||||||||||
life (years) | |||||||||||||||||
Outstanding at year ended July 31,2014 | 1,084,584 | $ | 7.5 | $ | - | 1.04 | |||||||||||
Granted | - | - | |||||||||||||||
Exercised | - | - | |||||||||||||||
Expired | (417,917 | ) | 7.5 | ||||||||||||||
Outstanding at quarter ended January 31, 2015 | 666,667 | $ | 7.5 | $ | - | 1.04 | |||||||||||
Warrants granted to related party | |||||||||||||||||
During the year ended July 31, 2011, we entered into a consulting agreement with Geoserve Marketing, LLC (“Geoserve”), a company controlled by Michael Watts, who is a related party. Under the terms of the agreement, we granted warrants to purchase 400,000 shares of common stock that have a market condition. If our common stock attains a five day average closing price of $22.50 per share, 200,000 warrants with an exercise price of $7.50 and an expiration date of February 15, 2016 shall be exercisable (“Warrant B”). If our common stock attains a five day average closing price of $45.00 per share, 200,000 warrants with an exercise price of $7.50 and an expiration date of February 15, 2016 shall be exercisable (“Warrant C”). The fair value of warrants that vest upon the attainment of a market condition must be estimated and amortized over the lower of the implicit or derived service period of the warrants. Previously recognized expense is not reversed in the event of a subsequent decline in the fair value of market condition equity based compensation. The fair value of the warrants and the derived service period were valued using a lattice model that values the liability of the warrants based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. Warrant B and Warrant C were amortized over the derived service periods of 2.08 years and 2.49 years, respectively. No expense related to these warrants was recognized during the six months ended January 31, 2015, as the expense for the warrants was fully amortized in previously reported periods. | |||||||||||||||||
The following reflects the fair value at the end of the derived service for each of the warrants: | |||||||||||||||||
Warrant B | Warrant C | ||||||||||||||||
Fair value | $ | 266,017 | $ | 206,245 | |||||||||||||
The following table reflects information regarding Warrant B and Warrant C during the six months ended January 31, 2015 and 2014: | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Compensation expense recognized | $ | - | $ | 6,754 |
Related_Party_Transactions
Related Party Transactions | 6 Months Ended | ||||||||||||||||
Jan. 31, 2015 | |||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||
Related Party Transactions | Note 9 – Related Party Transactions | ||||||||||||||||
During the reporting period we have had transactions as described below with entities controlled by Michael Watts. Michael Watts is the father-in-law of Jeremy Driver, who served as a director and Chief Executive Officer through November, 2013. Additionally, Michael Watts is the brother of Kent Watts, who became the Company’s Chairman of Board of Directors in October 2013. Michael Watts is a related party to the Company by virtue of his relationships with Mr. Driver and with Mr. Watts. Further, two of Michael Watts’ adult children are significant shareholders of HEC’s common stock. Between them, they are beneficial owners of approximately 68% of the outstanding common stock. | |||||||||||||||||
A company controlled by Michael Watts purchased a 5% working interest in one of our wells in Galveston Bay. As of January 31, 2015 and July 31, 2014, this company owed us $100 and $80,468, respectively, in joint interest billings. | |||||||||||||||||
During 2011, we entered into a consulting contract with a company controlled by Michael Watts, as detailed in Note 7 – Capital Stock - Warrants. The contract permits us to terminate the agreement after the first year with thirty days’ notice. We recognized expense of $0 and $6,754 from this contract during the six months ended January 31, 2015 and 2014, respectively. | |||||||||||||||||
During the three months ended October 31, 2013, a company controlled by one of our former officers, Carter E & P, LLC (“Carter”) operated several properties onshore in South Texas, including our producing properties located near the Victoria Barge Canal in Calhoun County, Texas. Although he was not a related party after September 1, 2013, he was a related party during the periods covered by this report. As of January 31, 2015 and July 31, 2014, there were no outstanding related party receivable from Carter. Revenues generated, lease operating costs, and contractual overhead charges incurred during the time Carter was a related party were as follows: | |||||||||||||||||
Three months ended | Six Months ended | ||||||||||||||||
January 31, | January 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Revenues | $ | - | $ | - | $ | $ | 39,274 | ||||||||||
Lease operating costs | $ | - | $ | - | $ | $ | 23,259 | ||||||||||
Overhead costs incurred | $ | - | $ | - | $ | $ | 4,687 | ||||||||||
In November 2013, we issued a promissory note for funds received from Mr. Kent Watts, Our Chairman, of $100,000. Under the terms of the note, principal on the note was due after one year and incurred interest at 5% per annum payable on a monthly basis. In April 2014, the Company entered into a new debt agreement whereby Mr. Watts agreed to loan the Company up to $600,000 at an interest rate of 6.25%. The previous debt of $100,000 was rolled into this new note. Additionally, we borrowed $200,000 from Mr. Watts during April 2014 and $300,000 from Mr. Watts in May 2014. The total balance on the note was $600,000 as of January 31, 2015. Accrued interest is payable monthly beginning in May 2014, and beginning in August 2014 the principal is due in 36 monthly payments through July 2017. The note is secured by the Company’s assets owned by GBE, subject to any other lien holder's superior rights, if any. As part of the financing agreement with Shadow Tree, this note has been subordinated, and no payments will be made until the Shadow Tree debt has been repaid. | |||||||||||||||||
During the three months ended April 30, 2014, Kent P. Watts advanced HCN (prior to its acquisition by HEC) funds for working capital purposes to the Company. On December 3, 2013, HCN issued 3,963 shares of its Series A Preferred Stock to Kent P. Watts in order to cancel the majority of the outstanding balance HCN owed to Kent P. Watts at that time. (See Note 7 – Capital Stock – HCN Series A Preferred Stock). During the six months ended as of January 31, 2015, the Company had current liabilities owed to Mr. Watts of $98,600. | |||||||||||||||||
During the six months ended January 31, 2015, the Company received approximately $58,000 from Mr. Michael Watts for a related party receivable previously outstanding for approximately the same amount as of July 31, 2014. |
Commitments_and_Contingencies
Commitments and Contingencies | 6 Months Ended | ||||
Jan. 31, 2015 | |||||
Commitments and Contingencies [Abstract] | |||||
Commitments and Contingencies | Note 10 - Commitments and Contingencies | ||||
Legal | |||||
We are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. We accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred. | |||||
As of January 31, 2015, we were party to the following legal proceedings: | |||||
Cause No. 2011-37552; Strategic American Oil Corporation (“Strategic”) v. ERG Resources, LLC (“ERG”), et al.; In the 55th District Court, Harris County, Texas. The Company is a plaintiff in this suit. In this case, Company brought claims for injunctive relief, breach of contract and fraudulent inducement against the defendant regarding the purchase of Galveston Bay Energy, LLC from ERG. The Company intends to prosecute its claims and defenses vigorously. As of the date of filing of this report, the Company is no longer seeking injunctive relief. Additionally, the below listed case has been consolidated into this case since the subject matter of the below case is subsumed within the subject matter of this case. From this point forward, there will be only this one piece of litigation. The trial was held in October 2013. The judge ruled in favor of ERG and that Hydrocarb is liable to pay the charges in the below-mentioned case and a portion of ERG’s attorney fees. The Company is in the process of post-trial motions and no judgment has been entered as of this date. As of January 31, 2015, the Company had accrued $232,974 for this cause. | |||||
Cause No. 2011-54428; ERG Resources, LLC v. Galveston Bay Energy, LLC, in the 125th Judicial District Court, Harris County, Texas. This case deals with the operating agreements for the processing of product by the entities owned by ERG. It is an action seeking payments of charges and expenses by ERG that are refuted by GBE. The Company intends to prosecute its claims and defenses vigorously. As indicated above, this case has been consolidated into the case listed above. As such, the claims in this case will be decided in cause No. 2011- 37552, which was tried in October 2013. | |||||
