Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 14, 2018 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | PetroShare Corp. | |
Entity Central Index Key | 1,568,079 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 28,064,765 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 | |
Current assets: | |||
Cash | $ 1,379,283 | $ 713,924 | |
Accounts receivable - joint interest billing | 6,419,099 | 828,583 | |
Accounts receivable - joint interest billing - related party | 7,431,969 | 204,730 | |
Accounts receivable - crude oil, natural gas and NGL sales | 3,785,321 | 1,412,612 | |
Prepaid expenses and other assets | 115,347 | 26,795 | |
Deferred financing fee, net | 0 | 251,389 | |
Total current assets | 19,131,019 | 3,438,033 | |
Crude oil and natural gas properties - using successful efforts method: | |||
Proved crude oil and natural gas properties | 51,982,054 | 22,144,366 | |
Unproved crude oil and natural gas properties | 6,654,026 | 1,919,335 | |
Wells in progress | 146,807 | 9,858,262 | |
Less: accumulated depletion, depreciation and amortization | (3,954,384) | (2,849,374) | |
Crude oil and natural gas properties, net | [1] | 54,828,503 | 31,072,589 |
Property, plant and equipment, net | 136,812 | 168,411 | |
Other assets | 333,871 | 233,871 | |
TOTAL ASSETS | 74,430,204 | 34,912,904 | |
Current liabilities: | |||
Accounts payable and accrued liabilities | 28,245,823 | 4,140,352 | |
Accounts payable and accrued liabilities - related party | 1,299,390 | 589,496 | |
Oil and gas revenue distributions payable | 131,262 | 148,103 | |
Participation agreement payable – related party | 4,647,047 | 0 | |
Drilling advances - related party | 0 | 680,248 | |
Asset retirement obligation | 213,043 | 288,784 | |
Line of credit - related party | 0 | 5,000,000 | |
Supplemental line of credit | 0 | 3,552,500 | |
Convertible notes payable, net | 8,047,562 | 6,831,897 | |
Total current liabilities | 42,584,127 | 21,231,380 | |
Long-term liabilities | |||
Secured Credit Facility - related party, net | 18,275,252 | 4,896,565 | |
Derivative liability - Secured Credit Facility - related party | 1,691,117 | 0 | |
Other long-term liabilities | 53,967 | 67,265 | |
Asset retirement obligation | 881,564 | 834,660 | |
Total liabilities | 63,486,027 | 27,029,870 | |
Shareholders’ equity: | |||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued or outstanding | 0 | 0 | |
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,064,765 and 27,718,802 shares issued and outstanding, respectively | 28,061 | 27,719 | |
Additional paid-in capital | 33,212,356 | 28,553,736 | |
Accumulated deficit | (22,296,240) | (20,698,421) | |
Total Shareholders’ Equity | 10,944,177 | 7,883,034 | |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ 74,430,204 | $ 34,912,904 | |
[1] | Net capitalized costs include capitalized interest costs. Approximately $2.2 million was capitalized during the six months ended June 30, 2018. |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock par value | $ .01 | $ .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 | $ .001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 28,064,765 | 27,718,802 |
Common stock shares outstanding | 28,064,765 | 27,718,802 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
REVENUE: | ||||
Total revenue | $ 4,625,536 | $ 4,457,502 | $ 6,692,468 | $ 5,918,887 |
COSTS AND EXPENSES: | ||||
Lease operating expense | 187,201 | 196,474 | 493,396 | 428,680 |
Production taxes, gathering and marketing | 519,520 | 294,678 | 750,439 | 484,640 |
Exploration costs | 0 | 2,483 | 0 | 66,673 |
Depreciation, depletion, amortization and accretion | 1,218,175 | 1,119,834 | 1,931,772 | 1,453,673 |
Accretion expense | 27,255 | 22,667 | 55,612 | 46,912 |
Plugging expense | 0 | 2,075 | 0 | 23,123 |
(Gain) on settlement asset retirement obligation | 1,274 | 0 | (54,178) | 0 |
General and administrative expense | 941,610 | 1,676,587 | 1,538,624 | 2,866,669 |
Total costs and expenses | 2,895,035 | 3,314,798 | 4,715,665 | 5,370,370 |
Operating income (loss) | 1,730,501 | 1,142,704 | 1,978,803 | 548,517 |
OTHER INCOME (EXPENSE): | ||||
Change in fair value - derivative liability | (110,987) | 0 | (21,100) | 0 |
Other income (expense) | (12,459) | 144 | (11,661) | 246 |
Interest expense | (1,717,129) | (1,442,475) | (3,543,861) | (2,872,275) |
Total other (expense) | (1,840,575) | (1,442,331) | (3,576,622) | (2,872,029) |
Net (loss) | $ (110,074) | $ (299,627) | $ (1,597,819) | $ (2,323,512) |
Net (loss) per share: | ||||
Basic and diluted (in dollars per share) | $ .00 | $ (.01) | $ (0.06) | $ (0.10) |
Weighted average number of shares outstanding: | ||||
Basic and diluted (in shares) | 28,005,644 | 22,563,830 | 27,891,210 | 22,265,712 |
Crude Oil [Member] | ||||
REVENUE: | ||||
Total revenue | $ 4,042,615 | $ 3,811,009 | $ 5,467,848 | $ 5,030,400 |
Natural Gas Excluding Natural Gas Liquids [Member] | ||||
REVENUE: | ||||
Total revenue | 397,978 | 373,225 | 792,389 | 575,652 |
Natural Gas Liquids [Member] | ||||
REVENUE: | ||||
Total revenue | $ 184,943 | $ 273,268 | $ 434,231 | $ 312,835 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net (loss) | $ (1,597,819) | $ (2,323,512) |
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: | ||
Depletion, depreciation, and amortization | 1,931,772 | 1,453,673 |
Deferred rental liability | (13,298) | 0 |
Accretion of asset retirement obligation | 55,612 | 46,912 |
Accretion of debt discounts | 3,162,617 | 2,251,752 |
Share-based compensation | 660,794 | 730,745 |
Change in fair value - derivative liability | 21,100 | 0 |
Plugging and abandonment | 0 | 23,123 |
(Gain) / loss on settlements of asset retirement obligations | (54,178) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable - joint interest billing | (824,527) | (578,758) |
Accounts receivable - joint interest billing - related party | (538,467) | (161,011) |
Accounts receivable - crude oil, natural gas and NGL sales | (2,372,709) | (4,052,581) |
Deferred equity issuance costs | 0 | (186,312) |
Prepaid expenses and other assets | (188,552) | 1,024,184 |
Accounts payable and accrued liabilities | (1,059,316) | 1,300,359 |
Oil and gas revenue distributions payable | (16,841) | 134,364 |
Accounts payable and accrued liabilities - related party | 49,390 | 0 |
Drilling advances - related party | (680,248) | 5,001,760 |
Settlements of asset retirement obligations | (88,781) | 0 |
Net cash (used in) provided by operating activities | (1,553,451) | 4,664,698 |
Cash flows from investing activities: | ||
Additions of property, plant and equipment | 0 | (164,346) |
Development of crude oil and natural gas properties | (8,706,655) | (3,294,424) |
Acquisitions of crude oil and natural gas properties | (237,727) | (2,695,226) |
Net cash (used in) investing activities | (8,944,382) | (6,153,996) |
Cash flows from financing activities: | ||
Borrowings under secured credit facility, net | 11,163,192 | 0 |
Repayment under supplemental line of credit | 0 | (3,552,500) |
Convertible notes issued for cash | 0 | 7,251,662 |
Net cash provided by financing activities | 11,163,192 | 3,699,162 |
Cash: | ||
Net increase in cash | 665,359 | 2,209,864 |
Cash, beginning of period | 713,924 | 2,449,412 |
Cash, end of period | 1,379,283 | 4,659,276 |
Supplemental cash flow disclosure: | ||
Cash paid for interest, net of amounts capitalized | 801,759 | 432,047 |
Non-cash investing and financing activities: | ||
Accrued development costs - crude oil and natural gas properties | 25,513,409 | 6,493,513 |
Oil and gas properties – additions – accrued participation agreement payable – related party | 4,647,047 | 0 |
Conveyance of oil and gas properties – debt repayment | 2,052,500 | 0 |
Lender fees - Secured credit facility | 1,250,000 | 0 |
Issuance of common stock warrants in connection with private placement | 0 | 809,779 |
Issuance of common stock warrants in connection with Secured credit facility | 1,521,451 | 0 |
Issuance of common stock in connection with conversion of notes payable and accrued interest | 203,944 | 0 |
Issuance of common stock in connection with lease acquisitions | 0 | 847,001 |
