Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 28, 2018 | Jun. 30, 2017 | |
Document And Entity Information [Abstract] | |||
Entity Registrant Name | PetroShare Corp. | ||
Entity Central Index Key | 1,568,079 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | Yes | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 22,999,615 | ||
Entity Common Stock, Shares Outstanding | 27,788,802 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 713,924 | $ 2,449,412 |
Accounts receivable - joint interest billing | 828,583 | 240,450 |
Accounts receivable - joint interest billing - related party | 204,730 | 286,226 |
Accounts receivable - crude oil, natural gas and NGL sales | 1,412,612 | 179,236 |
Accounts receivable - other | 27,876 | |
Prepaid expenses and other assets | 26,795 | 1,178,081 |
Deferred financing fee, net | 251,389 | |
Total current assets | 3,438,033 | 4,361,281 |
Crude oil and natural gas properties - using successful efforts method: | ||
Proved crude oil and natural gas properties | 22,144,366 | 8,132,881 |
Unproved crude oil and natural gas properties | 1,919,335 | 4,092,550 |
Wells in progress | 9,858,262 | 2,168,092 |
Less: accumulated depletion, depreciation and amortization | (2,849,374) | (783,320) |
Crude oil and natural gas properties, net | 31,072,589 | 13,610,203 |
Property, plant and equipment, net | 168,411 | 39,542 |
Other assets | 233,871 | 15,758 |
TOTAL ASSETS | 34,912,904 | 18,026,784 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 4,140,352 | 3,009,106 |
Accounts payable and accrued liabilities - related party | 589,496 | |
Oil and gas revenue distributions payable | 148,103 | 144,526 |
Drilling advances - related party | 680,248 | 234,452 |
Asset retirement obligation | 288,784 | |
Line of credit - related party | 5,000,000 | |
Supplemental line of credit | 3,552,500 | 7,088,698 |
Convertibles notes payable, net | 6,831,897 | |
Total current liabilities | 21,231,380 | 10,476,782 |
Long-term liabilities | ||
Line of credit - related party | 5,000,000 | |
Credit facility, net | 4,896,565 | |
Convertible notes payable, net | 5,308 | |
Other long-term liabilities | 67,265 | 23,128 |
Asset retirement obligation | 834,660 | 945,419 |
Total liabilities | 27,029,870 | 16,450,637 |
Shareholders' equity: | ||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding | ||
Common stock, $0.001 par value, 100,000,000 shares authorized, 27,718,802 and 21,964,282 shares issued and outstanding, respectively | 27,719 | 21,964 |
Additional paid-in capital | 28,553,736 | 11,405,225 |
Accumulated deficit | (20,698,421) | (9,851,042) |
Total Shareholders’ Equity | 7,883,034 | 1,576,147 |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ 34,912,904 | $ 18,026,784 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Preferred stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 27,718,802 | 21,964,282 |
Common stock shares outstanding | 27,718,802 | 21,964,282 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
REVENUE: | ||
Crude oil sales | $ 8,719,793 | $ 239,810 |
Natural gas sales | 1,525,833 | 68,304 |
NGL sales | 861,948 | 25,002 |
Total revenue | 11,107,574 | 333,116 |
COSTS AND EXPENSES: | ||
Lease operating expense | 722,799 | 167,988 |
Production taxes, gathering and marketing | 992,817 | 38,634 |
Exploration costs | 61,693 | 19,259 |
Depletion, depreciation and amortization | 2,836,891 | 65,033 |
Accretion expense | 99,682 | 30,483 |
Plugging expense | 9,608 | 31,122 |
Loss on impairment of proved crude oil and natural gas properties | 116,303 | |
General and administrative expense | 6,205,412 | 4,022,969 |
Total costs and expenses | 10,928,902 | 4,491,791 |
Operating income (loss) | 178,672 | (4,158,675) |
OTHER INCOME (EXPENSE): | ||
Other income | 39,381 | 573 |
Interest expense | (9,293,782) | (323,170) |
Loss on conversion of notes payable | (1,771,650) | |
Total other (expense) | (11,026,051) | (322,597) |
Net (loss) | $ (10,847,379) | $ (4,481,272) |
Net (loss) per share: | ||
Basic and diluted (in dollars per share) | $ (0.46) | $ (0.21) |
Weighted average number of shares outstanding: | ||
Basic and diluted (in shares) | 23,530,583 | 21,828,853 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Earnings/(Deficit) | Total |
Beginning Balance, Shares at Dec. 31, 2015 | 21,633,191 | |||
Beginning Balance, Amount at Dec. 31, 2015 | $ 21,633 | $ 8,124,443 | $ (5,369,770) | $ 2,776,306 |
Issuance of common stock for cash at $1.00 per share (in shares) | 95,000 | |||
Issuance of common stock for cash at $1.00 per share, Amount | $ 95 | 94,905 | 95,000 | |
Issuance of common stock in connection with consulting agreements, Shares | 141,666 | |||
Issuance of common stock in connection with consulting agreements, Amount | $ 142 | 173,774 | 173,916 | |
Shares issued for services (in shares) | 50,000 | |||
Issuance of common stock for services, Amount | $ 50 | 50,455 | 50,505 | |
Issuance of common stock for lease acquisition, Shares | 14,425 | |||
Issuance of common stock for lease acquisition, Amount | $ 14 | 26,672 | 26,686 | |
Issuance of common stock for property acquisition, Shares | 30,000 | |||
Issuance of common stock for property acquisition, Amount | $ 30 | 56,670 | 56,700 | |
Beneficial conversion feature on convertible notes payable | 703,753 | 703,753 | ||
Warrants issued | 1,033,586 | 1,033,586 | ||
Stock-based compensation | 1,140,967 | 1,140,967 | ||
Net (loss) | (4,481,272) | (4,481,272) | ||
Ending Balance Shares at Dec. 31, 2016 | 21,964,282 | |||
Ending Balance Amount at Dec. 31, 2016 | $ 21,964 | 11,405,225 | (9,851,042) | 1,576,147 |
Net (loss) | (2,023,885) | |||
Ending Balance Amount at Mar. 31, 2017 | 6,871,271 | |||
Beginning Balance, Shares at Dec. 31, 2016 | 21,964,282 | |||
Beginning Balance, Amount at Dec. 31, 2016 | $ 21,964 | 11,405,225 | (9,851,042) | 1,576,147 |
Net (loss) | (2,323,512) | |||
Ending Balance Amount at Jun. 30, 2017 | 8,082,043 | |||
Beginning Balance, Shares at Dec. 31, 2016 | 21,964,282 | |||
Beginning Balance, Amount at Dec. 31, 2016 | $ 21,964 | 11,405,225 | (9,851,042) | 1,576,147 |
Net (loss) | (4,037,984) | |||
Ending Balance Amount at Sep. 30, 2017 | 7,208,777 | |||
Beginning Balance, Shares at Dec. 31, 2016 | 21,964,282 | |||
Beginning Balance, Amount at Dec. 31, 2016 | $ 21,964 | 11,405,225 | (9,851,042) | 1,576,147 |
Issuance of common stock in connection with conversion of convertible notes payable, Shares | 4,814,265 | |||
Issuance of common stock in connection with conversion of convertible notes payable, Amount | $ 4,814 | 7,062,528 | 7,067,342 | |
Issuance of common stock for lease acquisition, Shares | 470,555 | |||
Issuance of common stock for lease acquisition, Amount | $ 471 | 846,529 | 847,000 | |
Issuance of common stock for loan extension, Shares | 250,000 | |||
Issuance of common stock for loan extension, Amount | $ 250 | 387,250 | 387,500 | |
Issuance of restricted shares, Shares | 219,700 | |||
Issuance of restricted shares, Amount | $ 220 | 155,111 | 155,331 | |
Beneficial conversion feature on convertible notes payable | 4,329,365 | 4,329,365 | ||
Warrants issued | 2,978,796 | 2,978,796 | ||
Share-based compensation | 1,388,932 | 1,388,932 | ||
Net (loss) | (10,847,379) | (10,847,379) | ||
Ending Balance Shares at Dec. 31, 2017 | 27,718,802 | |||
Ending Balance Amount at Dec. 31, 2017 | $ 27,719 | $ 28,553,736 | $ (20,698,421) | 7,883,034 |
Beginning Balance, Amount at Mar. 31, 2017 | 6,871,271 | |||
Net (loss) | (299,627) | |||
Ending Balance Amount at Jun. 30, 2017 | 8,082,043 | |||
Net (loss) | (1,714,472) | |||
Ending Balance Amount at Sep. 30, 2017 | $ 7,208,777 |
Consolidated Statements of Cha6
Consolidated Statements of Changes in Shareholders' Equity ( Parenthetical ) | 12 Months Ended |
Dec. 31, 2016$ / shares | |
Consolidated Statement of Stockholders' Equity [Abstract] | |
Issuance of common stock for cash price per share | $ 1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net (loss) | $ (10,847,379) | $ (4,481,272) |
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: | ||
Depletion, depreciation and amortization | 2,836,891 | 65,033 |
Deferred rental liability | 6,526 | |
Accretion of asset retirement obligation | 99,682 | 30,483 |
Accretion of debt discounts and deferred financing fee | 7,666,313 | 17,253 |
Loss on conversion of notes payable | 1,771,650 | |
Stock-based compensation | 1,544,261 | 1,365,388 |
Impairment of proved crude oil and natural gas properties | 116,303 | |
Changes in operating assets and liabilities: | ||
Accounts receivable - joint interest billing | (588,132) | 144,168 |
Accounts receivable - joint interest billing - related party | 81,495 | (286,226) |
Accounts receivable - crude oil, natural gas and NGL sales | (1,233,376) | (179,236) |
Accounts receivable - other | (27,876) | |
Prepaid expenses and other assets | 961,048 | (1,160,314) |
Accounts payable and accrued liabilities | 7,053,693 | 1,338,274 |
Accounts payable and accrued liabilities- related party | 589,496 | |
Accounts payable - oil and gas revenue distributions payable | 3,578 | 143,577 |
Drilling advances - related party | 445,796 | 234,452 |
Net cash provided by (used in) operating activities | 10,391,542 | (2,679,993) |
Cash flows from investing activities: | ||
Additions of property, plant and equipment | (91,186) | (43,485) |
Development of crude oil and natural gas properties | (17,052,313) | (3,038,339) |
Acquisitions of crude oil and natural gas properties - business combinations | (4,820,742) | |
Acquisitions of unproved crude oil and natural gas properties | (3,202,380) | (2,854,475) |
Net cash (used in) investing activities | (20,345,879) | (10,757,041) |
Cash flows from financing activities: | ||
Long-term debt - advances on initial line of credit | 3,937,815 | |
Repayment of supplemental line of credit | (3,552,500) | |
Borrowings under supplemental line of credit | 7,105,000 | |
Convertible notes issued for cash | 11,771,349 | 1,737,340 |
Common stock issued for cash (net of offering costs) | 95,000 | |
Net cash provided by financing activities | 8,218,849 | 12,875,155 |
Cash: | ||
Net (decrease) in cash | (1,735,488) | (561,879) |
Cash, beginning of period | 2,449,412 | 3,011,291 |
Cash, end of period | 713,924 | 2,449,412 |
Supplemental cash flow disclosure: | ||
Cash paid for interest | 640,410 | |
Non-cash investing and financing activities: | ||
Acquisition of crude oil and natural gas properties – business combinations | 973,604 | |
Accrued development costs of crude oil and natural gas properties | 1,719,481 | |
Addition of property, plant and equipment through tenant improvement allowance | 84,460 | |
Beneficial conversion feature in connection with convertible notes payable | 4,329,365 | |
Issuance of common stock warrants in connection with convertible notes payable | 2,978,796 | 191,692 |
Issuance of common stock in connection with conversion of notes payable and accrued interest | 7,067,342 | |
Conversion of notes payable and accrued interest to common stock | 5,295,692 | |
Issuance of common stock in connection with lease acquisitions | 847,000 | 26,686 |
Issuance of common stock for property acquisition | $ 56,700 | |
Issuance of common stock in connection with deferred financing fee | 387,500 | |
Accounts payable paid with credit facility borrowings | 4,895,128 | |
Financing fee paid through credit facility borrowings | 104,871 | |
Revisions and other non-cash changes to asset retirement obligation | 127,826 | |
Forgiveness of accounts payable in connection with the sale of proven oil and gas properties | $ 4,683 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 12 Months Ended |
Dec. 31, 2017 | |
ORGANIZATION AND NATURE OF BUSINESS | |
ORGANIZATION AND NATURE OF BUSINESS | NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS PetroShare Corp. (“PetroShare” or the “Company”) is a corporation organized under the laws of the State of Colorado on September 4, 2012 to investigate, acquire and develop crude oil and natural gas properties in the Rocky Mountain or mid-continent portion of the United States. Since inception, the Company has focused on financing activities and the acquisition, exploration and development of crude oil and natural gas prospects , and is currently focused in the Denver-Julesburg Basin, or DJ Basin, in northeast Colorado. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Principles of Consolidation The consolidated financial statements include the accounts and balances of the Company and its wholly-owned subsidiary, CFW Resources, LLC, a Colorado limited liability company, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Business Combinations The Company accounts for the acquisition of oil and gas properties, that are not commonly controlled, based on the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires an acquiring entity to recognize the assets acquired and liabilities assumed at fair value under the acquisition method of accounting, provided such assets and liabilities qualify for acquisition accounting under the standard. The Company accounts for certain property acquisitions of proved developed oil and gas property as business combinations. Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Estimated quantities of crude oil, natural gas and natural gas liquids reserves are the most significant of the Company’s estimates. All reserve data included in these consolidated financial statements are based on estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil, natural gas and natural gas liquids. There are numerous uncertainties inherent in estimating quantities of proved crude oil, natural gas and natural gas liquids reserves. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserve estimates may be different from the quantities of crude oil, natural gas and natural gas liquids that are ultimately recovered. Other items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances for deferred income tax assets and valuation assumptions related to the Company’s stock-based compensation. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions. See Note 17, Unaudited Crude Oil and Natural Gas Reserves Information. Loss Per Common Share Basic and diluted loss per share attributable to PetroShare shareholders is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The Company excluded potentially dilutive securities as shown below, as the effect of their inclusion would be considered anti-dilutive. Potentially dilutive securities at December 31, 2017 and 2016 are as follows: December 31, December 31, 2017 2016 Exercisable stock options 4,347,500 3,010,000 Warrants issued to underwriter 255,600 255,600 Warrants issued to convertible note holders 6,666,600 1,294,987 Warrants issued to placement agent - convertible note offering 666,600 129,526 Shares underlying convertible notes 6,372,066 1,295,067 Total 18,308,366 5,985,180 Cash The Company’s bank accounts periodically exceed federally insured limits. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is minimal. Revenue Recognition The Company recognizes revenue from the sale of crude oil, natural gas and NGLs when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. In general, settlements for hydrocarbon sales may occur after the month in which the oil, natural gas or other hydrocarbon products were produced. The Company may estimate and accrue for the value of these sales using information available to it at the time its consolidated financial statements are generated. Differences are reflected in the accounting period that payments are received from the purchaser. Accounts Receivable – Crude oil, natural gas and NGLs Accounts receivable – Crude oil, natural gas and NGLs consists of amounts receivable from sales from the Company’s well interests. Management continually monitors accounts receivable for collectability. Accounts Receivable – Joint interest billing Accounts receivable – Joint interest billing consists primarily of joint interest billings, which are recorded at the invoiced and to-be-invoiced amounts. Collateral is not required for such receivables, nor is interest charged on past due balances. Joint interest billing receivables are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself. Allowance for doubtful accounts The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as other expense. We have not recorded an allowance for doubtful accounts as of December 31, 2017 and 2016, respectively. Deferred Equity Issuance Costs The Company defers as other current assets the direct incremental costs of raising capital through equity offerings until such time as the offering is completed. At the time of the offering completion, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated. Capitalized Interest Costs The Company has capitalized certain interest costs related to unproved properties that the Company is currently preparing for their intended use. The interest costs that have been capitalized to oil and gas properties total $0.3 million and $nil for the years ended December 31, 2017 and 2016, respectively. Concentration of Credit Risk and Major Customers The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy related industries. The creditworthiness of customers and other counterparties is subject to regular review. The Company does not believe the loss of any single purchaser of its production would materially impact its operating results, as crude oil, natural gas, and NGLs are products with well-established markets and numerous purchasers in the Company’s operating regions. The Company had the following major customers, which accounted for 10 percent or more of its total crude oil, natural gas, and NGL production revenue for at least one of the periods presented: For the Years Ended December 31, 2017 2016 Great Western Operating Company % % Kerr-McGee Oil and Gas Onshore % % Ward Petroleum % % DCP Midstream % % PDC Energy, Inc. % % The Company maintains its primary bank accounts with a large, multinational bank that has branch locations in the Company’s areas of operations. The Company’s policy is to diversify its concentration of cash and cash equivalent investments among multiple institutions and investment products to limit the amount of credit exposure to any single institution or investment. Crude Oil and Natural Gas Properties Proved The Company follows the successful efforts method of accounting for its crude oil and natural gas properties. Under this method of accounting, all property acquisition costs and development costs are capitalized when incurred and depleted on a units-of-production basis over the remaining life of proved reserves and proved developed reserves, respectively. Costs of drilling exploratory wells are initially capitalized but are charged to expense if the well is determined to be unsuccessful. The Company assesses its proved crude oil and natural gas properties for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test compares estimated undiscounted future net cash flows to the assets’ net book value. If the net capitalized costs exceed estimated future net cash flows, then the cost of the property is written down to fair value. Fair value for crude oil and natural gas properties is generally determined based on estimated discounted future net cash flows. Impairment expense for proved properties is reported in exploration and impairment expense. The net carrying values of retired, sold or abandoned properties that constitute less than a complete unit of depreciable property are charged or credited, net of proceeds, to accumulated depletion, depreciation and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in the statement of operations. Gains or losses from the disposal of complete units of depreciable property are recognized in operations. Unproved Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. Undeveloped lease costs and unproved reserve acquisitions are capitalized, and individually insignificant unproved properties are amortized on a composite basis, based on past success, past experience and average lease-term lives. The Company evaluates significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified as proved properties and depleted on a units-of-production basis. Impairment expense for unproved properties is reported in exploration and impairment expense. Exploratory Geological and geophysical costs, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Costs of seismic studies that are utilized in development drilling within an area of proved reserves are capitalized as development costs. Amounts of seismic costs capitalized are based on only those blocks of data used in determining development well locations. To the extent that a seismic project covers areas of both developmental and exploratory drilling, those seismic costs are proportionately allocated between development costs and exploration expense. Costs of drilling exploratory wells are initially capitalized, pending determination of whether the well contains proved reserves. If an exploratory well does not contain proved reserves, the costs of drilling the well and other associated costs are charged to expense. Costs incurred for exploratory wells that contain reserves, which cannot yet be classified as proved, continue to be capitalized if (a) the well has found a sufficient quantity of reserves to justify completion as a producing well, and (b) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if the Company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well costs, net of any salvage value, are expensed. