CALIFORNIA
(State or other jurisdiction of incorporation) |
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94-0787340
(IRS Employer Identification No.) |
1177 West Loop South, Suite 1825
Houston, Texas
(Address of principal executive offices) |
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77027
(Zip Code) |
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(713) 968-7000
(Registrant’s telephone number, including area code) |
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N/A
(Former name, former address and former fiscal year, if changed since last report) |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
Financial Statements. |
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Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015. |
3 |
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Consolidated Statements of Operations for the Three and Six Months ended June 30, 2016 and 2015. |
5 |
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Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months ended June 30, 2016 and 2015. |
6 |
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Consolidated Statements of Changes in Equity for the Six Months ended June 30, 2016 and the year ended December 31, 2015. |
7 |
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Consolidated Statements of Cash Flows for the Six Months ended June 30, 2016 and 2015. |
8 |
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Unaudited Condensed Notes to the Consolidated Financial Statements. |
9 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
27 | |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk. |
40 | |
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Item 4. |
Controls and Procedures. |
40 | |
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PART II – OTHER INFORMATION |
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Item 1. |
Legal Proceedings. |
41 | |
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Item 1A. |
Risk Factors. |
41 | |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
42 | |
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Item 3. |
Defaults Upon Senior Securities. |
42 | |
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Item 4. |
Mine Safety Disclosures. |
42 | |
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Item 5. |
Other Information. |
42 | |
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Item 6. |
Exhibits. |
43 | |
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Signatures. |
44 | |
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June 30, |
December 31, |
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2016 |
2015 |
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(Unaudited) |
(As Restated) |
ASSETS |
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CURRENT ASSETS: |
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|
Cash and cash equivalents |
$2,092,997 |
$5,355,191 |
Accounts receivable, net of allowance for doubtful accounts: |
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Trade |
2,781,350 |
2,829,266 |
Officers and employees |
62,058 |
75,404 |
Other |
316,723 |
633,573 |
Commodity derivative instruments |
980,189 |
2,658,047 |
Prepayments |
375,656 |
704,523 |
Other deferred charges |
29,805 |
415,740 |
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Total current assets |
6,638,778 |
12,671,744 |
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OIL AND GAS PROPERTIES (full cost method): |
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Not subject to amortization |
14,940,004 |
14,288,716 |
Subject to amortization |
205,301,727 |
204,512,038 |
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220,241,731 |
218,800,754 |
Less: accumulated depreciation, depletion and amortization |
(132,665,148) |
(117,304,945) |
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Net oil and gas properties |
87,576,583 |
101,495,809 |
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OTHER PROPERTY AND EQUIPMENT: |
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Land, buildings and improvements |
2,795,000 |
2,795,000 |
Other property and equipment |
3,497,948 |
3,460,507 |
|
6,292,948 |
6,255,507 |
Less: accumulated depreciation and amortization |
(2,296,906) |
(2,174,316) |
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Net other property and equipment |
3,996,042 |
4,081,191 |
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OTHER ASSETS AND DEFERRED CHARGES: |
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Commodity derivative instruments |
329,819 |
1,070,541 |
Deposits |
414,064 |
264,064 |
Other noncurrent assets |
- |
38,104 |
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Total other assets and deferred charges |
743,883 |
1,372,709 |
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TOTAL ASSETS |
$98,955,286 |
$119,621,453 |
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June 30, |
December 31, |
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2016 |
2015 |
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(Unaudited) |
(As Restated) |
LIABILITIES AND EQUITY |
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CURRENT LIABILITIES: |
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Current maturities of debt |
$29,800,000 |
$30,063,635 |
Accounts payable, principally trade |
6,335,891 |
7,933,664 |
Commodity derivative instruments |
143,987 |
- |
Asset retirement obligations |
435,936 |
70,000 |
Other accrued liabilities |
2,022,327 |
1,781,484 |
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Total current liabilities |
38,738,141 |
39,848,783 |
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OTHER NONCURRENT LIABILITIES: |
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Asset retirement obligations |
8,469,015 |
8,720,498 |
Commodity derivative instruments |
10,004 |
- |
Deferred taxes |
192,129 |
1,417,364 |
Other liabilities |
14,540 |
30,090 |
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Total other noncurrent liabilities |
8,685,688 |
10,167,952 |
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EQUITY: |
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Preferred stock |
10,828,603 |
10,828,603 |
Common stock, no par value (300 million shares authorized, 72,544,053 and 71,834,617 issued) |
142,533,459 |
141,858,946 |
Accumulated earnings (deficit) |
(101,830,605) |
(83,082,831) |
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Total equity |
51,531,457 |
69,604,718 |
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TOTAL LIABILITIES AND EQUITY |
$98,955,286 |
$119,621,453 |
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Three Months Ended June 30, |
Six Months Ended June 30, | ||
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2016 |
2015 |
2016 |
2015 |
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(As Restated) |
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(As Restated) |
REVENUES: |
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Sales of natural gas and crude oil |
$3,124,424 |
$5,534,894 |
$6,056,010 |
$10,107,573 |
Net gains (losses) from commodity derivatives |
(1,226,702) |
(1,696,979) |
(855,764) |