Embedded discount features - Secured credit facility | 3,942,792 | 0 |
Initial line of credit - paid through Secured credit facility | 5,000,000 | 0 |
Supplemental line of credit - paid through Secured credit facility | 1,500,000 | 0 |
Accrued interest - paid through Secured credit facility | $ 1,086,608 | $ 0 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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. |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | Basis of Presentation The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading. In management’s opinion, the Condensed Consolidated Balance Sheet as of December 31, 2017, which has been derived from the audited consolidated financial statements, and the unaudited Condensed Consolidated Balance Sheet as of June 30, 2018, the unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017, and the unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited consolidated financial statements. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto and summary of significant accounting policies included in the Company’s annual report on Form 10-K for the year ended December 31, 2017. Except as noted below, there have been no changes to the footnotes from those accompanying the audited financial statements contained in the Company’s Form 10-K for the year ended December 31, 2017. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary CFW Resources, LLC, formed on August 1, 2017. Loss Per Share Basic and diluted loss per share 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 the effect of their inclusion would be anti-dilutive. Potentially dilutive securities at June 30, 2018 and December 31, 2017 are as follows: June 30, December 31, 2018 2017 Exercisable stock options 4,693,500 4,347,500 Warrants to purchase common shares 9,088,800 7,588,800 Shares underlying secured credit facility 17,251,052 — Shares underlying convertible notes 6,238,733 6,372,066 Total 37,272,085 18,308,366 Capitalized Interest Costs The Company has capitalized certain interest costs related to proved properties that are currently undergoing activities necessary to prepare them for their intended use. These costs have been capitalized to oil and gas properties. Revenue Recognition Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The timing of recognizing revenue from the sale of crude oil, natural gas and natural gas liquids was not changed as the result of the adoption of this standard. The Company derives all its revenue from the sale of crude oil, natural gas and natural gas liquids. Currently, all sales are in the Wattenberg Field in Northern Colorado. The ASU requires disclosure of significant components of revenue (disaggregation) which the Company presents on the face of the Statements of Operations. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the month the product is delivered to the purchaser. The Company typically receives payment from one to three months after delivery. The transaction price includes variable consideration as product pricing is based on published market prices and reduced for specified differentials. ASU 2014-09 does not require that the transaction price be fixed or stated in the contract. Debt Discount Costs On February 1, 2018, the Company entered into a Secured Term Credit Agreement (“Credit Agreement” and or “Secured Credit Facility”) with Providence Wattenberg, LP and 5NR Wattenberg, LLC (the “Secured Lenders”). Each of Providence and 5NR are affiliates of the Lenders (named below) under a Letter Agreement entered into by the Company and Providence Energy Ltd (“PEC”), Providence Energy Partners, LP (“PEP III”), Providence Energy Operators, LLC (“PEO”) Fifth Partners, LLC (“Fifth”) on December 21, 2017 (Note 6). The Credit Agreement contained an embedded beneficial conversion feature and warrants to purchase common stock of the Company. The proceeds from the sale of the securities were allocated between the Secured Credit Facility and, where applicable, the warrants based on the relative 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 Secured Credit Facility and is being amortized to interest expense using the effective interest method over the term of the Secured Credit Facility. The fair value of warrants issued has been recorded as a reduction to the carrying value of the Secured Credit Facility, and is being amortized over the term of the Secured Credit Facility using the effective interest method. Origination fees paid in cash have been recorded as a reduction in the carrying value of the Secured Credit Facility and are being amortized over the term of the Secured Credit Facility using the effective interest method. Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“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 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 resulting from 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. There were various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s reported financial position, results of operations, or cash flows. |
GOING CONCERN
GOING CONCERN | 6 Months Ended |
Jun. 30, 2018 | |
GOING CONCERN | |
GOING CONCERN | In the Report of the Independent Registered Public Accounting Firm as of and for the year ended December 31, 2017, the Company's independent registered public accounting firm expressed in an explanatory paragraph to their opinion significant doubt about the Company’s ability to continue as a going concern from the issuance date of their opinion. Pursuant to 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 condensed 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 may be unable to meet its obligations as they become due within one year from the condensed consolidated financial statement issuance date. As shown in the accompanying condensed consolidated financial statements, the Company incurred a net loss of $1.6 million during the six months ended June 30, 2018, and as of that date, the Company's current liabilities exceeded its current assets by $23.5 million. As of June 30, 2018, 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 planned drilling and acquisition activity. If sufficient cash flow and additional financing are 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 proceeds resulting from the Secured Credit Facility closed in February, 2018 (Note 6) coupled with increasing revenues from the Company’s non-operated and operated properties, may allow the Company to meet a portion of its maturing debt and interest obligations. However, to continue to fully 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 condensed 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. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | ASC Topic 820, Fair Value Measurements and Disclosure establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: ● Level 1: Quoted prices available in active markets for identical assets or liabilities; ● Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; ● Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models. The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The following table presents a roll-forward of the fair value of the derivative liabilities associated with the Company’s Secured Credit Facility, categorized as Level 3 for the six months ended June 30, 2018. There were no comparable liabilities for the 2017 period: Six months ended June 30, 2018 Beginning balance $ - Additions (Note 6) (1,670,017 ) Gain (loss) included in earnings (21,100 ) Gain (loss) included in other comprehensive income - Ending Balance (1,691,117 ) Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and various borrowings. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are representative of their fair values due to their short-term maturities. Likewise, the various borrowings have short term maturities and bear interest at variable rates. |
CRUDE OIL AND NATURAL GAS PROPE
CRUDE OIL AND NATURAL GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2018 | |
Oil and Gas Property [Abstract] | |