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed as incurred. Asset Impairment Proved crude oil and natural gas properties are reviewed for impairment on a field-by-field basis each quarter, or when events and circumstances indicate a possible decline in the recoverability of the carrying value of such field. The estimated future undiscounted cash flows expected in connection with the field are compared to the carrying amount of the field to determine if the carrying amount is recoverable. If the carrying amount of the field exceeds its estimated undiscounted future cash flows, the carrying amount of the field is reduced to its estimated fair value. Due to the unavailability of relevant comparable market data, a discounted cash flow method is used to determine the fair value of proved properties. The discounted cash flow method utilizes the most recent third-party reserve estimation report and estimates future cash flows based on management’s estimates of future crude oil and natural gas production, commodity prices based on commodity futures price strips, operating and development costs, and a risk-adjusted discount rate. Depletion, Depreciation and Amortization Depletion, depreciation and amortization of capitalized drilling and development costs of producing crude oil and natural gas properties, including related support equipment and facilities, are computed using the units-of-production method on a field basis based on total estimated proved developed crude oil and natural gas reserves. Amortization of producing leaseholds is based on the units-of-production method using total estimated proved reserves. In arriving at rates under the units-of-production method, the quantities of recoverable crude oil and natural gas reserves are established based on estimates made by the Company and independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated depletion, depreciation and amortization are eliminated from the accounts and the resulting gain or loss, if any, is recognized. Units-of-production rates are revised whenever there is an indication of a need, but at least in conjunction with annual reserve reports. Revisions are accounted for prospectively as changes in accounting estimates. Drilling Advances - Related Party The Company’s drilling advances consist of cash provided to the Company from its joint interest partners for planned drilling activities. Advances are applied against the joint interest partners’ share of expenses incurred. Prepaid Drilling Costs Prepaid drilling costs consist of cash payments made by the Company to the operators of oil and gas properties and other third-party service providers. Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. Interest expense in the accompanying statements of operations includes a negligible amount associated with income taxes. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2018. Asset Retirement Obligation Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance with Accounting Standards Codification (“ASC”) 410, “Accounting for Asset Retirement Obligations.” The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of crude oil and natural gas properties is recorded generally upon the completion of a well. The net estimated costs are discounted to present values using a credit-adjusted risk-free interest rate over the estimated economic life of the crude oil and natural gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method. The liability is periodically adjusted to reflect: (1) new liabilities incurred; (2) liabilities settled during the period; (3) accretion expense; and (4) revisions to estimated future cash flow requirements. Stock-Based Compensation The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards in accordance with ASC 718, “Compensation.” The option-pricing model requires the input of highly subjective assumptions, including the option’s expected life, the price volatility of the underlying stock, and the estimated dividend yield of the underlying stock. The expected term of outstanding stock-based awards represents the period that stock-based awards are expected to be outstanding and is determined based on the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. As there was insufficient historical data available to ascertain a forfeiture rate for these awards , the plain vanilla method was applied in calculating the expected term of the options. The Company’s common stock has limited historical trading data, and as a result the expected stock price volatility is based on the historical volatility of a group of publicly-traded companies that share similar operating metrics and histories. The Company has never paid dividends on its common stock and does not intend to do so in the foreseeable future, and as such, the expected dividend yield is zero. Loans and Borrowings Borrowings are recognized initially at fair value, net of financing costs incurred, and subsequently measured at amortized cost. Any difference between the amounts originally received and the redemption value of the debt is recognized in the consolidated statement of operations over the period to maturity using the effective interest method. Fair Value of Financial Instruments Fair value accounting, as prescribed in ASC Section 825, “Financial Instruments,” utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Level 2 Level 3 Going Concern Assessment Pursuant to Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements – Going Concern the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the consolidated financial statement issuance date. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $10.8 million during the year ended December 31, 2017, and as of that date, the Company's current liabilities exceeded its current assets by $17.8 million, the Company had a cash balance of $0.7 million and other current assets of $2.7 million. As of December 31, 2017, the Company had insufficient working capital and revenues from operations to meet its maturing debt obligations and other liabilities incurred and to be incurred in connection with the Company’s development activities. The Company will also need to generate sufficient cash flow from operations and sell equity or debt to fund further drilling and acquisition activity. If sufficient cash flow and additional financing is not available, the Company may be compelled to reduce the scope of its business activities and/or sell a portion of the Company’s interests in its oil and gas properties. This, in turn, may have an adverse effect on the Company’s ability to realize the value of its assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated these conditions and determined that a reduction in the working capital deficit subsequent to December 31, 2017 as a result of a new term Credit Facility (Note 6) coupled with anticipated increased revenues from the Company’s non-operated and operated properties, may allow the Company to meet its maturing debt and interest obligations. However, to continue to execute its business plan, additional capital will be required. As part of the analysis, the Company considered selective participation in certain non-operated drilling programs based on availability of working capital and the timing of production-related cash flows. The Company’s consolidated financial statements do not include any adjustments related to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases currently classified as operating leases. The Company is currently analyzing the impact this standard will have on the Company’s leases, including non-cancelable leases, drilling rigs, pipeline gathering, transportation, gas processing, and other existing arrangements. Further, the Company is evaluating current accounting policies, applicable systems, controls, and processes to support the potential recognition and disclosure changes resulting from ASU 2016-02. Based upon the Company’s initial assessment, ASU 2016-02 is expected to result in an increase in assets and liabilities recorded. The Company will adopt ASU 2016-02 using a modified retrospective method on the effective date of January 1, 2019. In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-01”). ASU 2018-01 provides an optional transitional practical expedient which allows entities to exclude from evaluation land easements that exist or expired before adoption of ASU 2016-02. The Company is currently evaluating this practical expedient and will adopt ASU 2018-01 at the same time as ASU 2016-02. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company has determined that the adoption of ASU 2017-01 on the effective date of January 1, 2018, using a prospective method, does not impact the Company’s current consolidated financial statements or disclosures. However, the clarified definition of a business will be applied by the Company to future transactions. In February 2018, the FASB issued ASU No. 2018-02, Income Statement–Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 permits entities to reclassify tax effects stranded in accumulated other comprehensive income (loss) to retained earnings as a result of the 2017 Tax Act. ASU 2018-02, is to be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the United States federal corporate income tax rate in the 2017 Tax Act is recognized. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted as outlined in ASU 2018-02. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s consolidated financial statements and disclosures. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. In March 2016, the FASB released certain implementation guidance through ASU 2016‑08 (collectively with ASU 2014-09, the "Revenue ASUs") to clarify principal versus agent considerations. The Revenue ASUs allow for the use of either the full or modified retrospective transition method, and the standard will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period, with early adoption permitted for annual reporting periods beginning after December 15, 2016. Currently, the Company has not identified any contracts that would require a change from the entitlements method, historically used for certain domestic crude oil and natural gas sales, to the sales method of accounting. The Company plans to adopt the guidance using the modified retrospective method on the effective date of January 1, 2018. The Company has determined that the adoption of, ASU 2014-09, does not impact the Company’s current consolidated financial statements or disclosures. There are no other ASUs applicable to the Company that would have a material effect on the Company’s consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company as of December 31, 2017, and through the filing of this report. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2017 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 3 - ACQUISITIONS PDC Acquisition On June 30, 2016, the Company completed the acquisition of certain oil and gas assets from PDC Energy, Inc. ("PDC"), including leases covering approximately 3,652 gross (1,410 net) acres of lands located in Adams County, Colorado and PDC's interest in 35 producing wells ("PDC assets"). Simultaneous with the closing, the Company's working interest partner exercised its option under a participation agreement (the "Participation Agreement") and acquired 50% of the Company's interest in the PDC assets. The acquisition was effective April 1, 2016. Following a final proration of costs and revenues from the operation of the PDC assets and the Company's working interest partner's exercise of its option under the Participation Agreement, the Company's net purchase price for the PDC assets was $2.3 million. A final allocation of the purchase price was prepared using, among other things, an internally prepared reserve analysis. The following table summarizes the consideration transferred, fair value of assets acquired, and liabilities assumed: December 31, 2016 Consideration: Cash 2,260,890 Total consideration $ 2,260,890 Fair Value of Liabilities Assumed: Current liabilities 93,225 Asset retirement obligations 542,611 Total consideration plus liabilities assumed $ 2,896,726 Fair Value of Assets Acquired: Proved crude oil and gas properties 2,473,082 Unproved crude oil and gas properties 423,644 Amount attributable to assets acquired $ 2,896,726 In accordance with FASB Topic ASC 805, the following table presents the unaudited pro forma combined results of operations for the years ended December 31, 2016, and 2015 (unaudited), as if the PDC assets acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to depletion, depreciation and amortization expense, accretion expense and costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results. Year Ended December 31, 2016 2015 Crude oil and natural gas revenues $ 466,138 $ 423,653 Net income (loss) $ (4,498,325) $ (1,439,823) Net income (loss) per common share basic and diluted $ (0.21) $ (0.08) Crimson Acquisition On December 22, 2016, the Company completed the acquisition of certain oil and gas assets from Crimson Exploration Operating, Inc. (“Crimson”), including leases covering approximately 15,514 gross (5,609 net) acres of lands located mostly in Adams and Weld Counties, Colorado and Crimson’s interest in 32 producing wells (“Crimson assets”). Simultaneous with the closing, the Company’s working interest partner acquired 50% of the Company’s interest in the Crimson assets. The acquisition was effective December 1, 2016. Following a reconciliation of certain suspense and inventory accounts, the Company’s net purchase price for the Crimson assets was $2.5 million. An Allocation of the purchase price was prepared using, among other things, an internally - prepared reserve analysis. The following table summarizes the consideration transferred, fair value of assets acquired, and liabilities assumed: December 31, 2016 Consideration: Cash 2,559,852 Total consideration $ 2,559,852 Fair Value of Liabilities Assumed: Current liabilities 13,938 Asset retirement obligations 337,468 Total consideration plus liabilities assumed $ 2,911,258 Fair Value of Assets Acquired: Current assets 20,907 Proved crude oil and gas properties 899,591 Unproved crude oil and gas properties 1,990,760 Amount attributable to assets acquired $ 2,911,258 In accordance with FASB Topic ASC 805, the following table presents the unaudited pro forma combined results of operations for the years ended December 31, 2016, and 2015 (unaudited), as if the Crimson assets acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to depletion expense, accretion expense and costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results. Year Ended December 31, 2016 2015 Crude oil and natural gas revenues $ 595,074 $ 237,035 Net income (loss) $ (4,437,877) $ (1,551,850) Net income (loss) per common share basic and diluted $ (0.20) $ (0.09) |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment balances were comprised of furniture, fixtures, and equipment and are shown below: December 31, 2017 2016 Property, plant and equipment $ 223,517 $ 47,870 Accumulated depreciation (55,106) (8,328) Total $ 168,411 $ 39,542 Depreciation expense recorded for the years ended December 31, 2017 and 2016 amounted to $46,778 and $5,772, respectively. |
CRUDE OIL AND NATURAL GAS PROPE
CRUDE OIL AND NATURAL GAS PROPERTIES | 12 Months Ended |
Dec. 31, 2017 | |
CRUDE OIL AND NATURAL GAS PROPERTIES | |
CRUDE OIL AND NATURAL GAS PROPERTIES | NOTE 5 – CRUDE OIL AND NATURAL GAS PROPERTIES The Company’s crude oil and natural gas properties are located entirely within the United States. The net capitalized costs related to the Company’s crude oil and natural gas producing activities were as follows: As of December 31, 2017 2016 Proved oil and gas properties $ 22,144,366 $ 8,132,881 Unproved oil and gas properties (1) 1,919,335 4,092,550 Wells in progress (2) 9,858,262 2,168,092 Total capitalized costs 33,921,963 14,393,523 Accumulated depletion, depreciation and amortization (2,849,374) (783,320) Net capitalized costs $ 31,072,589 $ 13,610,203 (1) Unproved oil and gas properties represent unevaluated costs the Company excludes from the amortization base until proved reserves are established or impairment is determined. (2) Costs from wells in progress are excluded from the amortization base until production commences. Costs Incurred in Crude Oil and Natural Gas Activities. Costs incurred in connection with the Company’s crude oil and natural gas acquisition, exploration and development activities for each of the periods are shown below: December 31, 2017 2016 Exploration costs $ 61,693 $ 2,700 Development costs 18,771,794 3,038,339 Acquisition of properties Proved — 3,630,195 Unproved 4,049,380 4,045,022 Total $ 22,882,867 $ 10,716,256 During the years ended December 31, 2017 and 2016, depletion, depreciation and amortization expense was $2.8 million and $0.1 million, respectively. 2017 Activity Significant acquisitions during 2017 included the following: On April 3, 2017, the Company completed an acquisition of oil and gas leases covering approximately 5,874 gross (1,462 net) acres in Adams and Weld Counties, Colorado. The seller reserved to itself all rights in the leases that exist below 50 feet above the top of the uppermost J Sand formation for those lands located in Township 7 North, Range 63 West in Weld County, Colorado. The acquisition was effective January 1, 2017. The net purchase price to the Company’s retained interest in the assets, following the Company’s working interest partner’s 50% participation in the transaction and a reduction in purchase price due to title defects, was $1.3 million. The Company paid $0.5 million of the Company’s net purchase price in cash, and $0.8 million was paid through the issuance of 450,000 shares of the Company’s common stock valued at $1.80 per share. On April 21, 2017, the Company acquired a 9.37% royalty interest covering approximately 145 net acres located in Adams County, Colorado for a net purchase price of $0.6 million following the Company’s working interest partner’s 50% participation in the transaction. The acquisition was effective April 1, 2017. In connection with the acquisition, the Company paid a finders’ fee of 20,555 shares of common stock valued at $1.80 per share to a lease broker. On May 9, 2017, the Company acquired 200 gross (70 net) acres in Adams County, Colorado for a net purchase price of $0.4 million following the Company’s working interest partner’s 50% participation in the transaction. The transaction was effective April 1, 2017. On September 15, 2017, the Company completed a purchase of additional oil and gas leases covering approximately 400 gross (200 net) acres. The gross purchase price was $0.4 million, or $0.2 million to the Company’s retained interest following the Company’s working interest partner’s 50% participation in the transaction. The location of the acreage is contiguous with that of the acreage acquired in the April 3, 2017 transaction described above. 2016 Activity Significant acquisitions during 2016 included the following: On March 10, 2016, the Company acquired certain surface rights and easements on lands located in Township 1 South, Range 67 West in its Todd Creek Farms prospect in exchange for $0.2 million in cash. The surface rights and easements allow the Company to access its Shook pad wells. On March 31, 2016, the Company acquired oil and gas assets on land adjacent to the Company’s Todd Creek Farms prospect, including approximately 160 net acres and a 50% working interest in one well following an assignment to the Company’s working interest partner pursuant to the Participation Agreement. The Company’s net cost for the foregoing assets was $0.6 million. On April 14, 2016, the Company acquired oil and gas leases in the Todd Creek Farms prospect covering approximately 189 net acres. The Company’s net cost for the leases was $0.3 million . In connection with obtaining its supplemental line of credit (Note 6), the Company assigned Providence Energy Partners III, LP (“PEP III”) 10% of the Company’s working interest in 278 gross (170 net) net acres in the Wattenberg Field including the Company’s interest in the Jacobucci wells. On October 14, 2016, the Company completed the acquisition of additional royalty interests in 10 Jacobucci pad wells located on its Todd Creek Farms prospect. The Company’s net cost for the royalty interests was $1.6 million. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
