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SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES (UNAUDITED)
12 Months Ended
Dec. 31, 2021
Extractive Industries [Abstract]  
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES (UNAUDITED)

NOTE 12—SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES (UNAUDITED)

 

This footnote provides unaudited information required by FASB ASC Topic 932, Extractive Activities—Oil and Gas.

 

Geographical Data

 

The following table shows the Company’s oil and gas revenues and lease operating expenses, which excludes the joint venture expenses incurred in South America, by geographic area:

 

   2021   2020 
Revenues        
North America  $1,330,198   $552,345 
South America        
           
   $1,330,198   $552,345 
           
Production Cost          
North America  $626,210   $403,974 
South America        
           
   $626,210   $403,974 

 

 

Capital Costs

 

Capitalized costs and accumulated depletion relating to the Company’s oil and gas producing activities as of December 31, 2021, all of which are onshore properties located in the United States and Colombia, South America are summarized below:

 

  

United

States

   South
America
   Total 
Unproved properties not being amortized  $   $2,343,126   $2,343,126 
Proved properties being amortized   13,326,568    49,444,654    62,771,222 
Accumulated depreciation, depletion, amortization and impairment   (10,861,936)   (49,444,654)   (60,306,590)
                
Net capitalized costs  $2,464,632   $2,343,126   $4,807,758 

 

Amortization Rate

 

The amortization rate per unit based on barrel of oil equivalents was $10.07 for the United States and $0 for South America for the year ended December 31, 2021.

 

Acquisition, Exploration and Development Costs Incurred

 

Costs incurred in oil and gas property acquisition, exploration and development activities as of December 31, 2021 and 2020 are summarized below:

 

   United States   South America 
   2021 
   United States   South America 
Property acquisition costs:          
Proved  $19,835   $ 
Unproved        
Exploration costs        
Development costs   22,971     
           
Total costs incurred  $42,806   $ 

 

   United States   South America 
   2020 
   United States   South America 
Property acquisition costs:          
Proved  $3,521   $ 
Unproved   1,503,349     
Exploration costs        
Development costs   3,006     
           
Total costs incurred  $1,509,876   $ 

 

 

Reserve Information and Related Standardized Measure of Discounted Future Net Cash Flows

 

The unaudited supplemental information on oil and gas exploration and production activities has been presented in accordance with reserve estimation and disclosures rules issued by the SEC in 2008. Under those rules, average first-day-of-the-month price during the 12-month period before the end of the year are used when estimating whether reserve quantities are economical to produce. This same 12-month average price is also used in calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows. The rules also allow for the use of reliable technology to estimate proved oil and gas reserves if those technologies have been demonstrated to result in reliable conclusions about reserve volumes. Disclosures by geographic area include the United States and South America, which consists of our interests in Colombia. The supplemental unaudited presentation of proved reserve quantities and related standardized measure of discounted future net cash flows provides estimates only and does not purport to reflect realizable values or fair market values of the Company’s reserves. Volumes reported for proved reserves are based on reasonable estimates. These estimates are consistent with current knowledge of the characteristics and production history of the reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, significant changes to these estimates can be expected as future information becomes available.

 

Proved reserves are those estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.

 

The reserve estimates set forth below were prepared by Russell K. Hall and Associates, Inc. (“R.K. Hall”), utilizing reserve definitions and pricing requirements prescribed by the SEC. R.K. Hall is an independent professional engineering firm specializing in the technical and financial evaluation of oil and gas assets. R.K. Hall’s report was conducted under the direction of Russell K. Hall, founder and President of R.K. Hall. Mr. Hall holds a BS in Mechanical Engineering from the University of Oklahoma and is a registered professional engineer with more than 30 years of experience in reserve evaluation services. R.K. Hall and their respective employees have no interest in the Company and were objective in determining the results of the Company’s reserves.

 

Total estimated proved developed and undeveloped reserves by product type and the changes therein are set forth below for the years indicated.

