December 20, 2018
Zel C. Khan
Chief Executive Officer
Petrolia Energy Corporation
710 N. Post Oak Road, Suite 512
Houston, Texas 77024
Re: Petrolia Energy Corporation
Form 10-K/A for the Fiscal Year ended December 31, 2017
Filed September 26, 2018
File No. 0-52690
Dear Mr. Khan:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Form 10-K/A for the Fiscal Year ended December 31, 2017
General
1. We note that you have not filed your Form 10-Q for the quarter ended
September 30,
2018, which was due November 14, 2018. Please comply with your reporting
obligations
under Rule 13a-13 of Regulation 13A.
Business
Proved Reserves, page 10
2. Please disclose production for each period, by final product sold, for
each individual field
that contains 15% or more of your total proved reserves, to comply with
Item 1204(a) of
Regulation S-K, based on the definition of field in Rule 4-10(a)(15) of
Regulation S-X.
Zel C. Khan
FirstName LastNameZel C. Khan
Petrolia Energy Corporation
Comapany20, 2018
December NamePetrolia Energy Corporation
December 20, 2018 Page 2
Page 2
FirstName LastName
Item 15. Exhibits, Financial Statement Schedules
Exhibit Index
Exhibit Number 99.1, page 31
3. We note the following remarks in the MKM Engineering reserve report:
"The Reserves estimates included in this report conform to the
guidelines specified by the
SPE, AAPG, WPC, and SPEE. For more information regarding Reserves
classification
definitions see Appendix A. A complete discussion of the Reserves
classification
definitions can be found on the SPE website (www.spe.org)."
However, the estimates of reserves and future net cash flows disclosed
in your filing and
summarized within the reserve report should adhere to the definitions
in Rule 4-10(a) of
Regulation S-X, and the requirements of FASB ASC 932. Please obtain
and file a revised
reserve report that conforms with this guidance. Please also revise
the disclosures within
your filing of reserves and future net cash flows, including the
standardized measures, as
necessary to resolve any material inconsistencies. You may refer to
Instructions 4 and 6
to Item 102 of Regulation S-K for further clarification.
4. We note that although the reserve report includes information relating
to probable
reserves, you have not included the related details within your
filing. If you choose not to
disclose probable reserves, you should obtain and file a reserve
report that does not
include information about probable reserves.
Alternatively, if you choose to disclose probable reserves, you should
adhere to the
guidance in Items 1202(a)(2) and 1202(a)(5) of Regulation S-K.
5. Please ensure that all disclosures of probable reserves, whether in
the filing or in the
reserve report, do not include any aggregated totals of proved and
probable reserves,
consistent with the guidance in the answer to Question 105.01 in our
Compliance and
Disclosure Interpretations, regarding Oil and Gas Rules, available on
our website at:
http://www.sec.gov/divisions/corpfin/guidance/oilandgas-interp.htm
6. The reserve report that you have filed does not include certain
information required by
Item 1202(a)(8) of Regulation S-K. Please obtain and file a revised
report that includes
the following information to comply with this guidance.
The purpose for which the report was prepared, e.g. for inclusion
as an exhibit in a
filing made with the U.S. Securities and Exchange Commission (Item
1202(a)(8)(i)).
The date on which the report was completed (in addition to the
effective date) (Item
1202(a)(8)(ii)).
Zel C. Khan
FirstName LastNameZel C. Khan
Petrolia Energy Corporation
Comapany20, 2018
December NamePetrolia Energy Corporation
December 20, 2018 Page 3
Page 3
FirstName LastName
The proportion of the Company's total proved reserves covered by
the report (Item
1202(a)(8)(iii)).
A statement that the assumptions, data, methods, and procedures
are appropriate for
the purpose served by the report (Item 1202(a)(8)(iv)).
The initial benchmark and the average realized prices after
adjustments for location
and quality differentials, by product type including natural gas
liquids, for the reserves
included in the report (Item(a)(8)(v)).
A discussion of the possible effects of regulation on the ability
of the Company to
recover the estimated reserves (Item (a)(8)(vi)).
A statement that the third party has used all methods and
procedures as it considered
necessary under the circumstances to prepare the report (Item
(a)(8)(viii)).
Financial Statements
Note 13 Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited),
page F-30
7. We note that you report a $16.6 million standardized measure of
discounted future net
cash flows as of December 31, 2017 on page F-32, although the
components of the
changes that you report in the 2017 column yield a negative $3.9
million. Please revise
this disclosure as necessary to accurately portray the changes and
year-end estimates,
consistent with FASB ASC 932-235-50-31 and 35.
Notes to Consolidated Financial Statements
Note 13. Supplemental Information Relating to Oil and Gas Producing Activities
(Unaudited)
Standardized Measure of Oil and Gas, page F-32
8. We note that the average future production costs per barrel of oil
reflected in your
standardized measures appear to be $16.69 and $21.13 as of December
31, 2017 and
December 31, 2016, based on the proved reserves reported on page F-31,
and the future
production costs reported on page F-32. However, your average annual
historical
production costs per barrel of oil, based on the annual lease
operating expense disclosed
on page F-3, and the annual oil production figures disclosed on page
F-31, are $121.67
and $45.79 per barrel for the years ended December 31, 2017 and 2016.
We also note that you report average annual production costs for
Texas, Oklahoma, and
New Mexico on page 10, of $57.94, $133.25 and $251.23 per barrel in
2017, all of which
reflect and increase compared to the figures of $35.53, $81.47 and
$186.25 per barrel in
2016, and are all greater than those reflected in your standardized
measures.
Zel C. Khan
Petrolia Energy Corporation
December 20, 2018
Page 4
Tell us why the future production costs per barrel of oil used in the
calculation of your
standardized measures of future net cash flows as of December 31, 2017
and 2016 appear
to be significantly lower than the comparable historical costs for
each period, and explain
how your computations are consistent with FASB ASC 932-235-50-31(b),
which requires
estimates of future development and production costs that are based on
year-end costs and
assuming a continuation of existing economic conditions, if this is
your view.
Also tell us why the future production costs per barrel of oil
utilized in the standardized
measure of future net cash flows as of December 31, 2017 would be 21%
lower than the
comparable costs used in the standardized measure of future net cash
flows as of
December 31, 2016, as reflected in your computations, considering the
increase in costs
you report for properties in each state.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact John Hodgin - Petroleum Engineer at (202) 551-3699 if
you have
questions regarding engineering comments. You may contact Lily Dang - Staff
Accountant at
(202) 551-3867 if you have questions regarding comments on the financial
statements and
related matters. Please contact Karl Hiller - Branch Chief at (202) 551-3686
with any other
questions.
FirstName LastNameZel C. Khan Sincerely,
Comapany NamePetrolia Energy Corporation
Division of
Corporation Finance
December 20, 2018 Page 4 Office of
Natural Resources
FirstName LastName