CRUDE OIL AND NATURAL GAS PROPERTIES | The Company’s oil and gas properties are located entirely within the United States. The net capitalized costs related to the Company’s oil and gas producing activities were as follows: June 30, December 31, 2018 2017 Proved oil and gas properties $ 51,982,054 $ 22,144,366 Unproved oil and gas properties (1) 6,654,026 1,919,335 Wells in progress (2) 146,807 9,858,262 Total capitalized costs 58,782,887 33,921,963 Accumulated depletion, depreciation and amortization (3,954,384 ) (2,849,374 ) Net capitalized costs (3) $ 54,828,503 $ 31,072,589 (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. (3) Net capitalized costs include capitalized interest costs. Approximately $2.2 million was capitalized during the six months ended June 30, 2018. Acquisitions and Divestitures In June, 2018 the Company executed two participation agreements with PEO whereby the Company agreed to acquire working interests in approximately 2,200 gross mineral acres for a total purchase price of $4.6 million (Note 11). The terms of the agreements allow the Company to defer payment until December 31, 2018. Should the Company fail to fund its participation, it will be obligated to pay a $0.7 million penalty fee and surrender all of its interests in the underlying assets. Effective June 1, 2018, the Company closed a transaction with PEP III that conveyed all of its working interests in four producing wells, eight wells in various stages of drilling and completion, 16 proposed wells and the underlying mineral leases (the "Ocho Assets"). As the transaction represented the conveyance of part of an interest in a proved property it has been recorded as a normal retirement. Proved oil and gas properties cost of $0.8 million were applied against accumulated depletion, depreciation, and amortization and $2.1 million has been recorded as property in lieu of payment against the outstanding principal balance of the supplemental line of credit (Note 6). |
DEBT
DEBT | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | Line of credit On May 13, 2015, the Company entered into a Revolving Line of Credit Facility Agreement ("initial line of credit", “Line of credit”) with PEO, a related party, which provided the Company a revolving line of credit of up to $5.0 million. As of December 31, 2017, the outstanding balance on the Line of credit was $5.0 million and accrued interest was $0.5 million. During the six months ended June 30, 2018 and 2017, the Company recorded interest expense of $0.3 million and $0.1 million respectively, related to the initial line of credit. 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 PEP III. PEP III is an affiliate of PEO by-virtue of having affiliated personnel. The supplemental line of credit permitted the Company to borrow up to $10.0 million to pay costs associated with its acquisition and development of oil and gas properties in the Wattenberg Field. Interest on the supplemental line initially accrued at the rate of 8% per year. The supplemental line of credit was amended on March 30, 2017, pursuant to which the Company agreed not to borrow additional amounts against the supplemental line of credit and to repay $3.6 million. On June 8, 2017, the Company entered into a letter agreement (“PEP III Agreement”) with PEP III and PEO, pursuant to which PEP III agreed to modify the Company’s supplemental line of credit. The PEP III Agreement extended the maturity date of the supplemental line of credit, including approximately $3.8 million in outstanding principal and accrued interest, 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, dated May 13, 2015 (“Participation Agreement”), in order to expand the area of mutual interest (“AMI”) established, and grants PEP III an option to participate under the Participation Agreement. As amended, the Participation Agreement grants PEO the option to acquire up to a 45% interest and, so long as the supplemental line of credit remains outstanding, grants 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. The expanded AMI covers a total of four and one-half townships in Adams and Weld Counties, Colorado. On December 21, 2017 in connection with the execution of a Letter Agreement (as described more fully below) the interest rate on the supplemental line of credit was increased to 15% and the maturity date was extended until June 30, 2018. On February 1, 2018 concurrent with the closing of the Secured Credit Facility (as described more fully below), $1.5 million of principal plus accrued interest was repaid. Effective June 1, 2018, the Company and PEP III closed on a transaction to exchange the Company’s interest in the Ocho Assets (Note 5) in full satisfaction of the remaining $2.1 million of outstanding principal balance. The Company accounted for this transaction as retirement in accordance with ASC 932-360-40-3. As the retirement did not impact the unit-of-production amortization rate no gain or loss was recognized on the transaction. Series A 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 Company received net proceeds of approximately $9.0 million from the private placement, after placement agent fees and other associated expenses. During the six months ended June 30, 2018 one Convertible Note in the principal amount of $0.2 million plus accrued interest was converted into 135,963 shares of common stock. The conversion was recorded at the contractual conversion rate of $1.50 per share. No gain or loss was recognized in connection with the conversion (Note 9). As of June 30, 2018, there was no accrued interest related to the Convertible Notes outstanding. As of December 31, 2017 accrued interest related to the notes was $0.3 million. The Series A Convertible Notes, together with all accrued and unpaid interest, are due and payable on December 31, 2018. Series B Convertible Notes On September 25, 2017, September 30, 2017 and October 17, 2017 the Company sold Series B Unsecured Convertible Promissory Notes (the "Series B Notes") in the principal amount of $4.7 million. As of June 30, 2018, there was no accrued interest related to the Series B Notes outstanding. As of December 31, 2017 accrued interest related to the Series B Notes was $0.2 million. The Series B Notes, together with all accrued and unpaid interest, are due and payable on December 31, 2018. Secured Credit Facility On February 1, 2018, the Company closed on a $25.0 million Secured Credit Facility with Providence Wattenberg, LP and 5NR Wattenberg, LLC (“Secured Lenders”). Each of Providence and 5NR are affiliates of the Lenders under a Letter Agreement entered into by the Company on December 21, 2017 under which the Company borrowed $5.0 million. The closing on February 1, 2018 fully incorporates the 2017 Letter Agreement and represents additional borrowings of $20.0 million (Note 11). ● Interest on the outstanding principal balance of the Loan accrues at the rate of 14% per year, plus 1% or the three month LIBOR, whichever is greater. In no event shall interest exceed 17%. Interest payments are due and payable monthly effective March 1, 2018. ● The Company paid a $1.25 million origination fee at the time of the closing and agreed to pay a $1.25 million underwriting fee on February 1, 2019. ● The Loan is secured by a lien on all the Company’s assets. ● All principal and accrued interest under the Credit Agreement is due February 1, 2020 (“Maturity Date”). ● At any time, each Secured Lender may convert 20% of the outstanding principal such Lender loaned 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 issued to the Secured Lenders 1,500,000 warrants to purchase common stock of the Company at a price of $0.01 per share (Note 9). ● The Secured Lenders were granted 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 ● An option to purchase up to $25 million of the Company’s common stock at a 10% discount from the 30-day volume-weighted average trading price (“VWAP”) of the common stock at the time the option is exercised, but in no event shall the exercise price be less than $1.85 per share, which option will become exercisable on the Maturity Date and expire on February 1, 2021; and registration rights in connection with the common stock that may be issued upon exercise of the foregoing rights. The Secured Credit Facility is