 

   United States   South America   Total 
   Gas (mcf)   Oil (bbls)   Gas (mcf)   Oil (bbls)   Gas (mcf)   Oil (bbls) 
Total proved reserves                              
                               
Balance December 31, 2019   2,010,669    247,236            2,010,669    247,236 
                               
Revisions of prior estimates   (1,176,962)   (139,338)           (1,176,962)   (139,338)
Production   (69,443)   (11,385)           (69,443)   (11,385)
                               
Balance December 31, 2020   764,274    96,513            764,274    96,513 
                               
Revisions to prior estimates   202,713    12,405            202,713    12,405 
Production   (60,069)   (14,367)           (60,069)   (14,367)
                               
Balance December 31, 2021   906,918    94,551            906,918    94,551 
                               
Proved developed reserves                              
at December 31, 2020   764,274    96,513            764,274    96,513 
at December 31, 2021   906,918    94,551            906,918    96,513 
                               
Proved undeveloped reserves                              
at December 31, 2020                        
at December 31, 2021                        

 

As of December 31, 2021 and 2020, the Company had no proved undeveloped (“PUD”) reserves.

 

The standardized measure of discounted future net cash flows relating to proved oil and gas reserves is computed using average first-day-of the-month prices for oil and gas during the preceding 12 month period (with consideration of price changes only to the extent provided by contractual arrangements), applied to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated related future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated), and assuming continuation of existing economic conditions. Future income tax expenses give effect to permanent differences and tax credits but do not reflect the impact of continuing operations including property acquisitions and exploration. The estimated future cash flows are then discounted using a rate of ten percent a year to reflect the estimated timing of the future cash flows.

 

 

Standardized measure of discounted future net cash flows at December 31, 2021:

 

   United
States
   South
America
   Total 
Future cash flows from sales of oil and gas  $11,281,236   $   $11,281,236 
Future production cost   (4,726,717)       (4,726,717)
Future development cost            
Future net cash flows   6,554,519        6,554,519 
                
10% annual discount for timing of cash flow   (3,173,541)       (3,173,541)
                
Standardized measure of discounted future net cash flow relating to proved oil and gas reserves  $3,380,978   $   $3,380,978 
                
Changes in standardized measure:               
Change due to current year operations
Sales, net of production costs
  $(678,014)  $   $(678,014)
Change due to revisions in standardized variables:               
Accretion of discount   117,413        117,413 
Net change in sales and transfer price, net of production costs   2,650,901        2,650,901 
Net change in future development cost            
Discoveries            
Revision and others   786,094        786,094 
Changes in production rates and other   (669,548)       (669,548)
                
Net   2,206,846        2,206,846 
Beginning of year   1,174,132        1,174,132 
                
End of year  $3,380,978   $   $3,380,978 

 

 

Standardized measure of discounted future net cash flows at December 31, 2020:

 

   United
States
   South
America
   Total 
Future cash flows from sales of oil and gas  $4,967,430   $   $4,967,430 
Future production cost   (3,127,015)       (3,127,015)
Future development cost            
Future net cash flows   1,840,415        1,840,415 
                
10% annual discount for timing of cash flow   (666,283)       (666,283)
                
Standardized measure of discounted future net cash flow relating to proved oil and gas reserves  $1,174,132   $   $1,174,132 
                
Changes in standardized measure:               
Change due to current year operations
Sales, net of production costs
  $(171,448)  $   $(171,448)
Change due to revisions in standardized variables:               
Accretion of discount   356,609        356,609 
Net change in sales and transfer price, net of production costs   (2,859,773)       (2,859,773)
Net change in future development cost            
Discoveries            
Revision and others   (1,164,932)       (1,164,932)
Changes in production rates and other   1,447,583        1,447,583 
                
Net   (2,391,961)       (2,391,961)
Beginning of year   3,566,093        3,566,093 
                
End of year  $1,174,132   $   $1,174,132