Trio Petroleum Corp
For the period ended Jul 31, 2024. Filed Sep 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2024 · Filed Sep 12, 2024
TPET$1.52+1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-04-30; filed 2024-06-14.
0001493152-24-023861
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-07-31; filed 2024-09-12.
0001493152-24-036044
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 119 current paragraphs.
64 unchanged; 33 reworded; 22 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
We have had revenue-generating operations since the McCool Ranch Oil Field was restarted on February 22, 2024, and recognized our first revenues in our fiscal quarter ended April 30, 2024, and received the proceeds from these operations in June 2024.
Current report
We were formed to initially acquire an approximate 82.75% working interest (which was subsequently increased to an approximate 85.775% working interest) from Trio Petroleum LLC (“Trio LLC”) in the large, approximately 9,300-acre South Salinas Project that is located in Monterey County, California, and subsequently partner with certain members of Trio LLC’s management team to develop and operate those assets. We hold an approximate 68.62% interest after the application of royalties (“net revenue interest”) in the South Salinas Project. Trio LLC holds an approximate 3.8% working interest in the South Salinas Project. We and Trio LLC are separate and distinct companies.
Current report
California is a significant part of our geographic focus and we recently acquired a 22% working interest in the McCool Ranch Oil Field (the “McCool Ranch Oil Field”, “McCool Ranch Field” or “McCool Ranch”) in Monterey County, California. However, our interests extend beyond California and we recently acquired an interest in the Asphalt Ridge Project in Uintah County, Utah; we may acquire additional assets both inside and outside of California and Utah.
Current report
South Salinas Project
Current report
McCool Ranch Oil Field
Current report
On October 16, 2023, we entered into a Purchase and Sale Agreement with Trio LLC (the “McCool Ranch Purchase Agreement”) pertaining to the McCool Ranch Oil Field. Pursuant to this agreement, effective October 1, 2023, we acquired an approximate 22% working interest in and to certain oil and gas assets at the McCool Ranch Field, which is located in Monterey, County, California, just seven miles from our flagship South Salinas Project. The assets are situated in what is known as the “Hangman Hollow Area” of the McCool Ranch Field. The acquired property is a relatively new oil field (discovered in 2011) developed with six oil wells, one water-disposal well, a steam generator, boiler, three 5,000 barrel tanks, a 250-barrel test tank, a water softener, two freshwater tanks, two soft water tanks, in-field steam pipelines, oil pipelines and other facilities. The property is fully and properly permitted for oil and gas production, cyclic-steam injection and water disposal. We are acquiring the working interest at McCool Ranch primarily through work commitment expenditures, which are being allocated to restart production at the field and establish cash flow for us, with upside potential given the numerous undrilled infill and development well locations. Oil production was restarted on February 22, 2024.
Current report
McCool Ranch operations have been successfully restarted, including the restarting of oil production at the HH-1, 35X and 58X wells. The HH-1 well has a short horizontal completion in the Lombardi Oil Sand, whereas the 35X and 58X wells are both vertical wells with similar oil columns in the Lombardi Oil Sand and with similar subsurface borehole completions. Upon restart, the HH-1 well at McCool Ranch was initially producing about 47 barrels of oil per day (“BOPD”) and it is currently producing about 20 BOPD. The 35X well produced some oil but it and the 58X well are temporarily idle and awaiting heat treatment, which we expect to accomplish during the calendar quarter ending September 30, 2024. The oil production at the HH-1 well is currently “cold” (i.e., without steam).
Current report
The aforementioned initial three wells at McCool Ranch were each restarted and produced “cold” (i.e. without steam injection), which allows for lower operating costs, with expectation that each would be produced cold as long as profitable. Our expectation was and is that each well will probably transition at some point from cold production to cyclic-steam operations, also known as “huff and puff,” which is expected to significantly increase production. The wells at McCool Ranch historically have responded favorably when cyclic-steam operations have been applied.
Current report
We expect to restart the last two wells in the restart program (the HH-3 and HH-4 wells) in the third calendar quarter of 2024. The HH-3 and HH-4 wells will have horizontal completion similar to that of the HH-1 well; all water produced from these wells will be disposed in the on-site water disposal well.
Current report
The HH-1 well was initially produced cold for about 380 days in 2012-2013, during which time peak production was approximately 156 BOPD, average production was approximately 35 BOPD and cumulative production was 13,147 barrels of oil (“BO”). The 58X well was initially produced cold for about 230 days in 2011-2013, during which time peak production was approximately 41 BOPD, average production was approximately 13 BOPD and cumulative production was 2,918 BO.
Current report
KLS Petroleum Consulting LLC (“KLSP”), a third-party, independent engineering firm, recommends that McCool Ranch be developed with horizontal wells; management estimates that our property can probably accommodate approximately 22 additional such horizontal wells and we may commence a drilling program in the third or fourth calendar quarter of 2024. We expect to add the reserve value of the McCool Ranch Field to our reserve report after a brief period of observation and review of the oil production that was restarted on February 22, 2024.
