CALIFORNIA
(State or other jurisdiction of incorporation)
|
94-0787340
(IRS Employer Identification No.)
|
1177 West Loop South, Suite 1825
Houston, Texas
(Address of principal executive offices)
|
77027
(Zip Code)
|
(713) 968-7000
(Registrant’s telephone number, including area code)
|
N/A
(Former name, former address and former fiscal year, if changed since last report)
|
PART I – FINANCIAL INFORMATION
|
Page | ||
Item 1.
|
Financial Statements.
|
3 | |
Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013.
|
3 | ||
Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2014 and 2013.
|
5 | ||
Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2014 and 2013.
|
6 | ||
Consolidated Statements of Changes in Equity for the Nine Months ended September 30, 2014.
|
7 | ||
Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2014 and 2013.
|
8 | ||
Unaudited Condensed Notes to the Consolidated Financial Statements.
|
10 | ||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
22 | |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
35 | |
Item 4.
|
Controls and Procedures.
|
35 | |
PART II – OTHER INFORMATION
|
|||
Item 1.
|
Legal Proceedings.
|
36 | |
Item 1A.
|
Risk Factors.
|
36 | |
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
43 | |
Item 3.
|
Defaults Upon Senior Securities.
|
43 | |
Item 4.
|
Mine Safety Disclosures.
|
43 | |
Item 5.
|
Other Information.
|
43 | |
Item 6.
|
Exhibits.
|
43 | |
Signatures.
|
43 | ||
September 30,
|
||||||||
2014
|
December 31,
|
|||||||
(Unaudited)
|
2013
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 9,562,262 | $ | 4,194,511 | ||||
Short-term investments
|
1,154,281 | - | ||||||
Accounts receivable, net of allowance for doubtful accounts:
|
||||||||
Trade
|
9,520,345 | 10,837,211 | ||||||
Stockholder and employees
|
85,870 | 155,080 | ||||||
Other
|
991,732 | 417,850 | ||||||
Commodity derivative instruments
|
383,603 | - | ||||||
Prepayments
|
789,083 | 433,991 | ||||||
Deferred taxes
|
- | 146,964 | ||||||
Other deferred charges
|
304,120 | 162,416 | ||||||
Total current assets
|
22,791,296 | 16,348,023 | ||||||
OIL AND GAS PROPERTIES (full cost method):
|
||||||||
Not subject to amortization
|
38,463,577 | 24,051,278 | ||||||
Subject to amortization
|
166,776,420 | 152,863,988 | ||||||
205,239,997 | 176,915,266 | |||||||
Less: accumulated depreciation, depletion and amortization
|
(99,943,199 | ) | (84,438,840 | ) | ||||
Net oil and gas properties
|
105,296,798 | 92,476,426 | ||||||
OTHER PROPERTY AND EQUIPMENT:
|
||||||||
Land, buildings and improvements
|
2,795,000 | - | ||||||
Other property and equipment
|
3,492,904 | 2,066,760 | ||||||
6,287,904 | 2,066,760 | |||||||
Less: accumulated depreciation and amortization
|
(1,922,849 | ) | (1,822,925 | ) | ||||
Net other property and equipment
|
4,365,055 | 243,835 | ||||||
OTHER ASSETS AND DEFERRED CHARGES:
|
||||||||
Commodity derivative instruments
|
548,573 | 818,637 | ||||||
Deposits
|
252,684 | - | ||||||
Receivables from affiliate
|
- | 95,634 | ||||||
Goodwill
|
5,740,315 | - | ||||||
Other noncurrent assets
|
479,389 | 1,649,413 | ||||||
Total other assets and deferred charges
|
7,020,961 | 2,563,684 | ||||||
Total assets
|
$ | 139,474,110 | $ | 111,631,968 | ||||
September 30,
|
||||||||
2014
|
December 31,
|
|||||||
(Unaudited)
|
2013
|
|||||||
LIABILITIES AND EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Current maturities of debt
|
$ | 565,166 | $ | 178,027 | ||||
Accounts payable, principally trade
|
23,648,139 | 15,116,560 | ||||||
Commodity derivative instruments
|
- | 677,132 | ||||||
Asset retirement obligations
|
931,154 | 1,755,650 | ||||||
Other accrued liabilities
|
2,390,907 | 1,127,283 | ||||||
Total current liabilities
|
27,535,366 | 18,854,652 | ||||||
LONG-TERM DEBT:
|
||||||||
Bank debt
|
24,965,000 | 31,215,000 | ||||||
OTHER NONCURRENT LIABILITIES:
|
||||||||
Preferred stock derivative liability, Series A and B
|
- | 51,290,414 | ||||||
Asset retirement obligations
|
11,591,497 | 8,942,029 | ||||||
Commodity derivative instruments
|
20,849 | 218,649 | ||||||
Deferred taxes
|
16,181,229 | 13,160,205 | ||||||
Restricted stock units
|
178,922 | 102,532 | ||||||
Other noncurrent liabilities
|
57,677 | 69,998 | ||||||
Total other noncurrent liabilities
|
28,030,174 | 73,783,827 | ||||||
PREFERRED STOCK:
|
||||||||
Series A and B, subject to mandatory redemption
|
- | 35,666,342 | ||||||
EQUITY:
|
||||||||
Common stock, no par value
|
||||||||
(300 million shares authorized, 68,865,962 and 41,074,953 issued)
|
133,865,431 | 2,669,465 | ||||||
Accumulated other comprehensive income
|
37,007 | 38,770 | ||||||
Accumulated earnings (deficit)
|
(74,958,868 | ) | (50,596,088 | ) | ||||
Total equity
|
58,943,570 | (47,887,853 | ) | |||||
Total liabilities and equity
|
$ | 139,474,110 | $ | 111,631,968 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Sales of natural gas and crude oil
|
$ | 10,229,280 | $ | 5,878,954 | $ | 30,564,244 | $ | 19,431,906 | ||||||||
Other revenue
|
341,819 | 308,092 | 885,455 | 739,584 | ||||||||||||
Total revenues
|
10,571,099 | 6,187,046 | 31,449,699 | 20,171,490 | ||||||||||||
EXPENSES:
|
||||||||||||||||
Marketing cost of sales
|
408,559 | 298,492 | 1,012,577 | 936,632 | ||||||||||||
Lease operating
|
2,838,055 | 2,394,813 | 9,761,203 | 6,371,172 | ||||||||||||
Re-engineering and workovers
|
778,628 | 245,528 | 1,330,539 | 1,513,767 | ||||||||||||
General and administrative – stock-based
|
||||||||||||||||
compensation
|
521,978 | 17,961 | 598,818 | 427,374 | ||||||||||||
General and administrative – other
|
2,396,780 | 1,224,903 | 7,335,901 | 3,814,439 | ||||||||||||
Depreciation, depletion and amortization
|
3,865,675 | 3,203,017 | 15,604,283 | 7,315,103 | ||||||||||||
Asset retirement obligation accretion expense
|
150,628 | 187,025 | 438,717 | 464,306 | ||||||||||||
Other
|
55,102 | 136,222 | 83,117 | 127,602 | ||||||||||||
Total expenses
|
11,015,405 | 7,707,961 | 36,165,155 | 20,970,395 | ||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
(444,306 | ) | (1,520,915 | ) | (4,715,456 | ) | (798,905 | ) | ||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Change in fair value of preferred stock
|
||||||||||||||||
derivative liability – Series A and Series B
|
(11,172,928 | ) | 15,382,964 | (15,676,842 | ) | (7,581,234 | ) | |||||||||
Interest expense
|
(114,405 | ) | (64,076 | ) | (321,680 | ) | (488,788 | ) | ||||||||
Other, net
|
2,970 | (23,325 | ) | 5,634 | (197,247 | ) | ||||||||||
Total other income (expense)
|
(11,284,363 | ) | 15,295,563 | (15,992,888 | ) | (8,267,269 | ) | |||||||||
NET INCOME (LOSS) BEFORE INCOME TAXES
|
(11,728,669 | ) | 13,774,648 | (20,708,344 | ) | (9,066,174 | ) | |||||||||
Income tax expense (benefit)
|
(576,632 | ) | (2,040,000 | ) | (1,710,632 | ) | (1,998,800 | ) | ||||||||
NET INCOME (LOSS)
|
(11,152,037 | ) | 15,814,648 | (18,997,712 | ) | (7,067,374 | ) | |||||||||
PREFERRED STOCK, SERIES A AND SERIES B:
|
||||||||||||||||
Accretion
|
220,007 | 275,757 | 786,536 | 821,630 | ||||||||||||
Dividends paid in cash
|
346,192 | - | 445,152 | 59,850 | ||||||||||||
Dividends paid in kind
|
- | - | 4,133,380 | 2,228,545 | ||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO
|
||||||||||||||||
COMMON STOCKHOLDERS
|
$ | (11,718,236 | ) | $ | 15,538,891 | $ | (24,362,780 | ) | $ | (10,177,399 | ) | |||||
EARNINGS (LOSS) PER COMMON SHARE:
|
||||||||||||||||
Basic
|
$ | (0.25 | ) | $ | 0.38 | $ | (0.56 | ) | $ | (0.25 | ) | |||||
Diluted
|
$ | (0.25 | ) | $ | 0.24 | $ | (0.56 | ) | $ | (0.25 | ) | |||||