subject to certain financial and restrictive covenants under which the Company’s failure to comply might result in mandatory redemption of the outstanding balance. The covenants include; ● The Company has agreed not to issue any equity securities or securities convertible into or exercisable for equity securities without the consent of Lenders, except for common stock issuable under the Company’s equity incentive plan, certain registered public offerings, common stock issuable in connection with certain convertible promissory notes and certain outstanding warrants; and ● Maintenance of a Total Leverage Ratio and a Present Value of Proved Developed Producing Reserves Coverage Ratio, as defined in the Credit Agreement. The Company received net cash proceeds of $11.2 million from the Secured Credit Facility after the deduction of amounts paid to the Secured Lenders and their affiliates for (i) full repayment of $5.0 million borrowed under the initial line of credit, (ii) partial repayment of $1.5 million against the Supplemental line of credit, (iii) payment of $1.25 million in origination fees to the Secured Lenders, and (iv) repayment of accrued interest of $1.1 million to the Secured Lenders. The following table below reconciles the use of the $20.0 million in additional borrowings under the terms of the Secured Credit Facility; Gross Proceeds $ 20,000,000 Payment of origination fee (1,250,000 ) Principal repayment on Initial Line of Credit (5,000,000 ) Principal repayment on Supplemental Line of Credit (1,500,000 ) Payment of accrued interest costs $ (1,086,808 ) Net Cash Proceeds $ 11,163,192 The Secured Credit Facility is considered a hybrid debt instrument with several elements that required identification and valuation. As the fair value of the embedded elements is not readily determinable through an active marketplace of identical instruments, the Company employed other valuation techniques, including a Monte Carlo simulation, to determine the fair value of the components of the instrument. It was determined that the rights to convert the debt into common shares contained a beneficial conversion feature that could be detached from the debt and valued as a component of equity. It was likewise determined that the warrants could be detached from the debt and valued as a component of equity. It was determined that the option to purchase shares at a 10% discount from VWAP represented a derivative liability that should be remeasured at fair value for each reporting period. The Company further determined that certain provisions of the agreement which provide for additional interest payments under certain conditions represent an additional compound derivative liability that should also be remeasured at fair value for each reporting period. For both the share purchase option and the additional interest provisions, a Monte Carlo simulation model was used to calculate estimates of fair value. The model was used as of February 1, 2018 to determine the initial valuation, and as of March 31, 2018 and June 30, 2018 to determine changes in the estimated values. During the period ended June 30, 2018, it was determined that the prior calculations had yielded an inaccurate estimate of the fair value of the share purchase option derivative liability and that the initial allocation of value to each component should be revised to reflect the more accurate estimate. Specifically the share purchase option derivative liability was undervalued by $1.1 million, the value allocated to the beneficial conversion feature was understated by $0.8 million and the net carrying value of the Secured Credit Facility was overstated by $1.9 million. As these revisions primarily reflected balance sheet reclassifications and were determined to be immaterial to the condensed consolidated financial statements, they were recorded during the period ended June 30, 2018. The values disclosed in the notes to this quarterly report were appropriately updated to reflect the amounts that should have been recorded at initiation. As of June 30, 2018 the values allocated to each component of the debt instrument at its initiation date are set forth below; Secured Credit Facility, net of all discounts $ 16,786,981 Compound derivative liability 322,164 Share purchase option derivative liability 1,347,853 Stock purchase warrants 1,538,943 Beneficial conversion feature 2,272,775 Legal fees and other 231,284 Subtotal $ 22,500,000 Origination fee and Underwriting fee 2,500,000 Secured Credit Facility $ 25,000,000 The following table reflects the net amounts recorded as debt at June 30, 2018 and December 31, 2017: Initial Supplemental Convertible Convertible Secured Line of Line of Notes Notes Credit Credit Credit Series A Series B Facility 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 ) Principal Borrowings - - - - (20,000,000 ) Repayments 5,000,000 3,552,500 - - - Conversions - - 200,000 - - - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 266,509 168,324 103,435 Additions - - - - 4,284,416 Accretion - - (138,184 ) (84,052 ) (789,224 ) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 128,325 84,272 3,598,627 Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,324,748 44,541 - Additions - - - - 2,272,775 Accretion - - (689,848 ) (23,379 ) (408,794 ) Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 634,900 21,162 1,863,981 Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 922,081 - - Additions - - - - 1,538,943 Accretion - - (480,202 ) - (276,803 ) Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 441,879 - 1,262,140 June 30, 2018, Principal Balance $ - $ - $ (4,633,200 ) $ (4,724,900 ) $ (25,000,000 ) June 30, 2018, Total, net $ - $ - $ (3,428,096 ) $ (4,619,466 ) $ (18,275,252 ) |
ASSET RETIREMENT OBLIGATION
ASSET RETIREMENT OBLIGATION | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | |
ASSET RETIREMENT OBLIGATION | To determine changes in the amount of the asset retirement obligation during the six months ended June 30, 2018, the Company assumed an inflation rate of 2.0% and a credit-adjusted risk-free interest rate ranging from 14% to 20%. Assumed well lives are based upon engineering and economic data and approximate 30 years for new wells and shorter lives for the acquisition of older wells. The following table presents changes in the asset retirement obligation for the periods presented: Six months ended Year ended June 30, December 31, 2018 2017 Asset retirement obligation, beginning of period $ 1,123,444 $ 945,419 Liabilities settled (142,959 ) (50,163 ) Liabilities incurred 58,510 91,999 Revisions in estimated liabilities — 36,507 Accretion 55,612 99,682 Asset retirement obligation, end of period $ 1,094,607 $ 1,123,444 Current obligation $ 213,043 $ 288,784 Long-term liability $ 881,564 $ 834,660 |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable and accrued liability balances were comprised of the following: June 30, December 31, 2018 2017 Trade accounts payable and accrued liabilities $ 1,012,629 $ 1,544,112 Accrued interest payable — 876,455 Liabilities incurred in connection with development of crude oil and natural gas properties 27,233,194 1,719,785 Total $ 28,245,823 $ 4,140,352 |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Activity for the six months ended June 30, 2018 included the following: On February 23, 2018 the Company issued 70,000 shares of common stock, valued at $1.00 per share, in lieu of cash compensation. On March 12, 2018 the Company issued 135,963 shares of common stock in connection with the conversion of $200,000 of 10% convertible notes payable plus accrued interest. The shares were issued at the contractual rate of $1.50. On April 18, 2018 the Company issued 75,000 shares of common stock, valued at $1.23 per share in connection with the appointment of three new members to its Board of Directors. On June 1, 2018 the Company issued 65,000 shares of common stock valued $1.40 per share to employees of the Company as compensation. The shares are subject to certain vesting restrictions, but all 65,000 shares have full voting rights and are eligible to receive dividends during the vesting period. Activity