Current report
Asphalt Ridge Option Agreement and the Lafayette Energy Leasehold Acquisition and Development Option Agreement
Current report
On November 10, 2023, we entered into a Leasehold Acquisition and Development Option Agreement (the “Asphalt Ridge Option Agreement”) with Heavy Sweet Oil LLC (“HSO”); pursuant to the Asphalt Ridge Option Agreement, we acquired an option to purchase up to a 20% working interest in certain leases at a long-recognized, major oil accumulation in northeastern Utah, in Uintah County, southwest of the city of Vernal, totaling 960 acres. HSO holds the right to such leases below 500 ft depth from surface and we acquired the option to participate in HSO’s initial 960-acre drilling and production program (the “HSO Program”) on such Asphalt Ridge Leases. We also hold the right of first refusal to participate with up to a 20% working interest on the greater approximate 30,000-acre leasehold at terms offered to other third parties. On December 29, 2023, we and HSO entered into an Amendment to Leasehold Acquisition and Development Agreement (the “Amendment to the Asphalt Ridge Option Agreement”), pursuant to which we amended the Asphalt Ridge Option Agreement to provide that, within three (3) business days of the effective date of the Amendment to the Asphalt Ridge Option Agreement, we would fund $200,000 of the $2,000,000 total purchase price in advance of HSO satisfying the closing conditions set forth in the Asphalt Ridge Option Agreement, in exchange for receiving an immediate 2% interest in the Asphalt Ridge Leases, which advanced funds would be used solely for the building of roads and related infrastructure in furtherance of the development plan. In January 2024, we funded an additional $25,000 resulting in a 2.25% working interest in the Asphalt Ridge Leases.
Current report
The Asphalt Ridge Project, according to J. Wallace Gwynn of Energy News, is estimated to be the largest measured tar sand resource in the United States and is unique given its low wax and negligible sulfur content, which is expected to make the oil produced very desirable for many industries, including shipping.
Current report
Asphalt Ridge is a prominent, northwest-southeast trending topographic feature (i.e., a dipping slope called a hog’s back or cuesta) that crops-out along the northeast flank of the Uinta Basin. The outcrop is comprised largely of Tertiary and Cretaceous age sandstones that are locally highly saturated with heavy oil and/or tar. The oil-saturated sandstones extend into the shallow subsurface of the Uinta Basin to the southwest, which is the site of the Asphalt Ridge Development Project, and where the sandstones are estimated in various independent studies to contain billions of barrels of oil-in-place. The project leasehold comprises over 30,000 acres and trends northwest-southeast, along the trend of Asphalt Ridge, over a distance of about 20 miles.
Current report
The area has been underdeveloped for decades due, in large part, to lease ownership issues and the definition of heavy oil falling under mining regulations in the State of Utah. These factors created conflict between surface rights and subsurface mineral rights and were obstacles to developing the asset using proven advanced cyclic-steam production techniques. Necessary permits have now been secured that should allow drilling to commence by our operating partner. HSO hopes to continue to work with the State of Utah to supplement prior receipt of permits with other state incentives, including working with the State on an arrangement requiring only an 8% state royalty in connection with this project.
Current report
An early development phase contemplates the development of 240 acres with an estimated 119 wells in the Northwest Asphalt Ridge Area. The plan is to develop the 240 acres using advanced cyclic-steam production techniques, including initial CO2 injection. This phase contemplates seventeen 7-spot hexagonal well patterns on 2 ½ acre spacing (a 7-spot has a central steam/CO2 injection well that is surrounded by six producing oil wells). Upgrades have been made to existing roads and well pads as part of this early development phase.
Current report
Two oil-saturated Cretaceous sandstones are targeted for development at Asphalt Ridge: the Rimrock Sandstone and the underlying Asphalt Ridge Sandstone. We expect to add the reserve value, if any, of the Asphalt Ridge Project to the Company’s reserve report after a brief period of observation and review of the oil development operations that commenced in the third calendar quarter of 2024.
Current report
Carbon Capture and Storage Project as part of Company’s South Salinas Project
Current report
We are committed to attempting to reduce our own carbon footprint and, where possible, that of others. For this reason, we are taking initial steps to launch a Carbon Capture and Storage (“CCS”) project as part of the South Salinas Project, which appears ideal for such a task. The South Salinas Project covers a vast area and is uniquely situated at a deep depocenter where there are thick geologic zones (e.g., Vaqueros Sand, up to approximately 500’ thick) about two miles deep, which could accommodate and permanently store vast volumes of CO2. Four existing deep wells in the South Salinas Project (i.e., the HV 1-35, BM 2-2, BM 1-2-RD1 and HV 3-6 wells) are excellent candidates for use as CO2 injection wells. A CCS project in the future may help reduce our carbon footprint by sequestering and permanently storing CO2 deep underground at one or more deep wells, away from drinking water sources. Furthermore, three of the aforementioned deep wells are directly located on three idle oil and gas pipelines that could be used to import CO2 to our CCS Project. We have opened discussions with third parties who wish to reduce their own greenhouse gas emissions and who may be interested in participating in our CCS project. We believe it is feasible to develop the major oil and gas resources of the South Salinas Project and to concurrently establish a substantial CCS project and potentially a CO2 storage hub and/or Direct Air Capture (DAC) hub.
Current report
We have until October 10, 2024 to pay HSO an additional $1,775,000 to exercise an option for the remaining 17.75% working interest in the initial 960 acres of the Asphalt Ridge Leases; if this option is not exercised on or before such date, we will forfeit any further right to acquire this additional 17.75% working interest in the initial 960 acres. As of July 31, 2024, we have paid a total of $225,000 to HSO in costs related to infrastructure and have a 2.25% interest in the leases; such costs are capitalized costs and are reflected in the balance of the oil and gas property as of July 31, 2024.
Current report
General and administrative expenses increased for the three months ended July 31, 2024 by approximately $0.1 million as compared to the prior period, which is a nominal amount.
