September 2, 2005
Mr. Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer
Tri-Valley Corporation
5555 Business Park South, Suite 200
Bakersfield, CA 93309
Re: Tri-Valley Corporation
Form 10-K/A for Fiscal Year Ended December 31, 2004
Filed August 22, 2005
Form 8-K/A
Filed July 15, 2005
File Number 1-31852
Dear Mr. Cunningham:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to all
other portions of your documents. Where indicated, we think you
should revise your document in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional
comments.
Accounting Comments
Form 10-K/A Filed on August 22, 2005
Cover page
1. We note you disclosed the aggregated market value of the common
shares held by non-affiliates as of August 3, 2005. As instructed
on
Form 10-K, please disclose the aggregated market value information
as
of the last business day of your most recently completed second
fiscal
quarter.
Audit Report, page 21
2. We note your response to the prior comment number 13 from our
letter dated July 12, 2005. It appears that the correction of an
error
resulted from a misapplication of generally accepted accounting
principles. Please request that your independent auditors give
recognition to the restatements in their audit report through an
addition of an explanatory paragraph in accordance with AU Section
420.12.
Consolidated Statements of Operations, page 24
3. We believe the line item "sale of oil and gas prospects" infers
sale of real property or property rights when it actually
represents
revenues generated from drilling and development services. Please
recharacterize this source of revenue as drilling and development
services and revise accordingly throughout the document.
Related Party Transaction, page 39
4. We note your response to the prior comment number 19 from our
letter dated July 12, 2005. Please advise us of the following:
a. You state that you own a 25% permanent general partner interest
in
Opus I. Then you state that you current have a zero percent
ownership
in Opus I. Please explain this apparent contradiction.
b. In your response, you stated that the company uses the
successful
efforts method of accounting for its oil and gas and drilling line
of
business. The successful efforts method of accounting is only
applicable to oil and gas producing activities and would not be
applicable to your drilling business. Please revise your
accounting to
comply, if necessary.
c. Tell us what you mean by "intra-company amounts are
eliminated."
In your response, please tell us how intra-company elimination
differs
from inter-company elimination, if you believe there is a
difference.
In this regard, it appears to us that this statement conflicts
with
your later statement that you have not eliminated any profit made
on
the turn-key contracts.
d. Explain what "carried interest" represents.
e. Tell us in detail your business arrangement with OPUS I and how
you
recognize revenue and expenses associated with the arrangement.
f. Explain to us in greater detail why you have not eliminated any
profit made on the turn-key contracts with OPUS I. In this
regard,
please note that Rule 4-10(c)(6)(iv)(B) of Regulation S-X is not
applicable to successful efforts companies. Tell us how you are
in
compliance with the elimination of profit provision under
Paragraph
19(a) of APB No. 18.
Engineering Comments
Form 10-K/A Filed on August 22, 2005
Subsequent Events, page 48
5. Regarding your response to the prior comment number 27 from our
letter dated July 12, 2005, it is not clear to us how reserves can
be
classified as proved when there are no proved developed reserves.
Please provide us with the engineering report that determined that
the
Pleasant Valley Energy properties contain 24 million barrels of
proved
oil reserves. It is also not clear to us why proved oil reserves
would be sold for $0.12 per barrel when oil is selling for upwards
of
$60 per barrel and the average selling price of reserves is over
$10
per barrel. We may have further comments.
Form 8-K/A Filed on July 15, 2005
General
6. We note that the Admiral Calder Calcium Carbonate mine you
acquired
has not operated within the last few years. Before you can
designate
"reserves" that you can disclose in SEC filings, you must
demonstrate
that you can penetrate the market, establish a commercially viable
operation, and sell a sufficient quantity that you can make a
profit
after all expenses including return of capital. This generally
requires industrial mineral companies to develop a final
feasibility
study that includes estimated quantities of material based on
drilling, sampling and geologic understanding, current costs and
market prices, a cash flow analysis, and a sales contract, binding
letter of intent or other proof that you have a successfully
marketed
your material. Unless you have this level of information, amend
your
Form 8-K to indicate that you do not have any reserves that meet
the
standards of SEC`s Industry Guide 7, and remove the estimates of
proven and probable reserves. This Guide can be reviewed on the
Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7.
7.
In addition, Industry Guide 7 does not allow for the reporting of
"possible resources or "possible reserves." Remove any references
to
and estimates of "possible resources" or "possible reserves" in
this
Form 8-K, or any other materials you file with the Commission.
8. As an alternative, the staff has traditionally held that
quantity
estimates of industrial mineral materials that cannot qualify as
"reserves" under Commission definitions may be reported as
"mineralized material," or in your case "high calcium materials,"
if
it meets certain qualifications. As the staff use the term,
"mineralized material" means a mineralized body, which has been
delineated by appropriately spaced drilling and/or underground
sampling to support a sufficient tonnage and average grade of
metals.
Such a deposit does not qualify as a reserve, until a
comprehensive
evaluation based upon unit cost, grade, recoveries, and other
material
factors conclude legal and economic feasibility.
Note that "mineralized material" does not include volumes and
grades
estimated by using only geologic inference, which are sometimes
classed as "inferred" or "possible" by some evaluators. Only
mineralization that has been sufficiently sampled at close enough
intervals to reasonably assume continuity between samples within
the
area of influence of the samples can be called "mineralized
materials." Grade cutoffs used to distinguish mineralized material
from just mineralization must be established based on economically
viable factors that are suitable for the particular site.
Generally,
mineralized material should be reported as "in place" grade and
tonnage.
9. For future reference, Industry Guide 7 provides a listing of
information that you should disclose about this property in any
future
Form 10-K filings.
Closing Comments
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested information. Detailed cover letters greatly
facilitate
our review. Please understand that we may have additional
comments
after reviewing your amendment and responses to our comments.
You may contact Yong Choi at (202) 551-3758, Sandy Eisen at (202)-
551-
3864, or April Sifford, Branch Chief at (202) 551-3684 if you have
questions regarding comments on the financial statements and
related
matters. You may contact James Murphy, Petroleum Engineer at
(202)
551-3703 or Roger Baer, Mining Engineer at (202) 551-3705 with
questions about engineering comments. Please contact me at (202)
551-
3740 with any other questions.
Sincerely,
H. Roger Schwall
Assistant Director
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Mr. Thomas J. Cunningham
Tri-Valley Corporation
September 2, 2005
page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
100 F Street, N.E.
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
MAIL STOP 7010