Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 07, 2014 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Petron Energy II, Inc. | ' | ' |
Entity Central Index Key | '0001467434 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'true | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $1,526,991 |
Entity Common Stock, Shares Outstanding | ' | 1,859,948,597 | ' |
Amendment Description | 'This Amendment No. 1 on Form 10-K/A (this “Amendment No.1”) amends Petron Energy II, Inc.’s (the “Company”) Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (“Original Filing”) originally filed on April 10, 2014 with the U.S. Securities and Exchange Commission (the "Commission"). We are filing this Amendment No. 1 for the purpose of revising the Company's consolidated financial statements and related notes to correct non-material scrivner's errors. | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Cash | $105 | $17,089 |
Accounts Receivable | 24,342 | 18,332 |
Total Current Assets | 24,447 | 35,421 |
Pipeline, net of accumulated depreciation of $320,452 and $245,156, respectively | 697,548 | 742,844 |
Producing Oil & Gas Properties, net of accumulated depletion of $865,165 and $731,795, respectively | 1,803,632 | 1,424,729 |
Other Depreciable Equipment, net of accumulated depreciation of $125,309 and $45,361, respectively | 609,732 | 71,915 |
Other Assets | 1,532 | 34,790 |
TOTAL ASSETS | 3,136,891 | 2,309,699 |
Current Liabilities | ' | ' |
Bank Overdraft | 57,942 | ' |
Accounts Payable--Trade | 1,282,779 | 716,140 |
Accounts Payable--Related Party | 224,425 | 18,082 |
Accrued Liabilities | 219,649 | 375,284 |
Derivative Liability | 960,047 | ' |
Notes Payable-- current | 1,432,731 | 170,500 |
Total Current Liabilities | 4,177,573 | 1,280,006 |
Asset Retirement Obligation | 220,347 | 40,278 |
Common Stock Issuance Liability | 946,551 | 5,904,090 |
Notes Payable--long-term | ' | 250,000 |
TOTAL LIABILITIES | 5,344,471 | 7,474,374 |
STOCKHOLDERS' EQUITY | ' | ' |
Series A, $0.001 par value, 1,000 shares designated, issued and outstanding | 1 | 1 |
Series B, $0.001 par value, 5,910,000 shares designated, 947,498 and 5,910,000 shares issued and outstanding, respectively | 947 | 5,910 |
Common Stock, $0.0001 par value, 15,000,000,000 shares authorized; 442,085,940 and 11,976,942 issued and outstanding, respectively | 44,209 | 1,198 |
Additional Paid-In Capital | 21,869,581 | 14,649,439 |
Accumulated Deficit | -24,122,318 | -19,821,223 |
Total Stockholders' Deficit | -2,207,580 | -5,164,675 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $3,136,891 | $2,309,699 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Accumulated depreciation of Pipeline | $320,452 | $245,156 |
Accumulated depletion of Producing Oil and Gas Properties | 865,165 | 731,795 |
Other Depreciable Equipment, net of accumulated depreciation | $125,309 | $45,361 |
Series B Preferred stock, par value | $0.00 | $0.00 |
Series B Preferred stock, authorized | 5,910,000 | 5,910,000 |
Series B Preferred stock, issued | 947,498 | 5,910,000 |
Series B Preferred stock, outstanding | 947,498 | 5,910,000 |
Series A Preferred stock, par value | $0.00 | $0.00 |
Series A Preferred stock, authorized | 1,000 | 1,000 |
Series A Preferred stock, issued | 1,000 | 1,000 |
Series A Preferred stock, outstanding | 1,000 | 1,000 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized | 15,000,000,000 | 15,000,000,000 |
Common stock, issued | 442,085,940 | 11,976,942 |
Common stock, outstanding | 442,085,940 | 11,976,942 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | ' | ' |
Oil & Gas Sales | $276,421 | $326,343 |
Costs and Expenses | ' | ' |
Cost of Revenue | 634,945 | 538,616 |
Depletion and Depreciation | 261,244 | 186,014 |
Impairment Charge | 48,000 | 6,046,000 |
Derivative Expense | 1,691,313 | ' |
General and Administrative | 1,547,774 | 1,736,427 |
Interest Expense | 394,240 | 145,349 |
Total Expenses | 4,577,516 | 8,652,406 |
Loss from Operations Before Income Taxes | -4,301,095 | -8,326,063 |
Income Taxes | ' | ' |
Net Loss | ($4,301,095) | ($8,326,063) |
Loss per share--basic and diluted | ($0.04) | ($0.72) |
Weighted average number of shares--basic and diluted | 121,078,256 | 11,517,282 |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders Deficit (USD $) | Series A | Series B | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Amount at Dec. 31, 2011 | $1 | ' | $1,107 | $13,516,557 | ($11,495,160) | $2,022,505 |
Beginning balance, Shares at Dec. 31, 2011 | 1,000 | ' | 11,072,751 | ' | ' | ' |
Preferred Stock Issued for Oil Lease Acquisition, Shares | ' | 5,910,000 | ' | ' | ' | ' |
Preferred Stock Issued for Oil Lease Acquisition, Amount | ' | 5,910 | ' | ' | ' | 5,910 |
Common Stock Issued for Services, Shares | ' | ' | 147,016 | ' | ' | ' |
Common Stock Issued for Services, Amount | ' | ' | 15 | 158,632 | ' | 158,647 |
Common Stock Sales, Shares | ' | ' | 717,175 | ' | ' | ' |
Common Stock Sales, Amount | ' | ' | 72 | 838,254 | ' | 838,326 |
Common Stock and Warrants issued for Penalty Interest related to Convertible Debt, Shares | ' | ' | 40,000 | ' | ' | ' |
Common Stock and Warrants issued for Penalty Interest related to Convertible Debt, Amount | ' | ' | 4 | 135,996 | ' | 136,000 |
Imputed interest on shareholder notes | ' | ' | ' | ' | ' | ' |
Net Income (loss) | ' | ' | ' | ' | -8,326,063 | -8,326,063 |
Ending balance, Amount at Dec. 31, 2012 | 1 | 5,910 | 1,198 | 14,649,439 | -19,821,223 | -5,164,675 |
Ending balance, Shares at Dec. 31, 2012 | 1,000 | 5,910,000 | 11,976,942 | ' | ' | ' |
Common Stock Sales, Shares | ' | ' | 41,141,643 | ' | ' | ' |
Common Stock Sales, Amount | ' | ' | 4,114 | 521,036 | ' | 525,150 |
Common stock and warrants issued for services, Shares | ' | ' | 8,422,130 | ' | ' | ' |
Common stock and warrants issued for services, Amount | ' | ' | 842 | 136,233 | ' | 137,075 |
Common stock issued in lawsuit settlement, Shares | ' | ' | 2,950,477 | ' | ' | ' |
Common stock issued in lawsuit settlement, Amount | ' | ' | 296 | 137,704 | ' | 138,000 |
Common stock issued for loan fees, Shares | ' | ' | 3,333,334 | ' | ' | ' |
Common stock issued for loan fees, Amount | ' | ' | 333 | 159,967 | ' | 160,300 |
Conversion of notes payable, Shares | ' | ' | 231,608,094 | ' | ' | ' |
Conversion of notes payable, Amount | ' | ' | 23,161 | 563,615 | ' | 586,776 |
Derivative Liability Related to Note Conversions | ' | ' | ' | 731,266 | ' | 731,266 |
Conversion of preferred stock, Shares | ' | -4,962,502 | 142,653,320 | ' | ' | ' |
Conversion of preferred stock, Amount | ' | -4,963 | 14,265 | 4,948,237 | ' | 4,957,539 |
Imputed interest on shareholder notes | ' | ' | ' | 22,084 | ' | 22,084 |
Net Income (loss) | ' | ' | ' | ' | -4,301,095 | -4,301,095 |
Ending balance, Amount at Dec. 31, 2013 | $1 | $947 | $44,209 | $21,869,581 | ($24,122,318) | ($2,207,580) |
Ending balance, Shares at Dec. 31, 2013 | 1,000 | 947,498 | 442,085,940 | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
OPERATING ACTIVITIES | ' | ' |
Net Loss | ($4,301,095) | ($8,326,063) |
Adjustments to reconcile net loss to cash used by operating activitites: | ' | ' |
Depletion, depreciation, and amortization | 261,244 | 186,014 |
Accretion of asset retirement obligation | 4,186 | ' |
Amortization of debt discount | 211,500 | ' |
Derivative expense | 1,691,313 | ' |
Impairment charge | 48,000 | 6,046,000 |
Imputed interest on shareholder loans | 22,084 | ' |
Penalty interest | 42,450 | ' |
Interest related to convertible debt | ' | 136,000 |
Common stock and warrants issued for services | 137,075 | 158,647 |
Common stock issued for lawsuit settlement | 138,000 | ' |
Change in other asset and liabilities: | ' | ' |
Decrease (Increase) in oil & gas receivables | -6,010 | 35,134 |
Decrease (Increase) in other assets | 33,258 | -3,215 |
Increase in accounts payable | 595,079 | 273,026 |
(Decrease) Increase in accrued liabilities | 203,200 | 303,127 |
Increase (Decrease) in related party payable | 56,343 | -32,535 |
Decrease in asset retirement obligation | -9,739 | ' |
Cash used in operating activities | -1,276,712 | -1,223,865 |
INVESTING ACTIVITIES | ' | ' |
Investment in oil & gas properties | 348,241 | -94,049 |
Pipeline investment | -30,000 | ' |
Accounts payable dedicated for asset purchases | 453,000 | ' |
Purchase of other equipment | -617,766 | -30,673 |
Cash used in investing activities | -543,047 | -124,722 |
FINANCING ACTIVITIES | ' | ' |
Bank overdraft | 57,942 | ' |
Proceeds from sales of common stock | 525,150 | 838,326 |
Proceeds from notes payable | 1,515,006 | 420,500 |
Payments on notes payable | -225,811 | ' |
Advances from shareholders | 375,000 | ' |
Repayment of advances from shareholders | -225,000 | ' |
Loan fees | -138,325 | ' |
Increase in deposit to lender | -81,187 | ' |
Cash from financing activities | 1,802,775 | 1,258,826 |
Decrease in cash | -16,984 | -89,761 |
Cash at beginning of period | 17,089 | 106,850 |
Cash at end of period | 105 | 17,089 |
Supplemental Disclosure of Cash Flow Information | ' | ' |
Cash paid for interest | 39,105 | 6,849 |
Cash paid for income taxes | ' | ' |
Non-Cash Investing and Financing Activities: | ' | ' |
Oil & gas properties | -185,622 | -5,924,738 |
Borrowings for accounts payable for equipment purchases | 480,440 | 100,000 |
Accounts payable paid through borrowing | -480,440 | -100,000 |
Notes Payable | -569,342 | ' |
Accrued liabilities | -17,434 | 14,738 |
Common Stock | 37,759 | ' |
