Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Apr. 15, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Citadel Exploration, Inc. | |
Entity Central Index Key | 1482075 | |
Document Type | 10-K | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
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 | $0 | |
Entity Common Stock, Shares Outstanding | 32,814,000 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2014 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash | $270,298 | $402,649 |
Other receivable | 1,209 | 40,660 |
Prepaid expenses | 35,886 | 41,589 |
Product inventory | 4,881 | 4,881 |
Total current assets | 312,274 | 489,779 |
Deposits | 4,900 | 4,000 |
Restricted cash | 45,000 | 45,000 |
Oil and gas properties | 2,042,054 | 1,373,363 |
Fixed assets, net | 25,927 | 12,633 |
Total assets | 2,430,155 | 1,924,775 |
Current liabilities: | ||
Accounts payable and accrued payables | 604,558 | 435,332 |
Accrued interest payable | 8,316 | |
Notes payable, net | 592,533 | 314,134 |
Derivative liability | 13,308 | |
Total current liabilities | 1,210,399 | 757,782 |
Asset retirement obligation | 48,923 | 31,407 |
Production payment liability | 300,000 | |
Total liabilities | 1,559,322 | 789,189 |
Stockholders' equity: | ||
Common stock, $0.001 par value, 100,000,000 shares authorized,31,389,000 and 28,949,823 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively | 31,389 | 28,950 |
Additional paid-in capital | 4,673,497 | 3,332,982 |
Accumulated deficit | -3,836,303 | -2,226,346 |
Share subscription payable | 2,250 | |
Total stockholders' equity | 870,833 | 1,135,586 |
Total liabilities and stockholders' equity | $2,430,155 | $1,924,775 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 31,389,000 | 28,949,823 |
Common stock, outstanding | 31,389,000 | 28,949,823 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||
Revenue | $19 | $9,223 |
Operating expenses: | ||
Lease operating expense | 103,883 | 85,335 |
Geological and geophysical expense | 2,396 | 6,304 |
General and administrative | 326,991 | 295,094 |
Depreciation, amortization and accretion | 14,976 | 8,381 |
Professional fees | 255,173 | 318,071 |
Executive compensation | 819,089 | 476,190 |
Total operating expenses | 1,522,508 | 1,189,375 |
Other expenses: | ||
Gain - other | 8,316 | |
Gain - notes payable settlement | 33,545 | |
Gain - debt extinguishment | 73,573 | |
Interest expense | -202,902 | -216,748 |
Total other expenses | -87,468 | -216,748 |
Net loss before provision for income taxes | -1,609,957 | -1,396,899 |
Provision for income taxes | 1,600 | |
Net loss | ($1,609,957) | ($1,398,499) |
Weighted average number of common shares outstanding - basic | 29,370,223 | 27,484,783 |
Net loss per common share - basic | ($0.05) | ($0.05) |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $) | Common Stock | Additional Paid-In Capital | Stock Payable | Accumulated Deficit during Development Stage | Total |
Beginning Balance at Dec. 31, 2012 | $22,613 | $740,352 | ($827,847) | ($64,882) | |
Beginning Balance, Shares at Dec. 31, 2012 | 22,613,000 | ||||
Shares issued for cash | 5,104 | 1,913,852 | 1,918,956 | ||
Shares issued for cash, shares | 5,104,183 | ||||
Shares issued for settlement of notes payable | 913 | 331,885 | 332,798 | ||
Shares issued for settlement of notes payable, shares | 912,640 | ||||
Shares issued for services | 320 | 103,149 | 103,469 | ||
Shares issued for services, shares | 320,000 | ||||
Warrants issued with notes payable | 93,750 | 93,750 | |||
Stock option compensation | 149,994 | 149,994 | |||
Net loss | -1,398,499 | -1,398,499 | |||
Ending Balance at Dec. 31, 2013 | 28,950 | 3,332,982 | -2,226,346 | 1,135,586 | |
Ending Balance, Shares at Dec. 31, 2013 | 289,498,233 | ||||
Shares issued for settlement of notes payable | 559 | 272,745 | 273,304 | ||
Shares issued for settlement of notes payable, shares | 559,092 | ||||
Shares issued for services | 1,080 | 296,785 | 297,838 | ||
Shares issued for services, shares | 1,080,085 | ||||
Private Placement Costs | -654 | -654 | |||
Conversion of Debt/Warrants into Stock | 800 | 271,200 | 272,000 | ||
Conversion of Debt/Warrants into Stock, Shares | 800,000 | ||||
Warrants issued with notes payable | 85,325 | 85,325 | |||
Stock option compensation | 414,487 | 414,487 | |||
Issuance of stock payable associated with N/P | 2,250 | 2,250 | |||
Net loss | -1,609,957 | -1,609,957 | |||
Ending Balance at Dec. 31, 2014 | $31,389 | $4,673,497 | $2,250 | ($3,836,303) | $870,833 |
Ending Balance, Shares at Dec. 31, 2014 | 31,389,000 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | ($1,609,957) | ($1,398,499) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation, amortization and accretion | 14,976 | 8,381 |
Amortization of debt discount | 159,083 | 178,267 |
Non cash interest expense | 22,500 | |
Gain - other | -8,316 | |
Gain - notes payable settlement | -33,545 | |
Gain - debt extinguishment | -73,573 | |
Executive stock based compensation expense | 414,487 | 149,994 |
Lease abandonment expense | 36,162 | |
Non-employee stock based compensation | 297,388 | 116,000 |
Changes in operating assets and liabilities: | ||
Decrease (Increase) in other receivable | 61,958 | -33,407 |
Decrease in prepaid expenses | 6,153 | 32,871 |
Increase in product inventory | -4,881 | |
Increase in deposits | -900 | -4,000 |
Increase in accounts payable and accrued payables | 80,725 | 332,894 |
Increase in accrued interest payable | 39,648 | -6,508 |
Net cash used in operating activities | -615,675 | -606,389 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase oil and gas properties | -654,148 | -1,182,189 |
Purchase of fixed assets | -28,165 | |
Restricted cash | -45,000 | |
Net cash used in investing activities | -682,313 | -1,227,189 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Production advance | 300,000 | |
Proceeds from sale of common stock, net of costs | 272,000 | 1,906,425 |
Proceeds from notes payable | 670,268 | 300,000 |
Repayments of notes payable | -76,631 | -82,778 |
Net cash provided by financing activities | 1,165,637 | 2,123,647 |
NET CHANGE IN CASH | -132,351 | 290,069 |
CASH AT BEGINNING OF YEAR | 402,649 | 112,580 |
CASH AT END OF YEAR | 270,298 | 402,649 |
SUPPLEMENTAL INFORMATION: | ||
Interest paid | -2,450 | -3,200 |
Income taxes paid | -3,200 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Financing of insurance | 70,268 | 65,176 |
Issuance of common stock for settlement of notes payable and accrued interest | 2,038,452 | 310,298 |
Asset retirement obligation | 48,923 | 1,407 |
Accounts payable related to property exchange | 97,491 | |
Other receivables related to property exchange | $22,507 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization | |
Citadel Exploration, Inc. ("Citadel Inc") was incorporated on December 17, 2009 in the State of Nevada originally under the name Subprime Advantage, Inc. On March 2, 2011, the Company changed its name from Subprime Advantage, Inc. to Citadel Exploration, Inc. | |
On May 3, 2011, Citadel Inc completed the acquisition of 100% interest in Citadel Exploration, LLC, a California limited liability company, ("Citadel LLC") pursuant to a Membership Purchase Agreement (the "MPA"). Under the MPA, Citadel Inc issued 14,000,000 shares of the its common stock an individual in exchange for a 100% interest in Citadel LLC. Additionally under the MPA, the former officers and directors of Citadel Inc agreed to cancel 7,696,000 shares of its common stock. For accounting purposes, the acquisition of the Citadel LLC by Citadel Inc has been accounted for as a recapitalization, similar to a reverse acquisition except no goodwill is recorded, whereby the private company, Citadel LLC, in substance acquired a non-operational public company (Citadel Inc) with nominal assets and liabilities for the purpose of becoming a public company. Accordingly, Citadel LLC are considered the acquirer for accounting purposes and thus, the historical financials are primarily that of Citadel LLC. As a result of this transaction, Citadel Inc changed its business direction and is now involved in the acquisition and development of oil and gas resources in California. Citadel LLC was incorporated on November 6, 2006 (Date of Inception) and accordingly, the accompanying financial statements are from the Date of Inception of Citadel LLC through ending reporting periods reflected. | |