DEBT | NOTE 6 – DEBT The following table presents account balances and activity for our various debt instruments as of December 31: Initial Supplemental Convertible Convertible Line of Line of Notes Notes Credit Credit Credit Series A Series B Facility December 31, 2015 Principal Balance $ (1,062,185) $ - $ - $ - $ - Principal Borrowings (3,937,815) (7,105,000) (1,942,600) - - Repayments - - - - - Conversions - - - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - - - - Additions - - 205,260 - - Accretion - - (557) - - Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 204,703 - - Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - - - - Additions - - 1,033,585 - - Accretion - - (2,823) - - Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,030,762 - - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - - - - Additions - - 703,753 - - Accretion - - (1,926) - - Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 701,827 - - December 31, 2016 Principal Balance $ (5,000,000) $ (7,105,000) $ (1,942,600) $ - $ - December 31, 2016, Total, net $ (5,000,000) $ (7,105,000) $ (5,308) $ - $ - Principal Borrowings - - (8,057,400) (4,724,900) (5,000,000) Repayments - (3,552,500) - - - Conversions - - 5,166,800 - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 204,703 - - Additions - - 804,750 205,211 104,871 Accretion - - (742,944) (36,887) (1,436) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 266,509 168,324 103,435 Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,030,762 - - Additions - - 4,272,867 56,500 - Accretion - - (3,978,881) (11,959) - Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,324,748 44,541 - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 701,827 - - Additions - - 2,978,791 - - Accretion - - (2,758,537) - - Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 922,081 - - December 31, 2017, Principal Balance $ (5,000,000) $ (3,552,500) $ (4,833,200) $ (4,724,900) $ (5,000,000) December 31, 2017, Total, net $ (5,000,000) $ (3,552,500) $ (2,319,862) $ (4,512,035) $ (4,896,565) Initial Line of Credit On May 13, 2015, the Company entered into a revolving line of credit facility agreement (“Initial Line of Credit”) with PEO which provided the Company with a revolving line of credit of up to $5.0 million, maturing June 30, 2018. PEO is the beneficial owner of approximately 11.7% of the Company’s outstanding common stock. The initial interest rate of 8% per year on the initial line of credit was increased twice in connection with other transactions involving the parties, the first time in September 2017 to 10% per year and the second time in December 2017 to 15% per year. The initial line of credit was repaid in full in February 2018, together with accrued interest of $0.6 million, as part of another financing. Supplemental Line of Credit On October 13, 2016, the Company entered into a revolving line of credit facility agreement (the “Supplemental Line of Credit”) with Providence Energy Partners, III, LP (“PEP III”) under which the Company was originally entitled to borrow up to $10.0 million . PEP III is an affiliate of PEO by virtue of having some common management personnel. Interest on the Supplemental Line of Credit initially accrued at the rate of 8% per year and the line matured on April 13, 2017. The Supplemental Line of Credit was amended on March 30, 2017, pursuant to which the Company agreed not to borrow additional amounts against the line and to repay $3.6 million in outstanding principal not later than April 13, 2017, in exchange for PEP III extending the maturity date of the Supplemental Line of Credit until June 13, 2017. On April 12, 2017, the Company paid $3.6 million in accordance with the amendment. On June 8, 2017, the Company entered into a letter agreement (“PEP III Agreement”) with PEP III and PEO, pursuant to which PEP III again agreed to modify the Supplemental Line of Credit. The PEP III Agreement further extended the maturity date of the Supplemental Line of Credit from June 13, 2017 until December 27, 2017 and increased the interest rate on the supplemental line from 8% to 10%, effective June 8, 2017. The Company and PEO also agreed to amend the participation agreement between the Company and PEO, in order to expand the area of mutual interest (“AMI”) and to grant PEP III an option to participate under the Participation Agreement. As amended, the Participation Agreement provides PEO the option to acquire up to a 45% interest and, so long as the Supplemental Line of Credit remained outstanding, PEP III the option to acquire up to a 10% interest in, and participate in, any oil and gas development on acreage acquired by the Company within the expanded AMI. As described more fully below , on December 21, 2017, the interest rate on the Supplemental Line of Credit was increased from 10% to 15%, and on February 1, 2018, concurrent with the closing of another credit facility, a principal payment in the amount of $1.5 million plus accrued interest of $0.5 million was made on the Supplemental Line of Credit. Convertible Notes On December 30, 2016, January 20, 2017 and January 30, 2017, the Company completed the private placement of units consisting of convertible promissory notes (“Convertible Notes”) with an aggregate face value of $10.0 million and common stock purchase warrants . The Convertible Notes are unsecured, bear interest at 10% per year and are due and payable on December 31, 2018. At the option of the holders of the Convertible Notes, the principal amount of the Convertible Notes, and any accrued but unpaid interest, are convertible into shares of the Company's common stock at a conversion price of $1.50 per share. The Company received net proceeds of approximately $9.0 million from the private placement, after placement agent fees and other associated expenses. On October 16, 2017, in connection with the sales of Series B Unsecured Convertible Promissory Notes (“Series B Notes”) as described more fully below, $5.2 million in principal of the Convertible Notes and $0.1 million in accrued interest was converted into 4,814,265 shares of common stock at a conversion rate of $1.10 per share. The Company has recorded a loss on conversion of $1.8 million in connection with the reduction of the initial contractual conversion rate. In accordance with ASC 470, Debt, the proceeds from the sale of the Convertible Notes was allocated between the conversion feature embedded in the Convertible Notes and the warrants attached to the notes based on the fair values of the debt instrument without the warrants, and of the warrants themselves, at the time of issuance. The fair value of the beneficial conversion feature has been recorded as a reduction of the carrying value of the Convertible Notes and is being amortized to interest expense using the effective interest method over the term of the Convertible Notes. The fair value of the warrants has been recorded as a reduction to the carrying value of the Convertible Notes and is being amortized to interest expense using the effective interest method over the term of the Convertible Notes. The fair value of the warrants issued to the placement agent in connection with the offering of $1.0 million has been recorded as a charge to additional paid-in capital. Series B Convertible Notes In September and October 2017, the Company sold Series B Notes in the principal amount of $4.7 million . The Series B Notes are unsecured, bear interest at 15% per year, and are due and payable on December 31, 2018. At the option of the holders , the principal amount of the Series B Notes and any accrued but unpaid interest are convertible into shares of the Company's common stock at a conversion price of $1.50 per share. The Company netted $4.5 million from the sale of the Series B Notes after expenses . In accordance with ASC 470, the fair value of the beneficial conversion feature of $ 56,500 has been recorded as a reduction of the carrying value of the Series B Notes and is being amortized to interest expense using the effective interest method over the term of the Series B Notes. Secured Credit Facility On December 21, 2017, the Company entered into a letter agreement (“Letter Agreement”) with Providence Energy Ltd. (“PEC”), and Fifth Partners, LLC (“Fifth,” and together with PEC, the “Lenders”) pursuant to which the Company borrowed $5.0 million from PEC (“Initial Funding”). PEC is an affiliate of PEO by virtue of common management. In connection with the Initial Funding, the Company and the Lenders agreed to negotiate a second credit facility of $20.0 million (“Second Funding”), which was completed on February 1, 2018. Interest on the outstanding principal balance of the Initial Funding accrued at the three-month LIBOR plus 14%, or 15.7%. As of December 31, 2017, accrued interest payable related to the Initial Funding amounted $21,801. In connection with the Initial Funding, the Company recorded debt issuance costs in the amount of $0.1 million and incurred interest expense in the amount of $1,437 related to the accretion of these costs. |
ASSET RETIREMENT OBLIGATION
ASSET RETIREMENT OBLIGATION | 12 Months Ended |
Dec. 31, 2017 | |
ASSET RETIREMENT OBLIGATION | |
ASSET RETIREMENT OBLIGATION | NOTE 7 – ASSET RETIREMENT OBLIGATION For the purpose of determining the fair value of the asset retirement obligation incurred during the year ended December 31, 2017, the Company assumed an inflation rate of 2.0%, an estimated average asset life of 29.9 years, and a credit-adjusted risk-free interest rate of 11.26% to 14.0%. For the year ended December 31, 2016, the Company assumed an inflation rate of 2.0%, an estimated average life of 13.2 years, and a credit-adjusted risk-free rate of 9.48% to 10.73%. The following reconciles the value of the asset retirement obligation for the periods presented: December 31, 2017 2016 Asset retirement obligation, beginning of period $ 945,419 $ 34,776 Liabilities settled (1) (50,163) 1,990 Liabilities incurred 91,999 878,170 Revisions in estimated liabilities 36,507 — Accretion 99,682 30,483 Asset retirement obligation, end of period $ 1,123,444 $ 945,419 _________________________ (1) Reflects liabilities settled through plugging and abandonment activities and divestitures of properties. Accretion expense recorded for the year ended December 31, 2017 and 2016 was $0.1 million and $30,483, respectively. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2017 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities were comprised of the following amounts: December 31, 2017 2016 Trade payables and accrued liabilities $ 1,544,112 $ 2,416,551 Accrued interest payable 876,455 302,477 Liabilities incurred in connection with acquisition of crude oil and natural gas properties 1,719,785 290,078 Total $ 4,140,352 $ 3,009,106 |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | NOTE 9 - SHAREHOLDERS’ EQUITY Common Stock As of December 31, 2017 and 2016, the Company had 100,000,000 shares of common stock authorized with a par value of $0.001 per share. As of December 31, 2017 and 2016, the Company had 27,718,802 and 21,964,282 shares issued and outstanding, respectively. Activity for the year ended December 31, 2017 included the following: · On October 16, 2017, the Company issued 4,814,265 shares of common stock valued at $1.38 in conversion of $5.2 million of Convertible Notes and $0.1 million in accrued interest (Note 6) ; · On September 23, 2017, the Company issued 250,000 shares of common stock valued at $1.55 to PEO in connection with the execution of a Letter Agreement; · On various dates, in connection with the execution of four employment agreements (Note 13) and the employment of additional employees, the Company issued 219,700 shares of restricted stock. The shares are subject to certain vesting restrictions, but all 219,700 shares have full voting rights and are eligible to receive dividends during the vesting period; and · On April 3, 2017, the Company issued 470,555 shares valued at $1.80 per share in connection with the acquisitions of oil and gas assets. Activity for the year ended December 31, 2016 included the following: · In January 2016, the Company sold 95,000 shares of common stock at $1.00 per share to one accredited investor pursuant to a private placement of its common stock; · On April 8, 2016, the Company issued 50,000 shares of common stock valued at $0.73 per share to an investor relations company in connection with the certain services to be provided pursuant to an investor relations agreement; · On May 4, 2016, the Company issued an aggregate of 50,000 shares of common stock valued at $1.01 per share to two of the Company's directors in connection with their appointment to the Board (Note 10); · On July 5, 2016, the Company issued 25,000 shares of common stock valued at $1.60 per share to a director in connection with his appointment to the Board (Note 10); · On July 22, 2016, the Company issued 8,333 shares of common stock valued at $1.65 per share and on August 22, 2016 the Company issued 8,333 shares of common stock valued at $1.40 per share, each to an investor relations company in connection with certain services to be provided to the Company; · On August 30, 2016, the Company issued 50,000 shares of common stock valued at $1.44 per share to an investor relations company in connection with a termination agreement; · On November 11, 2016, the Company issued 14,425 shares of common stock valued at $1.85 per share to an individual in connection with the consideration and acquisition of the certain oil and gas leases; and · On December 5, 2016, the Company issued 30,000 shares of common stock valued at $1.89 per share in connection with the exchange of interests in certain oil and gas assets in Buck Peak prospect. Preferred Stock As of December 31, 2017 and 2016, the Company had 10,000,000 shares of preferred stock authorized with a par value of $0.01 per share. As of December 31, 2017 and 2016, there were no shares of preferred stock issued or outstanding. Warrants The table below summarizes warrants outstanding as of December 31, 2017: Shares Underlying Exercise Price Outstanding Warrants Per Share Expiration Date Underwriter warrants $ 1.25 11/12/2020 Investor warrants $ 3.00 12/31/2019 Placement agent warrants $ 1.50 12/31/2021 Total Activity for the year ended December 31, 2017: · On January 20, 2017 and January 30, 2017, the Company issued 537,260 warrants exercisable at $1.50 per share and expiring on December 31, 2021 in connection with a private placement (Note 6) ; and · On January 20, 2017 and January 30, 2017, the Company issued 5,371,579 warrants exercisable at $3.00 per share and expiring on December 31, 2019, also in connection with the private placement (Note 6) . Activity for the year ended December 31, 2016: · On December 30, 2016, the Company issued 129,516 warrants exercisable at $1.50 per share and expiring on December 31, 2021 in connection with the closing of the first round of the Company’s private placement (Note 6) ; and · On December 30, 2016, the Company issued 1,294,987 warrants exercisable at $3.00 per share and expiring on December 31, 2019 in connection with the closing of the first round of the Company’s private placement (Note 6) . |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2017 | |
STOCK BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 10 – STOCK-BASED COMPENSATION On August 18, 2016, the Company's Board of Directors adopted the Amended and Restated PetroShare Corp. Equity Incentive Plan (the "Plan"), which replaced and restated the Company's original equity incentive plan. The Plan terminates by its terms on August 17, 2026. Among other things, the Plan increased the number of shares of common stock reserved for issuance thereunder from 5,000,000 to 10,000,000 shares. The Company's shareholders approved the Plan at the Company's annual meeting of shareholders on September 8, 2016. During the year ended December 31, 2017, the Board of Directors granted non-qualified options to employees, directors and consultants of the Company under the Plan to acquire 422,000 shares of common stock. A summary of activity under the Plan for the years ended December 31, 2017 and 2016 is as follows: Weighted Remaining Average Contractual Number of Exercise Term Shares Price (Years) Outstanding, December 31, 2015 2,275,000 $ 0.33 6.50 Exercisable, December 31, 2015 2,200,000 $ 0.30 6.72 Granted 2,400,000 $ 1.16 5.34 Exercised — — — Forfeited — — — Outstanding, December 31, 2016 4,675,000 $ 0.76 5.39 Exercisable, December 31, 2016 3,010,000 $ 0.54 5.97 Granted 422,000 $ 1.86 5.69 Exercised — — — Forfeited (100,000) — — Outstanding, December 31, 2017 4,997,000 $ 0.85 4.44 Exercisable, December 31, 2017 4,347,500 $ 0.74 4.48 The fair value of each stock-based award was estimated on the date of the grant using the Black-Scholes pricing model that incorporates key assumptions including volatility of the Company’s stock , dividend yield and risk-free interest rates. As the Company’s common stock has limited historical trading data, the expected stock price volatility is based primarily on the historical volatility of a group of publicly-traded companies that share similar operating metrics and histories. The expected term of the awards represents the period of time that management anticipates awards will be outstanding. As there was insufficient historical data available to ascertain a forfeiture rate, the plain vanilla method was applied in calculating the expected term of the options. The risk-free rates for the periods within the contractual life of the options are based on the US Treasury bond rate in effect at the time of the grant for bonds with maturity dates at the expected term of the options. The Company has never paid dividends on its common stock and currently does not intend to do so, and as such, the expected dividend yield is zero. Compensation expense related to stock options was recorded net of estimated forfeitures, which for options remaining at December 31, 2017, the Company expects no additional forfeitures. The table below summarizes assumptions utilized in the Black-Scholes pricing model for the years ended 2017 and 2016: December 31, December 31, 2017 2016 Expected option term—years 2.5 - 3.25 1.5 - 2.5 Risk-free interest rate 1.75% - 1.93% 0.94% - 1.31% Expected dividend yield — — Volatility 162% - 169% 142% - 214% Forfeited — — During the years ended December 31, 2017 and 2016, the Company recorded stock-based compensation related to options of $1.4 million, and $1.1 million, respectively. Unvested stock-based option compensation at December 31, 2017 amounted to $0.6 million. |
PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
PROVISION FOR INCOME TAXES | |
PROVISION FOR INCOME TAXES | NOTE 11 – PROVISION FOR INCOME TAXES Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. No uncertain tax positions have been identified as of December 31, 2017. The Company is in a position of cumulative reporting losses for the current and preceding reporting periods. The volatility of energy prices is not readily determinable by management. At this date, this fact pattern does not allow the Company to project sufficient sources of future taxable income to offset tax loss carry-forwards and net deferred tax assets. Under these circumstances, it is management's opinion that the realization of these tax attributes does not reach the "more likely than not criteria" under ASC 740, "Income Taxes." As a result, the Company's deferred tax assets as of December 31, 2017 and 2016 are subject to a full valuation allowance. Net deferred tax assets and liabilities consist of the following components as of December 31, 2017 and 2016: Year Ended December 31, 2017 2016 Deferred tax assets - current: Exploration costs $ — $ — Deferred tax assets - noncurrent: NOL carryover 2,109,423 4,287,567 Stock based compensation 727,631 576,808 Asset retirement obligation 277,015 350,333 Charitable contribution 814 — Total deferred tax assets 3,114,883 5,214,708 Deferred tax liabilities - current: Property and equipment (15,251) (1,990) Impairment, intangible drilling costs and other exploration costs capitalized (935,482) (1,796,102) Debt discount - Beneficial conversion feature (337,518) — Total deferred tax liabilities (1,288,251) (1,798,092) Net deferred tax assets 1,826,632 3,416,616 Valuation allowance (1,826,632) (3,416,616) Net deferred tax assets $ — $ — The income tax provision differs from the amount of income tax determined by applying the US federal tax rate to the pretax loss from continuing operations for the years ended December 31, 2017 and 2016 due to the following: Year Ended December 31, 2017 2016 Tax at statutory federal rate $ (3,688,109) $ (1,520,524) Permanent difference 2,258,353 2,378 State taxes, net of federal (331,474) (136,847) Depletion, depreciation, amortization and impairment — — Change in valuation allowance 396,256 938,026 Effect of the Tax Cuts and Jobs Act 918,446 Other 446,528 716,967 Provision (benefit) for income taxes $ — $ — At December 31, 2017, the Company had net operating loss carry-forwards of approximately $8.6 million that may be offset against future taxable income from the years 2018 through 2037. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years. The Company files income tax returns in the US federal jurisdiction and in the State of Colorado. The Company is currently subject to US federal, state and local income tax examinations by tax authorities since inception of the Company. ASC 740 requires the recognition of the tax effects of the of the Act for annual periods that include December 22, 2017. At December 31, 2017, the Company has made reasonable estimates of the effects on its existing deferred tax balances. The Company has remeasured certain federal deferred tax assets and liabilities based upon the rates at which they are expected to reverse in the future, which is generally 21 percent. The provisional amount recognized related to the remeasurement of its federal deferred tax balance was approximately $0.9 million, which was subject to a valuation allowance at December 31, 2017. The Company will continue to analyze the Tax Act and future IRS regulations, refine its calculations and gain a more thorough understanding of how individual states are implementing this new law. This further analysis could potentially affect the measurement of deferred tax balances or potentially give rise to new deferred tax amounts. |
