Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 11, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | FIELDPOINT PETROLEUM CORP | |
Entity Central Index Key | 316,736 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,784,665 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 508,319 | $ 1,467,279 |
Accounts receivable: | ||
Oil and natural gas sales | 371,790 | 536,413 |
Joint interest billings, less allowance for doubtful accounts of approximately $237,000 each period | 200,944 | 221,159 |
Prepaid income taxes | 18,202 | 23,442 |
Prepaid expenses and other current assets | 61,618 | 67,236 |
Total current assets | 1,160,873 | 2,315,529 |
PROPERTY AND EQUIPMENT: | ||
Oil and natural gas properties (successful efforts method) | 41,088,531 | 41,085,514 |
Other equipment | 108,460 | 108,460 |
Less accumulated depletion and depreciation | (33,885,214) | (32,989,814) |
Net property and equipment | 7,311,777 | 8,204,160 |
OTHER ASSETS | 25,000 | 0 |
Total assets | 8,497,650 | 10,519,689 |
CURRENT LIABILITIES: | ||
Short-term debt | 6,478,333 | 6,478,333 |
Accounts payable and accrued expenses | 937,489 | 891,611 |
Oil and gas revenues payable | 457,144 | 459,627 |
Asset retirement obligation - current | 61,168 | 127,795 |
Total current liabilities | 7,934,134 | 7,957,366 |
ASSET RETIREMENT OBLIGATION | 1,750,887 | 1,685,185 |
Total liabilities | 9,685,021 | 9,642,551 |
STOCKHOLDERS' EQUITY: | ||
Common stock, $.01 par value, 75,000,000 shares authorized; 9,827,101 and 9,807,101 shares issued, respectively, and 8,900,101 and 8,880,101 outstanding, respectively | 98,270 | 98,070 |
Additional paid-in capital | 13,014,997 | 13,001,447 |
Accumulated deficit | (12,333,746) | (10,255,487) |
Treasury stock, 927,000 shares, each period, at cost | (1,966,892) | (1,966,892) |
Total stockholders' equity (deficit) | (1,187,371) | 877,138 |
Total liabilities and stockholders' equity | $ 8,497,650 | $ 10,519,689 |
UNAUDITED CONDENSED CONSOLIDAT3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accounts receivable: | ||
Allowance for doubtful accounts of joint interest billings | $ 237,000 | $ 237,000 |
STOCKHOLDERS' EQUITY: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
Common stock, shares issued (in shares) | 9,827,101 | 9,807,101 |
Common stock, shares outstanding (in shares) | 8,900,101 | 8,880,101 |
Treasury stock, shares (in shares) | 927,000 | 927,000 |
UNAUDITED CONDENSED CONSOLIDAT4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUE: | ||||
Oil and natural gas sales | $ 635,489 | $ 932,614 | $ 1,955,263 | $ 3,170,100 |
Well operational and pumping fees | 1,262 | 1,262 | 3,786 | 3,786 |
Disposal fees | 24,881 | 23,606 | 67,876 | 79,239 |
Total revenue | 661,632 | 957,482 | 2,026,925 | 3,253,125 |
COSTS AND EXPENSES: | ||||
Production expense | 608,252 | 808,460 | 1,949,616 | 2,349,223 |
Depletion and depreciation | 267,800 | 475,800 | 895,400 | 1,426,400 |
Exploration expense | 0 | 2,610 | 0 | 18,107 |
Accretion of discount on asset retirement obligations | 28,000 | 26,000 | 82,000 | 79,000 |
General and administrative | 323,223 | 309,868 | 988,025 | 966,502 |
Total costs and expenses | 1,227,275 | 1,622,738 | 3,915,041 | 4,839,232 |
OPERATING LOSS | (565,643) | (665,256) | (1,888,116) | (1,586,107) |
OTHER INCOME (EXPENSE): | ||||
Interest income | 16 | 191 | 787 | 417 |
Interest expense | (64,819) | (65,392) | (191,201) | (193,271) |
Realized gain on commodity derivative | 0 | 132,298 | 0 | 157,532 |
Unrealized gain on commodity derivatives | 0 | 167,000 | 0 | 191,000 |
Warrant modification expense | 0 | 0 | 0 | (66,124) |
Miscellaneous | 147 | 0 | 271 | 15,878 |
Total other income (expense) | (64,656) | 234,097 | (190,143) | 105,432 |
LOSS BEFORE INCOME TAXES | (630,299) | (431,159) | (2,078,259) | (1,480,675) |
INCOME TAX EXPENSE -CURRENT | 0 | (4,130) | 0 | (4,540) |
INCOME TAX BENEFIT -DEFERRED | 0 | 159,000 | 0 | 498,000 |
TOTAL INCOME TAX PROVISION | 0 | 154,870 | 0 | 493,460 |
NET LOSS | $ (630,299) | $ (276,289) | $ (2,078,259) | $ (987,215) |
LOSS PER SHARE: | ||||
BASIC | $ (0.07) | $ (0.03) | $ (0.23) | $ (0.12) |
DILUTED | $ (0.07) | $ (0.03) | $ (0.23) | $ (0.12) |
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||
BASIC | 8,899,992 | 8,621,410 | 8,893,386 | 8,299,139 |
DILUTED | 8,899,992 | 8,621,410 | 8,893,386 | 8,299,139 |
UNAUDITED CONDENSED CONSOLIDAT5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (2,078,259) | $ (987,215) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Unrealized gain on commodity derivatives | 0 | (191,000) |
Depletion and depreciation | 895,400 | 1,426,400 |
Exploration expense | 0 | 18,107 |
Accretion of discount on asset retirement obligations | 82,000 | 79,000 |
Deferred income tax benefit | 0 | (498,000) |
Stock compensation expense | 13,750 | 75,626 |
Warrant modification expense | 0 | 66,124 |
Changes in current assets and liabilities: | ||
Accounts receivable | 184,838 | 114,373 |
Prepaid income taxes | 5,240 | (7,037) |
Prepaid expenses and other current assets | 5,618 | 2,278 |