Preferred Stock | -4,963 | 5,910 |
Additional Paid-in Capital | 6,403,085 | ' |
Derivative liability | -731,266 | ' |
Common stock issuance liability | -4,957,539 | 5,904,090 |
Asset retirement obligation | 185,622 | ' |
Loan fees | ($160,300) | ' |
Incorporation_and_Nature_of_Op
Incorporation and Nature of Operations | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Incorporation and Nature of Operations | ' |
1. INCORPORATION AND NATURE OF OPERATIONS | |
Petron Energy II, Inc. (“Petron Energy” or the “Company”) is engaged primarily in the acquisition, development, production, exploration for and the sale of oil, gas and gas liquids in the United States. The Company was incorporated in August 2008 under the laws of the State of Nevada. As of December 31, 2013 the Company is operating in the states of Texas and Oklahoma. In addition, the Company operates two gas gathering systems located in Tulsa, Wagoner, Rogers and Mayes counties of Oklahoma. The pipelines consist of approximately 132 miles of steel and poly pipe, a gas processing plant and other ancillary equipment. The Company sells its oil and gas products primarily to a domestic pipeline and to an oil company. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
Summary of Significant Accounting Policies | ' | |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Basis of presentation | ||
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: | ||
Subsidiary Name | ||
Petron Energy II Pipeline, Inc. | ||
Petron Energy II Well Services, Inc. | ||
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States. All intercompany transactions and account balances have been eliminated in consolidation. | ||
Going concern uncertainty | ||
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred a net loss of $4,301,095 for the year ended December 31, 2013 (2012 - $8,326,063) and at December 31, 2013 had an accumulated deficit of $24,122,318 (2012 - $19,821,223). While the Company has recognized significant revenues from operations, the revenues generated are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time. | ||
These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. | ||
Accounting estimates | ||
The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. | ||
Cash and cash equivalents | ||
Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As of December 31, 2013 there were no cash equivalents. | ||
Oil and gas properties | ||
The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. | ||
Investments in unproved properties are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized, or is reported as a period expense, as appropriate. | ||
Pursuant to full cost accounting rules, the Company must perform a ceiling test periodically on its proved oil and gas assets. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using current prices, excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, at a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. Should the net capitalized costs for a cost center exceed the sum of the components noted above, an impairment charge would be recognized to the extent of the excess capitalized costs. In 2013 and 2012 the Company recognized an impairment charge of $48,000 and $5,910,000, respectively, in accordance with the ceiling test. | ||
Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations. | ||
Exploration activities conducted jointly with others are reflected at the Company’s proportionate interest in such activities. | ||
Cost related to site restoration programs are accrued over the life of the project. | ||
Pipeline and equipment | ||
Depreciation is based on the estimated useful lives of the assets and is computed using the straight line method. Pipeline, trucks and equipment are recorded at cost. Depreciation is provided using the following useful lives: | ||
Pipeline | 15 years | |
Trucks and equipment | 5—15 years | |
Stock-based compensation | ||
The Company accounts for stock options in accordance with FASB ASC 505, “Equity,” and FASB ASC 718, “Compensation—Stock Compensation.” Accordingly, stock compensation expense has been recognized in the statement of operations based on the grant date fair value of the options for the year ended December 31, 2013. | ||
Under ASC 718 and 505, the fair value of options is estimated at the date of grant using a Black-Scholes-Merton (“Black-Scholes”) option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. Volatility is determined using historical stock prices over a period consistent with the expected term of the option. The Company utilizes the guidelines of Staff Accounting bulletin No. 107 (SAB 107) of the Securities and Exchange Commission relative to “plain vanilla” options in determining the expected term of options grants. SAB 107 permits the expected term of “plain vanilla” options to be calculated as the average of the option’s vesting term and contractual period. | ||
The Company has used this method in determining the expected term of all options. At such time as the Company has options with graded vesting, the Company will recognize compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The amount of compensation expense recognized at any date is at least equal to the portion of the grant date value of the award that is vested at that date. | ||
Advertising costs | ||
The Company expenses advertising costs as these are incurred. There were no advertising costs in 2013 or 2012. | ||
Revenue recognition | ||
Oil and gas revenues are recognized when oil and gas is produced and sold. | ||
Earnings (loss) per share | ||
Basic earnings (loss) per share is computed using the weighted average number of shares outstanding during the period. The treasury stock method is used to determine the diluted effect of stock options and warrants. Diluted loss per share is equal to the basic loss per share for the years ended December 31, 2013 and 2012 because common stock equivalents would have been anti-dilutive. | ||
Income taxes | ||
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. | ||
Long-lived assets impairment | ||
Long-term assets of the Company are reviewed for impairment when circumstances indicate the carrying value may not be recoverable in accordance with the guidance established in Statement of Financial Accounting Standards No. 144 (SFAS 144) (ASC 360), Accounting for the impairment or Disposal of Long-Lived Assets. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value. Fair values are determined based on discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. | ||
Asset retirement obligations | ||
The Company accounts for asset retirement obligations in accordance with the provisions of SFAS 143 (ASC 410) “Accounting for Asset Retirement Obligations”. SFAS 143 (ASC 410) requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Asset Retirement Obligation as of December 31, 2013 is $220,347 which includes an increase of $180,069 for the year ended December 31, 2013. | ||
Concentration of credit risk | ||
The Company has financial instruments that are exposed to concentrations of credit risk and consist primarily of cash and trade accounts receivable. The Company routinely maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Management believes that these financial institutions are of high quality and the risk of loss is minimal. At December 31, 2013 the Company had no cash balances in excess of FDIC limits. | ||
Financial instruments | ||
The carrying amount of financial instruments including cash, accounts receivable, accounts payable and accrued liabilities approximate fair value, unless otherwise stated as of December 31, 2013 and 2012. | ||
Fair value estimates of financial instruments are made at the period end based on relevant information about financial markets and specific financial instruments. Because these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. | ||
Contingencies | ||
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and legal counsel assess such contingent liabilities which inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||
If management determines that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. | ||
Commitments | ||
The Company amended its operating lease for its administrative office in Dallas, Texas on May 10, 2011. The lease will expire on April 30, 2014. The only lease commitment the Company has at December 31, 2013 is for $13,416 for the office rent through April 2014. | ||
Total rental expense was approximately $38,776 and $40,012 for years ended December 31, 2013 and 2012, respectively. | ||
Recent Accounting Pronouncements | ||
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
Going_Concern
Going Concern | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Going Concern | ' |
Going concern uncertainty | |
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred a net loss of $4,301,095 for the year ended December 31, 2013 (2012 - $8,326,063) and at December 31, 2013 had an accumulated deficit of $24,122,318 (2012 - $19,821,223). While the Company has recognized significant revenues from operations, the revenues generated are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time. | |
These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. |
Producing_Oil_and_Gas_Properti
Producing Oil and Gas Properties | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Producing Oil and Gas Properties | ' | ||||||||
3. PRODUCING OIL AND GAS PROPERTIES | |||||||||