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to exploration stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is December 31. | |
Principles of consolidation | |
For the years ended December 31, 2014 and 2013, the consolidated financial statements include the accounts of Citadel Exploration, Inc. and Citadel Exploration, LLC. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc. and Citadel Exploration, LLC will be collectively referred herein to as the “Company”. | |
Nature of operations | |
Currently, the Company is focused on the acquisition and development of oil and gas resources in California. The Company has not yet found oil and gas resources in commercially exploitable quantities and is engaged in exploring land in an effort to discover them. The Company has been in the exploration stage since its formation and has not realized significant revenues from its planned principal operations. | |
Use of estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. | |
Fair value of financial instruments | |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2014 and 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. | |
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. | |
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations. | |
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. | |
Fixed assets | |
The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows: | |
Vehicles 3 years | |
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. | |
Amortization is provided over the estimated useful lives of three years using the straight-line method for financial statement purposes. The Company has commenced amortization upon completion of the Company’s fully operational website. | |
Stock-based compensation | |
The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. | |
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50. | |
Earnings per share | |
The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. | |
Oil and gas properties | |
Effective, January 1, 2013, the Company changed its policy to successful efforts. The Company evaluated the impact on the prior periods and there were no material changes to the balance sheet as a result of the change in accounting policy. During the quarter ended December 31, 2012, the Company expensed $23,768 of geological and geophysical costs in anticipation of the change in accounting policy. Under the successful efforts method, oil and gas property costs are initially capitalized with the intent to establish commercially viable reserves. Expenditures to acquire mineral interests in oil and gas properties and to drill and equip exploratory wells are capitalized until the well is complete and the results have been evaluated. If, following the evaluation, the exploratory well has not found proved reserves, the previously capitalized costs are evaluated for derecognition or tested for impairment. Geological and geophysical costs and other exploration expenditures are expensed as incurred. | |
The Company is required to make estimates and judgments about future events and circumstances regarding the future economic viability of extracting the underlying resources. Changes to project economics, resource quantities, expected production techniques, unsuccessful drilling, expired mineral leases, production costs and required capital expenditures are important factors when making this determination. To the extent a judgment is made, that the underlying reserves are not viable, the oil and gas property costs will be impaired and charged to net earnings. | |
Cash and cash equivalents | |
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. | |
Concentrations of credit risk | |
Financial instruments that subject the Company to credit risk could consist of cash balances maintained in excess of federal depository insurance limits. The Company maintains its cash and cash equivalent balances with high credit quality financial institutions. At times, cash and cash equivalent balances may be in excess of Federal Deposit Insurance Corporation limits. To date, the Company has not experienced any such losses. | |
Restricted cash | |
The Company has two bonds at financial institutions to meet financial bonding requirements in the state of California. As of December 31, 2014, restricted cash totaled $45,000. | |
Debt discount | |
The Company records debt discount as a contra liability account and is presented net of the associated note payable. The discount is amortized over the life on the note payable using the straight line method because the straight line method approximates the effective interest method. | |
Revenue recognition | |
The Company recognizes oil and natural gas revenues from our interests in producing wells when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. | |
Asset retirement obligation | |
ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with the Company's oil and natural gas properties. Inherent in the fair value calculation of the ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. | |
Income taxes | |
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. | |
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The net operating loss carryforward for the year ended December 31, 2014 is $3,915,575 and the deferred tax asset is $1,330,049. The Company maintains a full valuation allowance for the deferred tax asset of $1,330,049. | |
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2014 and 2013, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. | |
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months. | |
The Company classifies tax-related penalties and net interest as income tax expense. As of December 31, 2014 and 2013, $0 and $1,600 of income tax expense has been recorded. | |
Long-lived Assets | |
In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. | |
Recent pronouncements | |
The Company has evaluated the recent accounting pronouncements through March 2015 and believes that none of them will have a material effect on the company’s financial statements. |
GOING_CONCERN
GOING CONCERN | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
GOING CONCERN | NOTE 2 – GOING CONCERN |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the exploration stage and, accordingly, has not yet generated significant revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring start up costs and expenses. As a result, the Company incurred a net loss for period ended December 31, 2014 of $1,609,957. In addition, the Company’s exploration activities since inception have been financially sustained through debt and equity financing. | |
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. |
PREPAID_EXPENSES
PREPAID EXPENSES | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
PREPAID EXPENSES | NOTE 3 –PREPAID EXPENSES |
As of December 31, 2014 and 2013, the Company had prepaid insurance totaling $23,849 and $33,104 respectively. The prepaid insurance will be expensed on a straight line basis over the remaining life of the insurance policies. During the years ended December 31, 2014 and 2013, the Company recorded $54,702 and $47,681 of insurance expenses. As of December 31, 2014 and 2013, the Company had prepaid expenses of $7,037 and $3,485 respectively before services were rendered. As of December 31, 2014 and 2013, the Company had a prepaid deposit of $5,000 and $5,000 respectively for leased office space. |