Judgments on both of these matters have been rendered whereby HEC paid ERG $35,000 in cash, relieving GBE of any liability to ERG and whereby HEC transferred $65,000 in HEC stock to ERG. Both cases have been fully settled and no further obligations have been or will be accrued as of January 31, 2015. | |||||
A state regulator has requested that we renew certain pipeline easements located in Galveston Bay. The easements in question were originally obtained by another company whose successor filed for bankruptcy protection. Our subsidiary, Galveston Bay Energy, LLC purchased certain assets from the bankruptcy estate; however, based on the bankruptcy court’s order and the purchase and sale agreement, we believe the pipelines and easements in question were not included in assets purchased. The easements in question were scheduled to renew at various dates between 2012 and 2021. Based on current posted rates, the cost of renewal of all of the easements would be approximately $400,000. We have engaged legal counsel to dispute the regulator’s claim. If we are obligated to renew these easements, they would be part of the asset retirement obligation that was acquired with our subsidiary, Galveston Bay Energy, LLC. As such, the potential liability for these easements is factored into the computation of the asset retirement obligation (See Note 7 – Asset Retirement Obligation) that is estimated using the guidance in ASC 410-20, Asset Retirement and Environmental Obligations. On August 29, 2014, we filed a lawsuit in the state district court in Chambers County, Texas asking the Court to reform an assignment and assumption agreement in the property records of Chambers County. The General Land Office has asserted claims against us under various miscellaneous easements, claiming we are obligated to either renew the easement or remove any pipeline laid in the easement. We have disclaimed any obligations under these easements. | |||||
Cause No. 2015-10005; Hydrocarb Energy Corporation and Kent P. Watts, Individually v. Vincent Pasquale Scaturro (“Scaturro”), in the 152nd Judicial District Court, Harris County, Texas. This case deals with a lock up leak out agreement executed by Scaturro limiting the amount of shares which Mr. Scaturro could transfer or sell. The court granted a temporary restraining order on February 20, 2015 and there is a temporary injunction hearing scheduled for April 10, 2015. | |||||
Environmental | |||||
We accrue for losses associated with environmental remediation obligations when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded at their undiscounted value as assets when their receipt is deemed probable. | |||||
There is soil contamination at a tank facility owned by GBE. Depending on the technique used to perform the remediation, we estimate the cost range to be between $150,000 and $900,000. We cannot determine a most likely scenario, thus we have recognized the lower end of the range. We have submitted a remediation plan to the appropriate authorities and have not yet received a response. As of January 31, 2015, $150,000 has been recognized and is included in the balance sheet caption “Accounts payable and accrued expenses.” | |||||
Letters of Credit | |||||
Oil and gas operators in the State of Texas are required to obtain a letter of credit in favor of the Railroad Commission of Texas as security that they will meet their obligations to plug and abandon the wells they operate. We have two letters of credit in the amount of $6,610,000 and $120,000 issued by Green Bank. These letters of credit are collateralized by a certificate of deposit held with the bank for the same amount. We pay a 1.5% per annum fee in conjunction with these letters of credit. | |||||
In June 2014, when we renewed the letters of credit, we prepaid the entire years’ interest upfront. We amortize these fees on a straight-line basis. The following table reflects the prepaid balances as of: | |||||
31-Jan-15 | |||||
Prepaid letter of credit fees | $ | 101,250 | |||
Amortization | (59,412 | ) | |||
Net prepaid letter of credit fees | $ | 41,838 |
Going_Concern
Going Concern | 6 Months Ended |
Jan. 31, 2015 | |
Going Concern [Abstract] | |
Going Concern | Note 11 – Going Concern |
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any significant revenues from ongoing operations and incurred net losses since inception. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | |
Management’s principal objective is to maximize shareholder value by, among other things, increasing production by developing its acreage, increasing profit margins by evaluating and optimizing its production, and executing its business plan to increase property values, prove its reserves, and expand its asset base. While management currently has no plans to discontinue or revise its business plan, recent volatility and decrease in crude oil prices may cause management to cut back on its development or acquisition plans, or otherwise revisit its business and/or its capital expenditure plan. Continued volatility and decreases in crude oil prices may accelerate such cut back or revisions. To combat price volatility in crude oil process and further diversify the business, management has increased its focus on the development of HEC. |
Subsequent_Events
Subsequent Events | 6 Months Ended |
Jan. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12 – Subsequent Events |
Subsequent to January 31, 2015, we raised approximately $1 million through the sale of various convertible promissory notes as described below. | |
LG Capital Funding, LLC Convertible Note | |
On February 17, 2015, we sold an 8% Convertible Redeemable Note to LG Capital Funding, LLC (“LG Capital” and the “LG Capital Convertible Note”) in the amount of $105,000 pursuant to a Securities Purchase Agreement. Amounts owed under the LG Capital Convertible Note accrue interest at the rate of 8% per annum (24% upon the occurrence of an event of default). The LG Capital Convertible Note is due and payable on February 17, 2016. The principal amount of the LG Capital Convertible Note and all accrued interest thereon is convertible at the option of the holder into our common stock at any time. The conversion price of the LG Capital Convertible Note is 65% of the average of the two lowest closing bid prices of our common stock for the 12 trading days prior to the date a notice of conversion is received by us from LG Capital. In the event we experience a “DTC chill” at any time, the conversion price percentage above decreases to 55%. At no time may the LG Capital Convertible Note be converted into shares of our common stock if such conversion would result in LG Capital and its affiliates owning an aggregate of in excess of 9.9% of the then outstanding shares of our common stock. | |
The LG Capital Convertible Note provides for customary events of default such as failing to timely make payments under the note when due. Additionally, in the event we fail to timely deliver shares due in connection with a conversion, we are required to pay the holder $250 per day beginning on the 4th day after the conversion notice was delivered to us, increasing to $500 per day on the 10th day after the conversion notice was delivered. In the event we have no “bid” price for our common stock at any time while the note is outstanding, the outstanding principal due under the terms of the note increases by 20%. In the event our common stock is delisted from an exchange (including the OTCQB), the outstanding principal amount of the note increases by 50%. If not paid at maturity, the outstanding principal amount of the note increases by 10%. | |
We may prepay in full the unpaid principal and interest on the LG Capital Convertible Note, upon notice, any time prior to the 180th day after the issuance date. Any prepayment is subject to payment of a prepayment amount ranging from 115% to 135% of the then outstanding balance on the LG Capital Convertible Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made. Additionally, upon the occurrence of certain fundamental events as described in the note, we are required to repay the note at the request of the holder in an amount equal to 150% of the then balance of the note. | |
We agreed to pay $5,000 of LG Capital’s legal fees in connection with the sale of the LG Capital Convertible Note and as such, the net amount received in connection with the sale of the LG Capital Convertible Note, before our expenses, was $100,000. We hope to repay the LG Capital Convertible Note prior to any conversion. | |
Adar Bays, LLC Convertible Note | |