Removed paragraphs (4)
Previous report
As of April 30, 2024, we currently have four actively producing oil wells - three at McCool Ranch Field and one in the South Salinas Project at Presidents Oil Field.
Previous report
Given adequate funding, we expect the McCool Ranch Field to return to production the last two wells in the restart program, the HH-3 and HH-4 wells, in the third quarter.
Previous report
Given adequate funding, we expect the McCool Ranch Field to return production the last two wells in the restart program, the HH-3 and HH-4 wells, in the third quarter.
Previous report
General and administrative expenses increased for the six months ended April 30, 2024 by approximately $1.4 million as compared to the prior period due to increases in NYSE American filing fees of $180,000, insurance expenses of $150,000, marketing fees of $235,000, directors fees of $110,000, increased legal fees of approximately $470,000 and increased salary expenses of approximately $490,000, offset by a decrease in consulting fees of $240,000.
Reworded paragraphs (33)
Previous wording
The Company was incorporated in the state of Delaware on July 19, 2021. The Company is an oil and gas exploration and development company headquartered in Bakersfield, California, with its principal offices located at 5401 Business Park South, Suite 115, Bakersfield, CA, 93309. The Company has operations in Monterey County, California and Uintah County, Utah. The Company owns an 85.75% working interest in the South Salinas Project in Monterey County, a producing oil and gas property it acquired from Trio LLC. The Company also owns an approximate 22% working interest in the McCool Ranch Oil Field in Monterey County, a producing oil property it acquired from Trio LLC. The Company owns a 2.25% working interest and has an option to acquire up to a 20% working interest in a 960-acre drilling and production program in the approximately 40,000-acre Asphalt Ridge formation in Uintah County, Utah. The Company has revenue-generating operations at the McCool Ranch Oil Field and at the South Salinas Project as of the date of this filing.
Current wording
We are a California-based oil and gas exploration and development company headquartered in Bakersfield, California, with our principal executive offices located at 5401 Business Park South, Suite 115, Bakersfield, California 93309, with operations in Monterey County, California, and Uintah County, Utah.
Previous wording
During March 2024, the HV-3A well at Presidents Field was returned to production at an initial rate of 30 barrels of oil per day. The Company believes that production at HV-3A can be significantly increased over current and previous levels, for example by adding up to 650 feet of additional perforations in the currently-producing oil zone, opening deeper behind-pipe oil zones some of which are already selectively perforated, acidizing the well for borehole cleanup, and other methods and operations under consideration. The Company will produce and monitor the HV-3A well as currently completed and when appropriate will take steps to increase production.
Current wording
Efforts to obtain conditional use permits and a full field development permit for the South Salinas Project from Monterey County are progressing; in the meantime, we recently determined that existing permits allow production testing to continue at the HV-3A discovery well at Presidents Field and, consequently, testing operations were restarted at this well on March 22, 2024. The well has been producing with a generally favorable oil-water ratio, and we believe that production at the HV-3A well can be significantly increased over current and previous levels by adding up to 650 feet of additional perforations in the currently producing oil zone, opening deeper behind-pipe oil zones some of which are already selectively perforated, acidizing the well for borehole cleanup, and other methods and operations under consideration. We expect to takes such steps towards increased production in the third or fourth calendar quarter of 2024, with first oil sales from the HV-3A well in the third calendar quarter of 2024.
Previous wording
During February 2024, the HH-1 well at McCool Ranch Field was returned to production at an initial rate of 47 barrels of oil per day, and the 35X and 58X wells at this field were subsequently also returned to production. All three of these wells were producing as of April 30, 2024. The Company in April 2024, made its first sale and shipment of approximately 1,925 barrels of oil, primarily produced from the HH-1 well. The Company is taking steps to optimize the oil production from the three wells, including possibly employing cyclic steam. The Company also plans to return to production the last two wells in the restart program, the HH-3 and HH-4 wells, in subsequent months.
Current wording
During February 2024, the HH-1 well at McCool Ranch Field was returned to production at an initial rate of 47 barrels of oil per day, and the 35X and 58X wells at this field were subsequently also returned to production. All three of these wells were producing as of April 30, 2024. In April 2024, we made our first sale and shipment of approximately 1,925 barrels of oil, primarily produced from the HH-1 well. We are taking steps to optimize the oil production from the three wells, including possibly employing cyclic steam. We also plan to return to production the last two wells in the restart program during the third calendar quarter of 2024.
Previous wording
During the quarterly period ended April 30, 2024, we announced the commencement of drilling activities on the Asphalt Ridge project in Uintah County, UT. The first well, HSO 8-4 (API# 4304757202), was spud on May 10, 2024 and drilled to a total depth of 1,020 feet. The well found 100 feet of Rimrock Sandstone tar-sand pay zone with good oil saturation and good porosity. Thirty feet of the Rimrock was cored. A small, representative piece of Rimrock core was placed in water and brought to boiling point, and within a few minutes the sand disaggregated and the bitumen became liquid, mobile-oil, floating on top of the water – this simple laboratory test indicates that the bitumen becomes mobile-oil at relatively low temperatures and supports our contention that oil extraction using subsurface thermal-recovery methods may be very successful. The operator of the project is waiting on the arrival of a down-hole heater for the HSO 8-4 well and expects to receive the heater and begin production approximately on June 15, 2024. A second well, the HSO 2-4 (API# 430475201), was spud on May 19, 2024 and drilled to a total depth of 1,390 feet. The well drilled through both the Rimrock tar-sand, which had a thickness of 135 feet, and the Asphalt Ridge tar-sand, which had a thickness of 59 feet. The Company installed a down-hole heater and began heating the Rimrock tar-sand zone on June 3, 2024. A third well is planned to be drilled in June 2024. The project targets a heavy-oil tar sand field that is expected to be densely developed at scale, with as low as 2.5 acre spacing for future wells. Through existing working interests and option agreements, we have the ability to take up to a 20% working interest in this project.