OIL_AND_GAS_PROPERTIES
OIL AND GAS PROPERTIES | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Extractive Industries [Abstract] | |||||
OIL AND GAS PROPERTIES | NOTE 4 – OIL AND GAS PROPERTIES | ||||
The costs capitalized in oil and gas properties as of December 31, 2014 and 2013 are as follows: | |||||
2014 | 2013 | ||||
Exploration | $ 2,042,054 | $ 1,373,363 | |||
Project Indian | |||||
On January 31, 2009, the Company entered into an oil, gas and mineral lease in San Benito County, California with an unrelated third party for the right to develop and operate the leased premises for an initial term of three years. The lease will continue as long as the Company continues actual drilling operations and continued development. The Company is obligated to pay royalties to the unrelated third party on oil and gas from all wells on the leased premises, and the royalty is a total of 20% of the market value. On February 1, 2012, the Company renegotiated this oil, gas and mineral lease for an additional minimum term of two years. The terms of the renegotiated lease are substantially the same as the original lease disclosed above. On February 1, 2013, the Company paid the final amount due to the mineral owner for this lease. | |||||
On February 22, 2012, the Company sold 40% of its interest in the property disclosed above in exchange for $350,000 to its joint venture partner. The Company recorded a gain on the sale of the partial interest totaling $267,856. Drilling commenced on this property in January 2014, the Indian #1-15 was drilled and cased with Citadel paying 100% of the costs. | |||||
On May 5, 2014 the Company received its steam injection permit from DOGGR, and then commenced cyclic steam operations in June. | |||||
On July 11, 2014, the Company announced that it had ended its joint venture with Sojitz Energy Ventures. In connection with the termination of the joint venture the Company entered into an agreement with Sojitz to exchange working interests in various properties. Under the agreement the Company agreed to transfer its ownership interest in the Tejon project in exchange for Sojitzs' working interest in the Indian and Yowlumne projects. After the transfer the Company owns 100% of the working interest in project Indian and 80% of the working interest at Yowlumne. In addition to the transfer of working interests in the properties the Company and Sojitz agreed to settle certain amounts recorded as a receivable from Sojitz and a payable to Sojitz in the amounts of $22,507 and $97,451, respectively. In connection with this transaction the Company incurred legal cost and fees related to land leases totaling $41,687. As a result of the above exchange of assets, the Company recorded a net reduction of oil and gas properties in the amount of $33,297. This exchange of assets was accounted for as a nonmonetary exchange of assets in accordance with ASC 845. | |||||
On August 13, 2014 the Company announced that it had completed a successful steam cycle on the Indian #1-15. The cycle consisted of injected approximately 3,600 barrels of steam. The Company then allowed the well to soak for approximately 7 days. The well was then turned onto production. After recovering approximately 50% of the injected steam volume, the well began to produce oil. Oil production has gradually increased and produced in a range of 3-7 barrels per day. The oil produced has been tested and is 11.6 degrees API in nature, with lower viscosity than traditional heavy oil. This lower viscosity indicates that the oil is mobile at room temperature, which we believe improves the economics of this oil field. Upon shutting down operations on the Indian #1-15 well, the produced oil was moved to our production facilities at Yowlumne. In September of 2014, we discovered that oil had been stolen from our Yowlumne production facilities, and subsequently contacted the police and filed a police report. To date, this matter has not been resolved. | |||||
We received notice on or about July 10, 2013 that the Center for Biological Diversity (“CBD”) had filed a law suit against the County of San Benito regarding the approval of Project Indian which is described more full, above, as the “Case”. The Board of Supervisors voted 5-0 in favor of our application to drill 15 exploration wells on our Project Indian lease. The Court approved the petition in a judgment entered on September 4, 2014, and ruled that Citadel was required to obtain an environmental impact report before commencing Project Indian. Thereafter, the Court awarded the petitioner $347,969 as attorney’s fees and costs against the County of San Benito and Citadel, jointly and severally. The Company is in the process of appealing this award. At this time management is unable to estimate the minimum liability that may be incurred if any as a result of the outcome of this appeal and therefore has made no provision in the financial statements for liability related to this case. | |||||
On September 1, 2014 the Company was granted a three year lease extension at Project Indian. | |||||
Per ASC 932, these wells qualify as exploratory wells and review of the capitalized costs incurred to prove up reserves must to be evaluated in the period of one year after the completion of the drilling date. | |||||
The following table reflects the net changes in capitalized exploratory well costs that have been capitalized for a period of one year or less since completion of drilling during as of December 31, 2014: | |||||
2014 | |||||
Beginning balance at January 1 | $ | 1,373,363 | |||
Additions to capitalized exploratory well costs pending the determination of proved reserves | 717,441 | ||||
Asset retirement obligation | 48,750 | ||||
Reclassifications to wells, facilities and equipment based on the determination of proved reserves | — | ||||
Capitalized exploratory well costs charged to expense | — | ||||
Ending balance at December 31 | $ | 2,042,054 | |||
Yowlumne | |||||
In May 2013, the Company entered into a one year lease for approximately 2,800 acres from AERA Energy, LLC. This acreage has been mapped using a combination of both 2D and 3D seismic, and is | |||||
In May 2013, the Company entered into a one year lease for approximately 2,800 acres from AERA Energy, LLC. This acreage has been mapped using a combination of both 2D and 3D seismic, and is in close proximity to the Yowlumne oil field in Kern County, California. The Company is obligated to pay royalties to AERA Energy, LLC on oil and gas from all wells on the leased premises, and the royalty is a total of 20% of the market value. In August of 2013, the Company entered into an agreement to sell 55% of the interest in the Yowlumne lease, recouping approximately 85% of its cost, while retaining a 25% interest in the lease and operatorship. Additionally, as part of this transaction, the Company retained 100% interest in the Yowlumne #2-26 well, which was originally drilled in 2007. After performing a workover job on this well, it has produced approximately 120 barrels of oil which were sold in December 2013. As of year end 2013, the well had produced approximately 50 barrels of oil which were stored in a tank and valued at net realizable value on the balance sheet as product inventory. | |||||
On July 11, 2014, the Company announced that it had ended its joint venture with Sojitz Energy Ventures. In connection with the termination of the joint venture the Company entered into an agreement with Sojitz to exchange working interests in various properties. Under the agreement the Company agreed to transfer its ownership interest in the Tejon project in exchange for Sojitzs' working interest in the Indian and Yowlumne projects. After the transfer the Company owns 100% of the working interest in project Indian and 80% of the working interest at Yowlumne. In addition to the transfer of working interests in the properties the Company and Sojitz agreed to settle certain amounts recorded as a receivable from Sojitz and a payable to Sojitz in the amounts of $22,507 and $97,451, respectively. In connection with this transaction the Company incurred legal cost and fees related to land leases totaling $41,687. As a result of the above exchange of assets, the Company recorded a net reduction of oil and gas properties in the amount of $33,297. This exchange of assets was accounted for as a nonmonetary exchange of assets in accordance with ASC 845. | |||||
