Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 14, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Citadel Exploration, Inc. | |
Entity Central Index Key | 1,482,075 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 38,814,000 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 27,641 | $ 270,298 |
Other receivable | 1,208 | 1,209 |
Prepaid expenses | 72,643 | 35,886 |
Product inventory | 4,881 | 4,881 |
Total current assets | 106,373 | 312,274 |
Deposits | 109,900 | 4,900 |
Restricted cash | 45,000 | 45,000 |
Oil and gas properties | 2,218,708 | 2,042,054 |
Fixed assets, net | 18,257 | 25,927 |
Total assets | 2,498,238 | 2,430,155 |
Current liabilities: | ||
Accounts payable and accrued payables | 702,880 | $ 604,558 |
Contingent Liability | 87,000 | |
Accrued interest payable | 67,163 | |
Notes payable, net | $ 762,584 | $ 592,533 |
Derivative liability | 13,308 | |
Total current liabilities | $ 1,619,627 | 1,210,399 |
Asset retirement obligation | 48,923 | 48,923 |
Production payment liability | 300,000 | 300,000 |
Total liabilities | 1,968,550 | 1,559,322 |
Stockholders' equity | ||
Common stock, $0.001 par value, 100,000,000 shares authorized, 32,814,000 and 31,389,000 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 32,814 | 31,389 |
Additional paid-in capital | 4,986,313 | 4,673,497 |
Accumulated deficit | $ (4,489,439) | (3,836,303) |
Share subscription payable | 2,250 | |
Total stockholders' equity (deficit) | $ 529,688 | 870,833 |
Total liabilities and stockholders' equity (deficit) | $ 2,498,238 | $ 2,430,155 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 32,814,000 | 31,389,000 |
Common stock, outstanding | 32,814,000 | 31,389,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 40,112 | $ 19 | $ 60,141 | $ 19 |
Operating expenses: | ||||
Lease operating expense | $ 14,504 | 1,369 | $ 26,162 | 29,251 |
Geological and geophysical expense | 296 | 2,396 | ||
General and administrative | $ 131,828 | 82,860 | $ 187,714 | 179,332 |
Depreciation, amortization and accretion | 3,835 | 4,060 | 7,671 | 7,307 |
Professional fees | 6,357 | 42,613 | 18,236 | 95,052 |
Executive compensation | 162,088 | 391,992 | 324,177 | 511,475 |
Total operating expenses | 318,612 | 523,190 | 563,961 | 824,813 |
Loss from operations | $ (278,500) | $ (523,171) | (503,820) | $ (824,794) |
Other income (expenses): | ||||
Loss - Contingency | $ (87,000) | |||
Gain - Other | $ 8,316 | |||
Gain (Loss) - note payable settlement | $ (26,080) | 33,545 | ||
Interest expense | $ (16,358) | $ (88,088) | (36,236) | (91,255) |
Total other expenses | (16,358) | (88,088) | (149,316) | (49,394) |
Net loss before provision for income taxes | $ (294,858) | (611,259) | $ (653,136) | (874,188) |
Provision for income taxes | 8,494 | 8,495 | ||
Net loss | $ (294,858) | $ (602,765) | $ (653,135) | $ (865,693) |
Weighted average number of common shares outstanding - basic and diluted | 32,814,000 | 27,484,783 | 32,105,436 | 27,484,783 |
Net loss per share - basic and diluted | $ (0.01) | $ (0.02) | $ (0.02) | $ (0.03) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (653,135) | $ (865,693) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation, amortization and accretion | 7,671 | 7,307 |
Amortization of debt discount | $ 7,467 | 76,821 |
Gain other | 8,316 | |
Loss (gain) on settlement of note payable | $ 26,080 | (33,545) |
Stock based compensation expense | $ 74,997 | 339,492 |
Shares issued for consulting | $ 110,775 | |
Loss contingency | $ 87,000 | |
Changes in operating assets and liabilities: | ||
Increase in other receivable | 1 | $ 18,153 |
Decrease in prepaid expense | 25,827 | 31,751 |
Increase in deposits | (105,000) | (900) |
Increase in accounts payable and accrued payables | 98,319 | $ 51,291 |
Increase in accrued interest payable | 67,163 | |
Net cash used in operating activities | (363,499) | $ (272,864) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase oil and gas properties | $ (176,762) | (523,558) |
Purchase of fixed assets | (28,273) | |
Restricted cash | (25,000) | |
Net cash used in investing activities | $ (176,762) | (576,831) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from sale of common stock, net of costs | 107,836 | (654) |
Proceeds from notes payable | 200,000 | 500,000 |
Repayments of notes payable | (10,230) | (26,669) |
Net cash provided by (used in) financing activities | 297,606 | 472,677 |