Current wording
During the quarterly period ended April 30, 2024, we announced the commencement of drilling activities at Asphalt Ridge. The first well, HSO 8-4 (API# 4304757202), was spud on May 10, 2024 and drilled to a total depth of 1,020 feet. The well found 100 feet of Rimrock Sandstone tar-sand pay zone with good oil saturation and good porosity and thirty feet of the Rimrock was cored. A small, representative piece of Rimrock core was placed in water and brought to boiling point, and within a few minutes the sand disaggregated and the bitumen became liquid, mobile-oil, floating on top of the water - this simple laboratory test indicates that the bitumen becomes mobile-oil at relatively low temperatures and supports our contention that oil extraction using subsurface thermal-recovery methods may be very successful. A second well, the HSO 2-4 (API# 430475201), was spud on May 19, 2024 and drilled to a total depth of 1,390 feet. The well drilled through both the Rimrock tar-sand, which had a thickness of 135 feet, and the Asphalt Ridge tar-sand, which had a thickness of 59 feet. A downhole-heater has been installed in the 2-4 well and we expect production to begin in the third calendar quarter of 2024. A third well is planned to be drilled in the third calendar quarter of 2024.
Previous wording
We have only begun to generate revenues in the current quarter and have incurred significant losses since inception. As of April 30, 2024, we have an accumulated deficit of $16,194,865 and a working capital deficit of $1,213,963, and for the three and six months ended April 30, 2024, net losses of $4,045,935 and $5,747,983, respectively. To date, we have been funding operations through proceeds from the issuance of common stock, financing through certain investors, the consummation of its IPO in April 2023, and convertible note financing under two tranches in October 2023 and December 2023, pursuant to which we raised total gross proceeds of $2,371,500. Additionally, we received funds in the amount of $125,000 from an unsecured promissory note from our CEO, as well as gross proceeds of $184,500 from a promissory note with an investor in March 2024 and gross proceeds of $720,000 from convertible debt financing with two investors in April 2024.
Current wording
We have only begun to generate revenues in the current year and have incurred significant losses since inception. As of July 31, 2024, we have an accumulated deficit of $18,373,436 and a working capital deficit of $2,970,428, and for the three and nine months ended July 31, 2024, net losses of $2,178,571 and $7,926,554, respectively. To date, we have been funding operations through proceeds from the issuance of common stock, financing through certain investors, the consummation of our IPO in April 2023, and convertible note financing under two tranches in October 2023 and December 2023, pursuant to which we raised total gross proceeds of $2,371,500. Additionally, we received funds in the amount of $125,000 from an unsecured promissory note from our CEO, gross proceeds of $184,500 from a promissory note with an investor in March 2024, gross proceeds of $720,000 from convertible debt financing with two investors in April 2024, gross proceeds of $720,000 from convertible debt financing with two investors in June 2024, as well as additional financing secured after the end of the period in August 2024 for gross proceeds in the aggregate amount of $359,000 from two unsecured promissory notes.
Previous wording
The accompanying condensed financial statements have been prepared assuming we will continue as a going concern. As we have only begun to generate revenues, we need to raise a significant amount of capital to pay for our development, exploration, drilling and operating costs. While we raised capital in April 2023 with our IPO, in October 2023, December 2023 and April 2024 with convertible debt financing, and in March 2024 with promissory notes, we expect to require additional funding in the future and there is no assurance that we will be able to raise additional needed capital or that such capital will be available under favorable terms or at all. We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. We may never achieve profitable operations or generate significant revenues.
Current wording
The accompanying condensed financial statements have been prepared assuming we will continue as a going concern. As we have only begun to generate revenues, we need to raise a significant amount of capital to pay for our development, exploration, drilling and operating costs. While we raised capital in April 2023 with our IPO, in October 2023, December 2023, April 2024 and June 2024 with convertible debt financing, and in March 2024 and August 2024 with promissory notes, we expect to require additional funding in the future and there is no assurance that we will be able to raise additional needed capital or that such capital will be available under favorable terms or at all. We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. We may never achieve profitable operations or generate significant revenues.
Previous wording
In October 2023, we entered into an agreement (“McCool Ranch Purchase Agreement”) with Trio LLC for purchase of a 21.918315% working interest in the McCool Ranch Oil Field located in Monterey County near our flagship South Salinas Project; we initially recorded a payment of $100,000 upon execution of the McCool Ranch Purchase Agreement, at which time Trio LLC began refurbishment operations with respect to the San Ardo WD-1 water disposal well (the “WD-1”) to determine if it was capable of reasonably serving the produced water needs for the assets. With refurbishment successfully accomplished, we are obligated to pay an additional $400,000 per the McCool Ranch Purchase Agreement; we have paid approximately $215,000 during the quarter for restarting production operations on the assets and has recorded a liability of $185,000 to Trio LLC as of April 30, 2024.