On February 17, 2015, we sold an 8% Convertible Redeemable Note to Adar Bays, LLC (“Adar Bays” and the “Adar Bays Convertible Note”) in the amount of $105,000 pursuant to a Securities Purchase Agreement. Amounts owed under the Adar Bays Convertible Note accrue interest at the rate of 8% per annum (24% upon the occurrence of an event of default). The Adar Bays Convertible Note is due and payable on February 17, 2016. The principal amount of the Adar Bays Convertible Note and all accrued interest is convertible at the option of the holder thereof into the Company’s common stock at any time. The conversion price of the Adar Bays Convertible Note is 65% of the average of the two lowest closing bid prices of our common stock for the 12 trading days prior to the date a notice of conversion is received by us from Adar Bays. In the event we experience a “DTC chill” at any time, the conversion price percentage above decreases to 55%. At no time may the Adar Bays Convertible Note be converted into shares of our common stock if such conversion would result in Adar Bays and its affiliates owning an aggregate of in excess of 9.9% of the then outstanding shares of our common stock. | |
The Adar Bays Convertible Note provides for customary events of default such as failing to timely make payments under the note when due. Additionally, in the event we fail to timely deliver shares due in connection with a conversion, we are required to pay the holder $250 per day beginning on the 4th day after the conversion notice was delivered to us, increasing to $500 per day on the 10th day after the conversion notice was delivered. In the event we have no “bid” price for our common stock at any time the note is outstanding, the outstanding principal due under the terms of the note increases by 20%. In the event our common stock is delisted from an exchange (including the OTCQB), the outstanding principal amount of the note increases by 50%. If not paid at maturity, the outstanding principal amount of the note increases by 10%. | |
We may prepay in full the unpaid principal and interest on the Adar Bays Convertible Note, upon notice, any time prior to the 180th day after the issuance date. Any prepayment is subject to payment of a prepayment amount ranging from 115% to 135% of the then outstanding balance on the Adar Bays Convertible Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made, provided that upon the occurrence of certain fundamental events, we are required to repay the note at the request of the holder for 150% of the then balance of the note. | |
We agreed to pay $5,000 of Adar Bays’ legal fees in connection with the sale of the Adar Bays Convertible Note and as such, the net amount received in connection with the sale of the Adar Bays Convertible Note, before our expenses, was $100,000. | |
We hope to repay the Adar Bays’ Convertible Note prior to any conversion. | |
KBM Worldwide, Inc. Convertible Note | |
On February 19, 2015, we sold KBM Worldwide, Inc. (“KBM”) a Convertible Promissory Note in the principal amount of $350,000 (the “KBM Convertible Note”), pursuant to a Securities Purchase Agreement, dated and entered into on February 17, 2015. The KBM Convertible Note bears interest at the rate of 8% per annum (22% upon an event of default) and is due and payable on February 19, 2016. The KBM Convertible Note provides for customary events of default such as failing to timely make payments under the KBM Convertible Note when due. Additionally, upon the occurrence of certain fundamental defaults, as described in the KBM Convertible Note, we are required to repay KBM liquidated damages in addition to the amount owed under the KBM Convertible Note. | |
The principal amount of the KBM Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time following the 180th day after the KBM Convertible Note was issued. The conversion price of the KBM Convertible Note is equal to 50% multiplied by the average of the lowest five closing bid prices of our common stock during the fifteen trading days immediately prior to the date of any conversion. | |
The KBM Convertible Note included a $26,000 original issue discount and we paid $4,000 of KBM’s attorney’s fees in connection with the sale of the KBM Convertible Note and as such, the net amount, before our expenses, that we received upon sale of the KBM Convertible Note was $320,000. | |
We are required to keep reserved from our authorized but unissued shares of common stock eight times the number of shares of common stock issuable upon conversion of the KBM Convertible Note at all times and if we fail to keep such amount reserved it is considered an event of default under the KBM Convertible Note. | |
At no time may the KBM Convertible Note be converted into shares of our common stock if such conversion would result in KBM and its affiliates owning an aggregate of in excess of 9.99% of the then outstanding shares of our common stock. | |
We may prepay in full the unpaid principal and interest on the KBM Convertible Note, upon notice, any time prior to the 180th day after the issuance date. Any prepayment is subject to payment of a prepayment amount ranging from 110% to 135% of the then outstanding balance on the KBM Convertible Note (inclusive of accrued and unpaid interest and any default amounts then owing), depending on when such prepayment is made. | |
We also deposited 750,000 shares of our common stock into escrow with KBM’s counsel to secure the repayment of the KBM Convertible Note, which shares are to be held in escrow and released to KBM only upon the occurrence of an event of default under the KBM Convertible Note. | |
We hope to repay the KBM Convertible Note prior to any conversion. | |
JSJ Investments Inc. Convertible Note | |
On February 23, 2015 we sold a 10% Convertible Note to JSJ Investments Inc. (“JSJ” and the “JSJ Convertible Note”) in the amount of $137,000. Amounts owed under the JSJ Convertible Note accrue interest at the rate of 10% per annum. The JSJ Convertible Note is payable by us on demand by JSJ at any time after August 23, 2015. We have the right to prepay the JSJ Convertible Note (a) for an amount equal to 135% of the then balance of such note until the 90th day following the date of the note, (b) for an amount equal to 140% of the balance of such note from the 91st day following the date of the note until the maturity date of the note, and (c) for an amount equal to 150% of the balance of such note subsequent to the maturity date (provided the holder consents to such payment after maturity). | |
The JSJ Convertible Note and all accrued interest is convertible at the option of the holder thereof into the Company’s common stock at any time. The conversion price of the JSJ Convertible Note is the lower of (a) 58% of the lowest trading price of our common stock during the prior 20 trading days prior to any conversion; or (b) 58% of the lowest trading price of our common stock during the 20 trading days prior to the date of the note. In the event we do not issue the holder any shares due in connection with a conversion within three business days, we are required to issue the holder additional shares equal to 25% of the conversion amount, and an additional 25% of such shares for each additional five business days beyond such fourth business day that such failure continues. | |
We agreed to pay $2,000 of JSJ’s legal fees and $10,000 of due diligence fees in connection with the sale of the JSJ Convertible Note and as such, the net amount received in connection with the sale of the JSJ Convertible Note, before our expenses, was $125,000. | |
Pursuant to the terms of the JSJ Convertible Note, we are not allowed to borrow any additional money or incur any liability for borrowed money, except borrowings in place as of the date of the note or indebtedness to trade creditors or financial institutions in the ordinary course of business, or sell, lease or dispose of a significant portion of our assets outside the usual course of business, without the written consent of JSJ. | |
The JSJ Convertible Note also includes anti-dilution rights in the event we sell or issue any securities with a price less than the then applicable conversion price, subject to certain exceptions. | |
We hope to repay the JSJ Convertible Note prior to any conversion. | |
Typenex Co-Investment, LLC Convertible Note | |
On March 5, 2015, we sold a Secured Convertible Promissory Note (the “Typenex Convertible Note”) to Typenex Co-Investment, LLC (“Typenex”) in the amount of $350,000. The Typenex Convertible Note was issued pursuant to the terms of a Securities Purchase Agreement dated as of the same date. The Typenex Convertible Note bears interest at the rate of 10% per annum (22% upon the occurrence of an event of default) and is due and payable in full on January 5, 2016. The Typenex Convertible Note provides for customary events of default such as failing to timely make payments under the Typenex Convertible Note when due. Additionally, upon the occurrence of certain fundamental defaults, as described in the Typenex Convertible Note, we are required to repay Typenex liquidated damages in addition to the amount owed under the Typenex Convertible Note. | |
We have the right to prepay the Typenex Convertible Note, pursuant to the terms thereof, at any time, provided we pay a prepayment amount of 125% of the then outstanding balance. The principal amount of the Typenex Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time. The conversion price of the Typenex Convertible Note is initially $2.25 per share, provided that if our market capitalization falls below $20 million (provided further that our current market capitalization is below $20 million), the conversion price becomes the lower of $2.25 per share and the average of the five lowest closing bid prices of our common stock on the twenty trading days immediately prior to such conversion date (the “Market Price”) multiplied by 80% (provided such percentage is subject to automatic reduction upon the occurrence of certain events, including among other things described in the Convertible Secured Note, a reduction by 5% in the event the Market Price is less than $0.75). | |