(626,411) |
Total revenues |
1,897,722 |
3,837,915 |
5,200,246 |
9,481,162 |
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EXPENSES: |
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Lease operating |
1,880,060 |
3,226,225 |
3,893,209 |
6,449,341 |
Re-engineering and workovers |
- |
60,063 |
- |
554,492 |
Marketing cost of sales |
- |
97,994 |
- |
199,682 |
General and administrative – stock-based |
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compensation |
301,808 |
133,921 |
720,098 |
1,872,331 |
General and administrative – other |
2,003,719 |
1,844,163 |
4,161,205 |
3,516,375 |
Depreciation, depletion and amortization |
2,020,804 |
3,755,446 |
4,467,205 |
7,896,466 |
Asset retirement obligation accretion expense |
105,242 |
166,773 |
210,256 |
329,557 |
Impairments |
11,015,589 |
4,927,508 |
11,015,589 |
4,927,508 |
Other |
8,647 |
707,338 |
(16,785) |
718,649 |
Total expenses |
17,335,869 |
14,919,431 |
24,450,777 |
26,464,401 |
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INCOME (LOSS) FROM OPERATIONS |
(15,438,147) |
(11,081,516) |
(19,250,531) |
(16,983,239) |
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OTHER INCOME (EXPENSE): |
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Interest expense |
(326,396) |
(114,378) |
(729,044) |
(206,385) |
Other, net |
(2,447) |
5,310 |
6,566 |
21,466 |
Total other income (expense) |
(328,843) |
(109,068) |
(722,478) |
(184,919) |
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NET INCOME (LOSS) BEFORE INCOME TAXES |
(15,766,990) |
(11,190,584) |
(19,973,009) |
(17,168,158) |
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Income tax expense (benefit) |
(692,302) |
(1,640,910) |
(1,225,235) |
(3,935,492) |
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NET INCOME (LOSS) |
(15,074,688) |
(9,549,674) |
(18,747,774) |
(13,232,666) |
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PREFERRED STOCK, PERPETUAL PREFERRED |
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SERIES A: |
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Dividends paid in cash |
- |
318,874 |
- |
619,689 |
Dividends in arrears |
320,626 |
- |
641,252 |
- |
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NET INCOME (LOSS) ATTRIBUTABLE TO |
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COMMON STOCKHOLDERS |
$(15,395,314) |
$(9,868,548) |
$(19,389,026) |
$(13,852,355) |
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EARNINGS (LOSS) PER COMMON SHARE: |
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Basic |
$(0.21) |
$(0.14) |
$(0.27) |
$(0.20) |
Diluted |
$(0.21) |
$(0.14) |
$(0.27) |
$(0.20) |
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WEIGHTED AVERAGE NUMBER OF COMMON |
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SHARES OUTSTANDING: |
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Basic |
72,185,618 |
71,502,546 |
72,048,490 |
70,384,326 |
Diluted |
72,185,618 |
71,502,546 |
72,048,490 |
70,384,326 |
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Three Months Ended June 30, |
Six Months Ended June 30, | ||
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2016 |
2015 |
2016 |
2015 |
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(As Restated) |
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(As Restated) |
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NET LOSS |
$(15,074,688) |
$(9,549,674) |
$(18,747,774) |
$(13,232,666) |
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OTHER COMPREHENSIVE INCOME (LOSS): |
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Commodity derivatives sold |
- |
- |
- |
(119,917) |
Less income taxes |
- |
- |
- |
(46,168) |
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|
Commodity derivatives sold, net of income taxes |
- |
- |
- |
(73,749) |
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Reclassification of loss on settled |
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commodity derivatives |
- |
8,118 |
- |
31,554 |
Less income taxes |
- |
3,125 |
- |
12,148 |
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Reclassification of loss on settled |
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commodity derivatives, net of income taxes |
- |
4,993 |
- |
19,406 |
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OTHER COMPREHENSIVE INCOME (LOSS) |
- |
4,993 |
- |
(54,343) |
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COMPREHENSIVE LOSS |
$(15,074,688) |
$(9,544,681) |
$(18,747,774) |
$(13,287,009) |
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June 30, |
December 31, |
|
2016 |
2015 |
|
(Unaudited) |
(As Restated) |
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PERPETUAL PREFERRED STOCK - 9.25% CUMULATIVE AND REDEEMABLE, NO PAR VALUE: |
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Balance at beginning of period: 554,596 for 2016 and 507,739 shares for 2015 |
$10,828,603 |
$9,958,217 |
Sales of 46,857 shares for 2015 |
- |
870,386 |
Balance at end of period: 554,596 shares for both 2016 and 2015 |
10,828,603 |
10,828,603 |
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COMMON STOCK, NO PAR VALUE: |
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Balance at beginning of period: 71,834,617 shares for 2016 and 69,139,869 shares for 2015 |
141,858,946 |
137,469,772 |
Sales of 1,347,458 shares of common stock in 2015 |
- |
1,363,160 |
Restricted stock awards, of which 983,804 vested in 2016 and 1,676,113 vested in 2015 |
570,376 |
3,171,477 |
Buy back shares from vested stock awards: 274,368 in 2016 and 328,823 in 2015 |
(69,177) |
(300,732) |
Stock appreciation rights issued in 2015, of which 789,117 vested in 2016 |
173,314 |
155,269 |
Balance at end of period: 72,544,053 shares for 2016 and 71,834,617 shares for 2015 |
142,533,459 |
141,858,946 |
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ACCUMULATED OTHER COMPREHENSIVE INCOME: |
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Balance at beginning of period |
- |
38,801 |
Comprehensive income (loss) from commodity derivative instruments, net of income taxes |
- |
(38,801) |
Balance at end of period |
- |
- |
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ACCUMULATED EARNINGS (DEFICIT): |
|
|
Balance at beginning of period |
(83,082,831) |
(67,195,800) |
Net loss |
(18,747,774) |
(14,839,840) |
Series A perpetual preferred stock cash dividends |
- |
(1,047,191) |
Balance at end of period |
(101,830,605) |
(83,082,831) |
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TOTAL EQUITY |
$51,531,457 |
$69,604,718 |
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Six Months Ended June 30, | |
|
2016 |
2015 |
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|
(As Restated) |
CASH FLOWS FROM OPERATING ACTIVITIES: |
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|
Reconciliation of net loss to net cash provided by (used in) operating activities |
|
|
Net loss |
$(18,747,774) |
$(13,232,666) |
Impairment of oil and gas properties |
11,015,589 |
- |
Impairment of goodwill |
- |
4,927,508 |
Depreciation, depletion and amortization of property and equipment |
4,467,205 |
7,896,466 |
Accretion of asset retirement obligation |
210,256 |
329,557 |