Current wording
In October 2023, we entered into an agreement (“McCool Ranch Purchase Agreement”) with Trio LLC for the purchase of a 21.918315% working interest in the McCool Ranch Oil Field located in Monterey County near our flagship South Salinas Project; we initially recorded a payment of $100,000 upon the execution of the McCool Ranch Purchase Agreement, at which time Trio LLC began refurbishment operations with respect to the San Ardo WD-1 water disposal well (the “WD-1”) to determine if it was capable of reasonably serving the produced water needs for the assets. With refurbishment successfully accomplished, we were obligated to pay an additional $400,000 per the McCool Ranch Purchase Agreement; to date, operations have been successfully restarted at three wells, and we expect to restart the last two wells in the restart program during the calendar quarter ending September 30, 2024. As of July 31, 2024, we have paid approximately $270,000 during the year for restarting production operations on the assets and have a liability recorded of approximately $130,000 to Trio LLC as of July 31, 2024.
Previous wording
On December 29, 2023, we entered into an amendment to the ARLO Agreement, whereby we funded $200,000 of the $500,000 payable by us to HSO at the Initial Closing, in advance of HSO satisfying certain required items for a 2% interest in the leases; such funds are to be used by HSO solely for the building of roads and related infrastructure in furtherance of the development of the leases. As of April 30, 2024, we have paid a total of $225,000 to HSO in costs related to infrastructure; such costs are capitalized costs and are reflected in the balance of the oil and gas property as of April 30, 2024.
Current wording
On December 29, 2023, we entered into an amendment to the ARLO Agreement, whereby we funded $200,000 of the $500,000 payable by us to HSO at the Initial Closing, in advance of HSO satisfying certain required items for a 2% interest in the leases; such funds are to be used by HSO solely for the building of roads and related infrastructure in furtherance of the development of the leases. During the quarterly period ended April 30, 2024, we announced the commencement of drilling activities at Asphalt Ridge and two wells (the HSO 8-4 and the HSO 2-4) were spud during May 2024; a third well is planned to be drilled in the third calendar quarter of 2024.
Previous wording
Revenues, net increased for the three months ended April 30, 2024 by approximately $0.1 million as compared to the prior period, which had no revenue; we made our first sale and shipment of approximately 2,100 barrels of oil, primarily produced from the HH-1 well.
Current wording
Revenues, net increased for the three months ended July 31, 2024 by approximately $0.1 million as compared to the prior period, which had no revenue; we sold and shipped approximately 1,000 barrels of oil, primarily produced from the HH-1 well.
Previous wording
Under the successful efforts method of accounting for crude oil and natural gas properties, exploration expenses consist primarily of exploratory geological and geophysical costs, delay rentals and exploratory overhead, and are expensed as incurred. Exploration expenses increased by approximately $15,000 as compared to the prior year period due to an increase in exploratory, geological, and geophysical costs incurred during the quarter.
Current wording
Under the successful efforts method of accounting for crude oil and natural gas properties, exploration expenses consist primarily of exploratory geological and geophysical costs, delay rentals and exploratory overhead, and are expensed as incurred. Exploration expenses decreased by approximately $190,000 as compared to the prior year period due to a decrease in exploratory, geological, and geophysical costs incurred during the quarter.
Previous wording
We record stock-based compensation expenses for costs associated with options and restricted shares granted in connection with the Plan, as well as for shares issued as payment for services. Stock-based compensation expense increased by approximately $0.8 million for the six months ended April 30, 2024 as compared to the prior period due to the amortization of approximately $900,000 in expense for restricted shares that had not yet been granted during the same period in the prior year.
Current wording
We record stock-based compensation expenses for costs associated with options and restricted shares granted in connection with the Plan, as well as for shares issued as payment for services. Stock-based compensation expense decreased by approximately $0.5 million for the three months ended July 31, 2024 as compared to the prior period due to the amortization of approximately $260,000 in expense for consulting services and $300,000 in expense for shares that vested in the prior period; such expenses was not present in the current period.
Previous wording
For the three months ended April 30, 2024, Other expenses, net increased by approximately $0.9 million compared to the prior year period. The increase is primarily due to increased non-cash interest expense of $0.9 million due to the payoff of the first and second tranches of the convertible debt (and associated debt discounts) during the quarter.
Current wording
For the three months ended July 31, 2024, Other expenses, net increased by approximately $0.7 million compared to the prior year period. The increase is primarily due to increased non-cash interest expense of $0.7 million, which is recognized as debt discounts on financings are amortized; there were no such financings in the prior period.
Previous wording
Six Months Ended April 30, 2024 compared to the Six Months Ended April 30, 2023 (unaudited)
Current wording
Nine Months Ended July 31, 2024 compared to the Nine Months Ended July 31, 2023 (unaudited)
Previous wording
Our financial results for the six months ended April 30, 2024 and 2023 are summarized as follows:
Current wording
Our financial results for the nine months ended July 31, 2024 and 2023 are summarized as follows:
Previous wording
Revenues, net increased for the six months ended April 30, 2024 by approximately $0.1 million as compared to the prior period, which had no revenue; we made our first sale and shipment of approximately 2,100 barrels of oil, primarily produced from the HH-1 well.
Current wording
Revenues, net increased for the nine months ended July 31, 2024 by approximately $0.1 million as compared to the prior period, which had no revenue; we sold and shipped approximately 3,100 barrels of oil, primarily produced from the HH-1 well.
Previous wording
Under the successful efforts method of accounting for crude oil and natural gas properties, exploration expenses consist primarily of exploratory geological and geophysical costs, delay rentals and exploratory overhead, and are expensed as incurred. Exploration expenses increased by approximately $0.1 million as compared to the prior year period due to an increase in exploratory, geological, and geophysical costs incurred during the period.
