SCHEDULE OF LEASE COSTS
| |
2022 | | |
2021 | |
| |
Three Months ended March 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Operating lease cost | |
$ | 31 | | |
| 24 | |
Short-term lease cost | |
| 2 | | |
| 4 | |
| |
| | | |
| | |
Sublease income | |
| (16 | ) | |
| (16 | ) |
Total lease costs | |
$ | 17 | | |
$ | 12 | |
The
Company’s Denver and Houston office operating leases do not contain implicit interest rates that can be readily determined; therefore,
the Company used the incremental borrowing rates in effect at the time the Company entered into the leases.
SCHEDULE OF WEIGHTED AVERAGE LEASE
| |
As of March 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Weighted average lease term (years) | |
| 0.9 | | |
| 1.9 | |
Weighted average discount rate | |
| 9.26 | % | |
| 9.26 | % |
The
future minimum lease commitments as of March 31, 2022 are presented in the table below in thousands. Such commitments are reflected at
undiscounted values and are reconciled to the discounted present value on the consolidated balance sheet as follows:
SCHEDULE OF FUTURE MINIMUM LEASE COMMITMENTS
| |
Amount | |
Remainder of 2022 | |
$ | 92 | |
2023 | |
| 18 | |
Total lease payments | |
| 110 | |
Less: imputed interest | |
| (4 | ) |
Total lease liability | |
$ | 106 | |
In
August 2021, the Company sold its 14-acre tract in Riverton, Wyoming with a two-story, 30,400 square foot office building. The Company
recognized, rental property income, net of rental operating expenses of $17 thousand related to its Riverton, Wyoming office building
for the three months ended March 31, 2021.
5.
OIL AND NATURAL GAS PRODUCTION ACTIVITIES
Divestitures
During
the three months ended March 31, 2022, there were no divestitures of oil and gas properties. During the three months ended March 31,
2021, the Company sold approximately 12 acres of undeveloped acreage in Midland County, Texas for approximately $30 thousand.
Ceiling
Test and Impairment
The
Company did not record a ceiling test write-down of its oil and natural gas properties during the three months ended March 31, 2022 or
2021. The reserves used in the ceiling test incorporate assumptions regarding pricing and discount rates over which management has no
influence in the determination of present value. In the calculation of the ceiling test as of March 31, 2022, the Company used $75.24
per barrel for oil and $4.09 per one million British Thermal Units (MMbtu) for natural gas (as further adjusted for property, specific
gravity, quality, local markets and distance from markets) to compute the future cash flows of the Company’s producing properties.
The discount factor used was 10%.
6.
DEBT
On
January 5, 2022, the Company entered into a five-year credit agreement (“Credit Agreement”) with Firstbank Southwest (“Firstbank”)
as administrative agent for one or more lenders (the “Lenders”), which provides for a revolving line of credit with an initial
borrowing base of $15 million, and a maximum credit amount of $100 million. Under the Credit Agreement, revolving loans may be borrowed,
repaid and re-borrowed until January 5, 2026, when all outstanding amounts must be repaid. Interest on the outstanding amounts under
the Credit Agreement will accrue at an interest rate equal to (a) the greatest of (i) the prime rate in effect on such day, and (b) the
Federal Funds rate in effect on such day (as determined in the Credit Agreement) plus 0.50%, and an applicable margin that ranges between
0.25% to 1.25% depending on utilization of the amount of the borrowing base (the “Applicable Margin”). During the three months
ended March 31, 2022, the interest rate was 4.25% per annum and the Company recorded interest expense of $36 thousand.
