Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 2018 | |
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 | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 45,000,000 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 307,381 | $ 772,103 |
Unbilled and joint interest billing receivables | 277,497 | 16,540 |
Prepaid expenses | 66,687 | 29,280 |
Product inventory | 20,107 | |
Total current assets | 651,565 | 838,030 |
Deposits | 35,100 | 10,100 |
Restricted cash | 200,000 | 200,000 |
Oil and gas properties, successful efforts basis | ||
Proved, net | 5,923,193 | 5,018,086 |
Unproved | 1,170,000 | 1,170,000 |
Equipment, net | 71,237 | 82,969 |
Total assets | 8,051,095 | 7,319,185 |
Current liabilities: | ||
Accounts payable and accrued payables | 2,430,794 | 2,220,938 |
Accrued interest payable | 330,585 | 459,416 |
Drilling obligation, net of discount of $63,000 and $126,000 as of September 30, 2018 and December 31, 2017 respectively | 700,742 | 700,000 |
Notes payable, net | 2,214,909 | 579,951 |
Total current liabilities | 5,677,030 | 3,960,305 |
Asset retirement obligation | 246,799 | 224,380 |
Related party production payment liability | 300,000 | 300,000 |
Total liabilities | 6,223,829 | 4,484,685 |
Stockholders' equity: | ||
Common stock, $0.001 par value, 300,000,000 shares authorized, 45,000,000 and 44,449,742 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively | 45,000 | 44,450 |
Series A Preferred stock, $20.00 par value, 500,000 shares authorized, 395,615 and 394,365 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively | 7,912,300 | 7,887,300 |
Additional paid-in capital | 6,014,828 | 5,691,239 |
Accumulated deficit | (12,144,862) | (10,788,489) |
Total stockholders' equity | 1,827,266 | 2,834,500 |
Total liabilities and stockholders' equity | $ 8,051,095 | $ 7,319,185 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
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 | 45,000,000 | 44,449,742 |
Common stock, outstanding | 45,000,000 | 44,449,742 |
Preferred stock, par value | $ 20 | $ 20 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, issued | 395,615 | 394,365 |
Preferred stock, outstanding | 395,615 | 394,365 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 320,774 | $ 46,824 | $ 928,092 | $ 133,472 |
Operating expenses: | ||||
Lease operating expense | 202,562 | 94,069 | 676,937 | 216,844 |
General and administrative | 75,204 | 60,632 | 219,843 | 178,821 |
Depreciation, depletion and amortization | 135,387 | 8,844 | 407,684 | 26,965 |
Professional fees | 40,951 | 37,738 | 183,237 | 160,855 |
Executive compensation | 180,000 | 165,525 | 540,000 | 472,411 |
Total operating expenses | 634,104 | 366,808 | 2,027,702 | 1,055,896 |
Loss from operations | (313,330) | (319,984) | (1,099,610) | (922,424) |
Other expenses: | ||||
Interest expense | (110,210) | (198,070) | (256,763) | (572,636) |
Total other expenses | (110,210) | (198,070) | (256,763) | (572,636) |
Loss before provision for income taxes | (423,540) | (518,054) | (1,356,373) | (1,495,060) |
Provision for income taxes | (2,188) | (2,300) | ||
Net loss | (423,540) | (520,242) | (1,356,373) | (1,497,360) |
Series A preferred stock dividends | (199,433) | (591,488) | ||
Net loss available to common stockholders | $ (622,973) | $ (520,242) | $ (1,947,861) | $ (1,497,360) |
Weighted average number of common shares - outstanding - basic and diluted | 45,000,000 | 41,348,002 | 44,907,286 | 40,692,353 |
Net loss per share - basic and diluted | $ (0.01) | $ (0.01) | $ (0.04) | $ (0.04) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING ACTIVITIES | ||
Net loss | $ (1,356,373) | $ (1,497,360) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation, amortization and accretion | 407,684 | 26,965 |
Amortization of debt discount | 151,807 | |
Preferred stock dividend expense | 406,800 | |
Stock based compensation expense | 90,051 | |
Changes in operating assets and liabilities: | ||
Increase in unbilled and joint interest billing receivables | (260,957) | (2,065) |
Decrease (increase) in prepaid expenses | 33,337 | (12,414) |
Increase in deposits | (25,000) | (200) |
Increase in accrued interest payable | 100,557 | 161,189 |
Increase in accounts payable and accrued | 329,857 | 286,321 |
Net cash used in operating activities | (529,037) | (636,859) |
INVESTING ACTIVITIES | ||
Exploration and development of oil and gas properties | (1,383,024) | (345,117) |
Property acquisitions | (600,000) | |
Cash received from disposal of O&G asset | 131,240 | |