In December of 2014, the Company entered into an agreement with Cibolo Creek Partners and Jim Walesa to invest $300,000 dedicated to the workover of the Yowlumne #2-26 well. In this agreement, Cibolo and Walesa will receive 75% of the net revenue interest from the well until the $300,000 is fully repaid. At that time Cibolo and Walesa will receive a 3% overriding royalty on the well. Mr. Walesa is a member of Cibolo Creek Partners and also a member of the Citadel Exploration Board of Directors. We have classified the $300,000 due as a long-term liability, however the liability is only tied to the production from the Yowlumne #2-26 well, and if the well does not produce in sufficient quantities for the investors to recoup their investment, Citadel has no further liability. | |||||
During 2014, we did not renew the leases on our Shiloh prospect due to lower than anticipated natural gas prices, and capital being allocated to our oil properties. |
FIXED_ASSETS
FIXED ASSETS | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
FIXED ASSETS | NOTE 5 – FIXED ASSETS | ||||||||
Fixed assets as of December 31, 2014 and 2013 are as follows: | |||||||||
2014 | 2013 | ||||||||
Vehicle | $ | 33,572 | $ | 23,572 | |||||
Website | 1,375 | 1,375 | |||||||
Furniture | 10,000 | — | |||||||
Computer Equipment | 8,165 | — | |||||||
Less: Accumulated depreciation | (27,185 | ) | (12,314 | ) | |||||
$ | 25,927 | $ | 12,633 | ||||||
Depreciation expense for the years ended December 31, 2014 and 2013 was $14,869 and $8,315. |
NOTES_PAYABLE
NOTES PAYABLE | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
NOTES PAYABLE | NOTE 6 – NOTES PAYABLE | ||||||||
Notes payable consists of the following at: | |||||||||
31-Dec-14 | 31-Dec-13 | ||||||||
Two notes payable to investors, unsecured, 10% interest; due October 30, 2014 | 500,000 | — | |||||||
Three notes payable to individuals, 10% interest, due January 1, 2014 | — | 300,000 | |||||||
Three note payables to an entity for the financing of insurance premiums, unsecured; 8.63% interest, due April 2015; 14% interest, due February 2014; 11% interest, due August 2014 | 7,771 | 14,134 | |||||||
Promissory note to an entity; 10% interest, due December 2015 | 100,000 | — | |||||||
Debt discount for 25,000 shares issued relating to note payable | (1,930 | ) | |||||||
Debt discount for derivative liability embedded in note payable | (13,308 | ) | |||||||
$ | 592,533 | $ | 314,134 | ||||||
Interest expense for the year ended December 31, 2014 was $202,902. Of that amount, $43,819 is interest expense relating to notes payable and insurance financing, and $159,083 is amortization of debt discount. Interest expense for the year ended December 31, 2013 was $216,748. Of that amount $15,980 is interest expense relating to notes payable and insurance financing, and $200,768 is amortization of debt discount. The $500,000 of notes, were due on October 30, 2014 and are currently in default. | |||||||||
In March 2014, the Company closed on a $500,000 bridge loan from two individuals. These notes have a 180 day term and bear interest of 10%. Additionally the investors received 500,000 warrants to purchase the Company’s stock at $1.00 per share for a term of two years. These loans were extended 30 days, now due October 30, 2014, with new terms on the warrants of $0.34 per share for the same two year term. Due to the change in the terms of the warrants the Company recalculated the value of the warrants and recognized a gain on the extinguishment of $73,573. Because the terms are substantially different, the change in terms has been accounted for as a debt extinguishment under ASC 470. |
PRODUCTION_PAYMENT_LIABILITY
PRODUCTION PAYMENT LIABILITY | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
PRODUCTION PAYMENT LIABILITY | NOTE 7 – PRODUCTION PAYMENT LIABILITY |
In December 2014, the company entered into a financing agreement with two entities. The company received $300,000 in total from both entities to fund costs of the Yowlumne 2-26 well recompletion. In return for the funds received, the two entities will receive a combined 75% of the net revenue from the well until the $300,000 is repaid. At the time of repayment, the entities will own a total 3% overriding royalty on the well. This liability is completely dependent on the well generating revenue. If the well fails to generate enough revenue to repay the $300,000, Citadel is not responsible for the unpaid amount. According to ASC 932-470-25 Section B, “Funds advanced to an operator that are repayable in cash out of the proceeds from a specified share of future production of a producing property, until the amount advanced $300,000 is paid in full, shall be accounted for as a borrowing. The advance is a payable for the recipient of the cash invested. Given the wells current production of approximately 20 barrels per day, coupled with the current oil price of approximately $50.00 per barrel, we believe it will take more than two years for payback to occur, therefore this has been classified as a long-term payable. |
ASSET_RETIREMENT_OBLIGATION
ASSET RETIREMENT OBLIGATION | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
ASSET RETIREMENT OBLIGATION | NOTE 8 – ASSET RETIREMENT OBLIGATION | ||||
The Company's ARO relates to future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment facilities from leased acreage and land restoration in accordance with applicable local, state and federal laws. The discounted fair value of an ARO liability is required to be recognized in the period in which it is incurred, with the associated asset retirement cost capitalized as part of the carrying cost of the oil and natural gas asset. In periods subsequent to the initial measurement of the ARO, the Company must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. Increases in the ARO liability due to the passage of time impact net earnings as accretion expense. The related capital cost, including revisions thereto, is charged to expense through depreciation, depletion and amortization of oil and natural gas production over the life of the oil and natural gas field. | |||||
In October 2013, the Company announced its first oil production on the Yowlumne 2-26 well and therefore an asset retirement obligation was recorded on this well as follows. | |||||
2014 | |||||
Beginning asset retirement obligation | $ | 31,407 | |||
Liabilities acquired from property acquisition | 17,517 | ||||
Accretion expense | — | ||||
Ending asset retirement obligation | $ | 48,923 | |||
STOCKHOLDERS_EQUITY_DEFICIT
STOCKHOLDERS' EQUITY (DEFICIT) | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT) |
The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock. As of December 31, 2014 and 2013, 31,389,000 and 28,949,823 shares, respectively, were issued and outstanding. | |
In February 2013, the Company issued 912,640 shares of restricted common stock for the conversion of loans and interest in the amount of $310,298. The fair value of the shares at the date of settlement was $332,798, which resulted in the Company recording $22,500 in additional interest expense. | |
In February 2013, the Company issued 320,000 shares of restricted common stock valued at $116,000 to various parties for accounting, legal and marketing services. | |