NET CHANGE IN CASH | (242,655) | (377,018) |
CASH AT BEGINNING OF YEAR | 270,298 | 402,649 |
CASH AT END OF YEAR | 27,641 | 25,631 |
SUPPLEMENTAL INFORMATION: | ||
Interest paid | $ (651) | $ (1,568) |
Income taxes paid | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Asset retirement obligation | $ 7,408 | |
Conversion of debt to equity | $ 25,494 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The interim condensed consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim condensed consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2014 and notes thereto included in the Companys 10-K annual report and all amendments. The Company follows the same accounting policies in the preparation of interim reports. Results of operations for the interim period are not indicative of annual results. Principles of consolidation The condensed consolidated financial statements include the accounts of Citadel Exploration, Inc. and Citadel Exploration, LLC, the Companys wholly owned subsidiary. Nature of operations Currently, the Company is focused on the acquisition and development of oil and gas properties in California. Revenue Recognition Sales of oil are recognized when the product has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. Impairment The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. Use of estimates The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated 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 The carrying value of the Companys financial instruments, including cash, due to shareholders/related parties and accounts and other payables approximate their fair values due to the immediate or short-term maturity of these instruments. It is managements opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. 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. The Company had no cash equivalents as of June 30, 2015 and December 31, 2014. 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. Recent pronouncements The Company has evaluated the recent accounting pronouncements through June 30, 2015 and believes that none of them will have a material effect on the companys condensed consolidated financial statements. |
GOING CONCERN
GOING CONCERN | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
GOING CONCERN | NOTE 2 GOING CONCERN The accompanying unaudited condensed consolidated 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. 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 condensed consolidated 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. |
OIL AND GAS PROPERTIES
OIL AND GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2015 | |
Extractive Industries [Abstract] | |
OIL AND GAS PROPERTIES | NOTE 3 OIL AND GAS PROPERTIES The costs capitalized in oil and gas properties as of June 30, 2015 and December 31, 2014 are as follows: 2015 2014 Exploration $ 2,218,708 $ 2,042,054 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 as of June 30, 2015: 2015 Beginning balance at January 1, 2015 (excluding asset retirement obligation) 1,993 Additions to capitalized exploratory well costs pending the determination of proved reserves 176,653 Asset retirement obligation 48,750 Ending balance at June 30, 2015 $ 2,218,708 Project Indian Project Indian is located in the Bitterwater sub-basin of the Salinas Basin, north of the giant San Ardo Field. Citadel currently owns a 100% working interest at Project Indian. In July of 2014 Citadel ended its prior joint venture with Sojitz Energy Ventures. There is a 20% royalty on the property owned by Vintage Petroleum, a wholly owned subsidiary of Occidental Petroleum Inc. In November of 2014 Occidental Petroleum Inc. spun off its California assets into a new public company called California Resources Corporation, which is listed on the New York Stock Exchange under the ticker CRC. CRC is now the mineral owner at Project Indian. In January of 2014, Citadel drilled and completed the first well at Project Indian, the Indian #1-15, and conducted a successful steam cycle in June of 2014. The Indian #1-15 then produced 3 to 7 barrels per day over several weeks before production halted because the well was shut-in by an order of the Superior Court of the State of California-County of Monterey entitled Center for Biological Diversity v. San Benito County In the Case, the Center for Biological Diversity, a non-governmental entity, petitioned the Court over the approval of Project Indian by the County of San Benito on a unanimous, 5-0 vote. Specifically, it argued that Project Indian required an Environmental Impact Report and not a Mitigated Negative Declaration which was the standard of environmental due diligence required by the County before its unanimous approval of the Project. 