Stock-based compensation net of capitalized cost |
720,098 |
1,872,331 |
Amortization of other assets and liabilities |
457,990 |
136,758 |
Deferred tax expense (benefit) |
(1,225,235) |
(3,937,892) |
Bad debt expense increase (decrease) |
(16,785) |
737,536 |
Unrealized (gains) losses on commodity derivatives |
2,572,571 |
5,308,196 |
Other |
- |
(18,887) |
Changes in current operating assets and liabilities: |
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Accounts receivable |
394,897 |
3,427,212 |
Other current assets |
328,867 |
(61,604) |
Accounts payable |
(1,273,595) |
(11,663,279) |
Other current liabilities |
219,138 |
877,533 |
Other noncurrent assets and liabilities |
(108,618) |
- |
NET CASH USED IN OPERATING ACTIVITIES |
(985,396) |
(3,401,231) |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Capital expenditures on property and equipment |
(1,873,671) |
(9,301,034) |
Proceeds from sale of property |
1,740 |
30,442 |
Decrease in short-term investments |
- |
1,170,868 |
NET CASH USED IN INVESTING ACTIVITIES |
(1,871,931) |
(8,099,724) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Change in borrowing on line of credit |
- |
7,000,000 |
Proceeds from insurance note |
- |
536,762 |
Payments on insurance note |
(263,635) |
(388,059) |
Line of credit financing costs |
(72,055) |
(210,194) |
Net proceeds from sale of common stock |
- |
1,363,160 |
Net proceeds from sale of perpetual preferred stock |
- |
870,386 |
Cash dividends to preferred shareholders |
- |
(619,689) |
Common stock purchased from employees |
(69,177) |
(300,732) |
Other |
- |
(25,998) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
(404,867) |
8,225,636 |
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
(3,262,194) |
(3,275,319) |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
5,355,191 |
11,558,322 |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$2,092,997 |
$8,283,003 |
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Supplemental disclosure of cash flow information: |
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Interest payments (net of interest capitalized) |
$308,434 |
$20,479 |
Interest capitalized |
$253,313 |
$483,158 |
Supplemental disclosure of significant non-cash activity: |
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(Increase) decrease in capital expenditures financed by accounts payable |
$324,178 |
$2,695,729 |
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Fair value measurements at June 30, 2016 | |||
|
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Significant |
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|
Quoted prices |
other |
Significant |
|
|
in active |
observable |
unobservable |
|
|
markets |
inputs |
inputs |
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(Level 1) |
(Level 2) |
(Level 3) |
Total |
Assets: |
|
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|
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Commodity derivatives – oil |
$- |
$1,310,008 |
$- |
$1,310,008 |
|
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|
|
Liabilities: |
|
|
|
|
Commodity derivatives – gas |
$- |
$153,991 |
$- |
$153,991 |
|
Fair value measurements at December 31, 2015 | |||
|
|
Significant |
|
|
|
Quoted prices |
other |
Significant |
|
|
in active |
observable |
unobservable |
|
|
markets |
inputs |
inputs |
|
|
(Level 1) |
(Level 2) |
(Level 3) |
Total |
Assets: |
|
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|
|
Commodity derivatives – oil |
$- |
$3,442,693 |
$- |
$3,442,693 |
Commodity derivatives – gas |
- |
285,895 |
- |
285,895 |
Total assets |
$- |
$3,728,588 |
$- |
$3,728,588 |
|
2016 |
2017 |
|
Settlement |
Settlement |
NATURAL GAS (MMBtu): |
|
|
Swaps |
|
|
Volume |
245,068 |
- |
Price |
$2.628* |
- |
|
|
|
3-way collars |
|
|
Volume |
- |
248,023 |
Ceiling sold price (call) |
- |
$3.280* |
Floor purchased price (put) |
- |
$2.946* |
Floor sold price (short put) |
- |
$2.381* |
|
|
|
CRUDE OIL (Bbls): |
|
|
Put spread |
|
|
Volume |
64,333 |
- |
Floor purchased price (put) |
$62.27 |
- |
Floor sold price (short put) |
$40.00 |
- |
|
|
|
3-way collars |
|
|
Volume |
23,449 |
113,029 |
Ceiling sold price (call) |
$47.15 |
$77.00 |
Floor purchased price (put) |
$40.00 |
$60.00 |
Floor sold price (short put) |
$30.00 |
$45.00 |
|
Fair value as of | |
|
June 30, |
December 31, |
|
2016 |
2015 |
Asset commodity derivatives: |
|
|
Current assets |
$1,433,402 |
$3,069,115 |
Noncurrent assets |
661,835 |
1,841,120 |
|
2,095,237 |
4,910,235 |
|
|
|
Liability commodity derivatives: |
|
|
Current liabilities |
(597,200) |
(411,068) |
Noncurrent liabilities |
(342,020) |
(770,579) |
|
(939,220) |
(1,181,647) |
Total commodity derivative instruments |
$1,156,017 |
$3,728,588 |
|
Three Months Ended |
Six Months Ended | ||
|
June 30, |
June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Sales of natural gas and crude oil |
$3,124,424 |
$5,534,894 |
$6,056,010 |
$10,107,573 |
Gain realized from sale of commodity |
|
|
|
|
derivatives |
- |
- |
- |
4,030,000 |
Other gains (losses) realized on |
|
|
|
|
commodity derivatives |
557,693 |
(255,049) |
1,716,807 |
651,785 |
Unrealized losses on |
|
|
|
|
commodity derivatives |
(1,784,395) |
(1,441,930) |
(2,572,571) |
(5,308,196) |
Total revenue from natural gas and crude oil |
$1,897,722 |
$3,837,915 |
$5,200,246 |
$9,481,162 |
|
Three Months Ended |
Year Ended | ||
|
June 30, 2016 |
December 31, 2015 | ||
|
Before tax |
After tax |
Before tax |
After tax |
|
|
|
|
|
Balance, beginning of period |
$- |
$- |
$63,091 |
$38,801 |
Sale of unexpired contracts previously subject |
|
|
|
|
to hedge accounting rules |
- |
- |
(119,917) |
(73,749) |
Other reclassifications due to expired contracts |
|
|
|
|
previously subject to hedge accounting rules |
- |
- |
56,826 |
34,948 |
Balance, end of period |
$- |
$- |
$- |
$- |
|
Number of |
Weighted average |
|
unvested |
grant-date |
|
RSA shares |
fair value |
|
|
|
Unvested shares as of January 1, 2016 |
2,514,434 |
$0.87 per share |
Granted |
132,244 |
$0.21 per share |
Forfeited |
(132,244) |
$0.73 per share |
Vested |
(983,804) |
$0.68 per share |
Unvested shares as of June 30, 2016 |
1,530,630 |
$0.95 per share |
|
|
Weighted |
|
Number of |
average |
|
unvested |
grant-date |
|
SARs |
fair value |
|
|
|
Unvested shares as of January 1, 2016 |
1,912,419 |
$0.30 per share |
Granted |
103,745 |
$0.03 per share |
Forfeited |
(103,745) |
$0.32 per share |
Vested |
(789,117) |
$0.24 per share |
Unvested shares as of June 30, 2016 |
1,123,302 |
$0.32 per share |
|
|
|
Weighted- |
|
|
|
Weighted- |
average |
|
|
|
average |
remaining |
Aggregate |
|
|
exercise |
contractual |
intrinsic |
|
Options |
price |
life (years) |
value |
|
|
|
|
|
Outstanding at December 31, 2015 |
105,000 |
$5.17 |
2.65 |
$- |
Granted |
- |
- |
- |
- |
Exercised |
- |
- |
- |
- |
Forfeited |
(5,000) |
$5.40 |
- |
- |
Outstanding at June 30, 2016 |
100,000 |
$5.16 |
2.27 |
$- |
|
|
|
|
|
Vested at June 30, 2016 |
100,000 |
$5.16 |
2.27 |
$- |
Exercisable at June 30, 2016 |
100,000 |
$5.16 |
2.27 |
$- |
|
|
Weighted |
|
Number of |
average |
|
unvested |
grant-date |
|
RSUs |
fair value |
|
|
|
Unvested shares as of January 1, 2016 |