RELATED PARTIES
RELATED PARTIES | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTIES | |
RELATED PARTIES | NOTE 12 – RELATED PARTIES Providence Initial Line of Credit · At December 31, 2017 and 2016, the Company had drawn $5.0 million and $5.0 million on the initial line of credit and had accrued interest in the amount of $0.5 million and $ 0.3 million, respectively. · On September 23, 2017, the Company issued 250,000 shares of common stock valued at $1.55 to PEO in connection with the execution of a letter agreement and extension of a loan (Notes 6 and 9). The Company recorded interest expense in the amount of $0.1 million as related to the accretion of this debt discount. As of December 31, 2017, the unaccreted portion of the discount amounted to $0.3 million. Credit Facility · Related to the execution of a Letter Agreement pursuant to the Initial Funding of a Credit Facility on December 21, 2017 (Note 6) , the Company drew $5.0 million on the facility resulting in a liability to a PEO - affiliated entity in the amount of $5.0 million in principal and $21,801 in accrued interest as of December 31, 2017. PEO beneficially owns approximately 11.7% of the Company’s common stock . Operations · At December 31, 2017, the Company has recorded a net $0.2 million in Accounts receivable – joint interest billing – related party. This amount relates to amounts billed to PEO related to its participation in the Company’s operated Shook drilling program and PEO’s ownership interest in the vertical wells that the Company operates. · At December 31, 2017, the Company has recorded $0.7 million in drilling advances – related party. This amount relates to unapplied cash advances received from PEO in connection with the Company’s operated Shook drilling program. Convertible Notes In January 2017, the Company sold Series A Notes to a total of four employees and directors who collectively purchased Series A Notes in the aggregate principal amount of $0.2 million (Note 6), on the same terms and conditions as the other purchasers. On October 16, 2017, ten of the Company’s officers and directors converted Series A Notes in the aggregate principal amount of $0.7 million and accrued interest of $20,670 into 691,516 shares of common stock at $1.10 per share. (Notes 6 and 9) Ten employees, officers and directors of the Company received cash interest payments for interest of $0.1 million related to Series A and Series B notes during the year ended December 31, 2017. Series B Convertible Notes In September and October 2017, the Company sold Series B Notes to ten of the Company’s officers and directors who collectively purchased $0.6 million in aggregate principal amount (Note 6), on the same terms and conditions as the other purchasers, with the exception that the Company did not pay commissions on these sales. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 13 – COMMITMENTS AND CONTINGENCIES Operating Leases and Agreements The Company leases its office facilities under a four-year non-cancelable operating lease agreement expiring in March 2021. The following is a schedule by year of future minimum rental payments required under the operating lease agreement: Year ending December 31, Amount 2018 $ 129,738 2019 133,698 2020 137,658 2021 34,662 2022 — Total $ 435,756 Lease expense totaled $0.1 million and $34,651 for the years ended December 31, 2017 and December 31, 2016, respectively. Employment Agreements 2017 On April 1, 2017, the Company entered an employment agreement with its Manager of Production and Completion Operations. The agreement provides for a base salary of $130,000 per year, an initial term expiring on March 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock and an option to purchase up to 200,000 shares of common stock at an exercise price of $1.83 per share. On April 1, 2017, the Company entered into an employment agreement with its Executive Vice President for Capital Markets and Investor Relations. The agreement provides for a base salary of $156,000 per year, an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 66,700 shares of restricted stock and the vesting of 200,000 previously issued stock options were accelerated. On June 1, 2017, the Company entered into an employment agreement with its Senior Landman. The agreement provides for a base salary of $130,000 per year, an initial term expiring on May 31, 2018 with an automatic renewal for successive one-month periods unless terminated in accordance with its terms, and provisions for termination. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock and an option to purchase 200,000 shares of common stock at $1.89 per share. On June 1, 2017, the Company entered into an employment agreement with its Chief Financial Officer. The agreement provides for a base salary of $150,000 per year, an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock. 2016 On February 25, 2016, the Board of Directors approved a form of amended and restated executive employment in order to provide uniform terms of employment for the Company’s executive officers. Effective March 1, 2016, the Company entered into an amended and restated employment agreement with each Stephen J. Foley and Fredrick J. Witsell. Pursuant to the amended and restated employment agreements, Messrs. Foley and Witsell are compensated by the Company at the rate of $13,000 per month, or $156,000 per year. The Company also executed an executive agreement with William B. Lloyd, Chief Operating Officer, pursuant to which, as amended, Mr. Lloyd is compensated at the rate of $13,000 per month, or $156,000 per year. For each of the foregoing executives, the employment agreements provide for an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms and provisions for termination and payment of severance under various circumstances. On April 15, 2016, the Company entered into an executive employment agreement with William R. Givan, Vice President, Land, pursuant to which Mr. Givan is compensated at the rate of $10,833.33 per month, or $130,000 per year. Mr. Givan’s employment agreement provides for an initial term expiring on April 14, 2017 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms and provisions for termination and payment of severance under various circumstances. |
REVISION OF PRIOR PERIOD FINANC
REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2017 | |
Accounting for the fair value of the convertible promissory notes and warrants issued in the Company's private placement | |
REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS | |
REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS | NOTE 14 – REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS In connection with the preparation of its financial statements for the quarter ended March 31, 2017, the Company identified an error related to the manner in which it accounted for the fair value of convertible promissory notes and warrants issued in a private placement during December 2016 (Note 6). Specifically, the Company was required to apply the guidance of FASB ASC 470, and more specifically, ASC 470 20 25 2 and ASC 470 20 25 3. On the balance sheet at December 31, 2016, the Company recorded the face value of convertible notes payable issued in connection with the private placement under liabilities, discounted by (i) the value of the original issue discount and (ii) the value of the warrants issued to the placement agent. The Company did not, however, discount the value of the convertible notes by the fair value of the warrants issued to individual investors. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality , and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company evaluated the error and determined that the related impact was not material to the Company’s results of operations or financial position for any prior annual or interim period. Accordingly, the Company corrected these errors for the year ended December 31, 2016 by revising the financial statements beginning in the period ended March 31, 2017. Periods not presented herein will be revised, as applicable, in future filings. The following tables present the revisions to the balance sheet as of, and the statement of operations for the year ended, December 31, 2016: Balance Sheet As of December 31, 2016 As Reported Adjustments As Revised Convertible notes payable, net $ 814,989 $ (809,681) $ 5,308 Total Liabilities $ 17,260,318 $ (809,681) $ 16,450,637 Shareholders’ Equity Additional paid-in capital $ 10,593,324 $ 811,901 $ 11,405,225 Accumulated deficit (9,848,822) (2,220) (9,851,042) Total Shareholders’ Equity $ 766,466 $ 809,681 $ 1,576,147 Total Liabilities and Shareholders’ Equity $ 18,026,784 $ — $ 18,026,784 Statement of Operations Year Ended December 31, 2016 Net (loss), as reported $ (4,479,052) Adjustments : Previously reported accretion of debt discount (conversion feature and warrants) (interest expense) 2,529 Corrected accretion of debt discount (interest expense) 4,749 Total adjustment (2,220) Net (loss), as revised $ (4,481,272) Net (loss) per share, as reported $ Net (loss) per share, as revised $ |
RESTATEMENT OF PRIOR PERIOD CON
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2017 | |
Error relating to calculation of depletion of oil and gas properties | |
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | NOTE 15 – RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In connection with the preparation of its consolidated financial statements for the year ended December 31, 2017, the Company identified a mathematical error related to the calculation of the depletion, depreciation and amortization of oil and gas properties as recorded during the periods ended March 31, 2017, June 30, 2017 and September 30, 2017. The issue resulted from the application of an incorrect conversion factor when evaluating NGL volumes. The impact of the correction of this issue has been recorded during the quarter ended December 31, 2017. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality , the Company evaluated the error and determined that the related impact was not material to the Company’s results of operations or financial position for any prior interim period. Accordingly, the Company has corrected these errors in total for the year ended December 31, 2017 by revising the consolidated financial statements. Periods presented herein will be revised, as applicable, in future filings. The following tables present the restatements to the consolidated balance sheets as of, and the consolidated statements of operations for the periods presented: Consolidated Balance Sheets As of March 31, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (1,229,486) $ 115,254 $ (1,114,232) Crude oil and natural gas properties, net $ 20,510,001 $ 115,254 $ 20,625,255 Total assets $ 28,739,336 $ 115,254 $ 28,854,590 Shareholders’ equity: Accumulated deficit $ (11,990,181) $ 115,254 $ (11,874,927) Total shareholders’ equity $ 6,756,017 $ 115,254 $ 6,871,271 Total liabilities and shareholders’ equity $ 28,739,336 $ 115,254 $ 28,854,590 As of June 30, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (2,765,660) $ 549,096 $ (2,216,564) Crude oil and natural gas properties, net $ 24,958,027 $ 549,096 $ 25,507,123 Total assets $ 35,682,868 $ 549,096 $ 36,231,964 Shareholders’ equity: Accumulated deficit $ (12,723,650) $ 549,096 $ (12,174,554) Total shareholders’ equity $ 7,532,947 $ 549,096 $ 8,082,043 Total liabilities and shareholders’ equity $ 35,682,868 $ 549,096 $ 36,231,964 As of September 30, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (3,918,935) $ 865,697 $ (3,053,238) Crude oil and natural gas properties, net $ 28,698,193 $ 865,697 $ 29,563,890 Total assets $ 32,918,686 $ 865,697 $ 33,784,383 Shareholders’ equity: Accumulated deficit $ (14,754,722) $ 865,697 $ (13,889,025) Total shareholders’ equity $ 6,343,080 $ 865,697 $ 7,208,777 Total liabilities and shareholders’ equity $ 32,918,686 $ 865,697 $ 33,784,383 Consolidated Statements of Operations Three months ended Three months ended Six months ended Three months ended Nine months ended March 31, 2017 June 30, 2017 June 30, 2017 September 30, 2017 September 30, 2017 Net (loss), as reported $ (2,139,139) $ (733,469) $ (2,872,608) $ (2,031,072) $ (4,903,680) Adjustments: Previously reported depletion, depreciation and amortization $ (446,166) $ (1,536,174) $ (1,982,341) $ (1,153,273) $ (3,135,614) Total adjustment 115,254 433,842 549,096 316,600 865,696 Corrected depletion, depreciation and amortization (330,912) (1,102,332) (1,433,245) (836,673) (2,269,918) Net (loss), as restated $ (2,023,885) $ (299,627) $ (2,323,512) $ (1,714,472) $ (4,037,984) Net (loss) per share, as reported $ (0.10) $ (0.03) $ (0.13) $ (0.09) $ (0.22) Net (loss) per share, as restated $ (0.09) $ (0.01) $ (0.10) $ (0.08) $ (0.18) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS On February 1, 2018, the Company entered into a Secured Term Credit Agreement (“Credit Agreement”) with Providence Wattenberg, LP and 5NR Wattenberg, LLC (the “Secured Lenders”). Each of Providence and 5NR are affiliates of the Lenders under the Letter Agreement. Under the Credit Agreement, the Secured Lenders agreed to loan the Company a total of $25.0 million (the “Loan”), including the $5.0 million previously advanced pursuant to the Letter Agreement. Interest on the outstanding principal balance of the Loan accrues at the rate of 14% per year plus the greater of three-month LIBOR or 1%, but in no event to exceed 17%. Interest payments are due monthly beginning March 1, 2018. Repayment of the Loan is secured by a lien on all of the Company’s assets, which is equal in priority to the lien securing the remaining indebtedness owed to PEP III. All principal and accrued interest under the Credit Agreement is due February 1, 2020 (“Maturity Date”). At any time, the Lenders may convert 20% of the outstanding principal of the Loan into common stock of the Company at a price of $1.15 per share and the remaining principal at a price of $1.55 per share. The Company also granted to the Lenders: · an option to purchase up to 50% of any securities offered by the Company in any private or public offering until December 31, 2018, and 25% of any securities offered thereafter; and The Company also agreed to certain affirmative and negative covenants in connection with the Loan, including the obligation to appoint up to three persons to the Company’s Board of Directors, two of whom would be designated by Providence and one by 5NR, and at least one of whom shall qualify as independent under the rules of the NYSE American. |
UNAUDITED CRUDE OIL AND NATURAL
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | |
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | NOTE 17 – UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION The reserves at December 31, 2017, presented below, were prepared by the independent engineering firm Cawley, Gillespie & Associates Inc. All reserves are located within the DJ Basin. Proved oil, natural gas and NGL reserves are the estimated quantities of oil, natural gas and NGLs which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions (i.e., prices and costs) existing at the time the estimate is made. Proved developed oil, natural gas and NGL reserves are proved reserves that can be expected to be recovered through existing wells and equipment in place and under operating methods being utilized at the time the estimates were made. A variety of methodologies are used to determine the proved reserve estimates. The principal methodologies employed are decline curve analysis, advance production type curve matching, petro physics/log analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of the Company’s fields. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. Analysis of Changes in Proved Reserves. Estimated quantities of proved developed reserves (all of which are located within the United States), as well as the changes in proved developed reserves during the periods indicated, are presented in the following tables: Natural Oil Gas NGL’s Total (Bbls) (Mcf) (Bbls) (BOE) Proved Reserves: Balance as of December 31, 2014 159 — — 159 Revisions of previous estimates (122) — — (122) Extensions and discoveries — — — — Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves — — — — Production (37) — — (37) Balance as of December 31, 2015 — — — — Revisions of previous estimates — — — — Extensions and discoveries 2,710,437 10,498,397 1,570,454 6,030,624 Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves 55,669 1,020,516 62,244 287,999 Production (4,902) (26,058) (1,510) (10,755) Balance as of December 31, 2016 2,761,204 11,492,855 1,631,188 6,307,868 Revisions of previous estimates (388,211) 292,477 38,668 (300,797) Extensions and discoveries 839,738 4,183,757 631,149 2,168,180 Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves — — — — Production (188,529) (549,846) (50,111) (330,281) Balance as of December 31, 2017 3,024,202 15,419,243 2,250,894 7,844,970 Proved Developed Reserves, included above Balance as of December 31, 2015 — — — — Balance as of December 31, 2016 260,284 1,788,895 181,655 740,088 Balance as of December 31, 2017 521,354 3,752,330 387,430 1,534,172 Proved Undeveloped Reserves, included above Balance as of December 31, 2015 — — — — Balance as of December 31, 2016 2,500,920 9,703,960 1,449,533 5,567,780 Balance as of December 31, 2017 2,502,847 11,666,911 1,863,465 6,310,797 The values for the 2017 oil, natural gas and NGL reserves are based on the twelve-month arithmetic average of the first day of the month prices for the period from January through December 31, 2017. The unweighted arithmetic average first-day-of-the-month prices for the prior twelve months was $51.34 per barrel (West Texas Intermediate price) for crude oil and NGLs and $2.98 per MMBtu (Henry Hub price) for natural gas. All prices are then further adjusted for transportation, quality and basis differentials. The average resulting price used as of December 31, 2017 was $45.03 per barrel for oil, $1.71 per Mcf for natural gas and $20.42 per barrel for NGLs. The values for the 2016 oil, natural gas and NGL reserves are based on the twelve-month arithmetic average of the first day of the month prices for the period from January through December 31, 2016. The unweighted arithmetic average first-day-of-the-month prices for the prior twelve months was $42.75 per barrel (West Texas Intermediate price) for crude oil and NGLs and $2.48 per MMBtu (Henry Hub price) for natural gas. All prices are then further adjusted for transportation, quality and basis differentials. The average resulting price used as of December 31, 2016 was $34.09 per barrel for oil, $2.69 per Mcf for natural gas and $14.44 per barrel for NGLs. The Company did not assign a value to its proved reserves as of December 31, 2015 due to immaterial quantity estimates and a volatile price environment. For the year ended December 31, 2017, the Company reported extensions and discoveries of 2,168,180 BOE primarily as result of the conversion of 18 PUD locations in the Todd Creek Farms prospect area during 2017 coupled with the addition of new PUD locations due to economic field extensions adjacent to Company leases. The Company reported downward revisions of previous estimates of 300,797 BOE primarily related to the removal of uneconomic PUD locations. For the year ended December 31, 2016, the Company reported extensions and discoveries of 6,030,624 BOE as a result of drilling and completion activities during 2016. Additionally, during 2016 the Company purchased reserves of 287,999 BOE. Standardized Measure of Estimated Discounted Future Net Cash Flows to Proved Oil and Natural Gas Reserves (in thousands): The Company follows the guidelines prescribed in ASC 932, Extractive Activities-Oil and Gas for computing a standardized measure of future net cash flows and changes therein relating to estimated proved reserves. The following summarizes the policies used in the preparation of the accompanying oil, natural gas and NGL reserve disclosures, standardized measures of discounted future net cash flows from proved oil, natural gas and NGL reserves and the reconciliations of standardized measures from year to year. The information is based on estimates of proved reserves attributable to the Company’s interest in oil and gas properties as of December 31 of the years presented. These estimates were prepared by Cawley Gillespie & Associates, Inc., independent petroleum engineers. The standardized measure of discounted future net cash flows from production of proved reserves was developed as follows: (1) estimates are made of quantities of proved reserves and future periods during which they are expected to be produced based on year-end economic conditions; (2) the estimated future cash flows are compiled by applying the twelve-month average of the first-day-of-the-month prices of crude oil and natural gas relating to the Company’s proved reserves to the year-end quantities of those reserves; (3) the future cash flows are reduced by estimated production costs, costs to develop and produce the proved reserves and abandonment costs, all based on year-end economic conditions, plus Company overhead incurred; and (4) future net cash flows are discounted to present value by applying a discount rate of 10%. The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations, since these reserve quantity estimates are the basis for the valuation process. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and gas properties. The standardized measure of discounted future net cash flows does not purport, nor should it be interpreted, to present the fair value of the Company’s oil and natural gas reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs and a discount factor more representative of the time value of money and the risks inherent in reserve estimates. The following are the principal sources of change in the standardized measure (in thousands): For the years ended December 31, 2017 2016 2015 Future cash inflows $ 208,459 $ 148,596 $ 5 Future cash outflows: Production cost (48,929) (35,038) (3) Development cost (58,784) (37,667) — Future income tax (16,006) (5,802) — Future net cash flows 84,740 70,089 2 Adjustment to discount future annual net cash flows at 10% (35,054) (29,925) (2) Standardized measure of discounted future net cash flows $ 49,686 $ 40,164 $ — The following summary sets forth the Company’s future net cash flows relating to proved oil, natural gas and NGL reserves based on the standardized measure prescribed in ASC 932, Extractive Activities-Oil and Gas (in thousands): Changes in Standardized Measure of Estimated Discounted Future Net Cash Flows For the years ended December 31, 2017 2016 2015 Standardized measure, beginning of year $ 40,164 $ — $ 5 Sales of oil and gas, net of production cost (9,392) (126) (3) Net change in sales prices, net of production cost 10,263 489 — Discoveries, extensions and improved recoveries 11,979 76,445 — Change in future development costs (4,050) (37,667) — Development costs incurred during the period that reduced future development cost 1,144 — — Sales of reserves in place — — — Revisions of quantity estimates (559) — (2) Accretion of discount 4,275 130 — Net change in income tax (6,810) (2,587) — Purchase of reserves — 6,021 — Changes in timing of rates of production 2,672 (2,541) — Standardized measure, end of year $ 49,686 $ 40,164 $ — |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts and balances of the Company and its wholly-owned subsidiary, CFW Resources, LLC, a Colorado limited liability company, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). |
