Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 19, 2019 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 000-54639 | |
Entity Registrant Name | Citadel Exploration, Inc. | |
Entity Central Index Key | 0001482075 | |
Entity Tax Identification Number | 27-1550482 | |
Entity Incorporation, State or Country Code | NV | |
Entity Address, Address Line One | 417 31st Street | |
Entity Address, Address Line Two | Unit A | |
Entity Address, Address Line Three | Newport Beach | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92663 | |
City Area Code | 949 | |
Local Phone Number | 612-8040 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 48,956,151 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 5,741 | $ 86,441 |
Accounts receivable | 135,824 | |
Prepaid expenses and other current assets | 56,798 | 32,633 |
Total current assets | 62,539 | 254,898 |
Long term assets | ||
Right-of-use asset | 15,372 | |
Deposits | 35,100 | 35,100 |
Restricted cash | 200,000 | 200,000 |
Oil and gas properties, successful efforts basis | ||
Proved, net | 5,564,531 | 5,685,535 |
Unproved | 1,172,034 | |
Equipment, net | 55,594 | 67,326 |
Total assets | 5,933,136 | 7,414,893 |
Current liabilities: | ||
Accounts payable and accrued payables | 2,908,376 | 2,657,590 |
Accrued interest payable | 661,460 | 390,224 |
Drilling obligation, net of discount of $0 and $42,000 as of September 30, 2019 and December 31, 2018 respectively | 698,154 | 676,060 |
Notes payable, net of unamortized discount | 2,444,457 | 2,353,003 |
Notes payable, related party | 119,000 | |
Operating lease liability | 15,372 | |
Production payment liability - related party | 300,000 | 300,000 |
Total current liabilities | 7,146,818 | 6,376,877 |
Asset retirement obligation | 261,174 | 250,358 |
Total liabilities | 7,407,992 | 6,627,235 |
Stockholders' equity: | ||
Common stock, $0.001 par value, 300,000,000 shares authorized, 48,956,151 and 45,000,004 shares issued and outstanding as of September 30, 2019 and December 31, 2018 respectively | 48,957 | 45,000 |
Series A Preferred stock, $20.00 par value, 500,000 shares authorized, 400,615 and 395,615 shares issued and outstanding as of September 30, 2019 and December 31, 2018 respectively | 8,012,300 | 7,912,300 |
Additional paid-in capital | 6,146,914 | 6,150,871 |
Accumulated deficit | (15,683,027) | (13,320,513) |
Total stockholders' equity | (1,474,856) | 787,658 |
Total liabilities and stockholders' equity | $ 5,933,136 | $ 7,414,893 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, issued | 48,956,151 | 45,000,004 |
Common stock, outstanding | 48,956,151 | 45,000,004 |
Preferred stock, par value | $ 20 | $ 20 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, issued | 400,615 | 395,615 |
Preferred stock, outstanding | 400,615 | 395,615 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenue | $ 28,404 | $ 320,774 | $ 279,488 | $ 928,092 |
Operating expenses: | ||||
Lease operating expense | 62,986 | 202,562 | 337,946 | 676,937 |
General and administrative | 38,504 | 75,204 | 151,897 | 219,843 |
Depreciation, depletion and amortization | 20,594 | 135,387 | 134,702 | 407,685 |
Professional fees | 19,908 | 40,951 | 76,026 | 183,237 |
Executive compensation | 90,000 | 180,000 | 390,000 | 540,000 |
Impairment of oil and gas properties | 843,574 | 1,172,034 | ||
Total operating expenses | 1,075,566 | 634,104 | 2,262,605 | 2,027,702 |
Other expenses: | ||||
Interest expense | (94,192) | (110,210) | (379,397) | (256,763) |
Total other expenses | (94,192) | (110,210) | (379,397) | (256,763) |
Loss before provision for income taxes | (1,141,354) | (423,540) | (2,362,514) | (1,356,373) |
Provision for income taxes | ||||
Net loss | (1,141,354) | (423,540) | (2,362,514) | (1,356,373) |
Series A preferred stock dividends | (201,954) | (199,433) | (597,468) | (591,488) |
Net loss available to common stockholders | $ (1,343,308) | $ (622,973) | $ (2,959,982) | $ (1,947,861) |
Weighted average number of common shares - outstanding - basic and diluted | 48,956,151 | 45,000,000 | 48,956,151 | 44,907,286 |
Net loss per share - basic and diluted | $ (0.02) | $ (0.01) | $ (0.06) | $ (0.04) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDER EQUITY (Unaudited) - USD ($) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2017 | $ 44,450 | $ 7,887,300 | $ 5,691,239 | $ (10,788,489) | $ 2,834,500 |
Beginning Balance, Shares at Dec. 31, 2017 | 44,449,742 | 394,365 | |||
Common shares issued for services rendered | $ 450 | 89,601 | 90,051 | ||
Common shares issued for services rendered, Shares | 450,262 | ||||
Shares issued to settle bonus payable | $ 100 | 19,900 | 20,000 | ||
Shares issued to settle bonus payable, Shares | 100,000 | ||||
Preferred shares issued for cash | $ 25,000 | 25,000 | |||