80,278 |
$2.72 per share |
Vested on April 1, 2016 |
(80,278) |
$2.72 per share |
Unvested shares as of June 30, 2016 |
- |
|
|
Three Months Ended |
Six Months Ended | ||
|
June 30, |
June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Restricted Stock Awards |
2,041,498 |
640,499 |
2,239,594 |
1,271,916 |
Restricted Stock Units |
- |
95,424 |
- |
95,424 |
|
2,041,498 |
735,923 |
2,239,594 |
1,367,340 |
|
June 30, |
December 31, |
|
2016 |
2015 |
Variable rate revolving credit agreement payable to Société Générale, |
|
|
CIT Bank, NAC, and LegacyTexas Bank, maturing May 20, 2017, |
|
|
secured by the stock of Exploration and its interest in POL, and |
|
|
guaranteed by The Yuma Companies, Inc. |
$29,800,000 |
$29,800,000 |
Installment loan due February 29, 2016, originating from the |
|
|
financing of insurance premiums at 3.74% interest rate. |
- |
108,894 |
Installment loan due June 11, 2016, originating from the |
|
|
financing of insurance premiums at 3.76% interest rate. |
- |
154,741 |
|
29,800,000 |
30,063,635 |
Less: current portion |
(29,800,000) |
(30,063,635) |
Total long-term debt |
$- |
$- |
|
Three Months Ended |
Six Months Ended | ||
|
June 30, |
June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Credit agreement |
$259,649 |
$280,113 |
$517,377 |
$521,407 |
Credit agreement commitment fees |
- |
9,331 |
- |
25,159 |
Amortization of |
|
|
|
|
credit agreement loan costs |
195,516 |
71,613 |
457,990 |
136,757 |
Insurance installment loan |
291 |
3,471 |
1,961 |
5,197 |
Other interest charges |
89 |
186 |
5,029 |
1,023 |
Capitalized interest |
(129,149) |
(250,336) |
(253,313) |
(483,158) |
Total interest expense |
$326,396 |
$114,378 |
$729,044 |
$206,385 |
|
Three Months Ended |
Six Months Ended | ||
|
June 30, |
June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Consolidated net income (loss) |
|
|
|
|
before income taxes |
$(15,766,990) |
$(11,190,584) |
$(19,973,009) |
$(17,168,158) |
Income tax expense (benefit) |
(692,302) |
(1,640,910) |
(1,225,235) |
(3,935,492) |
Effective tax rate |
4.4% |
14.7% |
6.1% |
22.9% |
|
Shares |
Net Proceeds |
|
|
|
Common Stock |
1,347,458 |
$1,363,160 |
Series A Preferred Stock |
46,857 |
870,386 |
Total |
|
$2,233,546 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Production volumes: |
|
|
|
|
Crude oil and condensate (Bbl) |
50,458 |
60,956 |
108,907 |
124,592 |
Natural gas (Mcf) |
346,219 |
500,404 |
808,398 |
990,540 |
Natural gas liquids (Bbl) |
12,979 |
17,767 |
29,158 |
33,939 |
Total (Boe) (1) |
121,140 |
162,124 |
272,798 |
323,621 |
|
|
|
|
|
Average prices realized: |
|
|
|
|
Excluding commodity derivatives: |
|
|
|
|
Crude oil and condensate (per Bbl) |
$41.85 |
$59.22 |
$35.36 |
$52.72 |
Natural gas (per Mcf) |
$2.14 |
$2.85 |
$2.09 |
$2.80 |
Natural gas liquids (per Bbl) |
$20.89 |
$22.71 |
$17.62 |
$19.57 |
Including commodity derivatives: |
|
|
|
|
Crude oil and condensate (per Bbl) |
$22.25 |
$52.00 |
$27.83 |
$73.62 |
Natural gas (per Mcf) |
$1.46 |
$3.23 |
$2.05 |
$4.89 |
Natural gas liquids (per Bbl) |
$20.89 |
$22.71 |
$17.62 |
$19.57 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Sales of natural gas and crude oil: |
|
|
|
|
Crude oil and condensate |
$2,111,468 |
$3,609,719 |
$3,850,862 |
$6,567,989 |
Natural gas |
741,783 |
1,429,114 |
1,691,446 |
2,771,188 |
Natural gas liquids |
271,173 |
403,544 |
513,702 |
664,110 |
Realized gain (loss) on commodity derivatives |
557,693 |
(255,049) |
1,716,807 |
4,681,785 |
Unrealized loss on commodity derivatives |
(1,784,395) |
(1,441,930) |
(2,572,571) |
(5,308,196) |
Gas marketing sales |
- |
92,517 |
- |
104,286 |
|
|
|
|
|
Total revenues |
$1,897,722 |
$3,837,915 |
$5,200,246 |
$9,481,162 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Lease operating expenses |
$1,248,620 |
$2,176,641 |
$2,579,367 |
$4,438,169 |
Severance, ad valorem taxes and marketing |
631,440 |
1,049,584 |
1,313,842 |
2,011,172 |
Total LOE |
$1,880,060 |
$3,226,225 |
$3,893,209 |
$6,449,341 |
|
|
|
|
|
LOE per Boe |
$15.52 |
$19.90 |
$14.27 |
$19.93 |
LOE per Boe without severance, ad valorem taxes and marketing |
$10.31 |
$13.43 |
$9.46 |
$13.71 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
General and administrative |
|
|
|
|
Stock-based compensation |
$315,715 |
$160,498 |
$746,567 |
$2,573,240 |
Capitalized stock-based compensation |
13,907 |
26,577 |
26,469 |
700,909 |
Net stock-based compensation |
301,808 |
133,921 |
720,098 |
1,872,331 |
|
|
|
|
|
Other G&A |
2,413,411 |
2,473,362 |
5,019,111 |
4,787,278 |
Capitalized other G&A |
409,692 |
629,199 |
857,906 |
1,270,903 |
Net other G&A |
2,003,719 |
1,844,163 |
4,161,205 |
3,516,375 |
|
|
|
|
|
Net general and administrative |
$2,305,527 |
$1,978,084 |
$4,881,303 |
$5,388,706 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Depreciation, Depletion and Amortization |
$2,020,804 |
$3,755,446 |
$4,467,205 |
$7,896,466 |
|
|
|
|
|
DD&A per Boe |
$16.68 |
$23.16 |
$16.38 |
$24.40 |
|
Three Months Ended June 30, |
Six Months Ended June 30, | ||
|
2016 |
2015 |
2016 |
2015 |
Interest expense |
$455,545 |
$364,714 |
$982,357 |
$689,543 |
Interest capitalized |
(129,149) |
(250,336) |
(253,313) |
(483,158) |
Net |
$326,396 |
$114,378 |
$729,044 |
$206,385 |
|
|
|
|
|
Bank debt |
$29,800,000 |
$29,900,000 |
$29,800,000 |
$29,900,000 |
|
Six Months Ended June 30, | |
|
2016 |
2015 |
Cash flows provided by (used in) operating activities |
$(985,396) |
$(3,401,231) |
Cash flows used in investing activities |
(1,871,931) |
(8,099,724) |
Cash flows provided by (used in) financing activities |
(404,867) |
8,225,636 |
Net increase (decrease) in cash |
$(3,262,194) |
$(3,275,319) |
|
Six Months
Ended
June 30,
2016 |
Year EndedDecember 31,
2015 |
Credit Facility: |
|
|
Balances outstanding, beginning of year |
$29,800,000 |
$22,900,000 |
Activity |
- |
6,900,000 |
Balances outstanding, end of period |
$29,800,000 |
$29,800,000 |
|
June 30, 2016 |
December 31, 2015 | ||
|
Oil |
Gas |
Oil |
Gas |
Assets |
|
|
|
|
Current |
$980,189 |
$- |
$2,393,032 |
$265,015 |
Noncurrent |
329,819 |
- |
1,049,661 |
20,880 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current |
$- |
$(143,987) |
$- |
$- |
Noncurrent |
- |
(10,004) |
- |
- |
|
Debt (1) |
Commodity
Derivatives (2) |
Operating
Leases |
Asset
Retirement
Obligations |
2016 |
$29,800,000 |
$475,306 |
$290,855 |
$435,936 |
2017 |
- |
680,711 |
564,732 |
294,592 |
2018 |
- |
- |
2,264 |
3,672,829 |
2019 |
- |
- |
- |
2,140,498 |
2020 |
- |
- |
- |
155,730 |
Thereafter |
- |
- |
- |
2,205,366 |
Totals |
$29,800,000 |
$1,156,017 |
$857,851 |
$8,904,951 |
|
(1) |
Does not include future commitment, modification or covenant waiver fees, interest expense or other expenses or costs because the credit agreement is a floating rate instrument, and we cannot determine with accuracy the timing of future loans, advances, modifications, repayments or future interest rates to be charged. |
|
(2) |
Represents the estimated future receipts under our oil and natural gas derivative contracts based on the future market prices as of June 30, 2016. These amounts will change as oil and natural gas commodity prices change. |
|
Total Number of Shares Purchased(1) |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
