☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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PETROLIA ENERGY CORPORATION
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TEXAS
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86-1061005
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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710 N Post Oak, Suite 512
Houston, TX
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77024
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☒
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(Do not check if a smaller reporting company)
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PART I
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2
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3
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11
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13
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13
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13
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PART II
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14
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14
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16
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17
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19
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19
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19
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19
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20
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PART III
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21
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21
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26
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28
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30
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33
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PART IV
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34
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34
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·
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The sale prices of crude oil:
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·
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The amount of production from oil wells in which we have an interest;
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·
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Lease operating expenses;
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·
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International conflict or acts of terrorism;
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·
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General economic conditions; and
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·
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Other factors disclosed in this report.
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·
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“we”, “us”, “our company”, “our”, “the company” refer to Petrolia Energy Corporation, and its subsidiaries
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·
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“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
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·
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“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and “Securities Act” refers to the Securities Act of 1933, as amended.
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||||||||||||||||||||||||||
State
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Productive Wells
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Developed Acreage
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Undeveloped Acreage (1)
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|||||||||||||||||||||||
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Gross
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Net
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Gross
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Net
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Gross
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Net
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||||||||||||||||||||
Texas
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13
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13
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260
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260
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363
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363
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||||||||||||||||||||
Oklahoma
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26
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(2
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)
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26
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1,040
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1,040
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1,564
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1,564
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||||||||||||||||||
New Mexico
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12
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12
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500
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500
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4,364
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4,364
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(1)
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Undeveloped acreage includes leasehold interests on which wells have not been drilled or completed to the point that would permit the production of commercial quantities of natural gas and oil regardless of whether the leasehold interest is classified as containing proved undeveloped reserves.
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(2)
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Represents twenty six (26) wells that were worked-over and capable of producing oil. Eighteen (18) of those wells experienced a repairable mechanical failure after a week of production. Those eighteen (18) wells are excluded from our producing well totals in the overview description above. Note that there were other wells that were worked over that never produce oil and are excluded from all of these reported amounts.
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State
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Held by
Production |
Not Held by
Production |
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Texas
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623
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—
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||||||
Oklahoma
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2,604
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—
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New Mexico
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4,864
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—
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Average Sales Price
(per Bbls)
($)
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Average Production Cost
(per Bbls)
($)
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Oil Production
(Bbls)
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Texas
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2014
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86.98
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117.91
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8,096
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2015
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42.38
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49.97
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4,024
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2016
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34.49
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35.52
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3,401
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Oklahoma
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2014
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89.12
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117.82
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0
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2015
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45.84
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68.48
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155
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2016
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38.14
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81.47
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2,400
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New Mexico (1)
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2014
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86.30
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(1)
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173.57
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0
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2015
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43.04
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(1)
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117.44
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134
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2016
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29.10
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(1)
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186.25
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(2)
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842
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(1)
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The market price offered for our New Mexico oil is typically lower than with our other states. There are fewer sales points in New Mexico and comparatively, they are not located as close to our production facilities. These inefficiencies result in a lower relative price for oil sales.
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(2)
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The New Mexico field was being prepared for significant production during 2016 but due to permitting issues, the equivalent of only one well was allowed to produce. Consequently the number of barrels used to compute this metric was respectively lower which resulted in a higher than usual production cost per barrel in 2016.
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Oil(Bbls)
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Gas(Mcf)
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|||||||
Proved:
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||||||||
Developed
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1,206,010
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—
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Undeveloped
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1,021,230
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—
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Total
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2,227,240
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---
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·
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Bbl - refers to one stock tank barrel, or 42 U.S. gallons liquid volume, in reference to crude oil or other liquid hydrocarbons.
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·
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Mcf - refers to one thousand cubic feet.
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·
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A BOE (i.e., barrel of oil equivalent) combines Bbls of oil and Mcf of gas by converting each six Mcf of gas to one Bbl of oil.
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Future cash inflows
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$
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90,265,000
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Deductions (including estimated taxes)
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$
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(57,446,760
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)
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Future net cash flow
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$
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32,818,240
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Discounted future net cash flow
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$
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13,564,480
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·
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our actual or anticipated operating and financial performance and drilling locations, including reserves estimates;
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·
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quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and cash flows, or those of companies that are perceived to be similar to us;
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·
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changes in revenue, cash flows or earnings estimates or publication of reports by equity research analysts;
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·
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speculation in the press or investment community;
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·
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public reaction to our press releases, announcements and filings with the SEC;
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·
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sales of our common stock by us or other shareholders, or the perception that such sales may occur;
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·
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the limited amount of our freely tradable common stock available in the public marketplace;
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·
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general financial market conditions and oil and natural gas industry market conditions, including fluctuations in commodity prices;
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·
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the realization of any of the risk factors presented in this Annual Report;
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·
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the recruitment or departure of key personnel;
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·
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commencement of, or involvement in, litigation;
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·
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the prices of oil and natural gas;
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·
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the success of our exploration and development operations, and the marketing of any oil and natural gas we produce;
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·
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changes in market valuations of companies similar to ours; and
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·
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domestic and international economic, legal and regulatory factors unrelated to our performance.
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Quarter Ended
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High
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Low
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||||||
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March 31, 2015
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$
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0.17
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$
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0.06
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June 30, 2015
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$
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0.12
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$
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0.06
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September 30, 2015
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$
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0.11
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$
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0.06
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December 31, 2015
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$
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0.19
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$
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0.02
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Quarter Ended
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High
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Low
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||||||
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||||||||
March 31, 2016
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$
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0.08
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$
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0.04
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June 30, 2016
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$
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0.18
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$
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0.05
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September 30, 2016
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$
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0.18
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$
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0.02
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December 31, 2016
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$
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0.16
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$
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0.09
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(A)
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(B)
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(C)
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||||||||||
Plan Category
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Number of securities to issued upon exercise of outstanding warrants
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Weighted-average exercise price of outstanding warrants
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
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|||||||||
Equity compensation plans approved by shareholders (1)
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0
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N/A
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4,000,000
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|||||||||
Equity compensation plans not approved by shareholders (2)
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1,522,916
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$ 0.09 per share
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0
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|||||||||
Total
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1,522,916
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$ 0.09 per share
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4,000,000
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(1)
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The Company’s 2015 Stock Incentive Plan has included 4,000,000 shares in the Plan. At present, no shares have been issued from the Plan.
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(2)
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During 2016 only, 1,522,916 warrants were issued to Management and Directors as performance incentives and compensation for funds provided from investment and operations.
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Cash used in operations
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$
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(551,823
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)
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||||
Net Purchase of equipment
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(63,362
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)
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Net Proceeds from shareholder advances
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296,000
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|||
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Proceeds from issuance of common stock
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111,352
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Proceeds from Short Term Loans
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275,000
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Name
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Age
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Position
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Zel C. Khan
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42
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Chief Executive Officer, President & Board Member
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Paul Deputy
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57
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Chief Financial Officer
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Leo Womack
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73
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Chairman
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Lee Lytton
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72
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Director and Corporate Secretary
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Joel Oppenheim
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73
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Director
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Quinten Beasley
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42
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Director
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(1)
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any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
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(2)
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any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding (excluding traffic violations and minor offenses);
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(3)
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being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
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(4)
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being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law;
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(5)
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being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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(6)
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being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section (1a)(40) of the Commodity Exchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.