WEIGHTED AVERAGE NUMBER OF COMMON
|
||||||||||||||||
SHARES OUTSTANDING:
|
||||||||||||||||
Basic
|
47,414,388 | 41,074,950 | 43,211,317 | 41,015,124 | ||||||||||||
Diluted
|
47,414,388 | 64,235,086 | 43,211,317 | 41,015,124 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
NET INCOME (LOSS)
|
$ | (11,152,037 | ) | $ | 15,814,648 | $ | (18,997,712 | ) | $ | (7,067,374 | ) | |||||
OTHER COMPREHENSIVE INCOME:
|
||||||||||||||||
Reclassification of gain on settled
|
||||||||||||||||
commodity derivatives
|
(7,117 | ) | (103,210 | ) | (2,867 | ) | (339,266 | ) | ||||||||
Less income taxes
|
(2,740 | ) | (39,736 | ) | (1,104 | ) | (130,618 | ) | ||||||||
OTHER COMPREHENSIVE INCOME (LOSS)
|
(4,377 | ) | (63,474 | ) | (1,763 | ) | (208,648 | ) | ||||||||
COMPREHENSIVE INCOME (LOSS)
|
$ | (11,156,414 | ) | $ | 15,751,174 | $ | (18,999,475 | ) | $ | (7,276,022 | ) | |||||
September 30,
|
||||||||
2014
|
December 31,
|
|||||||
(Unaudited)
|
2013
|
|||||||
COMMON STOCK:
|
||||||||
Balance at beginning of year (2013 as previously reported: 54,000 shares, $0.01 par value)
|
$ | 2,669,465 | $ | 540 | ||||
Retroactive effect of change to no par value upon merger closing on September 10, 2014
|
- | 2,182,293 | ||||||
Retroactive effect of retirement of 54,000 Yuma Energy, Inc. shares of common stock
|
||||||||
outstanding before merger dated September 10, 2014
|
- | - | ||||||
Retroactive effect of 40,896,221 shares issued for merger closing on September 10, 2014
|
- | - | ||||||
Convert Series A preferred stock to 15,112,295 shares of common stock on September 10, 2014
|
71,028,086 | - | ||||||
Convert Series B preferred stock to 7,771,192 shares of common stock on September 10, 2014
|
36,524,852 | - | ||||||
Pyramid Oil Company 4,788,085 shares outstanding last day of trading September 10, 2014
|
22,504,000 | - | ||||||
Fair value of Pyramid Oil Company stock options
|
100,500 | - | ||||||
Employee restricted stock awards (178,729 shares, vested April 1, 2013, issued September 11, 2014)
|
- | 486,632 | ||||||
Employee restricted stock awards (107,291 shares, vested and issued September 11, 2014)
|
537,528 | - | ||||||
Employee restricted stock awards forfeited September 8, 2014 (87,851 shares vested April 1, 2013)
|
- | - | ||||||
Stock awards (100,000 shares) to employees, directors and consultants of Pyramid Oil Company
|
||||||||
vested upon the change in control and issued September 11, 2014
|
501,000 | - | ||||||
Balance at end of period: 68,865,962 shares for 2014 and 41,074,953 shares for 2013, no par value
|
133,865,431 | 2,669,465 | ||||||
CAPITAL IN EXCESS OF PAR VALUE OF COMMON STOCK:
|
||||||||
Balance at beginning of 2013 as previously reported
|
- | 2,182,293 | ||||||
Retroactive effect of September 10, 2014 change to no par value
|
- | (2,182,293 | ) | |||||
Balance at end of period
|
- | - | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME:
|
||||||||
Balance at beginning of period
|
38,770 | 268,841 | ||||||
Comprehensive income (loss) from commodity derivative instruments, net of income taxes
|
(1,763 | ) | (230,071 | ) | ||||
Balance at end of period
|
37,007 | 38,770 | ||||||
ACCUMULATED EARNINGS (DEFICIT):
|
||||||||
Balance at beginning of period
|
(50,596,088 | ) | (10,885,832 | ) | ||||
Net loss attributable to Yuma Energy, Inc.
|
(18,997,712 | ) | (33,050,103 | ) | ||||
Preferred stock accretion (Series A and B)
|
(786,536 | ) | (1,101,972 | ) | ||||
Preferred stock cash dividends (Series A and B)
|
(445,152 | ) | (145,900 | ) | ||||
Preferred stock dividends paid in kind (Series A and B)
|
(4,133,380 | ) | (5,412,281 | ) | ||||
Balance at end of period
|
(74,958,868 | ) | (50,596,088 | ) | ||||
TOTAL EQUITY
|
$ | 58,943,570 | $ | (47,887,853 | ) | |||
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Reconciliation of net loss to net cash provided by operating activities:
|
||||||||
Net loss
|
$ | (18,997,712 | ) | $ | (7,067,374 | ) | ||
Increase in fair value of preferred stock derivative liability
|
15,676,842 | 7,581,234 | ||||||
Depreciation, depletion and amortization of property and equipment
|
15,604,283 | 7,315,103 | ||||||
Accretion of asset retirement obligation
|
438,717 | 464,306 | ||||||
Stock-based compensation net of capitalized cost
|
598,819 | 427,374 | ||||||
Amortization of other assets and liabilities
|
140,954 | 117,951 | ||||||
Deferred tax expense (benefit)
|
(1,710,632 | ) | (1,998,800 | ) | ||||
Bad debt expense
|
85,101 | 149,611 | ||||||
Gain on disposal of property and equipment
|
- | (19,500 | ) | |||||
Write off deferred offering costs
|
1,257,160 | - | ||||||
Write off credit financing costs
|
- | 313,652 | ||||||
Amortization of benefit from commodity derivatives (sold) and purchased, net
|
(70,313 | ) | (54,450 | ) | ||||
Net commodity derivatives mark-to-market gain
|
(921,026 | ) | (439,478 | ) | ||||
Other
|
2,057 | (1,716 | ) | |||||
Changes in current operating assets and liabilities:
|
||||||||
Accounts receivable
|
1,868,318 | (634,350 | ) | |||||
Note receivable
|
- | 216 | ||||||
Other current assets
|
(274,235 | ) | 426,186 | |||||
Accounts payable
|
8,024,528 | 7,472,589 | ||||||
Other current liabilities
|
1,007,872 | 951,624 | ||||||
Noncurrent payable to commodity derivative advisor and deferred commodity
|
||||||||
derivative premiums
|
(36,824 | ) | - | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
22,693,909 | 15,004,178 | ||||||
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital expenditures on property and equipment
|
$ | (17,901,264 | ) | $ | (22,313,654 | ) | ||
Proceeds from sale of property
|
307,600 | 698,766 | ||||||
Cash received from merger
|
4,550,082 | - | ||||||
Short-term investments retired
|
2,142,128 | - | ||||||
Decrease (increase) in noncurrent receivable from affiliate
|
95,634 | (2,493 | ) | |||||
NET CASH USED BY INVESTING ACTIVITIES
|
(10,805,820 | ) | (21,617,381 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from borrowing
|
901,257 | 872,754 | ||||||
Payments on borrowings
|
(514,118 | ) | (613,691 | ) | ||||
Change in borrowing on line of credit
|
(6,250,000 | ) | 6,740,000 | |||||
Line of credit financing costs
|
(47,291 | ) | (556,276 | ) | ||||
Preparation costs to issue preferred stock
|
(165,034 | ) | - | |||||
Deferred offering costs
|
- | (234,679 | ) | |||||
Cash dividends to preferred stockholders (Series A and Series B)
|
(445,152 | ) | (59,850 | ) | ||||
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
|
(6,520,338 | ) | 6,148,258 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
5,367,751 | (464,945 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
4,194,511 | 5,285,022 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 9,562,262 | $ | 4,820,077 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest payments (net of interest capitalized)
|
$ | 210,323 | $ | (23,569 | ) | |||
Interest capitalized
|
$ | 767,908 | $ | 788,214 | ||||
Supplemental disclosure of significant non-cash activity:
|
||||||||
Preferred dividends paid in kind (Series A and Series B)
|
$ | 4,133,380 | $ | 2,228,545 | ||||
Fair value measurements at September 30, 2014
|
||||||||||||||||
Significant
|
||||||||||||||||
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
in Active
|
Observable
|
Unobservable
|
||||||||||||||
Markets
|
Inputs
|
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Commodity derivatives – oil
|
$ | - | $ | 873,601 | $ | - | $ | 873,601 | ||||||||
Commodity derivatives – gas
|
- | 58,575 | - | 58,575 | ||||||||||||
Total assets
|
$ | - | $ | 932,176 | $ | - | $ | 932,176 | ||||||||