Current wording
Under the successful efforts method of accounting for crude oil and natural gas properties, exploration expenses consist primarily of exploratory geological and geophysical costs, delay rentals and exploratory overhead, and are expensed as incurred. Exploration expenses decreased by approximately $0.1 million as compared to the prior year period due to a decrease in exploratory, geological, and geophysical costs incurred during the period.
Previous wording
General and administrative expenses increased for the three months ended April 30, 2024 by approximately $0.6 million as compared to the prior period due to increases in NYSE American filing fees of $100,000, insurance expenses of $60,000, marketing fees of $180,000, increased legal fees of approximately $220,000 and increased salary expenses of approximately $250,000, offset by a decrease in consulting fees of $270,000.
Current wording
General and administrative expenses increased for the nine months ended July 31, 2024 by approximately $1.5 million as compared to the prior period due to increases social media marketing expenses of $300,000, increased legal fees of approximately $700,000 and increased salary expenses of approximately $500,000.
Previous wording
We record stock-based compensation expenses for costs associated with options and restricted shares granted in connection with the Plan, as well as for shares issued as payment for services. Stock-based compensation expense increased by approximately $0.4 million for the three months ended April 30, 2024 as compared to the prior period due to the amortization of approximately $500,000 in expense for restricted shares that had not yet been granted during the same period in the prior year.
Current wording
We record stock-based compensation expenses for costs associated with options and restricted shares granted in connection with the Plan, as well as for shares issued as payment for services. Stock-based compensation expense increased by approximately $0.3 million for the nine months ended July 31, 2024 due to the amortization of 1,425,000 options issued in September 2023; such had not yet been granted during the same period in the prior year.
Previous wording
We have an Asset Retirement Obligation (“ARO”) recorded that is associated with its oil and natural gas properties in the SSP; the fair value of the ARO was recorded as a liability and is accreted over time until the date the ARO is to be paid. For the six months ended April 30, 2024, accretion expenses remained consistent with that of the prior year period.
Current wording
We have an Asset Retirement Obligation (“ARO”) recorded that is associated with its oil and natural gas properties in the SSP; the fair value of the ARO was recorded as a liability and is accreted over time until the date the ARO is to be paid. For the nine months ended July 31, 2024, accretion expenses remained consistent with that of the prior year period.
Previous wording
For the six months ended April 30, 2024, Other expenses, net increased by approximately $0.5 million compared to the prior year period. The increase is due to increased non-cash interest expenses over the period of $0.4 million due to increased debt discounts on debt in the current period versus the same period in the prior year.
Current wording
For the nine months ended July 31, 2024, Other expenses, net increased by approximately $1.1 million compared to the prior year period. The increase is due to increased non-cash interest expense of $1.1 million, which is recognized as debt discounts on financings are amortized; there were less financings in the prior period.
Previous wording
Current assets decreased because of i) a decrease to the cash account of approximately $1.3 million due to increased payroll expenses and additional cash outlays for capital expenditures for the oil and gas properties, offset by an increase in prepaid assets of approximately $0.5 million. The balance of the current liabilities has remained fairly constant.
Current wording
Current assets decreased because of i) a decrease to the cash account of approximately $1.3 million due to increased payroll expenses and additional cash outlays for capital expenditures for the oil and gas properties, offset by an increase in prepaid assets of approximately $0.2 million. Current liabilities increased because of i) an increase in accounts payable of approximately $0.8 million, as well as increases in other current liabilities and notes payable – related parties of approximately $0.6 million and $0.3 million, respectively.
Previous wording
Our cash flows for the six months ended April 30, 2024, in comparison to our cash flows for the six months ended April 30, 2023, can be summarized as follows:
Current wording
Our cash flows for the nine months ended July 31, 2024, in comparison to our cash flows for the nine months ended July 31, 2023, can be summarized as follows:
Previous wording
For the six months ended April 30, 2024 and 2023, cash provided by/(used in) operating activities was $682,525 and ($801,266), respectively. The cash provided by operations for the six months ended April 30, 2024 was primarily attributable to our net loss of $5,747,983, adjusted for non-cash expenses in the aggregate amount of $6,086,949, as well as $343,559 of net cash provided to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the six months ended April 30, 2023 was primarily attributable to our net loss of $3,054,238, adjusted for non-cash expenses in the aggregate amount of $1,695,067, as well as $557,905 of net cash used to fund changes in the levels of operating assets and liabilities.
Current wording
For the nine months ended July 31, 2024 and 2023, cash provided by/(used in) operating activities was $118,642 and ($2,542,360), respectively. The cash provided by operations for the nine months ended July 31, 2024 was primarily attributable to our net loss of $7,926,554, adjusted for non-cash expenses in the aggregate amount of $6,853,494, as well as $1,191,702 of net cash provided to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the nine months ended July 31, 2023 was primarily attributable to our net loss of $5,224,839, adjusted for non-cash expenses in the aggregate amount of $2,481,724, as well as $200,755 of net cash provided to fund changes in the levels of operating assets and liabilities.
Previous wording
For the six months ended April 30, 2024 and 2023, cash used in investing activities was $1,018,704 and $970,168, respectively. The cash used during the current period is attributable to approximately $1.1 million related to costs for capital expenditures, which were capitalized and are reflected in the balance of the oil and gas property as of April 30, 2024. These amounts were offset by approximately $50,000 in amounts due to operators for costs for the South Salinas Project and the McCool Ranch Option. Cash used from investing activities for the six months ended April 30, 2023 was attributable to approximately $1.3 million related to drilling exploratory wells and approximately $200,000 related to acquisition costs, both of which were capitalized and reflected in the balance of the oil and gas property as of April 30, 2023. These amounts were offset by approximately $0.5 million in amounts used from the Advance to Operators account, which was designated for costs for the HV-1 well.
