| Property and Equipment |
Note 3 –
Property and Equipment
Oil and Gas Properties
The Company’s oil and gas properties
at March 31, 2019 and December 31, 2018 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 March 31, 2019 and
December 31, 2018 are set forth below in the following table:
| |
|
March 31, 2019 |
|
|
December 31, 2018 |
|
| Unproved leasehold (1) |
|
$ |
106,299 |
|
|
$ |
106,299 |
|
| Proved leasehold |
|
|
12,607,287 |
|
|
|
11,915,695 |
|
| Properties subject to depletion, net of depletion |
|
|
293,374 |
|
|
|
121,110 |
|
| Exploratory wells – construction-in-progress (1) |
|
|
- |
|
|
|
- |
|
| Total |
|
$ |
13,006,960 |
|
|
$ |
12,143,103 |
|
| (1) |
Not subject to depletion; |
| |
|
|
|
|
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 |
|
| 2018 |
|
|
— |
|
|
|
1,897,502 |
|
|
|
|
|
|
|
(2,886,535 |
) |
|
|
(989,033 |
) |
| 2019 |
|
|
657,304 |
|
|
|
407,305 |
|
|
|
|
|
|
|
(200,752 |
) |
|
|
863,857 |
|
| Total |
|
$ |
10,909,872 |
|
|
$ |
6,710,159 |
|
|
$ |
— |
|
|
$ |
(4,613,071 |
) |
|
$ |
13,006,960 |
|
| ● |
In 2017, the Company acquired a 21.62% non-operated working interest with a 17.1% net revenue interest in two exploratory horizontal gas wells in the Uinta Basin from an undisclosed party, and the Company incurred $1,479,282 in well costs. During the year ended December 31, 2018, the company incurred an additional $1,868,370 of well costs. At December 31, 2018, the Company’s share total costs for drilling and completing the two wells was $3,347,776. Although these wells produced economic quantities of natural gas liquids and residue gas through December 31, 2017, well completion activities were completed during the year ended December 31, 2018, so costs were reclassed from construction-in-progress to proved properties subject to depletion through December 31, 2018. As of December 31, 2018, we recorded impairment expense of $1,521,776 for the amount exceeding the ceiling test limitation. During the three months ended March 31, 2019, the company capitalized additional costs of $170,112. |
| |
|
| ● |
In 2017, the Company 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. During the year ended December 31, 2017, we incurred costs of $1,209,675 in the drilling of this well and $1,352,982 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. |
| |
|
| ● |
In 2017, the Company worked over two Duck Creek wells obtaining production from the Green River formation. We incurred $79,989 in capitalized workover costs associated with these wells. The wells require additional workover and were shut-in in July 2017. The Company recorded asset retirement costs of $291,659 related to Duck Creek wells. During the year ended December 31, 2018, we incurred $8,821 in capitalized workover costs associated with these wells. As of December 31, 2018, due to the Duck Creek wells subsequently becoming subject to a Sherriff’s sale stemming from a legal matter with our indirect subsidiary, the Duck Creek wells should be impaired to the extent of total intangible costs, which were capitalized for these properties during 2017 and 2018. Accordingly, the impairment expense for the period ending December 31, 2018 is $88,810. We did not incur any cost during the three months ended March 31, 2019. |
| ● |
In 2017, the Company incurred costs of $22,691 for bonding, legal, title, engineering, geological and surveying in our Ladysmith project in Fremont County, Wyoming. |
| |
|
| ● |
In 2017, the Company incurred costs of $3,750 related to Springs Project. The Company allowed the BLM leases for the Springs project to expire without paying additional delay rental payments. The primary terms on these leases were due to expire in Q4 2018 and in the view of management it was not in the best interest of the Company to continue exploratory efforts on this speculative play. Management concluded that Company resources would be better redirected to continue seeking lower-risk acquisitions of producing oil and gas properties rather than take additional wildcat drilling risk on this prospect. The Company currently no longer owns the mineral rights for this project. As the result, the Company recognized impairment of oil and gas property in amount of $154,787, during the year ended December 31, 2017. During the year ended 31, 2018, the Company has decided to allow Ladysmith leases to expire without making further delay rental payments to the BLM, as the result we recorded impairment expense of $78,469. |
| |
|
| ● |