The
Credit Agreement contains various restrictive covenants and compliance requirements, which include, among other things: (i) maintenance
of certain financial ratios, as defined in the Credit Agreement tested quarterly, that limit the Company’s ratio of total debt
to EBITDAX (as defined in the Credit Agreement) to 3:1 and require its ratio of consolidated current assets to consolidated current liabilities
(as each is described in the Credit Agreement) to remain at 1:1 or higher; (ii) a restriction on the payment of cash dividends (subject
to certain limited rights to declare and pay dividends as long as no event of default has occurred and certain financial ratios are met);
(iii) limits on the incurrence of additional indebtedness; (iv) a prohibition on the entry into commodity swap contracts exceeding a
specified percentage of our expected production; and (v) restrictions on the disposition of assets. As of March 31, 2022, we were in
compliance with all covenants related to our Credit Agreement.
A
total of $3.5
million was borrowed under the Credit Agreement
immediately upon the entry into such Credit Agreement on January 5, 2022. The $3.5 million was immediately used to repay $3.3
million of debt assumed as part of the acquisition
of the Acquired Assets. On March 10, 2022, we borrowed an additional $0.5
million for working capital needs, which was
repaid on March 28, 2022. The amount outstanding on the Credit Agreement as of March 31, 2022, was $3.5
million.
On
March 4, 2021, the Company closed a Debt Conversion Agreement (the “Conversion Agreement”) with APEG Energy II, L.P. (“APEG II”), which entity Patrick E. Duke, a former director of the Company, has shared voting power and shared
investment power over. The Conversion Agreement was related to a $375,000 related party secured note payable the Company borrowed
from APEG II on September 24, 2020 (the “Note”). The Note accrued interest at 10% per annum and had a maturity date of
September 24, 2021. The Note was secured by the Company’s wholly-owned subsidiary, Energy One’s oil and natural gas
producing properties. Under the terms of the Note, the Company may repay the Note prior to maturity, however, in the event of a
prepayment of the Note, the Company was required to pay APEG II the amount of interest which would have accrued through maturity (at
10% per annum). Pursuant to the Conversion Agreement, the Company converted the related party secured note payable of $375,000 and
accrued interest to the date of the Note’s September 24, 2021 maturity of $37,500 by issuing 97,962 shares of unregistered
common stock with a value on the date of the Conversion Agreement of $438,000. The difference of $25,500 between the value of the
shares issued and the $412,500 amount of the Note and accrued interest through the date of maturity is recorded as interest expense,
net, in the condensed consolidated statements of operations.
7.
COMMODITY DERIVATIVES
The
Company’s results of operations and cash flows are affected by changes in market prices for crude oil and natural gas. To manage
a portion of its exposure to price volatility from producing crude oil, and natural gas the Company enters into commodity derivative
contracts to protect against price declines in future periods. The Company does not enter into derivative contracts for speculative purposes.
The Company has not elected to designate the derivative contracts as cash flow hedges; therefore, the instruments do not qualify for
hedge accounting. Accordingly, changes in the fair value of the derivative contracts are recorded in the unaudited condensed consolidated
statements of operations and are included in cash flows from operating activities in the condensed consolidated statement of cash flows.
On
January 5, 2022, the Company and NextEra Energy Marketing LLC (“NextEra”) entered into an International Swap Dealers Association,
Inc. Master Agreement and Schedule (the “Master Agreement”), facilitating the Company to enter into derivative contracts
to manage the risk associated with its business relating to commodity prices. The Company’s obligations to NextEra under the Master
Agreement are secured by the collateral which secures the loans under the Credit Agreement on a pari passu and pro rata basis with the
principal of such loans. The structure of the derivative contacts may include swaps, caps, floors, collars, locks, forwards and options.