The Typenex Convertible Note included a $45,000 original issuance discount and we agreed to pay $5,000 of Typenex’s legal fees in connection with the transaction. As a result, the net amount received in connection with the sale of the Typenex Convertible Note, before our expenses, was $300,000. | |
The Typenex Convertible Note also includes anti-dilution rights in the event we sell or issue any securities with a price less than the applicable conversion price, subject to certain exceptions. The Typenex Convertible Note also includes various restrictions on our ability to enter into subsequent variable rate security transactions following the date thereof. | |
Beginning on the date that is six months after March 5, 2015, and continuing each month thereafter until maturity, we are required to prepay the Convertible Secured Note in cash or shares of our common stock (provided that upon the occurrence of certain defaults described in the Typenex Convertible Note we are only able to pay this amount in cash), an amount equal to the greater of (i) $70,000 and (ii) the outstanding balance of the Convertible Secured Note divided by the number of such required installment payments prior to the maturity date. Additionally, on the twentieth trading day following the date each tranche of installment shares becomes free trading we are required to issue Typenex additional shares of common stock if the applicable conversion price calculated on the true-up date is less than the original conversion price. | |
We are subject to various fees and penalties under the Typenex Convertible Note for our failure to timely deliver shares due upon any conversion or installment payment. | |
At no time may the Typenex Convertible Note be converted into shares of our common stock if such conversion would result in Typenex and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock, provided such percentage increases to 9.99% if our market capitalization is less than $10 million, and provided further that Typenex may change such percentage from time to time upon not less than 61 days prior written notice to us. | |
As additional consideration for the loan evidenced by the Typenex Convertible Note, the Company granted Typenex a five year warrant to purchase 38,889 shares of our common stock at an exercise price of $2.25 per share (the “Warrant”) which number of shares at exercise price are subject to adjustment. The Warrant includes the same ownership limitation described above in connection with the Typenex Convertible Note. The Warrant includes cashless exercise rights. | |
The Warrant contains anti-dilution rights such that if we issue or sell or are deemed to issue or sell securities for less than the then applicable exercise price of the Warrant, subject to certain exceptions, the exercise price of the Warrant is reduced to such lower price and the number of shares of common stock issuable upon exercise of the Warrant increases, such that the aggregate exercise price payable upon exercise of the Warrant remains the same upon such anti-dilutive adjustment, up to a maximum of three times the current number of shares issuable upon exercise of the Warrant, subject to certain exceptions upon which there is no cap on the number of shares issuable upon exercise of the Warrant. | |
The amounts owed under the Typenex Convertible Note were secured by a Stock Pledge Agreement (the “Pledge Agreement”) whereby CW Navigation, Inc., a Texas corporation, a significant shareholder of the Company, which is beneficially owned by Christopher Watts, the nephew of Kent P. Watts, our Chief Executive Officer and Chairman (“CW Navigation”), pledged one million one hundred thousand (1,100,000) shares of our common stock held by CW Navigation as security for our obligations under the Typenex Convertible Note and related documents. Pursuant to the Stock Pledge Agreement, in the event the value (determined based on the average closing trade price for our common stock) of the pledged shares, for the immediately preceding three trading days as of any applicable date of determination, declines below $900,000 it constitutes a default of the Typenex Convertible Note and CW Navigation is required to pledge additional shares to bring the total value of such pledged shares (as calculated above) to $900,000. Typenex also entered into a subordination agreement in favor our senior lender, Shadow Tree Capital Management, LLC (“Shadow Tree”), to subordinate the repayment of the Typenex Convertible Note to amounts owed by us to Shadow Tree. | |
We hope to repay the Typenex Convertible Note prior to any conversion. |
Description_of_Business_and_Su1
Description of Business and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jan. 31, 2015 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Description of business and basis of presentation | Description of business and basis of presentation |
The unaudited consolidated financial statements of Hydrocarb Energy Corp. (“Hydrocarb”, “HEC”, the “Company”, “we”, “us”, “our”) have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report filed with the SEC on Form 10-K for the year ended July 31, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended July 31, 2014, as reported in the Form 10-K, have been omitted. | |
While working towards plans and expectations of being listed on a major stock exchange, we currently trade on the OTCBB under the stock symbol “HECC”. | |
We are a natural resource exploration and production company engaged in the exploration, acquisition, development, and production of oil and gas properties in the United States and onshore in Namibia, Africa. We maintain developed acreage offshore in Texas. As part of our ongoing business strategy, we continue to review and evaluate acquisition opportunities in the continental United States and internationally. | |
Reclassifications | Reclassifications |
Certain prior year amounts have been reclassified to conform with the current presentation. | |
Principles of consolidation | Principles of consolidation |
We own 100% of the issued and outstanding share capital of (i) Penasco Petroleum Inc. (“Penasco”), a Nevada corporation, (ii) Galveston Bay Energy, LLC (“GBE”), a Texas limited liability company, (iii) SPE Navigation I, LLC, a Nevada limited liability company (“SPE”), (iv) Namibia Exploration, Inc. (“NEI”), a Nevada corporation, (v) Hydrocarb Corporation, a Nevada corporation (“HCN”), (vi) Hydrocarb Texas Corporation, a Texas corporation, and (vii) Hydrocarb Namibia Energy (Pty) Limited (“Namibia”), a company chartered in the Republic of Namibia. In addition, we own 95% of the issued and outstanding share capital of Otaiba Hydrocarb LLC (“Otaiba”), a UAE limited liability corporation. The accompanying consolidated financial statements include the accounts of the entities noted above. All significant intercompany accounts and transactions have been eliminated in consolidation. | |
The acquisition of HCN, an entity under common control, on December 9, 2013 (See Note 2 – HCN Acquisition) has resulted in a change in the reporting entity. The consolidated financial statements presented for the periods subsequent to the acquisition include the accounts of HCN and its subsidiaries. As HEC and HCN are under the common control of same shareholder group, the acquired assets and liabilities were recorded at the historical carrying value and the consolidated financial statements were retroactively restated to reflect the Company as if HCN had been owned since the beginning of the earliest period presented. | |
Noncontrolling interests | Noncontrolling interests |
Our consolidated financial statements include the accounts of all subsidiaries where we hold a controlling financial interest. We have a controlling financial interest if we own a majority of the outstanding voting common stock and minority shareholders do not have substantive participating rights, we have significant control over an entity through contractual or economic interests in which we are the primary beneficiary or we have the power to direct the activities that most significantly impact the entity’s economic performance. The ownership interest in subsidiaries held by third parties are presented in the consolidated balance sheet within equity, but separate from the parent’s equity, as noncontrolling interest. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Cash and cash equivalents | Cash and cash equivalents |
Cash and cash equivalents are all highly liquid investments with an original maturity of three months or less at the time of purchase and are recorded at cost, which approximates fair value. | |