Current wording
For the nine months ended July 31, 2024 and 2023, cash used in investing activities was $1,138,561 and $1,804,050, respectively. The cash used during the current period is attributable to approximately $1.1 million related to costs for capital expenditures, which were capitalized and are reflected in the balance of the oil and gas property as of July 31, 2024. Cash used from investing activities for the nine months ended July 31, 2023 was attributable to approximately $3.0 million related to drilling exploratory wells and approximately $200,000 related to acquisition costs, both of which were capitalized and reflected in the balance of the oil and gas property as of July 31, 2023. These amounts were offset by approximately $1.4 million in amounts used from the Advance to Operators account, which was designated for costs for the HV-1 well.
Previous wording
For the six months ended April 30, 2024 and 2023, cash (used in)/provided by financing activities was ($1,005,098) and $3,885,995, respectively. Cash provided by financing activities during the six months ended April 30, 2024 was primarily attributable to approximately $0.6 million in net proceeds from the issuance of convertible debt and approximately $1.0 million from the issuance of promissory notes and related party notes, offset by payments for the convertible debt in the amount of approximately $2.6 million and debt issuance costs of $0.2 million. Cash provided by financing activities during the six months ended April 30, 2023 was primarily attributable to $6.4 million in gross proceeds from the issuance of common stock, offset by the payment of offering costs of approximately $1.0 million and the payment of notes payables of approximately $1.5 million.
Current wording
For the nine months ended July 31, 2024 and 2023, cash (used in)/provided by financing activities was ($248,898) and $5,778,790, respectively. Cash provided by financing activities during the nine months ended July 31, 2024 was primarily attributable to approximately $2.5 million from the issuance of promissory notes, related party notes and convertible notes payable, offset by payments for the convertible debt in the amount of approximately $2.6 million and debt issuance costs of $0.2 million. Cash provided by financing activities during the nine months ended July 31, 2023 was primarily attributable to $6.4 million in gross proceeds from the issuance of common stock and $1.8 million in proceeds from the exercise of warrants, offset by the payment of offering costs of approximately $1.0 million and the payment of notes payables of approximately $1.5 million.
Previous wording
The Company holds interests in various leases related to the unproved properties of the McCool Ranch Oil Field. These leases occur in two parcels, “Parcel 1” and “Parcel 2”. Parcel 1 comprises ten leases and approximately 480 acres, which are held by delay rental payments that are paid-up and current. Parcel 2 comprises one lease and approximately 320 acres, which is held by production. The total leasehold comprises approximately 800 gross and net acres.
Current wording
We hold interests in various leases related to the unproved properties of the McCool Ranch Oil Field. These leases occur in two parcels, “Parcel 1” and “Parcel 2”. Parcel 1 comprises ten leases and approximately 480 acres, which are held by delay rental payments that are paid-up and current. Parcel 2 comprises one lease and approximately 320 acres, which is held by production. The total leasehold comprises approximately 800 gross and net acres.
Previous wording
On November 10, 2023, we entered into a leasehold acquisition and development option agreement (“ARLO Agreement”) with Heavy Sweet Oil (“HSO”) for a term of nine (9) months which gives the Company the exclusive right to acquire up to a 20% interest in a 960 acre drilling and production program in the Asphalt Ridge leases for $2,000,000, which may be invested in tranches by us, with an initial tranche closing for an amount no less than $500,000 and paid within seven days subsequent to HSO providing certain required items to the Company.
Current wording
On November 10, 2023, we entered into the ARLO Agreement with HSO for a term of nine months which allows us the exclusive right to acquire up to a 20% interest in a 960 acre drilling and production program in the Asphalt Ridge leases for $2,000,000, which may be invested in tranches, with an initial tranche closing for an amount no less than $500,000 and paid within seven days subsequent to HSO providing certain required items to us.
Previous wording
On December 29, 2023, we entered into an amendment to the ARLO Agreement, whereby we funded $200,000 of the $500,000 payable by us to HSO at the Initial Closing, in advance of HSO satisfying certain required items for a 2% interest in the leases; such funds are to be used by HSO solely for the building of roads and related infrastructure in furtherance of the development of the leases. As of April 30, 2024, we have paid a total of $225,000 to HSO in costs related to infrastructure and have obtained a 2.25% interest in the leases; such costs are capitalized costs and are reflected in the balance of the oil and gas property as of April 30, 2024.
Current wording
On December 29, 2023, we entered into an amendment to the ARLO Agreement, whereby we funded $200,000 of the $500,000 payable by us to HSO at the Initial Closing, in advance of HSO satisfying certain required items for a 2% interest in the leases; such funds are to be used by HSO solely for the building of roads and related infrastructure in furtherance of the development of the leases. As of July 31, 2024, we have paid a total of $225,000 to HSO in costs related to infrastructure and has obtained a 2.25% interest in the leases; such costs are capitalized costs and are reflected in the balance of the oil and gas property as of July 31, 2024.
Previous wording
On July 11, 2022, our Board of Directors approved compensation for each of the non-employee directors, which would be effective upon the consummation of the IPO. Such compensation is structured as follows: an annual retainer of $50,000 cash plus an additional $10,000 for each Board committee upon which the Director serves, each paid quarterly in arrears. Payment for this approved compensation commenced upon successful completion of our IPO in April 2023; for the three and six months ended April 30, 2024, we have recognized $54,000 and $110,685, respectively, in directors’ fees.