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Name
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Percent
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|||
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||||
Zel C. Khan
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90
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%
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Name and Principal Position
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Fiscal
Year |
Salary (1)
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Bonus (2)
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Stock
Awards (3) |
Option
Awards (4) |
All Other Compensation (5)
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Total
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|||||||||||||||||||
Zel Khan (Current Principal Executive Officer) (7)
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2016
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$
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194,000
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$
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—
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$
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—
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$
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18,757
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$
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—
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$
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212,757
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|||||||||||||
2015 |
$
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26,667
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$
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—
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$
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8,500
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$
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2,900
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$
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—
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$
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38,067
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||||||||||||||
Paul Deputy (Current Principal Financial and Accounting Officer) (8)
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2016
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$
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78,616
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$
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—
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$
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—
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$
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7,090
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$
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77,126
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$
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162,832
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|||||||||||||
David Baker (Former Principal Executive Officer) (6)
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2015
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$
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10,000
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$
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—
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$
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33,778
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$
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—
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$
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—
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$
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43,778
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(1)
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The dollar value of base salary (cash and non-cash) earned. Executive salaries in 2016 were accrued but not paid.
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(2)
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The dollar value of bonus (cash and non-cash earned.
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(3)
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The fair value of stock issued for services computed in accordance with ASC 718 on the date of grant
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(4)
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The fair value of options granted computed in accordance with ASC 718 in the date of grant.
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(5)
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All other compensation received that we could not properly report in any other column of the table.
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(6)
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Resigned as Chief Executive Officer effective February 28, 2015. One March 1, 2015, Mr. Zel C. Khan was appointed as President and Chief Executive Officer of the Company.
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(7)
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Appointed as President and Chief Executive Officer effective February 28, 2015. Mr. Khan’s signing bonus is recognized when it is earned. During 2016, $34,000 was earned and added to his accrued salary amount.
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(8)
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Appointed as Chief Financial Officer July 1, 2016. Mr. Deputy converted a significant portion of his salary to shares during 2016, thereby reducing his salary balance. The converted value is included in All Other Compensation.
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Name
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Fees Earned or Paid in Cash (1)
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Stock Awards (2)
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Option Awards (3)
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Non-Equity Incentive Plan Compensation
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Non-Qualified Deferred Compensation Earnings
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All Other Compensation
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Total ($)
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|||||||||||||||||||||
Leo Womack
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$
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48,000
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$
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—
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$
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57,522
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$
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—
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$
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—
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$
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—
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$
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105,522
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||||||||||||||
Lee H Lytton
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24,000
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—
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28,761
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—
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—
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—
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52,761
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|||||||||||||||||||||
Joel Oppenheim
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24,000
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—
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51,789
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—
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—
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—
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75,789
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|||||||||||||||||||||
Quinten Beasley (4)
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1,250
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—
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41,891
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—
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—
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133,591
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176,732
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(1)
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Fees earned due to retainers, meetings, committees and chairman services. Fees of $49,250 were paid for Director fees while $48,000 was paid for Chairman services. These fees were not paid in cash but were accrued.
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(2)
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The fair value of stock issued for services computed in accordance with ASC 718 on the date of grant.
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(3)
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The fair value of options granted computed in accordance with ASC 718 on the date of grant.
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Title of class
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Name and address of beneficial owner
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Amount of beneficial ownership (1)
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Percent of
class (2) |
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Executive Officers & Directors:
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||||||||||
Common
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Quinten Beasley
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29,991,166 shares
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(3
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)
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37.6
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%
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Common
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|
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Paul Deputy
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6,184,964 shares
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(4
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)
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|
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7.6
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%
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Common
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|
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Leo Womack
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4,703,000 shares
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(5
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)
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|
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5.8
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%
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Common
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|
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Joel Oppenheim
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3,005,000 shares
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(6
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)
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|
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3.7
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%
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Common
|
|
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Zel C Khan
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2,800,000 shares
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(7
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)
|
|
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3.5
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%
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Common
|
|
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Lee Lytton
|
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2,196,800 shares
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(8
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)
|
|
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2.7
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%
|
|
|
|
|
|
|
|
|
|
|
|
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Total of All Directors and Executive Officers:
|
|
48,881,264 shares
|
|
|
|
|
|
||||
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|
|
|
|
|
|
|
|
|
|
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More Than 5% Beneficial Owners:
|
|
|
|
|
|
|
|
|
|||
Jovian Petroleum Corporation
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(9)
|
|
|
|
25,297,136 shares
|
(10
|
)
|
|
|
26.2
|
%
|
Blue Sky New Mexico Inc
|
(11)
|
|
|
|
7,968,750 shares
|
(12
|
)
|
|
|
8.3
|
%
|
Rick Wilber
|
(13)
|
|
|
|
5,403,333 shares
|
(14
|
)
|
|
|
5.6
|
%
|
(1)
|
Under Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a beneficial owner of a se
c
urity includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares, and/or (ii) investment power, which includes the power to dispose or direct the disposition of shares. . Also under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.
|
(2)
|
Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 79,034,505 shares of common stock.
|
(3)
|
Includes 4,074,030 shares held by Mr. Beasley directly. Includes ownership of the securities held by Jovian Petroleum Corporation, which securities Mr. Beasley is deemed to beneficially own due to his position as President and CEO of Jovian (see footnotes 9 and 10). Includes 100,000 shares issuable upon exercise of warrants, which have an exercise price of $0.12 per share and expire on August 5, 2018. Includes warrants to purchase 500,000 shares of Company common stock at an exercise price of $0.06 per share, which expire on April 18, 2019. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 13, 2019. Includes warrants to purchase 100,000 shares of Company common stock at an exercise price of $0.12 per share, which expire on August 5, 2018.
|
(4)
|
Includes 4,262,048 shares held by Mr. Deputy. Includes 100,000 shares issuable upon exercise of warrants, which have an exercise price of $0.12 per share and expire on August 31, 2018. Includes 1,100,000 shares issuable upon exercise of warrants, which have an exercise price of $0.10 per share and expire on August 31, 2018. Includes 10,000 shares issuable upon exercise of warrants, which have an exercise price of $0.10 per share and expire on February 1, 2019. Includes 100,000 shares issuable upon exercise of warrants, which have an exercise price of $0.09 per share and expire on June 17, 2019. Includes 10,000 shares issuable upon exercise of warrants, which have an exercise price of $0.059 and expire on September 13, 2019. Includes 550,000 shares issuable upon exercise of warrants, which have an exercise price of $0.077 and expire on July 1, 2019. Includes 6,250 shares issuable upon exercise of warrants, which have an exercise price of $0.12 and expire on September 26, 2019. Includes 11,666 shares issuable upon exercise of warrants, which have an exercise price of $0.14 and expire on September 30, 2019. Includes 35,000 shares issuable upon exercise of warrants, which have an exercise price of $0.16 and expire on December 31, 2019.