The
Company’s entry into and the obligations of the Company under the Master Agreement were required conditions to the Closing of the
Banner Purchase Agreement, pursuant to which the Company was required to assume and novate certain hedges of Banner which had a mark
to market loss of approximately $3.1 million as of the Closing Date. In addition, on January 12, 2022, the Company entered into additional
Nymex WTI crude oil commodity derivative contracts with NextEra for 2022 and 2023 production. As of March 31, 2022, the Company had commodity
derivative contracts outstanding through the fourth quarter of 2023 as summarized in the tables below:
SCHEDULE
OF COMMODITY DERIVATIVE CONTRACTS
| |
Collars | | |
Fixed Price Swaps | |
| |
Quantity | | |
| | |
| | |
Quantity | | |
| |
Commodity/
Index/ | |
Crude oil-(Bbls)
Natural | | |
Weighted Average Prices | | |
Crude oil- (Bbls) Natural
| | |
Weighted
Average | |
Maturity Period | |
Gas-(Mmbtu) | | |
Floors | | |
Ceilings | | |
Gas-(Mmbtu) | | |
Price | |
| |
| | |
| | |
| | |
| | |
| |
NYMEX WTI | |
| | | |
| | | |
| | | |
| | | |
| | |
Crude Oil 2022 Contracts: | |
| | | |
| | | |
| | | |
| | | |
| | |
Second quarter 2022 | |
| 74,500 | | |
$ | 60.05 | | |
$ | 80.66 | | |
| 9,000 | | |
$ | 49.99 | |
Third quarter 2022 | |
| 73,400 | | |
$ | 59.97 | | |
$ | 80.54 | | |
| 9,000 | | |
$ | 49.99 | |
Fourth quarter 2022 | |
| 71,800 | | |
$ | 59.86 | | |
$ | 80.34 | | |
| 9,000 | | |
$ | 49.99 | |
Total Remaining 2022 | |
| 219,700 | | |
$ | 59.96 | | |
$ | 80.52 | | |
| 27,000 | | |
$ | 49.99 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Crude Oil 2023 Contracts: | |
| | | |
| | | |
| | | |
| | | |
| | |
First quarter 2023 | |
| 66,200 | | |
$ | 57.73 | | |
$ | 76.00 | | |
| 6,000 | | |
$ | 59.20 | |
Second quarter 2023 | |
| 53,500 | | |
$ | 60.00 | | |
$ | 81.04 | | |
| 6,000 | | |
$ | 59.20 | |
Third quarter 2023 | |
| 52,600 | | |
$ | 60.00 | | |
$ | 81.04 | | |
| - | | |
$ | - | |
Fourth quarter 2023 | |
| 51,200 | | |
$ | 60.00 | | |
$ | 81.04 | | |
| - | | |
$ | - | |
Total 2023 | |
| 223,500 | | |
$ | 59.33 | | |
$ | 79.55 | | |
| 12,000 | | |
$ | 59.20 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
NYMEX Henry Hub | |
| | | |
| | | |
| | | |
| | | |
| | |
Natural Gas 2022 Contracts: | |
| | | |
| | | |
| | | |
| | | |
| | |
Second quarter 2022 | |
| - | | |
$ | - | | |
$ | - | | |
| 60,000 | | |
$ | 2.96 | |
Third quarter 2022 | |
| - | | |
$ | - | | |
$ | - | | |
| 60,000 | | |
$ | 2.96 | |
Fourth quarter 2022 | |
| - | | |
$ | - | | |
$ | - | | |
| 60,000 | | |
$ | 2.96 | |
Total remaining 2022 | |
| - | | |
$ | - | | |
$ | - | | |
| 180,000 | | |
$ | 2.96 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Natural Gas 2023 Contracts: | |
| | | |
| | | |
| | | |
| | | |
| | |
First quarter 2023 | |
| - | | |
$ | - | | |
$ | - | | |
| 60,000 | | |
$ | 2.96 | |
The
following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets by category:
SCHEDULE
OF FAIR VALUE OF COMMODITY DERIVATIVE CONTRACTS
| |
March 31, 2022 | | |
December 31,
2021 | |
| |
(in thousands) | |
Derivative liabilities: | |
| | | |
| | |
Current liabilities | |
$ | 6,478 | | |
$ | - | |
Non-current liabilities | |
| 1,867 | | |
| - | |
Total derivative liabilities | |
$ | 8,344 | | |
$ | - | |
As
of March 31, 2022, all commodity derivative contracts held by the Company were subject to master netting arrangements with its counterparty.
