Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 15, 2019 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | PetroShare Corp. | |
Entity Central Index Key | 0001568079 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 28,077,332 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 2,309,517 | $ 2,636,943 |
Accounts receivable - joint interest billing | 580,586 | 495,911 |
Accounts receivable - joint interest billing - related party | 1,101,501 | 1,158,213 |
Accounts receivable - crude oil, natural gas and NGL sales | 5,431,408 | 11,659,479 |
Prepaid expenses and other assets | 295,750 | 178,259 |
Assets held for sale, net of costs to sell | 0 | 16,090,898 |
Total current assets | 9,718,762 | 32,219,703 |
Crude oil and natural gas properties - using successful efforts method: | ||
Proved crude oil and natural gas properties | 41,975,719 | 41,017,944 |
Unproved crude oil and natural gas properties | 1,530,114 | 2,055,752 |
Wells in progress | 222,587 | 1,194,114 |
Less: accumulated depletion, depreciation and amortization | (15,524,353) | (14,395,458) |
Crude oil and natural gas properties, net | 28,204,067 | 29,872,352 |
Property, plant and equipment, net | 102,790 | 115,350 |
Other assets | 542,591 | 357,070 |
TOTAL ASSETS | 38,568,210 | 62,564,475 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 16,896,928 | 24,385,417 |
Accounts payable and accrued liabilities - related party | 2,137,473 | 7,624,877 |
Oil and gas revenue distributions payable | 2,331,576 | 2,501,095 |
Asset retirement obligation | 809,580 | 843,796 |
Secured credit facility - related party, net | 14,299,436 | 20,182,264 |
Convertible notes payable, net | 9,358,100 | 9,358,100 |
Derivative liabilities – Secured credit facility | 165,088 | 241,800 |
Total current liabilities | 45,998,181 | 65,137,349 |
Long-term liabilities | ||
Other long-term liabilities | 1,062,189 | 448,465 |
Asset retirement obligation | 1,250,237 | 1,246,151 |
Total liabilities | 48,310,607 | 66,831,965 |
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, 200,000,000 shares authorized, 28,077,332 and 28,089,765 shares issued and outstanding, respectively | 28,077 | 28,090 |
Additional paid-in capital | 33,839,734 | 33,710,588 |
Accumulated deficit | (43,610,208) | (38,006,168) |
Total Shareholders’ (Deficit) | (9,742,397) | (4,267,490) |
TOTAL LIABILITIES & SHAREHOLDERS’ (DEFICIT) | $ 38,568,210 | $ 62,564,475 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
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 | 28,077,332 | 28,089,765 |
Common stock shares outstanding | 28,077,332 | 28,089,765 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
REVENUE: | ||
Total revenue | $ 4,971,530 | $ 2,068,932 |
COSTS AND EXPENSES: | ||
Lease operating expense | 473,427 | 305,809 |
Production taxes, gathering and marketing | 902,915 | 230,919 |
Depletion, depreciation and amortization | 1,203,239 | 741,954 |
Loss on sale and abandonment of properties | 822,290 | 0 |
Gain on settlement of asset retirement obligation | 0 | (55,067) |
General and administrative expense | 2,086,612 | 597,012 |
Total costs and expenses | 5,488,483 | 1,820,627 |
Operating (loss) income | (516,953) | 248,305 |
OTHER INCOME (EXPENSE): | ||
Change in fair value - derivative liability | 76,712 | 89,887 |
Interest expense | (5,162,222) | (1,826,733) |
Other income (expense) | (1,577) | 798 |
Total other income (expense) | (5,087,087) | (1,736,048) |
Net (loss) | $ (5,604,040) | $ (1,487,743) |
Net (loss) per share: | ||
Basic and diluted (in dollars per share) | $ (0.20) | $ (0.05) |
Weighted average number of shares outstanding: | ||
Basic and diluted (in shares) | 28,077,470 | 27,775,505 |
Crude Oil [Member] | ||
REVENUE: | ||
Total revenue | $ 4,178,946 | $ 1,425,233 |
Natural Gas Excluding Natural Gas Liquids [Member] | ||
REVENUE: | ||
Total revenue | 617,138 | 394,411 |
Natural Gas Liquids [Member] | ||
REVENUE: | ||
Total revenue | $ 175,446 | $ 249,288 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Shareholders’ (Deficit) - USD ($) | Common Stock [Member] | Additional Paid In Capital [Member] | Retained Earnings [Member] | Total |
Beginning Balance, Shares at Dec. 31, 2017 | 27,718,802 | |||
Beginning Balance, Amount at Dec. 31, 2017 | $ 27,719 | $ 28,553,736 | $ (20,698,421) | $ 7,833,034 |
Issuance of common stock in connection with conversion of convertible notes payable, Shares | 135,963 | |||
Issuance of common stock in connection with conversion of convertible notes payable, Amount | $ 136 | 203,811 | 203,947 | |
Issuance of common shares as compensation, Shares | 145,000 | |||
Issuance of common shares as compensation, Amount | $ 145 | 162,105 | 162,250 | |
Issuance of common stock for lease acquisition, Amount | 0 | |||
Issuance of restricted shares, Shares | 90,000 | |||
Issuance of restricted shares, Amount | $ 90 | 101,018 | 101,108 | |
Beneficial conversion feature on convertible notes payable | 2,272,775 | 2,272,775 | ||
Warrants issued | 1,521,451 | 1,521,451 | ||
Stock-based compensation | 895,692 | 895,692 | ||
Net (loss) | (17,307,747) | (17,307,747) | ||
Ending Balance, Shares at Dec. 31, 2018 | 28,089,765 | |||
Ending Balance, Amount at Dec. 31, 2018 | $ 28,090 | 33,710,588 | (38,006,168) | (4,267,490) |
Issuance of common stock in connection with conversion of convertible notes payable, Amount | 0 | |||
Restricted shares surrendered to satisfy tax withholding requirements, Shares | (12,433) | |||
Restricted shares surrendered to satisfy tax withholding requirements, Amount | $ (13) | 13 | ||
Stock-based compensation | 129,133 | 129,133 | ||
Net (loss) | (5,604,040) | (5,604,040) | ||
Ending Balance, Shares at Mar. 31, 2019 | 28,077,332 | |||
Ending Balance, Amount at Mar. 31, 2019 | $ 28,077 | $ 33,839,734 | $ (43,610,208) | $ (9,742,397) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Net (loss) | $ (5,604,040) | $ (1,487,743) |
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: | ||
Depletion, depreciation, and amortization | 1,141,455 | 713,598 |
Amortize lease assets and obligation | (6,154) | (5,068) |
Accretion of asset retirement obligation | 61,784 | 28,356 |
Accretion of debt discounts | 4,817,734 | 1,497,192 |
Loss on sale and abandonment of properties | 822,290 | 0 |
Share-based compensation | 129,133 | 287,589 |
Change in fair value - derivative liability | (76,712) | (89,887) |