Current wording
On July 11, 2022, our Board of Directors approved compensation for each of the non-employee directors of the Company, which would be effective upon the consummation of the IPO. Such compensation is structured as follows: an annual retainer of $50,000 cash plus an additional $10,000 for each Board committee upon which the Director serves, each paid quarterly in arrears. Payment for this approved compensation commenced upon successful completion of our IPO in April 2023; for the three and nine months ended July 31, 2024, we have recognized $55,000 and $165,000, respectively, in directors’ fees, and for the three and nine months ended July 31, 2023, we have recognized $78,132 and $78,132, respectively, in directors’ fees.
Previous wording
On October 4, 2023 and December 29, 2023, we entered into placement agent agreements with Spartan Capital Securities, LLC (“Spartan”), whereby Spartan will serve as the exclusive placement agent in connection with the closing of private placements. The agreements provide the agent with i) a cash fee 7.5% of the aggregate proceeds raised in the sale and ii) warrants to purchase a number of common shares equal to 5% of the number of common shares initially issuable upon conversion of each note tranche; warrants to purchase 83,333 and 55,000 common shares with exercise prices of $1.32 and $0.55 for the first and second tranches, respectively, were issued to Spartan as of January 31, 2024. Such warrants may be exercised beginning 6 months after issuance until four- and one-half years thereafter.
Current wording
On October 4, 2023 and December 29, 2023, we entered into additional placement agent agreements with Spartan, whereby Spartan would serve as the exclusive placement agent in connection with the closing of private placements. The agreements provided the agent with i) a cash fee 7.5% of the aggregate proceeds raised in the sale and ii) warrants to purchase a number of common shares equal to 5% of the number of common shares initially issuable upon conversion of each note tranche; warrants to purchase 83,333 and 55,000 common shares with exercise prices of $1.32 and $0.55 for the first and second tranches, respectively, were issued to Spartan as of January 31, 2024. Such warrants may be exercised beginning 6 months after issuance until four- and one-half years thereafter.
Previous wording
The Company’s projects are in the exploration and/or early production stages and the Company began generating revenue from its operations during the quarterly period ended April 30, 2024. We apply the successful efforts method of accounting for crude oil and natural gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, delay rentals and exploratory overhead are expensed as incurred. If an exploratory property provides evidence to justify potential development of reserves, drilling costs associated with the property are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. At the end of each quarter, management reviews the status of all suspended exploratory property costs in light of ongoing exploration activities; in particular, whether we are making sufficient progress in our ongoing exploration and appraisal efforts. If management determines that future appraisal drilling or development activities are unlikely to occur, associated exploratory well costs are expensed.
Current wording
Our projects are in exploration and/or early production stages and we began generating revenue from its operations during the quarterly period ended April 30, 2024. We apply the successful efforts method of accounting for crude oil and natural gas properties. Under this method, exploration costs such as exploratory, geological, and geophysical costs, delay rentals and exploratory overhead are expensed as incurred. If an exploratory property provides evidence to justify potential development of reserves, drilling costs associated with the property are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. At the end of each quarter, management reviews the status of all suspended exploratory property costs considering ongoing exploration activities; in particular, whether we are making sufficient progress in our ongoing exploration and appraisal efforts. If management determines that future appraisal drilling or development activities are unlikely to occur, associated exploratory well costs are expensed.
Previous wording
Costs to acquire mineral interests in crude oil and/or natural gas properties, drill and equip exploratory wells that find proved reserves and drill and equip development wells are capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proven crude oil and/or natural gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment, based on our current exploration plans, and a valuation allowance is provided if impairment is indicated. Capitalized costs from successful exploration and development activities associated with producing crude oil and/or natural gas leases, along with capitalized costs for support equipment and facilities, are amortized to expense using the unit-of-production method based on proved crude oil and/or natural gas reserves on a field-by-field basis, as estimated by qualified petroleum engineers. The Company currently has one well that is producing and is evaluating the impact of production on the reserve determination for that well and field.
Current wording
Costs to acquire mineral interests in crude oil and/or natural gas properties, drill and equip exploratory wells that find proved reserves and drill and equip development wells are capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proven crude oil and/or natural gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment, based on our current exploration plans, and a valuation allowance is provided if impairment is indicated. Capitalized costs from successful exploration and development activities associated with producing crude oil and/or natural gas leases, along with capitalized costs for support equipment and facilities, are amortized to expense using the unit-of-production method based on proved crude oil and/or natural gas reserves on a field-by-field basis, as estimated by qualified petroleum engineers. We currently have four wells that are producing (one well in President’s Field in the South Salinas Project and three wells at the McCool Ranch Oil Field) and are evaluating the impact of production on the reserve determination for those wells and fields. We expect to add the reserve value of such fields to our reserve report after a further period of observation and review of the oil production.
Previous wording
Unproved oil and natural gas properties are assessed periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage. The Company currently has one well that is producing and is evaluating the impact of production on the reserve determination for that well and field.
Current wording
Unproved oil and natural gas properties are not subject to amortization and are assessed periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage. We currently have four wells that are producing (one well in President’s Field in the South Salinas Project and three wells at the McCool Ranch Oil Field) and are evaluating the impact of production on the reserve determination for those wells and fields. We expect to add the reserve value of such fields to our reserve report after a further period of observation and review of the oil production. As of July 31, 2024 and October 31, 2023, all of our oil and gas properties were classified as unproved properties and were not subject to depreciation, depletion and amortization.