In September 2013, the Company closed on a $200,000 bridge loan from two individuals. In October 2013, the Company closed an additional $100,000 bridge loan from one investor. These notes have a 90 day term and bear interest of 10%. Additionally, each investor received 100,000 warrants to purchase the Company’s stock at $1.00 per share for a term of one year valued at $93,750 in total. | |
During the year ended December 31, 2013, the Company issued 5,104,183 shares of restricted common stock for cash consideration of $1,918,956, less issuance cost of $12,531. | |
During the year ended December 31, 2013, the Company recognized $149,994 in stock option compensation in accordance with employment agreements with the company’s two executive directors. | |
In January 2014, the Company issued 205,085 shares of common stock for services rendered and prepaid expenses with a value of $114,338. | |
In January 2014, the Company issued 559,092 shares of common stock to settle three notes payable and accrued interest totaling $306,849. The shares were recorded at fair value of $273,304, resulting in a gain of $33,545. | |
In March of 2014, the Company closed on a $500,000 bridge loan from two individuals. These notes have a 180 day term and bear interest of 10%. Additionally investors received 500,000 warrants to purchase the Company’s stock at $1.00 per share for a term of two years, valued at $147,102 in total. In September of 2014, the maturity date of this bridge loan was extended by 30 days, in return the exercise price of the warrant was reduced to $0.34 per share, with the original two year term remaining. Due to the change in the terms of the warrants, the Company recalculated the value of the warrants to be $85,325. Accordingly, the Company recognized a gain on the extinguishment of $73,573. | |
In July of 2014, investors owning warrants for the company’s stock, converted early at a reduced price. The first tranche of warrants equaled 500,000 shares at $0.55, which were reduced to $0.34 resulting in the issuance of 500,000 common stock shares for $170,000 or $0.34 per share. The second tranche of warrants equaled 100,000 warrants at $1.00 per share. These warrants were exchanged for the issuance of 300,000 shares at $0.34 for $102,000 in cash. | |
At December 2014, the company was obligated to issue 25,000 shares of common stock in connection with a note payable. On the date the agreement was executed, the price per share of the Company’s stock was $0.09. As the shares have not been issued as of December 31, 2014, the Company recorded a stock payable with at value of $2,250. | |
During the year ended December 31, 2014, the Company issued 875,000 shares of common stock valued at $183,500 to various parties for accounting, legal, and marketing services. | |
During the year ended December 31, 2014, the Company issued $414,487 in stock option compensation in accordance with employment agreements with the company’s two executive directors. |
STOCK_OPTION_PLAN
STOCK OPTION PLAN | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
STOCK OPTION PLAN | NOTE 10 – STOCK OPTION PLAN | ||||||||||||||
On September 1, 2012, the Board of Directors of the Company ratified, approved, and adopted a Stock Option Plan for the Company allowing for the grant of up to 10,000,000 shares of common stock or stock options to acquire common shares. In the event an optionee ceases to be employed by or to provide services to the Company for reasons other than cause, any Stock Option that is vested and held by such optionee may be exercisable within up to thirty days after the effective date that his position ceases. No Stock Option granted under the Stock Option Plan is transferable. Any Stock Option held by an optionee at the time of his death may be exercised by his estate within six months of his death or such longer period as the Board of Directors may determine. | |||||||||||||||
As approved by the Board of Directors, on September 4, 2012, the Company granted 4,000,000 stock options to two officers of the Company at $0.20 per share for terms of seven years. Of the total stock options, 1,000,000 vested immediately and the remaining vest equally over the next 3 years at the anniversary date of the employment agreements. The total fair value of these options at the date of grant was estimated to be $599,974 and was determined using the Black-Scholes option pricing model with an expected life of 7 years, a risk free interest rate of 1.01%, a dividend yield of 0% and expected volatility of 254%. During the years ended December 31, 2014 and 2013, $149,995 and $113,888, respectively, was recorded as a stock based compensation expense. | |||||||||||||||
On June 18, 2014 as approved by the Board of Directors, the Company granted 800,000 stock options to four members of the Board of Directors, which vested immediately, at $0.55 for terms of seven years. The total fair value of these options at the date of grant was estimated to be $264,495 and was determined using the Black-Scholes option pricing model with an expected life of 7 years, a risk free interest rate of 0.45%, dividend yield of 0%, and expected volatility of 235%. During the year ended December 31, 2014, $264,494 was recorded as a stock based compensation expense. | |||||||||||||||
The following is a summary of the status of all of the Company’s stock options as of December 31, 2014 and changes during the period ended on that date: | |||||||||||||||
Number | Weighted-Average | Weighted-Average | |||||||||||||
of Options | Exercise Price | Remaining Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | 4,000,000 | $ | 0.2 | 4.68 | |||||||||||
Granted | 800,000 | $ | 0.55 | 6.42 | |||||||||||
Exercised | — | $ | 0 | — | |||||||||||
Cancelled | — | $ | 0 | — | |||||||||||
Outstanding at December 31, 2014 | 4,800,000 | $ | 0.26 | 5.65 | |||||||||||
Exercisable at December 31, 2014 | 3,200,000 | $ | 0.22 | 3.79 | |||||||||||
WARRANTS
WARRANTS | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
WARRANTS | NOTE 11 – WARRANTS | ||||||||||||||
On November 15, 2012, the Company granted 500,000 stock warrants to a lender at $0.55 per share for terms of two years. The total fair value of these warrant at the date of grant was estimated to be $217,330 and was determined using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.28%, a dividend yield of 0% and expected volatility of 302%. During year ended December 31, 2012, $132,813 was recorded as amortization of debt discount and included in interest expense. During year ended December 31, 2013, $178,267 was recorded amortization of debt discount and included in interest expense. | |||||||||||||||
In September 2013, we closed on a $200,000 90-day bridge loan with two investors. The loans bear interest of 10%. Additionally each investor was granted 100,000 stock warrants to purchase stock at $1.00 per share for a period of one year. The total fair value of these warrants at the date of grant was estimated to be $56,283 and was determined using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.1%, a dividend yield of 0% and expected volatility of 197%. An additional $100,000 note payable with the same terms and warrants which were issued in October 2013 . The total fair value of these warrants at the date of grant was estimated to be $37,467 and was determined using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.1%, a dividend yield of 0% and expected volatility of 197%. During the year ended December 31, 2013, $21,297 was recorded as amortization of debt discount and included in interest expense. During the year ended December 31, 2014, $63,892 was recorded as amortization of debt discount and included in interest expense. | |||||||||||||||