for the six months ended June 30, 2017 included the following: In connection with the completion of a private placement, the Company received $7,251,662 in net proceeds from the sale of 161.15 units consisting of convertible promissory notes and warrants during the first quarter of 2017. The convertible notes payable are convertible into shares of common stock at $1.50 per share. Immediately following the closing, and including units sold during 2016, the outstanding convertible notes are convertible into 6,666,666 shares of common stock. On various dates, in connection with the execution of four employment agreements 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. Warrants The table below summarizes warrants outstanding as of June 30, 2018: Shares Underlying Outstanding Exercise Price Warrants Per Share Expiration Date Underwriter warrants 255,600 $ 1.25 11/12/2020 Investor warrants 6,666,600 $ 3.00 12/31/2019 Placement agent warrants 666,600 $ 1.50 12/31/2021 Secured Credit Facility Warrants 1,500,000 $ 0.01 2/1/2020 Total 9,088,800 Activity for the six months ended June 30, 2018 included the following: On February 1, 2018 in connection with the closing of the Secured Credit Facility the Company issued 1,500,000 stock purchase warrants. The warrants are exercisable at $0.01 per share and expire on February 1, 2020 (Notes 6 and 11). |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
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 amended and restated the Company’s original equity incentive plan. The Plan terminates 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. The Company’s shareholders approved the Plan at the Company’s annual meeting of shareholders on September 8, 2016. Activity for the six months ended June 30, 2018 included the following: On March 1, 2018, the Company issued 325,000 options to purchase shares of the Company’s common stock, which options are exercisable at $1.03 per share. The options were issued to employees and an officer of the Company. The options may be exercised at any time on or before March 1, 2023. On April 18, 2018, the Company issued options to purchase 75,000 shares of the Company’s common stock, which options are exercisable at $1.23 per share. The options were issued to directors of the Company. The options may be exercised at any time on or before December 31, 2022. A summary of activity under the Plan for the six months ended June 30, 2018 is as follows: Weighted Remaining Average Contractual Number of Exercise Term Shares Price (Years) Outstanding, December 31, 2017 4,997,000 $ 0.85 4.44 Granted 400,000 $ 1.07 Exercised - $ - Forfeited - $ - Outstanding, June 30, 2018 5,397,000 $ 0.87 4.00 Exercisable, June 30, 2018 4,693,500 $ 0.79 3.96 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 on the historical volatility of a group of publicly-traded companies that share similar operating metrics and histories and that of the Company itself. The expected term of the awards represents the period that management anticipates awards will be outstanding. As there was insufficient historical data available to ascertain the expected term of the options, the Company applied the “simplified method” in its calculation. The risk-free rates are based on the US Treasury bond rate in effect at the time of the grant for instruments with similar maturity dates. 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 is recorded net of actual forfeitures. There were no forfeitures during the period ended June 30, 2018. The table below summarizes assumptions utilized in the Black-Scholes pricing model for the six months ended June 30, 2018: June 30, 2018 Expected option term—years 2.4 - 3.0 Risk-free interest rate 2.58% - 2.73% Expected dividend yield — Volatility 96% - 101% During the three months and six months ended June 30, 2018, the Company recorded stock-based compensation expense of $0.2 million and $0.4 million, respectively, related to options issued through the Plan. During the three months and six months ended June 30, 2017, the Company recorded stock-based compensation expense of $0.6 million and $0.7 million, respectively, related to options issued through the Plan. Unvested stock-based compensation related to the options at June 30, 2018 and December 31, 2017 amounted to $0.5 million and $0.6 million, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Providence Initial Line of Credit As of June 30, 2018 there was no balance outstanding on the initial line of credit. As of December 31, 2017, the Company had an outstanding balance of $5.0 million and had accrued interest in the amount of $0.5 million. The outstanding principal balance of $5.0 million and accrued interest of $0.5 million were repaid on February 1, 2018 with proceeds from the closing of the Secured Credit Facility. Interest expense of $0.3 million was recognized related to the note and accretion of unamortized debt discount during the six months ended June 30, 2018. Secured Credit Facility Related to the execution of the Credit Agreement the Company entered into a Secured Credit Facility (Note 6), pursuant to which the Company borrowed $25MM from PEO affiliated entities. PEO beneficially owns approximately 11.7% of the Company’s common stock. PEO and affiliated entities could potentially own approximately 48% of the Company’s common stock in the event of the exercise of certain convertible notes and the exercise of warrants (Note 6). As of June 30, 2018, included in accounts payable and accrued liabilities – related party are $1.3 million in underwriting fees payable on February 1, 2019. Interest expense of $3.4 million was recognized related to the note and the accretion of debt discounts during the six months ended June 30, 2018. In connection with the execution of the Secured Credit Facility the Company issued 1.5 million warrants to purchase common stock of the Company to PEO affiliated entities (Note 9). Operations As of June 30, 2018, the Company has recorded a net $7.4 million in Accounts receivable—joint interest billing—related party. This amount relates to amounts billed to PEO with respect to its participation in the Company’s operated Shook drilling program and PEO’s ownership interest in the vertical wells that the Company operates. Participation Agreement In June, 2018 the Company entered into a participation agreement with PEO, whereby the Company acquired 2,200 mineral acres and interests in eight wells from PEO for $4.4 million. Payment is due December 31, 2018. If the Company should elect not to complete its participation, the Company will owe a penalty of $0.7 million to PEO and surrender all of its interests in the assets. Conveyance On June 1, the Company closed a transaction with an affiliate of PEO that exchanged the Company's interest in the Ocho Assets (Note 5) in exchange in full satisfaction of $2.1 million of outstanding principal related to our Supplemental line of credit (Note 6). |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Operating leases and agreements The Company leases its office facility under a four-year non-cancelable operating lease expiring in March 2021. The following is a schedule by year of future minimum rental payments required under the lease agreement: As of June 30, 2018 Amount 2018 $ 62,586 2019 133,698 2020 137,658 2021 34,662 Total $ 368,604 Lease expense totaled $29,816 and $61,508 and $27,293 and $50,108 for the three and six months ended June 30, 2018 and 2017, respectively. |
RESTATEMENT OF PRIOR PERIOD CON
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