Bad debt expense | 7,530 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable - joint interest billing | 44,355 | (316,377) |
Accounts receivable - joint interest billing - related party | (33,371) | (218,961) |
Accounts receivable - crude oil, natural gas and NGL sales | (909,567) | 3,316 |
Prepaid expenses and other assets | 400,684 | (46,543) |
Accounts payable and accrued liabilities | 2,147,827 | (596,378) |
Oil and gas revenue distributions payable | (169,519) | 92,750 |
Accounts payable and accrued liabilities - related party | (916,903) | 74,184 |
Asset retirement obligations | (81,408) | (55,067) |
Drilling advances - related party | 0 | (680,248) |
Net cash (used in) provided by operating activities | 1,775,118 | (799,287) |
Cash flows from investing activities: | ||
Development of crude oil and natural gas properties | (2,042,358) | (1,559,997) |
Acquisitions of crude oil and natural gas properties | (60,186) | (161,682) |
Net cash (used in) investing activities | (2,102,544) | (1,721,679) |
Cash flows from financing activities: | ||
Borrowings under Secured Credit Facility | 0 | 11,163,192 |
Net cash provided by financing activities | 0 | 11,163,192 |
Cash: | ||
Net (decrease) increase in cash | (327,426) | 8,642,226 |
Cash, beginning of period | 2,636,943 | 713,924 |
Cash, end of period | 2,309,517 | 9,356,150 |
Supplemental cash flow disclosure: | ||
Cash paid for interest, net of amounts capitalized | 349,873 | 1,393,312 |
Non-cash investing and financing activities: | ||
Accrued development costs - crude oil and natural gas properties | (2,242,719) | 6,070,025 |
Asset retirement obligation - additions | 0 | 612 |
Change in working interests – crude oil and natural gas properties | (430,632) | 0 |
Recognize right of use benefits and obligations for leased assets | 205,447 | 0 |
Exchange proceeds from sale of assets for obligations to secured lender – related party | 15,538,766 | 0 |
Issuance of common stock warrants in connection with Secured Credit Facility | 0 | 1,603,432 |
Issuance of common stock in connection with conversion of notes payable and accrued interest | 0 | 203,944 |
Lender fees - Secured credit facility | 0 | 1,250,000 |
Beneficial conversion feature in connection with private placements | 0 | 1,365,207 |
Embedded discount features - Secured credit facility | 0 | 530,255 |
Initial line of credit - paid through Secured credit facility | 0 | 5,000,000 |
Supplemental line of credit - paid through Secured credit facility | 0 | 1,500,000 |
Accrued interest - paid through Secured credit facility | $ 0 | $ 1,086,808 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 3 Months Ended |
Mar. 31, 2019 | |
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 | 3 Months Ended |
Mar. 31, 2019 | |
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, 2018, which has been derived from the audited financial statements, and the unaudited Condensed Consolidated Balance Sheet as of March 31, 2019, the unaudited Condensed Consolidated Statements of Operations, Changes in Shareholders’ (Deficit), and Cash Flows for the three months ended March 31, 2019 and 2018, 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 consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. Unless otherwise noted, there have been no material changes to the footnotes in the financial statements from the audited financial statements contained in the Company’s Form 10-K. 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. The Company’s undivided interests in joint operating ventures are proportionately consolidated. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as the disclosure of contingent assets and liabilities. Estimated quantities of crude oil, natural gas and natural gas liquids are the most significant of the Company’s estimates. All reserve data used in the preparation of these condensed 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, probable and possible 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. 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. Revenue Recognition Oil sales Under the Company’s oil sales contracts, the Company sells oil production at the point of delivery and collects an agreed upon index price, net of pricing differentials. The Company recognizes revenue when control transfers to the purchaser at the point of delivery at the net price received. Payment is generally received from the customer in the month following delivery. Natural gas and natural gas liquids Under the Company’s natural gas sales processing contracts, the Company delivers commingled natural gas and natural gas liquids (NGLs) to a midstream processing entity. The midstream processing entity gathers and processes the various hydrocarbons and remits proceeds to the Company for the resulting sale. Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery. Payment is generally received from the customer one to two months following delivery. Revenue is recognized net of gathering and processing fees. Disaggregation of Revenue. Operating revenues 2019 2018 Crude oil sales $ 4,178,946 $ 1,425,233 Natural gas sales 617,138 394,411 NGL sales 175,446 249,288 Total Operating Revenues $ 4,971,530 $ 2,068,932 Related Party Transactions The Company engages in a number of transactions with Providence Energy Operators, LLC (“PEO”) and its affiliates. PEO is the beneficial owner of 11.6% of our outstanding common stock. We have a participation agreement that grants PEO the option to acquire up to a 50% interest and participate in any oil and gas development on acreage we obtain within an area of mutual interest (AMI) near our Southern Core area. To date, PEO has exercised its option under the participation agreement or otherwise participated or agreed to participate in all acreage acquisitions and drilling operations. As discussed elsewhere in this report, an affiliate of PEO is a major participant in our principal lender group through the Secured Credit Facility. The Board of Directors is required to approve all significant related party transactions. Recently Adopted Accounting Pronouncements: In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease payment liabilities on the balance sheet for leases representing the Company’s right to use the underlying assets over the lease term. Each lease that is recognized on the balance sheet will be classified as either finance or