|
(5)
|
Includes 2,196,667 shares held by the Leo B. Womack Family Trust, which Mr. Womack is deemed to beneficially own (the “Trust”). Includes 166,667 shares issuable upon the exercise of warrants, which have an exercise price of $0.75 per share and an expiration date of August 5, 2019, held by the Trust. Includes 300,000 shares issuable upon the exercise of warrants, which have an exercise price of $0.12 per share and an expiration date of August 5, 2018, held by the Trust. Includes 1,000,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, and have a term of three years from their vesting date. Includes 1,000,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, and have a term of three years from their vesting date. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.10 per share, which expire on February 1, 2019. Includes warrants to purchase 20,000 shares of Company common stock at an exercise price of $0.09 per share, which expire on August 10, 2019. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 13, 2019.
|
(6)
|
Includes 1,250,000 shares held by Joel Oppenheim. Includes 500,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, vest on January 1, 2016, and have a term of three years from their vesting date. Includes 500,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, vest on January 1, 2017, and have a term of three years from their vesting date. Includes warrants to purchase 100,000 shares of Company common stock at an exercise price of $0.75 per share, which expire on August 5, 2019. Includes warrants to purchase 300,000 shares of Company common stock at an exercise price of $0.12 per share, which expire on August 5, 2018. Includes warrants to purchase 200,000 shares of Company common stock at an exercise price of $0.10 per share, which expire on September 1, 2018. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.10 per share, which expire on September 1, 2018. Includes warrants to purchase 12,500 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 13, 2019. Includes warrants to purchase 6,250 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 13, 2019 Includes warrants to purchase 50,000 shares of Company common stock at an exercise price of $0.09 per share, which expire on June 20, 2019. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.09 per share, which expire on August 5, 2019. Includes warrants to purchase 55,000 shares of Company common stock at an exercise price of $0.09 per share, which expire on August 23, 2019. . Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 14, 2019. . Includes warrants to purchase 300,000 shares of Company common stock at an exercise price of $0.08 per share, which expire on August 18, 2019. Includes warrants to purchase 6,250 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 30, 2019.
|
(7)
|
Includes 1,800,000 shares held by Mr. Khan. Includes 800,000 shares issuable upon exercise of warrants, which have an exercise price of $0.10 per share and expire on August 31, 2018. Includes 40,000 shares issuable upon exercise of warrants, which have an exercise price of $0.20 per share and expire on December 31, 2018. Includes 40,000 shares issuable upon exercise of warrants, which have an exercise price of $0.20 per share and expire on March 31, 2019. Includes 40,000 shares issuable upon exercise of warrants, which have an exercise price of $0.20 per share and expire on June 30, 2019. Includes 40,000 shares issuable upon exercise of warrants, which have an exercise price of $0.20 per share and expire on September 30, 2019. Includes 40,000 shares issuable upon exercise of warrants, which have an exercise price of $0.20 per share and expire on December 31, 2019. Note that Mr. Khan has a 25% ownership interest in Jovian Petroleum Corporation.
|
(8)
|
Includes 610,000 shares held by Mr. Lytton. Includes 500,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, and have a term of three years from their vesting date.. Includes 500,000 shares issuable upon the exercise of options, which have an exercise price of $0.06 per share, and have a term of three years from their vesting date. Includes warrants to purchase 33,400 shares of Company common stock at an exercise price of $0.75 per share, which expire on August 5, 2019. Includes warrants to purchase 300,000 shares of Company common stock at an exercise price of $0.12 per share, which expire on August 5, 2018. Includes warrants to purchase 200,000 shares of Company common stock at an exercise price of $0.10 per share, which expire on September 1, 2018. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.10 per share, which expire on February 1, 2019. Includes warrants to purchase 10,000 shares of Company common stock at an exercise price of $0.06 per share, which expire on September 14, 2019.
|
(9)
|
Address: 710 N. Post Oak Rd., Suite 550, Houston, Texas 77024. Shares held by Jovian Petroleum Corporation are beneficially owned by Quinten Beasley, President and CEO.
|
(10)
|
Includes 25,197,136 shares held by Jovian Petroleum Corporation. Includes 100,000 shares issuable upon the exercise of warrants, which have an exercise price of $0.12 per share and an expiration date of August 5, 2018.
|
(11)
|
Address: 320 Gold Avenue SW, Suite 1000, Albuquerque, New Mexico 87102. The shares held by Blue Sky NM, Inc. are beneficially owned by Fulucai Productions Ltd. and Mohammad Fazil, its CEO and President.
|
(12)
|
Includes 10,686,805 shares issued in the purchase of the SUDS working interest by the Company. Includes 500,000 shares issued for the extension of the note payable to BSNM for the purchase of Twin Lakes.
|
(13)
|
Address: 10360 Kestrel Street, Plantation, Florida 33324.
|
(14)
|
Includes shares issuable upon conversion of $550,000 in convertible notes which are convertible into shares of the Company’s common stock at a conversion price of $0.30 per share. Also includes 1,570,000 shares issuable upon exercise of warrants to purchase shares of Company common stock at an exercise price of $0.80 per share, which expire on September 20, 2023 (570,000 warrants) and June 17, 2023 (1,000,000 warrants). Includes 500,000 shares issuable upon exercise of warrants to purchase shares of Company stock at an exercise price of $0.15 per share which expire December 31, 2022.
|
(a)
|
Leo B. Womack, the Chairman of the Board of Directors of the Company, $4,000 per month in consideration for his services on the Board of Directors, and to grant him an option to purchase 1 million shares of the Company’s common stock at an exercise price of $0.06 per share, which vests on January 1, 2016, and is exercisable for 36 months thereafter; and
|
(b)
|
Lee Lytton and Joel Oppenheim, members of the Board of Directors, each $2,000 per month in consideration for their service on the Board of Directors, and to grant each of them an option to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.06 per share, which vest on January 1, 2016, and are exercisable for 36 months thereafter (collectively with the options granted to Mr. Womack as described above, the “Director Options”);
|
(c)
|
Provided that the cash fees due to the directors as described above shall only be payable out of 10% of the positive cash flow (if any) of the Company as of any fiscal quarter (“Positive Cash Flow”), and any other fees due such directors shall accrue until such time as the Company has Positive Cash Flow.