In 2017, the Company incurred costs of $100,191 for exploration and development efforts associated with the proved oil and gas assets in Utah, which were acquired on December 30, 2016, from Total Belief Limited, a wholly owned subsidiary of New Times Energy Corporation Limited. These assets include 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. In connection with the TBL acquisition, Foothills entered into a promissory note in the amount of $6,000,000. This note bears no interest during its term. The Company recorded ($342,804) of imputed interest as debt discount. Starting from July 1, 2018 the note bears 10% annual interest. During the year ended December 31, 2018, we incurred cost of $20,000 exploration and development efforts associated with these properties. During the three months ended March 31, 2019, we incurred costs of $15,000 exploration and development efforts associated with these properties. |
| |
|
| ● |
In 2017, the Company incurred costs of $379,498 for exploration and development efforts associated with numerous unproved oil and gas properties in the Company’s geographic areas of interest, including farmout properties (Paw Paw and Ironwood) and numerous others that were being evaluated and considered for a prospective acquisition and/or farmout by the Company. During the year ended December 31, 2018, we incurred cost of $312 exploration and development efforts associated with these properties. As of December 31, 2018, the Company determined it is unlikely that it will be able to obtain enough production from this test well at the present time to warrant continued development. As the result we recorded $778,034 impairment expense of Pawpaw during the year ended December 31, 2018. |
| |
|
| ● |
On March 6, 2019, the Company, through its indirect wholly-owned subsidiary, Foothills Exploration, LLC, closed on the acquisition of 22 natural gas wells and approximately 18,214 gross acres (14,584 core), 78% held by production, located in the Greater Green River Basin in Wyoming (the “GRB Assets”). Some of the underlying leases come with certain depth restrictions and roughly 80% of the acreage remains undeveloped. The GRB assets were purchased for $671,481, in an all-cash transaction, which was financed through Company borrowings. The Company’s optimization program targeting the first several wells has already generated an 11% increase in production rates and as such the Company is continuing to optimize additional wells to further increase production. $657,304 were recorded in oil and gas and property and $14,177 were allocated to Support Facilities and Equipment. We recorded $222,194 as asset retirement cost related to these wells. |
| |
|
| ● |
In 2017, we recorded depreciation, depletion and amortization cost related to oil and gas properties of $18,017. During the year ended December 31, 2018, we recorded depreciation, depletion, amortization costs related to oil and gas properties of $411,821. During the three months ended March 31, 2019 and 2018, we recorded depreciation, depletion, amortization costs related to oil and gas properties of $200,752 and $109,428, respectively. |
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:
| |
|
March 31, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
|
|
|
|
| Tank |
|
$ |
30,000 |
|
|
$ |
30,000 |
|
| Vehicle |
|
|
69,446 |
|
|
|
69,446 |
|
| Uinta Basin facilities |
|
|
184,887 |
|
|
|
186,428 |
|
| Sweetwater facilities |
|
|
14,177 |
|
|
|
— |
|
| Accumulated depreciation |
|
|
(2,537 |
) |
|
|
(1,717 |
) |
| Construction in progress (1) |
|
|
- |
|
|
|
- |
|
| Total support facilities and equipment, net |
|
$ |
295,973 |
|
|
$ |
284,157 |
|
| (1) |
Facilities constructed in conjunction with drilling for our two exploratory horizontal wells in Uintah County, Utah, not subject to depreciation. During the months ended March 31, 2019, construction-in-progress was reclassified to Uinta Basin facilities and became eligible for depreciation upon the completion of the construction. |
The Company recognized depreciation expense
of $820 and $185 during the three months ended March 31, 2019 and 2018, respectively.
Office Furniture, Equipment, and Other
As of March 31, 2019 and December 31, 2018,
office furniture, equipment, and other consisted of the following:
| |
|
March 31, 2019 |
|
|
December 31, 2018 |
|
| Computer equipment and fixtures |
|
$ |
22,453 |
|
|
$ |
22,453 |
|
| Accumulated depreciation |
|
|
(17,962 |
) |
|
|
(16,116 |
) |
| Office furniture, equipment, and other, net |
|
$ |
4,491 |
|
|
$ |
6,337 |
|
During the three months ended March 31, 2019
and 2018, we recorded depreciation expense of $1,845 and $1,846, respectively.
|