operating, with such classification affecting the pattern and classification of expense recognition in the statements of operations and presentation within the statements of cash flows. The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method. The Company elected as part of its adoption to also use the optional transition methodology whereby previously reported periods continue to be reported in accordance with historical accounting guidance for leases that were in effect for those prior periods. Policy elections and practical expedients that the Company has implemented as part of adopting ASC 842 include (a) excluding from the balance sheet leases with terms that are less than or equal to one year, (b) for all existing asset classes that contain both lease and non-lease components, combining these components together and accounting for them as a single lease component, (c) the package of practical expedients, which among other things, allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (d) excluding land easements, which were not accounted for under the previous leasing guidance, that existed or expired before adoption of ASC 842. The scope of ASC 842 does not apply to leases used in the exploration or use of minerals, oil, and natural gas. The Company's adoption of ASC 842 resulted in an increase in other assets, accounts payable and accrued liabilities, and other liabilities line items on the accompanying condensed consolidated balance sheets as a result of the additional ROU assets and related lease liabilities. Upon adoption on January 1, 2019, the Company recognized approximately $0.2 million in ROU assets and liabilities for its operating leases. There was no cumulative effect to accumulated deficit upon the adoption of this guidance. See Note 12 for the new disclosures required by ASC 842. |
GOING CONCERN
GOING CONCERN | 3 Months Ended |
Mar. 31, 2019 | |
GOING CONCERN | |
GOING CONCERN | In the Report of the Independent Registered Public Accounting Firm as of and for the year ended December 31, 2018, the auditor included an explanatory paragraph concerning the Company’s ability to continue as a going concern. 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 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 financial statement issuance date. The uncertainty regarding the Company’s ability to continue as a going concern is based on its substantial near-term liabilities, continuing net losses and negative working capital, among other things which existed as of March 31, 2019. At March 31, 2019, the Company had a cash balance of approximately $2.3 million, other current assets of approximately $7.4 million and current liabilities of $46 million, resulting in negative working capital of $36.3 million. The Company had a net loss, including non-cash charges, of $5.6 million for the three months ended March 31, 2019. At March 31, 2019 the Company was in default on the outstanding principal balances of $9.4 million under both issues of convertible notes. The Company is also in default under the terms of the Secured Credit Facility (Note 6) and as a result, $14.3 million of outstanding principal is due. Some accounts payable obligations to vendors are past the due date and some of those vendors have filed liens or indicated an intent to file liens on certain of the Company’s assets and/or commenced legal action to foreclose those liens. The Company has been unable to access the debt or equity markets to obtain any additional funding during 2019. Management has evaluated these conditions and determined that increased revenues from the Company’s operated properties may allow the Company to meet its obligations. However, to continue to execute its business plan, and meet its debt obligations, additional working capital will be required. As part of the analysis, the Company considered selective participation in certain operated drilling programs based on availability of working capital and the timing of production-related cash flows. There is uncertainty that management’s plans, if executed, will allow the Company to meet all of its obligations. As a result, there is substantial doubt about the Company’s ability to continue as a going concern for one year after the date the condensed consolidated financial statements are issued. 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 as a going concern. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | ASC Topic 820, “Fair Value Measurements and Disclosures”, 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. As disclosed in Note 6, the Secured Credit Facility contained embedded elements that required identification and quantification of fair value. The estimated fair values as of February 1, 2018, the closing date of the facility, are presented in Note 6. As of March 31, 2019, the estimated fair values are presented in the following table: March 31, 2019 Registration rights penalty derivative liability $ 93,024 Share purchase option derivative liability 72,064 Total $ 165,088 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: Three Months Ended March 31, 2019 Year Ended December 31, 2018 Beginning balance $ 241,800 $ — Additions — 1,670,017 Total (gains) or losses (realized / unrealized) Included in operations (76,712 ) (1,428,217 ) Included in other comprehensive income — — Ending Balance $ 165,088 $ 241,800 Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, and credit facility borrowings. The carrying values of cash, accounts receivable and accounts payable are representative of their fair values due to their short-term maturities. The carrying amount of the Company’s Secured Credit Facility approximates fair value as it bears interest at variable rates over the term of the loan. |
CRUDE OIL AND NATURAL GAS PROPE
CRUDE OIL AND NATURAL GAS PROPERTIES | 3 Months Ended |
Mar. 31, 2019 | |
Oil and Gas Property [Abstract] | |