Purchase of equipment | (6,749) | (2,215) |
Net cash used in investing activities | (1,258,533) | (947,332) |
FINANCING ACTIVITIES | ||
Proceeds from sale of preferred stock, net of costs | 25,000 | 875,000 |
Proceeds from notes payable | 1,420,612 | 672,552 |
Repayments to drilling liability | (62,258) | |
Repayments of notes payable | (60,506) | (55,617) |
Net cash provided by financing activities | 1,322,848 | 1,491,935 |
Net increase in cash and restricted cash | (464,722) | (92,256) |
Cash and restricted cash at beginning of year | 972,103 | 433,793 |
Cash and restricted cash at end of the period | 507,381 | 341,537 |
SUPPLEMENTAL INFORMATION: | ||
Cash paid for interest | 3,057 | |
Reclass of inventory to O&G properties | 20,107 | |
Income taxes paid | 2,300 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Insurance premium financing | 70,744 | |
Shares issued to pay off bonus payable | 20,000 | |
Debt Discount from senior secured credit facility | 214,087 | |
Asset retirement obligation | 12,128 | |
Non-cash addition of senior loan facility for payment of San Benito litigation | 100,000 | |
Accrued interest payable rolled over to senior loan facility | 229,388 | |
Conversion from preferred stock issuable | 6,514,600 | |
Issuance for preferred stock for services | 92,708 | |
Issuance of common stock for preferred stock interest | $ 406,800 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying unaudited interim financial statements and notes for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, 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 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 consolidated financial statements be read in conjunction with the financial statements of the Company for the period ended September 30, 2018 and notes thereto included in the Company’s 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 necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. Principles of consolidation The consolidated financial statements include the accounts of Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC, the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, 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 properties in California. 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. As of September 30, 2018, management believes that no impairment indicators exist. Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. The accounting policies most affected by management’s estimates and assumptions are the following: the reliance on estimates of proved reserves to compute the provision for depreciation, depletion and amortization and to determine the amount of any impairment of proved properties; the valuation of unproved acreage and proved crude oil and natural gas properties to determine the amount of any impairment of crude oil and natural gas properties; judgement regarding the productive status of in-progress exploratory wells to determine the amount of any provision for abandonment and estimates regarding abandonment liabilities. Fair value of financial instruments The carrying value of the Company’s 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 management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. Reclassification and comparative figures Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. 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 September 30, 2018 and December 31, 2017. 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. Disaggregation of revenue The Company does not disaggregate revenue, as all revenue is generated from oil at one property located in California. Revenues for the three months ending September 30, 2018 and 2017 w ere $320,774 and $46,824, respectively. Revenues for the nine months ending September 30, 2018 and 2017 w ere $928,092 and $133,472, respectively. Recent accounting pronouncements In May 2014, the FASB issued ASC updated No. 2014-09, Revenue from Contracts with Customers (Topic 606 (ASU 2014-09) In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). The update is effective for years beginning December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. These accounting pronouncements were adopted by the Company as of January 1, 2018. The purpose of Update 2016 -18 is to clarify guidance and presentation related to restricted cash in the Statements of Cash Flows. The amendment requires beginning-of-period and end-of- period total amounts shown on the Statements of Cash Flows to include cash and cash equivalents as well as restricted cash and restricted cash equivalents. Adoption of this new standard did not have a material impact on the Company’s financial statements. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