Business Combinations | Business Combinations The Company accounts for the acquisition of oil and gas properties, that are not commonly controlled, based on the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires an acquiring entity to recognize the assets acquired and liabilities assumed at fair value under the acquisition method of accounting, provided such assets and liabilities qualify for acquisition accounting under the standard. The Company accounts for certain property acquisitions of proved developed oil and gas property as business combinations. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Estimated quantities of crude oil, natural gas and natural gas liquids reserves are the most significant of the Company’s estimates. All reserve data included in these consolidated financial statements are based on estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil, natural gas and natural gas liquids. There are numerous uncertainties inherent in estimating quantities of proved crude oil, natural gas and natural gas liquids reserves. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserve estimates may be different from the quantities of crude oil, natural gas and natural gas liquids that are ultimately recovered. Other items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances for deferred income tax assets and valuation assumptions related to the Company’s stock-based compensation. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions. See Note 17, Unaudited Crude Oil and Natural Gas Reserves Information. |
Loss Per Common Share | Loss Per Common Share Basic and diluted loss per share attributable to PetroShare shareholders is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The Company excluded potentially dilutive securities as shown below, as the effect of their inclusion would be considered anti-dilutive. Potentially dilutive securities at December 31, 2017 and 2016 are as follows: December 31, December 31, 2017 2016 Exercisable stock options 4,347,500 3,010,000 Warrants issued to underwriter 255,600 255,600 Warrants issued to convertible note holders 6,666,600 1,294,987 Warrants issued to placement agent - convertible note offering 666,600 129,526 Shares underlying convertible notes 6,372,066 1,295,067 Total 18,308,366 5,985,180 |
Cash | Cash The Company’s bank accounts periodically exceed federally insured limits. The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is minimal. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from the sale of crude oil, natural gas and NGLs when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. In general, settlements for hydrocarbon sales may occur after the month in which the oil, natural gas or other hydrocarbon products were produced. The Company may estimate and accrue for the value of these sales using information available to it at the time its consolidated financial statements are generated. Differences are reflected in the accounting period that payments are received from the purchaser. |
Accounts Receivable | Accounts Receivable – Crude oil, natural gas and NGLs Accounts receivable – Crude oil, natural gas and NGLs consists of amounts receivable from sales from the Company’s well interests. Management continually monitors accounts receivable for collectability. Accounts Receivable – Joint interest billing Accounts receivable – Joint interest billing consists primarily of joint interest billings, which are recorded at the invoiced and to-be-invoiced amounts. Collateral is not required for such receivables, nor is interest charged on past due balances. Joint interest billing receivables are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself. |
Allowance for doubtful accounts | Allowance for doubtful accounts The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as other expense. We have not recorded an allowance for doubtful accounts as of December 31, 2017 and 2016, respectively. |
Deferred Equity Issuance Costs | Deferred Equity Issuance Costs The Company defers as other current assets the direct incremental costs of raising capital through equity offerings until such time as the offering is completed. At the time of the offering completion, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated. |
Capitalized Interest Costs | Capitalized Interest Costs The Company has capitalized certain interest costs related to unproved properties that the Company is currently preparing for their intended use. The interest costs that have been capitalized to oil and gas properties total $0.3 million and $nil for the years ended December 31, 2017 and 2016, respectively. |
Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy related industries. The creditworthiness of customers and other counterparties is subject to regular review. The Company does not believe the loss of any single purchaser of its production would materially impact its operating results, as crude oil, natural gas, and NGLs are products with well-established markets and numerous purchasers in the Company’s operating regions. The Company had the following major customers, which accounted for 10 percent or more of its total crude oil, natural gas, and NGL production revenue for at least one of the periods presented: For the Years Ended December 31, 2017 2016 Great Western Operating Company % % Kerr-McGee Oil and Gas Onshore % % Ward Petroleum % % DCP Midstream % % PDC Energy, Inc. % % The Company maintains its primary bank accounts with a large, multinational bank that has branch locations in the Company’s areas of operations. The Company’s policy is to diversify its concentration of cash and cash equivalent investments among multiple institutions and investment products to limit the amount of credit exposure to any single institution or investment. |
Crude Oil and Natural Gas Properties | Crude Oil and Natural Gas Properties Proved The Company follows the successful efforts method of accounting for its crude oil and natural gas properties. Under this method of accounting, all property acquisition costs and development costs are capitalized when incurred and depleted on a units-of-production basis over the remaining life of proved reserves and proved developed reserves, respectively. Costs of drilling exploratory wells are initially capitalized but are charged to expense if the well is determined to be unsuccessful. The Company assesses its proved crude oil and natural gas properties for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test compares estimated undiscounted future net cash flows to the assets’ net book value. If the net capitalized costs exceed estimated future net cash flows, then the cost of the property is written down to fair value. Fair value for crude oil and natural gas properties is generally determined based on estimated discounted future net cash flows. Impairment expense for proved properties is reported in exploration and impairment expense. The net carrying values of retired, sold or abandoned properties that constitute less than a complete unit of depreciable property are charged or credited, net of proceeds, to accumulated depletion, depreciation and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in the statement of operations. Gains or losses from the disposal of complete units of depreciable property are recognized in operations. Unproved Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. Undeveloped lease costs and unproved reserve acquisitions are capitalized, and individually insignificant unproved properties are amortized on a composite basis, based on past success, past experience and average lease-term lives. The Company evaluates significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified as proved properties and depleted on a units-of-production basis. Impairment expense for unproved properties is reported in exploration and impairment expense. Exploratory Geological and geophysical costs, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Costs of seismic studies that are utilized in development drilling within an area of proved reserves are capitalized as development costs. Amounts of seismic costs capitalized are based on only those blocks of data used in determining development well locations. To the extent that a seismic project covers areas of both developmental and exploratory drilling, those seismic costs are proportionately allocated between development costs and exploration expense. Costs of drilling exploratory wells are initially capitalized, pending determination of whether the well contains proved reserves. If an exploratory well does not contain proved reserves, the costs of drilling the well and other associated costs are charged to expense. Costs incurred for exploratory wells that contain reserves, which cannot yet be classified as proved, continue to be capitalized if (a) the well has found a sufficient quantity of reserves to justify completion as a producing well, and (b) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if the Company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well costs, net of any salvage value, are expensed. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed as incurred. |
Asset Impairment | Asset Impairment Proved crude oil and natural gas properties are reviewed for impairment on a field-by-field basis each quarter, or when events and circumstances indicate a possible decline in the recoverability of the carrying value of such field. The estimated future undiscounted cash flows expected in connection with the field are compared to the carrying amount of the field to determine if the carrying amount is recoverable. If the carrying amount of the field exceeds its estimated undiscounted future cash flows, the carrying amount of the field is reduced to its estimated fair value. Due to the unavailability of relevant comparable market data, a discounted cash flow method is used to determine the fair value of proved properties. The discounted cash flow method utilizes the most recent third-party reserve estimation report and estimates future cash flows based on management’s estimates of future crude oil and natural gas production, commodity prices based on commodity futures price strips, operating and development costs, and a risk-adjusted discount rate. |
Depletion, Depreciation and Amortization | Depletion, Depreciation and Amortization Depletion, depreciation and amortization of capitalized drilling and development costs of producing crude oil and natural gas properties, including related support equipment and facilities, are computed using the units-of-production method on a field basis based on total estimated proved developed crude oil and natural gas reserves. Amortization of producing leaseholds is based on the units-of-production method using total estimated proved reserves. In arriving at rates under the units-of-production method, the quantities of recoverable crude oil and natural gas reserves are established based on estimates made by the Company and independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated depletion, depreciation and amortization are eliminated from the accounts and the resulting gain or loss, if any, is recognized. Units-of-production rates are revised whenever there is an indication of a need, but at least in conjunction with annual reserve reports. Revisions are accounted for prospectively as changes in accounting estimates. |
Drilling Advances - Related Party | Drilling Advances - Related Party The Company’s drilling advances consist of cash provided to the Company from its joint interest partners for planned drilling activities. Advances are applied against the joint interest partners’ share of expenses incurred. |
Prepaid Drilling Costs | Prepaid Drilling Costs Prepaid drilling costs consist of cash payments made by the Company to the operators of oil and gas properties and other third-party service providers. |
Income Taxes | Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. Interest expense in the accompanying statements of operations includes a negligible amount associated with income taxes. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2018. |
Asset Retirement Obligation | Asset Retirement Obligation Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance with Accounting Standards Codification (“ASC”) 410, “Accounting for Asset Retirement Obligations.” The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of crude oil and natural gas properties is recorded generally upon the completion of a well. The net estimated costs are discounted to present values using a credit-adjusted risk-free interest rate over the estimated economic life of the crude oil and natural gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method. The liability is periodically adjusted to reflect: (1) new liabilities incurred; (2) liabilities settled during the period; (3) accretion expense; and (4) revisions to estimated future cash flow requirements. |
Stock-Based Compensation | Stock-Based Compensation The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards in accordance with ASC 718, “Compensation.” The option-pricing model requires the input of highly subjective assumptions, including the option’s expected life, the price volatility of the underlying stock, and the estimated dividend yield of the underlying stock. The expected term of outstanding stock-based awards represents the period that stock-based awards are expected to be outstanding and is determined based on the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. As there was insufficient historical data available to ascertain a forfeiture rate for these awards , the plain vanilla method was applied in calculating the expected term of the options. The Company’s common stock has limited historical trading data, and as a result the expected stock price volatility is based on the historical volatility of a group of publicly-traded companies that share similar operating metrics and histories. The Company has never paid dividends on its common stock and does not intend to do so in the foreseeable future, and as such, the expected dividend yield is zero. |
Loans and Borrowings | Loans and Borrowings Borrowings are recognized initially at fair value, net of financing costs incurred, and subsequently measured at amortized cost. Any difference between the amounts originally received and the redemption value of the debt is recognized in the consolidated statement of operations over the period to maturity using the effective interest method. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value accounting, as prescribed in ASC Section 825, “Financial Instruments,” utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Level 2 Level 3 |
Going Concern Assessment | Going Concern Assessment Pursuant to Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements – Going Concern the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the consolidated financial statement issuance date. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $10.8 million during the year ended December 31, 2017, and as of that date, the Company's current liabilities exceeded its current assets by $17.8 million, the Company had a cash balance of $0.7 million and other current assets of $2.7 million. As of December 31, 2017, the Company had insufficient working capital and revenues from operations to meet its maturing debt obligations and other liabilities incurred and to be incurred in connection with the Company’s development activities. The Company will also need to generate sufficient cash flow from operations and sell equity or debt to fund further drilling and acquisition activity. If sufficient cash flow and additional financing is not available, the Company may be compelled to reduce the scope of its business activities and/or sell a portion of the Company’s interests in its oil and gas properties. This, in turn, may have an adverse effect on the Company’s ability to realize the value of its assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated these conditions and determined that a reduction in the working capital deficit subsequent to December 31, 2017 as a result of a new term Credit Facility (Note 6) coupled with anticipated increased revenues from the Company’s non-operated and operated properties, may allow the Company to meet its maturing debt and interest obligations. However, to continue to execute its business plan, additional capital will be required. As part of the analysis, the Company considered selective participation in certain non-operated drilling programs based on availability of working capital and the timing of production-related cash flows. The Company’s consolidated financial statements do not include any adjustments related to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases currently classified as operating leases. The Company is currently analyzing the impact this standard will have on the Company’s leases, including non-cancelable leases, drilling rigs, pipeline gathering, transportation, gas processing, and other existing arrangements. Further, the Company is evaluating current accounting policies, applicable systems, controls, and processes to support the potential recognition and disclosure changes resulting from ASU 2016-02. Based upon the Company’s initial assessment, ASU 2016-02 is expected to result in an increase in assets and liabilities recorded. The Company will adopt ASU 2016-02 using a modified retrospective method on the effective date of January 1, 2019. In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-01”). ASU 2018-01 provides an optional transitional practical expedient which allows entities to exclude from evaluation land easements that exist or expired before adoption of ASU 2016-02. The Company is currently evaluating this practical expedient and will adopt ASU 2018-01 at the same time as ASU 2016-02. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company has determined that the adoption of ASU 2017-01 on the effective date of January 1, 2018, using a prospective method, does not impact the Company’s current consolidated financial statements or disclosures. However, the clarified definition of a business will be applied by the Company to future transactions. In February 2018, the FASB issued ASU No. 2018-02, Income Statement–Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 permits entities to reclassify tax effects stranded in accumulated other comprehensive income (loss) to retained earnings as a result of the 2017 Tax Act. ASU 2018-02, is to be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the United States federal corporate income tax rate in the 2017 Tax Act is recognized. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted as outlined in ASU 2018-02. The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s consolidated financial statements and disclosures. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. In March 2016, the FASB released certain implementation guidance through ASU 2016‑08 (collectively with ASU 2014-09, the "Revenue ASUs") to clarify principal versus agent considerations. The Revenue ASUs allow for the use of either the full or modified retrospective transition method, and the standard will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period, with early adoption permitted for annual reporting periods beginning after December 15, 2016. Currently, the Company has not identified any contracts that would require a change from the entitlements method, historically used for certain domestic crude oil and natural gas sales, to the sales method of accounting. The Company plans to adopt the guidance using the modified retrospective method on the effective date of January 1, 2018. The Company has determined that the adoption of, ASU 2014-09, does not impact the Company’s current consolidated financial statements or disclosures. There are no other ASUs applicable to the Company that would have a material effect on the Company’s consolidated financial statements and related disclosures that have been issued but not yet adopted by the Company as of December 31, 2017, and through the filing of this report. |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION(Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