Our functional currency is the United States dollars. Transactions denominated in foreign currencies are translated into their United States dollar equivalents using current exchange rates. Monetary assets and liabilities are translated using exchange rates that prevailed as of the balance sheet date. Non-monetary assets and liabilities are translated using exchange rates that prevailed as of the transaction date. Revenue, if applicable and expenses are translated using average exchange rates over the accounting period. We have had no revenue denominated in foreign currencies. Gains or losses resulting from foreign currency transactions are included in results of operations. | |
Stock Split | Stock Split |
On May 8, 2014, we effected a 1:3 reverse split of our authorized common stock and a corresponding 3:1 reverse split of our outstanding common stock. All share and per share amounts in this report have been retroactively restated to reflect the reverse split. This presentation is consistent with the guidance in ASC 260-10-55-12, Earnings per Share, which requires retroactive restatement of earnings per share if a capital structure change due to a stock dividend, stock split or reverse split occurs after the date of the latest balance sheet, but before the release of the financial statements. | |
Recent accounting pronouncements | Recent accounting pronouncements |
In August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial Statements Going Concern (Subtopic 205-40) which requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans and requires an express statement and other disclosures when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, early application is permitted. We are currently evaluating the accounting implication and do not believe the adoption of ASU 2014-15 to have material impact on our consolidated financial statements, although there may be additional disclosures upon adoption. | |
Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on our financial position or results from operations. |
HCN_Acquisition_Tables
HCN Acquisition (Tables) | 6 Months Ended | ||||
Jan. 31, 2015 | |||||
HCN Acquisition [Abstract] | |||||
Summary of Pro Forma Information | Summary of the accounting entry to record this acquisition in December 2013 is as follows. | ||||
Assets acquired | $ | 1,529,246 | |||
Liabilities assumed | (161,599 | ) | |||
Noncontrolling interest in 95% owned HCN subsidiary | 30,480 | ||||
$ | 1,398,127 | ||||
Common stock, at par | 8,397 | ||||
Receivable for common stock | (2,484,879 | ) | |||
Additional paid-in capital | 3,874,609 | ||||
$ | 1,398,127 |
Supplemental_Cash_Flow_Informa1
Supplemental Cash Flow Information (Tables) | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||
Schedule of Cash Flow, Supplemental Disclosures | NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Asset retirement obligation sold | $ | - | $ | 4,381 | |||||
Asset retirement obligations incurred | $ | - | $ | 100,932 | |||||
Asset retirement obligations - change in estimate | $ | (52,431 | ) | $ | - | ||||
Accounts payable for oil and gas properties | $ | - | $ | 11,373 | |||||
Note payable for prepaid insurance | $ | - | $ | - | |||||
Settlement of HCN debt with HCN preferred stock | $ | - | $ | 1,585,200 | |||||
Common stock exchanged for HCN common stock for acquisitin of HCN | $ | - | $ | 25,190 | |||||
Receivable for common stock - related party | $ | - | $ | 1,000,000 | |||||
Receivable for common stock - related party | $ | - | $ | 1,859,879 | |||||
Common stock issued to satisfy contingently issuable shares from 2012 acquisition of Namibia Exploration , Inc. | $ | - | $ | 22,410 | |||||
Value of shares issued to lenders as part of debt financing | $ | 247,655 | $ | - |
Oil_and_Gas_Properties_Tables
Oil and Gas Properties (Tables) | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Oil and Gas Properties [Abstract] | |||||||||
Schedule of Oil and Natural Gas Properties | Oil and natural gas properties as of January 31, 2015 and July 31, 2014 consisted of the following: | ||||||||
31-Jan-15 | July 31, | ||||||||
2014 | |||||||||
Evaluated Properties | |||||||||
Costs subject to depletion | $ | 21,371,958 | $ | 19,153,125 | |||||
Accumulated impairment | (373,335 | ) | (373,335 | ) | |||||
Accumulated depletion | (3,849,998 | ) | (3,491,420 | ) | |||||
Total evaluated properties | 17,148,625 | 15,288,370 | |||||||
Unevaluated properties | 2,302,098 | 2,119,769 | |||||||
Net oil and gas properties | $ | 19,450,723 | $ | 17,408,139 |
Asset_Retirement_Obligations_T
Asset Retirement Obligations (Tables) | 6 Months Ended | ||||||||
Jan. 31, 2015 | |||||||||
Asset Retirement Obligations [Abstract] | |||||||||
Reconciliation of Asset Retirement Obligation Liability | The following is a reconciliation of our asset retirement obligation liability as of January 31, 2015 and July 31, 2014: | ||||||||
31-Jan-15 | July 31, | ||||||||
2014 | |||||||||
Liability for asset retirement obligation, beginning of period | $ | 11,716,230 | $ | 10,933,398 | |||||
Asset retirement obligations sold | - | (33,195 | ) | ||||||
Asset retirement obligations incurred on properties drilled | - | - | |||||||
Accretion | 560,990 | 1,043,928 | |||||||
Revisions in estimated cash flows | (52,431 | ) | (104,237 | ) | |||||
Costs incurred | - | (123,664 | ) | ||||||
Liability for asset retirement obligation, end of period | $ | 12,224,789 | $ | 11,716,230 | |||||
Current portion of asset retirement obligation | $ | 60,000 | $ | 1,133,690 | |||||
Noncurrent portion of asset retirement obligation | 12,164,789 | 10,582,540 | |||||||
Total liability for asset retirement obligation | $ | 12,224,789 | $ | 11,716,230 |
Capital_Stock_Tables
Capital Stock (Tables) | 6 Months Ended | ||||||||||||||||
Jan. 31, 2015 | |||||||||||||||||
Capital Stock [Abstract] | |||||||||||||||||
Stock Options Granted to Employees Under Stock Incentive Plans | The following table provides information about options granted to employees under our stock incentive plans during the six months ended January 31, 2015 and 2014: | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
Number of options granted | 25,000 | - | |||||||||||||||
Compensation expense recognized | $ | 112,500 | $ | 56,208 | |||||||||||||
Weighted average exercise price of options granted | $ | 4.5 | $ | N/A | |||||||||||||
Summary Information Regarding Stock Options Issued and Outstanding | Summary information regarding stock options issued and outstanding as of January 31, 2015 is as follows: | ||||||||||||||||
Options | Weighted | Aggregate | Weighted | ||||||||||||||
Average | intrinsic | average | |||||||||||||||
Share Price | value | remaining | |||||||||||||||
contractual | |||||||||||||||||
life (years) | |||||||||||||||||
Outstanding at July 31, 2014 | 265,333 | $ | 6.81 | $ | 7.95 | ||||||||||||
Granted | 25,000 | 4.5 | 5 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Expired | (92,000 | ) | 6.85 | ||||||||||||||
Outstanding at January 31, 2015 | 198,333 | $ | 6.52 | $ | 7.51 | ||||||||||||
Summary Information Regarding Common Stock Warrants Issued and Outstanding | Summary information regarding common stock warrants issued and outstanding as of January 31, 2015, is as follows: | ||||||||||||||||
Warrants | Weighted | Aggregate | Weighted | ||||||||||||||
Average | intrinsic | average | |||||||||||||||
Share Price | value | remaining | |||||||||||||||
contractual | |||||||||||||||||
life (years) | |||||||||||||||||
Outstanding at year ended July 31,2014 | 1,084,584 | $ | 7.5 | $ | - | 1.04 | |||||||||||
Granted | - | - | |||||||||||||||
Exercised | - | - | |||||||||||||||
Expired | (417,917 | ) | 7.5 | ||||||||||||||
Outstanding at quarter ended January 31, 2015 | 666,667 | $ | 7.5 | $ | - | 1.04 | |||||||||||
Warrants Granted to Related Parties | The following reflects the fair value at the end of the derived service for each of the warrants: | ||||||||||||||||
Warrant B | Warrant C | ||||||||||||||||
Fair value | $ | 266,017 | $ | 206,245 | |||||||||||||
The following table reflects information regarding Warrant B and Warrant C during the six months ended January 31, 2015 and 2014: | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Compensation expense recognized | $ | - | $ | 6,754 |
Related_Party_Transactions_Tab
Related Party Transactions (Tables) | 6 Months Ended | ||||||||||||||||
Jan. 31, 2015 | |||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||
Revenues and Costs from Facility Controlled by Related Party | Revenues generated, lease operating costs, and contractual overhead charges incurred during the time Carter was a related party were as follows: | ||||||||||||||||
Three months ended | Six Months ended | ||||||||||||||||
January 31, | January 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Revenues | $ | - | $ | - | $ | $ | 39,274 | ||||||||||
Lease operating costs | $ | - | $ | - | $ | $ | 23,259 | ||||||||||
Overhead costs incurred | $ | - | $ | - | $ | $ | 4,687 |
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 6 Months Ended | ||||
Jan. 31, 2015 | |||||
Commitments and Contingencies [Abstract] | |||||