The following summarizes the investment in producing oil & gas properties as of December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Leasehold Cost | $ | 753,373 | $ | 753,373 | |||||
Development Cost | 1,011,106 | 537,453 | |||||||
Tangible Equipment | 876,948 | 865,698 | |||||||
2,641,427 | 2,156,524 | ||||||||
Accumulated Depreciation | |||||||||
and Depletion | (837,795 | ) | (731,795 | ) | |||||
Net Investment | $ | 1,803,632 | $ | 1,424,729 | |||||
Depletion expense for the years ended December 31, 2013 and 2012 was $106,000 and $103,000, respectively. |
Pipeline_and_Other_Depreciable
Pipeline and Other Depreciable Equipment | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Pipeline and Other Depreciable Equipment | ' | ||||||||
4. PIPELINE AND OTHER DEPRECIABLE EQUIPMENT | |||||||||
The following summarizes the investment in pipeline and other depreciable equipment as of December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Pipeline | $ | 1,018,000 | $ | 988,000 | |||||
Accumulated Depreciation | (320,452 | ) | (245,156 | ) | |||||
Net Pipeline | $ | 697,548 | $ | 742,844 | |||||
Equipment and Other | $ | 735,041 | $ | 117,276 | |||||
Accumulated Depreciation | (125,309 | ) | (45,361 | ) | |||||
Net Equipment and Other | $ | 609,732 | $ | 71,915 | |||||
Depreciation expense for the years ended December 31, 2013 and 2012 was $155,244 and $83,014, respectively. |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions | ' |
5. RELATED PARTY TRANSACTIONS | |
Petron Energy, Inc. is a company controlled by the Company’s majority shareholder. In 2013 and 2012, the Company paid Petron Energy, Inc. $225,000 and $61,163, respectively. These amounts have been reflected in the accompanying consolidated financial statements as charges from a related party and are included in lease operating expenses for the respective years. The Company has recorded $11,481 and $32,014 in revenue and $11,493 and $36,573 in lease operating expenses (including production taxes) for 2013 and 2012, respectively, representing the operations of wells operated by Petron Energy, Inc. in which the Company has a working interest. | |
Effective August 31, 2012, the Company entered into an Executive Employment Agreement with Floyd L. Smith. Pursuant to the employment agreement, Mr. Smith agreed to serve as President and Chief Executive Officer of the Company for a term of five years, renewable thereafter for additional one year periods if not terminated by either party. The employment agreement provides for Mr. Smith to receive a salary of $200,000 per year; reimbursement for reasonable business expenses; the ability to earn a yearly bonus in the sole discretion of the Board of Directors of the Company; co-investment rights, providing Mr. Smith the right to participate in the amount of up to 20% of any acquisition, transaction or funding undertaken by the Company during the term of the employment agreement; stock options, as adjusted for the reverse stock split to purchase 1,200,000 shares of the Company’s common stock at an exercise price of $0.039 per share, with cashless exercise rights and a five year term, which vested immediately upon the parties’ entry into the employment agreement; and 1,000 shares of Series A Preferred Stock which give Mr. Smith Super Majority Voting Rights. | |
The employment agreement includes a non-competition provision, prohibiting Mr. Smith from competing against the Company in Texas, Louisiana, Oklahoma or New Mexico for a term of 12 months following the termination of the employment agreement. | |
The employment agreement can be terminated by the Company for cause (as defined in the agreement), without cause, or by Mr. Smith for good reason (as defined in the agreement) or without good reason. If the employment agreement is terminated due to Mr. Smith’s death, disability, with cause by the Company or without good reason by Mr. Smith, he is due the consideration earned by him up until the date of termination of the agreement. If the employment agreement is terminated by the Company without cause or by Mr. Smith for good reason, Mr. Smith is due the consideration earned by him up until the date of termination, plus the lesser of six months of salary due to Mr. Smith under the employment agreement and the remaining amount of consideration due pursuant to the terms of the employment agreement in a lump sum. | |
Mr. Smith also agreed to assign the Company rights to any intellectual property and inventions which he creates or conceives during the term of the employment agreement relating to the Company’s business pursuant to the employment agreement. |
Notes_Payable
Notes Payable | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes Payable | ' | ||||||||
6. NOTES PAYABLE | |||||||||
The following summarizes the outstanding notes payable as of December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Draw from a $5,000,000 secured line of credit, interest at 11%, matures April 5, 2014 | $ | 450,000 | $ | — | |||||
Unamortized loan costs | -87,125 | ||||||||
Cash deposit held by lender | -81,187 | ||||||||
281,688 | |||||||||
Unsecured notes from various investors, interest at 20%--25%, maturing on April 3, 2014, issued for overriding and working interests. | 200,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 12%, maturing on December 2 and December 6, 2014 with the first dates of conversion eligibility being December 2 and December 6, 2013. | — | — | |||||||
The conversion price is the lower of $0.015 per share or 30% of the lowest closing bid price for the common stock during the 20 trading days previous to the conversion date. | 139,374 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 8%, maturing October 25, 2014 and November 25, 2014, the respective first date of conversion eligibility for the respective notes with an applicable discount rate of 50% from the average trading price for the lowest three closing prices for the common stock during the 10 trading days previous to the conversion date. | 133,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 9%, maturing on October 28, 2014 November 22, 2014 and November 29, 2014, the respective first date of conversion eligibility with an applicable discount rate of 50% from the lowest closing bid price for the common stock during the 10 trading days previous to the conversion date. | 131,169 | — | |||||||
Unsecured note from an investor, interest at 25%, matures April 3, 2014. | 100,000 | — | |||||||
Unsecured notes from various investors, non - interest bearing, maturing from February to November 2014, issued for overriding and working interests. | 75,000 | 250,000 | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures May 27, 2014. First date of conversion eligibility was February 28, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 68,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures August 4, 2014. First date of conversion eligibility is April 30, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 53,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 10%, maturing on October 8, 2014. The first date of conversion eligibility was October 8, 2013. The conversion price is the lower of $0.0075 per share or 50% from average of the 2 lowest closing bid price for the common stock during the 15 trading days previous to the conversion date. | 50,000 | — | |||||||
Initial draw under a convertible unsecured note from a financial institution, 10% original issue discount and a one-time 12% interest charge, matures December 9, 2014. First date of conversion eligibility was December 9, 2013. Conversion price is the lesser of $0.0025 per share or 60% of the lowest traded price for the common stock during the 25 trading days previous to the conversion date. | 50,000 | — | |||||||
Unsecured note from an investor, interest at 20%, maturing on April 18, 2014 | 45,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 8%, matures June 19, 2014. First date of conversion eligibility was December 19, 2013 with an applicable discount rate of 45% from the average trading price for the lowest 2 closing bid prices for the common stock during the 25 trading days previous to the conversion date. | 44,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures April 15, 2014. First date of conversion eligibility was January 10, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 32,500 | — | |||||||
Unsecured note from a company, interest at 5%, matures December 18, 2013. | 30,000 | — | |||||||
Unsecured convertible note from an investor, interest at 10%, maturing February 9, 2013. | — | 65,000 | |||||||
Convertible unsecured note from a financial institution, interest at 5%, matures April 30, 2013. First date of conversion eligibility was January 22, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | — | 63,000 | |||||||
Convertible unsecured note from a financial institution, interest at 5%, matures April 9, 2013. First date of conversion eligibility was March 13, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | — | 42,500 | |||||||
1,432,731 | 420,500 | ||||||||
Short-term portion | (1,432,731 | ) | (170,500 | ) | |||||
Long-term notes payable | $ | — | $ | 250,000 | |||||
Derivatives
Derivatives | 12 Months Ended |
Dec. 31, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Derivatives | ' |
7. DERIVATIVES | |