|
|
Year Ended
December 31,
|
|||||||
|
2016
|
2015
|
||||||
|
||||||||
Audit Fees
|
$
|
66,500
|
$
|
34,000
|
||||
Audit-Related Fees
|
—
|
—
|
||||||
Tax Fees
|
2,500
|
2,500
|
||||||
All Other Fees
|
—
|
—
|
||||||
Total
|
$
|
69,000
|
$
|
36,500
|
Audited Financial Statements for Years Ended December 31, 2016 and 2015
|
|
|
|
|
|
|
F-1
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-6
|
|
|
F-7
|
(2)
|
Financial Statement Schedules
|
(3)
|
Exhibits required by Item 601 of Regulation S-K
|
Exhibit
Number |
Description
|
|
2.1
|
Purchase and Sale Agreement effective October 1, 2015, by and between SUDS Properties, LLC and the Company (1)
|
|
3.1
|
Original Colorado Articles of Incorporation (2)
|
|
3.2
|
Amended and Restated Colorado Articles of Incorporation (2)
|
|
3.3
|
Amendment to Colorado Articles of Incorporation (3)
|
|
3.4
|
Texas Certificate of Conversion Converting From Rockdale Resources Corporation (Colorado) to Petrolia Energy Corporation (Texas) filed with the Secretary of State of Texas on June 15, 2016 (4)
|
|
3.5
|
Certificate of Correction to Texas Certificate of Formation filed with the Secretary of State of Texas on August 24, 2016 (4)
|
|
3.6
|
Statement of Conversion as filed with the Secretary of State of Colorado on August 30, 2016 (4)
|
|
3.7
|
Bylaws of Petrolia Energy Corporation (Texas)
(4)
|
|
10.1***
|
Employment Agreement with Mr. Zel C. Khan dated September 23, 2015 (1)
|
|
10.2***
|
|
Form of Warrant Agreement for the deferral of Mr. Khan’s salary (1)
|
10.3
|
Memorandum of Agreement dated November 4, 2015, by and between Blue Sky NM, Inc. and the Company, relating to the 15% Net Working Interest in the Twin Lakes San Andres Unit (5)
|
|
10.4
|
$146,875 Promissory Note with Financial Assurance & Bonds dated November 4, 2015, owed by the Company to Blue Sky NM, Inc. (5)
|
|
10.5
|
Memorandum of Agreement dated November 4, 2015, by and between Blue Sky NM, Inc. and the Company, relating to the acquisition of a $1.3 million promissory note in connection with the Bankruptcy of Orbit Petroleum, Inc. (5)
|
|
10.6
|
$1.3 million Installment Promissory Note due from Canyon E&P Company dated September 24, 2010 (5)
|
|
10.7***
|
2015 Stock Incentive Plan (5)
|
|
10.8
|
Agreement for Share Exchange, dated January 29, 2016 and effective February 1, 2016 between the Company and Askarii Resources, LLC (6)
|
|
10.9***
|
Employment Agreement dated August 17, 2016, with Paul M. Deputy as Chief Financial Officer (7)
|
|
10.10***
|
Option Agreement with Paul M. Deputy dated August 17, 2016 (7)
|
|
10.11
|
Rick Wilber Note Extension Agreement dated June 30, 2016 (7)
|
|
10.12
|
Purchase and Sale Agreement effective September 1, 2016, by and between Whistler Ventures, LLC and Petrolia Energy Corporation, relating to the 25% Net Working Interest in the Twin Lakes San Andres Unit (8)
|
|
10.13
|
Assignment and Transfer of Interest effective September 1, 2016 between Petrolia Energy Corporation and Whistler Ventures LLC (8)
|
|
10.14
|
Purchase and Sale Agreement effective September 28, 2016, by and between Jovian Petroleum Corporation and Petrolia Energy Corporation, relating to the 50% Net Working Interest in the Slick Unit Dutcher Sands (9)
|
|
10.15
|
Assignment and Transfer of Interest (50%) effective September 28, 2016 between Petrolia Energy Corporation and Jovian Petroleum Corporation (9)
|
|
10.16
|
Share Exchange Agreement effective September 28, 2016, by and between Jovian Petroleum Corporation and Petrolia Energy Corporation, relating to the 40% Net Working Interest in the Slick Unit Dutcher Sands (9)
|
10.17
|
Promissory Note ($1M) effective September 28, 2016, by and between Jovian Petroleum Corporation and Petrolia Energy Corporation, relating to the 50% Net Working Interest in the Slick Unit Dutcher Sands (9)
|
|
10.18
|
Production Payment Note ($3M) effective September 28, 2016, by and between Jovian Petroleum Corporation and Petrolia Energy Corporation, relating to the 50% Net Working Interest in the Slick Unit Dutcher Sands (9)
|
|
10.19
|
Settlement Agreement effective February 12, 2017 between Petrolia Energy Corporation and Dead Aim Investments (10)
|
|
10.20
|
Quitclaim Deed effective February 12, 2017 by and between Dead Aim Investments and Petrolia Energy Corporation, relating to the 60% Net Working Interest in the Twin Lakes San Andres Unit (10)
|
|
14.1
|
Code of Ethical Business Conduct (11)
|
|
21.1
|
||
23.1*
|
||
31.1*
|
||
31.2*
|
||
32.1**
|
||
32.2**
|
||
99.1**
|
||
99.2
|
||
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
|
PETROLIA ENERGY CORPORATION
|
|
|
|
|
|
|
|
By:
|
/s/ Zel Khan
|
|
|
|
Zel Khan
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive)
|
|
Date: April 17, 2017 |
|
By:
|
/s/ Paul Deputy
|
|
|
|
Paul Deputy
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial/Accounting Officer)
|
|
Date: April 17, 2017 |
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Zel C Khan
|
|
Chief Executive Officer
|
|
|
Zel C. Khan
|
|
Principal Executive, and Director
|
|
April 17,
2017
|
|
|
|
|
|
/s/ Leo Womack
|
|
|
|
|
Leo Womack
|
|
Chairman
|
|
April 17,
2017
|
|
|
|
|
|
/s/ Lee Lytton
|
|
|
|
|
Lee Lytton
|
|
Director
|
|
April 17,
2017
|
/s/ Joel Oppenheim
|
|
|
||
Joel Oppenheim
|
|
Director
|
|
April 17,
2017
|
|
|
|
|
|
/s/ Quinten Beasley
|
|
|
|
|
Quinten Beasley
|
|
Director
|
|
April 17,
2017
|
|
December 31,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash
|
$
|
68,648
|
$
|
3,091
|
||||
Accounts receivable
|
199,003
|
48,633
|
||||||
Other current assets
|
31,192
|
31,049
|
||||||
Total current assets
|
298,843
|
82,773
|
||||||
|
||||||||
Property & equipment
|
||||||||
Oil and gas, on the basis of full cost accounting
|
||||||||
Evaluated properties
|
13,465,387
|
4,733,853
|
||||||