Schedule Of Prepaid Balances | The following table reflects the prepaid balances as of: | ||||
31-Jan-15 | |||||
Prepaid letter of credit fees | $ | 101,250 | |||
Amortization | (59,412 | ) | |||
Net prepaid letter of credit fees | $ | 41,838 |
Description_of_Business_and_Su2
Description of Business and Summary of Significant Accounting Policies (Details) (USD $) | 0 Months Ended | 6 Months Ended |
8-May-14 | Jan. 31, 2015 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | ||
Revenue dominated in foreign currencies | $0 | |
Subsidiary or Equity Method Investee [Line Items] | ||
Reverse stock split conversion ratio | 3 | |
Penasco Petroleum Inc [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Galveston Bay, LLC [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
SPE Navigation I, LLC [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Namibia Exploration, Inc [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Hydrocarb Corporation, HCN [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Hydrocarb Texas Corporation [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Hydrocarb Namibia Energy [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 100.00% | |
Otaiba Hydrocarb LLC [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Ownership interest (in hundredths) | 95.00% |
HCN_Acquisition_Details
HCN Acquisition (Details) (USD $) | 0 Months Ended | ||
Dec. 09, 2013 | Jan. 31, 2015 | Jul. 31, 2014 | |
Well | |||
acre | |||
Summary of the accounting entry to record the acquisition [Abstract] | |||
Common stock, at par | $21,267 | $21,082 | |
Receivable for common stock | -2,184,879 | -2,184,879 | |
Additional paid-in capital | 82,929,743 | 82,228,799 | |
Recorded Unconditional Purchase Obligation [Line Items] | |||
Working interest rights (in hundredths) | 39.00% | 90.00% | |
Cost responsibility rate (in hundredths) | 100.00% | ||
Concession area | 5,300,000 | ||
Number of wells required to be drilled under the purchase obligation | 1 | ||
Initial Exploration Period [Member] | |||
Recorded Unconditional Purchase Obligation [Line Items] | |||
Area of seismic data required by purchase obligation | 750 | ||
Minimum required expenditure | 4,505,000 | ||
First Renewal Exploration Period [Member] | |||
Recorded Unconditional Purchase Obligation [Line Items] | |||
Duration of commitment period | 2 years | ||
Area of seismic data required by purchase obligation | 200 | ||
Minimum required expenditure | 17,350,000 | ||
Percentage of exploration license area relinquish requirement (in hundredths) | 25.00% | ||
Second Renewal Exploration Period [Member] | |||
Recorded Unconditional Purchase Obligation [Line Items] | |||
Duration of commitment period | 25 years | ||
Minimum required expenditure | 300,000 | ||
HCN [Member] | |||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | |||
Shares reserved for issuance to certain stock holders with certain rights (in shares) | 7,470,000 | ||
Shares issued and sold to extinguish debt (in shares) | 619,960 | ||
Value of shares issued to extinguish debt | 3,589,567 | ||
Summary of the accounting entry to record the acquisition [Abstract] | |||
Assets acquired | 1,529,246 | ||
Liabilities assumed | -161,599 | ||
Noncontrolling interest in 95% owned HCN subsidiary | 30,480 | ||
Total | 1,398,127 | ||
Common stock, at par | 8,397 | ||
Receivable for common stock | -2,484,879 | ||
Additional paid-in capital | 3,874,609 | ||
Recorded Unconditional Purchase Obligation [Line Items] | |||
Working interest rights (in hundredths) | 51.00% | ||
HCN [Member] | Common Stock [Member] | |||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | |||
Number of shares exchanged (in shares) | 8,396,667 | ||
Hydrocarb Namibia Energy (Pty) Limited [Member] | |||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | |||
Percentage ownership in subsidiaries (in hundredths) | 100.00% | ||
Otaiba Hydrocarb LLC [Member] | |||
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | |||
Percentage ownership in subsidiaries (in hundredths) | 95.00% |
Supplemental_Cash_Flow_Informa2
Supplemental Cash Flow Information (Details) (USD $) | 6 Months Ended | 12 Months Ended | |
Jan. 31, 2015 | Jan. 31, 2014 | Jul. 31, 2014 | |
NONCASH INVESTING AND FINANCING ACTIVITIES | |||
Asset retirement obligation sold | $0 | $4,381 | $33,195 |
Asset retirement obligations incurred | 0 | 100,932 | 0 |
Asset retirement obligations - change in estimate | -52,431 | 0 | -104,237 |
Accounts payable for oil and gas properties | 0 | 11,373 | |
Note payable for prepaid insurance | 0 | 0 | |
Settlement of HCN debt with HCN preferred stock | 0 | 1,585,200 | |
Common stock exchanged for HCN common stock for acquisition of HCN | 0 | 25,190 | |
Receivable for common stock - related party | 0 | 1,000,000 | |
Receivable for common stock - related party | 0 | 1,859,879 | |
Common stock issued to satisfy contingently issuable shares from 2012 acquisition of Namibia Exploration , Inc. | 0 | 22,410 | |
Value of shares issued to lenders as part of debt financing | $247,655 | $0 |
Oil_and_Gas_Properties_Schedul
Oil and Gas Properties (Schedule of Oil and Gas Properties) (Details) (USD $) | Jan. 31, 2015 | Jul. 31, 2014 |
Evaluated Properties [Abstract] | ||
Costs subject to depletion | $21,371,958 | $19,153,125 |
Accumulated impairment | -373,335 | -373,335 |
Accumulated depletion | -3,849,998 | -3,491,420 |
Total evaluated properties | 17,148,625 | 15,288,370 |
Unevaluated properties | 2,302,098 | 2,119,769 |
Net oil and gas properties | $19,450,723 | $17,408,139 |
Oil_and_Gas_Properties_Details
Oil and Gas Properties (Details) (USD $) | 6 Months Ended |
Jan. 31, 2015 | |
Oil And Gas Properties [Line Items] | |
Geological and geophysical costs | $2,271,263 |
Namibia Exploration, Inc. [Member] | |
Oil And Gas Properties [Line Items] | |
Ownership percentage (in hundredths) | 90.00% |
Cost responsibility percentage (in hundredths) | 100.00% |
Additions to unevaluated properties | 182,000 |
Leasehold costs | 182,000 |
Exploration costs | $2,200,000 |
Asset_Retirement_Obligations_D
Asset Retirement Obligations (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jan. 31, 2015 | Jan. 31, 2014 | Jan. 31, 2015 | Jan. 31, 2014 | Jul. 31, 2014 | |
Reconciliation of asset retirement obligation liability [Roll Forward] | |||||
Liability for asset retirement obligation, beginning of period | $11,716,230 | $10,933,398 | $10,933,398 | ||
Asset retirement obligations sold | 0 | -4,381 | -33,195 | ||
Asset retirement obligations incurred on properties drilled | 0 | 100,932 | 0 | ||
Accretion | 258,782 | 244,509 | 560,990 | 488,485 | 1,043,928 |
Revisions in estimated cash flows | -52,431 | 0 | -104,237 | ||
Costs incurred | 0 | -123,664 | |||
Liability for asset retirement obligation, end of period | 12,224,789 | 12,224,789 | 11,716,230 | ||
Current portion of asset retirement obligation | 60,000 | 60,000 | 1,133,690 | ||
Noncurrent portion of asset retirement obligation | 12,164,789 | 12,164,789 | 10,582,540 | ||
Total liability for asset retirement obligation | $12,224,789 | $12,224,789 | $11,716,230 |
Notes_Payable_Details
Notes Payable (Details) (USD $) | 6 Months Ended | 1 Months Ended | 0 Months Ended | ||||||
Jan. 31, 2015 | Jan. 31, 2014 | 31-May-12 | Feb. 28, 2014 | 31-May-14 | Apr. 30, 2014 | Nov. 30, 2013 | Aug. 15, 2014 | Jul. 31, 2014 | |
Payment | Payment | ||||||||
Debt Instrument [Line Items] | |||||||||
Additional funds borrowed | $3,452,812 | $0 | |||||||
Debt issuance cost | 283,455 | ||||||||
Amortization of debt discount | 352,807 | ||||||||
Note payable | 3,841,420 | 0 | |||||||
Unamortized of debt discount | 704,035 | ||||||||
Term or amortization | 2 years | ||||||||
Amortization expenses classified as interest expenses | 94,626 | ||||||||
Unamortized debt issuance cost | 188,829 | ||||||||
Notes Payable For Vehicle Purchase [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | 18,375 | ||||||||
Periodic installments amount | 567 | ||||||||
Debt instrument, interest rate (in hundredths) | 6.93% | ||||||||
Principal balance | 2,273 | 7,100 | |||||||
Number of required periodic payments | 36 | ||||||||
Note Payable For Commercial Insurance Program [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | 403,104 | ||||||||
Periodic installments amount | 45,718 | ||||||||
Principal balance | 45,000 | ||||||||
Number of required periodic payments | 9 | ||||||||
Note Payable-Chairman [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | 600,000 | 100,000 | |||||||
Debt instrument, interest rate (in hundredths) | 6.25% | 5.00% | |||||||
Additional funds borrowed | 300,000 | 200,000 | |||||||
Principal balance | 600,000 | ||||||||
Number of required periodic payments | 36 | ||||||||
Term of debt instrument | 1 year | ||||||||
Term Loan [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, face amount | 4 | ||||||||
Principal balance | 4,545,454 | ||||||||
Discount rate (in hundredths ) | 12.00% | ||||||||
Structuring fee | 90,909 | ||||||||
Structuring fee (in hundredths) | 2.00% | ||||||||
Debt issuance cost | 172,824 | ||||||||
Placement fee (in hundredths) | 5.00% | ||||||||