In 2013 the Company entered into numerous convertible debt agreements of six to twelve months in duration. At December 31, 2013 the Company had $701,043 in outstanding convertible debt obligations that bear interest from 5% to 12%. Interest expense recognized related to the convertible debt was $26,218. There were no detachable warrants included in the debt agreements. The derivative liability related to the convertible feature of these notes payable is $960,047 at December 31, 2013. Derivative expense recognized during the year was $1,691,313. The value of the conversion shares was determined using the Black-Scholes formula. In connection with the valuation of the conversion shares, the Company used the following assumptions: dividend yield—0%, risk free interest rate--.07%, volatility—377.99% and an expected term of 1/10th of a year. |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Income Taxes | ' | ||||||||
8. INCOME TAXES | |||||||||
The Company uses the liability method in accounting for income taxes. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. | |||||||||
The potential benefit of net operating loss carry forwards has not been recognized in the accompanying consolidated financial statements since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. | |||||||||
The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported for the years ended December 31, 2013 and 2012 is as follows: | |||||||||
2013 | 2012 | ||||||||
Net Loss | $ | 4,301,095 | $ | 8,326,063 | |||||
Income Tax Rate | 34 | % | 34 | % | |||||
Income Tax Benefit | 1,462,372 | 2,830,861 | |||||||
Permanent Difference | (622,983 | ) | (103,664 | ) | |||||
Valuation Allowance Change | (839,389 | ) | (2,727,197 | ) | |||||
Deferred Income Tax (Recovery) | $ | — | $ | — | |||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. | |||||||||
Future income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of future income tax assets and liabilities at December 31, 2013 and 2012 are as follows: | |||||||||
2013 | 2012 | ||||||||
Net Operating Loss Carryforwards | $ | 3,586,257 | $ | 2,711,283 | |||||
Impairments | 2,071,960 | 2,055,640 | |||||||
Asset Retirement Obligation | 4,080 | ||||||||
Depletion and Depreciation | (279,485 | ) | (223,500 | ) | |||||
Net Deferred Tax Assets | 5,382,812 | 4,543,423 | |||||||
Valuation Allowance | (5,382,812 | ) | (4,543,423 | ) | |||||
Deferred Tax Asset | $ | — | $ | — | |||||
The Company has recognized a valuation allowance for the deferred tax assets for which it is more likely than not that the realization will not occur. The valuation allowance is reviewed periodically. When circumstance change and this causes a change in management's judgment about the realizeability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in current income. | |||||||||
The net operating loss carryforwards for income tax purposes are approximately $$10,550,000 and will begin to expire in 2026. Neither the Company nor any of its subsidiaries have ever been the subject of an examination by the Internal Revenue Service. | |||||||||
Pursuant to Section 382 of the Internal Revenue Code, use of the Company’s net operating loss carryforwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three year period. Ownership changes could impact the Company’s ability to utilize net operating losses and credit carryforwards remaining at the ownership change date. The limitation would be determined by the fair market value of common stock outstanding prior to the ownership change, multiplied by the applicable federal rate. |
Stockholders_Equity
Stockholders' Equity | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
Stockholders' Equity | ' | ||||||||
9. STOCKHOLDERS’ EQUITY | |||||||||
Preferred Stock | |||||||||
The articles of incorporation of the Company authorize the issuance of 10,000,000 shares of $0.001 par value Preferred Stock. The Board of Directors is authorized, from time to time, to divide the preferred shares into “Series” and to fix and determine separately for each Series any or all of the relative rights and preferences. | |||||||||
In connection with an employment agreement, the Company issued 1,000 shares of Series A Preferred Stock in August 2011. The Series A Preferred Stock has voting rights on all shareholder matters equal to fifty-one percent (51%) of the total vote. There are no other liquidation, conversion or redemption rights. | |||||||||
On February 17, 2012, the Board of Directors designated “Series B Convertible Preferred Stock” with the number of shares initially constituting such series being up to 6,000,000 shares, issuing 5,910,000 for the acquisition of oil & gas properties in Knox County, Texas. | |||||||||
The Board of Directors does not formally approve the declaration of the preferred stock dividends; therefore, as checks for payment of preferred dividends are approved by the CEO of the Company, dividend expense is recognized. For the years ended December 31, 2013 and 2012, there were no preferred stock dividends. | |||||||||
Warrants | |||||||||
The following summarizes the stock purchase warrant transactions for the year ended December 31, 2013 and 2012: | |||||||||
Number of Warrants | Weighted Average Exercise Price | ||||||||
Outstanding, December 31, 2011 | 1,000,000 | $ | 0.8 | ||||||
Warrants Issued with Convertible Debt | 100,000 | $ | 1.4 | ||||||
Outstanding, December 31, 2012 | 1,100,000 | $ | 0.8545 | ||||||
Warrants Issued to an Officer | 807,760 | $ | 0.0125 | ||||||
Outstanding, December 31, 2013 | 1,907,760 | $ | 0.498 | ||||||
Fair_Value_Estimates
Fair Value Estimates | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair Value Estimates | ' | ||||||||||||||||
10. FAIR VALUE ESTIMATES | |||||||||||||||||
In February 2007 the FASB issued ASC 820 “Fair Value Measurements and Disclosures”. The objective of ASC 820 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. ASC 820 defines fair value establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. | |||||||||||||||||
The Company measures its options at fair value in accordance with ASC 820. 820 specifies a valuation hierarchy based on whether the inputs to those valuations techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy: | |||||||||||||||||
Level 1—Quoted prices for identical instruments in active markets; | |||||||||||||||||
Level 2—Quoted prices for similar instruments in active markets, quoted process for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and | |||||||||||||||||
Level 3—Valuations derived from valuations techniques in which one or more significant inputs or significant value drivers are unobservable. | |||||||||||||||||
This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The fair values of the common stock options, preferred stock and common stock issuances at December 31, 2013 and 2012 were as follows: | |||||||||||||||||
Markets for Identical Assets | Observable Inputs | Unobsevable Inputs | |||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
2012 | |||||||||||||||||
Stock Warrants | $ | — | $ | 84,000 | $ | — | $ | 84,000 | |||||||||
Common Stock | $ | — | $ | 52,000 | $ | — | $ | 52,000 | |||||||||
2013 | |||||||||||||||||
Stock Warrants | $ | — | $ | 11,400 | $ | — | $ | 11,400 | |||||||||
Common Stock | $ | — | $ | 125,675 | $ | — | $ | 125,675 | |||||||||
Convertible Debt Derivative: | |||||||||||||||||
Liability | $ | ---- | $ | 960,047 | $ | — | $ | 960,047 | |||||||||
Expense | $ | ---- | $ | 1,691,313 | $ | — | $ | 1,691,313 | |||||||||
Paid-in Capital | $ | ---- | $ | 731,266 | $ | — | $ | 731,266 | |||||||||
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
11. SUBSEQUENT EVENTS | |
The Company’s management has evaluated subsequent events through April 9, 2014, the date the consolidated financial statements were issued. | |
The Company filed a Certificate of Amendment (the “Third Amendment”) to the Company’s Articles of Incorporation on February 4, 2014 to increase the number of authorized shares of the Company’s common stock from 2,989,999,999 to 6,000,000,000 and on February 27, 2014 the Company filed a Certificate of Amendment (the “Fourth Amendment”) to increase the number of authorized shares of the Company’s common stock from 6,000,000,000 to 15,000,000,000. On March 27, 2014 the Company filed a Certificate of Amendment (th “Fifth Amendment”) to change the par value of its common stock from $0.001 per share to $0.0001 per share. As of the date of this registration statement, we have authorized capital stock consisting of 15,000,000,000 shares of common stock, $0.0001 par value per share and 10,000,000 shares of preferred stock, $0.001 par value per share. | |
On December 13, 2013 the Company executed a $10,000,000 Investment Agreement whereby an investor will buy shares of the Company’s common stock, subject to certain limitations, as requested by the Company. The purchase price is at a 30% discount from the lowest closing bid price for the ten days before the purchase request. The Investment Agreement cannot be used until the Company as an effective Registration Statement filed with the Securities and Exchange Commission. | |
Subsequent to December 31, 2013 the Company has issued 1,417,862,657 shares of its common stock. 154,066,994 shares were issued for conversions of Preferred Stock, 990,314,609 were issued from conversions of notes payable and the remaining were purchased by accredited investors or issued for services rendered. | |