The terms of the Company’s derivative agreements provide for offsetting of amounts payable or receivable between it and the counterparty
for contracts that settle on the same date. The Company’s agreements also provide that in the event of an early termination, the
counterparty has the right to offset amounts owed or owing under that and any other agreement. The Company’s accounting policy
is to offset positions that settle on the same date with the same counterparty.
The
following table summarizes the commodity components of the derivative settlement gain (loss) as well as the components of the net derivative
loss line-item presentation in the accompanying condensed consolidated statement of operations:
SCHEDULE
OF DERIVATIVE SETTLEMENT GAIN LOSS
| |
2022 | | |
2021 | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Derivative settlement gain (loss) | |
| | | |
$ | | |
Oil contracts | |
$ | (1,547 | ) | |
| (2 | ) |
Gas contracts | |
| (97 | ) | |
| - | |
Total net derivative settlement gain (loss) | |
$ | (1,644 | ) | |
$ | (2 | ) |
| |
| | | |
| | |
Total net derivative gain (loss) | |
| | | |
$ | | |
Oil contracts | |
$ | (6,296 | ) | |
| 107 | |
Gas contracts | |
| (541 | ) | |
| - | |
Total net derivative gain (loss) | |
$ | (6,837 | ) | |
$ | 107 | |
8.
COMMITMENTS, CONTINGENCIES AND RELATED-PARTY TRANSACTIONS
Litigation
In
July 2020, the Company received a request for arbitration from its former Chief Executive Officer, David Veltri claiming that it breached
his employment agreement. The Company settled the litigation in December 2021 by paying Mr. Veltri and his attorneys $750 thousand, of
which $375 thousand was reimbursed by the Company’s insurance carrier. Total amounts incurred by the Company related to the litigation
was $427 thousand.
APEG
II Litigation
From
February 2019 until August 2020, the Company was involved in litigation with its former Chief Executive Officer, David Veltri, and at
the time its largest shareholder, APEG II and APEG II’s general partner, APEG Energy II, GP (together with APEG II, “APEG”).
In addition, Patrick E. Duke, a former director of the Company, had shared voting and shared investment power over APEG. The litigation
arose as a result of a vote at the February 25, 2019 board of directors meeting to terminate Mr. Veltri for using Company funds outside
of his authority and for other reasons (the “Texas Litigation”). In a separate lawsuit, APEG initiated a shareholder derivative
action in Colorado against Mr. Veltri due to his refusal to recognize the Board’s decision to terminate him (the “Colorado
Litigation”). The Company was named as a nominal defendant in the Colorado Litigation. The Colorado litigation was dismissed in
May 2020 and the Texas Litigation was dismissed in August 2020. On March 4, 2021, the Company issued 90,846 shares of unregistered common
stock, which had a value on the date of issuance of $406 thousand, to APEG in reimbursement of APEG’s legal costs in the Colorado
and Texas Litigation.
9.
SHAREHOLDERS’ EQUITY
Warrants
In
December 2016, the Company completed a registered direct offering of 100,000 shares of common stock at a net gross price of $15.00 per
share. Concurrently, the investors received warrants to purchase 100,000 shares of common stock of the Company at an exercise price of
$20.05 per share, for a period of five years from the final closing date of June 21, 2017. The warrants include anti-dilution rights.
The total net proceeds received by the Company were approximately $1.32 million. The fair value of the warrants upon issuance were $1.24
million, with the remaining $0.08 million being attributed to common stock. On September 29, 2020, the Company received proceeds of $565
thousand related to the exercise of warrants to purchase 50,000 shares of common stock and on March 9, 2022, the Company received proceeds
of $195 thousand related to the exercise of the remaining 50,000 warrants.