CRUDE OIL AND NATURAL GAS PROPERTIES | The Company’s oil and gas properties are located entirely within the State of Colorado in the United States. The net capitalized costs related to the Company’s crude oil and natural gas activities were as follows: March 31, December 31, 2019 2018 Proved oil and gas properties $ 41,975,719 $ 41,017,944 Unproved oil and gas properties (1) 1,530,114 2,055,752 Wells in progress (2) 222,587 1,194,114 Total capitalized costs 43,728,420 44,267,810 Accumulated DDA and impairment (3) (15,524,353 ) (14,395,458 ) Net capitalized costs $ 28,204,067 $ 29,872,352 (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. (3) Includes the accumulated expenses for depletion, depreciation, and amortization (DDA) plus accumulated expenses for impairment. On February 27, 2019, the Company completed the sale of certain assets. Based upon the preliminary settlement statement, the $16.5 million sale price for the assets yielded net proceeds of approximately $15.3 million, after adjustments for title defects, inventory, reconciliation of other amounts payable and receivable from the buyer, and transaction costs of the sale. Final settlement of the transaction is scheduled for May 28, 2019. All of the net proceeds from the sale were remitted to the Secured Lenders as required by the Secured Lenders, and have been applied to reduce amounts allegedly owed by the Company under the Secured Credit Facility. Additional information about the use of proceeds from the sale can be found in Note 6. The assets were classified as Held for Sale as of December 31, 2018 and included as current assets in the financial statements. During the period from January 1, 2019 to February 27, 2019, the assets sold generated revenues of $1.1 million and operating expenses of $0.3 million, resulting in net operating income for those properties of $0.8 million. The terms of the transaction provide that 2019 revenues and expenses accrue to the benefit of the buyer, and accordingly, the Company recorded an adjustment of $0.8 million to the purchase price and the corresponding loss on sale of properties during the period ended March 31, 2019. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
DEBT | 10% Convertible Notes On 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 were due and payable on December 31, 2018. At the option of the holders of the Convertible Notes, the principal amount 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. As of December 31, 2018, the 10% Convertible Notes had an outstanding principal balance of $4.6 million. The 10% Convertible Notes were not paid on their due date of December 31, 2018. The Company’s failure to retire the 10% Convertible Notes was an event of default. The Company has continued to accrue and pay interest at the rate of 10%, in the approximate amount of $0.1 million each calendar quarter. As of March 31, 2019, the principal balance of $4.6 million remains outstanding, and the 10% Convertible Notes remain in default. Series B Convertible Notes In September and October 2017, the Company sold Series B Convertible Notes in the principal amount of $4.7 million. The Series B Convertible Notes are unsecured, bear interest at 15% per year, and were due and payable on December 31, 2018. At the option of the holders, the principal amount of the Series B 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. As of December 31, 2018, the Series B Convertible Notes had an outstanding principal balance of $4.7 million. The Series B Convertible Notes were not paid on their due date of December 31, 2018. The Company’s failure to retire the Series B Convertible Notes was an event of default. The Company has continued to accrue and pay interest at the rate of 15%, in the approximate amount of $0.2 million each calendar quarter. As of March 31, 2019, the principal balance of $4.7 million remains outstanding, and the Series B Convertible Notes remain in default. The Company has commenced negotiations with holders of the 10% Convertible Notes and the Series B Convertible Notes regarding resolution of the default conditions. At this time, it is not possible to predict the eventual outcome of those negotiations. 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”). The Secured Credit Facility incorporated certain provisions of a Letter Agreement entered into by the Company on December 21, 2017 under which the Company borrowed $5.0 million from the Secured Lenders. The closing on February 1, 2018 represented additional borrowings of $20.0 million. As of March 31, 2019, the Company was in default under certain provisions of the Secured Credit Facility. The default conditions included the non-payment of the 10% Convertible Notes and the Series B Convertible Notes on December 31, 2018, and non-payment of the underwriting fee payable to PEO on February 1, 2019. Other defaults related to non-payment of certain accounts payable and accrued liabilities within a 90-day allowable time period, liens filed in Adams County, Colorado against certain of the Company’s assets, among other conditions. On March 26, 2019, the Secured Lenders required that the Company pay to them the net proceeds from the Company’s sale of non-operated assets and subsequently applied the net proceeds of $15.3 from sale to the outstanding accrued interest, penalties and principal, resulting in a remaining principal balance of $14.3 million. On April 2, 2019, the Secured Lenders delivered their formal Notice of Default under the terms of the Secured Credit Facility to confirm their previous communications. The following table reflects the net amounts recorded as debt at March 31, 2019 and December 31, 2018: 10% Convertible Secured Convertible Notes Credit Notes Series B Facility December 31, 2018 Principal Balance $ 4,633,200 $ 4,724,900 $ 25,000,000 December 31, 2018, Total, net $ 4,633,200 $ 4,724,900 $ 20,182,264 Principal Borrowings - - - Repayments - - 10,700,564 Conversions - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 2,598,187 Additions - - - Accretion - - (2,598,187) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - - Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,323,403 Additions - - - Accretion - - (1,323,403) Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 896,146 Additions - - - Accretion - - (896,146) Ending - Unamortized Debt Issuance Costs - Warrant Discount - - - March 31, 2019, Principal Balance $ 4,633,200 $ 4,724,900 $ 14,299,436 March 31, 2019, Total, net $ 4,633,200 $ 4,724,900 $ 14,299,436 |
ASSET RETIREMENT OBLIGATION
ASSET RETIREMENT OBLIGATION | 3 Months Ended |
Mar. 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