Other than the changes in the authorized shares of common stock and the change in the par value of the common stock, in the opinion of the Company’s management, there have been no other significant subsequent events since December 31, 2013. |
Supplemental_Information_on_Oi
Supplemental Information on Oil & Gas | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||
Supplemental Information on Oil & Gas | ' | ||||
12. SUPPLEMENTAL INFORMATION ON OIL & GAS (Unaudited) | |||||
2013 | 2012 | ||||
Capitalized Costs Relating to Oil and Gas Producing | |||||
Activities at December 31, 2013 and 2012 | |||||
Proved Oil and Gas Properties | $ 2,438,541 | $ 1,953,638 | |||
Proved Non-producing Oil and Gas Properties | 202,866 | 202,866 | |||
641,427 | 2,156,524 | ||||
Less Accumulated Depletion | -837,795 | -731,795 | |||
Net Capitalized Costs Relating to Oil and Gas Producing Activities | $ 1,803,632 | $ 1,424,729 | |||
Costs incurred in Oil and Gas Producing Activities for the | |||||
year ended December 31, 2013 and 2012 | |||||
Property acquisition cost: | |||||
Proved | $ - | $ 5,910,000 | |||
Unproved | - | - | |||
Exploration and development costs | 348,281 | 203,662 | |||
Depletion rate per equivalent barrel of production | $ 27.89 | $ 34.92 | |||
Results for Operations for Oil and Gas Producing Activities for the | |||||
year ended December 31, 2013 and 2012 | |||||
Oil and Gas Sales | $ 276,421 | $ 293,798 | |||
Less: Production Costs | 634,945 | 538,616 | |||
Depletion, Depreciation and Amortization | 106,000 | 103,000 | |||
Impairment of oil and gas investment | 48,000 | 6,046,000 | |||
-512,524 | -6,393,818 | ||||
Income Tax Benefit | - | - | |||
Results of Operations for Oil and Gas Producing Activities | |||||
(excluding corporate overhead and financing costs) | $ (512,524) | $ (6,393,818) | |||
Reserve Information | |||||
The following estimates of proved and proved developed reserve quantities and related standardized measure of discounted net cash flow are estimates only, and do not purport to reflect realizable values or fair market values of the Company’s reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. All of the Company’s reserves are located in the United States. | |||||
Proved reserves are estimated reserves of crude oil (including condensates and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods. | |||||
The standardized measure of discounted future net cash flows is computed by applying average prices of oil and gas based upon the prior 12 months to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10% a year to reflect the estimated timing of the future cash flows. | |||||
The following table sets forth estimated proved oil and gas reserves together with the changes therein for the years ended December 31, 2013 and 2012: | |||||
The following table sets forth estimated proved oil and gas reserves together with the changes therein for the years | |||||
ended December 31, 2013 and 2012: | |||||
2013 | 2012 | ||||
Oil | Gas | Oil | Gas | ||
(bbls) | (mcf) | (bbls) | (mcf) | ||
Proved Developed and Undeveloped Reserves: | |||||
Beginning of the year | 35,031 | 106,650 | 59,191 | 0 | |
Revisions of previous estimate | 3,125 | 95,541 | -30,283 | 106,650 | |
Purchases | - | - | 8,959 | - | |
Production | -2,478 | (8,580) | -2,836 | - | |
End of the year | 35,678 | 193,611 | 35,031 | 106,650 | |
Proved Developed Reserves: | |||||
Beginning of year | 35,031 | 106,650 | 59,191 | 0 | |
End of year | 35,678 | 193,611 | 35,031 | 106,650 | |
The following table sets forth the Standardized Measure of Discounted Future Net | |||||
Cash Flows for 2013 and 2012 and shows the reconciliation of the changes therein: | |||||
2013 | 2012 | ||||
Standardized measure of Discounted Future | |||||
Net Cash Flows at December 31 | |||||
Future cash inflows | $ 4,167,792 | $ 3,611,006 | |||
Future production costs | -1,604,556 | -1,383,744 | |||
Future development costs | -45,000 | -45,000 | |||
2,518,236 | 2,182,262 | ||||
Future net cash flows 10% annual discount | |||||
for estimated timing of cash flows | -725,412 | -757,410 | |||
Standardized measure of Discounted Future | |||||
Net Cash Flows relating to Proved Oil and | |||||
Gas Reserves | $ 1,792,824 | $ 1,424,852 | |||
The following reconciles the change in the | |||||
standardized measure of discounted future | |||||
net cash flows during the year: | |||||
Beginning of the year | $ 1,424,852 | $ 1,750,619 | |||
Purchases of minerals in place | - | 231,772 | |||
Sales of oil and gas produced, net of | |||||
production costs | 358,524 | 242,597 | |||
Net changes in prices and production costs | -1,317,946 | -496,481 | |||
Development costs incurred during the year | |||||
which were previously estimated | - | 94,661 | |||
Net change in estimated future development | |||||
costs | - | -35,339 | |||
Revisions of previous quantity estimates | 1,295,394 | -1,133,600 | |||
Change in discount | 32,000 | 770,623 | |||
End of year | $ 1,792,824 | $ 1,424,852 | |||
The main reason for the increase in the gas reserves in 2013 was the revision on one lease due to the better than expected production levels. The revision on this lease was an increase of 73,992 mcf. The increase in the gas reserves in 2012 was the result of development activity undertaken in 2012 that resulted in a reserve revision to proved developed. | |||||
In 2012 certain development efforts did not result in a favorable outcome when completed so the reserves relative to the lease were revised downward by 11,849. Also in 2012 there were wells taken out of production due to repair issues which resulted in a further downward revision of 16,705 barrels. All other revisions resulted in a net decrease in proved reserves of 1,729 barrels for a net total downward revision in 2012 of 30,283 barrels. | |||||
The 2012 purchases of minerals in place were from the acquisition of oil and gas interests in Knox, County, Texas. The Company exchanged preferred stock for these interests on February 27, 2012 as explained in footnote 9. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
Basis of Presentation | ' | |
Basis of presentation | ||
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: | ||
Subsidiary Name | ||
Petron Energy II Pipeline, Inc. | ||
Petron Energy II Well Services, Inc. | ||
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States. All intercompany transactions and account balances have been eliminated in consolidation. | ||
Accounting estimates | ' | |
Accounting estimates | ||
The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. | ||
Cash and cash equivalents | ' | |
Cash and cash equivalents | ||
Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As of December 31, 2013 there were no cash equivalents. | ||
Oil and gas properties | ' | |
Oil and gas properties | ||
The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. | ||
Investments in unproved properties are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized, or is reported as a period expense, as appropriate. | ||
Pursuant to full cost accounting rules, the Company must perform a ceiling test periodically on its proved oil and gas assets. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using current prices, excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, at a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. Should the net capitalized costs for a cost center exceed the sum of the components noted above, an impairment charge would be recognized to the extent of the excess capitalized costs. In 2013 and 2012 the Company recognized an impairment charge of $48,000 and $5,910,000, respectively, in accordance with the ceiling test. | ||
Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations. | ||
Exploration activities conducted jointly with others are reflected at the Company’s proportionate interest in such activities. | ||
Cost related to site restoration programs are accrued over the life of the project. | ||
Pipeline and equipment | ' | |
Pipeline and equipment | ||
Depreciation is based on the estimated useful lives of the assets and is computed using the straight line method. Pipeline, trucks and equipment are recorded at cost. Depreciation is provided using the following useful lives: | ||
Pipeline | 15 years | |
Trucks and equipment | 5—15 years | |
Stock-based compensation | ' | |
Stock-based compensation | ||
The Company accounts for stock options in accordance with FASB ASC 505, “Equity,” and FASB ASC 718, “Compensation—Stock Compensation.” Accordingly, stock compensation expense has been recognized in the statement of operations based on the grant date fair value of the options for the year ended December 31, 2013. | ||
Under ASC 718 and 505, the fair value of options is estimated at the date of grant using a Black-Scholes-Merton (“Black-Scholes”) option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. Volatility is determined using historical stock prices over a period consistent with the expected term of the option. The Company utilizes the guidelines of Staff Accounting bulletin No. 107 (SAB 107) of the Securities and Exchange Commission relative to “plain vanilla” options in determining the expected term of options grants. SAB 107 permits the expected term of “plain vanilla” options to be calculated as the average of the option’s vesting term and contractual period. | ||