Accounts payable and accrued expenses | 31,554 | 329,787 |
Oil and gas revenues payable | (2,483) | 132,792 |
Other | 0 | 30,815 |
Net cash provided by (used in) operating activities | (862,342) | 592,050 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to oil and natural gas properties and other equipment | (96,618) | (226,233) |
Net cash used in investing activities | (96,618) | (226,233) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from the exercise of warrants | 0 | 734,716 |
Net cash provided by financing activities | 0 | 734,716 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (958,960) | 1,100,533 |
CASH AND CASH EQUIVALENTS, beginning of the period | 1,467,279 | 978,145 |
CASH AND CASH EQUIVALENTS, end of the period | 508,319 | 2,078,678 |
SUPPLEMENTAL INFORMATION: | ||
Cash paid during the period for interest | 191,806 | 192,296 |
Cash paid during the period for income taxes | 2,174 | 6,931 |
Change in accrued capital expenditures | $ 54,932 | $ (42,400) |
Nature of Business, Organizatio
Nature of Business, Organization and Basis of Preparation and Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business, Organization and Basis of Preparation and Presentation | FieldPoint Petroleum Corporation (the “Company”, “FieldPoint”, “our”, or “we”) is incorporated under the laws of the state of Colorado. The Company is engaged in the acquisition, operation and development of oil and natural gas properties, which are located in Louisiana, New Mexico, Oklahoma, Texas, and Wyoming. The 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. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the periods presented have been made. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Form 10-K filing for the year ended December 31, 2015. |
Liquidity and Going Concern
Liquidity and Going Concern | 9 Months Ended |
Sep. 30, 2016 | |
Liquidity [Abstract] | |
Liquidity and Going Concern | Our condensed consolidated financial statements for the nine months ended September 30, 2016, were prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. Continued low oil and natural gas prices during 2015 and 2016 have had a significant adverse impact on our business, and as a result of our financial condition, substantial doubt exists that we will be able to continue as a going concern. As of September 30, 2016, the Company has a working capital deficit of approximately $6,773,000 primarily due to the classification of our line of credit as a current liability. The line of credit provides for certain financial covenants and ratios measured quarterly which include a current ratio, leverage ratio, and interest coverage ratio requirements. The Company is out of compliance with all three ratios as of September 30, 2016, and we do not expect to regain compliance in 2016 without an amendment to our credit agreement. Citibank is in a first lien position on all of our properties. We are current on all interest payments but Citibank lowered our borrowing base from $11,000,000 to $5,500,000 on December 1, 2015. As a result of the redetermination of the credit base, the Company had a borrowing base deficiency in the amount of $1,495,000 on December 1, 2015. As an election under the Loan Agreement, the Company agreed to pay and cure the deficiency in three equal monthly installments of $498,333 each, due on December 31, 2015, January 31, 2016 and February 29, 2016. We made our first required deficiency payment in the amount of $516,667 on December 29, 2015. However, we did not make the required deficiency payments in January or February 2016. As of September 30, 2016, our loan balance is $6,478,333 and our borrowing base deficiency is $978,333. In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibanks forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runs through January 1, 2018, and requires that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and that we pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. We are currently in compliance with the agreement, however the Agreement was extended by a closing letter agreement to allow the Company time to pay the associated legal costs and solidify the Deposit/Withdraw at Custodian Agreements (DEWAC) as provided for in the Forbearance Agreement. To mitigate our current financial situation, we are taking the following steps. We are actively meeting with investors for possible equity investments, including business combinations. We have filed a new shelf registration statement on Form S-3 that was effective August 15, 2016, to permit the future sale of equity securities, including a limited at the market (ATM) capital raise. We are investigating other sources of capital. As reported in Note 10 Subsequent Events Our ability to continue as a going concern is dependent on many factors, including, among other things, our ability to comply with the covenants in our existing debt agreements, our ability to cure any defaults that occur under our debt agreements or to obtain waivers or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as defaults occur or as interest and principal payments come due. Our ability to continue as a going concern is also dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. While we are actively involved in seeking new sources of working capital, there can be no assurance that we will be able to raise sufficient additional capital or to have positive cash flow from operations to address all of our cash flow needs. Additional capital could be on terms that are highly dilutive to our shareholders. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders may be materially and adversely affected. On May 11, 2016, the Company received notification from the NYSE MKT that it was noncompliant with the NYSE MKT continued listing standards; specifically, Section 1003(a) of the Company Guide related to financial impairment. The Companys stockholders equity is below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years. The Company submitted a plan to regain compliance; whereupon NYSE Regulation reviewed the plan and determined to accept it, as supplemented, and granted a plan period through November 13, 2017, to regain compliance, the targeted completion date. NYSE Regulation staff will review the Company periodically for compliance with the initiatives outlined in the plan. If the Company is not in compliance with the continued listing standards by the targeted completion date of November 13, 2017, or if the Company does not make progress consistent with the plan during the plan period, NYSE Regulation staff will initiate delisting proceeding as appropriate. If our initiatives to regain compliance are not successful and the Company is delisted from the NYSE MKT, it could have a significant adverse impact on our ability to raise additional capital. |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recently Issued Accounting Pronouncements | The FASB issued ASU 2016-09 “Compensation – Stock Compensation” simplifying the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. Under the new standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit on the statements of income. Under current GAAP, excess tax benefits are recognized in additional paid-in capital while tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or on the statements of income. The new accounting guidance is effective for annual periods beginning after December 15, 2016. Early adoption is permitted in any interim or annual period. Certain provisions require retrospective/modified retrospective transition while others are to be applied prospectively. Management plans to adopt ASU 2016-09 effective January 1, 2017. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. In February 2016, the FASB issued Update No. 2016-02 – Leases to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This authoritative guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company is currently evaluating the provisions of this guidance and assessing its impact in relation to the Company's leases. In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, consistent with the presentation of a debt discount. The guidance is effective on a retrospective basis for annual periods beginning after December 15, 2015, including interim periods within that reporting period, with early adoption permitted. The Company adopted this accounting standard update as of January 1, 2016. The Company did not have any debt issuance costs at January 1, 2016, and the adoption of the updated standard had no effect on our consolidated financial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15 – Presentation of Financial Statements – Going Concern that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the entity’s financial statements are issued, or within one year after the date that the entity’s financial statements are available to be issued, and to provide disclosures when certain criteria are met. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact. |
Oil and Natural Gas Properties
Oil and Natural Gas Properties | 9 Months Ended |
Sep. 30, 2016 | |
Oil and Gas Property [Abstract] | |
Oil and Natural Gas Properties | No wells were drilled or completed during the three or nine months ended September 30, 2016 or 2015. On a quarterly basis, the Company compares our most recent engineering reports to current pricing and production to determine impairment charges, if needed, in order to write down the carrying value of certain properties to fair value. In order to determine the amounts of the impairment charges, the Company compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management's expectations of economically recoverable proved reserves. If the net capitalized cost exceeds the undiscounted future net cash flows, the Company impairs the net cost basis down to the discounted future net cash flows, which is management's estimate of fair value. In order to determine the fair value, the Company estimates reserves, future operating and development costs, future commodity prices and a discounted cash flow model utilizing a 10 percent discount rate. The estimates used by management for the fair value measurements utilized in this review include significant unobservable inputs, and therefore, the fair value measurements are classified as Level 3 of the fair value hierarchy. Based on its current circumstances, the Company has not recorded any impairment charges during the nine months ended September 30, 2016. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