ASSET RETIREMENT OBLIGATION | The Company records an estimated liability to recognize the anticipated costs of its obligation to properly plug and abandon oil and gas wells at the end of their productive life. No new obligations were incurred during the three months ended March 31, 2019. The following table summarizes the changes in asset retirement obligations associated with the Company’s oil and gas properties: Three months ended Year ended March 31, December 31, 2019 2018 Asset retirement obligation, beginning of period $ 2,089,947 $ 1,123,444 Liabilities settled (91,914 ) (192,996 ) Liabilities incurred — 58,511 Revisions in estimated liabilities — 983,352 Accretion 61,784 117,636 Asset retirement obligation, end of period $ 2,059,817 $ 2,089,947 Current liability $ 809,580 $ 843,796 Long-term liability $ 1,250,237 $ 1,246,151 |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable and accrued liability balances were comprised of the following: March 31, December 31, 2019 2018 Trade payables and accrued liabilities $ 4,934,543 $ 2,093,428 Accrued interest payable 293,014 — Liabilities incurred in connection with development of crude oil and natural gas properties 11,669,371 22,291,989 Total $ 16,896,928 $ 24,385,417 |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Common Stock Activity for the three months ended March 31, 2019 included the following: On March 15, 2019, at a special meeting, the shareholders approved an amendment to the Company’s Articles of Incorporation (“Amendment”) to increase the authorized common stock from 100,000,000 shares to 200,000,000 shares. The Amendment was effective on March 20, 2019 upon filing the Amendment with the Colorado Secretary of State. Activity for the three months ended March 31, 2018 included the following: On February 23, 2018 the Company issued 70,000 shares of common stock 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 10% convertible notes payable in the principal amount of $200,000 plus accrued interest. The shares were issued at the contractual rate of $1.50 per share. Warrants The table below summarizes warrants outstanding as of March 31, 2019: Shares Underlying Exercise Price Outstanding 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 There was no activity for the three months ended March 31, 2019. Activity for the three months ended March 31, 2018 included the following: On February 1, 2018, in connection with the closing of the Secured Credit Facility, the Company issued 1,500,000 common 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 | 3 Months Ended |
Mar. 31, 2019 | |
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”). 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. No additional shares were granted under the Plan for the three months ended March 31, 2019. During the three months ended March 31, 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. A summary of options outstanding under the Plan for at March 31, 2019 is as follows: Weighted Remaining Average Contractual Number of Exercise Term Shares Price (Years) Outstanding, December 31, 2018 5,037,000 $ 0.79 3.87 Exercisable, December 31, 2018 4,621,000 $ 0.75 3.86 Granted — — — Exercised — — — Forfeited — — — Outstanding, March 31, 2019 5,037,000 $ 0.79 3.62 Exercisable, March 31, 2019 4,946,000 $ 0.77 3.64 During the three months ended March 31, 2019 and 2018 the Company recorded stock-based compensation of $0.1 million and $0.2 million, respectively, related to options issued under the Plan. Unvested stock-based compensation related to the options at March 31, 2019 and December 31, 2018 amounted to $nil and $0.1 million, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Providence Energy Operators (“PEO”) and Affiliates As of March 31, 2019, PEO beneficially owned approximately 11.6% of the Company’s outstanding common stock. The table below summarizes related party balances with PEO and its affiliates as of: March 31, 2019 December 31, 2018 Liabilities Revenue distribution payable and accrued liabilities $ (1,556,592 ) $ (2,133,622 ) Secured Credit Facility (14,299,436 ) (25,000,00 ) Loan commitment fee – Secured Credit Facility — (1,250,000 ) Default penalty interest – Secured Credit Facility — (312,500 ) Make-whole premium – Secured Credit Facility — (3,347,874 ) Break-up fee payable, participation agreement (580,881 ) (580,881 ) Assets Accounts receivable – joint interest billing $ 1,101,501 $ 1,158,213 Secured Credit Facility Interest expense of $4.8 million was recognized related to the Secured Credit Facility and the accretion of debt discounts during the year three months ended March 31, 2019. As a result of defaults under the Secured Credit Facility, the Company accrued additional penalty interest and the make-whole premium. On March 26, 2019, Secured Lenders notified the Company that they were applying the net proceeds from the February 27, 2019 non-operated property sale (Note 5) against the make-whole premium, accrued default interest, other outstanding liabilities and the outstanding principal balance of the Secured Credit Facility (Note 6). The table below presents the application of the proceeds: Principal Balance $ 25,000,000 Total Sale Proceeds Received 15,538,766 Less Accrued broker fees (250,000) Expenses (17,702) Available cash 15,271,064 Underwriting fee (1,250,000) January 2019 default interest (105,706) February 2019 interest (452,865) March 1, 2019 - March 26, 2019 interest (377,768) Make-whole premium (2,384,161) Allocated to Principal 10,700,564 Remaining Principal Balance $ 14,299,436 Operations At March 31, 2019, the Company has recorded $1.1 million in Accounts receivable – joint interest billing – related party Included in the balance sheet caption Accounts payable and accrued liabilities - related party In addition, the caption includes the break-up fee payable, participation agreement of $0.6 million related to the contractual penalty for the Company’s election not to participate in a leasehold acquisition under a participation agreement with PEO. 10% Convertible Notes As of March 31, 2019 and December 31, 2018, the principal balance of the 10% Convertible Notes held by officers and directors amounted to $0.1 million and $0.1 million respectively. Interest expense for the three months ended March 31, 2019 and 2018 amounted to $2,000 and $2,000 respectively. Series B Convertible Notes As of March 31, 2019 and December 31, 2018, the principal balance of the Series B Convertible Notes held by officers and directors amounted to $0.6 million and $0.6 million respectively. Interest expense for the three months ended March 31, 2019 and 2018 amounted to $21,375 and $21,375 respectively. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