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 three and six month periods ended June 30, 2017. The issue resulted from the application of an incorrect conversion factor when evaluating NGL volumes. The correction of this error was recorded during the quarter ended December 31, 2017. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality The following table presents the restatement amounts included in the condensed consolidated statements of operations and cash flows for the three months and six months ended June 30, 2017; Three months ended Six months ended June 30, 2017 June 30, 2017 Net (loss), as reported $ (733,469 ) $ (2,872,608 ) Adjustments: Previously reported depletion, depreciation and amortization (1) $ (1,536,174 ) $ (1,982,341 ) Total adjustment 433,842 549,096 Corrected depletion, depreciation and amortization (1) (1,102,332 ) (1,433,245 ) Net (loss), as restated $ (299,627 ) $ (2,323,512 ) Net (loss) per share, as reported $ (0.03 ) $ (0.13 ) Net (loss) per share, as restated $ (0.01 ) $ (0.10 ) (1) Excludes depreciation expense not directly related to oil and gas properties of $17,502 and $20,428 for the three and six months ended June 30, 2017, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company has evaluated events through August 14, 2018 and noted no items that would require disclosure in the condensed consolidated financial statements. |
BASIS OF PRESENTATION AND SUM20
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading. In management’s opinion, the Condensed Consolidated Balance Sheet as of December 31, 2017, which has been derived from the audited consolidated financial statements, and the unaudited Condensed Consolidated Balance Sheet as of June 30, 2018, the unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017, and the unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited consolidated financial statements. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto and summary of significant accounting policies included in the Company’s annual report on Form 10-K for the year ended December 31, 2017. Except as noted below, there have been no changes to the footnotes from those accompanying the audited financial statements contained in the Company’s Form 10-K for the year ended December 31, 2017. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary CFW Resources, LLC, formed on August 1, 2017. |
Loss Per Share | Basic and diluted loss per share 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 the effect of their inclusion would be anti-dilutive. Potentially dilutive securities at June 30, 2018 and December 31, 2017 are as follows: June 30, December 31, 2018 2017 Exercisable stock options 4,693,500 4,347,500 Warrants to purchase common shares 9,088,800 7,588,800 Shares underlying secured credit facility 17,251,052 — Shares underlying convertible notes 6,238,733 6,372,066 Total 37,272,085 18,308,366 |
Capitalized Interest Costs | The Company has capitalized certain interest costs related to proved properties that are currently undergoing activities necessary to prepare them for their intended use. These costs have been capitalized to oil and gas properties. |
Revenue Recognition | Effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The timing of recognizing revenue from the sale of crude oil, natural gas and natural gas liquids was not changed as the result of the adoption of this standard. The Company derives all its revenue from the sale of crude oil, natural gas and natural gas liquids. Currently, all sales are in the Wattenberg Field in Northern Colorado. The ASU requires disclosure of significant components of revenue (disaggregation) which the Company presents on the face of the Statements of Operations. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the month the product is delivered to the purchaser. The Company typically receives payment from one to three months after delivery. The transaction price includes variable consideration as product pricing is based on published market prices and reduced for specified differentials. ASU 2014-09 does not require that the transaction price be fixed or stated in the contract. |
Debt Discount Costs | On February 1, 2018, the Company entered into a Secured Term Credit Agreement (“Credit Agreement” and or “Secured Credit Facility”) with Providence Wattenberg, LP and 5NR Wattenberg, LLC (the “Secured Lenders”). Each of Providence and 5NR are affiliates of the Lenders (named below) under a Letter Agreement entered into by the Company and Providence Energy Ltd (“PEC”), Providence Energy Partners, LP (“PEP III”), Providence Energy Operators, LLC (“PEO”) Fifth Partners, LLC (“Fifth”) on December 21, 2017 (Note 6). The Credit Agreement contained an embedded beneficial conversion feature and warrants to purchase common stock of the Company. The proceeds from the sale of the securities were allocated between the Secured Credit Facility and, where applicable, the warrants based on the relative 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 Secured Credit Facility and is being amortized to interest expense using the effective interest method over the term of the Secured Credit Facility. The fair value of warrants issued has been recorded as a reduction to the carrying value of the Secured Credit Facility, and is being amortized over the term of the Secured Credit Facility using the effective interest method. Origination fees paid in cash have been recorded as a reduction in the carrying value of the Secured Credit Facility and are being amortized over the term of the Secured Credit Facility using the effective interest method. |
Recently Issued Accounting Pronouncements | In February 2016, the Financial Accounting Standards Board (“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 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 resulting from 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. There were various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s reported financial position, results of operations, or cash flows. |
BASIS OF PRESENTATION AND SUM21
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Schedule of potentially dilutive securities | June 30, December 31, 2018 2017 Exercisable stock options 4,693,500 4,347,500 Warrants to purchase common shares 9,088,800 7,588,800 Shares underlying secured credit facility 17,251,052 — Shares underlying convertible notes 6,238,733 6,372,066 Total 37,272,085 18,308,366 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of roll-forward of the fair value of the derivative liabilities associated with Company's Secured Credit Facility, categorized as Level 3 | Six months ended June 30, 2018 Beginning balance $ - Additions (Note 6) (1,670,017 ) Gain (loss) included in earnings (21,100 ) Gain (loss) included in other comprehensive income - Ending Balance (1,691,117 ) |
CRUDE OIL AND NATURAL GAS PRO23
CRUDE OIL AND NATURAL GAS PROPERTIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Oil and Gas Property [Abstract] | |
Schedule of net capitalized costs | June 30, December 31, 2018 2017 Proved oil and gas properties $ 51,982,054 $ 22,144,366 Unproved oil and gas properties (1) 6,654,026 1,919,335 Wells in progress (2) 146,807 9,858,262 Total capitalized costs 58,782,887 33,921,963 Accumulated depletion, depreciation and amortization (3,954,384 ) (2,849,374 ) Net capitalized costs (3) $ 54,828,503 $ 31,072,589 (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. (3) Net capitalized costs include capitalized interest costs. Approximately $2.2 million was capitalized during the six months ended June 30, 2018. |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Summary of net amounts of debt | Initial Supplemental Convertible Convertible Secured Line of Line of Notes Notes Credit Credit Credit Series A Series B Facility 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 ) Principal Borrowings - - - - (20,000,000 ) Repayments 5,000,000 3,552,500 - - - Conversions - - 200,000 - - - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 266,509 168,324 103,435 Additions - - - - 4,284,416 Accretion - - (138,184 ) (84,052 ) (789,224 ) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - 128,325 84,272 3,598,627 Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,324,748 44,541 - Additions - - - - 2,272,775 Accretion - - (689,848 ) (23,379 ) (408,794 ) Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 634,900 21,162 1,863,981 Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 922,081 - - Additions - - - - 1,538,943 Accretion - - (480,202 ) - (276,803 ) Ending - Unamortized Debt Issuance Costs - Warrant Discount - - 441,879 - 1,262,140 June 30, 2018, Principal Balance $ - $ - $ (4,633,200 ) $ (4,724,900 ) $ (25,000,000 ) June 30, 2018, Total, net $ - $ - $ (3,428,096 ) $ (4,619,466 ) $ (18,275,252 ) |