Liabilities:
|
||||||||||||||||
Commodity derivatives – gas
|
$ | - | $ | 20,849 | $ | - | $ | 20,849 | ||||||||
Preferred stock derivative liability
|
- | - | - | - | ||||||||||||
Total Liabilities
|
$ | - | $ | 20,849 | $ | - | $ | 20,849 |
Fair value measurements at December 31, 2013
|
||||||||||||||||
Significant
|
||||||||||||||||
Quoted Prices
|
Other
|
Significant
|
||||||||||||||
in Active
|
Observable
|
Unobservable
|
||||||||||||||
Markets
|
Inputs
|
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Commodity derivatives – oil
|
$ | - | $ | 818,637 | $ | - | $ | 818,637 | ||||||||
Total assets
|
$ | - | $ | 818,637 | $ | - | $ | 818,637 | ||||||||
Liabilities:
|
||||||||||||||||
Commodity derivatives – gas
|
$ | - | $ | 472,564 | $ | - | $ | 472,564 | ||||||||
Commodity derivatives – oil
|
- | 423,217 | - | 423,217 | ||||||||||||
Preferred stock derivative liability
|
- | - | 51,290,414 | 51,290,414 | ||||||||||||
Total Liabilities
|
$ | - | $ | 895,781 | $ | 51,290,414 | $ | 52,186,195 |
Preferred Stock
|
||||
Derivative Liability
|
||||
September 30, 2014
|
$ | - | ||
December 31, 2013
|
51,290,414 | |||
Total change
|
$ | (51,290,414 | ) |
Prices are Weighted Averages
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
Settlement
|
Settlement
|
Settlement
|
||||||||||
NATURAL GAS (MMBtu):
|
||||||||||||
3-way collars
|
||||||||||||
Volume
|
415,862 | 2,377,371 | 1,122,533 | |||||||||
Ceiling sold price (call)
|
$ | 4.35 | $ | 4.47 | $ | 4.35 | ||||||
Floor purchased price (put)
|
$ | 4.07 | $ | 4.00 | $ | 4.10 | ||||||
Floor sold price (short put)
|
$ | 3.30 | $ | 3.25 | $ | 3.25 | ||||||
Swaps
|
||||||||||||
Volume
|
382,570 | 458,622 | - | |||||||||
Price
|
$ | 4.05 | $ | 4.08 | - | |||||||
Reverse Swaps
|
||||||||||||
Volume
|
122,974 | 293,234 | - | |||||||||
Price
|
$ | 4.27 | $ | 4.33 | - | |||||||
CRUDE OIL (Bbls):
|
||||||||||||
3-way collars
|
||||||||||||
Volume
|
11,400 | 89,512 | 70,263 | |||||||||
Ceiling sold price (call)
|
$ | 103.70 | $ | 104.36 | $ | 106.39 | ||||||
Floor purchased price (put)
|
$ | 90.99 | $ | 86.49 | $ | 92.38 | ||||||
Floor sold price (short put)
|
$ | 69.34 | $ | 65.82 | $ | 72.38 | ||||||
Swaps
|
- | |||||||||||
Volume
|
43,375 | - | - | |||||||||
Price
|
$ | 95.46 | ||||||||||
Swaps with short puts
|
||||||||||||
Volume
|
13,500 | - | - | |||||||||
Swap price
|
$ | 89.34 | ||||||||||
Floor sold price (short put)
|
$ | 70.00 | - | - | ||||||||
Reverse Swaps
|
||||||||||||
Volume
|
33,999 | - | - | |||||||||
Price
|
$ | 95.30 | - | - | ||||||||
Swaps at Argus Light Louisiana Sweet
|
||||||||||||
Volume
|
10,453 | - | - | |||||||||
Price
|
$ | 99.40 | - | - | ||||||||
Put Spread
|
||||||||||||
Volume
|
- | 27,588 | - | |||||||||
Floor purchased price (put)
|
- | $ | 90.00 | * | - | |||||||
Floor sold price (short put)
|
- | $ | 75.00 | * | - |
Fair value as of
|
||||||||
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Asset commodity derivatives:
|
||||||||
Current assets
|
$ | 1,576,732 | $ | 1,109,403 | ||||
Noncurrent assets
|
1,617,039 | 2,861,225 | ||||||
3,193,771 | 3,970,628 | |||||||
Liability commodity derivatives:
|
||||||||
Current liabilities
|
(1,193,129 | ) | (1,786,535 | ) | ||||
Noncurrent liabilities
|
(1,089,315 | ) | (2,261,237 | ) | ||||
(2,282,444 | ) | (4,047,772 | ) | |||||
Total commodity derivative instruments
|
$ | 911,327 | $ | (77,144 | ) |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Sales of natural gas and crude oil
|
$ | 7,821,497 | $ | 6,832,601 | $ | 31,837,566 | $ | 19,086,656 | ||||||||
Gains (losses) realized on commodity
|
||||||||||||||||
derivatives
|
(223,614 | ) | (148,436 | ) | (2,264,661 | ) | (148,678 | ) | ||||||||
Gains (losses) unrealized on
|
||||||||||||||||
commodity derivatives
|
2,607,959 | (823,361 | ) | 921,026 | 439,478 | |||||||||||
Amortized gains from benefit of sold
|
||||||||||||||||
qualified gas options
|
23,438 | 18,150 | 70,313 | 54,450 | ||||||||||||
Total sales of natural gas and crude oil
|
$ | 10,229,280 | $ | 5,878,954 | $ | 30,564,244 | $ | 19,431,906 |
Nine Months Ended
|
Year Ended
|
|||||||||||||||
September 30, 2014
|
December 31, 2013
|
|||||||||||||||
Before tax
|
After tax
|
Before tax
|
After tax
|
|||||||||||||
Balance, beginning of period
|
$ | 63,041 | $ | 38,770 | $ | 437,140 | $ | 268,841 | ||||||||
Other reclassifications due to expired contracts
|
||||||||||||||||
previously subject to hedge accounting rules
|
67,446 | 41,479 | (301,499 | ) | (185,422 | ) | ||||||||||
Amortized gains from benefit of sold qualified
|
||||||||||||||||
options realized in income
|
(70,313 | ) | (43,242 | ) | (72,600 | ) | (44,649 | ) | ||||||||
Balance, end of period
|
$ | 60,174 | $ | 37,007 | $ | 63,041 | $ | 38,770 |
Number of
|
Weighted
|
||||
Unvested
|
Average
|
||||
RSA
|
Grant-Date
|
||||
Shares
|
Fair Value
|
||||
Unvested shares as of January 1, 2014
|
1,895,602 |
$3.42 per share
|
|||
Granted on March 6, 2014
|
196,148 |
$3.89 per share
|
|||
Granted on April 1, 2014
|
33,322 |
$3.89 per share
|
|||
Granted on May 20, 2014
|
341,554 |
$3.96 per share
|
|||
Vested
|
(107,291 | ) |
$3.08 per share
|
||
Forfeited
|
- | ||||
Unvested shares as of September 30, 2014
|
2,359,335 |
$3.56 per share
|
Weighted-
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Options
|
Price
|
Life (Years)
|
Value
|
|||||||||||||
Outstanding at December 31, 2013
|
105,000 | $ | 5.17 | 4.66 | $ | - | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Forfeited
|
- | - | - | - | ||||||||||||
Outstanding at September 30, 2014
|
105,000 | $ | 5.17 | 3.91 | $ | - | ||||||||||
Vested and expected to vest at
|
||||||||||||||||
September 30, 2014
|
105,000 | $ | 5.17 | 3.91 | $ | - | ||||||||||
Exercisable at September 30, 2014
|
105,000 | $ | 5.17 | 3.91 | $ | - |
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Weighted-
|
Weighted
|
Weighted
|
||||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||||
Exercise
|
Number of
|
Remaining
|
Exercise
|
Number of
|
Exercise
|
|||||||||||||||||
Price
|
Shares
|
Life (Years)
|
Price
|
Shares
|
Price
|
|||||||||||||||||
$ | 5.40 | 5,000 | 1.67 | $ | 5.40 | 5,000 | $ | 5.40 | ||||||||||||||
$ | 5.16 | 100,000 | 4.02 | $ | 5.16 | 100,000 | $ | 5.16 | ||||||||||||||
105,000 | 105,000 | |||||||||||||||||||||
Weighted
|
|||||
Number of
|
average
|
||||
Unvested
|
grant-date
|
||||
RSUs
|
fair value
|
||||
Unvested shares as of January 1, 2014
|
119,659 |
$2.72 per share
|
|||
Forfeited
|
(24,235 | ) |
$2.72 per share
|
||
Unvested shares as of September 30, 2014
|
95,424 |
$2.72 per share
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Series A Preferred Stock
|
11,662,749 | 13,719,925 | 13,411,550 | 12,708,122 | ||||||||||||
Series B Preferred Stock
|
5,997,333 | 7,359,805 | 7,037,394 | 7,224,242 | ||||||||||||
Restricted Stock Awards
|
2,443,318 | 1,958,475 | 2,227,892 | 1,145,094 | ||||||||||||
Restricted Stock Units
|
101,104 | 121,931 | 109,086 | 82,550 | ||||||||||||
20,204,504 | 23,160,136 | 22,785,922 | 21,160,008 |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Variable rate revolving credit facility payable to Société Générale,
|
||||||||
OneWest Bank, FSB, and View Point Bank, N.A., maturing
|
||||||||
May 20, 2017, secured by oil and natural gas properties held by
|
||||||||
Yuma Exploration and Production Company, Inc. and guaranteed
|
||||||||
by The Yuma Companies, Inc.
|
$ | 24,965,000 | $ | 31,215,000 | ||||
Installment loan due February 28, 2015, originating from the
|
||||||||
financing of insurance premiums at 3.65% interest rate.