The Company has used this method in determining the expected term of all options. At such time as the Company has options with graded vesting, the Company will recognize compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The amount of compensation expense recognized at any date is at least equal to the portion of the grant date value of the award that is vested at that date. | ||
Advertising costs | ' | |
Advertising costs | ||
The Company expenses advertising costs as these are incurred. There were no advertising costs in 2013 or 2012. | ||
Revenue recognition | ' | |
Revenue recognition | ||
Oil and gas revenues are recognized when oil and gas is produced and sold. | ||
Earnings (loss) per share | ' | |
Earnings (loss) per share | ||
Basic earnings (loss) per share is computed using the weighted average number of shares outstanding during the period. The treasury stock method is used to determine the diluted effect of stock options and warrants. Diluted loss per share is equal to the basic loss per share for the years ended December 31, 2013 and 2012 because common stock equivalents would have been anti-dilutive. | ||
Income taxes | ' | |
Income taxes | ||
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. | ||
Long-lived assets impairment | ' | |
Long-lived assets impairment | ||
Long-term assets of the Company are reviewed for impairment when circumstances indicate the carrying value may not be recoverable in accordance with the guidance established in Statement of Financial Accounting Standards No. 144 (SFAS 144) (ASC 360), Accounting for the impairment or Disposal of Long-Lived Assets. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value. Fair values are determined based on discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. | ||
Asset retirement obligations | ' | |
Asset retirement obligations | ||
The Company accounts for asset retirement obligations in accordance with the provisions of SFAS 143 (ASC 410) “Accounting for Asset Retirement Obligations”. SFAS 143 (ASC 410) requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Asset Retirement Obligation as of December 31, 2013 is $220,347 which includes an increase of $180,069 for the year ended December 31, 2013. | ||
Concentration of credit risk | ' | |
Concentration of credit risk | ||
The Company has financial instruments that are exposed to concentrations of credit risk and consist primarily of cash and trade accounts receivable. The Company routinely maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Management believes that these financial institutions are of high quality and the risk of loss is minimal. At December 31, 2013 the Company had no cash balances in excess of FDIC limits. | ||
Financial instruments | ' | |
Financial instruments | ||
The carrying amount of financial instruments including cash, accounts receivable, accounts payable and accrued liabilities approximate fair value, unless otherwise stated as of December 31, 2013 and 2012. | ||
Fair value estimates of financial instruments are made at the period end based on relevant information about financial markets and specific financial instruments. Because these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. | ||
Contingencies | ' | |
Contingencies | ||
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and legal counsel assess such contingent liabilities which inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||
If management determines that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. | ||
Commitments | ' | |
Commitments | ||
The Company amended its operating lease for its administrative office in Dallas, Texas on May 10, 2011. The lease will expire on April 30, 2014. The only lease commitment the Company has at December 31, 2013 is for $13,416 for the office rent through April 2014. | ||
Total rental expense was approximately $38,776 and $40,012 for years ended December 31, 2013 and 2012, respectively. | ||
Recent Accounting Pronouncements | ' | |
Recent Accounting Pronouncements | ||
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
Producing_Oil_and_Gas_Properti1
Producing Oil and Gas Properties (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Investments in producing oil & gas properties | ' | ||||||||
2013 | 2012 | ||||||||
Leasehold Cost | $ | 753,373 | $ | 753,373 | |||||
Development Cost | 1,011,106 | 537,453 | |||||||
Tangible Equipment | 876,948 | 865,698 | |||||||
2,641,427 | 2,156,524 | ||||||||
Accumulated Depreciation | |||||||||
and Depletion | (837,795 | ) | (731,795 | ) | |||||
Net Investment | $ | 1,803,632 | $ | 1,424,729 |
Pipeline_and_Other_Depreciable1
Pipeline and Other Depreciable Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Investment in pipeline and other depreciable equipment | ' | ||||||||
2013 | 2012 | ||||||||
Pipeline | $ | 1,018,000 | $ | 988,000 | |||||
Accumulated Depreciation | (320,452 | ) | (245,156 | ) | |||||
Net Pipeline | $ | 697,548 | $ | 742,844 | |||||
Equipment and Other | $ | 735,041 | $ | 117,276 | |||||
Accumulated Depreciation | (125,309 | ) | (45,361 | ) | |||||
Net Equipment and Other | $ | 609,732 | $ | 71,915 |
Notes_Payable_Tables
Notes Payable (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Outstanding Notes Payable | ' | ||||||||
2013 | 2012 | ||||||||
Draw from a $5,000,000 secured line of credit, interest at 11%, matures April 5, 2014 | $ | 450,000 | $ | — | |||||
Unamortized loan costs | -87,125 | ||||||||
Cash deposit held by lender | -81,187 | ||||||||
281,688 | |||||||||
Unsecured notes from various investors, interest at 20%--25%, maturing on April 3, 2014, issued for overriding and working interests. | 200,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 12%, maturing on December 2 and December 6, 2014 with the first dates of conversion eligibility being December 2 and December 6, 2013. | — | — | |||||||
The conversion price is the lower of $0.015 per share or 30% of the lowest closing bid price for the common stock during the 20 trading days previous to the conversion date. | 139,374 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 8%, maturing October 25, 2014 and November 25, 2014, the respective first date of conversion eligibility for the respective notes with an applicable discount rate of 50% from the average trading price for the lowest three closing prices for the common stock during the 10 trading days previous to the conversion date. | 133,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 9%, maturing on October 28, 2014 November 22, 2014 and November 29, 2014, the respective first date of conversion eligibility with an applicable discount rate of 50% from the lowest closing bid price for the common stock during the 10 trading days previous to the conversion date. | 131,169 | — | |||||||
Unsecured note from an investor, interest at 25%, matures April 3, 2014. | 100,000 | — | |||||||
Unsecured notes from various investors, non - interest bearing, maturing from February to November 2014, issued for overriding and working interests. | 75,000 | 250,000 | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures May 27, 2014. First date of conversion eligibility was February 28, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 68,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures August 4, 2014. First date of conversion eligibility is April 30, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 53,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 10%, maturing on October 8, 2014. The first date of conversion eligibility was October 8, 2013. The conversion price is the lower of $0.0075 per share or 50% from average of the 2 lowest closing bid price for the common stock during the 15 trading days previous to the conversion date. | 50,000 | — | |||||||
Initial draw under a convertible unsecured note from a financial institution, 10% original issue discount and a one-time 12% interest charge, matures December 9, 2014. First date of conversion eligibility was December 9, 2013. Conversion price is the lesser of $0.0025 per share or 60% of the lowest traded price for the common stock during the 25 trading days previous to the conversion date. | 50,000 | — | |||||||
Unsecured note from an investor, interest at 20%, maturing on April 18, 2014 | 45,000 | — | |||||||
Convertible unsecured notes from a financial institution, interest at 8%, matures June 19, 2014. First date of conversion eligibility was December 19, 2013 with an applicable discount rate of 45% from the average trading price for the lowest 2 closing bid prices for the common stock during the 25 trading days previous to the conversion date. | 44,000 | — | |||||||
Convertible unsecured note from a financial institution, interest at 8%, matures April 15, 2014. First date of conversion eligibility was January 10, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 32,500 | — | |||||||
Unsecured note from a company, interest at 5%, matures December 18, 2013. | 30,000 | — | |||||||
Unsecured convertible note from an investor, interest at 10%, maturing February 9, 2013. | — | 65,000 | |||||||
Convertible unsecured note from a financial institution, interest at 5%, matures April 30, 2013. First date of conversion eligibility was January 22, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | — | 63,000 | |||||||
Convertible unsecured note from a financial institution, interest at 5%, matures April 9, 2013. First date of conversion eligibility was March 13, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | — | 42,500 | |||||||
1,432,731 | 420,500 | ||||||||
Short-term portion | (1,432,731 | ) | (170,500 | ) | |||||