Schedule of potentially antidilutive securities excluded from computation of earnings per share | December 31, December 31, 2017 2016 Exercisable stock options 4,347,500 3,010,000 Warrants issued to underwriter 255,600 255,600 Warrants issued to convertible note holders 6,666,600 1,294,987 Warrants issued to placement agent - convertible note offering 666,600 129,526 Shares underlying convertible notes 6,372,066 1,295,067 Total 18,308,366 5,985,180 |
Schedule of concentration of credit risk and major customers | For the Years Ended December 31, 2017 2016 Great Western Operating Company % % Kerr-McGee Oil and Gas Onshore % % Ward Petroleum % % DCP Midstream % % PDC Energy, Inc. % % |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PDC Assets | |
Summary of Consideration Transferred, Fair Value of Assets Acquired and Liabilities Assumed | December 31, 2016 Consideration: Cash 2,260,890 Total consideration $ 2,260,890 Fair Value of Liabilities Assumed: Current liabilities 93,225 Asset retirement obligations 542,611 Total consideration plus liabilities assumed $ 2,896,726 Fair Value of Assets Acquired: Proved crude oil and gas properties 2,473,082 Unproved crude oil and gas properties 423,644 Amount attributable to assets acquired $ 2,896,726 |
Pro forma Financial Information | Year Ended December 31, 2016 2015 Crude oil and natural gas revenues $ 466,138 $ 423,653 Net income (loss) $ (4,498,325) $ (1,439,823) Net income (loss) per common share basic and diluted $ (0.21) $ (0.08) |
Crimson Assets | |
Summary of Consideration Transferred, Fair Value of Assets Acquired and Liabilities Assumed | December 31, 2016 Consideration: Cash 2,559,852 Total consideration $ 2,559,852 Fair Value of Liabilities Assumed: Current liabilities 13,938 Asset retirement obligations 337,468 Total consideration plus liabilities assumed $ 2,911,258 Fair Value of Assets Acquired: Current assets 20,907 Proved crude oil and gas properties 899,591 Unproved crude oil and gas properties 1,990,760 Amount attributable to assets acquired $ 2,911,258 |
Pro forma Financial Information | Year Ended December 31, 2016 2015 Crude oil and natural gas revenues $ 595,074 $ 237,035 Net income (loss) $ (4,437,877) $ (1,551,850) Net income (loss) per common share basic and diluted $ (0.20) $ (0.09) |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of property and equipment | December 31, 2017 2016 Property, plant and equipment $ 223,517 $ 47,870 Accumulated depreciation (55,106) (8,328) Total $ 168,411 $ 39,542 |
CRUDE OIL AND NATURAL GAS PRO29
CRUDE OIL AND NATURAL GAS PROPERTIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CRUDE OIL AND NATURAL GAS PROPERTIES | |
Schedule of net capitalized costs | As of December 31, 2017 2016 Proved oil and gas properties $ 22,144,366 $ 8,132,881 Unproved oil and gas properties (1) 1,919,335 4,092,550 Wells in progress (2) 9,858,262 2,168,092 Total capitalized costs 33,921,963 14,393,523 Accumulated depletion, depreciation and amortization (2,849,374) (783,320) Net capitalized costs $ 31,072,589 $ 13,610,203 (1) Unproved oil and gas properties represent unevaluated costs the Company excludes from the amortization base until proved reserves are established or impairment is determined. (2) Costs from wells in progress are excluded from the amortization base until production commences. |
Schedule of costs incurred in crude oil and natural gas activities | December 31, 2017 2016 Exploration costs $ 61,693 $ 2,700 Development costs 18,771,794 3,038,339 Acquisition of properties Proved — 3,630,195 Unproved 4,049,380 4,045,022 Total $ 22,882,867 $ 10,716,256 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
Summary of account balances and activity for various debt instruments | Initial Supplemental Convertible Convertible Line of Line of Notes Notes Credit Credit Credit Series A Series B Facility December 31, 2015 Principal Balance $ (1,062,185) $ - $ - $ - $ - Principal Borrowings (3,937,815) (7,105,000) (1,942,600) - - Repayments - - - - - Conversions - - - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - - - - Additions - - 205,260 - - Accretion - - (557) - - Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 204,703 - - Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - - - - Additions - - 1,033,585 - - Accretion - - (2,823) - - Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,030,762 - - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - - - - Additions - - 703,753 - - Accretion - - (1,926) - - Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 701,827 - - December 31, 2016 Principal Balance $ (5,000,000) $ (7,105,000) $ (1,942,600) $ - $ - December 31, 2016, Total, net $ (5,000,000) $ (7,105,000) $ (5,308) $ - $ - Principal Borrowings - - (8,057,400) (4,724,900) (5,000,000) Repayments - (3,552,500) - - - Conversions - - 5,166,800 - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 204,703 - - Additions - - 804,750 205,211 104,871 Accretion - - (742,944) (36,887) (1,436) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 266,509 168,324 103,435 Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,030,762 - - Additions - - 4,272,867 56,500 - Accretion - - (3,978,881) (11,959) - Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,324,748 44,541 - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 701,827 - - Additions - - 2,978,791 - - Accretion - - (2,758,537) - - Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 922,081 - - December 31, 2017, Principal Balance $ (5,000,000) $ (3,552,500) $ (4,833,200) $ (4,724,900) $ (5,000,000) December 31, 2017, Total, net $ (5,000,000) $ (3,552,500) $ (2,319,862) $ (4,512,035) $ (4,896,565) |
ASSET RETIREMENT OBLIGATION (Ta
ASSET RETIREMENT OBLIGATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ASSET RETIREMENT OBLIGATION | |
Reconciliation of the Asset Retirement Obligation | December 31, 2017 2016 Asset retirement obligation, beginning of period $ 945,419 $ 34,776 Liabilities settled (1) (50,163) 1,990 Liabilities incurred 91,999 878,170 Revisions in estimated liabilities 36,507 — Accretion 99,682 30,483 Asset retirement obligation, end of period $ 1,123,444 $ 945,419 _________________________ (1) Reflects liabilities settled through plugging and abandonment activities and divestitures of properties. |
ACCOUNTS PAYABLE AND ACCRUED 32
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
Components of Accounts Payable and Accrued Liabilities | December 31, 2017 2016 Trade payables and accrued liabilities $ 1,544,112 $ 2,416,551 Accrued interest payable 876,455 302,477 Liabilities incurred in connection with acquisition of crude oil and natural gas properties 1,719,785 290,078 Total $ 4,140,352 $ 3,009,106 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SHAREHOLDERS' EQUITY | |
Summary of Warrants Outstanding | The table below summarizes warrants outstanding as of December 31, 2017: Shares Underlying Exercise Price Outstanding Warrants Per Share Expiration Date Underwriter warrants $ 1.25 11/12/2020 Investor warrants $ 3.00 12/31/2019 Placement agent warrants $ 1.50 12/31/2021 Total |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
STOCK BASED COMPENSATION | |
Summary of Stock Option Activity | Weighted Remaining Average Contractual Number of Exercise Term Shares Price (Years) Outstanding, December 31, 2015 2,275,000 $ 0.33 6.50 Exercisable, December 31, 2015 2,200,000 $ 0.30 6.72 Granted 2,400,000 $ 1.16 5.34 Exercised — — — Forfeited — — — Outstanding, December 31, 2016 4,675,000 $ 0.76 5.39 Exercisable, December 31, 2016 3,010,000 $ 0.54 5.97 Granted 422,000 $ 1.86 5.69 Exercised — — — Forfeited (100,000) — — Outstanding, December 31, 2017 4,997,000 $ 0.85 4.44 Exercisable, December 31, 2017 4,347,500 $ 0.74 4.48 |
Summary of Fair Value Assumptions | December 31, December 31, 2017 2016 Expected option term—years 2.5 - 3.25 1.5 - 2.5 Risk-free interest rate 1.75% - 1.93% 0.94% - 1.31% Expected dividend yield — — Volatility 162% - 169% 142% - 214% Forfeited — — |
PROVISION FOR INCOME TAXES (Tab
PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PROVISION FOR INCOME TAXES | |
Components of Deferred Tax Assets and Liabilities | Year Ended December 31, 2017 2016 Deferred tax assets - current: Exploration costs $ — $ — Deferred tax assets - noncurrent: NOL carryover 2,109,423 4,287,567 Stock based compensation 727,631 576,808 Asset retirement obligation 277,015 350,333 Charitable contribution 814 — Total deferred tax assets 3,114,883 5,214,708 Deferred tax liabilities - current: Property and equipment (15,251) (1,990) Impairment, intangible drilling costs and other exploration costs capitalized (935,482) (1,796,102) Debt discount - Beneficial conversion feature (337,518) — Total deferred tax liabilities (1,288,251) (1,798,092) Net deferred tax assets 1,826,632 3,416,616 Valuation allowance (1,826,632) (3,416,616) Net deferred tax assets $ — $ — |
Schedule of Effective Income Tax Rate Reconciliation | Year Ended December 31, 2017 2016 Tax at statutory federal rate $ (3,688,109) $ (1,520,524) Permanent difference 2,258,353 2,378 State taxes, net of federal (331,474) (136,847) Depletion, depreciation, amortization and impairment — — Change in valuation allowance 396,256 938,026 Effect of the Tax Cuts and Jobs Act 918,446 Other 446,528 716,967 Provision (benefit) for income taxes $ — $ — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Operating Lease Agreement Schedule | Year ending December 31, Amount 2018 $ 129,738 2019 133,698 2020 137,658 2021 34,662 2022 — Total $ 435,756 |
REVISION OF PRIOR PERIOD FINA37
REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting for the fair value of the convertible promissory notes and warrants issued in the Company's private placement | |
Quantifying Misstatement in Current Year Financial Statements [Line Items] | |
Schedule of revisions to the balance sheets and the statements of operations | The following tables present the revisions to the balance sheet as of, and the statement of operations for the year ended, December 31, 2016: Balance Sheet As of December 31, 2016 As Reported Adjustments As Revised Convertible notes payable, net $ 814,989 $ (809,681) $ 5,308 Total Liabilities $ 17,260,318 $ (809,681) $ 16,450,637 Shareholders’ Equity Additional paid-in capital $ 10,593,324 $ 811,901 $ 11,405,225 Accumulated deficit (9,848,822) (2,220) (9,851,042) Total Shareholders’ Equity $ 766,466 $ 809,681 $ 1,576,147 Total Liabilities and Shareholders’ Equity $ 18,026,784 $ — $ 18,026,784 Statement of Operations Year Ended December 31, 2016 Net (loss), as reported $ (4,479,052) Adjustments : Previously reported accretion of debt discount (conversion feature and warrants) (interest expense) 2,529 Corrected accretion of debt discount (interest expense) 4,749 Total adjustment (2,220) Net (loss), as revised $ (4,481,272) Net (loss) per share, as reported $ Net (loss) per share, as revised $ |
RESTATEMENT OF PRIOR PERIOD FIN
RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Error relating to calculation of depletion of oil and gas properties | |
Quantifying Misstatement in Current Year Financial Statements [Line Items] | |
Schedule of restatements to the consolidated balance sheets and the consolidated statements of operations | Consolidated Balance Sheets As of March 31, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (1,229,486) $ 115,254 $ (1,114,232) Crude oil and natural gas properties, net $ 20,510,001 $ 115,254 $ 20,625,255 Total assets $ 28,739,336 $ 115,254 $ 28,854,590 Shareholders’ equity: Accumulated deficit $ (11,990,181) $ 115,254 $ (11,874,927) Total shareholders’ equity $ 6,756,017 $ 115,254 $ 6,871,271 Total liabilities and shareholders’ equity $ 28,739,336 $ 115,254 $ 28,854,590 As of June 30, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (2,765,660) $ 549,096 $ (2,216,564) Crude oil and natural gas properties, net $ 24,958,027 $ 549,096 $ 25,507,123 Total assets $ 35,682,868 $ 549,096 $ 36,231,964 Shareholders’ equity: Accumulated deficit $ (12,723,650) $ 549,096 $ (12,174,554) Total shareholders’ equity $ 7,532,947 $ 549,096 $ 8,082,043 Total liabilities and shareholders’ equity $ 35,682,868 $ 549,096 $ 36,231,964 As of September 30, 2017 As Reported Adjustments As Restated Crude oil and natural gas properties, net: Accumulated depletion, depreciation and amortization $ (3,918,935) $ 865,697 $ (3,053,238) Crude oil and natural gas properties, net $ 28,698,193 $ 865,697 $ 29,563,890 Total assets $ 32,918,686 $ 865,697 $ 33,784,383 Shareholders’ equity: Accumulated deficit $ (14,754,722) $ 865,697 $ (13,889,025) Total shareholders’ equity $ 6,343,080 $ 865,697 $ 7,208,777 Total liabilities and shareholders’ equity $ 32,918,686 $ 865,697 $ 33,784,383 Consolidated Statements of Operations Three months ended Three months ended Six months ended Three months ended Nine months ended March 31, 2017 June 30, 2017 June 30, 2017 September 30, 2017 September 30, 2017 Net (loss), as reported $ (2,139,139) $ (733,469) $ (2,872,608) $ (2,031,072) $ (4,903,680) Adjustments: Previously reported depletion, depreciation and amortization $ (446,166) $ (1,536,174) $ (1,982,341) $ (1,153,273) $ (3,135,614) Total adjustment 115,254 433,842 549,096 316,600 865,696 Corrected depletion, depreciation and amortization (330,912) (1,102,332) (1,433,245) (836,673) (2,269,918) Net (loss), as restated $ (2,023,885) $ (299,627) $ (2,323,512) $ (1,714,472) $ (4,037,984) Net (loss) per share, as reported $ (0.10) $ (0.03) $ (0.13) $ (0.09) $ (0.22) Net (loss) per share, as restated $ (0.09) $ (0.01) $ (0.10) $ (0.08) $ (0.18) |
UNAUDITED CRUDE OIL AND NATUR39
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | |
Schedule of changes in proved developed reserves | Natural Oil Gas NGL’s Total (Bbls) (Mcf) (Bbls) (BOE) Proved Reserves: Balance as of December 31, 2014 159 — — 159 Revisions of previous estimates (122) — — (122) Extensions and discoveries — — — — Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves — — — — Production (37) — — (37) Balance as of December 31, 2015 — — — — Revisions of previous estimates — — — — Extensions and discoveries 2,710,437 10,498,397 1,570,454 6,030,624 Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves 55,669 1,020,516 62,244 287,999 Production (4,902) (26,058) (1,510) (10,755) Balance as of December 31, 2016 2,761,204 11,492,855 1,631,188 6,307,868 Revisions of previous estimates (388,211) 292,477 38,668 (300,797) Extensions and discoveries 839,738 4,183,757 631,149 2,168,180 Sales of reserves in place — — — — Improved recovery — — — — Purchase of reserves — — — — Production (188,529) (549,846) (50,111) (330,281) Balance as of December 31, 2017 3,024,202 15,419,243 2,250,894 7,844,970 Proved Developed Reserves, included above Balance as of December 31, 2015 — — — — Balance as of December 31, 2016 260,284 1,788,895 181,655 740,088 Balance as of December 31, 2017 521,354 3,752,330 387,430 1,534,172 Proved Undeveloped Reserves, included above Balance as of December 31, 2015 — — — — Balance as of December 31, 2016 2,500,920 9,703,960 1,449,533 5,567,780 Balance as of December 31, 2017 2,502,847 11,666,911 1,863,465 6,310,797 |
Schedule of standardized measure of discounted future net cash flows | The following are the principal sources of change in the standardized measure (in thousands): For the years ended December 31, 2017 2016 2015 Future cash inflows $ 208,459 $ 148,596 $ 5 Future cash outflows: Production cost (48,929) (35,038) (3) Development cost (58,784) (37,667) — Future income tax (16,006) (5,802) — Future net cash flows 84,740 70,089 2 Adjustment to discount future annual net cash flows at 10% (35,054) (29,925) (2) Standardized measure of discounted future net cash flows $ 49,686 $ 40,164 $ — |
Schedule of changes in standardized measure of estimated discounted future net cash flows | The following summary sets forth the Company’s future net cash flows relating to proved oil, natural gas and NGL reserves based on the standardized measure prescribed in ASC 932, Extractive Activities-Oil and Gas (in thousands): Changes in Standardized Measure of Estimated Discounted Future Net Cash Flows For the years ended December 31, 2017 2016 2015 Standardized measure, beginning of year $ 40,164 $ — $ 5 Sales of oil and gas, net of production cost (9,392) (126) (3) Net change in sales prices, net of production cost 10,263 489 — Discoveries, extensions and improved recoveries 11,979 76,445 — Change in future development costs (4,050) (37,667) — Development costs incurred during the period that reduced future development cost 1,144 — — Sales of reserves in place — — — Revisions of quantity estimates (559) — (2) Accretion of discount 4,275 130 — Net change in income tax (6,810) (2,587) — Purchase of reserves — 6,021 — Changes in timing of rates of production 2,672 (2,541) — Standardized measure, end of year $ 49,686 $ 40,164 $ — |
SUMMARY OF SIGNIFICANT ACCOUN40
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION -Loss Per Common Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loss Per Share | ||
Potentially dilutive securities | 18,308,366 | 5,985,180 |
Stock Options | ||
Loss Per Share | ||
Potentially dilutive securities | 4,347,500 | 3,010,000 |
Warrants issued to underwriter | ||
Loss Per Share | ||
Potentially dilutive securities | 255,600 | 255,600 |
Warrants issued to convertible note holders | ||
Loss Per Share | ||
Potentially dilutive securities | 6,666,600 | 1,294,987 |
Warrants issued to placement agent - convertible note offering | ||
Loss Per Share | ||
Potentially dilutive securities | 666,600 | 129,526 |
Shares underlying convertible notes | ||
Loss Per Share | ||
Potentially dilutive securities | 6,372,066 | 1,295,067 |
SUMMARY OF SIGNIFICANT ACCOUN41
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION - Allowance for doubtful accounts, Capitalized Interes (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts | ||
Allowance for doubtful accounts | $ 0 | $ 0 |
Capitalized Interest Costs | ||
Interest cost capitalized | $ 0.3 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN42
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION - Concentration of Credit Risk (Details) - Revenue - Customer | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Great Western Operating Company | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 22.00% | 43.00% |
Kerr-McGee Oil and Gas Onshore | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 4.00% | 23.00% |
Ward Petroleum | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 2.00% | 20.00% |
DCP Midstream | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 1.00% | 11.00% |
PDC Energy, Inc. | ||
Concentration of credit risk | ||
Concentration risk (as a percent) | 71.00% | 0.00% |
SUMMARY OF SIGNIFICANT ACCOUN43
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION - Going Concern Assesment (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Going Concern Assessment | ||||||||
Net (loss) | $ (1,714,472) | $ (299,627) | $ (2,023,885) | $ (2,323,512) | $ (4,037,984) | $ (10,847,379) | $ (4,481,272) | |
Amount by which current liabilities exceed current assets | 17,800,000 | |||||||
Cash balance | 713,924 | $ 2,449,412 | $ 3,011,291 | |||||
Other current assets | $ 2,700,000 | |||||||
Substantial doubt about the Company’s ability to continue as a going concern | true |
ACQUISITIONS - PDC Acquisition
ACQUISITIONS - PDC Acquisition (Detail) - PDC Assets - Oil and Gas Assets | 1 Months Ended | 12 Months Ended | |
Jun. 30, 2016aitem | Dec. 31, 2016USD ($)$ / shares | Dec. 31, 2015USD ($)$ / shares | |
Acquisitions | |||
Acres, gross | a | 3,652 | ||
Acres, net | a | 1,410 | ||
Number of wells drilled and completed | item | 35 | ||
Ownership interest acquired by the option holder (as a percent) | 50.00% | ||
Consideration: | |||
Cash | $ 2,260,890 | ||
Total consideration | 2,260,890 | ||
Fair Value of Liabilities Assumed: | |||
Current liabilities | 93,225 | ||
Asset retirement obligations | 542,611 | ||
Total consideration plus liabilities assumed | 2,896,726 | ||
Fair Value of Assets Acquired: | |||
Proved crude oil and gas properties | 2,473,082 | ||
Unproved crude oil and gas properties | 423,644 | ||
Amount attributable to assets acquired | 2,896,726 | ||
Pro forma information | |||