Furniture, equipment & software
|
200,416
|
108,234
|
||||||
Less accumulated depreciation
|
(1,119,708
|
)
|
(1,045,644
|
)
|
||||
Net property and equipment
|
12,546,095
|
3,796,443
|
||||||
|
||||||||
Other Assets
|
||||||||
Intangible assets
|
49,886
|
—
|
||||||
Note receivable
|
316,800
|
316,800
|
||||||
|
||||||||
Total Assets
|
$
|
13,211,624
|
$
|
4,196,016
|
||||
LIABILITIES & STOCKHOLDERS’ EQUITY
|
||||||||
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
352,241
|
$
|
169,564
|
||||
Accrued liabilities
|
494,983
|
133,398
|
||||||
Debt short term
|
275,000
|
|||||||
Convertible debt - related party (net of unamortized discount $0, $171,573)
|
550,000
|
378,427
|
||||||
Current maturities of installment notes payable
|
26,186
|
21,144
|
||||||
Note payable – related parties
|
1,287,980
|
192,875
|
||||||
Total current liabilities
|
2,986,390
|
895,408
|
||||||
|
||||||||
Asset retirement obligations
|
322,710
|
213,328
|
||||||
Installment note payable
|
---
|
6,652
|
||||||
Note payable to related party – long term
|
2,904,020
|
--
|
||||||
Total Liabilities
|
6,213,120
|
1,115,388
|
||||||
|
||||||||
Stockholders’ Equity
|
||||||||
Preferred stock, $.10 par value; 1,000,000 shares authorized; No shares issued & outstanding
|
—
|
—
|
||||||
Common stock, $.001 par value; 150,000,000 shares authorized; 79,034,505 and 42,839,958 shares issued and outstanding
|
79,034
|
42,840
|
||||||
Additional paid in capital
|
14,887,090
|
9,129,629
|
||||||
Accumulated deficit
|
(7,967,620
|
)
|
(6,091,841
|
)
|
||||
|
||||||||
Total Stockholders’ Equity
|
6,998,504
|
3,080,628
|
||||||
Total Liabilities and Stockholders’ Equity
|
$
|
13,211,624
|
$
|
4,196,016
|
|
Year ended
|
Year ended
|
||||||
|
December 31, 2016
|
December 31, 2015
|
||||||
|
||||||||
Oil and gas sales
|
$
|
123,246
|
$
|
187,976
|
||||
Equipment sales to related party
|
198,000
|
--
|
||||||
Total Revenue
|
321,246
|
187,976
|
||||||
Operating expenses
|
||||||||
Cost of equipment sold
|
33,330
|
--
|
||||||
Lease operating expense
|
304,199
|
250,303
|
||||||
General and administrative expenses
|
1,433,182
|
706,456
|
||||||
Depreciation, depletion and amortization
|
74,065
|
94,964
|
||||||
Asset retirement obligation accretion
|
38,998
|
11,856
|
||||||
Impairment of oil & gas properties
|
--
|
668,073
|
||||||
Total Operating Expense
|
1,883,774
|
1,731,652
|
||||||
Loss from Operations
|
(1,562,528
|
)
|
(1,543,676
|
)
|
||||
Interest (expense)
|
(359,239
|
)
|
(241,778
|
)
|
||||
Other income (expense)
|
60,324
|
38,719
|
||||||
Loss on warrants issued for PORRI
|
(14,336
|
)
|
---
|
|||||
Loss on conversion of debt
|
---
|
(109,879
|
)
|
|||||
Total other income (expense)
|
(313,251
|
)
|
(312,938
|
)
|
||||
Net loss from continuing operations before taxes
|
(1,875,779
|
)
|
(1,856,614
|
)
|
||||
Income tax provision (benefit)
|
—
|
—
|
||||||
|
||||||||
Net Loss
|
$
|
(1,875,779
|
)
|
$
|
(1,856,614
|
)
|
||
|
||||||||
Loss per share
|
||||||||
(Basic and fully diluted)
|
$
|
(0.03
|
)
|
$
|
(0.07
|
)
|
||
|
||||||||
Weighted average number of common shares outstanding, basic and diluted
|
54,541,922
|
24,875,600
|
Year Ended
December 31,
2016 |
Year Ended
December 31,
2015 |
|||||||
Cash Flows from Operating Activities
|
||||||||
Net Loss
|
$
|
(1,875,779
|
)
|
$
|
(1,856,614
|
)
|
||
Adjustment to reconcile net loss to net cash Used in operating activities:
|
||||||||
Depreciation and amortization
|
74,065
|
94,964
|
||||||
Accretion of debt discount
|
171,573
|
152,980
|
||||||
Finance fee for extension on note payable
|
79,223
|
37,500
|
||||||
Impairment of oil & gas properties
|
---
|
668,073
|
||||||
Loss on conversion of debt
|
109,879
|
|||||||
Cost of warrants issued for PORRI
|
14,336
|
---
|
||||||
Loss on disposal of assets
|
---
|
497
|
||||||
Debt Issuance costs
|
38,622
|
---
|
||||||
Asset retirement obligation accretion
|
38,998
|
11,856
|
||||||
Stock-based compensation expense-employees
|
150,790
|
185,395
|
||||||
Stock-based compensation expense-consultants and directors
|
209,125
|
--
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable
|
(150,370
|
)
|
(22,457
|
)
|
||||
Inventory
|
33,330
|
---
|
||||||
Other assets
|
(143
|
)
|
9,752
|
|||||
Accounts payable
|
302,821
|
70,139
|
||||||
Accrued liabilities
|
161,586
|
81,707
|
||||||
Deferred salaries
|
200,000
|
40,000
|
||||||
Net cash used in operating activities
|
(551,823
|
)
|
(416,329
|
)
|
||||
|
||||||||
Cash Flows from Investing Activities
|
||||||||
Cash acquired from investment in Askarii
|
114
|
---
|
||||||
Proceeds from sale of property and equipment
|
30,000
|
4,029
|
||||||
Purchase of fixed assets
|
(93,476
|
)
|
(19,854
|
)
|
||||
Cash used in investing activities
|
(63,362
|
)
|
(15,825
|
)
|
||||
|
||||||||
Cash Flows from Financing Activities
|
||||||||
Proceeds from shareholder advances
|
388,000
|
134,000
|
||||||
Proceeds from issuance of common stock
|
111,352
|
302,000
|
||||||
Payments of shareholder advances
|
(92,000
|
)
|
(8,000
|
)
|
||||
Payments on notes payable
|
(1,610
|
)
|
(17,443
|
)
|
||||
Proceeds from short term loans
|
275,000
|
---
|
||||||
Cash provided by financing activities
|
680,742
|
410,557
|
||||||
|
||||||||
Net change in cash and cash equivalents
|
65,557
|
(21,597
|
)
|
|||||
|
||||||||
Cash and cash equivalents
|
||||||||
Beginning of period
|
3,091
|
24,688
|
||||||
|
||||||||
End of period
|
$
|
68,648
|
$
|
3,091
|
|
Year Ended
December 31,
2016 |
Year Ended
December 31,
2015 |
||||||
SUPPLEMENTAL DISCLOSURES
|
||||||||
Interest paid
|
$
|
33,088
|
$
|
5,660
|
||||
Income taxes paid
|
—
|
—
|
||||||
NON-CASH INVESTING AND FINANCIAL DISCLOSURES
|
||||||||
Settlement of accrued accounts payable through share issuance
|
120,146
|
—
|
||||||