GOING CONCERN | NOTE 2 – GOING CONCERN The accompanying unaudited 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. In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing. There can be no assurance that the Company will be successful to raise sufficient cash to operate over the 12 months immediately following the issuance of its financial reports. The Company incurred a net loss in the amount of $1,356,373 for the period ended September 30, 2018. The Company has incurred net losses since entering the crude oil and natural gas exploration industry and as of September 30, 2018 has an accumulated deficit of $12,144,862 and a working capital deficit of $5,025,465 which raises substantial doubt about the Company’s ability to continue as a going concern. 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 unaudited consolidated financial statements as of September 30, 2018, 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, BUILDIN
OIL AND GAS PROPERTIES, BUILDINGS AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Extractive Industries [Abstract] | |
OIL AND GAS PROPERTIES, BUILDINGS AND EQUIPMENT | NOTE 3 – OIL AND GAS PROPERTIES Oil and natural gas properties, buildings and equipment consist of the following: September December Oil and Natural Gas: Proved properties $ 4,137,287 $ 3,468,306 Unproved properties 1,170,000 1,170,000 Facilities 2,297,724 2,244,716 7,605,011 6,883,022 Less oil property impairment — (562,030 ) Less accumulated depreciation, depletion, and amortization (511,818 ) (132,906 ) $ 7,093,193 $ 6,188,086 Total accumulated depreciation totaled $511,818 and $132,906, respectively, as of September 30, 2018 and December 31, 2017 , respectively. For the period ending September 30, 2018 and September 30, 2017 total depletion expense totaled $378,912 and $12, 588, respectively. |
RESTRICTED CASH
RESTRICTED CASH | 9 Months Ended |
Sep. 30, 2018 | |
Restricted Cash | |
RESTRICTED CASH | NOTE 4 – RESTRICTED CASH Restricted cash consists of one bond totaling $200,000, which is a blanket bond that will cover up to 50 wells. This bond was required in the normal course of business in the oil and gas industry. The bond totaling $200,000 was purchased in August 2015 following the acquisition of the Kern Bluff Oil Field. The detail breakdown of restricted cash and cash is depicted in the Consolidated Statement of Cash Flows as follows: Nine Months Ended 2018 2017 Cash and restricted cash at end of period $ 507,381 $ 341,537 Cash at end of period 307,381 141,537 Restricted cash at end of period 200,000 200,000 Cash and restricted cash, end of period $ 507,381 $ 341,537 |
DEPOSITS
DEPOSITS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
DEPOSITS | NOTE 5 – DEPOSITS The Company had deposits at September 30, 2018 and December 31, 2017 totaling $35,100 and $10,100, respectively, which pertain to: a natural gas deposit to purchase gas per contract; deposit on building rent; and a deposit to the County of San Benito for a drilling program which we are in the process of trying to have the County refund. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTES PAYABLE | NOTE 6 – NOTES PAYABLE Notes payable consists of the following: September December Note payable to an entity for the financing of insurance premiums, unsecured; 7.99% interest, due February 2019 34,847 14,548 Debt Discount on Senior Secured Facility Loan (125,280 ) — Senior Secured Facility Loan 10% interest; due March 31, 2019. 2,250,000 — Chandler/Lloyd Trust-Notes Payable 10% interest — 500,000 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due December 2022 28,075 32,351 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 27,267 33,052 Total – Notes Payable $ 2,214,909 $ 579,951 In March of 2018, the Company closed on a $3,000,000 senior secured credit facility. The facility bears 10% interest and has a one-year term. For every two dollars drawn on the facility, the investor receives one five-year warrant to purchase common stock at a price of $0.10. The Company has drawn $2,250,000 on the facility and issued 1,125,000 warrants. The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method. Future drawdowns are at the discretion of the lender. The senior secured facility is secured by a deed of trust on the Kern Bluff Oil Field. Proceeds from the first draw where used to retire the previous bridge loan and accrued interest. The balance was used for general corporate purposes, including the drilling of a well. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 7 – STOCKHOLDERS’ EQUITY The Company is authorized to issue 300,000,000 shares of its $0.001 par value common stock. The Company is authorized to issue 500,000 shares of Series A Convertible Participating Preferred Stock. For the nine-months ended September 30, 2018, the Company issued 450,262 and 100,000 common shares for $90,051 of services rendered and $20,000 of bonus payable, respectively. For the six and nine month s ended June 30, 2018 and September 30, 2018 the common stock balances were the same. The Company also issued 1,250 preferred shares for $25,000 cash. For the nine-months ended September 30, 2018 , the Company incurred a net loss of $1,356,37 3. For the six and nine months ended June 30, 2018 and September 30, 2018 the preferred stock balances were the same. On December 15, 2017, the Company adopted the 2017 Restricted Stock Unit Plan (RSU) authorizing the issuance of 10,000,000 restricted stock units to management and future employees. |
STOCK OPTION PLAN
STOCK OPTION PLAN | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
STOCK OPTION PLAN | NOTE 8 – STOCK OPTION PLAN The following is a summary of the status of all the Company’s stock options as of September 30, 2018 and changes during the period ended on that date: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Life Outstanding as of December 31, 9,500,000 $ 0.20 3.26 Granted 500,000 $ 0.20 6.84 Exercised — $ 0.00 — Cancelled — $ 0.00 — Outstanding as of September 30, 2018 10,000,000 $ 0.20 2.73 Exercisable at September 30, 2018 10,000,000 $ 0.20 2.73 |
WARRANTS
WARRANTS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
WARRANTS | NOTE 9 – WARRANTS In March 2018, the Company closed on a $3,000,000 Senior Secured Credit Facility. As of September 30, 2018, the Company has drawn $2,250,000. As per the terms of the facility, the Company has issued 1,125,000 warrants to the lender. The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method Number Weighted-Average Weighted-Average Outstanding at December 31, $ 0.00 — Granted 1,125,000 $ 0.10 4. 58 Exercised — $ 0.00 — Cancelled — $ 0.00 — Total outstanding at 1,125,000 $ 0.10 4.58 Exercisable at September 1,125,000 $ 0.10 4. 58 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS During the nine months ended September 30, 2018, the Company purchased $125,217 of equipment from Grey Energy. Grey Energy is owned by a member of the Board of Directors of the Company. As of the end of the period, the Company had a production payment liability of $300,000 outstanding to a related party. The CEO & CFO continue to defer $20,000 a month of their $30,000 per month salary. For the nine-month period ended September 30, 2018, the CEO & CFO deferred $360,000 in salary. Pursuant to the adoption of the 2017 Restricted Stock Unit Plan (RSU), the Company issued 5,500,000 shares to three employees. In March of 2018 the Board of Directors authorized a 2% Overriding Royalty Interest (ORRI) to two members of management. The Company plans to begin paying this accrued ORRI in the fourth quarter of 2018. |
DRILLING OBLIGATION
DRILLING OBLIGATION | 9 Months Ended |
Sep. 30, 2018 | |
Drilling Obligation | |
DRILLING OBLIGATION | NOTE 11 – DRILLING OBLIGATION The Company entered into a joint venture agreement with investors to drill two wells in the fourth quarter of 2017. The $700,000 liability has an 18% rate of return. The Company originally booked a debt discount of $126,000 and will be amortized over the next 18 months. During the nine-month ended September 30, 2018, the company amortized $63,000 of the debt discount. During the period, the Company paid $62,258 towards this obligation from oil production. |
REVISION OF PREVIOUSLY-ISSUED I
REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS | NOTE 12 – REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS During the three months ended September 30, 2018, the Company identified errors in its financial statements for the second quarter of the period ended September 30 , 2018, as included in the Company’s 10-Q for the period ended June 30, 2018, related to the restatement of prior period revenues. Specifically, the Company accounted for a Joint Venture Partner as a royalty owner in the three and six months ended June 30, 2018. The Company made adjustments in the current quarter relating to this. The Company assessed the effect of the above errors in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to any of the Company’s prior interim and annual financial statements. The Company determined that the correction of the cumulative amounts of the errors would be material to its consolidated financial statements for the three and nine months ended September 30, 2018. Therefore, the Company revised its previously-issued financial statements for the second quarter of fiscal 2018. The balance sheet as of June 30, 2018 and the statement of operations for the three and six months ended June 30, 2018 included in this Form 10- Q are revised as described below for those adjustments. All financial information contained in the accompanying notes to these financial statements has been revised to reflect the correction of these errors. The following tables present the effect of the aforementioned revisions on the Company’s consolidated balance sheet for the six months ended June 30, 2018: Six Months Ended June 30, 2018 As Reported Revision As Restated Drilling obligation, net of discount of $84,000 as of June 30, 2018 707,129 (34,871 ) 672,258 Accounts payable and accrued liabilities 2,175,964 (21,872 ) 2,154,092 Total current liabilities 4,920,137 (56,743 ) 4,863,394 Total liabilities 5,463,421 (56,743 ) 5,406,678 Accumulated deficit (11,778,065 ) 56, 743 (11,721,322 ) Total stockholders' equity 2,138,642 56, 743 2,195,385 Total liabilities and stockholders’ equity 7,602,063 — 7,602,063 The following tables present the effect of the aforementioned revisions on the Company’s consolidated statement of operations for the three and six months ended June 30, 2018: Three Months Ended June 30, 2018 As Reported Revision As Restated Revenue $ 299,989 84,455 384,444 Lease operating expense 150,546 33,819 184,365 Total operating expenses 630,527 33,819 664,346 Loss from operations (330,538 ) 50,636 (279,902 ) Loss before provision for income taxes (437,661 ) 50,636 (387,025 ) Net loss (437,661 ) 50,636 (387,025 ) Net loss attributable to common stockholders (634,927 ) 50,636 (584,291 ) Net loss per share (basic and diluted) (0.01 ) — (0.01 ) Six Months Ended June 30, 2018 As Reported Revision As Restated Revenue $ 512,542 94,776 607,318 Lease operating expense 436,342 38,033 398,309 Total operating expenses 1,355,565 38,033 1,317,532 Loss from operations (843,023 ) 56,743 (786,280 ) Loss before provision for income taxes (989,576 ) 56,743 (932,833 ) Net loss (989,576 ) 56,743 (932,833 ) Net loss attributable to common stockholders (1,381,631 ) 56,743 (1,324,888 ) Net loss per share (basic and diluted) (0.03 ) — (0.03 ) |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The accompanying unaudited interim financial statements and notes for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, 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 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 consolidated financial statements be read in conjunction with the financial statements of the Company for the period ended September 30, 2018 and notes thereto included in the Company’s 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 necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. |
Principles of consolidation | Principles of consolidation The consolidated financial statements include the accounts of Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC, the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, 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 properties in California. |
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. As of September 30, 2018, management believes that no impairment indicators exist. |
Use of estimate | Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. The accounting policies most affected by management’s estimates and assumptions are the following: the reliance on estimates of proved reserves to compute the provision for depreciation, depletion and amortization and to determine the amount of any impairment of proved properties; the valuation of unproved acreage and proved crude oil and natural gas properties to determine the amount of any impairment of crude oil and natural gas properties; judgement regarding the productive status of in-progress exploratory wells to determine the amount of any provision for abandonment and estimates regarding abandonment liabilities. |
Fair value of financial instruments | Fair value of financial instruments The carrying value of the Company’s 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 management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments. |