Preferred shares issued for cash, Shares | 1,250 | ||||
Warrants issued on debt | 214,088 | 214,088 | |||
Net loss | (1,356,373) | (1,356,373) | |||
Ending Balance at Sep. 30, 2018 | $ 45,000 | $ 7,912,300 | 6,014,828 | (12,144,862) | 1,827,266 |
Ending Balance, Shares at Sep. 30, 2018 | 45,000,004 | 395,615 | |||
Beginning Balance at Jun. 30, 2018 | $ 45,000 | $ 7,912,300 | 5,959,407 | (11,721,322) | 2,195,385 |
Beginning Balance, Shares at Jun. 30, 2018 | 45,000,004 | 395,615 | |||
Warrants issued on debt | 55,421 | 55,421 | |||
Net loss | (423,540) | (423,540) | |||
Ending Balance at Sep. 30, 2018 | $ 45,000 | $ 7,912,300 | 6,014,828 | (12,144,862) | 1,827,266 |
Ending Balance, Shares at Sep. 30, 2018 | 45,000,004 | 395,615 | |||
Beginning Balance at Dec. 31, 2018 | $ 45,000 | $ 7,912,300 | 6,150,871 | (13,320,513) | 787,658 |
Beginning Balance, Shares at Dec. 31, 2018 | 45,000,004 | 395,615 | |||
Common shares issued for special preferred stock dividend | $ 3,957 | (3,957) | |||
Common shares issued for special preferred stock dividend, Shares | 3,956,147 | ||||
Shares issued to settle bonus payable | |||||
Preferred shares issued for cash | $ 100,000 | 100,000 | |||
Preferred shares issued for cash, Shares | 5,000 | ||||
Net loss | (2,362,514) | (2,362,514) | |||
Ending Balance at Sep. 30, 2019 | $ 48,957 | $ 8,012,300 | 6,146,914 | (15,683,027) | (1,474,856) |
Ending Balance, Shares at Sep. 30, 2019 | 48,956,151 | 400,615 | |||
Beginning Balance at Jun. 30, 2019 | $ 48,957 | $ 8,012,300 | 6,146,914 | (14,541,673) | (333,502) |
Beginning Balance, Shares at Jun. 30, 2019 | 48,956,151 | 400,615 | |||
Net loss | (1,141,354) | (1,141,354) | |||
Ending Balance at Sep. 30, 2019 | $ 48,957 | $ 8,012,300 | $ 6,146,914 | $ (15,683,027) | $ (1,474,856) |
Ending Balance, Shares at Sep. 30, 2019 | 48,956,151 | 400,615 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
OPERATING ACTIVITIES | ||
Net loss | $ (2,362,514) | $ (1,356,373) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Impairment of oil and gas properties | 1,172,034 | |
Noncash operating lease expense | 76,859 | |
Depreciation, amortization and accretion | 134,702 | 407,685 |
Stock based compensation expense | 90,051 | |
Amortization of debt discount | 104,923 | 151,807 |
Changes in operating assets and liabilities: | ||
Decrease in operating lease obligations | (76,859) | |
Decrease (increase) in accounts receivable | 135,824 | (260,957) |
Increase in deposits | (25,000) | |
Decrease (increase) in prepaid expenses and other current assets | 50,026 | 33,337 |
Increase (decrease) in accrued interest payable | 271,236 | 100,557 |
Increase (decrease) in accounts payable and accrued payables | 286,339 | 329,857 |
Net cash used in operating activities | (207,430) | (529,037) |
INVESTING ACTIVITIES | ||
Additions to oil and gas properties | (26,704) | (1,383,024) |
Purchase of fixed assets | (6,749) | |
Cash received from disposal of O&G asset | 131,240 | |
Net cash used in investing activities | (26,704) | (1,258,533) |
FINANCING ACTIVITIES | ||
Proceeds from sale of preferred stock, net of costs | 100,000 | 25,000 |
Proceeds from notes payable, related party | 119,000 | |
Proceeds from notes payable | 1,420,612 | |
Payments to drilling liability | (19,906) | (62,258) |
Repayments of notes payable | (45,660) | (60,506) |
Net cash provided by financing activities | 153,434 | 1,322,848 |
Net increase in cash and restricted cash | (80,700) | (464,722) |
Cash and restricted cash at beginning of year | 286,441 | 972,103 |
Cash and restricted cash at end of the period | 205,741 | 507,381 |
SUPPLEMENTAL INFORMATION: | ||
Income taxes paid | ||
Interest paid | 3,057 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Reclass of inventory to O&G properties | 20,107 | |
Right-of-use asset and operating lease obligation recognized upon adoption of Topic Eight Four Two | 92,231 | |
Shares issued to settle bonus payable | 20,000 | |
Common Stock issued for preferred stock dividend | 3,957 | |
Accrued interest payable rolled over to senior loan facility | 229,388 | |
Debt discount from warrants issued on debt | 214,087 | |
Asset retirement obligation | 12,128 | |
Non-cash addition of senior loan facility for payment of San Benito litigation | 100,000 | |