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 further at Project Indian . Then, on November 4, 2014 Measure J was passed by a majority of participating, registered voters in the County of San Benito. Measure J bans hydraulic fracturing and other stimulation techniques defined as high intensity petroleum operations by the Measure, including cyclic steam injection. Citadel believes the passing of Measure J constitutes a regulatory taking of property and is preempted by the State of California. At this time there is no certainty that we will be able to develop Project Indian. Per ASC 932, these wells qualify as exploratory wells and review of the capitalized costs incurred to prove up reserves must be Yowlumne In May 2013, we leased approximately 2,800 acres from AERA Energy, LLC (Aera). 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 a 20% royalty to Aera. 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. In July of 2014 the Company ended its joint venture with Sojitz Energy Ventures retaining Sojitzs 55% interest in the Yowlumne lease, therefore increasing Citadels ownership to 75% in the Yowlumne lease. Additionally, as part of this transaction, the Company retained 100% interest in the Yowlumne #2-26 well, and the 160 acres surrounding the well bore. The Yowlumne #2-26 was first drilled in 2008 under supervision of Citadel CEO, Armen Nahabedian, during his previous tenure with his familys oil company. Although the well tested oil at that time, the well was left idle for 5 years as lease issues prevented operations on the well until the appropriate curative measures could be taken. In December of 2014, Citadel began a work-over on the Yowlumne #2-26 well including installation of a new pump in February of 2015. The well has been producing approximately 20- 25 barrels per day (32 degree API quality) since the beginning of March. In June the wells pump had a mechanical issue, and the company anticipates returning the well to production during the third quarter of 2015. Citadel is in the final stages of the CEQA process to permit two additional exploration wells on the Yowlumne acreage. Recent regulatory changes, including SB4 the State of Californias bill on fracking have delayed the final approval of our CEQA application. As such we do not expect to have these prospects permitted until 2016, at which time we will determine when to drill. Both of these exploration wells will be targeting the Stephens Sands at a depth of 12,000 to 15,000 feet. Citadel currently has a 75% working interest in these exploration prospects and is the operator. |
RESTRICTED CASH
RESTRICTED CASH | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
RESTRICTED CASH | NOTE 4 RESTRICTED CASH Restricted cash consists of two bonds totaling $45,000. The bonds are required in the normal course of business in the oil and gas industry. The two bonds totaling $45,000 were purchased in November 2013. The bonds will not be released until after the Indian #1-15 and the Yowlumne #2-26 wells are properly abandoned, and the property has been restored to its original condition. |
DEPOSITS
DEPOSITS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
DEPOSITS | NOTE 5 DEPOSITS Deposits primarily consist of a $100,000 deposit provided exclusivity during the due diligence process of the Kern Bluff Oil Field acquisition which was part of the Letter of Intent executed on May 12, 2015. This deposit will be applied towards the purchase price of the acquisition. |
NOTES PAYABLE
NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