Initial recognition of asset retirement obligations
|
70,384
|
26,201
|
||||||
Change in estimated cash flows from asset retirement obligation
|
---
|
75,096
|
||||||
Fair value of stock issued for oil properties
|
4,773,186
|
719,903
|
||||||
Fair value of stock issued for extinguishment of debt
|
146,875
|
316,800
|
||||||
Shares issued in payment of shareholder advance
|
150,000
|
130,000
|
||||||
Note payable for oil & gas properties
|
$
|
4,000,000
|
$
|
---
|
|
Additional
|
Stockholders’
|
||||||||||||||||||
|
Common Stock
|
Paid-In
|
Accumulated
|
Equity
|
||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
(Deficit)
|
|||||||||||||||
Balance at December 31, 2014
|
19,353,152
|
$
|
19,353
|
$
|
7,351,640
|
$
|
(4,235,227
|
)
|
$
|
3,135,766
|
||||||||||
Shares issued for services
|
1,100,000
|
1,100
|
52,178
|
—
|
53,278
|
|||||||||||||||
Stock based compensation - directors
|
—
|
—
|
132,117
|
—
|
132,117
|
|||||||||||||||
Repurchase and cancellation of common shares
|
(400,000
|
)
|
(400
|
)
|
400
|
—
|
—
|
|||||||||||||
Shares issued related to acquisitions
|
10,586,806
|
10,587
|
709,316
|
—
|
719,903
|
|||||||||||||||
Shares issued for note receivable
|
6,000,000
|
6,000
|
310,800
|
—
|
316,800
|
|||||||||||||||
Shares issued for note extension
|
500,000
|
500
|
37,000
|
—
|
37,500
|
|||||||||||||||
Shares issued for cash
|
4,100,000
|
4,100
|
297,900
|
—
|
302,000
|
|||||||||||||||
Shares issued for conversion of shareholder advances
|
1,600,000
|
1,600
|
238,278
|
—
|
239,878
|
|||||||||||||||
Net Loss
|
—
|
—
|
—
|
(1,856,614
|
)
|
(1,856,614
|
)
|
|||||||||||||
Balance at December 31, 2015
|
42,839,958
|
$
|
42,840
|
$
|
9,129,629
|
$
|
(6,091,841
|
)
|
$
|
3,080,628
|
||||||||||
Shares issued for settlement of payables
|
1,581,098
|
1,581
|
118,565
|
—
|
120,146
|
|||||||||||||||
Stock based compensation - directors
|
---
|
---
|
209,125
|
—
|
209,125
|
|||||||||||||||
Stock based compensation – employees
|
800,000
|
800
|
149,990
|
—
|
150,790
|
|||||||||||||||
Shares issued for issuance of common stock for cash
|
1,625,000
|
1,625
|
109,727
|
—
|
111,352
|
|||||||||||||||
Shares issued related to acquisitions
|
28,808,985
|
28,809
|
4,744,377
|
—
|
4,773,186
|
|||||||||||||||
Warrants issued for note extension
|
---
|
---
|
79,223
|
—
|
79,223
|
|||||||||||||||
Warrants issued for loans
|
---
|
---
|
38,622
|
—
|
38,622
|
|||||||||||||||
Shares issued for conversion of shareholder advances
|
1,910,714
|
1,910
|
148,090
|
150,000
|
||||||||||||||||
Warrants issued for PORRI equity offering
|
---
|
---
|
14,336
|
14,336
|
||||||||||||||||
Shares issued for extinguishment of debt
|
1,468,750
|
1,469
|
145,406
|
---
|
146,875
|
|||||||||||||||
Net Loss
|
(1,875,779
|
)
|
(1,875,779
|
)
|
||||||||||||||||
Balance at December 31, 2016
|
79,034,505
|
$
|
79,034
|
$
|
14,887,090
|
$
|
(7,967,620
|
)
|
$
|
6,998,504
|
Shareholder Advances (Related Party Only)
|
||||
Amount
|
||||
Balance at December 31, 2015
|
$
|
46,000
|
||
Additions
|
||||
Rig Loan (1)
|
60,000
|
|||
Bridge loan – Working Capital (2)
|
230,000
|
|||
Advance (3)
|
98,000
|
|||
Total Additions
|
388,000
|
|||
Payments
|
||||
Debt Conversion to Shares (4)
|
150,000
|
|||
Cash (5)
|
92,000
|
|||
Total Payments
|
242,000
|
|||
Balance at December 31, 2016
|
$
|
192,000
|
(1)
|
Represents funds that were provided to purchase a pulling rig for maintenance work on the Company’s wells
|
(2)
|
Funds that were provided as pre-bridge working capital loans. These loans earn interest at 10% and are due in 60 days from issuance.
|
(3)
|
Funds that were provided by related parties as shareholder advances.
|
(4)
|
Shares were issued to extinguish outstanding liabilities of the Company. These liabilities could be outstanding shareholder advances, pre-bridge working capital loans or service related accounts payable.
|
(5)
|
Funds that were paid in cash by the Company to various related parties to reimburse for funds that were previously loaned as a shareholder advances.
|
Fiscal year ending:
|
||||
2017
|
$
|
2,139,166
|
||
2018
|
922,608
|
|||
2019
|
1,121,267
|
|||
2020
|
860,145
|
|||
Total
|
$
|
5,043,186
|
|
Warrants
|
Weighted Average Exercise Price
|
Aggregate intrinsic value
|
Weighted average remaining contractual life (years)
|
||||||||||||
Outstanding at year ended December 31, 2014
|
4,170,111
|
$
|
0.77
|
$
|
—
|
6.1
|
||||||||||
Granted
|
7,740,000
|
0.10
|
—
|
2.6
|
||||||||||||
Exercised
|
—
|
—
|
—
|
|||||||||||||
Expired
|
—
|
—
|
—
|
|||||||||||||
Outstanding at year ended December 31, 2015
|
11,910,111
|
0.33
|
—
|
3.5
|
||||||||||||
Granted
|
5,740,416
|
0.09
|
—
|
2.6
|
||||||||||||
Exercised
|
(825,000
|
)
|
—
|
—
|
||||||||||||
Expired
|
—
|
—
|
—
|
|||||||||||||
Outstanding at year ended December 31, 2016
|
16,825,527
|
$
|
0.25
|
$
|
—
|
3.2
|
Year Ended
December 31,
|
||||||||
2016
|
2015
|
|||||||
Warrants Granted
|
||||||||
Board of Director Service
|
2,500,000
|
2,000,000
|
||||||
PORRI
|
150,000
|
|||||||
Deferred Salary – CEO, CFO
|
206,666
|
40,000
|
||||||
Providing Bond Related Collateral
|
31,250
|
|||||||
Pre-bridge Loans
|
290,000
|
|||||||
Short-term Debt
|
100,000
|
|||||||
Advisory Board
|
262,500
|
|||||||
Deferred loan penalty
|
10,000
|
|||||||
Consulting Agreements
|
340,000
|
|||||||
Rick Wilber Loan
|
500,000
|
|||||||
Signing Bonus – CEO, CFO
|
550,000
|
|||||||
Private Placement Memo (Sept 2015)
|
800,000
|
3,500,000
|
||||||
Private Placement Memo (May 2015)
|
2,200,000
|
|||||||
Total
|
5,740,416
|
7,740,000
|
December 31, 2016
Petrolia Combined
|
December 31, 2015
Petrolia Combined
|
|||||||
Oil and Gas Sales
|
361,991
|
328,301
|
||||||
Net Loss
|
(1,960,188
|
)
|
(1,989,642
|
)
|
||||
Loss per share
|
(0.03
|
)
|
(0.04
|
)
|
|
December 31, 2016
|
|||
Inflation rate (avg.)