LEASES | Operating Lease The Company evaluates contractual arrangements at inception to determine if individual agreements are a lease or contain an identifiable lease component as defined by ASC 842. The Company currently has one contract that meets the definition of a long-term lease. The Company leases its office facilities under a four-year non-cancelable operating lease agreement expiring in March 2021. Annual payments approximate $0.1 million. Operating lease costs for the three months ended March 31, 2019 were less than $0.1 million. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On April 29, 2019, Providence Wattenberg, LP, as administrative agent and Lender, and 5NR Wattenberg, LLC, as Lender, caused to be recorded with the clerk and recorder for Adams County, Colorado a Notice of Election and Demand for foreclosure of the Deed of Trust granted by us to the Lenders to secure repayment of the Secured Credit Facility. On May 2, 2019, 1888 Industrial Services, LLC, a Delaware limited liability company, filed a civil action in the District Court of Adams County, Colorado against us and other defendants seeking a declaratory judgment and other relief in connection with an oil and gas lien filed against our interest in the Shook wells and related oil and gas leases. On May 7, 2019, Liberty Oilfield Services LLC, a Delaware limited liability company, filed claims in the District Court of Adams County, Colorado to foreclose its lien filed against our Shook wells and related oil and gas leases. |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
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, 2018, which has been derived from the audited financial statements, and the unaudited Condensed Consolidated Balance Sheet as of March 31, 2019, the unaudited Condensed Consolidated Statements of Operations, Changes in Shareholders’ (Deficit), and Cash Flows for the three months ended March 31, 2019 and 2018, 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 consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. Unless otherwise noted, there have been no material changes to the footnotes in the financial statements from the audited financial statements contained in the Company’s Form 10-K. |
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. The Company’s undivided interests in joint operating ventures are proportionately consolidated. |
Use of Estimates | The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as the disclosure of contingent assets and liabilities. Estimated quantities of crude oil, natural gas and natural gas liquids are the most significant of the Company’s estimates. All reserve data used in the preparation of these condensed 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, probable and possible 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. |
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. |
Revenue Recognition | Oil sales Under the Company’s oil sales contracts, the Company sells oil production at the point of delivery and collects an agreed upon index price, net of pricing differentials. The Company recognizes revenue when control transfers to the purchaser at the point of delivery at the net price received. Payment is generally received from the customer in the month following delivery. Natural gas and natural gas liquids Under the Company’s natural gas sales processing contracts, the Company delivers commingled natural gas and natural gas liquids (NGLs) to a midstream processing entity. The midstream processing entity gathers and processes the various hydrocarbons and remits proceeds to the Company for the resulting sale. Under these processing agreements, the Company recognizes revenue when control transfers to the purchaser at the point of delivery. Payment is generally received from the customer one to two months following delivery. Revenue is recognized net of gathering and processing fees. Disaggregation of Revenue. Operating revenues 2019 2018 Crude oil sales $ 4,178,946 $ 1,425,233 Natural gas sales 617,138 394,411 NGL sales 175,446 249,288 Total Operating Revenues $ 4,971,530 $ 2,068,932 |
Related Party Transactions | The Company engages in a number of transactions with Providence Energy Operators, LLC (“PEO”) and its affiliates. PEO is the beneficial owner of 11.6% of our outstanding common stock. We have a participation agreement that grants PEO the option to acquire up to a 50% interest and participate in any oil and gas development on acreage we obtain within an area of mutual interest (AMI) near our Southern Core area. To date, PEO has exercised its option under the participation agreement or otherwise participated or agreed to participate in all acreage acquisitions and drilling operations. As discussed elsewhere in this report, an affiliate of PEO is a major participant in our principal lender group through the Secured Credit Facility. The Board of Directors is required to approve all significant related party transactions. |
Recently Issued Accounting Pronouncements | In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease payment liabilities on the balance sheet for leases representing the Company’s right to use the underlying assets over the lease term. Each lease that is recognized on the balance sheet will be classified as either finance or operating, with such classification affecting the pattern and classification of expense recognition in the statements of operations and presentation within the statements of cash flows. The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method. The Company elected as part of its adoption to also use the optional transition methodology whereby previously reported periods continue to be reported in accordance with historical accounting guidance for leases that were in effect for those prior periods. Policy elections and practical expedients that the Company has implemented as part of adopting ASC 842 include (a) excluding from the balance sheet leases with terms that are less than or equal to one year, (b) for all existing asset classes that contain both lease and non-lease components, combining these components together and accounting for them as a single lease component, (c) the package of practical expedients, which