NOTES PAYABLE | NOTE 6 NOTES PAYABLE Notes payable consists of the following at: June December Note payable to an entity for the financing of insurance premiums, unsecured; 7.44% interest, due March 2016 $ 62,584 Term loan with investor executed July 2015, due July 2016 $ 200,000 Two notes payable to investors, unsecured, 10% interest; due October 30, 2014 $ 500,000 $ 500,000 Promissory note to an entity; 10% interest, due December 2015 100,000 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 Debt discount for 25,000 shares issued relating to note payable (1,930 ) Debt discount for derivative liability embedded in note payable (13,308 ) $ 762,584 $ 592,533 During the quarter ended March 31, 2015, the Company settled the $100,000 note payable with 681,100 shares valued at $102,164. Interest expense on the note payable was $2,164. Interest expense for the quarter ended June 30, 2015 was $16,358. Of that amount, $2,153 relates to notes payable and insurance financing and $14,205 relates to interest accrued on the bridge loans. 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%. The $500,000 of notes, were due on October 30, 2014 and are currently in default as of June 30, 2015 (see notes in Subsequent Events regarding default status). |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
STOCKHOLDERS' EQUITY | NOTE 7 STOCKHOLDERS EQUITY The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock. 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 Companys 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 companys 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. In August of 2014, the Company issued 400,000 shares of common stock valued at $136,000 to various parties for accounting, legal and marketing services. 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 Companys stock was $0.09. As the shares have not been issued as of December 31, 2014, the Company recorded a stock payable with a 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. 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 $107,836, all at $0.15 per share. 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. |
STOCK OPTION PLAN
STOCK OPTION PLAN | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
STOCK OPTION PLAN | NOTE 8 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. During the period ended June 30, 2015, $324,177 was recorded as a stock based compensation expense. The Company expects to incur an additional $324,177 as a stock based compensation expense during 2015. 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 per share 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 Companys stock options as of June 30, 2015 and changes during the period ended on that date: The following is a summary of the status of all of the Companys stock options as of June 30, 2015 and changes during the period ended on that date: Please add above options. Number Weighted-Average Weighted-Average Outstanding at January 1, 2015 4,800,000 $ 0.26 4.46 Granted $ 0.00 Exercised $ 0.00 Cancelled $ 0.00 Outstanding at June 30, 2015 4,800,000 $ 0.26 4.46 Exercisable at June 30, 2015 3,200,000 $ 0.22 4.28 |
WARRANTS
WARRANTS | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
WARRANTS | NOTE 9 WARRANTS 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 Companys stock warrants as of June 30, 2015 and changes during the period ended on that date: Number Weighted-Average Weighted-Average Outstanding at January 1, 2015 500,000 $ 0.34 0.83 Granted $ 0.00 Exercised $ 0.00 Cancelled $ 0.00 Total Outstanding at June 30, 2015 500,000 $ 0.34 0.83 Exercisable at June 30, 2015 500,000 $ 0.34 0.83 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 SUBSEQUENT EVENTS On July 31, 2015 Citadel acquired approximately 1,100 acres of leases, production facilities and equipment that encompassed the Kern Bluff Oil Field. As consideration for this acquisition Citadel issued 6,000,000 shares of common stock and paid $2,000,000 in cash. The transaction was financed via a $3,000,000 one year term loan from Cibolo Creek Partners, of Midland Texas. $200,000 was received on May 12, 2015 to be used as a deposit for the transaction. On July 28, 2015 Citadel extended two bridge loans totaling $500,000 that were previously in default. These notes are now due October 31, 2015. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding: o exploration risks such as drilling unsuccessful wells; o our ability to operate profitably; o our ability to efficiently and effectively finance our operations; o inability to achieve future sales levels or other operating results; o inability to raise additional financing for working capital; o inability to efficiently manage our operations; o inability to hire or retain sufficient qualified operating field personnel; o the inability of management to effectively implement our strategies and business plans; o the unavailability of funds for capital expenditures and/or general working capital; o deterioration in general or regional economic conditions; o the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; o changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; o adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; As well as other statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed under the heading Risk Factors in Part II, Item 1A and those discussed in other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. References in the following discussion and throughout this quarterly report to we, our, us, Citadel, the Company, and similar terms refer to Citadel Exploration, Inc. and its subsidiary, unless otherwise expressly stated or the context otherwise requires. AVAILABLE INFORMATION We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.citadelexploration.com st |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The interim condensed consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim condensed consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2014 and notes thereto included in the Companys 10-K annual report and all amendments. The Company follows the same accounting policies in the preparation of interim reports. Results of operations for the interim period are not indicative of annual results. |
Principles of consolidation | Principles of consolidation The condensed consolidated financial statements include the accounts of Citadel Exploration, Inc. and Citadel Exploration, LLC, the Companys wholly owned subsidiary. |
Nature of operations | Nature of operations Currently, the Company is focused on the acquisition and development of oil and gas properties in California. |
Revenue Recognition | Revenue Recognition Sales of oil are recognized when the product has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. |
Impairment | Impairment The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. |
Use of estimates | Use of estimates The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated 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 The carrying value of the Companys financial instruments, including cash, due to shareholders/related parties and accounts and other payables approximate their fair values due to the immediate or short-term maturity of these instruments. It is managements opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. |
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. The Company had no cash equivalents as of June 30, 2015 and December 31, 2014. |
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. |
Recent pronouncements | Recent pronouncements The Company has evaluated the recent accounting pronouncements through June 30, 2015 and believes that none of them will have a material effect on the companys condensed consolidated financial statements. |
OIL AND GAS PROPERTIES (Tables)
OIL AND GAS PROPERTIES (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Extractive Industries [Abstract] | |
The costs capitalized in oil and gas properties | 2015 2014 Exploration $ 2,218,708 $ 2,042,054 |
Schedule of capitalized exploratory well costs | 2015 Beginning balance at January 1, 2015 (excluding asset retirement obligation) 1,993 Additions to capitalized exploratory well costs pending the determination of proved reserves 176,653 Asset retirement obligation 48,750 Ending balance at June 30, 2015 $ 2,218,708 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Notes payable consists of the following at: | June December Note payable to an entity for the financing of insurance premiums, unsecured; 7.44% interest, due March 2016 62,584 Term loan with investor executed July 2015, due July 2016 200,000 Two notes payable to investors, unsecured, 10% interest; due October 30, 2014 $ 500,000 $ 500,000 Promissory note to an entity; 10% interest, due December 2015 100,000 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 Debt discount for 25,000 shares issued relating to note payable (1,930 ) Debt discount for derivative liability embedded in note payable (13,308 ) $ 762,584 $ 592,533 |
STOCK OPTION PLAN (Tables)
STOCK OPTION PLAN (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Summary of the status of all of the Company's stock options | Number Weighted-Average Weighted-Average Outstanding at January 1, 2015 4,800,000 $ 0.26 4.46 Granted $ 0.00 Exercised $ 0.00 Cancelled $ 0.00 Outstanding at June 30, 2015 4,800,000 $ 0.26 4.46 Exercisable at June 30, 2015 3,200,000 $ 0.22 4.28 |