|
2.1
|
%
|
||
Estimated asset life
|
23 years
|
Asset retirement obligations at December 31, 2014
|
$
|
100,175
|
||
|
||||
Obligations assumed in acquisitions
|
26,201
|
|||
Additional retirement obligations incurred
|
---
|
|||
Change in estimate
|
75,096
|
|||
Accretion expense
|
11,856
|
|||
Settlements
|
—
|
|||
|
||||
Asset retirement obligations at December 31, 2015
|
$
|
213,328
|
||
|
||||
Obligations assumed in acquisition
|
70,384
|
|||
Additional retirement obligations incurred
|
---
|
|||
Change in estimate
|
---
|
|||
Accretion expense
|
38,998
|
|||
Settlements
|
—
|
|||
|
||||
Asset retirement obligations at December 31, 2016
|
$
|
322,710
|
|
Fiscal Year
Ended December 31, 2016 |
Fiscal Year
Ended December 31, 2015 |
||||||
|
||||||||
Income tax expense computed at statutory rates
|
$
|
(656,523
|
)
|
$
|
(649,815
|
)
|
||
Non-deductible items
|
219,438
|
66,313
|
||||||
Change in valuation allowance
|
437,085
|
583,502
|
||||||
|
||||||||
Total
|
$
|
—
|
$
|
—
|
|
December 31, 2015
|
|||||||||||
|
Gross Values
|
Tax Effect
|
||||||||||
Deferred tax assets
|
||||||||||||
Book impairment
|
$
|
668,073
|
$
|
$
|
233,826
|
|||||||
Net operating loss carryforwards
|
5,911,319
|
2,068,962
|
||||||||||
Asset retirement obligation
|
—
|
—
|
||||||||||
Other
|
—
|
—
|
||||||||||
Total deferred tax assets
|
6,579,392
|
2,302,788
|
||||||||||
|
||||||||||||
Deferred tax liabilities
|
||||||||||||
O&G Properties
|
(2,211,892
|
)
|
(774,162
|
)
|
||||||||
Other
|
—
|
—
|
||||||||||
Total deferred tax liabilities
|
(2,211,892
|
)
|
(774,162
|
)
|
||||||||
Less: Valuation allowance
|
(4,367,500
|
)
|
(1,528,626
|
)
|
||||||||
Net deferred tax assets (liabilities)
|
$
|
—
|
$
|
$
|
—
|
|
December 31, 2016
|
|||||||
|
Gross Values
|
Tax Effect
|
||||||
Deferred tax assets
|
$ | |||||||
Book Impairment
|
$
|
668,073
|
$
|
233,825
|
||||
Net operating loss carryforwards
|
7,120,879
|
2,492,308
|
||||||
Asset retirement obligation
|
—
|
—
|
||||||
Other
|
—
|
—
|
||||||
Total deferred tax assets
|
7,788,952
|
2,726,133
|
||||||
|
||||||||
Deferred tax liabilities
|
||||||||
O&G Properties
|
(6,496,717
|
)
|
(2,273,851
|
)
|
||||
Other
|
—
|
—
|
||||||
Total deferred tax liabilities
|
(6,496,717
|
)
|
(2,273,851
|
)
|
||||
Less: Valuation allowance
|
(1,292,235
|
)
|
(452,282
|
)
|
||||
Net deferred tax assets (liabilities)
|
$
|
—
|
$
|
—
|
|
Fiscal
Year Ended December 31, 2016 |
Fiscal
Year Ended December 31, 2015 |
||||||
Property acquisitions
|
$
|
8,723,186
|
$
|
769,916
|
||||
Unevaluated
|
—
|
—
|
||||||
Evaluated
|
—
|
—
|
||||||
Exploration
|
—
|
—
|
||||||
Development
|
—
|
---
|
||||||
Total Costs Incurred
|
$
|
8,723,186
|
$
|
769,916
|
December 31, 2016
|
December 31, 2015
|
|||||||
Capitalized costs
|
||||||||
Unevaluated properties
|
$
|
—
|
$
|
—
|
||||
Evaluated properties
|
13,092,012
|
4,586,992
|
||||||
13,092,012
|
4,586,992
|
|||||||
Less: Accumulated DD&A
|
(1,042,545
|
)
|
(996,863
|
)
|
||||
Net capitalized costs
|
$
|
12,049,467
|
$
|
3,590,129
|
|
Oil
(Bbls) |
|||
|
||||
December 31, 2014
|
301,900
|
|||
Revisions of prior estimates
|
(99,207
|
)
|
||
Purchases of reserves in place
|
536,140
|
|||
Production
|
(4,313
|
)
|
||
December 31, 2015
|
734,520
|
|||
Revisions of prior estimates
|
(58,297
|
)
|
||
Purchases of reserves in place
|
1,557,660
|
|||
Production
|
(6,643
|
)
|
||
December 31, 2016
|
2,227,240
|
December 31, 2016
|
December31, 2015
|
|||||||
Estimated Quantities of Proved Developed Reserves – Oil (Bbls)
|
1,206,010
|
287,780
|
||||||
Estimated Quantities of Proved Undeveloped Reserves – Oil (Bbls)
|
1,021,230
|
446,740
|
Proved developed producing and non-producing reserve
|
Oil (bbls)
|
|||
December 31, 2015
|
287,780
|
|||
Acquired Reserves
|
989,403
|
|||
Revision of prior estimates
|
(64,530
|
)
|
||
Production
|
(6,643
|
)
|
||
December 31, 2016
|
1,206,010
|
Proved undeveloped reserves
|
Oil (bbls)
|
|||
December 31, 2015
|
446,740
|
|||
Acquired Reserves
|
568,257
|
|||
Revisions to prior estimates
|
6,233
|
|||
December 31, 2016
|
1,021,230
|
December 31, 2016
|
December 31, 2015
|
|||||||
Future cash inflows
|
$
|
90,265,000
|
$
|
35,738,970
|
||||
Future production costs
|
(47,050,770
|
)
|
(17,472,870
|
)
|
||||
Future development costs
|
(10,396,000
|
)
|
(4,955,500
|
)
|
||||
Future income taxes
|
—
|
—
|
||||||
Future net cash flows
|
32,818,230
|
13,310,600
|
||||||
Discount of future net cash flows at 10% per annum
|
(19,253,750
|
)
|
(7,090,100
|
)
|
||||
Standardized measure of discounted future net cash flows
|
$
|
13,564,480
|
$
|
6,220,500
|
Changes in standardized measure of discounted future cash flows
|
||||||||
12/31/16
|
12/31/15
|
|||||||
Beginning of year
|
$
|
6,220,500
|
$
|
6,303,880
|
||||
Sales and transfers of oil & gas produced, net of production costs
|
175,048
|
40,633
|
||||||
Net changes in prices and production costs
|
(1,917,506
|
)
|
(3,346,089
|
)
|
||||
Changes in estimated future development costs
|
(673,960
|
)
|
360,790
|
|||||
Acquisitions of minerals in place, net of production costs
|
9,941,241
|
4,851,420
|
||||||
Revision of previous estimates
|
(544,877
|
)
|
(1,477,073
|
)
|
||||
Change in discount
|
817,235
|
630,388
|
||||||
Change in production rate or other
|
(453,201
|
)
|
(1,143,449
|
)
|
||||
End of year
|
$
|
13,564,480
|
$
|
6,220,500
|
December 31, 2016
|
December 31, 2015
|
|||||||
Revenues
|
||||||||
Oil & Gas
|
$
|
123,246
|
$
|
187,976
|
||||
Oil field services
|
198,000
|
---
|
||||||
Total Revenues
|
321,246
|
187,976
|
||||||
Net Income
|
||||||||
Oil & Gas
|
(2,052,004
|
)
|
(1,856,614
|
)
|
||||
Oil field services
|
176,225
|
---
|
||||||
Total Net Income
|
(1,875,779
|
)
|
(1,856,614
|
)
|
||||
Assets
|
||||||||
Oil & Gas
|
13,026,082
|
4,196,016
|
||||||
Oil field services
|
185,542
|
---
|
||||||
Total Assets
|
13,211,624
|
4,196,016
|
||||||
Accounts Receivable
|
||||||||
Oil & Gas
|
199,003
|
48,633
|
||||||
Oil field services
|
---
|
---
|
||||||
Total Accounts Receivable
|
$
|
199,003
|
$
|
48,633
|
|
MKM ENGINEERING
State of Texas Registration No. F-009733
|
|
|
|
|
|
|
|
By:
|
/s/Michele Mudrone
|
|
|
Name:
|
Michele Mudrone, P.E.