April 2016 |
43,178 |
$0.21 |
- |
- |
May 2016 |
231,190 |
$0.26 |
- |
- |
June 2016 |
- |
- |
- |
- |
Form 10-Q for the quarter ended June 30, 2016. | ||||||||||||||||||
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|
Incorporated by Reference |
|
|
|
| ||||||||||
Exhibit No. |
|
Description |
|
Form |
|
SEC File No. |
|
Exhibit |
|
Filing Date |
|
Filed Herewith |
|
Furnished Herewith | ||||
|
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| ||||
31.1 |
|
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |
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X |
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31.2 |
|
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |
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X |
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32.1 |
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |
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|
X | ||||
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32.2 |
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |
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|
X | ||||
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101.INS |
|
XBRL Instance Document. |
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X |
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101.SCH |
|
XBRL Schema Document. |
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X |
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101.CAL |
|
XBRL Calculation Linkbase Document. |
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X |
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101.DEF |
|
XBRL Definition Linkbase Document. |
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X |
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101.LAB |
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XBRL Label Linkbase Document. |
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X |
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101.PRE |
|
XBRL Presentation Linkbase Document. |
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X |
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YUMA ENERGY, INC. |
| |
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|
By:
|
/s/ Sam L. Banks |
|
|
|
Name:
|
Sam L. Banks |
|
Date: August 15, 2016 |
|
Title:
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
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|
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|
By:
|
/s/ James J. Jacobs |
|
Date: August 15, 2016 |
|
Name:
|
James J. Jacobs |
|
|
|
Title:
|
Chief Financial Officer (Principal Financial Officer) |
|
|
/s/ Sam L. Banks
Sam L. Banks
Principal Executive Officer
August 15, 2016 |
|
/s/ James J. Jacobs
James J. Jacobs
Principal Financial Officer
August 15, 2016 |
|
/s/ Sam L. Banks
Sam L. Banks
President and Chief Executive Officer
August 15, 2016 |
|
/s/ James J. Jacobs
James J. Jacobs
Chief Financial Officer
August 15, 2016 |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Aug. 15, 2016 |
|
Document And Entity Information | ||
Entity Registrant Name | Yuma Energy, Inc. | |
Entity Central Index Key | 0000081318 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 72,579,820 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2016 |
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, shares par value | $ 0.00 | $ 0.00 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common Stock, shares, Issued | 72,544,053 | 71,834,617 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
REVENUES: | ||||
Sales of natural gas and crude oil | $ 3,124,424 | $ 5,534,894 | $ 6,056,010 | $ 10,107,573 |
Net gains (losses) from commodity derivatives | (1,226,702) | (1,696,979) | (855,764) | (626,411) |
Total revenues | 1,897,722 | 3,837,915 | 5,200,246 | 9,481,162 |
EXPENSES: | ||||
Lease operating | 1,880,060 | 3,226,225 | 3,893,209 | 6,449,341 |
Re-engineering and workovers | 0 | 60,063 | 0 | 554,492 |
Marketing cost of sales | 0 | 97,994 | 0 | 199,682 |
General and administrative - stock-based compensation | 301,808 | 133,921 | 720,098 | 1,872,331 |
General and administrative - other | 2,003,719 | 1,844,163 | 4,161,205 | 3,516,375 |
Depreciation, depletion and amortization | 2,020,804 | 3,755,446 | 4,467,205 | 7,896,466 |
Asset retirement obligation accretion expense | 105,242 | 166,773 | 210,256 | 329,557 |
Impairments | 11,015,589 | 4,927,508 | 11,015,589 | 4,927,508 |
Other | 8,647 | 707,338 | (16,785) | 718,649 |
Total expenses | 17,335,869 | 14,919,431 | 24,450,777 | 26,464,401 |
INCOME (LOSS) FROM OPERATIONS | (15,438,147) | (11,081,516) | (19,250,531) | (16,983,239) |
OTHER INCOME (EXPENSE): | ||||
Interest expense | (326,396) | (114,378) | (729,044) | (206,385) |
Other, net | (2,447) | 5,310 | 6,566 | 21,466 |
Total other income (expense) | (328,843) | (109,068) | (722,478) | (184,919) |
NET INCOME (LOSS) BEFORE INCOME TAXES | (15,766,990) | (11,190,584) | (19,973,009) | (17,168,158) |
Income tax expense (benefit) | (692,302) | (1,640,910) | (1,225,235) | (3,935,492) |
NET INCOME (LOSS) | (15,074,688) | (9,549,674) | (18,747,774) | (13,232,666) |
PREFERRED STOCK, PERPETUAL PREFERRED SERIES A: | ||||
Dividends paid in cash | 0 | 318,874 | 0 | 619,689 |
Dividends in arrears | 320,626 | 0 | 641,252 | 0 |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (15,395,314) | $ (9,868,548) | $ (19,389,026) | $ (13,852,355) |
EARNINGS (LOSS) PER COMMON SHARE: | ||||
Basic | $ (0.21) | $ (0.14) | $ (0.27) | $ (0.2) |
Diluted | $ (0.21) | $ (0.14) | $ (0.27) | $ (0.2) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | ||||
Basic | 72,185,618 | 71,502,546 | 72,048,490 | 70,384,326 |
Diluted | 72,185,618 | 71,502,546 | 72,048,490 | 70,384,326 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Consolidated Statements Of Comprehensive Income Loss | ||||
NET LOSS | $ (15,074,688) | $ (9,549,674) | $ (18,747,774) | $ (13,232,666) |
OTHER COMPREHENSIVE INCOME (LOSS): | ||||
Commodity derivatives sold | 0 | 0 | 0 | (119,917) |
Less income taxes | 0 | 0 | 0 | (46,168) |
Commodity derivatives sold, net of income taxes | 0 | 0 | 0 | (73,749) |
Reclassification of loss on settled commodity derivatives | 0 | 8,118 | 0 | 31,554 |
Less income taxes | 0 | 3,125 | 0 | 12,148 |
Reclassification of loss on settled commodity derivatives, net of income taxes | 0 | 4,993 | 0 | 19,406 |
OTHER COMPREHENSIVE INCOME (LOSS) | 0 | 4,993 | 0 | (54,343) |
COMPREHENSIVE LOSS | $ (15,074,688) | $ (9,544,681) | $ (18,747,774) | $ (13,287,009) |
1. BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
1. BASIS OF PRESENTATION | These consolidated financial statements are unaudited; however, in the opinion of management, they reflect all adjustments necessary for a fair presentation of the results for the periods reported. All such adjustments are of a normal recurring nature unless disclosed otherwise. These consolidated financial statements, including notes, have been condensed and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2015 and the notes thereto included with the Annual Report on Form 10-K/A of Yuma Energy, Inc. (the Company) filed with the Securities and Exchange Commission (SEC) on May 23, 2016.