Long-term notes payable | $ | — | $ | 250,000 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Income tax expense | ' | ||||||||
2013 | 2012 | ||||||||
Net Loss | $ | 4,301,095 | $ | 8,326,063 | |||||
Income Tax Rate | 34 | % | 34 | % | |||||
Income Tax Recovery | 1,462,372 | 2,830,861 | |||||||
Permanent Difference | (622,983 | ) | (103,664 | ) | |||||
Valuation Allowance Change | (839,389 | ) | (2,727,197 | ) | |||||
Deferred Income Tax (Recovery) | $ | — | $ | — | |||||
Future income tax assets and liabilities | ' | ||||||||
2013 | 2012 | ||||||||
Net Operating Loss Carryforwards | $ | 3,586,257 | $ | 2,711,283 | |||||
Impairments | 2,071,960 | 2,055,640 | |||||||
Asset Retirement Obligation | 4,080 | ||||||||
Depletion and Depreciation | (279,485 | ) | (223,500 | ) | |||||
Net Deferred Tax Assets | 5,382,812 | 4,543,423 | |||||||
Valuation Allowance | (5,382,812 | ) | (4,543,423 | ) | |||||
Deferred Tax Asset | $ | — | $ | — |
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
Stock purchase warrant transactions | ' | ||||||||
Number of Warrants | Weighted Average Exercise Price | ||||||||
Outstanding, December 31, 2011 | 1,000,000 | $ | 0.8 | ||||||
Warrants Issued with Convertible Debt | 100,000 | $ | 1.4 | ||||||
Outstanding, December 31, 2012 | 1,100,000 | $ | 0.8545 | ||||||
Warrants Issued to an Officer | 807,760 | $ | 0.0125 | ||||||
Outstanding, December 31, 2013 | 1,907,760 | $ | 0.498 |
Fair_Value_Estimates_Tables
Fair Value Estimates (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair values of common stock options, preferred stock, and common stock issuances | ' | ||||||||||||||||
Markets for Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
2012 | |||||||||||||||||
Stock Warrants | $ | — | $ | 84,000 | $ | — | $ | 84,000 | |||||||||
Common Stock | $ | — | $ | 52,000 | $ | — | $ | 52,000 | |||||||||
2013 | |||||||||||||||||
Stock Warrants | $ | — | $ | 11,400 | $ | — | $ | 11,400 | |||||||||
Common Stock | $ | — | $ | 125,675 | $ | — | $ | 125,675 | |||||||||
Convertible Debt Derivative: | |||||||||||||||||
Liability | $ | — | $ | 960,047 | $ | — | $ | 960,047 | |||||||||
Expense | $ | — | $ | 1,691,313 | $ | — | $ | 1,691,313 | |||||||||
Paid-in Capital | $ | — | $ | 731,266 | $ | — | $ | 731,266 |
Supplemental_Information_on_Oi1
Supplemental Information on Oil & Gas (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||
Capitalized costs relating to oil and gas producing activities | ' | ||||
2013 | 2012 | ||||
Capitalized Costs Relating to Oil and Gas Producing | |||||
Activities at December 31, 2013 and 2012 | |||||
Proved Oil and Gas Properties | $ 2,438,541 | $ 1,953,638 | |||
Proved Non-producing Oil and Gas Properties | 202,886 | 202,886 | |||
2,641,427 | 2,156,524 | ||||
Less Accumulated Depletion | -837,795 | -731,795 | |||
Net Capitalized Costs Relating to Oil and Gas Producing Activities | $ 1,803,632 | $ 1,424,729 | |||
Costs incurred in Oil and Gas Producing Activities for the | |||||
year ended December 31, 2013 and 2012 | |||||
Property acquisition cost: | |||||
Proved | $ - | $ 5,910,000 | |||
Unproved | - | - | |||
Exploration and development costs | 348,281 | 203,662 | |||
Depletion rate per equivalent barrel of production | $ 27.89 | $ 34.92 | |||
Results for Operations for Oil and Gas Producing Activities for the | |||||
year ended December 31, 2013 and 2012 | |||||
Oil and Gas Sales | $ 276,421 | $ 293,798 | |||
Less: Production Costs | 634,945 | 538,616 | |||
Depletion, Depreciation and Amortization | 106,000 | 103,000 | |||
Impairment of oil and gas investment | 48,000 | 6,046,000 | |||
-512,524 | -6,393,818 | ||||
Income Tax Benefit | - | - | |||
Results of Operations for Oil and Gas Producing Activities | |||||
(excluding corporate overhead and financing costs) | $ (512,524) | $ (6,393,818) | |||
Estimated proved oil and gas reserves | ' | ||||
The following table sets forth estimated proved oil and gas reserves together with the changes therein for the years | |||||
ended December 31, 2013 and 2012: | |||||
2013 | 2012 | ||||
Oil | Gas | Oil | Gas | ||
(bbls) | (mcf) | (bbls) | (mcf) | ||
Proved Developed and Undeveloped Reserves: | |||||
Beginning of the year | 35,031 | 106,650 | 59,191 | 0 | |
Revisions of previous estimate | 3,125 | 95,541 | -30,283 | 106,650 | |
Purchases | - | - | 8,959 | - | |
Production | -2,478 | (8,580) | -2,836 | - | |
End of the year | 35,678 | 193,611 | 35,031 | 106,650 | |
Proved Developed Reserves: | |||||
Beginning of year | 35,031 | 106,650 | 59,191 | 0 | |
End of year | 35,678 | 193,611 | 35,031 | 106,650 | |
The following table sets forth the Standardized Measure of Discounted Future Net | |||||
Cash Flows for 2013 and 2012 and shows the reconciliation of the changes therein: | |||||
2013 | 2012 | ||||
Standardized measure of Discounted Future | |||||
Net Cash Flows at December 31 | |||||
Future cash inflows | $ 4,167,792 | $ 3,611,006 | |||
Future production costs | -1,604,556 | -1,383,744 | |||
Future development costs | -45,000 | -45,000 | |||
2,518,236 | 2,182,262 | ||||
Future net cash flows 10% annual discount | |||||
for estimated timing of cash flows | -725,412 | -757,410 | |||
Standardized measure of Discounted Future | |||||
Net Cash Flows relating to Proved Oil and | |||||
Gas Reserves | $ 1,792,824 | $ 1,424,852 | |||
The following reconciles the change in the | |||||
standardized measure of discounted future | |||||
net cash flows during the year: | |||||
Beginning of the year | $ 1,424,852 | $ 1,750,619 | |||
Purchases of minerals in place | - | 231,772 | |||
Sales of oil and gas produced, net of | |||||
production costs | 358,524 | 242,597 | |||
Net changes in prices and production costs | -1,317,946 | -496,481 | |||
Development costs incurred during the year | |||||
which were previously estimated | - | 94,661 | |||
Net change in estimated future development | |||||
costs | - | -35,339 | |||
Revisions of previous quantity estimates | 1,295,394 | -1,133,600 | |||
Change in discount | 32,000 | 770,623 | |||
End of year | $ 1,792,824 | $ 1,424,852 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Accounting Policies [Abstract] | ' | ' |
Impairment charge | $48,000 | $5,910,000 |
Asset Retirement Obligation | 220,347 | ' |
Increase in Asset Retirement Obligation | 180,069 | ' |
Lease commitment | 13,416 | ' |
Rental expense | $38,776 | $40,012 |
Going_Concern_Details_Narrativ
Going Concern (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' |
Net loss | ($4,301,095) | ($8,326,063) |
Accumulated deficit | ($24,122,318) | ($19,821,223) |
Producing_Oil_and_Gas_Properti2
Producing Oil and Gas Properties - Investments in producing oil & gas properties (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes to Financial Statements | ' | ' |
Leasehold Cost | $753,373 | $753,373 |
Development Cost | 1,011,106 | 537,453 |
Tangible Equipment | 876,948 | 865,698 |
Gross investment in producing oil & gas properties | 2,641,427 | 2,156,524 |
Accumulated Depreciation and Depletion | -837,795 | -731,795 |
Net Investment | $1,803,632 | $1,424,729 |
Producing_Oil_and_Gas_Properti3
Producing Oil and Gas Properties (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Depletion expense | $106,000 | $103,000 |
Pipeline_and_Other_Depreciable2
Pipeline and Other Depreciable Equipment - Investment in pipeline and other depreciable equipment (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes to Financial Statements | ' | ' |
Pipeline | $1,018,000 | $988,000 |
Accumulated Depreciation | -320,452 | -245,156 |
Net Pipeline | 697,548 | 742,844 |
Equipment and Other | 735,041 | 117,276 |
Accumulated Depreciation | -125,309 | -45,361 |
Net Equipment and Other | $609,732 | $71,915 |
Pipeline_and_Other_Depreciable3
Pipeline and Other Depreciable Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Depreciation expense | $155,244 | $83,014 |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Aug. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' | ' |
Amount paid to Petron Energy, Inc. | $225,000 | $61,163 | ' |
Revenues | 11,481 | 32,014 | ' |
Lease operating expenses | 11,493 | 36,573 | ' |
Chief Executive Officer yearly salary | ' | ' | $200,000 |
Stock options issued to Chief Executive Officer | ' | ' | 1,200,000 |
Exercise price of stock options issued | ' | ' | $0.04 |
Series A Preferred Stock issued to Chief Executive Officer | ' | ' | 1,000 |
Notes_Payable_Outstanding_Note
Notes Payable - Outstanding Notes Payable (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Debt Disclosure [Abstract] | ' | ' |
Draw from a $5,000,000 secured line of credit, interest at 11%, matures April 5, 2014 | $450,000 | ' |
Unamortized loan costs | -87,125 | ' |
Cash deposit held by lender | -81,187 | ' |
[custom:SecuredDemandNotesNet] | 281,688 | ' |
Unsecured notes from various investors, interest at 20%-25%, maturing on April 3, 2014, issued for overriding and working interests. | 200,000 | ' |
Convertible unsecured notes from a financial institution, interest at 12%, maturing on December 2 and December 6, 2014 with the first dates of conversion eligibility being December 2 and December 6, 2013. The conversion price is the lower of $0.015 per share or 30% of the lowest closing bid price for the common stock during the 20 trading days previous to the conversion date. | 139,374 | ' |
