| Property and Equipment |
Note 4 –
Property and Equipment
Oil and Gas Properties
The Company’s oil and gas properties
at December 31, 2017 and 2016 are located in the United States of America.
The carrying values
of the Company’s oil and gas properties, net of depletion, depreciation, amortization, and impairment at December 31, 2017
and 2016 are set forth below in the following table:
| |
|
December 31, |
|
| |
|
2017 |
|
|
2016 |
|
| Unproved leasehold (1) |
|
$ |
977,936 |
|
|
$ |
1,181,421 |
|
| Proved leasehold |
|
|
10,094,760 |
|
|
|
10,252,568 |
|
| Properties subject to depletion, net of depletion |
|
|
580,158 |
|
|
|
— |
|
| Exploratory wells – construction-in-progress (1) (2) |
|
|
1,479,282 |
|
|
|
— |
|
| Total |
|
$ |
13,132,136 |
|
|
$ |
11,433,989 |
|
| (1) |
Not subject to depletion; |
| (2) |
Expected to be reclassified from exploratory to properties subject to amortization in the first quarter of 2018. |
| |
|
|
|
|
Exploration and |
|
|
|
|
|
Depreciation, Depletion, Amortization, |
|
|
|
|
| Year |
|
Acquisition |
|
|
Development |
|
|
Disposition |
|
|
and |
|
|
|
|
| Incurred |
|
Costs |
|
|
Costs |
|
|
of Assets |
|
|
Impairment |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 and prior |
|
$ |
10,252,568 |
|
|
$ |
1,181,421 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
11,433,989 |
|
| 2017 |
|
|
— |
|
|
|
3,223,931 |
|
|
|
— |
|
|
|
(1,525,784 |
) |
|
|
1,698,147 |
|
| Total |
|
$ |
10,252,568 |
|
|
$ |
4,405,352 |
|
|
$ |
— |
|
|
$ |
(1,525,784 |
) |
|
$ |
13,132,136 |
|
During the year ended
December 31, 2017, the Company engaged in the following activities associated with its oil and gas properties:
| ● |
Acquired a 21.6% non-operated working interest in two exploratory horizontal gas wells in the Uinta Basin from an undisclosed party. Both wells are operated by EOG. We expect total cost of both wells will be $3.2 million. These wells align with the Company’s overall growth strategy for the Uinta Basin. The well was drilled successfully and had a small amount of production, and completion will be finalized in 2018. As of December 31, 2017, the Company incurred $1,501,377 in costs for our working interest share. The wells are classified on our consolidated balance sheets as construction-in-progress and not subject to amortization until completion has occurred which is expected to be late in the first quarter of 2018. |
| |
|
| ● |
Drilled a test well on the Labokay prospect to the total measured depth of 8,795 feet, where hydrocarbons shows were not in commercial quantities to warrant completion. This well was plugged and abandoned. Since the well was not commercially viable the Company’s working interest in the underlying mineral lease terminated and we no longer have a right to acquire title to said property. We incurred $1,507,768 in the drilling of this well which was charged to impairment expense. Civil lawsuits were filed against FPOI arising from unpaid accounts in connection with drilling of this well – see Note 11 – Commitments and contingencies for additional information on the lawsuits. |
| |
|
| ● |
Successfully worked over two Duck Creek wells obtaining production from the Green River formation. We incurred $70,937 in capitalized workover costs associated with these wells. |
| |
|
| ● |
Incurred costs of $22,691 for bonding, legal, title, engineering, geological and surveying in our Ladysmith project in Fremont County, Wyoming. |
During the year ended
December 31, 2016, the Company engaged in the following activities associated with its oil and gas properties:
| ● |
Completed drilling of the Federal #1 test well in the Paw Paw project in Big Horn County, Wyoming. The test well reached total depth in the Madison Formation and the Company successfully logged and acquired valid data to further evaluate the project’s potential. Oil shows were found in the Muddy, Phosphoria, and Madison formations. The Phosphoria is a regionally productive formation and could end up being the secondary zone in sidetrack operations should that type of operation be deemed commercially economic. We incurred costs of approximately $730,000 in this project. |
| |
|
| ● |
Acquired various proved oil and gas assets in Utah from Total Belief Limited, a wholly owned subsidiary of New Times Energy Corporation Limited. These assets included certain oil and gas wells throughout the Uinta Basin in Utah on acreage with over 30 proved undeveloped drilling locations, additional non-operating interest in other leases, and access to approximately 6,000 acres in the Uinta Basin with proven and probable reserves and existing infrastructure in place. Through the acquisition, the Company also obtained six shut-in wells in the Natural Buttes Field, Utah. The transaction provided the Company with the rights to an agreement to acquire up to 6,000 acres and up to 16 shut-in oil and gas wells with proved and proved undeveloped reserves on Tribal lands in the Uinta Basin. This acquisition delivered to the Company an additional 40% working interest in the Ladysmith Prospect covering 3,060 acres in the Greater Green River Basin, Wyoming, bringing the Company’s total working interest in the prospect from a pre-acquisition 35% up to 75%. We incurred $10,562,501 in acquiring these assets. |
| |
|
| ● |
Incurred costs of $55,848 for to acquire additional leases and working interest and for bonding, legal, title, engineering, geological and surveying in our Ladysmith project in Fremont County, Wyoming. |
Support Facilities
and Equipment
The Company’s
support facilities and equipment serve its oil and gas production activities. The following table summarizes these properties and
equipment, together with their estimated useful lives:
| |
|
December 31, |
|
| |
|
2017 |
|
|
2016 |
|
| |
|
|
|
|
|
|
| Tank |
|
$ |
30,000 |
|
|
$ |
30,000 |
|
| Vehicle |
|
|
69,446 |
|
|
|
69,446 |
|
| Accumulated depreciation |
|
|
(31 |
) |
|
|
— |
|
| Construction in progress (1) |
|
|
22,087 |
|
|
|
— |
|
| Total support facilities and equipment, net |
|
$ |
121,502 |
|
|
$ |
99,446 |
|
| |
(1) |
Facilities constructed in conjunction with drilling for our two exploratory horizontal wells in Uintah County, Utah. |
The Company recognized depreciation expense
of $31 and $0 during the years ended December 31, 2017 and 2016, respectively.
Office Furniture, Equipment, and Other
As of December 31, 2017, and 2016, office furniture,
equipment, and other consisted of the following:
| |
|
December 31, |
|
| |
|
2017 |
|
|
2016 |
|
| Computer equipment and fixtures |
|
$ |
22,453 |
|
|
$ |
22,453 |
|
| Vehicle |
|
|
— |
|
|
|
— |
|
| Accumulated depreciation |
|
|
(8,632 |
) |
|
|
(4,114 |
) |
| Office furniture, equipment, and other, net |
|
$ |
13,821 |
|
|
$ |
18,339 |
|
During the year ended December 31, 2017, the
vehicle was reclassified to Support Facilities and Equipment, as it is used in oil and gas field operations of the Company.
During the years
ended December 31, 2017 and 2016, depreciation expense was $8,632 and $4,114, respectively.
|