Placement fee | 227,273 | ||||||||
Consulting fee (in hundredths) | 1.00% | ||||||||
Consulting fee | 45,455 | ||||||||
Net amount received in connection with the sale | 3,463,539 | ||||||||
Additional borrowing capacity | 1,000,000 | ||||||||
Sale of equity | 750,000 | ||||||||
Credit agreement period sale of equity | 150 days | ||||||||
Structuring Fee on additional borrowings (in hundredths) | 2.00% | ||||||||
Threshold Revenues | 900,000 | ||||||||
Interest rate under condition one (in hundredths) | 16.00% | ||||||||
Interest rate under condition two (in hundredths) | 14.00% | ||||||||
Interest rate in case of default (in hundredths) | 24.00% | ||||||||
Restricted shares issued (in shares) | 60,000 | ||||||||
Restricted shares issued after 12 months from effective date (in shares) | 32,500 | ||||||||
Restricted shares issued after 18 months from effective date (in shares) | 32,500 | ||||||||
Restricted shares issued after 21 months from effective date (in shares) | 25,000 | ||||||||
Credit agreement effective date | 15-Aug-14 | ||||||||
Voting stock percentage (in hundredths) | 25.00% | ||||||||
Payables in case of default | $250,000 | ||||||||
Period of default | 30 days |
Capital_Stock_Details
Capital Stock (Details) (USD $) | 0 Months Ended | 6 Months Ended | 1 Months Ended | ||
Aug. 04, 2014 | Dec. 04, 2013 | Sep. 06, 2013 | Jan. 31, 2015 | Aug. 31, 2014 | |
Class of Stock [Line Items] | |||||
Value of settlement | $65,000 | ||||
Maximum percentage of proceeds to be received upon sale of stock to third party (in hundredths) | 100.00% | 95.00% | |||
Maximum proceeds to be received upon sale of stock to third party | 1,000,000 | ||||
Period of stock listing on major stock exchange within which the Company will receive proceeds from sale of stock | 60 days | 90 days | 90 days | ||
Period of six month anniversary of stock sale within which the Company will receive proceeds from sale of stock | 60 days | ||||
Period from date that shares become unrestricted within which the Company will receive proceeds from sale of stock | 60 days | ||||
Percentage of remaining receivable balance is due within stock listing period (in hundredths) | 100.00% | ||||
Minimum share price for note receivable to be due to company (in dollars per share) | $6 | ||||
Note receivable extension fee | 50,000 | ||||
Note payable remaining balance repaid in future | 750,000 | ||||
HCN [Member] | |||||
Class of Stock [Line Items] | |||||
Number of shares of common stock issued in exchange for note receivable (in shares) | 619,960 | 191,667 | |||
Value of common stock issued in exchange for note receivable | 1,859,879 | 1,000,000 | |||
Restricted Common Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Stock issued for notes payable and joint interest billings (in shares) | 60,000 | ||||
Shares issued for services rendered (in shares) | 122,000 | ||||
Shares used to settle litigation (in shares) | 22,000 | ||||
Value of settlement | $65,000 |
Capital_Stock_Options_Granted_
Capital Stock, Options Granted (Details) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jan. 31, 2015 | Jan. 31, 2014 | Jul. 31, 2014 | ||
Information about options granted to non-employees and employee under stock incentive plans [Abstract] | ||||
Compensation expense recognized | $453,475 | $1,214,213 | ||
Stock Option [Member] | ||||
Information about options granted to non-employees and employee under stock incentive plans [Abstract] | ||||
Number of options granted (in shares) | 25,000 | |||
Weighted average exercise price of options granted (in dollars per share) | $4.50 | |||
Number of options Exercised (in shares) | 0 | |||
Number of options expired (in shares) | 92,000 | |||
Options [Roll Forward] | ||||
Outstanding, beginning balance (in shares) | 265,333 | |||
Granted (in shares) | 25,000 | |||
Exercised (in shares) | 0 | |||
Expired (in shares) | -92,000 | |||
Outstanding, ending balance (in shares) | 198,333 | 265,333 | ||
Weighted Average Exercise Price [Roll Forward] | ||||
Outstanding, beginning balance (in dollars per share) | $6.81 | |||
Granted (in dollars per share) | $4.50 | |||
Exercised (in dollars per share) | $0 | |||
Expired (in dollars per share) | $6.85 | |||
Outstanding, ending balance (in dollars per share) | $6.52 | $6.81 | ||
Aggregate intrinsic value, beginning balance | 0 | |||
Aggregate intrinsic value, ending balance | 0 | 0 | ||
Weighted average remaining contractual life, beginning balance | 7 years 6 months 4 days | 7 years 11 months 12 days | ||
Weighted average remaining contractual life, Granted | 5 years | |||
Weighted average remaining contractual life, ending balance | 7 years 6 months 4 days | 7 years 11 months 12 days | ||
Stock Option [Member] | Non Employees [Member] | ||||
Information about options granted to non-employees and employee under stock incentive plans [Abstract] | ||||
Number of options granted (in shares) | 25,000 | |||
Compensation expense recognized | 112,500 | |||
Number of options Exercised (in shares) | 0 | |||
Number of options expired (in shares) | 92,000 | |||
Options [Roll Forward] | ||||
Granted (in shares) | 25,000 | |||
Exercised (in shares) | 0 | |||
Expired (in shares) | -92,000 | |||
Stock Option [Member] | Employees [Member] | ||||
Information about options granted to non-employees and employee under stock incentive plans [Abstract] | ||||
Number of options granted (in shares) | 25,000 | 0 | ||
Compensation expense recognized | $112,500 | $56,208 | ||
Weighted average exercise price of options granted (in dollars per share) | $4.50 | [1] | ||
Options [Roll Forward] | ||||
Granted (in shares) | 25,000 | 0 | ||
Weighted Average Exercise Price [Roll Forward] | ||||
Granted (in dollars per share) | $4.50 | [1] | ||
2013 Stock Incentive Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Maximum number of shares authorized (in shares) | 737,706 | |||
[1] | N/A |
Capital_Stock_Warrants_Granted
Capital Stock, Warrants Granted (Details) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jan. 31, 2015 | Jan. 31, 2014 | Jul. 31, 2014 | Jul. 31, 2011 | |
Warrants Granted To Related Party [Line Items] | ||||
Exercise price (in dollars per share) | $7.50 | $7.50 | ||
Warrants [Roll Forward] | ||||
Outstanding, beginning balance (in shares) | 1,084,584 | |||
Granted (in shares) | 0 | |||
Exercised (in shares) | 0 | |||
Expired (in shares) | -417,917 | |||
Outstanding, beginning balance (in shares) | 666,667 | 1,084,584 | ||
Weighted Average Exercise Price [Roll Forward] | ||||
Outstanding, beginning balance (in dollars per share) | $7.50 | |||
Granted (in dollars per share) | $0 | |||
Exercised (in dollars per share) | $0 | |||
Expired (in dollars per share) | $7.50 | |||
Outstanding, beginning balance (in dollars per share) | $7.50 | $7.50 | ||
Aggregate intrinsic value | $0 | $0 | ||
Weighted average remaining contractual life | 1 year 0 months 14 days | 1 year 0 months 14 days | ||
Compensation expense recognized | 453,475 | 1,214,213 | ||
Warrant B [Member] | ||||
Weighted Average Exercise Price [Roll Forward] | ||||
Fair value | 266,017 | |||
Warrant C [Member] | ||||
Weighted Average Exercise Price [Roll Forward] | ||||
Fair value | 206,245 | |||
Warrants [Member] | ||||
Weighted Average Exercise Price [Roll Forward] | ||||
Compensation expense recognized | $0 | $6,754 | ||
Geoserve Marketing, LLC [Member] | ||||
Warrants Granted To Related Party [Line Items] | ||||
Total shares of common stock issuable under warrants (in shares) | 400,000 | |||
Geoserve Marketing, LLC [Member] | Warrant B [Member] | ||||
Warrants Granted To Related Party [Line Items] | ||||
Period for calculating average closing price | 5 days | |||
Average closing stock price that will trigger issuance of additional warrants (in dollars per share) | $22.50 | |||
Number of warrants exercisable upon attaining target average closing price (in shares) | 200,000 | |||
Exercise price (in dollars per share) | $7.50 | |||
Expiration date | 15-Feb-16 | |||
Term of warrants | 2 years 0 months 29 days | |||
Weighted Average Exercise Price [Roll Forward] | ||||
Outstanding, beginning balance (in dollars per share) | $7.50 | |||
Geoserve Marketing, LLC [Member] | Warrant C [Member] | ||||
Warrants Granted To Related Party [Line Items] | ||||
Period for calculating average closing price | 5 days | |||
Average closing stock price that will trigger issuance of additional warrants (in dollars per share) | $45 | |||
Number of warrants exercisable upon attaining target average closing price (in shares) | 200,000 | |||
Exercise price (in dollars per share) | $7.50 | |||
Expiration date | 15-Feb-16 | |||
Term of warrants | 2 years 5 months 26 days | |||
Weighted Average Exercise Price [Roll Forward] | ||||
Outstanding, beginning balance (in dollars per share) | $7.50 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 0 Months Ended | 6 Months Ended | 3 Months Ended | |||
Dec. 03, 2013 | Jan. 31, 2015 | Jan. 31, 2014 | Jan. 31, 2015 | Jan. 31, 2014 | Jul. 31, 2014 | |
Related Party Transaction [Line Items] | ||||||
Due to related parties | $98,585 | $98,585 | $165,542 | |||