Pursuant
to the original warrant agreement, as a result of common stock issuances at various prices, the warrant exercise price was reduced from
its original $20.50 exercise price to the floor price of $3.92, which was the exercise price of the warrants when the remaining 50,000
warrants were exercised in March 2022.
Stock
Options
From
time to time, the Company may grant stock options under its incentive plan covering shares of common stock to employees of the Company.
Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the
option. These awards typically expire ten years from the grant date.
For
the three months ended March 31, 2022 and 2021, there was no compensation expense related to stock options. As of December 31, 2019,
all stock options had vested. No stock options were granted or exercised during the three months ended March 31, 2022 or 2021. Stock
options to purchase 750 shares expired during the three months ended March 31, 2022. No stock options expired during the three months
ended March 31, 2021. Presented below is information about stock options outstanding and exercisable as of March 31, 2022, and December
31, 2021:
SCHEDULE OF STOCK OPTIONS ACTIVITY
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
Shares | | |
Price | | |
Shares | | |
Price | |
| |
| | | |
| | | |
| | | |
| | |
Stock options outstanding and exercisable | |
| 30,285 | | |
$ | 60.11 | | |
| 31,035 | | |
$ | 62.79 | |
The
following table summarizes information for stock options outstanding and for stock options exercisable at March 31, 2022. All shares
and prices per share have been adjusted for a one share-for-ten shares reverse stock split that took effect on January 6, 2020:
SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE
Options Outstanding | | |
Options Exercisable | |
| | |
Exercise | | |
Weighted | | |
Remaining | | |
| | |
Weighted | |
Number of | | |
Price
Range | | |
Average
Exercise | | |
Contractual
Term
| | |
Number of | | |
Average
Exercise | |
Shares | | |
Low | | |
High | | |
Price | | |
(years) | | |
Shares | | |
Price | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| 16,500 | | |
$ | 7.20 | | |
$ | 11.60 | | |
$ | 10.00 | | |
| 5.5 | | |
| 16,500 | | |
$ | 10.00 | |
| 10,622 | | |
| 90.00 | | |
| 124.80 | | |
| 106.20 | | |
| 2.1 | | |
| 10,622 | | |
| 106.20 | |
| 2,163 | | |
| 139.20 | | |
| 139.20 | | |
| 139.20 | | |
| 0.3 | | |
| 2,163 | | |
| 139.20 | |
| 1,000 | | |
| 226.20 | | |
| 226.20 | | |
| 232.48 | | |
| 2.5 | | |
| 1,000 | | |
| 232.48 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| 30,285 | | |
$ | 7.20 | | |
$ | 226.20 | | |
$ | 60.11 | | |
| 3.8 | | |
| 30,285 | | |
$ | 60.11 | |
Restricted
Stock
The
Company grants restricted stock under its incentive plan covering shares of common stock to employees and directors of the Company. The
restricted stock awards are time-based awards and are amortized ratably over the requisite service period. Restricted stock vests ratably
on each anniversary following the grant date provided the grantee is employed on the vesting date. Restricted stock granted to employees,
when vested are net settled through the issuance of shares, net of the number of shares required to pay withholding taxes.
The
following table presents the changes in non-vested time-based restricted stock awards to all employees and directors for the three months
ended March 31, 2022:
SCHEDULE OF NON-VESTED TIME-BASED RESTRICTED STOCK AWARDS
| |
Shares | | |
Weighted-Avg. Grant Date Fair Value per Share | |
| |
| |
Non-vested restricted stock as of December 31, 2021 | |
| 174,000 | | |
$ | 4.75 | |
Granted | |
| 986,500 | | |
$ | 3.70 | |
Vested | |
| (373,500 | ) | |
$ | 4.02 | |
Non-vested as of March 31, 2022 | |
| 787,000 | | |
$ | 3.78 | |
For
the three months ended March 31, 2022 and 2021, the Company recognized $1.5 million and $79 thousand, respectively of stock compensation
expense related to restricted stock grants. Total compensation cost related to non-vested time-based awards and not yet recognized in
the Company’s condensed consolidated statements of operations as of March 31, 2022 was $2.6 million. This cost is expected to be
recognized over a weighted average period of one year.