Insurance premium financing | $ 74,191 | $ 70,744 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The interim 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 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 year ended December 31, 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 indicative of annual results. 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 “we”, “our or 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, 2019, management decided to impair all unproved oil and gas properties. This decision was driven by the fact that the Company is currently in default on its senior secured loan, and as such the lender through court order has appointed a third-party trustee to oversee operations at the Kern Bluff Oil Field. Without operational control, management felt it was prudent to impair these unproved leases as the Company will not be in the position to renew leases and or develop the leases in the near term. Consequently, the Company recognized an impairment loss of $1,172,034 for the nine months ended September 30, 2019. 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. Fair value of financial instruments The carrying value of the Company’s financial instruments, including cash, due to shareholders/related parties, accounts and other payables and notes payable 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. 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, 2019 and December 31, 2018. Earnings per share The Company follows ASC Topic 260 to account for 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. Revenue Recognition Policy On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers, Recent pronouncements In February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2016-02 and these additional ASUs are now codified as Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). ASC 842 supersedes the lease accounting guidance in Accounting Standards Codification 840 “Leases” (“ASC 840”) and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company’s consolidated financial statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Company’s historical accounting policy. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s consolidated balance sheet of approximately $92,231. As the right of use asset and the lease payable obligation were the same upon adoption of ASC 842, there was no cumulative effect impact on the Company’s retained earnings. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2019 | |
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. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring startup costs and expenses. As a result, the Company has experienced recurring losses resulting in an accumulated deficit and a working capital deficit as of September 30, 2019 of $15,683,027 and $7,084,279, respectively. In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing. These factors raised substantial doubt as to the Company’s ability to continue as a going concern. 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 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 or debt and, ultimately, the achievement of significant operating revenues. These unaudited 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 | 9 Months Ended |
Sep. 30, 2019 | |
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 $ 4,113,090 $ 4,121,940 Unproved properties — 1,172,034 Facilities 2,231,561 2,231,561 6,344,651 7,525,535 Less - accumulated depletion (780,120 ) (667,966 ) $ 5,564,531 $ 6,857,569 For the nine months ended September 30, 2019 and September 30, 2018 total depletion expense amounted to $112,154 and $378,912 respectively. During the nine months ending September 30, 2019, given the annual lease payments coupled with the Company being in default on its senior secured loan facility, the Company has decided to impair all remaining unproved properties. Consequently, the Company recognized an impairment loss of $1,172,034 of which $328,460 was recognized in the second quarter of 2019 and the remaining $843,574 was recognized during the three months ended September 30, 2019. |
CASH AND RESTRICTED CASH
CASH AND RESTRICTED CASH | 9 Months Ended |
Sep. 30, 2019 | |
Cash And Restricted Cash | |
CASH AND RESTRICTED CASH | NOTE 4 – CASH AND RESTRICTED CASH Amounts in consolidated balance sheets included as cash and restricted cash on the Company’s consolidated statements of cash flows are as follows: September 30, 2019 December 31, 2018 Cash $ 5,741 $ 86,441 Restricted cash – long term 200,000 200,000 Total cash and restricted cash $ 205,741 $ 286,441 Restricted cash consists of one bond totaling $200,000 as of September 30, 2019. 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. This was a blanket bond, which will cover 50 wells. |
DEPOSITS
DEPOSITS | 9 Months Ended |
Sep. 30, 2019 | |
Banking and Thrift [Abstract] | |
DEPOSITS | NOTE 5 – DEPOSITS The Company had deposits of $35,100 for September 30, 2019 and December 31, 2018, of which $25,000 was a deposit in natural gas purchases and the remaining $10,100 was incurred for rental of office space. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
