| Property and Equipment |
Note
3 – Property and Equipment
Oil
and Gas Properties
The
Company’s oil and gas properties at June 30, 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
June 30, 2019 and December 31, 2018 are set forth below in the following table:
| |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
| Unproved leasehold (1) |
|
$ |
106,299 |
|
|
$ |
106,299 |
|
| Proved leasehold and Properties subject to depletion, net of depletion |
|
|
12,569,237 |
|
|
|
12,036,804 |
|
| Exploratory wells – construction-in-progress (1) |
|
|
- |
|
|
|
- |
|
| Total |
|
$ |
12,675,536 |
|
|
$ |
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 |
|
|
|
419,449 |
|
|
|
|
|
|
|
(544,320 |
) |
|
|
532,433 |
|
| Total |
|
$ |
10,909,872 |
|
|
$ |
6,722,303 |
|
|
$ |
— |
|
|
$ |
(4,956,639 |
) |
|
$ |
12,675,536 |
|
| ● |
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 six months ended June 30, 2019, the company capitalized additional costs of $170,146. |
| ● |
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 six months ended June 30, 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 six months ended June 30, 2019, we incurred costs of $24,722 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. During the six months ended June 30,
2019, we incurred costs of $2,388 exploration and development efforts associated with these properties. |
| |
|
| ● |
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 six months ended June 30, 2019 and 2018, we recorded depreciation, depletion, amortization costs related to oil
and gas properties of $544,320 and $214,179, 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:
| |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
|
|
|
|
| Tank |
|
$ |
30,000 |
|
|
$ |
30,000 |
|
| Vehicles |
|
|
69,446 |
|
|
|
69,446 |
|
| Uinta Basin facilities |
|
|
184,887 |
|
|
|
186,428 |
|
| Sweetwater facilities |
|
|
14,177 |
|
|
|
— |
|
| Accumulated depreciation |
|
|
(3,954 |
) |
|
|
(1,717 |
) |
| Construction in progress (1) |
|
|
- |
|
|
|
- |
|
| Total support facilities and equipment, net |
|
$ |
294,556 |
|
|
$ |
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 June 30, 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 $2,237 and $354 during the six months ended June 30, 2019 and 2018, respectively.
Office
Furniture, Equipment, and Other
As
of June 30, 2019 and December 31, 2018, office furniture, equipment, and other consisted of the following:
| |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
| Computer equipment and fixtures |
|
$ |
22,453 |
|
|
$ |
22,453 |
|
| Accumulated depreciation |
|
|
(19,828 |
) |
|
|
(16,116 |
) |
| Office furniture, equipment, and other, net |
|
$ |
2,625 |
|
|
$ |
6,337 |
|
During
the six months ended June 30, 2019 and 2018, we recorded depreciation expense of $3,711 and $3,711, respectively.
|