HCN [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Shares issued in order to cancel the value of outstanding balance of related party (in shares) | 3,963 | |||||
Due to related parties | 98,600 | 98,600 | ||||
Company received payment from related party | 58,000 | |||||
Father-In-Law of Chief Executive Officer [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Number of adult children of related party who are significant shareholders | 2 | 2 | ||||
Percentage of outstanding common stock owned by beneficial owners (in hundredths) | 68.00% | 68.00% | ||||
Percentage of working interest sold (in hundredths) | 5.00% | |||||
Outstanding joint interest billings owed by related party | 100 | 100 | 80,468 | |||
Period of termination notice | 30 days | |||||
Expense recognized from consulting contract with related party | 0 | 6,754 | ||||
Promissory note for funds received from related party | 100,000 | 100,000 | ||||
Term of promissory note | 1 year | |||||
Interest rate on debt (in hundredths) | 5.00% | 5.00% | ||||
Maximum borrowing capacity | 600,000 | 600,000 | ||||
Interest rate (in hundredths) | 6.25% | 6.25% | ||||
Additional borrowing capacity | 200,000 | 200,000 | ||||
Remaining balance borrowing amount | 300,000 | 300,000 | ||||
Number of monthly payment | 36 months | |||||
Carter E&P [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Related party receivable from Carter | 0 | 0 | 0 | |||
Revenues | 0 | 39,274 | 0 | 0 | ||
Lease operating costs | 0 | 23,259 | 0 | 0 | ||
Overhead costs incurred | $0 | $4,687 | $0 | $0 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | 6 Months Ended |
Jan. 31, 2015 | |
LetterofCredit | |
Commitments And Contingencies [Line Items] | |
Contingency accrued | $232,974 |
Cash settlement to be paid by Galveston Bay | 35,000 |
Stock settlement to be paid by Hydrocarb | 65,000 |
Cost renewal of easements | 400,000 |
Number of letters of credit in favor of the Railroad Commission of Texas | 2 |
Schedule of prepaid balances [Abstract] | |
Prepaid letter of credit fees | 101,250 |
Amortization | -59,412 |
Net prepaid letter of credit fees | 41,838 |
Minimum [Member] | |
Commitments And Contingencies [Line Items] | |
Loss contingency, estimate | 150,000 |
Maximum [Member] | |
Commitments And Contingencies [Line Items] | |
Loss contingency, estimate | 900,000 |
Letter of Credit One [Member] | |
Commitments And Contingencies [Line Items] | |
Debt instrument, face amount | 6,610,000 |
Debt instrument, fee percentage (in hundredths) | 1.50% |
Letter of Credit Two [Member] | |
Commitments And Contingencies [Line Items] | |
Debt instrument, face amount | 120,000 |
Debt instrument, fee percentage (in hundredths) | 1.50% |
Accounts payable and accrued expenses [Member] | |
Commitments And Contingencies [Line Items] | |
Environmental remediation expense | $150,000 |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | 3 Months Ended |
Jan. 31, 2015 | |
Subsequent Event [Line Items] | |
Original issue discount | $704,035 |
Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 1,000,000 |
Subsequent Event [Member] | LG Capital Funding, LLC Convertible Note [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 105,000 |
Interest rate (in hundredths) | 8.00% |
Interest rate in case of default (in hundredths) | 24.00% |
Due and payable date | 17-Feb-16 |
Conversion price percentage average of the two lowest closing bid prices of common stock (in hundredths) | 65.00% |
Conversion price percentage decrease in the event of "DTC chill" (in hundredths) | 55.00% |
Excess percentage of outstanding shares that convertible note cannot be converted to Company's common stock (in hundredths) | 9.90% |
Daily payment in the event of failure to deliver shares | 250 |
Daily payment in the event of failure to deliver shares after 10 days | 500 |
Note increase in the event of no "bid" price (in hundredths) | 20.00% |
Increase in outstanding principal amount in the event of common stock being delisted (in hundredths) | 50.00% |
Increase in outstanding principal amount if not paid at maturity (in hundredths) | 10.00% |
Percentage of repayment upon the occurrence of certain fundamental events (in hundredths) | 150.00% |
Legal fees | 5,000 |
Net amount received in connection with the sale | 100,000 |
Subsequent Event [Member] | LG Capital Funding, LLC Convertible Note [Member] | Minimum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 115.00% |
Subsequent Event [Member] | LG Capital Funding, LLC Convertible Note [Member] | Maximum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 135.00% |
Subsequent Event [Member] | Adar Bays, LLC Convertible Note [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 105,000 |
Interest rate (in hundredths) | 8.00% |
Interest rate in case of default (in hundredths) | 24.00% |
Due and payable date | 17-Feb-16 |
Conversion price percentage average of the two lowest closing bid prices of common stock (in hundredths) | 65.00% |
Conversion price percentage decrease in the event of "DTC chill" (in hundredths) | 55.00% |
Excess percentage of outstanding shares that convertible note cannot be converted to Company's common stock (in hundredths) | 9.90% |
Daily payment in the event of failure to deliver shares | 250 |
Daily payment in the event of failure to deliver shares after 10 days | 500 |
Note increase in the event of no "bid" price (in hundredths) | 20.00% |
Increase in outstanding principal amount in the event of common stock being delisted (in hundredths) | 50.00% |
Increase in outstanding principal amount if not paid at maturity (in hundredths) | 10.00% |
Percentage of repayment upon the occurrence of certain fundamental events (in hundredths) | 150.00% |
Legal fees | 5,000 |
Net amount received in connection with the sale | 100,000 |
Subsequent Event [Member] | Adar Bays, LLC Convertible Note [Member] | Minimum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 115.00% |
Subsequent Event [Member] | Adar Bays, LLC Convertible Note [Member] | Maximum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 135.00% |
Subsequent Event [Member] | KBM Worldwide, Inc. Convertible Note [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 350,000 |
Interest rate (in hundredths) | 8.00% |
Interest rate in case of default (in hundredths) | 22.00% |
Entered date | 17-Feb-15 |
Due and payable date | 19-Feb-16 |
Conversion price percentage (in hundredths) | 50.00% |
Excess percentage of outstanding shares that convertible note cannot be converted to Company's common stock (in hundredths) | 9.99% |
Original issue discount | 26,000 |
Legal fees | 4,000 |
Net amount received in connection with the sale | 320,000 |
Common stock deposited into escrow | 750,000 |
Subsequent Event [Member] | KBM Worldwide, Inc. Convertible Note [Member] | Minimum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 110.00% |
Subsequent Event [Member] | KBM Worldwide, Inc. Convertible Note [Member] | Maximum [Member] | |
Subsequent Event [Line Items] | |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 135.00% |
Subsequent Event [Member] | JSJ Investments Inc. Convertible Note [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 137,000 |
Interest rate (in hundredths) | 10.00% |
Payable after date | 23-Aug-15 |
Prepayment percentage until 90th day (in hundredths) | 135.00% |
Prepayment percentage after 91st day (in hundredths) | 140.00% |
Prepayment percentage maturity date (in hundredths) | 150.00% |
Percentage of conversion price during 20 days prior to any conversion (in hundredths) | 58.00% |
Percentage of conversion price during 20 days prior to the date of the note (in hundredths) | 58.00% |
Percentage of conversion amount within three business days (in hundredths) | 25.00% |
Percentage of conversion amount within for each additional five business days (in hundredths) | 25.00% |
Legal fees | 2,000 |
Diligence fees | 10,000 |
Net amount received in connection with the sale | 125,000 |
Subsequent Event [Member] | Typenex Co-Investment, LLC Convertible Note [Member] | |
Subsequent Event [Line Items] | |
Convertible note, face amount | 350,000 |
Interest rate (in hundredths) | 10.00% |
Interest rate in case of default (in hundredths) | 22.00% |
Due and payable date | 5-Jan-16 |
Excess percentage of outstanding shares that convertible note cannot be converted to Company's common stock (in hundredths) | 4.99% |
Percentage increase of market capitalization (in hundredths) | 9.99% |
Market capitalization limit | 10,000,000 |
Percentage of prepayment amount of the outstanding balance of the Convertible Note (in hundredths) | 125.00% |
Conversion price (in dollars per share) | $2.25 |
Current market capitalization limit | 20,000,000 |
Multiplier (in hundredths) | 80.00% |
Reduction in convertible note (in hundredths) | 5.00% |
Market Price limit (in dollars per share) | $0.75 |
Prepayment minimum amount | 70,000 |
Original issue discount | 45,000 |
Legal fees | 5,000 |
Net amount received in connection with the sale | 300,000 |
Warrants, granted (in shares) | 38,889 |
Warrants, exercise price (in dollars per share) | $2.25 |
Shares pledged by Christopher Watts (in shares) | 1,100,000 |
Pledged, amount minimum | $900,000 |