|
565,166 | 178,027 | ||||||
25,530,166 | 31,393,027 | |||||||
Less: current portion
|
(565,166 | ) | (178,027 | ) | ||||
Total long-term debt
|
$ | 24,965,000 | $ | 31,215,000 |
LIBOR
|
||||||||
Borrowing base utilization
|
Prime margin
|
margin
|
||||||
Utilization ≥ 90%
|
2.25 | % | 3.25 | % | ||||
75% ≤ utilization < 90%
|
2.00 | % | 3.00 | % | ||||
50% ≤ utilization < 75%
|
1.75 | % | 2.75 | % | ||||
25% ≤ utilization < 50%
|
1.50 | % | 2.50 | % | ||||
Utilization < 25%
|
1.25 | % | 2.25 | % |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Credit facility
|
$ | 308,486 | $ | 223,967 | $ | 889,111 | $ | 748,450 | ||||||||
Credit facility commitment fees
|
19,133 | 14,140 | 47,209 | 39,053 | ||||||||||||
Amortization and write offs of
|
||||||||||||||||
credit facility loan costs
|
47,715 | 36,436 | 140,955 | 431,603 | ||||||||||||
Insurance installment loan
|
4,955 | 6,222 | 9,244 | 12,789 | ||||||||||||
Louisiana Mineral Board
|
- | 32,383 | - | 32,383 | ||||||||||||
Other interest charges
|
616 | 331 | 3,069 | 12,724 | ||||||||||||
Capitalized interest
|
(266,500 | ) | (249,403 | ) | (767,908 | ) | (788,214 | ) | ||||||||
Total interest expense
|
$ | 114,405 | $ | 64,076 | $ | 321,680 | $ | 488,788 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Consolidated net income (loss) before
|
||||||||||||||||
income taxes
|
$ | (11,728,669 | ) | $ | 13,774,648 | $ | (20,708,344 | ) | $ | (9,066,174 | ) | |||||
Income tax expense (benefit)
|
(576,632 | ) | (2,040,000 | ) | (1,710,632 | ) | (1,998,800 | ) | ||||||||
Effective tax rate
|
5 | % | (15 | %) | 8 | % | 22 | % |
Series A Preferred Stock Dividends
|
$ | 214,903 | ||
Series B Preferred Stock Dividends
|
131,289 | |||
Total Dividends
|
$ | 346,192 |
Purchase Price(i):
|
||||
Shares of Pyramid common stock held by Pyramid stockholders
|
4,788,085 | |||
Pyramid common stock price (September 10, 2014 closing)
|
$ | 4.70 | ||
Fair value of Pyramid common stock issued
|
$ | 22,504,000 | ||
Consideration to be paid to Pyramid’s stockholders
|
- | |||
Issuance of 100,000 shares to Pyramid affiliated persons at $5.01 per share (September 11, 2014 closing)
|
501,000 | |||
Fair value of Pyramid options assumed by Yuma(iv)
|
100,500 | |||
Total purchase price
|
$ | 23,105,500 | ||
Estimated Fair Value of Liabilities Assumed:
|
||||
Current liabilities
|
$ | 633,917 | ||
Long-term deferred tax liability(ii)
|
4,879,724 | |||
Other non-current liabilities (asset retirement obligation)
|
1,334,278 | |||
Amount attributable to liabilities assumed
|
6,847,9191 | |||
Total purchase price plus liabilities assumed
|
29,953,419 | |||
Estimated Fair Value of Assets Acquired:
|
||||
Current assets
|
9,066,589 | |||
Natural gas and oil properties(iii)
|
10,726,715 | |||
Net other operating property and equipment
|
4,158,420 | |||
Other non-current assets
|
261,380 | |||
Amount attributable to assets acquired
|
24,213,104 | |||
Goodwill(i)
|
$ | 5,740,315 |
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
Revenues
|
$ | 34,352,101 | $ | 23,472,140 | ||||
Net loss from operations
|
$ | (18,700,021 | ) | $ | (7,765,019 | ) | ||
Net loss per share:
|
||||||||
Basic
|
$ | (.27 | ) | $ | (.18 | ) | ||
Diluted
|
$ | (.27 | ) | $ | (.18 | ) |
●
|
The borrowing base utilization percentage is 90% or less giving effect for the dividend payment;
|
●
|
No default has occurred and will not occur with the dividend payment;
|
●
|
All dividend payments need to be made in accordance with the Certificate of Determination or other agreements governing the Series A Preferred Stock.
|
●
|
our ability to successfully integrate acquired oil and natural gas businesses and operations;
|
●
|
the possibility that acquisitions and divestitures may involve unexpected costs or delays, and that acquisitions may not achieve intended benefits and will divert management’s time and energy, which could have an adverse effect on our financial position, results of operations, or cash flows;
|
●
|
risks in connection with potential acquisitions and the integration of significant acquisitions;
|
●
|
we may incur more debt; higher levels of indebtedness make us more vulnerable to economic downturns and adverse developments in our business;
|
●
|
our ability to successfully develop our large inventory of undeveloped acreage in our resource plays;
|
●
|
access to adequate gathering systems, processing facilities, transportation take-away capacity to move our production to market and marketing outlets to sell our production at market prices, which is necessary to fully execute our capital program;
|
●
|
our ability to generate sufficient cash flow from operations, borrowings or other sources to enable us to fund our operations, satisfy our obligations and fully develop our undeveloped acreage positions;
|
●
|
volatility in commodity prices for oil and natural gas;
|
●
|
our ability to replace our oil and natural gas reserves;
|
●
|
the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated costs;
|
●
|
the potential for production decline rates for our wells to be greater than we expect;
|
●
|
our ability to retain key members of senior management and key technical employees;
|
●
|
environmental risks;
|
●
|
drilling and operating risks;
|
●
|
exploration and development risks;
|
●
|
the possibility that the industry may be subject to future regulatory or legislative actions (including additional taxes and changes in environmental regulations);
|
●
|
general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business, may be less favorable than expected, including the possibility that economic conditions in the United States will worsen and that capital markets are disrupted, which could adversely affect demand for oil and natural gas and make it difficult to access capital;
|
●
|
social unrest, political instability or armed conflict in major oil and natural gas producing regions outside the United States, such as Africa, the Middle East, and armed conflict or acts of terrorism or sabotage;
|
●
|
other economic, competitive, governmental, regulatory, legislative, including federal, state and tribal regulations and laws, geopolitical and technological factors that may negatively impact our business, operations or oil and natural gas prices;
|
●
|
the insurance coverage maintained by us may not adequately cover all losses that may be sustained in connection with our business activities;
|
●
|
title to the properties in which we have an interest may be impaired by title defects;
|
●
|
management’s ability to execute our plans to meet our goals;
|
●
|
the cost and availability of goods and services, such as drilling rigs; and
|
●
|
our dependency on the skill, ability and decisions of third party operators of the oil and natural gas properties in which we have a non-operated working interest.
|
●
|
transition existing inventory of reserves into oil and natural gas production;
|
●
|
add to project inventory through ongoing prospect generation, exploration and strategic acquisitions;
|
●
|
acquire additional working interests within drilling units in existing operated proved undeveloped locations; and
|
●
|
retain a greater percentage working interest in, and operatorship of, our projects going forward
|
●
|
unconventional oil resource plays;
|
●
|
onshore liquids-rich projects through the use of 3-D seismic surveys; and
|
●
|
identification of high impact deep onshore prospects located beneath known producing trends through the use of 3-D seismic surveys.
|
●
|
Extensive technical knowledge and history of operations in the Gulf Coast region. Since 1983 Yuma Co. or its predecessor has operated in the Gulf Coast region, which is an area that extends through Texas, Louisiana and Mississippi. Our extensive understanding of the geology and experience in interpreting well control, core and 3-D seismic data in this area provides us with a competitive advantage in exploring and developing projects in the Gulf Coast region. We have cultivated amicable and mutually beneficial relationships with acreage owners in this region and adjacent oil and gas operators, which generally provides for effective leasing and development activities.
|
●
|
In-house technical expertise in 3-D seismic programs. We design and generate in-house 3-D seismic survey programs on many of our projects. By controlling the 3-D seismic program from field acquisition through seismic processing and interpretation, we gain a competitive advantage through proprietary knowledge of the project.
|
●
|
Liquids-rich, quality assets with attractive economics. Our reserves and drilling locations are primarily oil plays with associated liquids-rich natural gas.
|
●
|
Diversified portfolio of producing and non-producing assets. Our current portfolio of producing and non-producing assets covers a large area within the U.S. Gulf Coast, the Bakken/Three Forks shale in North Dakota, and Kern and Santa Barbara Counties in California.
|
●
|
Significant inventory of oil and gas assets. We have a significant inventory of both proved reserves and significant growth assets that we believe can be developed over the near to medium term. In addition, we have the ability to organically generate new oil and gas prospects and projects through techniques utilized by our experienced management team, which include (1) analyzing subsurface data and 2-D seismic data to identify areas where a 3-D seismic survey could be acquired for the generation of oil and gas prospects, (2) negotiating mineral rights with large landowners in prospective areas, and (3) reprocessing of older 3-D seismic surveys utilizing new technology. Once these techniques are applied, the technical team surveys prospective areas for new oil and gas deposits and what methods might be employed to identify those likely locations. In recent years, the predominant method used has been to conduct 3-D seismic surveys. Once a survey has been acquired, the team evaluates the seismic data.
|
●
|
Company operated assets. In order to maintain better control over our assets, we have established a leasehold position comprised primarily of assets where we are the operator. By controlling operations, we are able to dictate the pace of development and better manage the cost, type, and timing of exploration and development activities.