NOTES PAYABLE | NOTE 6 – NOTES PAYABLE Notes payable consists of the following: September 30, 2019 December 31, 2018 Note payable to an entity for the financing of insurance — 13,939 Note payable to an entity for the financing of insurance $ 52,232 — Senior Secured Facility Loan 10% interest; due March 31, 2019. 2,350,000 2,350,000 Unamortized debt discount — (62,924 ) 3 Note s payable, related party, 15% simple interest, due November 16, 2019, February 4, 2020, and March 23, 2020 119,000 — Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due October 2022 20,888 25,598 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 21,337 26,390 Total – Notes Payable $ 2,563,457 $ 2,353,003 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 down $2,350,000 on the facility and issued 1,175,000 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. The unamortized debt discount as of December 31, 2018 of $62,973 was fully amortized during the nine months ended September 30, 2019. 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. Subsequent draws were used for general corporate purposes. The facility required the Company to achieve $1,000,000 in EBITDA as of December 31, 2018, which it did not attain. As such, the Company was in default of the facility's covenants as of January 1, 2019 requiring the Company to pay a default interest rate of 15%. As of September 30, 2019, the Company was in default on its loan. At this time, the Company has not been able to refinance the loan and remains in default. On September 11, 2019 a court in Kern County, granted the lender's request to appoint a third-party trustee to oversee the operations at the Kern Bluff Oil Field. Consequently, August's 2019 gross production revenue receipts were turned over to the third-party trustee on September 15, 2019 amounting to $16,097. As of September 30, 2019, the net receivable from the third-party trustee amounted to $10,624 which is included in the consolidated balance sheet under prepaid expenses and other current assets. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
STOCKHOLDERS' EQUITY | 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. In January of 2019, we issued 3,956,147 shares of our common stock valued at $0.20 as a dividend payment on our Series A Preferred Stock. In March of 2019, we sold an additional 5,000 shares of Series A Convertible Participating Preferred Stock for cash proceeds of $100,000. |
STOCK OPTIONS
STOCK OPTIONS | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
STOCK OPTIONS | NOTE 8 – STOCK OPTIONS The following is a summary of the status of all of the Company’s stock options as of December 31, 2018 and changes during the nine months ended September 30, 2019: Number Weighted-Average Aggregate Weighted-Average Outstanding at December 31, 2018 10,000,000 $ 0.20 $ — 2.48 Exercisable at December 31, 2018 10,000,000 $ 0.20 $ — 2.48 Expired at September 30, 2018 (4,000,000 ) $ 0.20 $ — — Outstanding at September 30, 2019 6,000,000 $ 0.21 $ — 2.93 Exercisable at September 30, 2019 6,000,000 $ 0.21 $ — 2.93 |
WARRANTS
WARRANTS | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
WARRANTS | NOTE 9 – WARRANTS The Company did not issue any new warrants during the nine months ended September 30, 2019. Warrant activity for the nine months ended September 30, 2019 is as follows: Number Weighted-Average Weighted-Average Outstanding at December 31, 2018 1,175,000 $ 0.10 4.34 Granted — $ 0.00 — Exercised — $ 0.00 — Outstanding at September 30, 2019 1,175,000 $ 0.10 3.60 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS During the period the Company did not have any purchases of equipment from related parties; historically the Company had purchased oil field equipment from one of its board members. As of September 30, 2019, and December 31, 2018, the Company had a production payment liability of $300,000 outstanding to a related party. The Company also has accrued interest related to a loan of $233,085 due to a related party. On May 20, 2019, the Company received a note payable in the amount of $50,000 with 15% interest, maturing on November 16, 2019. Consequently, the May 20, 2019 note is currently in default. On August 12, 2019, the Company received a note payable in the amount of $50,000 with 15% interest, maturing on February 4, 2020. On September 25, 2019, the Company received a note payable in the amount of $19,000 with 15% interest, maturing on March 23, 2020. |
DRILLING OBLIGATION
DRILLING OBLIGATION | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
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 on this obligation which was amortized over a period of 18 months. Amortization of debt discount for each of the nine months ended September 30, 2019 and 2018 amounted to $42,000 and $63,000 respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 – SUBSEQUENT EVENTS On October 22, 2019 the Company was loaned $50,000 by a related party in the form of a 180-day unsecured bridge loan bearing interest at 15%. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The interim 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 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 year ended December 31, 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 indicative of annual results. |