Restatement Background
On May 11, 2016, the Company determined that there were non-cash errors in the computation of its income tax provision and the recording of its deferred taxes related to its asset retirement obligations, its stock based compensation, its allocation of the purchase price in the Pyramid merger and resultant amount of goodwill, the tax amortization of that goodwill, the tax treatment of expenses related to the Pyramid merger, the incorrect roll forward of the historic net operating losses and the difference in the book and tax basis in its properties. As a result, the Companys computation of its income tax provision and the net amount of its deferred tax liability were restated for the years ended December 31, 2015, 2014 and 2013 and the applicable quarterly periods in 2015 and 2014.
As a result, management, the Audit Committee and the Board of Directors determined after consideration of the relevant facts and circumstances, that the Companys consolidated financial statements as of December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013 contained within the Companys Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K), and the financial data included in its interim consolidated financial statements set forth in its quarterly reports on Form 10-Q for the quarter ended September 30, 2014, and for all subsequent quarters through the quarter ended December 31, 2015, should be restated, and that such financial statements previously filed with the SEC, should no longer be relied upon.
As a result, on May 23, 2016, the Company filed Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2015 (the Amended Filing). Prior period financial information in this Form 10-Q has been amended where necessary to reflect the restatement. Additional information regarding the restatement is contained in the Amended Filing. Therefore, this Form 10-Q should be read in conjunction with the Amended Filing. |
2. LIQUIDITY CONSIDERATIONS AND GOING CONCERN |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
2. LIQUIDITY CONSIDERATIONS AND GOING CONCERN | The Company has borrowings which require, among other things, compliance with certain financial ratios. Due to operating losses the Company has sustained during recent quarters as a result of the prolonged weak commodity price environment and other factors, the Company was not in compliance with the trailing four quarter funded debt to EBITDA financial ratio covenant under its credit facility at September 30, 2015, December 31, 2015 or at March 31, 2016, as well as its EBITDA to interest expense ratio as of December 31, 2015 and March 31, 2016. In addition, the Company was not in compliance due to its going concern opinion at March 31, 2016, as well as its failure to maintain a certain financial bank as its principal depository bank. On May 20, 2016, the Company remedied its compliance with regard to the depository bank. On December 30, 2015, the Companys wholly owned subsidiary, Yuma Exploration and Production Company, Inc. (Exploration) entered into the Waiver, Borrowing Base Redetermination and Ninth Amendment (the Ninth Amendment) to the credit agreement which provided for a $29.8 million conforming borrowing base, with an automatic reduction to $20.0 million on May 31, 2016, and waived the compliance with the trailing four quarter funded debt to EBITDA and EBITDA to interest expense financial ratio covenants or any other events of default under the credit facility for the quarters ended September 30, 2015 and December 31, 2015. On June 6, 2016 and effective as of May 31, 2016, Exploration entered into the Waiver and Tenth Amendment to the credit agreement (the Tenth Amendment), which maintains the borrowing base at $29.8 million and automatically reduces the borrowing base to $20.0 million on the earliest of (each a Tenth Amendment Termination Date) (i) August 15, 2016, if the registration statement on Form S-4 (the Form S-4) filed with the SEC pursuant to the pending agreement and plan of merger dated as of February 10, 2016 (the merger agreement) by and among the Company, two wholly owned subsidiaries of the Company, and Davis Petroleum Acquisition Corp. (Davis) has not been declared effective by such date; (ii) the date that is forty-seven days after the date the Form S-4 has been declared effective by the SEC; (iii) September 30, 2016; and (iv) in the event of the termination of the merger agreement. As of June 30, 2016, the Company had a working capital deficit of $32.1 million inclusive of the Companys outstanding debt under its credit facility, which was fully drawn with no additional borrowing capacity available.
A breach of any of the terms and conditions or the financial covenants contained in the credit agreement could result in acceleration of the Companys indebtedness, in which case the debt would become immediately due and payable. Given that the Company was in violation of the funded debt to EBITDA and EBITDA to interest expense ratio covenants as of March 31, 2016, and was out of compliance with the funded debt to EBITDA, EBITDA to interest expense and current asset to current liability ratio covenants as of June 30, 2016, the Company has classified its bank debt as a current liability in its financial statements. In the event the Form S-4 is not declared effective by August 15, 2016, the Company anticipates working with its lenders to obtain an extension of its waivers until the closing of the transaction. In the event that the Company does not obtain an extension or waiver of the violations, then the Companys outstanding indebtedness would become immediately due and payable.
During 2015 and 2016, the Company initiated several strategic alternatives to remedy its debt covenant compliance issues and provide working capital to develop the Companys existing assets. On February 10, 2016, the Company entered into the merger agreement. Upon completion of the transaction, which is subject to the approval of the stockholders of both companies and other conditions, Davis will become a wholly owned subsidiary of the Company. Subject to bank approval, it is anticipated that the Company will enter into another credit agreement amendment that will take into account the contemplated merger with Davis (see Note 15 Agreement and Plan of Merger and Reorganization). However, the Companys management can provide no assurance that the merger with Davis and the amendment to the credit agreement will actually occur.
The significant risks and uncertainties described above raise substantial doubt about the Companys ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. |
3. ACCOUNTING STANDARDS |
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Jun. 30, 2016 | |
Accounting Standards | |
3. ACCOUNTING STANDARDS | Not Yet Adopted
In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which seeks to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard requires the Company to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted and if an entity early adopts the guidance in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of adopting this standard on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, Leases, a new lease standard requiring lessees to recognize lease assets and lease liabilities for most leases classified as operating leases under previous GAAP. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact of adopting this standard on its Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes certain guidance related to the recognition, measurement, presentation and disclosure of financial instruments. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted for the majority of the update, but is permitted for two of its provisions. The Company is evaluating the new guidance and has not determined the impact this standard may have on its Consolidated Financial Statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), an update which removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers, and increases disclosure requirements. The guidance requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued guidance which provides further clarification on the principal versus agent evaluation. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. The Company is currently evaluating the level of effort needed to implement the standard, the impact of adopting this standard on its Consolidated Financial Statements, and whether to use the full retrospective approach or the modified retrospective approach.
Recently Adopted
In April 2015, the FASB issued ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs, an update that requires debt issuance costs to be presented in the balance sheet as a direct reduction from the associated debt liability. In August 2015, the FASB subsequently issued ASU 2015-15, Interest Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, a clarification as to the handling of debt issuance costs related to line-of-credit arrangements that allows the presentation of these costs as an asset. The standards update is effective for interim and annual periods beginning after December 15, 2015. The Company has debt costs associated with its line-of-credit only; therefore, this standard had no impact on its Consolidated Financial Statements. These costs remain an asset on the Companys Balance Sheet.