|
●
|
Experienced management team. We have a highly qualified management team with many years of industry experience, including extensive experience in the Gulf Coast region. Our team has substantial expertise in the design, acquisition, processing and interpretation of new 3-D seismic surveys, and our experienced operations staff allows for efficient turnaround from project identification to drilling to production.
|
● |
Experienced board of directors. Our directors have substantial experience managing successful public companies and realizing value for investors through the development, acquisition and monetization of both conventional and unconventional oil and gas assets in the Gulf Coast region.
|
●
|
For the three months ended September 30, 2014, production averaged 1,646 Boe/d compared to 1,377 Boe/d for the three months ended September 30, 2013, which represents a 19.5% increase.
|
●
|
For the three months ended September 30, 2014, revenues totaled $10.6 million compared to $6.2 million for the three months ended September 30, 2013, which represents a 70.0% increase.
|
●
|
For the three months ended September 30, 2014, our crude oil revenues were approximately $4.9 million, an increase of 2.6% compared to the three months ended September 30, 2013.
|
●
|
For the three months ended September 30, 2014, our gas revenues were approximately $2.1 million, an increase of 22.3% compared to the three months ended September 30, 2013.
|
●
|
During the third quarter of 2014, we successfully drilled and completed the Nettles 39-1 well where we hold a 32.5% working interest.
|
●
|
For the nine months ended September 30, 2014, production averaged 2,270 Boe/d compared to 1,110 Boe/d for the same period in 2013, representing a 104.5% increase.
|
●
|
For the nine months ended September 30, 2014, crude oil revenues were approximately $17.5 million, an increase of 26.5% compared to the same period in 2013.
|
●
|
For the nine months ended September 30, 2014, natural gas revenues were approximately $10.6 million, an increase of 200.5% compared to the nine months ended September 30, 2013.
|
1.
|
The Thibodeaux No. 1 well was drilled to a total depth of 19,079 feet and logged a net 217 feet of hydrocarbon bearing sand. The well was put on production in March 2012.
|
2.
|
The Broussard No. 2 well was drilled to a depth of 19,150 feet on the north side of the structure in 2012. This well logged a net 328 feet of hydrocarbon bearing sand in the Lower Planulina Cris R-1 and Cris R-2A, B and C sandstones. The well was put on production in September 2012.
|
3.
|
The Broussard No. 1 well (originally drilled and temporarily abandoned in 2007) was re-entered and sidetracked to the upper Cris R sand as an acceleration well. The Broussard No. 1 sidetrack was drilled to a depth of 18,035 feet and encountered the upper productive sand in 2013. The well was put on production in May 2013.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Production volumes:
|
|
|
||||||||||||||
Crude oil and condensate (Bbl)
|
49,475 | 43,509 | 172,965 | 128,970 | ||||||||||||
Natural gas (Mcf)
|
513,002 | 433,967 | 2,229,405 | 903,959 | ||||||||||||
Natural gas liquids (Bbl)
|
16,457 | 10,865 | 77,389 | 23,519 | ||||||||||||
Total (Boe) (1)
|
151,432 | 126,702 | 621,922 | 303,149 | ||||||||||||
Average prices realized:
|
||||||||||||||||
Excluding commodity derivatives (both realized and unrealized)
|
||||||||||||||||
Crude oil and condensate (per Bbl)
|
$ | 98.58 | $ | 109.25 | $ | 101.23 | $ | 107.30 | ||||||||
Natural gas (per Mcf)
|
$ | 4.04 | $ | 3.91 | $ | 4.76 | $ | 3.90 | ||||||||
Natural gas liquids (per Bbl)
|
$ | 40.73 | $ | 41.72 | $ | 41.25 | $ | 42.64 | ||||||||
Including commodity derivatives (realized only)
|
||||||||||||||||
Crude oil and condensate (per Bbl)
|
$ | 93.66 | $ | 101.57 | $ | 93.68 | $ | 104.99 | ||||||||
Natural gas (per Mcf)
|
$ | 4.13 | $ | 4.38 | $ | 4.36 | $ | 4.13 | ||||||||
Natural gas liquids (per Bbl)
|
$ | 40.73 | $ | 41.72 | $ | 41.25 | $ | 42.64 |
(1)
|
Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (1 Boe).
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Sales of natural gas and crude oil:
|
||||||||||||||||
Crude oil and condensate
|
$ | 4,877,227 | $ | 4,753,431 | $ | 17,508,388 | $ | 13,838,521 | ||||||||
Natural gas
|
2,074,901 | 1,696,623 | 10,606,760 | 3,529,837 | ||||||||||||
Natural gas liquids
|
670,267 | 453,262 | 3,192,449 | 1,002,775 | ||||||||||||
Realized gain/(loss) on commodity derivatives
|
(200,176 | ) | (130,286 | ) | (2,194,348 | ) | (94,228 | ) | ||||||||
Unrealized gain/(loss) on commodity derivatives
|
2,607,959 | (823,361 | ) | 921,026 | 439,478 | |||||||||||
Gas marketing sales
|
199,102 | (70,715 | ) | 529,969 | 715,523 | |||||||||||
Other revenue
|
341,819 | 308,092 | 885,455 | 739,584 | ||||||||||||
Total revenues
|
$ | 10,571,099 | $ | 6,187,046 | $ | 31,449,699 | $ | 20,171,490 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Lease operating expenses
|
$ | 2,838,055 | $ | 2,394,813 | $ | 9,761,203 | $ | 6,371,172 | ||||||||
LOE per Boe
|
$ | 18.74 | $ | 18.90 | $ | 15.70 | $ | 21.02 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
General and administrative
|
|
|||||||||||||||
Stock-based compensation
|
$ | 521,978 | $ | 27,105 | $ | 613,917 | $ | 553,764 | ||||||||
Capitalized
|
- | (9,144 | ) | (15,099 | ) | (126,390 | ) | |||||||||
Net stock-based compensation
|
521,978 | 17,961 | 598,818 | 427,374 | ||||||||||||
Other
|
3,033,711 | 1,881,676 | 9,335,235 | 5,849,574 | ||||||||||||
Capitalized
|
(636,931 | ) | (656,773 | ) | (1,999,334 | ) | (2,035,135 | ) | ||||||||
Net Other
|
2,396,780 | 1,224,903 | 7,335,901 | 3,814,439 | ||||||||||||
Net general and administrative
|
$ | 2,918,758 | $ | 1,242,864 | $ | 7,934,719 | $ | 4,241,813 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
DD&A
|
$ | 3,865,675 | $ | 3,203,017 | $ | 15,604,283 | $ | 7,315,103 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Net Income
|
$ | (11,152,037 | ) | $ | 15,814,648 | $ | (18,997,712 | ) | $ | (7,067,374 | ) | |||||
Add: Depreciation, depletion & amortization of property and equipment
|
3,865,675 | 3,203,017 | 15,604,283 | 7,315,103 | ||||||||||||
Add: Interest expense, net of interest income and amounts capitalized
|
112,078 | 62,009 | 316,850 | 482,564 | ||||||||||||
Deduct: Income tax benefit
|
(576,632 | ) | (2,040,000 | ) | (1,710,632 | ) | (1,998,800 | ) | ||||||||
EBITDA
|
(7,750,916 | ) | 17,039,674 | (4,787,211 | ) | (1,268,507 | ) | |||||||||
Add: Costs to obtain a public listing
|
844,482 | - | 2,729,447 | - | ||||||||||||
Add (deduct): Increase (decrease) in value of preferred stock derivative liability
|
11,172,928 | (15,382,964 | ) | 15,676,842 | 7,581,234 | |||||||||||
Add: Accretion of asset retirement obligation
|
150,628 | 187,025 | 438,717 | 464,306 | ||||||||||||
Add: Bank mandated commodity derivative novation cost
|
- | - | - | 175,000 | ||||||||||||
Deduct: Amortization of benefit from commodity derivatives sold
|
(23,438 | ) | (18,150 | ) | (70,313 | ) | (54,450 | ) | ||||||||
Add (deduct): Net commodity derivatives mark-to-market loss (gain)
|
(2,607,959 | ) | 823,361 | (921,026 | ) | (439,478 | ) | |||||||||
Adjusted EBITDA
|
$ | 1,785,725 | $ | 2,648,946 | $ | 13,066,456 | $ | 6,458,105 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Interest expense
|
$ | 380,905 | $ | 313,479 | $ | 1,089,588 | $ | 1,277,002 | ||||||||
Interest capitalized
|
(266,500 | ) | (249,403 | ) | (767,908 | ) | (788,214 | ) | ||||||||
Net
|
$ | 114,405 | $ | 64,076 | $ | 321,680 | $ | 488,788 | ||||||||
Bank debt
|
$ | 24,965,000 | $ | 24,615,000 | $ | 24,965,000 | $ | 24,615,000 |
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
Cash flows provided by operating activities
|
$ | 22,693,909 | $ | 15,004,178 | ||||
Cash flows used for investing activities
|
(10,805,820 | ) | (21,617,381 | ) | ||||
Cash flows provided by (used for) financing activities
|
(6,520,338 | ) | 6,148,258 | |||||
Net increase (decrease) in cash
|
$ | 5,367,751 | $ | (464,945 | ) |
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
Acquisition of acreage and new properties
|
$ | 3,987,163 | $ | 10,831,259 | ||||
Drilling and completion
|
14,481,398 | 9,696,045 | ||||||
Recompletions, capital workovers and plugging and abandoning (“P&A”)
|
(630,021 | ) | 1,727,716 | |||||
Total oil and natural gas investing activities
|
17,838,540 | 22,255,020 | ||||||
Corporate office property and equipment purchases
|
62,724 | 58,634 | ||||||
Total cash used for capitalized expenditures on property and equipment
|
17,901,264 | 22,313,654 | ||||||
Proceeds from sale of property
|
(307,600 | ) | (698,766 | ) | ||||
Cash received in merger
|
(4,550,082 | ) | - | |||||
Short-term investments retired
|
(2,142,128 | ) | - | |||||
(Decrease) increase in noncurrent receivable from affiliate
|
(95,634 | ) | 2,493 | |||||
Cash flows used for investing activities
|
$ | 10,805,820 | $ | 21,617,381 |
Nine Months Ended
September 30, 2014 |
Year Ended
December 31, 2013
|
|||||||
Credit Facility:
|
||||||||
Balances outstanding, beginning of year
|
$ | 31,215,000 | $ | 17,875,000 | ||||
Activity
|
(6,250,000 | ) | 13,340,000 | |||||
Balances outstanding, end of period
|
$ | 24,965,000 | $ | 31,215,000 |
September 30, 2014
|
December 31, 2013
|
|||||||||||||||
Oil
|
Gas
|
Oil
|
Gas
|
|||||||||||||
Assets
|
||||||||||||||||
Current
|
$ | 325,028 | $ | 58,575 | $ | - | $ | - | ||||||||
Noncurrent
|
548,573 | - | 818,637 | - | ||||||||||||
Liabilities
|
||||||||||||||||
Current
|
- | - | (423,217 | ) | (253,915 | ) | ||||||||||
Noncurrent
|
- | (20,849 | ) | - | (218,649 | ) |
●
|
effectively manage cash flow to minimize price volatility and generate internal funds available for operations, capital development projects and additional acquisitions; and
|
●
|
ensure our ability to support our exploration activities as well as administrative and debt service obligations.