Revolving Credit Facility Related Party [Member] | |
Schedule of reconciliation of additional borrowings | Gross Proceeds $ 20,000,000 Payment of origination fee (1,250,000 ) Principal repayment on Initial Line of Credit (5,000,000 ) Principal repayment on Supplemental Line of Credit (1,500,000 ) Payment of accrued interest costs $ (1,086,808 ) Net Cash Proceeds $ 11,163,192 |
Schedule of initial value allocated to each component of debt instrument | Secured Credit Facility, net of all discounts $ 16,786,981 Compound derivative liability 322,164 Share purchase option derivative liability 1,347,853 Stock purchase warrants 1,538,943 Beneficial conversion feature 2,272,775 Legal fees and other 231,284 Subtotal $ 22,500,000 Origination fee and Underwriting fee 2,500,000 Secured Credit Facility $ 25,000,000 |
ASSET RETIREMENT OBLIGATION (Ta
ASSET RETIREMENT OBLIGATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Reconciliation of the Asset Retirement Obligation | Six months ended Year ended June 30, December 31, 2018 2017 Asset retirement obligation, beginning of period $ 1,123,444 $ 945,419 Liabilities settled (142,959 ) (50,163 ) Liabilities incurred 58,510 91,999 Revisions in estimated liabilities — 36,507 Accretion 55,612 99,682 Asset retirement obligation, end of period $ 1,094,607 $ 1,123,444 Current obligation $ 213,043 $ 288,784 Long-term liability $ 881,564 $ 834,660 |
ACCOUNTS PAYABLE AND ACCRUED 26
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Components of Accounts Payable and Accrued Liabilities | June 30, December 31, 2018 2017 Trade accounts payable and accrued liabilities $ 1,012,629 $ 1,544,112 Accrued interest payable — 876,455 Liabilities incurred in connection with development of crude oil and natural gas properties 27,233,194 1,719,785 Total $ 28,245,823 $ 4,140,352 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Summary of Warrants Outstanding | Shares Underlying Outstanding Exercise Price Warrants Per Share Expiration Date Underwriter warrants 255,600 $ 1.25 11/12/2020 Investor warrants 6,666,600 $ 3.00 12/31/2019 Placement agent warrants 666,600 $ 1.50 12/31/2021 Secured Credit Facility Warrants 1,500,000 $ 0.01 2/1/2020 Total 9,088,800 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Option Activity | Weighted Remaining Average Contractual Number of Exercise Term Shares Price (Years) Outstanding, December 31, 2017 4,997,000 $ 0.85 4.44 Granted 400,000 $ 1.07 Exercised - $ - Forfeited - $ - Outstanding, June 30, 2018 5,397,000 $ 0.87 4.00 Exercisable, June 30, 2018 4,693,500 $ 0.79 3.96 |
Summary of Fair Value Assumptions | June 30, 2018 Expected option term—years 2.4 - 3.0 Risk-free interest rate 2.58% - 2.73% Expected dividend yield — Volatility 96% - 101% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating Lease Agreement Schedule | As of June 30, 2018 Amount 2018 $ 62,586 2019 133,698 2020 137,658 2021 34,662 Total $ 368,604 |
RESTATEMENT OF PRIOR PERIOD FIN
RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of restatements to the consolidated balance sheets and the consolidated statements of operations | Three months ended Six months ended June 30, 2017 June 30, 2017 Net (loss), as reported $ (733,469 ) $ (2,872,608 ) Adjustments: Previously reported depletion, depreciation and amortization (1) $ (1,536,174 ) $ (1,982,341 ) Total adjustment 433,842 549,096 Corrected depletion, depreciation and amortization (1) (1,102,332 ) (1,433,245 ) Net (loss), as restated $ (299,627 ) $ (2,323,512 ) Net (loss) per share, as reported $ (0.03 ) $ (0.13 ) Net (loss) per share, as restated $ (0.01 ) $ (0.10 ) (1) Excludes depreciation expense not directly related to oil and gas properties of $17,502 and $20,428 for the three and six months ended June 30, 2017, respectively. |
BASIS OF PRESENTATION AND SUM31
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details) - shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Potentially dilutive securities | 37,272,085 | 18,308,366 |
Exercisable Stock Option [Member] | ||
Potentially dilutive securities | 4,693,500 | 4,347,500 |
Warrants to Purchase Common Shares [Member] | ||
Potentially dilutive securities | 9,088,800 | 7,588,800 |
Share Underlying Secured Credit Facility [Member] | ||
Potentially dilutive securities | 17,251,052 | 0 |
Shares Underlying Convertible Notes [Member] | ||
Potentially dilutive securities | 6,238,733 | 6,372,066 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
GOING CONCERN | ||||
Net (loss) | $ (110,074) | $ (299,627) | $ (1,597,819) | $ (2,323,512) |
Net assets/(liabilities) | $ (23,500,000) | $ (23,500,000) |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Fair Value Disclosures [Abstract] | |
Beginning balance | $ 0 |
Additions (Note 6) | (1,670,017) |
Gain (loss) included in earnings | (21,100) |
Gain (loss) included in other comprehensive income | 0 |
Ending Balance | $ (1,691,117) |
CRUDE OIL AND NATURAL GAS PRO34
CRUDE OIL AND NATURAL GAS PROPERTIES (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 | |
Oil and Gas Property [Abstract] | |||
Proved oil and gas properties | $ 51,982,054 | $ 22,144,366 | |
Unproved oil and gas properties | [1] | 6,654,026 | 1,919,335 |
Wells in progress | [2],[3] | 146,807 | 9,858,262 |
Total capitalized costs | 58,782,887 | 33,921,963 | |
Accumulated depletion, depreciation and amortization | (3,954,384) | (2,849,374) | |
Net capitalized costs | [4] | $ 54,828,503 | $ 31,072,589 |
[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. | ||
[3] | Wells in progress include capitalized interest costs. Approximately $2.2 million was capitalized during the six months ended June 30, 2018. | ||
[4] | Net capitalized costs include capitalized interest costs. Approximately $2.2 million was capitalized during the six months ended June 30, 2018. |
CRUDE OIL AND NATURAL GAS PRO35
CRUDE OIL AND NATURAL GAS PROPERTIES (Details Narrative) | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Oil and Gas Property [Abstract] | |
Interest cost capitalized | $ 2,200,000 |
DEBT (Details)
DEBT (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Gross proceeds | $ 20,000,000 | |
Payment of origination fee | (1,250,000) | $ 0 |
Payment of accrued interest costs | (1,086,608) | $ 0 |
Net cash proceeds | 11,163,192 | |
Initial Line Of Credit [Member] | ||
Principal repayment | (5,000,000) | |
Supplemental Line Of Credit [Member] | ||
Principal repayment | $ (1,500,000) |
DEBT (Details 1)
DEBT (Details 1) | Jun. 30, 2018USD ($) |
Debt Disclosure [Abstract] | |
Secured credit facility, net of all discounts | $ 16,786,981 |
Compound derivative liability | 322,164 |
Share purchase option derivative liability | 1,347,853 |
Stock purchase warrants | 1,538,943 |
Beneficial conversion feature | 2,272,775 |
Legal fees and other | 231,284 |
Subtotal | 22,500,000 |
Origination fee and underwriting fee | 2,500,000 |
Secured credit facility, net of all discounts | $ 25,000,000 |
DEBT (Details 2)
DEBT (Details 2) - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Additions | $ 1,250,000 | $ 0 | |
Accretion | 3,162,617 | $ 2,251,752 | |
Balance at end of period | 25,000,000 | ||
Total, net | (16,786,981) | ||
Initial Line Of Credit [Member] | |||
Balance at beginning of period | (5,000,000) | ||
Borrowings | 0 | ||
Repayments | 5,000,000 | ||
Conversions | 0 | ||
Balance at end of period | 0 | ||
Total, net | 0 | $ (5,000,000) | |
Initial Line Of Credit [Member] | Warrant [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Initial Line Of Credit [Member] | Original Issuer Discount [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Initial Line Of Credit [Member] | Beneficial Conversion Feature [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Supplemental Line Of Credit [Member] | |||
Balance at beginning of period | (3,552,500) | ||
Borrowings | 0 | ||
Repayments | 3,552,500 | ||
Conversions | 0 | ||
Balance at end of period | 0 | ||
Total, net | 0 | (3,552,500) | |