In March 2014, the Company closed on a $500,000 180-day bridge loan with two investors. The loans bear interest of 10%. Additionally, the investors were granted a total of 500,000 stock warrants to purchase stock at $1.00 per share for a period of two years valued at $147,102. The total fair value of these warrant at the date of grant was determined using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.45%, a dividend yield of 0% and expected volatility of 333%. In September of 2014, the maturity date of this bridge loan was extended by 30 days, in return the exercise price of the warrant was reduced to $0.34 per share, with the original two year term remaining. Due to the change in the terms of the warrants, the Company recalculated the value of the warrants to be $85,325. Accordingly, the Company recognized a gain on the extinguishment of $73,573. | |||||||||||||||
In September of 2014, the 500,000 warrants issued on November 15, 2012 and 100,000 warrants issued in September 2013 were exercised early at a reduced price of $0.34 per share. | |||||||||||||||
The following is a summary of the status of all of the Company’s stock warrants as of December 31, 2014 and changes during the period ended on that date: | |||||||||||||||
Number | Weighted-Average | Weighted-Average | |||||||||||||
of Warrants | Exercise Price | Remaining Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | 800,000 | $ | 0.72 | 0.89 | |||||||||||
Granted | 500,000 | $ | 0.34 | 1.33 | |||||||||||
Exercised | 600,000 | $ | 0.34 | — | |||||||||||
Cancelled | — | $ | 0 | — | |||||||||||
Outstanding at December 31, 2014 | 500,000 | $ | 0.34 | 1.33 | |||||||||||
Exercisable at December 31, 2014 | 500,000 | $ | 0.34 | 1.33 |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
RELATED PARTY TRANSACTIONS | NOTE 12 – RELATED PARTY TRANSACTIONS |
On September 15, 2012, the Company entered into a three year employment agreement with its CEO. The annual salary for the first year is $120,000, then in the second year it increases to $180,000, and in the third year it increases to $240,000. | |
Additionally, the officer received 2,000,000 stock options. During the year ended December 31, 2013 and 2012, the Company recorded executive compensation totaling $216,302 and $114,997, respectively. | |
On September 1, 2012, the Company entered into a three year employment agreement with its CFO. The annual salary for the first year is $120,000, then in the second year increases to $180,000 and in the third year it increases to $240,000. Additionally, the officer received 2,000,000 stock options. During the year ended December 31, 2014 and 2013, the Company recording executive compensation totaling $256,944 and $214,997, respectively. | |
As of the second year of the employment agreement from September 2013 to September 2014, the CEO and CFO have deferred payment of approximately $5,000 per month of salary. As of the third year of the employment from September 2014 to present, the CEO and CFO have deferred payment of approximately $10,000 per month of salary. | |
As of December 31, 2014 and 2013, $203,042 and $55,000 is included in accounts payable and accrued liabilities related to the employment agreements with the CEO and CFO. | |
During the year ended December 31, 2014, the Company made the following purchases from KVOS, an oil field service company owned by Jams Borgna a member of Citadel Exploration’s Board of Directors; $39,199.43 of oil field equipment and services. | |
During the year ended December 31, 2014, the Company purchased a vehicle from an officer’s wife for $10,000. As of the date of this report the full amount was still owed and booked as an accounts payable. | |
In December 2014, we entered into an agreement with Jim Walesa and Cibolo Creek Partners to fund $300,000 towards the Yowlumne #2-26 recompletion. In this agreement Mr. Walesa and Cibolo Creek will receive 75% of the net revenue after expenses, until they have received $300,000 in payment. Upon full repayment, Mr.Walesa and Cibolo Creek will receive a 3% royalty on the well. Mr. Walesa is currently on the Board of Directors of Citadel and a member of Cibolo Creek Partners. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 – SUBSEQUENT EVENTS |
In February of 2015, the Company announced that recompletion efforts at the Yowlumne #2-26 were successful and that the well is currently producing approximately 25 barrels per day. | |
In March of 2015, the Company approved the issuance of 1,400,000 common stock shares for the conversion of a $100,000 promissory note, plus accrued interest of $2,164 and an additional capital investment of $107,835, all at $0.15 per share. | |
In March of 2015, the Company entered into a non-binding letter of intent (LOI) with Cibolo Creek Partners, a private equity firm based in Midland, Texas for funding of certain oil and natural gas acquisitions in the State of California. | |
In March of 2015, the Company issued 25,000 shares of common stock to settle the stock payable of $2,250 recorded as of December 31, 2014. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
Organization | Organization |
Citadel Exploration, Inc. ("Citadel Inc") was incorporated on December 17, 2009 in the State of Nevada originally under the name Subprime Advantage, Inc. On March 2, 2011, the Company changed its name from Subprime Advantage, Inc. to Citadel Exploration, Inc. | |
On May 3, 2011, Citadel Inc completed the acquisition of 100% interest in Citadel Exploration, LLC, a California limited liability company, ("Citadel LLC") pursuant to a Membership Purchase Agreement (the "MPA"). Under the MPA, Citadel Inc issued 14,000,000 shares of the its common stock an individual in exchange for a 100% interest in Citadel LLC. Additionally under the MPA, the former officers and directors of Citadel Inc agreed to cancel 7,696,000 shares of its common stock. For accounting purposes, the acquisition of the Citadel LLC by Citadel Inc has been accounted for as a recapitalization, similar to a reverse acquisition except no goodwill is recorded, whereby the private company, Citadel LLC, in substance acquired a non-operational public company (Citadel Inc) with nominal assets and liabilities for the purpose of becoming a public company. Accordingly, Citadel LLC are considered the acquirer for accounting purposes and thus, the historical financials are primarily that of Citadel LLC. As a result of this transaction, Citadel Inc changed its business direction and is now involved in the acquisition and development of oil and gas resources in California. Citadel LLC was incorporated on November 6, 2006 (Date of Inception) and accordingly, the accompanying financial statements are from the Date of Inception of Citadel LLC through ending reporting periods reflected. | |
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to exploration stage enterprises, and are expressed in U.S. dollars. The Company’s fiscal year end is December 31. | |
Principles of consolidation | Principles of consolidation |
For the years ended December 31, 2014 and 2013, the consolidated financial statements include the accounts of Citadel Exploration, Inc. and Citadel Exploration, LLC. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc. and Citadel Exploration, LLC will be collectively referred herein to as the “Company”. | |
Nature of operations | Nature of operations |
Currently, the Company is focused on the acquisition and development of oil and gas resources in California. The Company has not yet found oil and gas resources in commercially exploitable quantities and is engaged in exploring land in an effort to discover them. The Company has been in the exploration stage since its formation and has not realized significant revenues from its planned principal operations. | |
Use of estimates | Use of estimates |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. | |
Fair value of financial instruments | Fair value of financial instruments |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2014 and 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. | |
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets. | |
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations. | |