Reclassification and comparative figures | Reclassification and comparative figures Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
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 September 30, 2018 and December 31, 2017. |
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. |
Disaggregation of revenue | Disaggregation of revenue The Company does not disaggregate revenue, as all revenue is generated from oil at one property located in California. Revenues for the three months ending September 30, 2018 and 2017 w ere $320,774 and $46,824, respectively. Revenues for the nine months ending September 30, 2018 and 2017 w ere $928,092 and $133,472, respectively. |
Recent pronouncements | Recent accounting pronouncements In May 2014, the FASB issued ASC updated No. 2014-09, Revenue from Contracts with Customers (Topic 606 (ASU 2014-09) In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). The update is effective for years beginning December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. These accounting pronouncements were adopted by the Company as of January 1, 2018. The purpose of Update 2016 -18 is to clarify guidance and presentation related to restricted cash in the Statements of Cash Flows. The amendment requires beginning-of-period and end-of- period total amounts shown on the Statements of Cash Flows to include cash and cash equivalents as well as restricted cash and restricted cash equivalents. Adoption of this new standard did not have a material impact on the Company’s financial statements. |
OIL AND GAS PROPERTIES, BUILD_2
OIL AND GAS PROPERTIES, BUILDINGS AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Extractive Industries [Abstract] | |
Schedule of Oil and natural gas properties, buildings and equipment | Oil and natural gas properties, buildings and equipment consist of the following: September December Oil and Natural Gas: Proved properties $ 4,137,287 $ 3,468,306 Unproved properties 1,170,000 1,170,000 Facilities 2,297, 724 2,244,716 7,605,011 6,883,022 Less oil property impairment — (562,030 ) Less accumulated depreciation, depletion, and amortization (511,818 ) (132,906 ) $ 7,093,193 $ 6,188,086 |
RESTRICTED CASH (Tables)
RESTRICTED CASH (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Restricted Cash Tables Abstract | |
Schedule of Cash and Restricted Cash | The detail breakdown of restricted cash and cash is depicted in the Consolidated Statement of Cash Flows as follows: Nine Months Ended 2018 2017 Cash and restricted cash at end of period $ 507,381 $ 341,537 Cash at end of period 307,381 141,537 Restricted cash at end of period 200,000 200,000 Cash and restricted cash, end of period $ 507,381 $ 341,537 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Schedule of Notes Payable | Notes payable consists of the following: September December Note payable to an entity for the financing of insurance premiums, unsecured; 7.99% interest, due February 2019 34,847 14,548 Debt Discount on Senior Secured Facility Loan (125,280 ) — Senior Secured Facility Loan 10% interest; due March 31, 2019. 2,250,000 — Chandler/Lloyd Trust-Notes Payable 10% interest — 500,000 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due December 2022 28,075 32,351 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 27,267 33,052 Total – Notes Payable $ 2,214,909 $ 579,951 |
STOCK OPTION PLAN (Tables)
STOCK OPTION PLAN (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Schedule of Company's stock options | The following is a summary of the status of all the Company’s stock options as of September 30, 2018 and changes during the period ended on that date: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Life Outstanding as of December 31, 9,500,000 $ 0.20 3.26 Granted 500,000 $ 0.20 6.84 Exercised — $ 0.00 — Cancelled — $ 0.00 — Outstanding as of September 30, 2018 10,000,000 $ 0.20 2.73 Exercisable at September 30, 2018 10,000,000 $ 0.20 2.73 |
WARRANTS (Tables)
WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Schedule of Warrants | The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method Number Weighted-Average Weighted-Average Outstanding at December 31, $ 0.00 — Granted 1,125,000 $ 0.10 4. 58 Exercised — $ 0.00 — Cancelled — $ 0.00 — Total outstanding at 1,125,000 $ 0.10 4.58 Exercisable at September 1,125,000 $ 0.10 4. 58 |
REVISION OF PREVIOUSLY-ISSUED_2
REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Schedule of Revision of Balance Sheet and Statement of Operations | The following tables present the effect of the aforementioned revisions on the Company’s consolidated balance sheet for the six months ended June 30, 2018: Six Months Ended June 30, 2018 As Reported Revision As Restated Drilling obligation, net of discount of $84,000 as of June 30, 2018 707,129 (34,871 ) 672,258 Accounts payable and accrued liabilities 2,175,964 (21,872 ) 2,154,092 Total current liabilities 4,920,137 (56,743 ) 4,863,394 Total liabilities 5,463,421 (56,743 ) 5,406,678 Accumulated deficit (11,778,065 ) 56, 743 (11,721,322 ) Total stockholders' equity 2,138,642 56, 743 2,195,385 Total liabilities and stockholders’ equity 7,602,063 — 7,602,063 The following tables present the effect of the aforementioned revisions on the Company’s consolidated statement of operations for the three and six months ended June 30, 2018: Three Months Ended June 30, 2018 As Reported Revision As Restated Revenue $ 299,989 84,455 384,444 Lease operating expense 150,546 33,819 184,365 Total operating expenses 630,527 33,819 664,346 Loss from operations (330,538 ) 50,636 (279,902 ) Loss before provision for income taxes (437,661 ) 50,636 (387,025 ) Net loss (437,661 ) 50,636 (387,025 ) Net loss attributable to common stockholders (634,927 ) 50,636 (584,291 ) Net loss per share (basic and diluted) (0.01 ) — (0.01 ) Six Months Ended June 30, 2018 As Reported Revision As Restated Revenue $ 512,542 94,776 607,318 Lease operating expense 436,342 38,033 398,309 Total operating expenses 1,355,565 38,033 1,317,532 Loss from operations (843,023 ) 56,743 (786,280 ) Loss before provision for income taxes (989,576 ) 56,743 (932,833 ) Net loss (989,576 ) 56,743 (932,833 ) Net loss attributable to common stockholders (1,381,631 ) 56,743 (1,324,888 ) Net loss per share (basic and diluted) (0.03 ) — (0.03 ) |
OIL AND GAS PROPERTIES, BUILD_3
OIL AND GAS PROPERTIES, BUILDINGS AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Oil and Natural Gas: | ||
Proved properties | $ 5,923,193 | $ 5,018,086 |
Unproved properties | 1,170,000 | 1,170,000 |
Facilities | 2,297,724 | 2,244,716 |
Oil and Natural Gas Total | 7,605,011 | 6,883,022 |
Less oil property impairment | (562,030) | |
Less accumulated depreciation, depletion, and amortization | (511,818) | (132,906) |
Oil and Natural Gas, Net | $ 7,093,193 | $ 6,188,086 |
OIL AND GAS PROPERTIES, BUILD_4
OIL AND GAS PROPERTIES, BUILDINGS AND EQUIPMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Disclosure Oil And Gas Properties Buildings And Equipment Details Narrative Abstract | ||
Depletion Expense, Net | $ 378,912 | $ 12,588 |
RESTRICTED CASH (Details Narrat
RESTRICTED CASH (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Aug. 25, 2015 |
Disclosure Restricted Cash Details Narrative Abstract | ||||
Restricted Cash | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 |
RESTRICTED CASH (Details)
RESTRICTED CASH (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Aug. 25, 2015 |
Disclosure Restricted Cash Details Abstract | |||||
Cash | $ 307,381 | $ 772,103 | $ 141,537 | ||
Restricted cash | 200,000 | 200,000 | 200,000 | $ 200,000 | |
Cash and restricted cash | $ 507,381 | $ 972,103 | $ 341,537 | $ 433,793 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Notes Payable | ||
Note payable to an entity for the financing of insurance premiums, unsecured; 7.99% interest, due February 2019 | $ 34,847 | $ 14,548 |
Debt Discount | (125,280) | |
Senior Secured Facility Loan 10% interest; due March 31, 2019. | 2,250,000 | |
Chandler/Lloyd Trust-Notes Payable | 500,000 | |
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due December 2022 | 28,075 | 32,351 |
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 | 27,267 | 33,052 |
Notes payable | $ 2,214,909 | $ 579,951 |
STOCK OPTION PLAN (Details)
STOCK OPTION PLAN (Details) - Stock Option [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Number of Options | ||
Outstanding, Beginning | 9,500,000 | |
Granted | 500,000 | |
Exercised | ||
Cancelled | ||
Outstanding, Ending | 10,000,000 | |
Exercisable at June 30, 2018 | 10,000,000 | |
Weighted-Average Exercise Price | ||
Outstanding, Beginning | $ 0.20 | |
Granted | 0.20 | |
Exercised | 0 | |
Cancelled | 0 | |
Outstanding, Ending | $ 0.20 | |
Exercisable at June 30 | $ 0.20 | |
Weighted-Average Remaining Life (Years) | ||
Outstanding, Beginning | 3 years 3 months 4 days | |
Grants | 6 years 10 months 2 days | |
Outstanding, Ending | 2 years 8 months 23 days | |