among other things, allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (d) excluding land easements, which were not accounted for under the previous leasing guidance, that existed or expired before adoption of ASC 842. The scope of ASC 842 does not apply to leases used in the exploration or use of minerals, oil, and natural gas. The Company's adoption of ASC 842 resulted in an increase in other assets, accounts payable and accrued liabilities, and other liabilities line items on the accompanying condensed consolidated balance sheets as a result of the additional ROU assets and related lease liabilities. Upon adoption on January 1, 2019, the Company recognized approximately $0.2 million in ROU assets and liabilities for its operating leases. There was no cumulative effect to accumulated deficit upon the adoption of this guidance. See Note 12 for the new disclosures required by ASC 842. |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Operating revenues 2019 2018 Crude oil sales $ 4,178,946 $ 1,425,233 Natural gas sales 617,138 394,411 NGL sales 175,446 249,288 Total Operating Revenues $ 4,971,530 $ 2,068,932 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | March 31, 2019 Registration rights penalty derivative liability $ 93,024 Share purchase option derivative liability 72,064 Total $ 165,088 |
Schedule of roll-forward of the fair value of the derivative liabilities associated with Company's Secured Credit Facility, categorized as Level 3 | Three Months Ended March 31, 2019 Year Ended December 31, 2018 Beginning balance $ 241,800 $ — Additions — 1,670,017 Total (gains) or losses (realized / unrealized) Included in operations (76,712 ) (1,428,217 ) Included in other comprehensive income — — Ending Balance $ 165,088 $ 241,800 |
CRUDE OIL AND NATURAL GAS PRO_2
CRUDE OIL AND NATURAL GAS PROPERTIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Oil and Gas Property [Abstract] | |
Schedule of net capitalized costs | March 31, December 31, 2019 2018 Proved oil and gas properties $ 41,975,719 $ 41,017,944 Unproved oil and gas properties (1) 1,530,114 2,055,752 Wells in progress (2) 222,587 1,194,114 Total capitalized costs 43,728,420 44,267,810 Accumulated DDA and impairment (3) (15,524,353 ) (14,395,458 ) Net capitalized costs $ 28,204,067 $ 29,872,352 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Summary of net amounts of debt | 10% Convertible Secured Convertible Notes Credit Notes Series B Facility December 31, 2018 Principal Balance $ 4,633,200 $ 4,724,900 $ 25,000,000 December 31, 2018, Total, net $ 4,633,200 $ 4,724,900 $ 20,182,264 Principal Borrowings - - - Repayments - - 10,700,564 Conversions - - - Beginning Balance - Unamortized Debt Issuance Costs - Original Issuer Discount - - 2,598,187 Additions - - - Accretion - - (2,598,187) Ending - Unamortized Debt Issuance Costs - Original Issuer Discount - - - Beginning Balance - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - 1,323,403 Additions - - - Accretion - - (1,323,403) Ending - Unamortized Debt Issuance Costs - Beneficial Conversion Feature - - - Beginning Balance - Unamortized Debt Issuance Costs - Warrant Discount - - 896,146 Additions - - - Accretion - - (896,146) Ending - Unamortized Debt Issuance Costs - Warrant Discount - - - March 31, 2019, Principal Balance $ 4,633,200 $ 4,724,900 $ 14,299,436 March 31, 2019, Total, net $ 4,633,200 $ 4,724,900 $ 14,299,436 |
ASSET RETIREMENT OBLIGATION (Ta
ASSET RETIREMENT OBLIGATION (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Reconciliation of the Asset Retirement Obligation | The following table summarizes the changes in asset retirement obligations associated with the Company’s oil and gas properties: Three months ended Year ended March 31, December 31, 2019 2018 Asset retirement obligation, beginning of period $ 2,089,947 $ 1,123,444 Liabilities settled (91,914 ) (192,996 ) Liabilities incurred — 58,511 Revisions in estimated liabilities — 983,352 Accretion 61,784 117,636 Asset retirement obligation, end of period $ 2,059,817 $ 2,089,947 Current liability $ 809,580 $ 843,796 Long-term liability $ 1,250,237 $ 1,246,151 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Payables and Accruals [Abstract] | |
Components of Accounts Payable and Accrued Liabilities | March 31, December 31, 2019 2018 Trade payables and accrued liabilities $ 4,934,543 $ 2,093,428 Accrued interest payable 293,014 — Liabilities incurred in connection with development of crude oil and natural gas properties 11,669,371 22,291,989 Total $ 16,896,928 $ 24,385,417 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Summary of Warrants Outstanding | Shares Underlying Outstanding Warrants Exercise Price 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) | 3 Months Ended |
Mar. 31, 2019 | |
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, 2018 5,037,000 $ 0.79 3.87 Exercisable, December 31, 2018 4,621,000 $ 0.75 3.86 Granted — — — Exercised — — — Forfeited — — — Outstanding, March 31, 2019 5,037,000 $ 0.79 3.62 Exercisable, March 31, 2019 4,946,000 $ 0.77 3.64 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions Tables Abstract | |
Related party balances | March 31, 2019 December 31, 2018 Liabilities Revenue distribution payable and accrued liabilities $ (1,556,592 ) $ (2,133,622 ) Secured Credit Facility (14,299,436 ) (25,000,00 ) Loan commitment fee – Secured Credit Facility — (1,250,000 ) Default penalty interest – Secured Credit Facility — (312,500 ) Make-whole premium – Secured Credit Facility — (3,347,874 ) Break-up fee payable, participation agreement (580,881 ) (580,881 ) Assets Accounts receivable – joint interest billing $ 1,101,501 $ 1,158,213 |
Use of Proceeds | Principal Balance $ 25,000,000 Total Sale Proceeds Received 15,538,766 Less Accrued broker fees (250,000) Expenses (17,702) Available cash 15,271,064 Underwriting fee (1,250,000) January 2019 default interest (105,706) February 2019 interest (452,865) March 1, 2019 - March 26, 2019 interest (377,768) Make-whole premium (2,384,161) Allocated to Principal 10,700,564 Remaining Principal Balance $ 14,299,436 |
BASIS OF PRESENTATION AND SUM_4
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues | $ 4,971,530 | $ 2,068,932 |
Crude Oil [Member] | ||
Revenues | 4,178,946 | 1,425,233 |
Natural Gas Excluding Natural Gas Liquids [Member] | ||
Revenues | 617,138 | 394,411 |
Natural Gas Liquids [Member] | ||