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants. | |
Fixed assets | Fixed assets |
The Company records all property and equipment at cost less accumulated depreciation. Improvements are capitalized while repairs and maintenance costs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the assets or the lease term, whichever is shorter. Leasehold improvements include the cost of the Company’s internal development and construction department. Depreciation periods are as follows: | |
Vehicles 3 years | |
The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350. Other costs related to the maintenance of the website are expensed as incurred. | |
Amortization is provided over the estimated useful lives of three years using the straight-line method for financial statement purposes. The Company has commenced amortization upon completion of the Company’s fully operational website. | |
Stock-based compensation | Stock-based compensation |
The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. | |
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50 | |
Earnings per share | Earnings per share |
The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. | |
Oil and gas properties | Oil and gas properties |
Effective, January 1, 2013, the Company changed its policy to successful efforts. The Company evaluated the impact on the prior periods and there were no material changes to the balance sheet as a result of the change in accounting policy. During the quarter ended December 31, 2012, the Company expensed $23,768 of geological and geophysical costs in anticipation of the change in accounting policy. Under the successful efforts method, oil and gas property costs are initially capitalized with the intent to establish commercially viable reserves. Expenditures to acquire mineral interests in oil and gas properties and to drill and equip exploratory wells are capitalized until the well is complete and the results have been evaluated. If, following the evaluation, the exploratory well has not found proved reserves, the previously capitalized costs are evaluated for derecognition or tested for impairment. Geological and geophysical costs and other exploration expenditures are expensed as incurred. | |
The Company is required to make estimates and judgments about future events and circumstances regarding the future economic viability of extracting the underlying resources. Changes to project economics, resource quantities, expected production techniques, unsuccessful drilling, expired mineral leases, production costs and required capital expenditures are important factors when making this determination. To the extent a judgment is made, that the underlying reserves are not viable, the oil and gas property costs will be impaired and charged to net earnings. | |
Cash and Cash Equivalents | Cash and cash equivalents |
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. | |
Concentrations of credit risk | Concentrations of credit risk |
Financial instruments that subject the Company to credit risk could consist of cash balances maintained in excess of federal depository insurance limits. The Company maintains its cash and cash equivalent balances with high credit quality financial institutions. At times, cash and cash equivalent balances may be in excess of Federal Deposit Insurance Corporation limits. To date, the Company has not experienced any such losses. | |
Restricted Cash | Restricted cash |
The Company has two bonds at financial institutions to meet financial bonding requirements in the state of California. As of December 31, 2014, restricted cash totaled $45,000. | |
Debt discount | Debt discount |
The Company records debt discount as a contra liability account and is presented net of the associated note payable. The discount is amortized over the life on the note payable using the straight line method because the straight line method approximates the effective interest method. | |
Revenue recognition | Revenue recognition |
The Company recognizes oil and natural gas revenues from our interests in producing wells when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. | |
Asset retirement obligation | Asset retirement obligation |
ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with the Company's oil and natural gas properties. Inherent in the fair value calculation of the ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. | |
Income taxes | Income taxes |
The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. | |
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The net operating loss carryforward for the year ended December 31, 2014 is $3,915,575 and the deferred tax asset is $1,330,049. The Company maintains a full valuation allowance for the deferred tax asset of $1,330,049. | |
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of December 31, 2014 and 2013, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company. | |
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months. | |
The Company classifies tax-related penalties and net interest as income tax expense. As of December 31, 2014 and 2013, $0 and $1,600 of income tax expense has been recorded. | |
Long-lived Assets | Long-lived Assets |
In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. | |
Recent pronouncements | Recent pronouncements |
The Company has evaluated the recent accounting pronouncements through March 2015 and believes that none of them will have a material effect on the company’s financial statements. |
OIL_AND_GAS_PROPERTIES_Tables
OIL AND GAS PROPERTIES (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Extractive Industries [Abstract] | |||||
The costs capitalized in oil and gas properties | 2014 | 2013 | |||
Exploration | $ 2,042,054 | $ 1,373,363 | |||
Schedule of capitalized exploratory well costs | 2014 | ||||
Beginning balance at January 1 | $ | 1,373,363 | |||
Additions to capitalized exploratory well costs pending the determination of proved reserves | 717,441 | ||||
Asset retirement obligation | 48,750 | ||||
Reclassifications to wells, facilities and equipment based on the determination of proved reserves | — | ||||
Capitalized exploratory well costs charged to expense | — | ||||
Ending balance at December 31 | $ | 2,042,054 |
FIXED_ASSETS_Tables
FIXED ASSETS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Schedule of Fixed Assets | 2014 | 2013 | |||||||
Vehicle | $ | 33,572 | $ | 23,572 | |||||
Website | 1,375 | 1,375 | |||||||
Furniture | 10,000 | — | |||||||
Computer Equipment | 8,165 | — | |||||||
Less: Accumulated depreciation | (27,185 | ) | (12,314 | ) | |||||
$ | 25,927 | $ | 12,633 |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Notes payable consists of the following at: | 31-Dec-14 | 31-Dec-13 | |||||||
Two notes payable to investors, unsecured, 10% interest; due October 30, 2014 | 500,000 | — | |||||||
Three notes payable to individuals, 10% interest, due January 1, 2014 | — | 300,000 | |||||||
Three note payables to an entity for the financing of insurance premiums, unsecured; 8.63% interest, due April 2015; 14% interest, due February 2014; 11% interest, due August 2014 | 7,771 | 14,134 | |||||||
Promissory note to an entity; 10% interest, due December 2015 | 100,000 | — | |||||||
Debt discount for 25,000 shares issued relating to note payable | (1,930 | ) | |||||||
Debt discount for derivative liability embedded in note payable | (13,308 | ) | |||||||
$ | 592,533 | $ | 314,134 | ||||||
ASSET_RETIREMENT_OBLIGATION_Ta
ASSET RETIREMENT OBLIGATION (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
Company announced its first oil production | 2013 | ||||
Beginning asset retirement obligation | $ | — | |||
Liabilities acquired from property acquisition | 31,407 | ||||
Accretion expense | 66 | ||||
Ending asset retirement obligation | $ | 31,472 |
STOCK_OPTION_PLAN_Tables
STOCK OPTION PLAN (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