|
Asset for
|
||||||||||||||||
Commodity
|
Operating
|
Asset Retirement
|
||||||||||||||
Debt (1)
|
Derivatives (2)
|
Leases
|
Obligations
|
|||||||||||||
2014
|
$ | - | $ | 111,235 | $ | 135,181 | $ | - | ||||||||
2015
|
565,166 | 347,656 | 544,718 | 1,188,711 | ||||||||||||
2016
|
- | 452,436 | 553,053 | 992,589 | ||||||||||||
2017
|
24,965,000 | - | 538,291 | 311,865 | ||||||||||||
2018
|
- | - | 2,264 | 727,665 | ||||||||||||
Thereafter
|
- | - | - | 9,301,821 | ||||||||||||
Totals
|
$ | 25,530,166 | $ | 911,327 | $ | 1,773,507 | $ | 12,522,651 |
(1)
|
This table does not include future commitment fees, interest expense or other fees because the credit agreement is a floating rate instrument, and we cannot determine with accuracy the timing of future loans, advances, repayments or future interest rates to be charged.
|
(2)
|
Represents the estimated future payments under our oil and natural gas derivative contracts based on the future market prices as of September 30, 2014. These amounts will change as oil and natural gas commodity prices change.
|
●
|
the domestic and foreign supply of oil and natural gas;
|
●
|
the ability of members of the Organization of Petroleum Exporting Countries and other producing countries to agree upon and maintain oil prices and production levels;
|
●
|
social unrest and political instability, particularly in major oil and natural gas producing regions outside the United States, such as northern Africa and the Middle East, and armed conflict or terrorist attacks, whether or not in oil or natural gas producing regions;
|
●
|
the level of consumer product demand;
|
●
|
the growth of consumer product demand in emerging markets, such as China;
|
●
|
labor unrest in oil and natural gas producing regions;
|
●
|
weather conditions, including hurricanes and other natural occurrences that affect the supply and/or demand of oil and natural gas;
|
●
|
the price and availability of alternative fuels;
|
●
|
the price of foreign imports;
|
●
|
worldwide economic conditions; and
|
●
|
the availability of liquid natural gas imports.
|
●
|
human error, accidents, labor force and other factors beyond our control that may cause personal injuries or death to persons and destruction or damage to equipment and facilities;
|
●
|
blowouts, fires, hurricanes, pollution and equipment failures that may result in damage to or destruction of wells, producing formations, production facilities and equipment and increased drilling and production costs;
|
●
|
unavailability of materials and equipment;
|
●
|
engineering and construction delays;
|
●
|
unanticipated transportation costs and delays;
|
●
|
unfavorable weather conditions;
|
●
|
hazards resulting from unusual or unexpected geological or environmental conditions;
|
●
|
environmental regulations and requirements;
|
●
|
accidental leakage of toxic or hazardous materials, such as petroleum liquids or drilling fluids, into the environment;
|
●
|
hazards resulting from the presence of hydrogen sulfide or other contaminants in natural gas we produce;
|
●
|
changes in laws and regulations, including laws and regulations applicable to oil and natural gas activities or markets for the oil and natural gas produced;
|
●
|
fluctuations in supply and demand for oil and natural gas causing variations of the prices we receive for our oil and natural gas production; and
|
●
|
the availability of alternative fuels and the price at which they become available.
|
●
|
unexpected drilling conditions;
|
●
|
pressure or irregularities in formations;
|
●
|
equipment failures or accidents and shortages or delays in the availability of drilling and completion equipment and services;
|
●
|
adverse weather conditions, including hurricanes; and
|
●
|
compliance with governmental requirements.
|
●
|
water discharge and disposal permits for drilling operations;
|
●
|
drilling bonds;
|
●
|
drilling permits;
|
●
|
reports concerning operations;
|
●
|
air quality, noise levels and related permits;
|
●
|
spacing of wells;
|
●
|
rights-of-way and easements;
|
●
|
unitization and pooling of properties;
|
●
|
pipeline construction;
|
●
|
gathering, transportation and marketing of oil and natural gas;
|
●
|
taxation; and
|
●
|
waste transport and disposal permits and requirements.
|
●
|
personal injury;
|
●
|
bodily injury;
|
●
|
third party property damage;
|
●
|
medical expenses;
|
●
|
legal defense costs;
|
●
|
pollution in some cases;
|
●
|
well blowouts in some cases; and
|
●
|
workers compensation.
|
●
|
our production is less than expected;
|
●
|
there is a widening of price differentials between delivery points for our production; or
|
●
|
the counterparties to our hedging agreements fail to perform under the contracts.
|
Form 10-Q for the quarter ended September 30, 2014.
|
||||||||||||||||||
Incorporated by Reference
|
||||||||||||||||||
Exhibit No.
|
Description
|
Form
|
SEC File No.
|
Exhibit
|
Filing Date
|
Filed Herewith
|
Furnished Herewith
|
|||||||||||
10.1
|
Employment Agreement dated October 15, 2014 between Yuma Energy, Inc. and Paul D. McKinney.
|
X
|
||||||||||||||||
31.1
|
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
X
|
||||||||||||||||
31.2
|
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
X
|
||||||||||||||||
32.1
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
X
|
||||||||||||||||
32.2
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
|
X
|
||||||||||||||||
101.INS*
|
XBRL Instance Document.
|
X
|
||||||||||||||||
101.SCH*
|
XBRL Schema Document.
|
X
|
||||||||||||||||
101.CAL*
|
XBRL Calculation Linkbase Document.
|
X
|
||||||||||||||||
101.DEF*
|
XBRL Definition Linkbase Document.
|
X
|
||||||||||||||||
101.LAB*
|
XBRL Label Linkbase Document.
|
X
|
||||||||||||||||
101.PRE*
|
XBRL Presentation Linkbase Document.
|
X
|
||||||||||||||||
YUMA ENERGY, INC.
|
||||
By:
|
/s/ Sam L. Banks
|
|||
Name:
|
Sam L. Banks
|
|||
Date: November 14, 2014
|
Title:
|
President and Chief Executive Officer
(Principal Executive Officer)
|
||
By:
|
/s/ Kirk F. Sprunger
|
|||
Date: November 14, 2014
|
Name:
|
Kirk F. Sprunger
|
||
Title:
|
Chief Financial Officer (Principal Financial Officer)
|
A.
|
Work with the President to develop standards for reservoir engineering, reserve estimates and economic analyses; use portfolio development and ranking to manage prospects; perform post-mortem analyses to compare pre-drill estimates to post-drill results; and integrate operations strategies with financial and land strategies.
|
B.
|
Work with the President to assess the Company’s existing asset acquisition processes and capabilities to ensure effective, thorough, and responsive technical, economic, and risk assessments; recommend and implement changes, as appropriate. Assist in review and evaluation of potential asset acquisitions, evaluate economic opportunities and risks, and reach proper risk/reward decisions.
|
C.
|
Full and direct responsibility for all aspects of operations including drilling, well completion, production and midstream facility management activities. Work to improve production in the field and work with Vice President of Production to integrate the California operations. Establish criteria for accurate and timely measurement of operational results, deliver optimal operating results, and regularly and systematically appraise and evaluate results against industry standards and Company objectives.
|
D.