LOSS PER SHARE: | |
Earnings Per Share | Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share take common stock equivalents (such as options and warrants) into consideration using the treasury stock method. The Company had 7,177,010 warrants outstanding with an exercise price of $4.00 at September 30, 2016 and 2015. The dilutive effect of the warrants for the three and nine months ended September 30, 2016 and 2015 is presented below. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Net loss $ (630,299 ) $ (276,289 ) $ (2,078,259 ) $ (987,215 ) Weighted average common stock outstanding 8,899,992 8,621,410 8,893,386 8,299,139 Weighted average dilutive effect of stock warrants - - - - Dilutive weighted average shares 8,899,992 8,621,410 8,893,386 8,299,139 Loss per share: Basic $ (0.07 ) $ (0.03 ) $ (0.23 ) $ (0.12 ) Diluted $ (0.07 ) $ (0.03 ) $ (0.23 ) $ (0.12 ) |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | In November 2015, the FASB issued Accounting Standards Update No. 2015-17 – Balance Sheet Classification of Deferred Taxes that simplifies the presentation of deferred income taxes on the balance sheet. Under the new standard, deferred tax assets and liabilities are classified as noncurrent on the balance sheet. This new update is effective for financial statements issued for fiscal years beginning after December 15, 2016 (and interim periods within those fiscal years), with early adoption permitted and allows prospective or retrospective application. The Company adopted this accounting standard update prospectively as of January 1, 2016. The adoption of this standard had no impact on the consolidated balance sheet as of September 30, 2016, or December 31, 2015. For the three and nine months ended September 30, 2016, the Company’s deferred tax assets were reduced in full by a valuation allowance due to our determination that it is more likely than not that some or all of the deferred tax assets will not be realized in the future. As a result, the Company has not recognized an income tax benefit associated with its net loss for the three or nine months ended September 30, 2016. The rate for the three months ended September 30, 2015, was approximately 36% of book income before tax and approximates the statutory federal and state rates. The rate for the nine months ended September 30, 2015, was 33% and differed slightly from the statutory federal and state rates due primarily to permanent differences in book and taxable income related to the warrant modification expense and stock compensation expense. |
Line of Credit
Line of Credit | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Line of Credit | The Company has a line of credit with a bank with a borrowing base of $5,500,000 at September 30, 2016, and December 31, 2015. The amount outstanding under this line of credit was $6,478,333 which is $978,333 over the borrowing base at September 30, 2016, and December 31, 2015. The agreement requires quarterly interest-only payments until maturity on October 18, 2016. The interest rate is based on a LIBOR or Prime option. The Prime option provides for the interest rate to be prime plus a margin ranging between 1.75% and 2.25% and the LIBOR option to be the 3-month LIBOR rate plus a margin ranging between 2.75% and 3.25%, both depending on the borrowing base usage. Currently, we have elected the LIBOR interest rate option in which our interest rate was approximately 4% as of September 30, 2016, and December 31, 2015, respectively. The commitment fee is .50% of the unused borrowing base. The line of credit provides for certain financial covenants and ratios which include a current ratio that cannot be less than 1.10:1.00, a leverage ratio that cannot be more than 3.50:1.00, and an interest coverage ratio that cannot be less than 3.50:1.00. The Company is out of compliance with all three ratios as of September 30, 2016, and is in technical default of the agreement. As a result of the redetermination of the credit base, the Company had a borrowing base deficiency in the amount of $1,495,000 on December 1, 2015. As an election under the Loan Agreement, the Company agreed to pay and cure the deficiency in three equal monthly installments of $498,333 each, due on December 31, 2015, January 31, 2016 and February 29, 2016. We made our first required deficiency payment in the amount of $516,667 on December 29, 2015. However, we did not make the required deficiency payments in January or February 2016. As of September 30, 2016, our loan balance is $6,478,333 and our borrowing base deficiency $978,333. Citibank is in a first lien position on all of our properties and assets. In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibanks forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runs through January 1, 2018, and requires that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and that we pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. We are currently in compliance with the agreement, however the Agreement was extended by a closing letter agreement to allow the Company time to pay the associated legal costs and solidify the Deposit/Withdraw at Custodian Agreements (DEWAC) as provided for in the Forbearance Agreement. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
STOCKHOLDERS' EQUITY: | |
Stockholders' Equity | There were 7,177,010 warrants with an exercise price of $4.00 outstanding at September 30, 2016. There have been no warrants issued or exercised during the nine months ended September 30, 2016. The weighted average expected life of the warrants was 2.25 years at December 31, 2015, and was 1.50 years at September 30, 2016. As a signing bonus to his “at will” employment agreement, Phillip Roberson, as President and CFO, is entitled to receive a total of 50,000 shares of common stock, of which 10,000 shares were immediately vested in 2014 and 20,000 shares vested in 2015. An additional 10,000 shares were vested and issued on January 1, 2016. The remaining 10,000 shares vested at the last six-month anniversary date on July 1, 2016. The fair value of this stock grant was $275,000 on July 1, 2014, of which $13,750 was recognized as non-cash stock compensation expense during the nine months ended September 30, 2016. There was no remaining future expense related to this stock grant after June 30, 2016. |
Commodity Derivatives
Commodity Derivatives | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Commodity Derivatives | No commodity positions were outstanding at September 30, 2016, or at December 31, 2015. On May 13, 2015, we entered into the following commodity positions to hedge our oil production price risk, effective from June 1, 2015, to December 31, 2015. Period Volume (Barrels) $/Barrel Daily Total Floor Ceiling NYMEX –WTI Collars October 1 – December 2015 200 18,400 $ 55.00 $ 70.00 The following table summarizes the change in fair value of our commodity derivatives: Fair Value Income Statement Three Months Ended September 30, Nine Months Ended September 30, Location 2016 2015 2016 2015 Derivatives not designated as hedging instruments Unrealized gain (loss) on commodity derivatives Other Income (Expense) $ - $ 167,000 $ - $ 191,000 Realized gain (loss) on commodity derivatives Other Income (Expense) $ - $ 132,298 $ - $ 157,532 Unrealized gains and losses, at fair value, are included on our consolidated balance sheets as current or non-current assets or liabilities based on the anticipated timing of cash settlements under the related contracts. Changes in the fair value of our commodity derivative contracts are recorded in earnings as they occur and included in other income (expense) on our consolidated statements of operations. We estimate the fair values of collar contracts based on the present value of the difference in exchange-quoted forward price curves and contractual settlement prices multiplied by notional quantities. We internally valued the option contracts using industry-standard option pricing models and observable market inputs. We use our internal valuations to determine the fair values of the contracts that are reflected on our consolidated balance sheets. Realized gains and losses are also included in other income (expense) on our consolidated statements of operations. We are exposed to credit losses in the event of non-performance by the counterparties on our commodity derivatives positions and have considered the exposure in our internal valuations. However, we do not anticipate non-performance by the counterparties over the term of the commodity derivatives positions. To estimate the fair value of our commodity derivatives positions, we use market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and attempt to use the best available information. We determine the fair value based upon the hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and lowest priority to unobservable inputs (Level 3 measurement). The three levels of fair value hierarchy are as follows: ● Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. At September 30, 2016, we had no Level 1 measurements. ● Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Our derivatives, which consist of commodity collars, are valued using commodity market data which is derived by combining raw inputs and quantitative models and processes to generate forward curves. Where observable inputs are available, directly or indirectly, for substantially the full term of the asset or liability, the instrument is categorized in Level 2. At September 30, 2016, we had no Level 2 measurements. ● Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. At September 30, 2016, we had no Level 3 measurements. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | On August 12, 2016, the Company entered into a binding Stock and Mineral Purchase Agreement (the SMPA) with HFT Enterprises, LLC (the Buyer) in order to provide liquidity to the Company. The original closing date of September 30, 2016, was extended to November 3, 2016, by mutual consent. The Buyer will purchase in two equal tranches, a number of newly-issued shares of common stock of the Company equal to 19.9% of the total number of issued and outstanding shares of the Company, as measured on the date of the Agreement, for a price of $0.45 per share (the shares to be purchased, the Shares). The first tranche was purchased on November 3, 2016, for gross proceeds of $398,053 paid in consideration of 884,564 shares of unregistered common stock. The second tranche is expected to be purchased by December 31, 2016. The shares are restricted shares that are also not registered under the Securities Act of 1933, as amended (the Securities Act), and therefore the Buyer must hold the Shares indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Euro Pacific Capital, Inc. acted as the placement agent and garnered a fee of 5%. The SMPA also granted to the Buyer the right to purchase an undivided 100% working interest on or before December 31, 2016, in the Companys Elkhorn and JC Kinney leases in the Big Muddy Oil Field in Converse County, Wyoming for a purchase price of $430,000. As a contingency of the purchase, all proceeds from the sale of the working interest must be used to pay down the Companys indebtedness owed to Citibank. Other contingencies include the requirement that Citibank will have agreed to extend the maturity date on the Companys current indebtedness owed until December 31, 2017, which was accomplished in the Forbearance Agreement discussed above. Also, the Buyer will have the right to nominate one member of the Board of Directors. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
LOSS PER SHARE: | |
Schedule of Earnings Per Share, Basic and Diluted | For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Net loss $ (630,299 ) $ (276,289 ) $ (2,078,259 ) $ (987,215 ) Weighted average common stock outstanding 8,899,992 8,621,410 8,893,386 8,299,139 Weighted average dilutive effect of stock warrants - - - - Dilutive weighted average shares 8,899,992 8,621,410 8,893,386 8,299,139 Loss per share: Basic $ (0.07 ) $ (0.03 ) $ (0.23 ) $ (0.12 ) Diluted $ (0.07 ) $ (0.03 ) $ (0.23 ) $ (0.12 ) |
Commodity Derivatives (Tables)
Commodity Derivatives (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commodity Derivatives Tables | |
Commodity Derivative Positions to Hedge Oil Production Price risk | Period Volume (Barrels) $/Barrel Daily Total Floor Ceiling NYMEX –WTI Collars October 1 – December 2015 200 18,400 $ 55.00 $ 70.00 |
Change in Fair Value of Commodity Derivatives | Fair Value Income Statement Three Months Ended September 30, Nine Months Ended September 30, Location 2016 2015 2016 2015 Derivatives not designated as hedging instruments Unrealized gain (loss) on commodity derivatives Other Income (Expense) $ - $ 167,000 $ - $ 191,000 Realized gain (loss) on commodity derivatives Other Income (Expense) $ - $ 132,298 $ - $ 157,532 |
Liquidity (Details Narrative)
Liquidity (Details Narrative) - Line of Credit [Member] | Sep. 30, 2016USD ($) |
Line of Credit Facility [Line Items] | |
Working capital (deficit) | $ 6,773,000 |
Borrowing base | 5,500,000 |
Borrowing base deficiency | $ 978,333 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Schedule of earnings per share, basic and diluted [Abstract] | ||||
Net loss | $ (630,299) | $ (276,289) | $ (2,078,259) | $ (987,215) |
Weighted average common stock outstanding (in shares) | 8,899,992 | 8,621,410 | 8,893,386 | 8,299,139 |
Weighted average dilutive effect of stock warrants (in shares) | 0 | 0 | 0 | 0 |
Dilutive weighted average shares (in shares) | 8,899,992 | 8,621,410 | 8,893,386 | 8,299,139 |
Earnings (loss) per share [Abstract] | ||||
Basic (in dollars per share) | $ (0.07) | $ (0.03) | $ (0.23) | $ (0.12) |
Diluted (in dollars per share) | $ (0.07) | $ (0.03) | $ (0.23) | $ (0.12) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Federal statutory rate | 0.00% | 36.00% | 0.00% | 33.00% |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Line of Credit Facility [Line Items] | ||
Outstanding line of credit | $ 6,478,333 | $ 6,478,333 |
Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Borrowing base | 5,500,000 | |
Outstanding line of credit | 6,478,333 | |
Borrowing base deficiency | $ 978,333 |
Commodity Derivatives (Details)
Commodity Derivatives (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Commodity Derivatives Details | ||||
Unrealized gain (loss) on commodity derivatives | $ 0 | $ 167,000 | $ 0 | $ 191,000 |
Realized gain (loss) on commodity derivatives | $ 0 | $ 132,298 | $ 0 | $ 157,532 |