Summary of the status of all of the Company's stock options | Number | Weighted-Average | Weighted-Average | ||||||||||||
of Options | Exercise Price | Remaining Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | 4,000,000 | $ | 0.2 | 4.68 | |||||||||||
Granted | 800,000 | $ | 0.55 | 6.42 | |||||||||||
Exercised | — | $ | 0 | — | |||||||||||
Cancelled | — | $ | 0 | — | |||||||||||
Outstanding at December 31, 2014 | 4,800,000 | $ | 0.26 | 5.65 | |||||||||||
Exercisable at December 31, 2014 | 3,200,000 | $ | 0.22 | 3.79 |
WARRANTS_Tables
WARRANTS (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Notes to Financial Statements | |||||||||||||||
Summary of the status of all of the Company's stock warrants | Number | Weighted-Average | Weighted-Average | ||||||||||||
of Warrants | Exercise Price | Remaining Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | 800,000 | $ | 0.72 | 0.89 | |||||||||||
Granted | 500,000 | $ | 0.34 | 1.33 | |||||||||||
Exercised | 600,000 | $ | 0.34 | — | |||||||||||
Cancelled | — | $ | 0 | — | |||||||||||
Outstanding at December 31, 2014 | 500,000 | $ | 0.34 | 1.33 | |||||||||||
Exercisable at December 31, 2014 | 500,000 | $ | 0.34 | 1.33 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | |
Summary Of Significant Accounting Policies Details Narrative | |||
Geological and Geophysical costs in anticipation of the change in accounting policy | $23,768 | ||
Restricted cash | 45,000 | 45,000 | |
Net operating loss carryfoward | 3,915,575 | ||
Deferred tax asset | 1,330,049 | ||
Income Tax Expense (Benefit) | $1,600 |
GOING_CONCERN_Details_Narrativ
GOING CONCERN (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
Net loss | $1,609,957 | $1,398,499 |
PREPAID_INSURANCE_Details_Narr
PREPAID INSURANCE (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
Prepaid insurance total | $23,849 | $33,104 |
Insurance expense | 54,702 | 47,681 |
Prepaid expenses | 7,037 | 3,485 |
Prepaid Deposit | $5,000 | $5,000 |
OIL_AND_GAS_PROPERTIES_Details
OIL AND GAS PROPERTIES (Details Narrative) (USD $) | Dec. 31, 2014 | Feb. 22, 2013 |
Extractive Industries [Abstract] | ||
Interest in the property disclosed above in exchange | $350,000 | |
Gain on the sale of the partial interest total | 267,856 | |
Expensed as consulting expense | $13,290 |
OIL_AND_GAS_PROPERTIES_Details1
OIL AND GAS PROPERTIES (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Oil And Gas Properties Details | |
Beginning balance at January 1 | $1,373,363 |
Additions to capitalized exploratory well costs pending the determination of proved reserves | 717,441 |
Asset retirement obligation | 48,750 |
Reclassifications to wells, facilities and equipment based on the determination of proved reserves | |
Capitalized exploratory well costs charged to expense | |
Ending balance at December 31 | $2,042,054 |
FIXED_ASSETS_Details
FIXED ASSETS (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Less: Accumulated depreciation | ($27,185) | ($12,314) |
Fixed assets, net | 25,927 | 12,633 |
Vehicles [Member] | ||
Fixed Assets | 33,572 | 23,572 |
Website [Member] | ||
Fixed Assets | 1,375 | 1,375 |
Furniture [Member] | ||
Fixed Assets | 10,000 | |
Computer Equipment [Member] | ||
Fixed Assets | $8,165 |
FIXED_ASSETS_Details_Narrative
FIXED ASSETS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
Depreciation expense | $14,869 | $8,315 |
NOTES_PAYABLE_Details_Narrativ
NOTES PAYABLE (Details Narrative) (USD $) | 1 Months Ended | 12 Months Ended | ||||
Mar. 31, 2014 | Oct. 31, 2013 | Sep. 30, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Feb. 28, 2013 | |
Notes to Financial Statements | ||||||
Interest expense | $202,902 | $216,748 | ||||
Interest Expense Notes Payable | 43,819 | |||||
Amortization of Debt Discount | 159,083 | |||||
Restricted Common Stock Issued | 500,000 | 100,000 | 100,000 | 31,389,000 | 28,949,823 | 4,186,000 |
Restriced Common Stock, par value | $1 | $1 | $1 | $0.34 | ||
Restricted Common Stock Value | 147,103 | 93,750 | 93,750 | 31,389 | 28,950 | 1,423,240 |
Notes Payable | $500,000 | $100,000 | $200,000 | |||
Term | 180 days | 90 days | 90 days | |||
Interest rate | 0.1 | 0.1 | 0.1 |
ASSET_RETIREMENT_OBLIGATION_De
ASSET RETIREMENT OBLIGATION (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Asset Retirement Obligation Details | |
Beginning Balance | $31,407 |
Liabilities acquired from property acquisition | 17,517 |
Accretion expense | |
Ending Balance | $48,923 |
STOCKHOLDERS_EQUITY_DEFICIT_De
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) (USD $) | 1 Months Ended | |||||
Mar. 31, 2014 | Oct. 31, 2013 | Sep. 30, 2013 | Feb. 28, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||||||
Restricted Common Stock Issued | 500,000 | 100,000 | 100,000 | 4,186,000 | 31,389,000 | 28,949,823 |
Restriced Common Stock, par value | $1 | $1 | $1 | $0.34 | ||
Restricted Common Stock Value | $147,103 | $93,750 | $93,750 | $1,423,240 | $31,389 | $28,950 |
Issuance Cost | 12,531 | |||||
Notes Payable | $500,000 | $100,000 | $200,000 | |||
Term | 180 days | 90 days | 90 days | |||
Interest rate | 0.1 | 0.1 | 0.1 |
STOCK_OPTION_PLAN_Details
STOCK OPTION PLAN (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Number of Options | |
Outstanding at January 1, 2014 | 4,000,000 |
Granted | 800,000 |
Exercised | |
Cancelled | |
Outstanding at December 31, 2014 | 4,800,000 |
Exercisable at December 31, 2014 | 320,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2014 | $0.20 |
Granted | $0.55 |
Exercised | $0 |
Cancelled | $0 |
Outstanding at December 31, 2014 | $0.26 |
Exercisable at December 31, 2014 | $0.22 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2014 | 4 years 7 months 6 days |
Granted | 6 years 5 months 1 day |
Outstanding at December 31, 2014 | 45 years 7 months 24 days |
Exercisable at December 31, 2014 | 9 years 9 months 14 days |
WARRANTS_Details
WARRANTS (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Number of Options | |
Outstanding at January 1, 2014 | 4,000,000 |
Granted | 800,000 |
Exercised | |
Cancelled | |
Outstanding at December 31, 2014 | 4,800,000 |
Exercisable at December 31, 2014 | 320,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2014 | $0.20 |
Granted | $0.55 |
Exercised | $0 |
Cancelled | $0 |
Outstanding at December 31, 2014 | $0.26 |
Exercisable at December 31, 2014 | $0.22 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2014 | 4 years 7 months 6 days |
Granted | 6 years 5 months 1 day |
Outstanding at December 31, 2014 | 45 years 7 months 24 days |
Exercisable at December 31, 2014 | 9 years 9 months 14 days |
Warrant [Member] | |
Number of Options | |
Outstanding at January 1, 2014 | 800,000 |
Granted | 500,000 |
Exercised | 600,000 |
Cancelled | |
Outstanding at December 31, 2014 | 500,000 |
Exercisable at December 31, 2014 | 500,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2014 | $0.72 |
Granted | $0.34 |
Exercised | $0.34 |
Cancelled | $0 |
Outstanding at December 31, 2014 | $0.34 |
Exercisable at December 31, 2014 | $0.34 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2014 | 0 years 10 months 20 days |
Granted | 1 year 3 months 28 days |
Outstanding at December 31, 2014 | 1 year 3 months 28 days |
Exercisable at December 31, 2014 | 1 year 3 months 28 days |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Nov. 30, 2013 | Jul. 31, 2013 | Jul. 01, 2013 | |
Notes to Financial Statements | |||||
Entities considered related parties | $20,136 | ||||
Capital expenditures | 6,304 | ||||
Consulting expense | 3,357 | ||||
Consulting fees | 60,000 | ||||
Rent expense | 62,930 | ||||
Accounts payable | 50,953 | ||||
Purchased a vehicle from the CEO | 23,572 | ||||
Annual salary for the first year | 120,000 | ||||
Second year increases | 180,000 | ||||
Third year it increases | 240,000 | ||||
Officer received stock options | 2,000,000 | ||||
Executive compensation totaling | 214,997 | 114,997 | |||
Paid to The Nahabedian Group for reimbursement | $6,196 |