WARRANTS (Tables)
WARRANTS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Summary of the status of all of the Company's stock warrants | Number Weighted-Average Weighted-Average Outstanding at January 1, 2015 500,000 $ 0.34 0.83 Granted $ 0.00 Exercised $ 0.00 Cancelled $ 0.00 Total Outstanding at June 30, 2015 500,000 $ 0.34 0.83 Exercisable at June 30, 2015 500,000 $ 0.34 0.83 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 101 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | |
Notes to Financial Statements | |||||
Net loss | $ 294,858 | $ 602,765 | $ 653,135 | $ 865,693 | $ 4,489,439 |
OIL AND GAS PROPERTIES (Details
OIL AND GAS PROPERTIES (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Oil And Gas Properties Details | ||
Oil and gas properties exploration | $ 2,218,708 | $ 2,042,054 |
Beginning balance at January 1 | 1,993,305 | |
Additions to capitalized exploratory well costs pending the determination of proved reserves | 176,653 | |
Asset retirement obligation | 48,750 | |
Ending balance at December 31 | $ 2,218,708 |
DEPOSITS (Details Narrative)
DEPOSITS (Details Narrative) | May. 12, 2015USD ($) |
Kern Bluff Oil Field [Member] | |
Deposit provided exclusivity during the due diligence process | $ 100,000 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Notes Payable Details | ||
Note payable to an entity for the financing of insurance premiums, unsecured; 7.44% interest, due March 2016 | $ 62,584 | |
Term loan with investor executed July 2015, due July 2016 (Partial proceeds received on May 12, 2015) | 200,000 | |
Two notes payable to investors, unsecured, 10% interest; due October 30, 2014 | $ 500,000 | $ 500,000 |
Promissory note to an entity; 10% interest, due December 2015 | 100,000 | |
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 | |
Debt discount for 25,000 shares issued relating to note payable | (1,930) | |
Debt discount for derivative liability embedded in note payable | (13,308) | |
Notes payable, net | $ 762,584 | $ 592,533 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2014 | |
Interest Expense Notes Payable | $ 2,164 | ||
Shares issued upon conversion of Notes payable | 681,100 | ||
Fair value of shares issued | $ 102,164 | ||
Interest Expenses | $ 16,358 | $ 88,088 | |
Notes Payable And Insurance Financing [Member] | |||
Interest Expense Notes Payable | 2,153 | ||
Bridge Loans [Member] | |||
Interest Expense Notes Payable | $ 14,205 |
STOCK OPTION PLAN (Details)
STOCK OPTION PLAN (Details) - Jun. 30, 2015 - $ / shares | Total |
Number of Options | |
Outstanding at January 1, 2015 | 4,800,000 |
Granted | |
Exercised | |
Cancelled | |
Outstanding at March 31, 2015 | 4,800,000 |
Exercisable at March 31, 2015 | 3,200,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2015 | $ 0.26 |
Granted | .00 |
Exercised | .00 |
Cancelled | .00 |
Outstanding at March 31, 2015 | .26 |
Exercisable at March 31, 2015 | $ .22 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2015 | 4 years 5 months 16 days |
Outstanding at March 31, 2015 | 4 years 5 months 16 days |
Exercisable at March 31, 2015 | 4 years 3 months 11 days |
WARRANTS (Details)
WARRANTS (Details) - Jun. 30, 2015 - $ / shares | Total |
Number of Options | |
Outstanding at January 1, 2015 | 4,800,000 |
Granted | |
Exercised | |
Cancelled | |
Outstanding at March 31, 2015 | 4,800,000 |
Exercisable at March 31, 2015 | 3,200,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2015 | $ 0.26 |
Granted | .00 |
Exercised | .00 |
Cancelled | .00 |
Outstanding at March 31, 2015 | .26 |
Exercisable at March 31, 2015 | $ .22 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2015 | 4 years 5 months 16 days |
Outstanding at March 31, 2015 | 4 years 5 months 16 days |
Exercisable at March 31, 2015 | 4 years 3 months 11 days |
Warrant [Member] | |
Number of Options | |
Outstanding at January 1, 2015 | 500,000 |
Granted | |
Exercised | |
Cancelled | |
Outstanding at March 31, 2015 | 500,000 |
Exercisable at March 31, 2015 | 500,000 |
Weighted-Average Exercise Price | |
Outstanding at January 1, 2015 | $ .34 |
Granted | |
Exercised | |
Cancelled | |
Outstanding at March 31, 2015 | $ .34 |
Exercisable at March 31, 2015 | $ 0.34 |
Weighted-Average Remaining Life (Years) | |
Outstanding at January 1, 2015 | 9 months 29 days |
Outstanding at March 31, 2015 | 9 months 29 days |
Exercisable at March 31, 2015 | 9 months 29 days |