10.
ASSET RETIREMENT OBLIGATIONS
The
Company has asset retirement obligations (“AROs”) associated with the future plugging and abandonment of proved properties.
Initially, the fair value of a liability for an ARO is recorded in the period in which the ARO is incurred with a corresponding increase
in the carrying amount of the related asset. The liability is accreted to its present value each period and the capitalized cost is depleted
over the life of the related asset. If the liability is settled for an amount other than the recorded amount, an adjustment to the full-cost
pool is recognized. The Company had no assets that are restricted for the purpose of settling AROs.
On
January 5, 2022, the Company closed on an acquisition of assets and recorded an additional $9.6 million of ARO related to the acquired
assets. See Note 2- Acquisitions.
In
the fair value calculation for the ARO there are numerous assumptions and judgments, including the ultimate retirement cost, inflation
factors, credit-adjusted risk-free discount rates, timing of retirement and changes in legal, regulatory, environmental, and political
environments. To the extent future revisions to assumptions and judgments impact the present value of the existing ARO, a corresponding
adjustment is made to the oil and natural gas property balance.
The
following is a reconciliation of the changes in the Company’s liabilities for asset retirement obligations as of March 31, 2022
and December 31, 2021:
SCHEDULE OF ASSET RETIREMENT OBLIGATIONS
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
(in thousands) | |
Balance, beginning of year | |
$ | 1,461 | | |
$ | 1,408 | |
Acquired | |
| 9,614 | | |
| 45 | |
Sold/Plugged | |
| - | | |
| (70 | ) |
Accretion | |
| 215 | | |
| 78 | |
Balance, end of period | |
$ | 11,290 | | |
$ | 1,461 | |
11.
INCOME TAXES
The Company’s tax provision or
benefit from income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for
discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date
adjustment to the provision. The Company’s effective tax rate was approximately 44.3%
and 0.0%
for the three months ended March 31, 2022 and 2021, respectively. The primary difference in the Company’s effective tax rate
and the statutory rate for the three months ended March 31, 2022 related to the movement in the valuation allowance against the
Company’s net deferred tax assets.
The Company’s income tax benefit for the
three months ended March 31, 2022 includes a discrete income tax benefit of $2.4 million related to the release of a portion of the Company’s
previously established valuation allowance to offset deferred tax liabilities arising from the January 5, 2022 transaction.
Deferred taxes are recognized for the expected
future tax consequences of temporary differences between the financial statement and tax basis of assets, liabilities, net operating
losses and tax credit carry-forwards. We review our deferred tax assets (“DTAs”) and valuation allowance on a quarterly basis.
As part of our review, we consider positive and negative evidence, including cumulative results in recent years. The January 5, 2022
transaction triggered an IRC Section 382 ownership change, and therefore placed additional limitations on the Company’s pre-transaction
NOL and other tax attributes. As such, the Company is projecting that as of December 31, 2022 it will not have sufficient DTAs available
to offset the expected future taxable income that will be generated by the realization of the Company’s deferred tax liabilities.
The DTA as of March 31, 2022 is expected to reverse during 2022.
The
Company recognizes, measures, and discloses uncertain tax positions whereby tax positions must meet a “more-likely-than-not”
threshold to be recognized. During the three months ended March 31, 2022 and 2021, no adjustments were recognized for uncertain tax positions.
12.
LOSS PER SHARE
Basic
net loss per common share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of common
shares outstanding for the respective period. Diluted net loss per common share is calculated by dividing adjusted net loss by the diluted
weighted average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive
securities for this calculation consist of stock options and warrants, which are measured using the treasury stock method, the conversion
feature of the Series A Preferred Stock prior to redemption, and unvested shares of restricted common stock. When the Company recognizes
a net loss, as was the case for the three months ended March 31, 2022 and 2021, all potentially dilutive shares are anti-dilutive and
are consequently excluded from the calculation of dilutive net loss per common share.