Exercisable June 30 | 2 years 8 months 23 days |
WARRANTS (Details)
WARRANTS (Details) - Warrant [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Number of Options | ||
Outstanding, Beginning | ||
Granted | 1,125,000 | |
Exercised | ||
Cancelled | ||
Outstanding, Ending | 1,125,000 | |
Exercisable at June 30 | 1,125,000 | |
Weighted-Average Exercise Price | ||
Outstanding, Beginning | $ 0 | |
Granted | 0.10 | |
Exercised | 0 | |
Cancelled | 0 | |
Outstanding, Ending | 0.10 | |
Exercisable at June 30 | $ 0.10 | $ 0 |
Weighted-Average Remaining Life (Years) | ||
Outstanding, Beginning | ||
Grants | 4 years 6 months 29 days | |
Outstanding at June 30 | 4 years 6 months 29 days | |
Exercisable at June 30 | 4 years 6 months 29 days |
REVISION OF PREVIOUSLY-ISSUED_3
REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS (Details) - USD ($) | Sep. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Drilling obligation, net of discount of $84,000 as of June 30, 2018 | $ 700,742 | $ 700,000 | |
Accounts payable and accrued liabilities | 2,430,794 | 2,220,938 | |
Total current liabilities | 5,677,030 | 3,960,305 | |
Total liabilities | 6,223,829 | 4,484,685 | |
Accumulated deficit | (12,144,862) | (10,788,489) | |
Total stockholders' equity | 1,827,266 | 2,834,500 | |
Total liabilities and stockholders' equity | $ 8,051,095 | $ 7,319,185 | |
As Reported | |||
Drilling obligation, net of discount of $84,000 as of June 30, 2018 | $ 707,129 | ||
Accounts payable and accrued liabilities | 2,175,964 | ||
Total current liabilities | 4,920,137 | ||
Total liabilities | 5,463,421 | ||
Accumulated deficit | (11,778,065) | ||
Total stockholders' equity | 2,138,642 | ||
Total liabilities and stockholders' equity | 7,602,063 | ||
Revision | |||
Drilling obligation, net of discount of $84,000 as of June 30, 2018 | (34,871) | ||
Accounts payable and accrued liabilities | (21,872) | ||
Total current liabilities | (56,743) | ||
Total liabilities | (56,743) | ||
Accumulated deficit | 56,743 | ||
Total stockholders' equity | 56,743 | ||
Total liabilities and stockholders' equity | |||
As Restated | |||
Drilling obligation, net of discount of $84,000 as of June 30, 2018 | 672,258 | ||
Accounts payable and accrued liabilities | 2,154,092 | ||
Total current liabilities | 4,863,394 | ||
Total liabilities | 5,406,678 | ||
Accumulated deficit | (11,721,322) | ||
Total stockholders' equity | 2,195,385 | ||
Total liabilities and stockholders' equity | $ 7,602,063 |
REVISION OF PREVIOUSLY-ISSUED_4
REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | $ 320,774 | $ 46,824 | $ 928,092 | $ 133,472 | ||
Lease operating expense | 202,562 | 94,069 | 676,937 | 216,844 | ||
Total operating expenses | 634,104 | 366,808 | 2,027,702 | 1,055,896 | ||
Loss from operations | (313,330) | (319,984) | (1,099,610) | (922,424) | ||
Loss before provision for income taxes | (423,540) | (518,054) | (1,356,373) | (1,495,060) | ||
Net loss | (423,540) | (520,242) | (1,356,373) | (1,497,360) | ||
Net loss attributable to common stockholders | $ (622,973) | $ (520,242) | $ (1,947,861) | $ (1,497,360) | ||
Net loss per share (basic and diluted) | $ (0.01) | $ (0.01) | $ (0.04) | $ (0.04) | ||
As Restated | ||||||
Revenue | $ 384,444 | $ 607,318 | ||||
Lease operating expense | 184,365 | 398,309 | ||||
Total operating expenses | 664,346 | 1,317,532 | ||||
Loss from operations | (279,902) | (786,280) | ||||
Loss before provision for income taxes | (387,025) | (932,833) | ||||
Net loss | (387,025) | (932,833) | ||||
Net loss attributable to common stockholders | $ (584,291) | $ (1,324,888) | ||||
Net loss per share (basic and diluted) | $ (0.01) | $ (0.03) | ||||
As Reported | ||||||
Revenue | $ 299,989 | $ 512,542 | ||||
Lease operating expense | 150,546 | 436,342 | ||||
Total operating expenses | 630,527 | 1,355,565 | ||||
Loss from operations | (330,538) | (843,023) | ||||
Loss before provision for income taxes | (437,661) | (989,576) | ||||
Net loss | (437,661) | (989,576) | ||||
Net loss attributable to common stockholders | $ (634,927) | $ (1,381,631) | ||||
Net loss per share (basic and diluted) | $ (0.01) | $ (0.03) | ||||
Revision | ||||||
Revenue | $ 84,455 | $ 94,776 | ||||
Lease operating expense | 33,819 | 38,033 | ||||
Total operating expenses | 33,819 | 38,033 | ||||
Loss from operations | 50,636 | 56,743 | ||||
Loss before provision for income taxes | 50,636 | 56,743 | ||||
Net loss | 50,636 | 56,743 | ||||
Net loss attributable to common stockholders | $ 50,636 | $ 56,743 | ||||
Net loss per share (basic and diluted) |