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) Amendments to the Consolidation Analysis, an amendment to the guidance for determining whether an entity is a variable interest entity (VIE). The standard does not add or remove any of the five characteristics that determine if an entity is a VIE. However, it does change the manner in which a reporting entity assesses one of the characteristics. In particular, when decision-making over the entitys most significant activities has been outsourced, the standard changes how a reporting entity assesses if the equity holders at risk lack decision making rights. This standard is effective for the Company for annual periods beginning after December 15, 2015 and early adoption is permitted, including in interim periods. The Company adopted this standards update, as required, effective January 1, 2016. The adoption of this standards update did not have a material impact on its Consolidated Financial Statements. |
4. FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4. FAIR VALUE MEASUREMENTS | Certain financial instruments are reported at fair value on the Consolidated Balance Sheets. Under fair value measurement accounting guidance, fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. The Company uses a market valuation approach based on available inputs and the following methods and assumptions to measure the fair values of its assets and liabilities, which may or may not be observable in the market.
Fair Value of Financial Instruments (other than Commodity Derivatives, see below) The carrying values of financial instruments, excluding commodity derivatives, comprising current assets and current liabilities approximate fair values due to the short-term maturities of these instruments and are considered Level 1.
Derivatives The fair values of the Companys commodity derivatives are considered Level 2 as their fair values are based on third-party pricing models which utilize inputs that are either readily available in the public market, such as natural gas and oil forward curves and discount rates, or can be corroborated from active markets or broker quotes. These values are then compared to the values given by the Companys counterparties for reasonableness. The Company is able to value the assets and liabilities based on observable market data for similar instruments, which results in the Company using market prices and implied volatility factors related to changes in the forward curves. Derivatives are also subject to the risk that counterparties will be unable to meet their obligations. Because the Companys commodity derivative counterparty was Société Générale (SocGen) at June 30, 2016, the Company considered non-performance risk in the valuation of its derivatives to be minimal.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques, and at least one significant model assumption or input is unobservable.
Derivative instruments listed above include swaps, reverse swaps and three-way collars. For additional information on the Companys derivative instruments and derivative liabilities, see Note 5 Commodity Derivative Instruments.
Debt The Companys debt is recorded at the carrying amount on its Consolidated Balance Sheets. For further discussion of the Companys debt, please see Note 10 Debt and Interest Expense. The carrying amount of floating-rate debt approximates fair value because the interest rates are variable and reflective of market rates.
Asset Retirement Obligations (AROs) The Company estimates the fair value of AROs based on discounted cash flow projections using numerous estimates, assumptions and judgments regarding such factors as the existence of a legal obligation for an ARO, amounts and timing of settlements, the credit-adjusted risk-free rate to be used and inflation rates. |
5. COMMODITY DERIVATIVE INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5. COMMODITY DERIVATIVE INSTRUMENTS | Objective and Strategies for Using Commodity Derivative Instruments In order to mitigate the effect of commodity price uncertainty and enhance the predictability of cash flows relating to the marketing of the Companys crude oil and natural gas, the Company enters into crude oil and natural gas price commodity derivative instruments with respect to a portion of the Companys expected production. The commodity derivative instruments used include variable to fixed price commodity swaps, two-way and three-way collars.
While these instruments mitigate the cash flow risk of future reductions in commodity prices, they may also curtail benefits from future increases in commodity prices.
The Company elected to discontinue hedge accounting for all commodity derivative instruments beginning with the 2013 financial year. The balance in other comprehensive income (OCI) at year-end 2012 remained in accumulated other comprehensive income (AOCI) until the original hedged forecasted transaction occurred. The last of these contracts expired in December 2015 and the Companys AOCI balance is now zero. No mark-to-market adjustments for commodity derivative contracts are made to AOCI, but instead are recognized in earnings. As a result of discontinuing the application of hedge accounting, the Companys earnings are potentially more volatile. See Note 4 Fair Value Measurements for a discussion of methods and assumptions used to estimate the fair values of the Companys commodity derivative instruments.
Counterparty Credit Risk Commodity derivative instruments expose the Company to counterparty credit risk. The Companys commodity derivative instruments are with SocGen whose long-term senior unsecured debt is rated A by Standard and Poors, A2 by Moodys, A by Fitch, A by R&I and A(high) by DBRS. Commodity derivative contracts are executed under master agreements which allow the Company, in the event of default, to elect early termination of all contracts. If the Company chooses to elect early termination, all asset and liability positions would be netted and settled at the time of election.
On February 18, 2015, the Company settled all of its natural gas and crude oil options, realizing $4.03 million. The Company retained its existing natural gas swap positions. Concurrent with the settlement of the Companys option positions and during the following day, the Company entered into new swap transactions for crude oil and natural gas for the balance of 2015 and all of 2016. In addition, the Company entered into three-way collars for 2017 for both natural gas and crude oil.
In conjunction with certain derivative hedging activity, the Company deferred the payment of $153,389 put premiums which was recorded in both current other deferred charges and current other accrued liabilities at year-end 2014 and was for production months January 2015 through December 2015. The put premium liabilities became payable monthly as the hedge production month became the prompt production month. The Company amortized the deferred put premium liabilities in January and February 2015; however, the liability for the remainder of the year was settled as part of the $4.03 million settlement.
Commodity derivative instruments open as of June 30, 2016 are provided below. Natural gas prices are New York Mercantile Exchange (NYMEX) Henry Hub prices, 2016 crude oil prices are Argus Light Louisiana Sweet (LLS), and 2017 crude oil prices are NYMEX West Texas Intermediate (WTI).
*Price is a weighted average
Derivatives for each commodity are netted on the Consolidated Balance Sheets as they are all contracts with the same counterparty. The following table presents the fair value and balance sheet location of each classification of commodity derivative contracts on a gross basis without regard to same-counterparty netting:
Sales of natural gas and crude oil on the Consolidated Statements of Operations are comprised of the following:
A reconciliation of the components of accumulated other comprehensive income (loss) in the Consolidated Statements of Changes in Equity is presented below:
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6. ASSET IMPAIRMENTS |
6 Months Ended |
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Jun. 30, 2016 | |
Asset Impairments | |
6. ASSET IMPAIRMENTS | Oil and natural gas prices have remained low in the first and second quarters of 2016 and, as a result, the Company recognized a non-cash asset impairment charge of $11,015,589 to write down oil and gas properties for the three months ended June 30, 2016. In addition, the Company recognized a non-cash asset impairment of $4,927,508 to write off goodwill for the three months ended June 30, 2015.