|
|
|
Title:
|
Petroleum Engineer
|
|
Date:
|
February 16, 2017
|
|
|
April 17,
2017
|
|
|
|
/s/ Zel C. Khan
|
|
Zel C. Khan, Chief Executive Officer (Principal Executive and Financial/Accounting Officer)
|
|
|
|
April 17,
2017
|
|
/s/ Paul. Deputy
|
|
Paul Deputy, Chief Financial Officer (Principal Financial/Accounting Officer)
|
|
|
April 17,
2017
|
|
|
|
/s/ Zel C. Khan
|
|
Zel C. Khan, Chief Executive Officer (Principal Executive)
|
|
|
|
|
|
|
April 17,
2017
|
|
|
|
|
|
/s/ Paul Deputy
|
|
|
Paul Deputy, Chief Financial Officer (Principal Financial/Accounting Officer)
|
Net Reserves
|
Present Worth
|
|||||||||||||||
as of January 1, 2017
|
of Future
|
|||||||||||||||
Hydrocarbon
|
Natural
|
|
Net Income
|
|||||||||||||
Liquids
|
Gas
|
Future Net
|
Discounted @
|
|||||||||||||
Reserve Category
|
(Bbl)
|
(Mcf)
|
Income, $
|
10%/Annum, $
|
||||||||||||
Proved Developed Producing
|
445,470
|
0
|
12,023,410
|
5,000,640
|
||||||||||||
Proved Developed Behind Pipe
|
128,570
|
0
|
3,145,260
|
2,160,280
|
||||||||||||
Proved Developed Non Producing
|
631,970
|
0
|
7,812,410
|
2,604,480
|
||||||||||||
Proved Undeveloped
|
1,021,230
|
0
|
9,837,160
|
3,799,080
|
||||||||||||
Total Proved
|
2,227,240
|
0
|
32,818,240
|
13,564,480
|
||||||||||||
Probable Behind Pipe
|
127,520
|
0
|
1,823,510
|
511,270
|
||||||||||||
Total Probable
|
127,520
|
0
|
1,823,510
|
511,270
|
||||||||||||
Total Proved + Probable
|
2,354,760
|
0
|
34,641,750
|
14,075,750
|
NYMEX PRICES
|
||||||||
Base Price
|
Base Price
|
|||||||
Dates
|
$/Bbl
|
$/MMBtu
|
||||||
2017
|
42.75
|
2.49
|
||||||
2018
|
42.75
|
2.49
|
||||||
2019
|
42.75
|
2.49
|
||||||
2020
|
42.75
|
2.49
|
||||||
2021
|
42.75
|
2.49
|
||||||
2022
|
42.75
|
2.49
|
||||||
2023
|
42.75
|
2.49
|
||||||
2024
|
42.75
|
2.49
|
||||||
2025
|
42.75
|
2.49
|
||||||
2026
|
42.75
|
2.49
|
||||||
Thereafter
|
42.75
|
2.49
|
1.
|
The maturity date of both Notes is and shall be extended to June 30, 2017.
|
2. |
The Company shall make the interest payments on the consolidated principal balance of
the Notes on December 31,2016 and then at the rate of 10% per annum on March 31, 2017 and from March 31, 2017 to June 31, 2017 at the rate of 12% per annum.
|
3. |
If at any time prior to June 30, 2017, the Company pays to Holder the principal amount of $500,000.00 on the Notes (together with all accrued interest), the Company shall automatically receive a discount of $50,000.00 on the principal amount, thereby automatically reducing the principal amount of the Notes from $550,000.00 to $500,000.00.
|
4. |
Upon execution of this Second Amendment, the Company will issue new warrants to the
Holder providing for the purchase of 500,000 shares of common stock at $.15 cents per share at any time for the following five (5) years from date of issuance of the new warrants.
|
5. |
If the Company fails to pay to the Holder the principal amount of $550,000.00 prior to June 30, 2017, this amendment shall be null and void, and the original terms of the original Notes shall be reinstated, meaning both Notes will be past due and bear interest at the default rate provided in the Notes. Additionally, the Holder shall be entitled to receive new warrants equal to and under the same terms and provisions as provided for in the original Notes.
|
6. |
This Amendment embodies the entire agreement between the Company and the Holder with respect to the amendment of the Notes. In the event of any conflict or inconsistency between the provisions of the Notes and this Amendment, the provisions of this Amendment shall control and govern.
|
7. |
Except as specifically modified and amended herein, all of the terms, provisions, requirements and specifications contained in the Notes are and shall remain in full force and effect.
|
8. |
Except as otherwise expressly provided herein, the parties do not intend to, and the
execution of this Amendment shall not, in any manner whatsoever impair the Notes, the purpose of this Amendment being simply to amend and ratify the Agreement, as hereby amended and ratified, and to confirm and carry forward the Agreement, as hereby amended, in full force and effect.
|
9. |
This Amendment may be executed in counterparts, but all counterparts shall constitute
one and the same document. Electronic or facsimile signatures on this Amendment shall be accepted and deemed valid for all purposes as if an original signed signature.
|
Name: | ||
/s/Paul Deputy
|
12/27/16
|
|
Paul Deputy
|
Date
|
|
Petrolia Energy CFO
|
||
/s/Rick Wilber
|
12/17/16
|
|
Rick Wilber
|
Date
|