The
following table sets forth the calculation of basic and diluted net loss per share for the three months ended March 31, 2022 and 2021:
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE
| |
2022 | | |
2021 | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands except per share data) | |
Net loss applicable to common shareholders | |
$ | (3,384 | ) | |
$ | (162 | ) |
| |
| | | |
| | |
Basic weighted-average common shares outstanding | |
| 23,717 | | |
| 3,924 | |
Dilutive effect of potentially dilutive securities | |
| - | | |
| - | |
Diluted weighted-average common shares outstanding | |
| 23,717 | | |
| 3,924 | |
| |
| | | |
| | |
Basic net loss per share | |
$ | (0.14 | ) | |
$ | (0.04 | ) |
Diluted net loss per share | |
$ | (0.14 | ) | |
$ | (0.04 | ) |
For
the three months ended March 31, 2022 and 2021, potentially dilutive securities excluded from the calculation of weighted average shares
because they were anti-dilutive are as follows:
SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Stock options | |
| 30 | | |
| 31 | |
Unvested shares of restricted stock | |
| 787 | | |
| 139 | |
Warrants | |
| - | | |
| 50 | |
Total | |
| 817 | | |
| 220 | |
13.
FAIR VALUE MEASUREMENTS
The
Company’s fair value measurements are estimated pursuant to a fair value hierarchy that requires us to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The valuation hierarchy is based upon the transparency
of inputs to the valuation of an asset or liability as of the measurement date, giving highest priority to quoted prices in active markets
(Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in
different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety
determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement
in its entirety requires judgment, considering factors specific to the asset or liability, and may affect the valuation of the assets
and liabilities and their placement within the hierarchy level. The three levels of inputs that may be used to measure fair value are
defined as:
Level
1 - Quoted prices for identical assets and liabilities traded in active exchange markets.
Level
2 - Observable inputs other than Level 1 that are directly or indirectly observable for the asset or liability, including quoted prices
for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities inactive markets, or
other observable inputs that can be corroborated by observable market data.
Level
3 - Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models,
discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires
significant management judgment or estimation.
Recurring
Fair Value Measurements
Commodity
Derivative Instruments
We
measure the fair value of commodity derivative contracts using an income valuation technique based on the contract price of the underlying
positions, crude oil forward curves, discount rates, and Company or counterparty non-performance risk. The fixed-price swaps and collar
derivative contracts are included in Level 2.
SCHEDULE OF RECURRING MEASUREMENTS OF FAIR VALUE OF ASSETS AND LIABILITIES
| |
Quoted Prices in Active Markets for Identical Assets (Level 1) | | |
Significant Other Observable Inputs (Level 2) | | |
Significant Unobservable Inputs (Level 3) | | |
Total Fair Value | | |
Effect Of Netting | | |
Net Fair Value Presented in the Condensed Consolidated Balance Sheet | |
(in thousands) |
Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Current: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commodity derivatives | |
$ | - | | |
$ | 411 | | |
$ | - | | |
$ | 411 | | |
$ | (411 | ) | |
$ | - | |
Non-current: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commodity derivatives | |
$ | - | | |
$ | 930 | | |
$ | - | | |
$ | 930 | | |
$ | (930 | ) | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Current: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commodity derivatives | |
$ | - | | |
$ | (6,888 | ) | |
$ | - | | |
$ | (6,888 | ) | |
$ | 411 | | |
$ | (6,478 | ) |
Non-current: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commodity derivatives | |
$ | - | | |
$ | (2,796 | ) | |
$ | - | | |
$ | (2,796 | ) | |
$ | 930 | | |
$ | (1,867 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net derivative instruments | |
$ | - | | |
$ | (8,344 | ) | |
$ | - | | |
$ | (8,344 | ) | |
$ | - | | |
$ | (8,344 | ) |
Marketable
Equity Securities
We
measure the fair value of marketable equity securities based on quoted market prices obtained from independent pricing services. The
Company has an investment in the marketable equity securities of Anfield Energy (“Anfield”), which it acquired as consideration
for sales of certain mining operations. Anfield is traded in an active market under the trading symbol AEC:TSXV and has been classified
as Level 1.