Supplemental Line Of Credit [Member] | Warrant [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Supplemental Line Of Credit [Member] | Original Issuer Discount [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Supplemental Line Of Credit [Member] | Beneficial Conversion Feature [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Convertible Notes Series A [Member] | |||
Balance at beginning of period | (4,833,200) | ||
Borrowings | 0 | ||
Repayments | 0 | ||
Conversions | 200,000 | ||
Balance at end of period | (4,633,200) | ||
Total, net | (3,428,096) | (2,319,862) | |
Convertible Notes Series A [Member] | Warrant [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 922,081 | ||
Additions | 0 | ||
Accretion | (480,202) | ||
Ending - Unamortized Debt Issuance Costs | 441,879 | ||
Convertible Notes Series A [Member] | Original Issuer Discount [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 266,509 | ||
Additions | 0 | ||
Accretion | (138,184) | ||
Ending - Unamortized Debt Issuance Costs | 128,325 | ||
Convertible Notes Series A [Member] | Beneficial Conversion Feature [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 1,324,748 | ||
Additions | 0 | ||
Accretion | (689,848) | ||
Ending - Unamortized Debt Issuance Costs | 634,900 | ||
Convertible Notes Series B [Member] | |||
Balance at beginning of period | (4,724,900) | ||
Borrowings | 0 | ||
Repayments | 0 | ||
Conversions | 0 | ||
Balance at end of period | (4,724,900) | ||
Total, net | (4,512,035) | (4,619,466) | |
Convertible Notes Series B [Member] | Warrant [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 0 | ||
Accretion | 0 | ||
Ending - Unamortized Debt Issuance Costs | 0 | ||
Convertible Notes Series B [Member] | Original Issuer Discount [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 168,324 | ||
Additions | 0 | ||
Accretion | (84,052) | ||
Ending - Unamortized Debt Issuance Costs | 84,272 | ||
Convertible Notes Series B [Member] | Beneficial Conversion Feature [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 44,541 | ||
Additions | 0 | ||
Accretion | (23,379) | ||
Ending - Unamortized Debt Issuance Costs | 21,162 | ||
Secured Credit Facility [Member] | |||
Balance at beginning of period | (5,000,000) | ||
Borrowings | (20,000,000) | ||
Repayments | 0 | ||
Conversions | 0 | ||
Balance at end of period | (25,000,000) | ||
Total, net | (18,275,252) | $ (4,896,565) | |
Secured Credit Facility [Member] | Warrant [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 1,538,943 | ||
Accretion | (276,803) | ||
Ending - Unamortized Debt Issuance Costs | 1,262,140 | ||
Secured Credit Facility [Member] | Original Issuer Discount [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 103,435 | ||
Additions | 4,284,416 | ||
Accretion | (789,224) | ||
Ending - Unamortized Debt Issuance Costs | 3,598,627 | ||
Secured Credit Facility [Member] | Beneficial Conversion Feature [Member] | |||
Beginning Balance - Unamortized Debt Issuance Costs | 0 | ||
Additions | 2,272,775 | ||
Accretion | (408,794) | ||
Ending - Unamortized Debt Issuance Costs | $ 1,863,981 |
ASSET RETIREMENT OBLIGATION (De
ASSET RETIREMENT OBLIGATION (Details) - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Activity of asset retirement obligation | |||
Asset retirement obligation, beginning of period | $ 1,123,444 | $ 945,419 | $ 945,419 |
Liabilities settled | (142,959) | (50,163) | |
Liabilities incurred | 58,510 | 91,999 | |
Revisions in estimated liabilities | 0 | 36,507 | |
Accretion | 55,612 | $ 46,912 | 99,682 |
Asset retirement obligation, end of period | 1,094,607 | 1,123,444 | |
Current liability | 213,043 | 288,784 | |
Long-term liability | $ 881,564 | $ 834,660 |
ACCOUNTS PAYABLE AND ACCRUED 40
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Trade accounts payable and accrued liabilities | $ 1,012,629 | $ 1,544,112 |
Accrued interest payable | 0 | 876,455 |
Liabilities incurred in connection with acquisition of crude oil and natural gas properties | 27,233,194 | 1,719,785 |
Total | $ 28,245,823 | $ 4,140,352 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | Jun. 30, 2018$ / sharesshares |
Warrants | |
Shares underlying outstanding warrants | 9,088,800 |
Underwriter Warrants [Member] | |
Warrants | |
Shares underlying outstanding warrants | 255,600 |
Warrants exercise price | $ / shares | $ 1.25 |
Investor Warrants [Member] | |
Warrants | |
Shares underlying outstanding warrants | 6,666,600 |
Warrants exercise price | $ / shares | $ 3 |
Placement Agent Warrants [Member] | |
Warrants | |
Shares underlying outstanding warrants | 666,600 |
Warrants exercise price | $ / shares | $ 1.50 |
Secured Credit Facility Warrants [Member] | |
Warrants | |
Shares underlying outstanding warrants | 1,500,000 |
Warrants exercise price | $ / shares | $ .01 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Number of Shares | |
Outstanding Options, Beginning of period | shares | 4,997,000 |
Options Granted | shares | 400,000 |
Options Exercised | shares | 0 |
Options Forfeited | shares | 0 |
Outstanding Options, End of period | shares | 5,397,000 |
Options Exercisable | shares | 4,693,500 |
Weighted Average Exercise Price | |
Outstanding, Beginning, Weighted-Average Exercise Price | $ / shares | $ .85 |
Granted | $ / shares | 1.07 |
Exercised | $ / shares | .00 |
Forfeited | $ / shares | .00 |
Outstanding, Ending, Weighted-Average Exercise Price | $ / shares | .87 |
Exercisable | $ / shares | $ .79 |
Remaining Contractual Term (Years) | |
Outstanding, Beginning | 4 years 5 months 8 days |
Outstanding, Ending | 4 years |
Exercisable | 3 years 11 months 16 days |
STOCK-BASED COMPENSATION (Det43
STOCK-BASED COMPENSATION (Details 1) | 6 Months Ended |
Jun. 30, 2018 | |
Pricing model assumptions | |
Weighted-average risk-free interest rate, minimum | 2.58% |
Weighted-average risk-free interest rate, maximum | 2.73% |
Expected dividend yield | 0.00% |
Weighted-average volatility, minimum | 96.00% |
Weighted-average volatility, maximum | 101.00% |
Minimum [Member] | |
Pricing model assumptions | |
Expected option term | 2 years 4 months 24 days |
Maximum [Member] | |
Pricing model assumptions | |
Expected option term | 3 years |
STOCK-BASED COMPENSATION (Det44
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||
Stock-based compensation expense | $ 200,000 | $ 600,000 | $ 400,000 | $ 700,000 | |
Unvested share based compensation | $ 500,000 | $ 500,000 | $ 600,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Line of credit outstanding balance | $ 16,786,981 | |
Accrued interest | 0 | $ 876,455 |
Interest expense, related party | 3,400,000 | |
Accounts payable and accrued liabilities - related party | 1,299,390 | 589,496 |
Accounts receivable - joint interest billing - related party | 7,431,969 | 204,730 |
Initial Line Of Credit [Member] | ||
Line of credit outstanding balance | 0 | 5,000,000 |
Accrued interest | 0 | $ 500,000 |
Interest expense, related party | $ 300,000 |
COMMITMENTS AND CONTINGENCIES46
COMMITMENTS AND CONTINGENCIES (Details) | Jun. 30, 2018USD ($) |
Future minimum rental payments required under operating lease agreement | |
2,018 | $ 62,586 |
2,019 | 133,698 |
2,020 | 137,658 |
2,021 | 34,662 |
Total | $ 368,604 |
COMMITMENTS AND CONTINGENCIES47
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Commitments And Contingencies | ||||
Lease expense | $ 29,816 | $ 27,293 | $ 61,508 | $ 50,108 |
RESTATEMENT OF PRIOR PERIOD C48
RESTATEMENT OF PRIOR PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | ||
Net (loss) | $ (110,074) | $ (299,627) | $ (1,597,819) | $ (2,323,512) | |
Adjustments | |||||
Depletion, depreciation and amortization | [1] | $ (1,102,332) | $ (1,433,245) | ||
Net (loss) per share | $ .00 | $ (.01) | $ (0.06) | $ (0.10) | |
Scenario Previously Reported [Member] | |||||
Net (loss) | $ (733,469) | $ (2,872,608) | |||
Adjustments | |||||
Depletion, depreciation and amortization | [1] | $ (1,536,174) | $ (1,982,341) | ||
Net (loss) per share | $ (.03) | $ (.13) | |||
Restatement Adjustment [Member] | |||||
Adjustments | |||||
Depletion, depreciation and amortization | $ 433,842 | $ 549,096 | |||
[1] | Excludes depreciation expense not directly related to oil and gas properties of $17,502 and $20,428 for the three and six months ended June 30, 2017, respectively. |