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 “we”, “our or 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, 2019, management decided to impair all unproved oil and gas properties. This decision was driven by the fact that the Company is currently in default on its senior secured loan, and as such the lender through court order has appointed a third-party trustee to oversee operations at the Kern Bluff Oil Field. Without operational control, management felt it was prudent to impair these unproved leases as the Company will not be in the position to renew leases and or develop the leases in the near term. Consequently, the Company recognized an impairment loss of $1,172,034 for the nine months ended September 30, 2019. |
Use of estimates | 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. |
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, accounts and other payables and notes payable 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. |
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, 2019 and December 31, 2018. |
Earnings per share | Earnings per share The Company follows ASC Topic 260 to account for 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. |
Revenue recognition policy | Revenue Recognition Policy On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers, |
Recent pronouncements | Recent pronouncements In February 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2016-02 and these additional ASUs are now codified as Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). ASC 842 supersedes the lease accounting guidance in Accounting Standards Codification 840 “Leases” (“ASC 840”) and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company’s consolidated financial statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Company’s historical accounting policy. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s consolidated balance sheet of approximately $92,231. As the right of use asset and the lease payable obligation were the same upon adoption of ASC 842, there was no cumulative effect impact on the Company’s retained earnings. |
OIL AND GAS PROPERTIES (Tables)
OIL AND GAS PROPERTIES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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 $ 4,113,090 $ 4,121,940 Unproved properties - 1,172,034 Facilities 2,231,561 2,231,561 6,344,651 7,525,535 Less - accumulated depletion (780,120 ) (667,966 ) $ 5,564,531 $ 6,857,569 |
CASH AND RESTRICTED CASH (Table
CASH AND RESTRICTED CASH (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of the status of all of the Company’s stock warrants | |
Schedule of Cash and Restricted Cash | Amounts in consolidated balance sheets included as cash and restricted cash on the Company’s consolidated statements of cash flows are as follows: September 30, 2019 December 31, 2018 Cash $ 5,741 $ 86,441 Restricted cash – long term 200,000 200,000 Total cash and restricted cash $ 205,741 $ 286,441 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
Schedule of Notes Payable | Notes payable consists of the following: September 30, 2019 December 31, 2018 Note payable to an entity for the financing of insurance — 13,939 Note payable to an entity for the financing of insurance $ 52,232 — Senior Secured Facility Loan 10% interest; due March 31, 2019. 2,350,000 2,350,000 Unamortized debt discount — (62,924 ) 3 Notes payable, related party, 15% simple interest, due November 16, 2019, February 4, 2020, and March 23, 2020 119,000 — Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due October 2022 20,888 25,598 Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 21,337 26,390 Total – Notes Payable $ 2,563,457 $ 2,353,003 |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
Schedule of Company's stock options | The following is a summary of the status of all of the Company’s stock options as of December 31, 2018 and changes during the nine months ended September 30, 2019: Number Weighted-Average Aggregate Weighted-Average Outstanding at December 31, 2018 10,000,000 $ 0.20 $ — 2.48 Exercisable at December 31, 2018 10,000,000 $ 0.20 $ — 2.48 Expired at September 30, 2018 (4,000,000 ) $ 0.20 $ — — Outstanding at September 30, 2019 6,000,000 $ 0.21 $ — 2.93 Exercisable at September 30, 2019 6,000,000 $ 0.21 $ — 2.93 |
WARRANTS (Tables)
WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