SCHEDULE OF INVESTMENT IN THE MARKETABLE EQUITY SECURITIES
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Current assets: | |
| | | |
| | |
Marketable equity securities | |
| | | |
| | |
Number of shares owned | |
| 2,421,180 | | |
| 2,421,180 | |
Quoted market price | |
$ | 0.11217 | | |
$ | 0.07874 | |
| |
| | | |
| | |
Fair value of marketable equity securities | |
$ | 271,572 | | |
$ | 190,641 | |
Nonrecurring
Fair Value Measurements
Asset
Retirement Obligations
The
Company measures the fair value of asset retirement obligations as of the date a well is acquired or the date a well begins drilling
using a discounted cash flow method based on unobservable inputs in the market and therefore are designated as Level 3 within the valuation
hierarchy See Note 10- Asset Retirement Obligations.
Other
Assets and Liabilities
The
Company evaluates the fair value on a non-recurring basis of properties acquired in asset acquisitions. The fair value of the oil and
gas properties is determined based upon estimated future discounted cash flow, a Level 3 input, using estimated production which we reasonably
expect, and estimated prices adjusted for differentials. Unobservable inputs include estimated future oil and natural gas production,
prices, operating and development costs, and a discount rate of 10%, all Level 3 inputs within the fair value hierarchy.
The
carrying value of financial instruments included in current assets and current liabilities approximate fair value due to the short-term
nature of those instruments.
14.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
SCHEDULE
OF SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
| |
2022 | | |
2021 | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
(in thousands) | |
Cash paid for interest | |
$ | (36 | ) | |
$ | - | |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Change in capital expenditure accruals | |
$ | 166 | | |
$ | 108 | |
Change in accrual for acquisition costs | |
| (546 | ) | |
| - | |
Common stock issued for acquisition of properties | |
| 64,694 | | |
| - | |
Assumption of commodity derivative liability in acquisition of properties | |
| 3,152 | | |
| - | |
Assumption of debt in acquisition of properties | |
| 3,347 | | |
| - | |
Assumption of suspense accounts in acquisition of properties | |
| 1,276 | | |
| - | |
Addition of operating lease liability and right of use asset | |
| - | | |
| 82 | |
Asset retirement obligations | |
| 9,614 | | |
| 44 | |
Financing activities: | |
| | | |
| | |
Issuance of stock for conversion of related party secured note payable and accrued interest | |
| - | | |
| 438 | |
Issuance of stock for settlement of related party legal costs | |
| - | | |
| 406 | |
Financing of insurance premiums with note payable | |
$ | 588 | | |
$ | 223 | |
15.
SUBSEQUENT EVENTS
On
April 5, 2022, the Company sold the Wildhorse Waterflood Unit in Osage County, Oklahoma which it acquired on January 5, 2022. The effective
date of the sale was March 1, 2022. Proceeds from the sale of the properties were $1.4 million.
On
May 2, 2022, the Company paid a cash dividend of $0.0225 per share to shareholders of record on April 15, 2022. The total amount of the
dividend including fees was $578 thousand.
On
May 3, 2022, The Company acquired operated oil and gas producing properties in Liberty County, Texas, adjacent to its existing assets
in the area, for $1.0 million in an all-cash transaction. The effective date of the transaction is April 1, 2022. The assets include
approximately 1,022 acres, which are 100% held by production, a gas pipeline and associated infrastructure.