Crude oil and natural gas revenues | 466,138 | $ 423,653 | |
Net income (loss) | $ (4,498,325) | $ (1,439,823) | |
Net income (loss) per common share basic (in dollars per share) | $ / shares | $ (0.21) | $ (0.08) | |
Net income (loss) per common share diluted (in dollars per share) | $ / shares | $ (0.21) | $ (0.08) |
ACQUISITIONS - Crimson Acquisit
ACQUISITIONS - Crimson Acquisition (Details) - Oil and Gas Assets - Crimson Assets | Dec. 22, 2016aitem | Dec. 31, 2016USD ($)$ / shares | Dec. 31, 2015USD ($)$ / shares |
Acquisitions | |||
Acres, gross | a | 15,514 | ||
Acres, net | a | 5,609 | ||
Number of wells drilled and completed | item | 32 | ||
Ownership interest acquired by the option holder (as a percent) | 50.00% | ||
Consideration: | |||
Cash | $ 2,559,852 | ||
Total consideration | 2,559,852 | ||
Fair Value of Liabilities Assumed: | |||
Current liabilities | 13,938 | ||
Asset retirement obligations | 337,468 | ||
Total consideration plus liabilities assumed | 2,911,258 | ||
Fair Value of Assets Acquired: | |||
Current assets | 20,907 | ||
Proved crude oil and gas properties | 899,591 | ||
Unproved crude oil and gas properties | 1,990,760 | ||
Amount attributable to assets acquired | 2,911,258 | ||
Pro forma information | |||
Crude oil and natural gas revenues | 595,074 | $ 237,035 | |
Net income (loss) | $ (4,437,877) | $ (1,551,850) | |
Net income (loss) per common share basic (in dollars per share) | $ / shares | $ (0.20) | $ (0.09) |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - Net (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
PROPERTY, PLANT AND EQUIPMENT | ||
Property, plant and equipment | $ 223,517 | $ 47,870 |
Accumulated depreciation | (55,106) | (8,328) |
Total | $ 168,411 | $ 39,542 |
PROPERTY, PLANT AND EQUIPMENT47
PROPERTY, PLANT AND EQUIPMENT - Depreciation expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Depreciation expense | $ 46,778 | $ 5,772 |
CRUDE OIL AND NATURAL GAS PRO48
CRUDE OIL AND NATURAL GAS PROPERTIES - Capitalized Costs (Details) - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
CRUDE OIL AND NATURAL GAS PROPERTIES | |||||
Proved oil and gas properties | $ 22,144,366 | $ 8,132,881 | |||
Unproved oil and gas properties | 1,919,335 | 4,092,550 | |||
Wells in progress | 9,858,262 | 2,168,092 | |||
Total capitalized costs | 33,921,963 | 14,393,523 | |||
Accumulated depletion, depreciation and amortization | (2,849,374) | (783,320) | |||
Net capitalized costs | $ 31,072,589 | $ 29,563,890 | $ 25,507,123 | $ 20,625,255 | $ 13,610,203 |
CRUDE OIL AND NATURAL GAS PRO49
CRUDE OIL AND NATURAL GAS PROPERTIES - Costs Incurred in Crude Oil and Natural Gas Activities (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
CRUDE OIL AND NATURAL GAS PROPERTIES | |||||||
Exploration costs | $ 61,693 | $ 2,700 | |||||
Development costs | 18,771,794 | 3,038,339 | |||||
Acquisition of properties: | |||||||
Proved | 3,630,195 | ||||||
Unproved | 4,049,380 | 4,045,022 | |||||
Total | 22,882,867 | 10,716,256 | |||||
Depletion, depreciation and amortization | $ 836,673 | $ 1,102,332 | $ 330,912 | $ 1,433,245 | $ 2,269,918 | $ 2,836,891 | $ 65,033 |
CRUDE OIL AND NATURAL GAS PRO50
CRUDE OIL AND NATURAL GAS PROPERTIES - Other Acquisitions (Details) | Sep. 15, 2017USD ($)a | May 09, 2017USD ($)a | Apr. 21, 2017USD ($)a$ / sharesshares | Apr. 03, 2017USD ($)aft$ / sharesshares | Oct. 14, 2016USD ($)item | Apr. 14, 2016USD ($)a | Mar. 31, 2016USD ($)aitem | Mar. 10, 2016USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Oct. 13, 2016a |
Acquisitions | |||||||||||
Payment to acquire | $ 3,202,380 | $ 2,854,475 | |||||||||
Amount borrowed on line of credit to fund acquisition | $ 7,105,000 | ||||||||||
Adams County, Colorado | |||||||||||
Acquisitions | |||||||||||
Acres, gross | a | 200 | ||||||||||
Acres, net | a | 70 | ||||||||||
Percentage of working interest partner’s participation | 50.00% | ||||||||||
Payment to acquire | $ 400,000 | ||||||||||
Surface Rights and Easements on Lands | Todd Creek Farms | |||||||||||
Acquisitions | |||||||||||
Payment to acquire | $ 200,000 | ||||||||||
Oil and Gas Leases | Adams and Weld Counties, Colorado | |||||||||||
Acquisitions | |||||||||||
Acres, gross | a | 400 | 5,874 | |||||||||
Acres, net | a | 200 | 1,462 | |||||||||
Number of feet seller retained all rights | ft | 50 | ||||||||||
Net cost for oil and gas property | $ 1,300,000 | ||||||||||
Working interest partner’s participation | $ 200,000 | ||||||||||
Percentage of working interest partner’s participation | 50.00% | 50.00% | |||||||||
Payment to acquire | $ 400,000 | $ 500,000 | |||||||||
Equity interest issuable under acquisition | $ 800,000 | ||||||||||
Issuance of common stock for property acquisition, Shares | shares | 450,000 | ||||||||||
Share price (in dollars per share) | $ / shares | $ 1.80 | ||||||||||
Oil and Gas Leases | Todd Creek Farms | |||||||||||
Acquisitions | |||||||||||
Acres, net | a | 189 | ||||||||||
Purchase price | $ 300,000 | ||||||||||
Oil and Gas Assets | Land Adjacent to Todd Creek Farms | |||||||||||
Acquisitions | |||||||||||
Acres, net | a | 160 | ||||||||||
Working interest in well (as a percent) | 50.00% | ||||||||||
Payment to acquire | $ 600,000 | ||||||||||
Number of producing wells | item | 1 | ||||||||||
Royalty Interests | Adams County, Colorado | |||||||||||
Acquisitions | |||||||||||
Percentage of royalty | 9.37% | ||||||||||
Acres, net | a | 145 | ||||||||||
Percentage of working interest partner’s participation | 50.00% | ||||||||||
Payment to acquire | $ 600,000 | ||||||||||
Issuance of common stock for property acquisition, Shares | shares | 20,555 | ||||||||||
Share price (in dollars per share) | $ / shares | $ 1.80 | ||||||||||
Royalty Interests | Todd Creek Farms | |||||||||||
Acquisitions | |||||||||||
Payment to acquire | $ 1,600,000 | ||||||||||
Number of producing wells | item | 10 | ||||||||||
Supplemental line of credit | Oil and Gas Leases | Wattenberg Field | Providence Energy Partners III, LP (PEP III) | |||||||||||
Acquisitions | |||||||||||
Acres, gross | a | 278 | ||||||||||
Acres, net | a | 170 | ||||||||||
Working interest in well (as a percent) | 10.00% |
DEBT - Various Debt Instruments
DEBT - Various Debt Instruments (Details) - USD ($) | 2 Months Ended | 12 Months Ended | |
Oct. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Debt | |||
Accretion | $ 7,666,313 | $ 17,253 | |
Initial Line of Credit | |||
Debt | |||
Balance at beginning of period | (5,000,000) | (1,062,185) | |
Borrowings | (3,937,815) | ||
Balance at end of period | (5,000,000) | (5,000,000) | |
Total, net | 5,000,000 | 5,000,000 | |
Supplemental line of credit | |||
Debt | |||
Balance at beginning of period | (7,105,000) | ||
Borrowings | (7,105,000) | ||
Repayments | (3,552,500) | ||
Balance at end of period | (3,552,500) | (7,105,000) | |
Total, net | 3,552,500 | 7,105,000 | |
Series A Convertible Notes | |||
Debt | |||
Balance at beginning of period | (1,942,600) | ||
Borrowings | (8,057,400) | (1,942,600) | |
Conversions | 5,166,800 | ||
Balance at end of period | (4,833,200) | (1,942,600) | |
Total, net | 2,319,862 | 5,308 | |
Series A Convertible Notes | Warrants | |||
Debt | |||
Beginning Balance - Unamortized Debt Issuance Costs | 701,827 | ||
Additions | 2,978,791 | 703,753 | |
Accretion | 2,758,537 | (1,926) | |
Ending - Unamortized Debt Issuance Costs | 922,081 | 701,827 | |
Series A Convertible Notes | Original Issuer Discount | |||
Debt | |||
Beginning Balance - Unamortized Debt Issuance Costs | 204,703 | ||
Additions | 804,750 | 205,260 | |
Accretion | 742,944 | 557 | |
Ending - Unamortized Debt Issuance Costs | 266,509 | 204,703 | |
Series A Convertible Notes | Beneficial Conversion Feature | |||
Debt | |||
Beginning Balance - Unamortized Debt Issuance Costs | 1,030,762 | ||
Additions | 4,272,867 | 1,033,585 | |
Accretion | (3,978,881) | (2,823) | |
Ending - Unamortized Debt Issuance Costs | 1,324,748 | $ 1,030,762 | |
Series B Notes | |||
Debt | |||
Borrowings | $ (4,700,000) | (4,724,900) | |
Balance at end of period | (4,724,900) | ||
Total, net | 4,512,035 | ||
Series B Notes | Original Issuer Discount | |||
Debt | |||
Additions | 205,211 | ||
Accretion | 36,887 | ||
Ending - Unamortized Debt Issuance Costs | 168,324 | ||
Series B Notes | Beneficial Conversion Feature | |||
Debt | |||
Additions | 56,500 | ||
Accretion | (11,959) | ||
Ending - Unamortized Debt Issuance Costs | 44,541 | ||
Secured Credit Facility | |||
Debt | |||
Borrowings | (5,000,000) | ||
Balance at end of period | (5,000,000) | ||
Total, net | 4,896,565 | ||
Secured Credit Facility | Original Issuer Discount | |||
Debt | |||
Additions | 104,871 | ||
Accretion | 1,436 | ||
Ending - Unamortized Debt Issuance Costs | $ 103,435 |
DEBT - Initial Line of Credit (
DEBT - Initial Line of Credit (Details) - USD ($) $ in Millions | May 13, 2015 | Feb. 28, 2018 | Dec. 31, 2017 | Sep. 30, 2017 |
Providence Energy Operators, LLC | PetroShare Corp | ||||
Initial Line of credit | ||||
Related party, ownership percentage | 11.70% | |||
Providence Energy Operators, LLC | Initial Line of Credit | ||||
Initial Line of credit | ||||
Borrowing capacity | $ 5 | |||
Interest rate (as a percent) | 8.00% | 15.00% | 10.00% | |
Accrued interest repaid | $ 0.6 |
DEBT - Supplemental lines of cr
DEBT - Supplemental lines of credit (Details) - USD ($) | Feb. 01, 2018 | Jun. 08, 2017 | Apr. 12, 2017 | Dec. 31, 2017 | Dec. 21, 2017 | Dec. 31, 2016 | Oct. 13, 2016 |
Supplemental line of credit | |||||||
Supplemental line of credit | $ 3,552,500 | $ 7,088,698 | |||||
Repayment of line of credit | $ 3,552,500 | ||||||
Supplemental line of credit | Providence Energy Partners III, LP (PEP III) | |||||||
Supplemental line of credit | |||||||
Borrowing capacity | $ 10 | ||||||
Interest rate (as a percent) | 10.00% | 8.00% | |||||
Supplemental line of credit | $ 3,600,000 | ||||||
Repayment of line of credit | $ 3,600,000 | ||||||
Providence Energy Operators, LLC (PEO) | Supplemental line of credit | Providence Energy Partners III, LP (PEP III) | |||||||
Supplemental line of credit | |||||||
Interest rate (as a percent) | 10.00% | 15.00% | |||||
Principal payments | $ 1,500,000 | ||||||
Accrued interest repaid | $ 500,000 | ||||||
Participation Agreement | Providence Energy Partners III, LP (PEP III) | |||||||
Supplemental line of credit | |||||||
Participation Agreement acquisition interest in any oil and gas development acres in area of mutual interest (as a percent) | 10.00% | ||||||
Participation Agreement | Providence Energy Operators, LLC (PEO) | |||||||
Supplemental line of credit | |||||||
Participation Agreement acquisition interest in any oil and gas development acres in area of mutual interest (as a percent) | 45.00% |
DEBT - Convertible notes (Detai
DEBT - Convertible notes (Details) - USD ($) | Oct. 16, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 30, 2017 |
Convertible notes | ||||
Loss on conversion of notes payable | $ 1,771,650 | |||
Charge to additional paid-in capital for warrants issued | 2,978,796 | $ 1,033,586 | ||
Original Convertible Notes | ||||
Convertible notes | ||||
Face amount | $ 10,000,000 | |||
Interest rate (as a percent) | 10.00% | |||
Conversion price (in dollars per share) | $ 1.10 | $ 1.50 | ||
Net proceeds from private placement | 9,000,000 | |||
Principal converted | $ 5,200,000 | |||
Convertible accrued interest | $ 100,000 | |||
Number of shares issued | 4,814,265 | |||
Loss on conversion of notes payable | $ 1,800,000 | |||
Charge to additional paid-in capital for warrants issued | $ 1,000,000 |
DEBT - Series B convertible not
DEBT - Series B convertible notes (Details) - USD ($) | 2 Months Ended | 12 Months Ended | |
Oct. 31, 2017 | Dec. 31, 2017 | Oct. 16, 2017 | |
Series B Convertible Notes | |||
Fair value of the beneficial conversion feature | $ 4,329,365 | ||
Convertible Notes | |||
Series B Convertible Notes | |||
Conversion price (in dollars per share) | $ 1.38 | ||
Series B Notes | |||
Series B Convertible Notes | |||
Proceeds from issuance of debt | $ 4,700,000 | $ 4,724,900 | |
Interest rate (as a percent) | 15.00% | ||
Conversion price (in dollars per share) | $ 1.50 | ||
Net value | $ 4,500,000 | ||
Fair value of the beneficial conversion feature | $ 56,500 |
DEBT - Secured Credit Facility
DEBT - Secured Credit Facility (Details) - Secured Credit Facility - USD ($) | Feb. 01, 2018 | Dec. 21, 2017 | Dec. 31, 2017 |
Debt | |||
Proceeds from issuance of debt | $ 20,000,000 | $ 5,000,000 | |
Interest rate (as a percent) | 15.70% | ||
Three-month LIBOR | |||
Debt | |||
Spread on variable rate | 14.00% | ||
Accrued interest payable | $ 21,801 | ||
Debt issuance costs | 100,000 | ||
Interest expense | $ 1,437 |
ASSET RETIREMENT OBLIGATION (De
ASSET RETIREMENT OBLIGATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Assumptions used to determine the fair value of the asset retirement obligation | ||
Assumed inflation rate (as a percent) | 2.00% | 2.00% |
Average estimated asset life | 29 years 10 months 24 days | 13 years 2 months 12 days |
Activity of asset retirement obligation | ||
Asset retirement obligation, beginning of period | $ 945,419 | $ 34,776 |
Liabilities settled | (50,163) | |
Liabilities settled, Net increase in obligation | 1,990 | |
Liabilities incurred | 91,999 | 878,170 |
Revisions in estimated liabilities | 36,507 | |
Accretion | 99,682 | 30,483 |
Asset retirement obligation, end of period | $ 1,123,444 | $ 945,419 |
Minimum | ||
Assumptions used to determine the fair value of the asset retirement obligation | ||
Credit adjusted risk free interest rate (as a percent) | 11.26% | 9.48% |
Maximum | ||
Assumptions used to determine the fair value of the asset retirement obligation | ||
Credit adjusted risk free interest rate (as a percent) | 14.00% | 10.73% |
ACCOUNTS PAYABLE AND ACCRUED 58
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | ||
Trade payables and accrued liabilities | $ 1,544,112 | $ 2,416,551 |
Accrued interest payable | 876,455 | 302,477 |
Liabilities incurred in connection with acquisition of crude oil and natural gas properties | 1,719,785 | 290,078 |
Total | $ 4,140,352 | $ 3,009,106 |
SHAREHOLDERS' EQUITY - Common S
SHAREHOLDERS' EQUITY - Common Stock - Shares (Details) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Common Stock | ||
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock shares issued | 27,718,802 | 21,964,282 |
Common stock shares outstanding | 27,718,802 | 21,964,282 |
Common Stock | ||
Common Stock | ||
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock shares issued | 27,718,802 | 21,964,282 |
Common stock shares outstanding | 27,718,802 | 21,964,282 |
SHAREHOLDERS' EQUITY - Common60
SHAREHOLDERS' EQUITY - Common Stock - Activity (Details) $ / shares in Units, $ in Millions | Oct. 16, 2017USD ($)$ / sharesshares | Sep. 23, 2017$ / sharesshares | Apr. 03, 2017$ / sharesshares | Dec. 05, 2016$ / sharesshares | Nov. 11, 2016$ / sharesshares | Aug. 30, 2016$ / sharesshares | Aug. 22, 2016$ / sharesshares | Jul. 22, 2016$ / sharesshares | Jul. 05, 2016$ / sharesshares | May 04, 2016director$ / sharesshares | Apr. 08, 2016$ / sharesshares | Jan. 31, 2016item$ / sharesshares | Oct. 31, 2017USD ($)$ / shares | Jun. 01, 2017agreementshares | Dec. 31, 2017USD ($)shares | Dec. 31, 2016USD ($)shares | Jan. 30, 2017$ / shares |
Common Stock | |||||||||||||||||
Warrants to purchase common stock (in shares) | 7,588,800 | ||||||||||||||||
Stock-based compensation expense | $ | $ 1.4 | $ 1.1 | |||||||||||||||
Restricted Stock | |||||||||||||||||
Common Stock | |||||||||||||||||
Number of employment agreements | agreement | 4 | ||||||||||||||||
Issuance of restricted shares, Shares | 219,700 | ||||||||||||||||
Common Stock | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock in connection with conversion of convertible notes payable, Shares | 4,814,265 | ||||||||||||||||
Issuance of common stock for loan extension, Shares | 250,000 | ||||||||||||||||
Issuance of restricted shares, Shares | 219,700 | ||||||||||||||||
Issuance of common stock for lease acquisition, Shares | 470,555 | 14,425 | 470,555 | 14,425 | |||||||||||||
Issuance of common stock for cash at $1.00 per share (in shares) | 95,000 | ||||||||||||||||
Issuance of common stock in connection with consulting agreements, Shares | 141,666 | ||||||||||||||||
Shares issued for services (in shares) | 50,000 | ||||||||||||||||
Share price (in dollars per share) | $ / shares | $ 1.80 | $ 1.85 | |||||||||||||||
Common Stock | Consultants | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock in connection with consulting agreements, Shares | 50,000 | 8,333 | 8,333 | 50,000 | |||||||||||||
Share price (in dollars per share) | $ / shares | $ 1.44 | $ 1.40 | $ 1.65 | $ 0.73 | |||||||||||||
Common Stock | Directors | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock in connection with consulting agreements, Shares | 25,000 | ||||||||||||||||
Shares issued for services (in shares) | 50,000 | ||||||||||||||||
Share price (in dollars per share) | $ / shares | $ 1.60 | $ 1.01 | |||||||||||||||
Number of directors issued stock | director | 2 | ||||||||||||||||
Common Stock | Private placement | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock for cash at $1.00 per share (in shares) | 95,000 | ||||||||||||||||
Share price (in dollars per share) | $ / shares | $ 1 | ||||||||||||||||
Number of accredited investors in the transaction | item | 1 | ||||||||||||||||
Common Stock | Exchange of interests in oil and gas assets in Buck Peak prospect | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock for property acquisition (in shares) | 30,000 | ||||||||||||||||
Share price (in dollars per share) | $ / shares | $ 1.89 | ||||||||||||||||
Initial Line of Credit | Providence Energy Operators, LLC | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock for loan extension, Shares | 250,000 | ||||||||||||||||
Share price (in dollars per share) | $ / shares | $ 1.55 | ||||||||||||||||
Original Convertible Notes | |||||||||||||||||
Common Stock | |||||||||||||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.10 | $ 1.50 | |||||||||||||||
Debt conversion, shares issued | 4,814,265 | ||||||||||||||||
Principal converted | $ | $ 5.2 | ||||||||||||||||
Series B Notes | |||||||||||||||||
Common Stock | |||||||||||||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.50 | ||||||||||||||||
Convertible notes issued for cash | $ | $ 4.5 | ||||||||||||||||
Convertible Notes | |||||||||||||||||
Common Stock | |||||||||||||||||
Issuance of common stock in connection with conversion of convertible notes payable, Shares | 4,814,265 | ||||||||||||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.38 | ||||||||||||||||
Principal converted | $ | $ 5.2 | ||||||||||||||||
Debt conversion, accrued interest amount | $ | $ 0.1 |
SHAREHOLDERS' EQUITY - Preferre
SHAREHOLDERS' EQUITY - Preferred Stock (Details) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Preferred Stock | ||
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Preferred Stock | ||
Preferred Stock | ||
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
SHAREHOLDERS' EQUITY - Warrants
SHAREHOLDERS' EQUITY - Warrants (Details) - $ / shares | Jan. 30, 2017 | Jan. 20, 2017 | Dec. 30, 2016 | Dec. 31, 2017 |
Warrants | ||||
Shares underlying outstanding warrants | 7,588,800 | |||
Underwriter warrants | ||||
Warrants | ||||
Shares underlying outstanding warrants | 255,600 | |||
Warrants exercise price (in dollars per share) | $ 1.25 | |||
Investor warrants | ||||
Warrants | ||||
Shares underlying outstanding warrants | 6,666,600 | |||
Warrants exercise price (in dollars per share) | $ 3 | $ 3 | $ 3 | $ 3 |
Warrants issued during the period (in shares) | 5,371,579 | 5,371,579 | 1,294,987 | |
Placement agent warrants | ||||
Warrants | ||||
Shares underlying outstanding warrants | 666,600 | |||
Warrants exercise price (in dollars per share) | $ 1.50 | $ 1.50 | $ 1.50 | $ 1.50 |
Warrants issued during the period (in shares) | 537,260 | 537,260 | 129,516 |
STOCK-BASED COMPENSATION - Plan
STOCK-BASED COMPENSATION - Plan (Details) - $ / shares | Jun. 01, 2017 | Apr. 01, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Aug. 18, 2016 | Aug. 17, 2016 |
STOCK-BASED COMPENSATION | ||||||
Shares reserved for issuance | 10,000,000 | 5,000,000 | ||||
Options granted to employees, directors and consultants | 422,000 | 2,400,000 | ||||
Exercise price (in dollars per share) | $ 1.86 | $ 1.16 | ||||
Manager of Production and Completion Operations | ||||||
STOCK-BASED COMPENSATION | ||||||
Exercise price (in dollars per share) | $ 1.83 | |||||
Senior Landman | ||||||
STOCK-BASED COMPENSATION | ||||||
Exercise price (in dollars per share) | $ 1.89 |
STOCK-BASED COMPENSATION - Acti
STOCK-BASED COMPENSATION - Activity Summary (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Shares | |||
Outstanding Options, Beginning of period (in shares) | 4,675,000 | 2,275,000 | |
Exercisable Options (in shares) | 4,347,500 | 3,010,000 | 2,200,000 |
Options Granted (in shares) | 422,000 | 2,400,000 | |
Options Forfeited (in shares) | (100,000) | ||
Outstanding Options, End of period (in shares) | 4,997,000 | 4,675,000 | 2,275,000 |
Weighted Average Exercise Price | |||
Outstanding (in dollars per share) | $ 0.85 | $ 0.76 | $ 0.33 |
Exercisable (in dollars per share) | 0.74 | 0.54 | $ 0.30 |
Granted (in dollars per share) | $ 1.86 | $ 1.16 | |
Remaining Contractual Term (Years) | |||