Convertible unsecured notes from a financial institution, interest at 8%, maturing October 25, 2014 and November 25, 2014, the respective first date of conversion eligibility for the respective notes with an applicable discount rate of 50% from the average trading price for the lowest three closing prices for the common stock during the 10 trading days previous to the conversion date. | 133,000 | ' |
Convertible unsecured notes from a financial institution, interest at 9%, maturing on October 28, 2014 November 22, 2014 and November 29, 2014, the respective first date of conversion eligibility with an applicable discount rate of 50% from the lowest closing bid price for the common stock during the 10 trading days previous to the conversion date. | 131,169 | ' |
Unsecured note from an investor, interest at 25%, matures April 3, 2014. | 100,000 | ' |
Unsecured notes from various investors,non - interest bearing, maturing from February to November 2014, issued for overriding and working interests. | 75,000 | 250,000 |
Convertible unsecured note from a financial institution, interest at 8%, matures May 27, 2014. First date of conversion eligibility was February 28, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 68,000 | ' |
Convertible unsecured note from a financial institution, interest at 8%, matures August 4, 2014. First date of conversion eligibility is April 30, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 53,000 | ' |
Convertible unsecured note from a financial institution, interest at 10%, maturing on October 8, 2014. The first date of conversion eligibility was October 8, 2013. The conversion price is the lower of $0.0075 per share or 50% from average of the 2 lowest closing bid price for the common stock during the 15 trading days previous to the conversion date. | 50,000 | ' |
Initial draw under a convertible unsecured note from a financial institution, 10% original issue discount and a one-time 12% interest charge, matures December 9, 2014. First date of conversion eligibility was December 9, 2013. Conversion price is the lesser of $0.0025 per share or 60% of the lowest traded price for the common stock during the 25 trading days previous to the conversion date. | 50,000 | ' |
Unsecured note from an investor, interest at 20%, maturing on April 18, 2014 | 45,000 | ' |
Convertible unsecured notes from a financial institution, interest at 8%, matures June 19, 2014. First date of conversion eligibility was December 19, 2013 with an applicable discount rate of 45% from the average trading price for the lowest 2 closing bid prices for the common stock during the 25 trading days previous to the conversion date. | 44,000 | ' |
Convertible unsecured note from a financial institution, interest at 8%, matures April 15, 2014. First date of conversion eligibility was January 10, 2014 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | 32,500 | ' |
Unsecured note from a company, interest at 5%, matures December 18, 2013. | 30,000 | ' |
Unsecured convertible note from an investor, interest at 10%, maturing February 9, 2013. | ' | 65,000 |
Convertible unsecured note from a financial institution, interest at 5%, matures April 30, 2013. First date of conversion eligibility was January 22, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | ' | 63,000 |
Convertible unsecured note from a financial institution, interest at 5%, matures April 9, 2013. First date of conversion eligibility was March 13, 2013 with an applicable discount rate of 42% from the average trading price for the lowest 3 closing bid prices for the common stock during the 10 trading days previous to the conversion date. | ' | 42,500 |
Total notes payable | 1,432,731 | 420,500 |
Short-term portion | -1,432,731 | -170,500 |
Long-term notes payable | ' | $250,000 |
Derivatives_Details_Narrative
Derivatives (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Outstanding convertible debt obligations | $701,043 |
Convertible debt obligations; minimum interest rate | 5.00% |
Convertible debt obligations; maximum interest rate | 12.00% |
Interest expense related to convertible debt | 26,218 |
Derivative liability related to convertible debt | 960,047 |
Derivative expense recognized | $1,691,313 |
Dividend yield | 0.00% |
Risk free interest rate | 0.07% |
Volatility rate | 377.99% |
Expected term | '1 month 6 days |
Income_Taxes_Income_tax_expens
Income Taxes - Income tax expense (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Net Loss | ($4,301,095) | ($8,326,063) |
Income Tax Rate | 34.00% | 34.00% |
Income Tax Benefit | 1,462,372 | 2,830,861 |
Permanent Difference | -622,983 | -103,664 |
Valuation Allowance Change | -839,389 | -2,727,197 |
Deferred Income Tax (Recovery) | ' | ' |
Income_Taxes_Future_income_tax
Income Taxes - Future income tax assets and liabilities (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Disclosure [Abstract] | ' | ' |
Net Operating Loss Carryforwards | $3,586,257 | $2,711,283 |
Impairments | 2,071,960 | 2,055,640 |
Asset Retirement Obligation | 4,080 | ' |
Depletion and Depreciation | -279,485 | -223,500 |
Net Deferred Tax Assets | 5,382,812 | 4,543,423 |
Valuation Allowance | -5,382,812 | -4,543,423 |
Deferred Tax Asset | ' | ' |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | Dec. 31, 2013 |
Income Tax Disclosure [Abstract] | ' |
Total Net operating loss carryforwards | $10,550,000 |
Stockholders_Equity_Details_Na
Stockholders' Equity (Details Narrative) (USD $) | Dec. 31, 2013 |
Equity [Abstract] | ' |
Preferred stock authorized | 10,000,000 |
Par value of preferred stock authorized | $0.00 |
Series B preferred stock designated | 6,000,000 |
Series B preferred stock issued for oil & gas properties | 5,910,000 |
Subsequent_Events_Details_Narr
Subsequent Events (Details Narrative) (USD $) | Mar. 27, 2014 | Feb. 27, 2014 | Feb. 04, 2014 | Dec. 31, 2013 | Dec. 13, 2013 |
Subsequent Events [Abstract] | ' | ' | ' | ' | ' |
Beginning number of shares authorized, third amendment | ' | ' | 2,989,999,999 | ' | ' |
Ending number of shares authorized; third amendment | ' | ' | 6,000,000,000 | ' | ' |
Beginning number of shares authorized, fourth amendment | ' | 6,000,000,000 | ' | ' | ' |
Ending number of shares authorized, fourth amendment | ' | 15,000,000,000 | ' | ' | ' |
Beginning common stock par value; fifth amendment | $0.00 | ' | ' | ' | ' |
Ending par value; fifth amendment | $0.00 | ' | ' | ' | ' |
Total common stock authorized | ' | ' | ' | 15,000,000,000 | ' |
Total preferred stock authorized | ' | ' | ' | 10,000,000 | ' |
Executed Investment Agreement | ' | ' | ' | ' | $10,000,000 |
Total common stock issued subsequent to December 31, 2013 | ' | ' | ' | 1,417,862,657 | ' |
Total common stock issued for conversions of preferred stock subsequent to December 31, 2013 | ' | ' | ' | 154,066,994 | ' |
Total common stock issued for conversion of notes payable subsequent to December 31, 2013 | ' | ' | ' | 917,565,071 | ' |
Supplemental_Information_on_Oi2
Supplemental Information on Oil & Gas - Capitalized costs relating to oil and gas producing activities (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Capitalized Costs Relating to Oil and Gas Producing Activities at December 31, 2013 and 2012 | ' | ' |
Proved Oil and Gas Properties | $2,438,541 | $1,953,638 |
Proved Non-producing Oil and Gas Properties | 202,866 | 202,866 |
[OtherOilAndGasPropertySuccessfulEffortMethod] | 2,641,427 | 2,156,524 |
Less Accumulated Depletion | -837,795 | -731,795 |
Net Capitalized Costs Relating to Oil and Gas Producing Activities | 1,803,632 | 1,424,729 |
Property acquisition cost: | ' | ' |
Proved | ' | 5,910,000 |
Unproved | ' | ' |
Exploration and development costs | 348,281 | 203,662 |
Results for Operations for Oil and Gas Producing Activities for the year ended December 31, 2013 | ' | ' |
Oil and Gas Sales | 276,421 | 293,798 |
Less: Production Costs | 634,945 | 538,616 |
Depletion, Depreciation and Amortization | 106,000 | 103,000 |
Impairment of oil and gas investment | 48,000 | 6,046,000 |
[OtherComprehensiveIncomeLossBeforeTax] | -512,524 | -6,393,818 |
Income Tax Benefit | ' | ' |
Results of Operations for Oil and Gas Producing Activities (excluding corporate overhead and financing costs) | ($512,524) | ($6,393,818) |
Supplemental_Information_on_Oi3
Supplemental Information on Oil & Gas - Estimated proved oil and gas reserves (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Standardized measure of Discounted Future Net Cash Flows at December 31 | ' | ' |
Future cash inflows | $4,167,792 | $3,611,006 |
Future production costs | -1,604,556 | -1,383,744 |
Future development costs | -45,000 | -45,000 |
[DiscountedFutureNetCashFlowsRelatingToProvedOilAndGasReservesFutureNetCashFlows] | 2,518,236 | 2,182,262 |
Future net cash flows 10% annual discount for estimated timing of cash flows | -725,412 | -757,410 |
Net Cash Flows relating to Proved Oil and Gas Reserves | 1,792,824 | 1,424,852 |
The following reconciles the change in the standardized measure of discounted future net cash flow during the year | ' | ' |
Beginning of the year | 1,424,852 | 1,750,619 |
Purchases of minerals in place | ' | 231,772 |
Sales of oil and gas produced, net of production costs | 358,524 | 242,597 |
Net changes in prices and production costs | -1,317,946 | -496,481 |
Development costs incurred during the year which were previously estimated | ' | 94,661 |
Net change in estimated future development costs | ' | -35,339 |
Revisions of previous quantity estimates | 1,295,394 | -1,133,600 |
Change in discount | 32,000 | 770,623 |
End of year | $1,792,824 | $1,424,852 |