|
Participate in key decisions as a member of the executive management team including assisting in reviewing monthly, quarterly and annual financial results. Enhance the Company’s future direction by formulating, recommending, and implementing short and long-term plans. Develop, implement and manage process and programs that enhance the Company’s productivity, carry out approved strategies, achieve cost improvements, and attain established objectives.
|
E.
|
Work with the Chairman to assess the Company’s current operating talent and to develop and maintain a sound organization that plans for growth objectives and encompasses attracting, motivating, and retaining key personnel and reducing exposure to underperforming personnel. Mentor subordinates and delegate responsibilities, authorities and direction, as required, ensuring they are defined and understood.
|
F.
|
Oversee the Company’s Environmental, Safety & Regulatory Compliance policies and monitor operations for agency compliance to satisfy federal, state, and local guidelines.
|
G.
|
Keep the Chairman, President and the Board informed through timely and accurate reporting, both formally and informally.
|
A.
|
A base compensation of $29,166.67 per month ($350,000.00 per year) (“Base Compensation”), paid semimonthly on the fifteenth and the last day of each month, consistent with Yuma’s normal payroll procedures.
|
B.
|
Employee is eligible to participate in Yuma’s 2011 Stock Option Plan or any successor plan (the “Stock Plan”) and will enter into a Restricted Stock Agreement in accordance with and subject to the terms of the Stock Plan for a grant of restricted stock as described in Exhibit B, and may in the future, as determined by the Company’s Board of Directors in its sole discretion, periodically receive additional grants under the Stock Plan, subject to the terms and conditions thereof (“Stock Awards”).
|
C.
|
Employee is eligible to participate in Yuma’s Annual Incentive Plan and may, as determined by the Company’s Board of Directors in its sole discretion, receive annual bonuses based on achievement of pre-determined objective individual and corporate performance goals established by the Board of Directors. The target incentive bonus on an annual basis shall be 50% of annual Base Compensation upon Employee’s attainment of 100% of Employee’s individual and corporate goals, and 200% of Employee’s annual Base Compensation based upon Employee’s attainment of 120% of Employee’s individual and corporate goals.
|
D.
|
Employee shall be provided coverage in Yuma’s group medical, dental, and life insurance plans, 401(k) retirement plan, and other insurance plans or benefits provided by Yuma at the levels of coverage and/or amounts commensurate with other employees of the Company and consistent with Yuma’s policies (“Benefits”).
|
E.
|
Employee shall be entitled to five weeks paid annual vacation, to be taken in accordance with Yuma’s policies.
|
F.
|
Yuma agrees to reimburse Employee for all normal business expenses needed to carry out his duties, including, without limitation, expenses of attending pre-approved seminars and conferences, business-related travel, and business-related entertainment. Yuma will reimburse Employee expenses associated with professional associations and continuing professional education with preapproval. Employee must submit a proper expense report consistent with Company policy and regulations promulgated by the Internal Revenue Service in order to obtain reimbursement.
|
A.
|
This Agreement may not be terminated during the Initial Term or any Renewal Term for any reason other than Employee’s resignation due to illness, Employee’s death, or termination by the Company with Cause. Employee’s employment shall terminate, without the need for any action by Company, upon Employee’s death.
|
B.
|
This Agreement may be terminated at the end of the Initial Term or at the end of any Renewal Term by either party upon sixty (60) days written notice to the other party (“Notice Period”). In the case of the Employee wishing to tender his resignation under the provisions of this paragraph, Employee and Yuma agree to keep such resignation quiet and confidential in order for Yuma to find a replacement and make the proper announcement to the other employees of Yuma. Employee agrees to cooperate and assist any employee of Yuma in the transition phase of his duties at Yuma during the Notice Period.
|
C.
|
The Company may terminate Employee’s employment under this Agreement for Cause at any time, by providing Employee with a Notice of Termination. If the Employee’s employment is terminated by the Company for Cause, Company shall be released from any further obligations to Employee, other than any unpaid portion of Employee’s Base Compensation and Benefits accrued through the Termination Date. All unvested Stock Awards will be forfeited as of the Termination Date. Employee’s obligations under Article VII shall continue after termination pursuant to the terms of this Agreement.
|
ARTICLE VII. CONFIDENTIAL INFORMATION AND NON-SOLICITATION
|
A.
|
Definition of Confidential Information. For purposes hereof, “Confidential Information” shall mean:
|
1)
|
The financial condition of Yuma; records of transactions, and other information concerning the business of Yuma; or any information acquired from the inspection of Yuma’s records or property;
|
2)
|
The name and location of any Yuma Leads, Prospects, 3-D Seismic Projects, Unconventional Projects, Acquisition Projects or joint ventures;
|
3)
|
All information concerning Leads, Prospects, 3-D Seismic Projects, Unconventional Projects, Acquisition Projects, Reserves, potential discoveries of hydrocarbons, seismic data and interpretations thereof, geological and Prospect maps, future development drilling locations, reports of drilling and well operations, well data, logs, technical processes, pricing and bidding methods, proprietary marketing and proprietary sales techniques, production and processing techniques, systems, products, services, designs, inventions, research records, technical data, information about costs, profits, and key personnel, heretofore or hereafter acquired, developed and/or used by Yuma;
|
4)
|
2D seismic lines and 3D seismic data, which are licensed and/or the property of Yuma. Employee will not keep copies of such data;
|
5)
|
Terms and provisions of any seismic, joint venture, farm-out, farm-in, seismic survey participation, or drilling participation agreements; terms of any special JOA provisions;
|
6)
|
Terms and provisions of this Agreement, and of Yuma polices, manuals, guidelines or internal directives.
|
B.
|
|
Employee Shall Not Disclose Confidential Information. Employee agrees that the direct or indirect disclosure of any Confidential Information would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, and cause irreparable harm to the Company. Employee also agrees that disclosure of Confidential Information may constitute improper appropriation and/or use of proprietary information and trade secrets. Except as set forth in Paragraph C below, or when the Confidential Information is part of the marketing effort for Prospects and Projects, or where authorized by the CEO of Yuma for the benefit of Yuma, Employee agrees that Employee shall not, directly or indirectly, at any time, divulge to any persons, firms, corporations, governmental entities or agencies or other entities, any Confidential Information. This non-disclosure of Confidential Information covenant shall extend for a period of two years following the termination of this agreement.
|
C.
|
|
Exceptions to Non-Disclosure of Confidential Information. Notwithstanding the foregoing, the restrictions on disclosure shall not apply to any Confidential Information or portion thereof which:
|
1)
|
At the time of disclosure by Employee is generally and readily available to the public other than by an act or omission on the part of Employee;
|
2)
|
At the time of disclosure by Employee has been acquired from or made available to Employee by a third party having the lawful right to disclose such information;
|
3)
|
Employee is required to disclose pursuant to any state or federal law, rule or regulation or by an applicable judgment, order or decree of any court or government body or agency having jurisdiction over such matter. However, if possible Employee will notify Yuma in writing at least twenty (20) days prior to the date of such required disclosure to enable Yuma to seek an appropriate protective order to take such other actions as it deems necessary or appropriate;
|
4)
|
Employee may disclose the terms of this Agreement to his creditors, mortgage lenders, and financial institutions as required. In addition, Employee may divulge information relating to the occurrence of a change in control, to calculations of payments required under this Agreement, or to a termination of this Agreement, to Employee's attorney or accountant solely for such attorney's or accountant's confidential use with respect thereto. Employee shall provide Yuma with a copy of such information and the name of the accountant or attorney given such information.
|
D.
|
Non-Solicitation. Employee covenants and agrees that to protect the Confidential Information, it is necessary to enter into the following restrictive covenants which are ancillary to enforceable promises between the Company and Employee in this Agreement:
|
1)
|
Employee shall not at any time, solicit or cause or authorize directly or indirectly to be solicited, or accept or cause or authorize directly or indirectly to be accepted, for or on behalf of himself or third parties, any business from third parties who are not considered normal industry participants. For clarification, this non-solicitation provision would include contacts developed personally by Sam Banks such as Ignacio Rivas and Ricardo Goizueta from Madrid, Spain. Further, this covenant extends for a period of two (2) years following the termination of this Agreement.
|
2)
|
For the Employment Period of this Agreement, and for two (2) years after this Agreement is terminated, Employee agrees not to solicit or cause or authorize directly or indirectly to be solicited for employment, or cause or authorize directly or indirectly to be employed, for or on behalf of the Employee or any third parties, any person who is a current employee of Yuma.
|
E.
|
Return of Confidential Information upon Termination. Employee expressly acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protected business interest of the Company. All files, records, documents, memoranda, software, electronic data or other writings whatsoever made, compiled, acquired, or received by Employee during the Employment Period with Company arising out of, in connection with, or related to any activity or business of the Company are the sole and exclusive property of the Company, and shall, together with all copies thereof, be returned to the Company by Employee immediately, without demand, upon the termination of Employee’s employment with the Company.
|
F.