Schedule of Warrants | The Company did not issue any new warrants during the nine months ended September 30, 2019. Warrant activity for the nine months ended September 30, 2019 is as follows: Number Weighted-Average Weighted-Average Outstanding at December 31, 2018 1,175,000 $ 0.10 4.34 Granted — $ 0.00 — Exercised — $ 0.00 — Outstanding at September 30, 2019 1,175,000 $ 0.10 3.60 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Summary Of Significant Accounting Policies | ||||
Impairment Loss on Oil and Gas | $ 843,574 | $ 1,172,034 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Notes payable consists of the following at: | ||
Accumulated Deficit | $ 15,683,027 | $ 13,320,513 |
Working Capital Deficit | $ 7,084,279 |
OIL AND GAS PROPERTIES (Details
OIL AND GAS PROPERTIES (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Oil and Natural Gas: | ||
Proved properties | $ 4,113,090 | $ 4,121,940 |
Unproved properties | 1,172,034 | |
Facilities | 2,231,561 | 2,231,561 |
Oil and Natural Gas Total | 6,344,651 | 7,525,535 |
Less accumulated depreciation, depletion, and amortization | (780,120) | (667,966) |
Oil and Natural Gas, Net | $ 5,564,531 | $ 6,857,569 |
OIL AND GAS PROPERTIES (Detai_2
OIL AND GAS PROPERTIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Oil And Gas Properties | ||||
Depletion expenses | $ 112,154 | $ 378,912 | ||
Impairment loss | $ 843,574 | $ 328,460 |
CASH AND RESTRICTED CASH (Detai
CASH AND RESTRICTED CASH (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Disclosure Cash And Restricted Cash Details Abstract | ||||
Cash | $ 5,741 | $ 86,441 | ||
Restricted cash - long term | 200,000 | 200,000 | ||
Total cash and restricted cash | $ 205,741 | $ 286,441 | $ 507,381 | $ 972,103 |
DEPOSITS (Details Narrative)
DEPOSITS (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Banking and Thrift [Abstract] | ||
Deposits | $ 35,100 | $ 35,100 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Notes Payable | ||
Note payable to an entity for the financing of insurance premiums, unsecured; 7.99% interest, due March 2019 | $ 13,939 | |
Note payable to an entity for the financing of insurance premiums, unsecured; 8.63% interest, due March 2020 | 52,232 | |
Senior Secured Facility Loan 10% interest; due March 31, 2019. | 2,350,000 | 2,350,000 |
Unamortized debt discount | (62,924) | |
3 Notes payable, related party, 15% simple interest, due November 16, 2019, February 4, 2020, and March 23, 2020 | 119,000 | |
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due October 2022 | 20,888 | 25,598 |
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022 | 21,337 | 26,390 |
Notes payable | $ 2,563,457 | $ 2,353,003 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Jan. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Preferred shares issued for cash | $ 100,000 | $ 25,000 | ||
Series A Preferred Stock [Member] | ||||
Common shares issued as dividend payment on our Series A Preferred Stock | 3,956,147 | |||
Preferred shares issued for cash | $ 100,000 | |||
Preferred shares issued for cash, Shares | 5,000 |
STOCK OPTIONS (Details)
STOCK OPTIONS (Details) - Stock Option [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Number of Options | ||
Outstanding, Beginning | 10,000,000 | |
Expired during the period | (4,000,000) | |
Outstanding, Ending | 6,000,000 | |
Exercisable at end of period | 6,000,000 | 10,000,000 |
Weighted-Average Exercise Price | ||
Outstanding, Beginning | $ 0.20 | |
Expired price (per share) | .20 | |
Outstanding, Ending | 0.21 | |
Exercisable at end of period | $ .21 | $ .20 |
Weighted-Average Remaining Life (Years) | ||
Outstanding, Beginning | 2 years 5 months 23 days | |
Outstanding, Ending | 2 years 11 months 5 days | |
Exercisable at end of period | 2 years 11 months 5 days |
WARRANTS (Details)
WARRANTS (Details) - Warrant [Member] | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Number of Warrants | |
Outstanding, Beginning | shares | 1,175,000 |
Granted | shares | |
Exercised | shares | |
Outstanding, Ending | shares | 1,175,000 |
Weighted-Average Exercise Price | |
Outstanding, Beginning | $ / shares | $ .10 |
Granted | $ / shares | .00 |
Exercised | $ / shares | .00 |
Outstanding, Ending | $ / shares | $ .10 |
Weighted-Average Remaining Life (Years) | |
Outstanding, Beginning | 4 years 4 months 2 days |
Outstanding at at end of period | 3 years 7 months 6 days |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Outstanding at January 1, 2014 | ||
Production payment liability - related party | $ 300,000 | $ 300,000 |
Accrued Interest due to related party | $ 233,085 |
DRILLING OBLIGATION (Details Na
DRILLING OBLIGATION (Details Narrative) - USD ($) | 9 Months Ended | 18 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | |
Drilling Obligation | |||
Amortization of debt discount | $ 63,000 | $ 63,000 | $ 126,000 |