Outstanding | 4 years 5 months 9 days | 5 years 4 months 21 days | 6 years 6 months |
Exercisable | 4 years 5 months 23 days | 5 years 11 months 19 days | 6 years 8 months 19 days |
Granted | 5 years 8 months 9 days | 5 years 4 months 2 days | |
Stock Compensation Plan | |||
Number of Shares | |||
Options Granted (in shares) | 422,000 |
STOCK-BASED COMPENSATION - Assu
STOCK-BASED COMPENSATION - Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Pricing model assumptions | ||
Weighted-average risk-free interest rate, minimum | 1.75% | 0.94% |
Weighted-average risk-free interest rate, maximum | 1.93% | 1.31% |
Weighted-average volatility, minimum (as a percent) | 162.00% | 142.00% |
Weighted-average volatility, maximum (as a percent) | 169.00% | 214.00% |
Minimum | ||
Pricing model assumptions | ||
Expected option term | 2 years 6 months | 1 year 6 months |
Maximum | ||
Pricing model assumptions | ||
Expected option term | 3 years 3 months | 2 years 6 months |
STOCK-BASED COMPENSATION - Expe
STOCK-BASED COMPENSATION - Expense and Unvested (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
STOCK BASED COMPENSATION | ||
Stock-based compensation expense | $ 1.4 | $ 1.1 |
Unvested share based compensation | $ 0.6 |
PROVISION FOR INCOME TAXES - De
PROVISION FOR INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
PROVISION FOR INCOME TAXES | ||
Liability for uncertain tax positions | $ 0 | |
Deferred tax assets - noncurrent: | ||
NOL carryover | 2,109,423 | $ 4,287,567 |
Stock based compensation | 727,631 | 576,808 |
Asset retirement obligation | 277,015 | 350,333 |
Charitable contribution | 814 | |
Total deferred tax assets | 3,114,883 | 5,214,708 |
Deferred tax liabilities - current: | ||
Property and equipment | (15,251) | (1,990) |
Impairment, intangible drilling costs and other exploration costs capitalized | (935,482) | (1,796,102) |
Debt discount - Beneficial conversion feature | (337,518) | |
Total deferred tax liabilities | (1,288,251) | (1,798,092) |
Net deferred tax assets | 1,826,632 | 3,416,616 |
Valuation allowance | $ (1,826,632) | $ (3,416,616) |
PROVISION FOR INCOME TAXES - In
PROVISION FOR INCOME TAXES - Income Tax Reconciliation and NOL (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Tax at statutory federal rate | $ (3,688,109) | $ (1,520,524) | |
Permanent difference | 2,258,353 | 2,378 | |
State taxes, net of federal | (331,474) | (136,847) | |
Change in valuation allowance | 396,256 | 938,026 | |
Effect of the Tax Cuts and Jobs Act | 918,446 | ||
Other | 446,528 | $ 716,967 | |
Operating loss carryforwards | 8,600,000 | ||
Amount of federal deferred tax balance | $ 900,000 | ||
Forecast | |||
Federal and deferred tax assets and liabilities tax rate (in percent) | 21.00% |
RELATED PARTIES (Details)
RELATED PARTIES (Details) | Dec. 21, 2017USD ($) | Oct. 16, 2017USD ($)item$ / sharesshares | Sep. 23, 2017$ / sharesshares | Jan. 31, 2017USD ($)item | Oct. 31, 2017USD ($)item$ / shares | Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) |
Related Party Transactions | |||||||
Line of credit - related party | $ 5,000,000 | ||||||
Line of credit - related party | $ 5,000,000 | ||||||
Accrued interest | 876,455 | 302,477 | |||||
Accounts receivable - joint interest billing - related party | 204,730 | 286,226 | |||||
Drilling advances | $ 680,248 | 234,452 | |||||
Providence Energy Operators, LLC | PetroShare Corp | |||||||
Related Party Transactions | |||||||
Related party, ownership percentage | 11.70% | ||||||
Initial Line of Credit | |||||||
Related Party Transactions | |||||||
Proceeds from issuance of debt | 3,937,815 | ||||||
Secured Credit Facility | |||||||
Related Party Transactions | |||||||
Proceeds from issuance of debt | $ 5,000,000 | ||||||
Convertible Notes | |||||||
Related Party Transactions | |||||||
Principal converted | $ 5,200,000 | ||||||
Debt conversion, accrued interest amount | $ 100,000 | ||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.38 | ||||||
Series A Convertible Notes | |||||||
Related Party Transactions | |||||||
Principal converted | 5,166,800 | ||||||
Proceeds from issuance of debt | 8,057,400 | 1,942,600 | |||||
Series B Notes | |||||||
Related Party Transactions | |||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.50 | ||||||
Proceeds from issuance of debt | $ 4,700,000 | 4,724,900 | |||||
Providence Energy Operators, LLC | |||||||
Related Party Transactions | |||||||
Accounts receivable - joint interest billing - related party | 200,000 | ||||||
Drilling advances | 700,000 | ||||||
Providence Energy Operators, LLC | Initial Line of Credit | |||||||
Related Party Transactions | |||||||
Line of credit - related party | 5,000,000 | ||||||
Line of credit - related party | 5,000,000 | ||||||
Shares issued | shares | 250,000 | ||||||
Share price (in dollars per share) | $ / shares | $ 1.55 | ||||||
Accrued interest | 500,000 | $ 300,000 | |||||
Unamortized portion of debt issuance costs | 300,000 | ||||||
Interest expense, related party | 100,000 | ||||||
Providence Energy Operators, LLC | Secured Credit Facility | |||||||
Related Party Transactions | |||||||
Line of credit outstanding balance | 5,000,000 | ||||||
Accrued interest | $ 21,801 | ||||||
Proceeds from issuance of debt | $ 5,000,000 | ||||||
Employees and directors | Series A Convertible Notes | |||||||
Related Party Transactions | |||||||
Number of accredited investors | item | 4 | ||||||
Face amount of debt | $ 200,000 | ||||||
Officers and directors | Convertible Notes | |||||||
Related Party Transactions | |||||||
Number of accredited investors | item | 10 | ||||||
Interest expense, related party | $ 100,000 | ||||||
Officers and directors | Series A Convertible Notes | |||||||
Related Party Transactions | |||||||
Number of accredited investors | item | 10 | ||||||
Principal converted | $ 700,000 | ||||||
Debt conversion, accrued interest amount | $ 20,670 | ||||||
Debt conversion, shares issued | shares | 691,516 | ||||||
Notes conversion price (in dollars per share) | $ / shares | $ 1.10 | ||||||
Officers and directors | Series B Notes | |||||||
Related Party Transactions | |||||||
Number of accredited investors | item | 10 | ||||||
Face amount of debt | $ 600,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Operating leases (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Operating leases and agreements | ||
Lease term | 4 years | |
Future minimum rental payments required under operating lease agreement | ||
2,018 | $ 129,738 | |
2,019 | 133,698 | |
2,020 | 137,658 | |
2,021 | 34,662 | |
Total | 435,756 | |
Lease expense | $ 100,000 | $ 34,651 |
COMMITMENTS AND CONTINGENCIES71
COMMITMENTS AND CONTINGENCIES - Employment Agreements (Details) - USD ($) | Jun. 01, 2017 | Apr. 01, 2017 | Apr. 15, 2016 | Feb. 25, 2016 | Dec. 31, 2017 | Dec. 31, 2016 |
Employment agreements | ||||||
Exercise price (in dollars per share) | $ 1.86 | $ 1.16 | ||||
Manager of Production and Completion Operations | ||||||
Employment agreements | ||||||
Annual salary | $ 130,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Options granted (in shares) | 200,000 | |||||
Exercise price (in dollars per share) | $ 1.83 | |||||
Manager of Production and Completion Operations | Restricted Stock | ||||||
Employment agreements | ||||||
Restricted stock granted (in shares) | 50,000 | |||||
Executive Vice President | ||||||
Employment agreements | ||||||
Annual salary | $ 156,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Options vested (in shares) | 200,000 | |||||
Executive Vice President | Restricted Stock | ||||||
Employment agreements | ||||||
Restricted stock granted (in shares) | 66,700 | |||||
Senior Landman | ||||||
Employment agreements | ||||||
Annual salary | $ 130,000 | |||||
Renewal period of the employment agreement | 1 month | |||||
Options granted (in shares) | 200,000 | |||||
Exercise price (in dollars per share) | $ 1.89 | |||||
Senior Landman | Restricted Stock | ||||||
Employment agreements | ||||||
Restricted stock granted (in shares) | 50,000 | |||||
Chief Financial Officer | ||||||
Employment agreements | ||||||
Annual salary | $ 150,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Chief Financial Officer | Restricted Stock | ||||||
Employment agreements | ||||||
Restricted stock granted (in shares) | 50,000 | |||||
Executive Officer, Stephen J. Foley | ||||||
Employment agreements | ||||||
Monthly compensation | $ 13,000 | |||||
Annual salary | $ 156,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Executive Officer, Fredrick J. Witsell | ||||||
Employment agreements | ||||||
Monthly compensation | $ 13,000 | |||||
Annual salary | $ 156,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Chief Operating Officer, William B. Lloyd | ||||||
Employment agreements | ||||||
Monthly compensation | $ 13,000 | |||||
Annual salary | $ 156,000 | |||||
Renewal period of the employment agreement | 1 year | |||||
Vice President, William R. Givan | ||||||
Employment agreements | ||||||
Monthly compensation | $ 10,833.33 | |||||
Annual salary | $ 130,000 | |||||
Renewal period of the employment agreement | 1 year |
REVISION OF PRIOR PERIOD FINA72
REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Balance Sheets | ||||||||
Convertible notes payable, net | $ 5,308 | |||||||
Total Liabilities | $ 27,029,870 | 16,450,637 | ||||||
Shareholders' Equity | ||||||||
Additional paid-in capital | 28,553,736 | 11,405,225 | ||||||
Accumulated deficit | $ (13,889,025) | $ (12,174,554) | $ (11,874,927) | $ (12,174,554) | $ (13,889,025) | (20,698,421) | (9,851,042) | |
Total Shareholders’ Equity | 7,208,777 | 8,082,043 | 6,871,271 | 8,082,043 | 7,208,777 | 7,883,034 | 1,576,147 | $ 2,776,306 |
Total Liabilities and Shareholder's Equity | 33,784,383 | 36,231,964 | 28,854,590 | 36,231,964 | 33,784,383 | 34,912,904 | 18,026,784 | |
Statement of Operations | ||||||||
Net (loss) | $ (1,714,472) | $ (299,627) | $ (2,023,885) | $ (2,323,512) | $ (4,037,984) | $ (10,847,379) | (4,481,272) | |
Adjustments | ||||||||
Accretion of debt discounts (interest expense) | $ 4,749 | |||||||
Net (loss) per share | $ (0.08) | $ (0.01) | $ (0.09) | $ (0.10) | $ (0.18) | $ (0.46) | $ (0.21) | |
Accounting for the fair value of the convertible promissory notes and warrants issued in the Company's private placement | As Reported | ||||||||
Balance Sheets | ||||||||
Convertible notes payable, net | $ 814,989 | |||||||
Total Liabilities | 17,260,318 | |||||||
Shareholders' Equity | ||||||||
Additional paid-in capital | 10,593,324 | |||||||
Accumulated deficit | (9,848,822) | |||||||
Total Shareholders’ Equity | 766,466 | |||||||
Total Liabilities and Shareholder's Equity | 18,026,784 | |||||||
Statement of Operations | ||||||||
Net (loss) | (4,479,052) | |||||||
Adjustments | ||||||||
Accretion of debt discounts (interest expense) | $ 2,529 | |||||||
Net (loss) per share | $ (0.21) | |||||||
Accounting for the fair value of the convertible promissory notes and warrants issued in the Company's private placement | Adjustments | ||||||||
Balance Sheets | ||||||||
Convertible notes payable, net | $ (809,681) | |||||||
Total Liabilities | (809,681) | |||||||
Shareholders' Equity | ||||||||
Additional paid-in capital | 811,901 | |||||||
Accumulated deficit | (2,220) | |||||||
Total Shareholders’ Equity | 809,681 | |||||||
Adjustments | ||||||||
Accretion of debt discounts (interest expense) | $ (2,220) |
RESTATEMENT OF PRIOR PERIOD C73
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Crude oil and natural gas properties - using successful efforts method: | ||||||||
Accumulated depletion, depreciation and amortization | $ (3,053,238) | $ (2,216,564) | $ (1,114,232) | $ (2,216,564) | $ (3,053,238) | $ (2,849,374) | $ (783,320) | |
Crude oil and natural gas properties, net | 29,563,890 | 25,507,123 | 20,625,255 | 25,507,123 | 29,563,890 | 31,072,589 | 13,610,203 | |
Total assets | 33,784,383 | 36,231,964 | 28,854,590 | 36,231,964 | 33,784,383 | 34,912,904 | 18,026,784 | |
Shareholders' Equity | ||||||||
Accumulated deficit | (13,889,025) | (12,174,554) | (11,874,927) | (12,174,554) | (13,889,025) | (20,698,421) | (9,851,042) | |
Total Shareholders’ Equity | 7,208,777 | 8,082,043 | 6,871,271 | 8,082,043 | 7,208,777 | 7,883,034 | 1,576,147 | $ 2,776,306 |
Total Liabilities and Shareholder's Equity | 33,784,383 | 36,231,964 | 28,854,590 | 36,231,964 | 33,784,383 | 34,912,904 | 18,026,784 | |
Statement of Operations | ||||||||
Net (loss) | (1,714,472) | (299,627) | (2,023,885) | (2,323,512) | (4,037,984) | (10,847,379) | (4,481,272) | |
Adjustments | ||||||||
Depletion, depreciation and amortization | $ (836,673) | $ (1,102,332) | $ (330,912) | $ (1,433,245) | $ (2,269,918) | $ (2,836,891) | $ (65,033) | |
Net (loss) per share | $ (0.08) | $ (0.01) | $ (0.09) | $ (0.10) | $ (0.18) | $ (0.46) | $ (0.21) | |
Error relating to calculation of depletion of oil and gas properties | As Reported | ||||||||
Crude oil and natural gas properties - using successful efforts method: | ||||||||
Accumulated depletion, depreciation and amortization | $ (3,918,935) | $ (2,765,660) | $ (1,229,486) | $ (2,765,660) | $ (3,918,935) | |||
Crude oil and natural gas properties, net | 28,698,193 | 24,958,027 | 20,510,001 | 24,958,027 | 28,698,193 | |||
Total assets | 32,918,686 | 35,682,868 | 28,739,336 | 35,682,868 | 32,918,686 | |||
Shareholders' Equity | ||||||||
Accumulated deficit | (14,754,722) | (12,723,650) | (11,990,181) | (12,723,650) | (14,754,722) | |||
Total Shareholders’ Equity | 6,343,080 | 7,532,947 | 6,756,017 | 7,532,947 | 6,343,080 | |||
Total Liabilities and Shareholder's Equity | 32,918,686 | 35,682,868 | 28,739,336 | 35,682,868 | 32,918,686 | |||
Statement of Operations | ||||||||
Net (loss) | (2,031,072) | (733,469) | (2,139,139) | (2,872,608) | (4,903,680) | |||
Adjustments | ||||||||
Depletion, depreciation and amortization | $ (1,153,273) | $ (1,536,174) | $ (446,166) | $ (1,982,341) | $ (3,135,614) | |||
Net (loss) per share | $ (0.09) | $ (0.03) | $ (0.10) | $ (0.13) | $ (0.22) | |||
Error relating to calculation of depletion of oil and gas properties | Adjustments | ||||||||
Crude oil and natural gas properties - using successful efforts method: | ||||||||
Accumulated depletion, depreciation and amortization | $ 865,697 | $ 549,096 | $ 115,254 | $ 549,096 | $ 865,697 | |||
Crude oil and natural gas properties, net | 865,697 | 549,096 | 115,254 | 549,096 | 865,697 | |||
Total assets | 865,697 | 549,096 | 115,254 | 549,096 | 865,697 | |||
Shareholders' Equity | ||||||||
Accumulated deficit | 865,697 | 549,096 | 115,254 | 549,096 | 865,697 | |||
Total Shareholders’ Equity | 865,697 | 549,096 | 115,254 | 549,096 | 865,697 | |||
Total Liabilities and Shareholder's Equity | 865,697 | 549,096 | 115,254 | 549,096 | 865,697 | |||
Adjustments | ||||||||
Depletion, depreciation and amortization | $ 316,600 | $ 433,842 | $ 115,254 | $ 549,096 | $ 865,696 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Millions | Feb. 01, 2018USD ($)director$ / sharesshares | Dec. 21, 2017USD ($) | Dec. 31, 2017shares |
SUBSEQUENT EVENTS | |||
Warrants to purchase common stock (in shares) | shares | 7,588,800 | ||
Secured Debt | |||
SUBSEQUENT EVENTS | |||
Proceeds from issuance of debt | $ | $ 5 | ||
Subsequent Event | Secured Debt | |||
SUBSEQUENT EVENTS | |||
Face amount | $ | $ 25 | ||
Percentage of conversion of outstanding principal of Lender loaned into common stock | 20.00% | ||
Conversion price (in dollars per share) | $ / shares | $ 1.15 | ||
Conversion price of remaining outstanding loan | $ / shares | $ 1.55 | ||
Warrants to purchase common stock (in shares) | shares | 1,500,000 | ||
Warrants exercise price (in dollars per share) | $ / shares | $ 0.01 | ||
Option to purchase percentage of securities offered by the Company in any offering after December 31, 2018 | 25.00% | ||
Discount on issuance of common stock | 10.00% | ||
Number of volume-weighted average trading price | 30 days | ||
Number of board of directors, lenders may appoint | director | 3 | ||
Minimum number of independent director | director | 1 | ||
Subsequent Event | Secured Debt | Providence Energy Operators, LLC | |||
SUBSEQUENT EVENTS | |||
Number of board of directors designated by related party | director | 2 | ||
Subsequent Event | Secured Debt | 5NR | |||
SUBSEQUENT EVENTS | |||
Number of board of directors designated by related party | director | 1 | ||
Subsequent Event | Secured Debt | Three-month LIBOR | |||
SUBSEQUENT EVENTS | |||
Spread on variable rate | 1.00% | ||
Subsequent Event | Secured Debt | Minimum | |||
SUBSEQUENT EVENTS | |||
Interest rate (as a percent) | 14.00% | ||
Exercise price minimum | $ / shares | $ 1.85 | ||
Subsequent Event | Secured Debt | Maximum | |||
SUBSEQUENT EVENTS | |||
Interest rate (as a percent) | 17.00% | ||
Option to purchase percentage of securities offered by the Company in any offering until December 31, 2018 | 50.00% | ||
Option to purchase common stock maximum | $ | $ 25 |
UNAUDITED CRUDE OIL AND NATUR75
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION - Proved Reserves (Details) | 12 Months Ended | ||
Dec. 31, 2017Boelocation$ / MMBbls$ / Mcf$ / bblMcfbbl | Dec. 31, 2016Boe$ / MMBbls$ / Mcf$ / bblMcfbbl | Dec. 31, 2015Boebbl | |
Proved Reserves, Total: | |||
Balance, beginning of year | Boe | 6,307,868 | 159 | |
Revisions of previous estimates | Boe | (300,797) | (122) | |
Extensions and discoveries | Boe | 2,168,180 | 6,030,624 | |
Purchase of reserves | Boe | 287,999 | ||
Production | Boe | (330,281) | (10,755) | (37) |
Balance, end of year | Boe | 7,844,970 | 6,307,868 | |
Proved Developed Reserves (in energy) | Boe | 1,534,172 | 740,088 | |
Proved Undeveloped Reserves (in energy) | Boe | 6,310,797 | 5,567,780 | |
Oil (Bbls) | |||
Proved Reserves: | |||
Balance, beginning of year | 2,761,204 | 159 | |
Revisions of previous estimates | (388,211) | (122) | |
Extensions and discoveries | 839,738 | 2,710,437 | |
Purchase of reserves | 55,669 | ||
Production | (188,529) | (4,902) | (37) |
Balance, end of year | 3,024,202 | 2,761,204 | |
Proved Reserves, Total: | |||
Proved Developed Reserves (in volume) | 521,354 | 260,284 | |
Proved Undeveloped Reserve (in volume) | 2,502,847 | 2,500,920 | |
Average resulting price (in dollars per barrel and Mcf) | $ / bbl | 45.03 | 34.09 | |
Natural Gas (Mcf) | |||
Proved Reserves: | |||
Balance, beginning of year | Mcf | 11,492,855 | ||
Revisions of previous estimates | Mcf | 292,477 | ||
Extensions and discoveries | Mcf | 4,183,757 | 10,498,397 | |
Purchase of reserves | Mcf | 1,020,516 | ||
Production | Mcf | (549,846) | (26,058) | |
Balance, end of year | Mcf | 15,419,243 | 11,492,855 | |
Proved Reserves, Total: | |||
Proved Developed Reserves (in volume) | Mcf | 3,752,330 | 1,788,895 | |
Proved Undeveloped Reserve (in volume) | Mcf | 11,666,911 | 9,703,960 | |
Unweighted average resulting price (in dollars per barrel and MMBtu) | $ / MMBbls | 2.98 | 2.48 | |
Average resulting price (in dollars per barrel and Mcf) | $ / Mcf | 1.71 | 2.69 | |
NGL's (Bbls) | |||
Proved Reserves: | |||
Balance, beginning of year | 1,631,188 | ||
Revisions of previous estimates | 38,668 | ||
Extensions and discoveries | 631,149 | 1,570,454 | |
Purchase of reserves | 62,244 | ||
Production | (50,111) | (1,510) | |
Balance, end of year | 2,250,894 | 1,631,188 | |
Proved Reserves, Total: | |||
Proved Developed Reserves (in volume) | 387,430 | 181,655 | |
Proved Undeveloped Reserve (in volume) | 1,863,465 | 1,449,533 | |
Average resulting price (in dollars per barrel and Mcf) | $ / bbl | 20.42 | 14.44 | |
Crude oil and NGLs | |||
Proved Reserves, Total: | |||
Unweighted average resulting price (in dollars per barrel and MMBtu) | $ / bbl | 51.34 | 42.75 | |
Todd Creek Farms | |||
Proved Reserves, Total: | |||
Number of PUD locations converted | location | 18 |
UNAUDITED CRUDE OIL AND NATUR76
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION - Standardized Measure of Discounted Future Net Cash Flows (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | ||||
Future cash inflows | $ 208,459 | $ 148,596 | $ 5 | |
Future cash outflows: | ||||
Production cost | (48,929) | (35,038) | (3) | |
Development cost | (58,784) | (37,667) | ||
Future income tax | (16,006) | (5,802) | ||
Future net cash flows | 84,740 | 70,089 | 2 | |
Adjustment to discount future annual net cash flows at 10% | (35,054) | (29,925) | $ (2) | |
Standardized measure of discounted future net cash flows | $ 49,686 | $ 40,164 | $ 5 | |
Percentage of discount on future annual net cash flows (as a percent) | 10.00% | 10.00% | 10.00% |
UNAUDITED CRUDE OIL AND NATUR77
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION - Changes in Standardized Measure of Estimated Discounted Future Net Cash Flows (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION | |||
Standardized measure, beginning of year | $ 40,164 | $ 5 | |
Sales of oil and gas, net of production cost | (9,392) | $ (126) | (3) |
Net change in sales prices, net of production cost | 10,263 | 489 | |
Discoveries, extensions and improved recoveries | 11,979 | 76,445 | |
Change in future development costs | (4,050) | (37,667) | |
Development costs incurred during the period that reduced future development cost | 1,144 | ||
Revisions of quantity estimates | (559) | $ (2) | |
Accretion of discount | (4,275) | (130) | |
Net change in income tax | (6,810) | (2,587) | |
Purchase of reserves | 6,021 | ||
Changes in timing of rates of production | 2,672 | (2,541) | |
Standardized measure, end of year | $ 49,686 | $ 40,164 |