|
Injunctive and Other Relief. Employee acknowledges and agrees that the services to be rendered by him to the Company are of a special, unique and extraordinary character and, in connection with such services, he will have access to business opportunities, intellectual property and Confidential Information vital to the Company’s business. Employee acknowledges that a remedy at law for any breach or attempted breach of the foregoing under this Article will be inadequate, and agrees that the Company and its subsidiaries, affiliates, successors or assigns shall have the following rights and remedies, each of which shall be independent of the others and severally enforceable, and each of which shall be in addition to, and not in lieu of, any other rights or remedies available to the Company or its subsidiaries, affiliates, successors or assigns at law or in equity under this Agreement or otherwise:
|
1)
|
The right and remedy to have each and every one of the covenants in this Agreement specifically enforced and the right and remedy to obtain injunctive relief, it being agreed that any breach or threatened breach of any of the non-solicitation or other restrictive covenants and agreements contained herein would cause irreparable injury to the Company and its subsidiaries, affiliates, successors or assigns and that money damages would not provide an adequate remedy at law to the Company and its subsidiaries, affiliates, successors or assigns. The Company shall not be prohibited by this provision from pursuing all other remedies at law or equity available to the Company, including a claim for losses and damages.
|
G.
|
Reasonableness of Limitations. Employee acknowledges and agrees that the restrictive covenants and agreements contained herein are reasonable and valid in geographic, temporal and subject matter scope and in all other respects, and do not impose limitations greater than are necessary to protect the goodwill, Confidential Information, and other business interests of the Company, and its affiliates, successors and assigns. If, however, any court subsequently determines that any of such covenants or agreements, or any part thereof, is invalid or unenforceable, the remainder of such covenants and agreements shall not thereby be affected and shall be given full effect without regard to the invalid portions.
|
H.
|
Survival. Each covenant provided in this agreement under Article VII hereof shall survive the termination of this Agreement and of Employee’s employment with the Company, whether by resignation, discharge or otherwise.
|
|
This Agreement may be modified or amended only if the modification or amendment is made in writing and is signed by both parties. The previous sentence notwithstanding, any such modification or amendment shall be in compliance with the provisions of Section 409A of the Code and shall not cause any benefit available pursuant to this Agreement to be includible in income or cause Employee to be subject to any penalty tax or interest charges that may be imposed by reason of a violation of the form and operational requirements of Section 409A of the Code.
|
|
If any provisions of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it should become valid or enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited. This Agreement should be construed by limiting it and reducing it only the minimum extent necessary to be enforceable under applicable law.
|
|
The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.
|
H.
|
Compliance with Section 409A
|
1)
|
The Company and Employee intend that any amounts or benefits payable or provided under this Agreement comply with the provisions of Section 409A of the Internal Revenue Code and the treasury regulations relating thereto so as not to subject Employee to the payment of the tax, interest and any tax penalty which may be imposed under Code Section 409A. The provisions of this Agreement shall be interpreted in a manner consistent with such intent. In furtherance thereof, to the extent that any provision hereof would otherwise result in Employee being subject to payment of tax, interest and tax penalty under Code Section 409A, the Company and Employee agree to amend this Agreement in a manner that brings this Agreement into compliance with Code Section 409A and preserves to the maximum extent possible the economic value of the relevant payment or benefit under this Agreement to Employee.
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2)
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If Employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Employee’s separation from service (within the meaning of Treas. Reg. Section 1.409A-1(h)), then any payment or benefit pursuant to this Employment Agreement on account of Employee’s separation from service, to the extent such payment constitutes non-qualified deferred compensation subject to Section 409A and is required to be delayed pursuant to Section 409A(a)(2)(B)(i) of the Code (after taking into account any exclusions applicable to such payment under Section 409A), shall not be made until the first business day after (i) the expiration of six (6) months from the date of Employee’s separation from service, or (ii) if earlier, the date of Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Employment Agreement (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay), will be paid or reimbursed to Employee in a lump sum and any remaining payments and benefits due under this Employment Agreement will be paid or provided in accordance with the normal payment dates specified for them herein.
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3)
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Employee acknowledges that (i) the provisions of this Article VIII, Paragraph H may result in a delay in the time which payments would otherwise be made pursuant to this Agreement and (ii) the Company is authorized to amend this Agreement, to void or amend any election made by Employee under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with Section 409A of the Code (including any transition or grandfather rules thereunder) without prior notice to or consent of Employee. Employee hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by Employee as a result of the application of Section 409A of the Code.
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A.
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Mediation. Mediation, as defined in Section 154-023 of the Texas Civil Practices and Remedies Code, shall be initiated by written notice from one party to the other. The notice shall reasonably describe and identify the issues or claims to be mediated. The other party can respond with a written notice of additional issues or claims. The parties shall schedule a mediation to take place within 30 days from the receipt of the written notice of mediation, pursuant to the Mediation Procedures of the CPR International Institute for Conflict Prevention & Resolution (“CPR”) in effect on the date of this Agreement. Unless otherwise agreed, the parties will select a mediator from the CPR Panels of Distinguished Neutrals. All proceedings pursuant to this paragraph are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence and any additional confidentiality protections provided by applicable law.
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B.
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Arbitration.
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1)
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If the dispute has not been resolved by the mediation provided for herein, it shall then be finally resolved by arbitration in accordance with the CPR Rules for Non-Administered Arbitration (the “CPR Rules”) in effect on the date of this Agreement. Either party may initiate the arbitration by filing its statement of claim within fifteen days after the mediation provided for herein.
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2)
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The arbitration shall be conducted and decided by a person mutually agreeable to the parties and knowledgeable and experienced in the type of matter that is the subject of the dispute. If the parties cannot agree on an arbitrator within fifteen (15) days after arbitration has been initiated by the filing of the notice, then he/she shall be selected from the CPR Panel using the CPR Rules.
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3)
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The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. 1-16. The arbitration shall occur in Houston, Texas, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.
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4)
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If reasonably possible, arbitration shall be commenced within 30 days of the selection of the arbitrator. The arbitrator shall render the award not later than 30 days after the last hearing date.
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5)
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The arbitrator shall bill his or her fees and costs attributable to such binding arbitration in equal shares to the parties and each party shall bear its own attorneys’ fees and/or out-of-pocket costs expended by it. If any party seeks to modify or overturn all or a portion of the arbitrator’s award and is unsuccessful, then the opposing party shall be awarded all of its reasonable attorneys’ fees incurred in the arbitration. If it becomes necessary for a prevailing party to secure judicial confirmation of the award and to otherwise undertake legal action to collect an award, then such party shall be entitled to its reasonable attorneys’ fees and all costs for such action.
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6)
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No Punitive Damages. No punitive damages are recoverable in the arbitration. The arbitrator is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover any punitive or exemplary damages with respect to any dispute between them.
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YUMA ENERGY, INC. | |||
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By:
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/s/ Sam L. Banks | |
Sam L. Banks, CEO | |||
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By:
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/s/ Paul McKinney | |
Paul McKinney | |||
(a)
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The term “Acquisition Project” shall mean an acquisition of proved reserves being PDP, PDNP or PUD acquired by Yuma during the term of this Agreement, with or without non-proved potential.
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(b)
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The term “Agreement” shall mean this Employment Agreement, as amended, modified, or supplemented from time to time.
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(c)
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The term “Article” shall mean an article of this agreement, unless the context otherwise requires.
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(d)
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Regarding a dismissal for cause, the term “Cause” shall be defined as any of the following:
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(e)
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The term “CEO” shall mean Chief Executive Officer.
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(f)
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The term “CFO” shall mean Chief Financial Officer.
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(g)
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The term “Code” means the Internal Revenue Code of 1986, as amended, or its successor. References herein to any section of the Code shall include any successor provisions of the Code.
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(h)
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The term “Lead” shall mean any idea which suggests a direction for further geological and or geophysical investigation. A Lead can be a step in the direction toward creating a Prospect. A Lead is a geological or geophysical idea which lacks the supporting data to be considered drillable.
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(i)
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The term “Notice of Termination” means a written notice setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment for Cause, and specifying the Termination Date. The failure of Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause shall not waive any right of Company, or preclude Company from asserting such fact or circumstance in enforcing the Company’s rights.
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(j)
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The term “Prospect” shall mean the identification of the existence of a certain geological structure, conducive to the Production of oil and gas underlying a certain area of land.
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(k)
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The term “Reserve” shall mean that portion of the identified oil and/or gas resource from which a usable mineral and energy commodity can be economically and legally extracted at the time of determination.
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(l)
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The term “3-D Seismic Project” shall mean the identification of the existence of “Lead”(s) in a geographical area, requiring a 3-D seismic survey to be conducted in order to mature the “Lead”(s) to a “Prospect”(s) status.
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(m)
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The term “Termination Date” shall mean the date on which Employee’s employment terminates with the Company.
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(n)
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The term “3-D Seismic Project” shall mean the identification of the existence of “Lead”(s) in a geographical area, requiring a 3-D seismic survey to be conducted in order to mature the “Lead”(s) to a “Prospect”(s) status.
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(o)
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The term “Unconventional” Projects and Prospects shall mean those projects/prospects which are regional in nature, typically lack definable water contacts and/or hydrocarbon traps, and typically are developed with the use of horizontal drilling and isolated multi-stage hydraulic fracturing.
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1.
|
I have reviewed this Quarterly Report on Form 10-Q of Yuma Energy, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
I, Kirk F. Sprunger, certify that:
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Yuma Energy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
H. PAYMENT OF PREFERRED DIVIDENDS (Details) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2014
|
Sep. 30, 2013
|
Sep. 30, 2014
|
Sep. 30, 2013
|
|
Notes to Financial Statements | ||||
Series A Preferred Stock Dividends | $ 214,903 | |||
Series B Preferred Stock Dividends | 131,289 | |||
Total Dividends | $ 346,192 | $ 0 | $ 445,152 | $ 59,850 |
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