Revenues | $ 175,446 | $ 249,288 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
GOING CONCERN | |||
Net (loss) | $ (5,604,040) | $ (1,487,743) | $ (17,307,747) |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) | Mar. 31, 2019USD ($) |
Fair Value Measurements | |
Registration rights penalty derivative liability | $ 93,024 |
Share purchase option derivative liability | 72,064 |
Total | $ 165,088 |
FAIR VALUE MEASUREMENTS (Deta_2
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | ||
Beginning balance | $ 241,800 | $ 0 |
Additions | 0 | 1,670,017 |
Included in operations | (76,712) | (1,428,217) |
Included in other comprehensive income | 0 | 0 |
Ending Balance | $ 165,088 | $ 241,800 |
CRUDE OIL AND NATURAL GAS PRO_3
CRUDE OIL AND NATURAL GAS PROPERTIES (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Oil and Gas Property [Abstract] | ||
Proved oil and gas properties | $ 41,975,719 | $ 41,017,944 |
Unproved oil and gas properties | 1,530,114 | 2,055,752 |
Wells in progress | 222,587 | 1,194,114 |
Total capitalized costs | 43,728,420 | 44,267,810 |
Accumulated depletion, depreciation and amortization | (15,524,353) | (14,395,458) |
Net capitalized costs | $ 28,204,067 | $ 29,872,352 |
DEBT (Details)
DEBT (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Payment of origination fee | $ 0 | $ (1,250,000) |
Payment of accrued interest costs | $ 0 | $ (1,086,808) |
DEBT (Details 2)
DEBT (Details 2) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Additions | $ 0 | $ 1,250,000 |
Accretion | 4,817,734 | $ 1,497,192 |
Convertible Notes Series A [Member] | ||
Balance at beginning of period | 4,633,200 | |
Borrowings | 0 | |
Repayments | 0 | |
Conversions | 0 | |
Beginning Balance - Unamortized Debt Issuance Costs | 0 | |
Additions | 0 | |
Accretion | 0 | |
Ending - Unamortized Debt Issuance Costs | 0 | |
Balance at end of period | 4,633,200 | |
Convertible Notes Series B [Member] | ||
Balance at beginning of period | 4,724,900 | |
Beginning Balance - Unamortized Debt Issuance Costs | 0 | |
Ending - Unamortized Debt Issuance Costs | 0 | |
Balance at end of period | 4,724,900 | |
Secured Credit Facility [Member] | ||
Balance at beginning of period | 25,000,000 | |
Borrowings | 0 | |
Repayments | 10,700,564 | |
Conversions | 0 | |
Beginning Balance - Unamortized Debt Issuance Costs | 2,598,187 | |
Additions | 0 | |
Accretion | (2,598,187) | |
Ending - Unamortized Debt Issuance Costs | 0 | |
Balance at end of period | 14,299,436 | |
Secured Credit Facility [Member] | Warrant [Member] | ||
Beginning Balance - Unamortized Debt Issuance Costs | 896,146 | |
Additions | 0 | |
Accretion | (896,146) | |
Ending - Unamortized Debt Issuance Costs | 0 | |
Secured Credit Facility [Member] | Original Issuer Discount [Member] | ||
Beginning Balance - Unamortized Debt Issuance Costs | 2,598,187 | |
Additions | 0 | |
Accretion | (2,598,187) | |
Ending - Unamortized Debt Issuance Costs | 0 | |
Secured Credit Facility [Member] | Beneficial Conversion Feature [Member] | ||
Beginning Balance - Unamortized Debt Issuance Costs | 1,323,403 | |
Additions | 0 | |
Accretion | (1,323,403) | |
Ending - Unamortized Debt Issuance Costs | $ 0 |
ASSET RETIREMENT OBLIGATION (De
ASSET RETIREMENT OBLIGATION (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Activity of asset retirement obligation | |||
Asset retirement obligation, beginning of period | $ 2,089,947 | $ 1,123,444 | $ 1,123,444 |
Liabilities settled | (91,914) | (192,666) | |
Liabilities incurred | 0 | 58,511 | |
Revisions in estimated liabilities | 0 | 983,352 | |
Accretion | 61,784 | $ 28,356 | 117,636 |
Asset retirement obligation, end of period | 2,059,817 | 2,089,947 | |
Current liability | 809,580 | 843,796 | |
Long-term liability | $ 1,250,237 | $ 1,246,151 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Trade accounts payable and accrued liabilities | $ 4,934,543 | $ 2,093,428 |
Accrued interest payable | 293,014 | 0 |
Liabilities incurred in connection with acquisition of crude oil and natural gas properties | 11,669,371 | 22,291,989 |
Total | $ 16,896,928 | $ 24,385,417 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | Mar. 31, 2019$ / 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 | $ 0.01 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) | 3 Months Ended |
Mar. 31, 2019$ / sharesshares | |
Number of Shares | |
Outstanding Options, Beginning of period | shares | 5,037,000 |
Options Granted | shares | 0 |
Options Exercised | shares | 0 |
Options Forfeited | shares | 0 |
Outstanding Options, End of period | shares | 5,037,000 |
Options Exercisable | shares | 4,946,000 |
Weighted Average Exercise Price | |
Outstanding, Beginning, Weighted-Average Exercise Price | $ / shares | $ 0.79 |
Granted | $ / shares | 0 |
Exercised | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Outstanding, Ending, Weighted-Average Exercise Price | $ / shares | 0.79 |
Exercisable | $ / shares | $ 0.77 |
Remaining Contractual Term (Years) | |
Outstanding, Beginning | 3 years 10 months 13 days |
Outstanding, Ending | 3 years 7 months 13 days |
Exercisable | 3 years 7 months 20 days |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Stock-based compensation expense | $ 100,000 | $ 200,000 | |
Unvested share based compensation | $ 0 | $ 100,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Trade payables and accrued liabilities | ||
Related party transactions | $ (1,556,592) | $ (2,133,622) |
Senior Secured Credit Facility | ||
Related party transactions | (14,299,436) | (2,500,000) |
Loan commitment fee - Senior Secured Credit Facility | ||
Related party transactions | 0 | (1,250,000) |
Default penalty interest - Senior Secured Credit Facility | ||
Related party transactions | 0 | (312,500) |
Make-whole premium – Secured Credit Facility | ||
Related party transactions | 0 | (3,347,874) |
Break-up fee payable, participation agreement | ||
Related party transactions | (580,881) | (580,881) |
Accounts receivable | ||
Related party transactions | $ 1,101,501 | $ 1,158,213 |
RELATED PARTY TRANSACTIONS (D_2
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Accrued interest | $ 293,014 | $ 0 |
Interest expense, related party | 4,800,000 | |
Accounts payable and accrued liabilities - related party | 2,137,473 | 7,624,877 |
Accounts receivable - joint interest billing - related party | $ 1,101,501 | $ 1,158,213 |