Potential for Future Impairments
If commodities prices remain at or below the current low levels, subject to numerous factors and inherent limitations, and all other factors remain constant, the Company expects to incur a non-cash full cost impairment of approximately $3.0 million during the third quarter of 2016, which will have an adverse effect on the Companys results of operations. |
7. PREFERRED STOCK |
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Jun. 30, 2016 | |
Preferred stock [Abstract] | |
7. PREFERRED STOCK | The Companys shares of 9.25% Series A Cumulative Redeemable Preferred Stock, no par value per share, with a liquidation preference of $25.00 per share (the Series A Preferred Stock), trade on the NYSE MKT under the symbol YUMAprA. The Series A Preferred Stock cannot be converted into common stock (except upon a change in control and in the event the Company chooses not to redeem the Series A Preferred Stock), but may be redeemed by the Company, at the Companys option, on or after October 23, 2017 (or in certain circumstances, prior to such date as a result of a change in control of the Company), at a redemption price of $25.00 per share plus any accrued and unpaid dividends. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and will remain outstanding indefinitely unless repurchased, redeemed or converted into common stock in connection with a change in control. Holders of the Series A Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, cumulative dividends at the rate of 9.25% per annum (the dividend rate) based on the liquidation price of $25.00 per share of the Series A Preferred Stock, payable monthly in arrears on each dividend payment date, with the first payment date of December 1, 2014. The Series A Preferred Stock is presented in the permanent equity section of the financial statements. Due to the current depressed commodity price environment, as well as other factors which have adversely affected the Companys cash flows and liquidity, the monthly dividends on the Series A Preferred Stock were suspended beginning with the month ended November 30, 2015. Pursuant to the Companys credit facility, the Company is precluded from making dividend payments on its Series A Preferred Stock. The Companys articles of incorporation provide that any unpaid dividends will accumulate. While the accumulation does not result in presentation of a liability on the balance sheet, the accumulated dividends are deducted from the Companys net income (or added to its net loss) in the determination of income (loss) attributable to common shareholders and, as appropriate, the corresponding computation of earnings (loss) per share. As of June 30, 2016, the Company had accumulated a total of $855,003 in unpaid preferred stock dividends, attributable to the Series A Preferred Stock. If the Company does not pay dividends on its Series A Preferred Stock for six quarterly periods, whether consecutive or non-consecutive, the holders of the shares of the Series A Preferred Stock, voting together as a single class, will have the right to elect two additional directors to serve on the Companys board of directors until all accumulated and unpaid dividends are paid in full. The Company anticipates the Series A Preferred Stock will convert into common equity as part of the merger with Davis. See Note 15 Agreement and Plan of Merger and Reorganization for additional information. |
8. STOCK-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8. STOCK-BASED COMPENSATION | The Yuma Co. 2011 Stock Option Plan (the Yuma Co. Plan) was adopted on June 21, 2011. On September 10, 2014, the shareholders of Pyramid Oil Company (Pyramid) (see Note 11 Merger With Pyramid Oil Company and Goodwill), adopted the 2014 Long-Term Incentive Plan (the 2014 Plan). Under these plans, the Board of Directors is authorized to grant stock options, stock awards (including restricted stock and restricted stock unit awards) and performance awards to officers, directors, employees and consultants. At June 30, 2016, 4,584,075 shares of the 8,900,000 shares of Yuma common stock originally authorized under active share-based compensation plans remained available for future issuance. The Company generally issues new shares to satisfy awards under employee share-based payment plans. The number of shares available is reduced by awards granted.
Restricted Stock The Company granted restricted stock awards (RSAs) under the Yuma Co. Plan and the 2014 Plan. These restricted stock awards granted to officers, directors and employees generally vest in one-third increments over a three-year period, and are contingent on the recipients continued employment.
A summary of the status of the RSAs for employees and non-employees and changes for the period ended June 30, 2016 is presented below.
At June 30, 2016, total unrecognized RSA compensation expense of $619,658 is expected to be recognized over a weighted average remaining service period of 1.33 years.
Stock Appreciation Rights In 2015, the Company also granted Stock Appreciation Rights (SARs) to employees and non-employees under the 2014 Plan. A summary of the status of these SARs and changes for the six months ended June 30, 2016 is presented below.
Weighted average assumptions used to estimate fair value for employees were expected life of five years, 61.17% volatility, 1.60% risk-free rate, and zero annual dividends.
At June 30, 2016, total unrecognized SAR compensation expense of $214,281 is expected to be recognized over a weighted average remaining service period of 1.49 years.
The SARs in the table above have a weighted average exercise price of $0.605 and an aggregate intrinsic value of zero. The Company intends to settle these SARs in equity, as opposed to cash.
Stock Options Pyramid issued stock options as compensation for non-employee members of its board of directors under the Pyramid Oil Company 2006 Equity Incentive Plan. The options vested immediately, and are exercisable for a five-year period from the date of the grant.
The following is a summary of the Companys stock option activity.
As of June 30, 2016, there were no unvested stock options or unrecognized stock option expenses. The exercise price for all options is $5.16.
Restricted Stock Units On April 1, 2013, the Company granted 123,446 Restricted Stock Units or RSUs to employees under the Yuma Co. Plan. Each RSU represented a right to receive one share of the Companys common stock upon vesting. The awards were liability-based and the booked valuation changed as the market value for common stock changed. Of the RSUs originally granted, 43,168 were forfeited prior to vesting, and the remaining RSUs vested on April 1, 2016 and were settled in cash for $16,858.
A summary of the status of the unvested RSUs and changes during the six months ended June 30, 2016 is presented below.
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9. EARNINGS (LOSS) PER COMMON SHARE |
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9. EARNINGS (LOSS) PER COMMON SHARE | Earnings (loss) per common share is computed by dividing earnings or losses attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Potential common stock equivalents are determined using the if converted method.
Potentially dilutive securities for the computation of diluted weighted average shares outstanding are as follows:
For the three months ended June 30, 2016 and the three months ended June 30, 2015, adjusted earnings were losses, therefore common stock equivalents were excluded from the calculation of diluted net loss per share of common stock, as their effect was anti-dilutive. RSUs were settled in cash during April 2016 and are no longer considered potentially dilutive. |
10. DEBT AND INTEREST EXPENSE |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10. DEBT AND INTEREST EXPENSE |
On December 30, 2015, Exploration entered into the Ninth Amendment pursuant to which Exploration agreed that on or before February 6, 2016, it would engage an investment bank to explore strategic options for its finances and, on or before March 31, 2016, would either enter into an underwritten commitment for additional capital in an aggregate amount sufficient to pay any borrowing base deficiency then existing or enter into a definitive agreement for the acquisition by a third party of all or substantially all of the assets of Exploration and its subsidiaries by merger, asset purchase, equity purchase or other structure acceptable to SocGen and the lenders. On February 10, 2016, the Company entered into the merger agreement with Davis (see Note 15 Agreement and Plan of Merger and Reorganization).
On June 6, 2016 and effective as of May 31, 2016, Exploration entered into the Tenth Amendment which maintains the borrowing base at $29.8 million and automatically reduces the borrowing base to $20.0 million on the occurrence of a Tenth Amendment Termination Date.
Costs and fees paid to the banks in connection with the revolving credit facility were amortized through May 31, 2016, due to the possible accelerated maturity date pursuant to the Ninth Amendment.
Additional loan costs incurred during the second quarter of 2016 were $50,334, and are being amortized to August 15, 2016. SocGen, as Agent Bank, is also paid an annual administrative fee of $25,000 that is usually amortized over the year, but was also amortized through May 31, 2016.
The terms of the credit agreement require the Company to meet a specific current ratio, interest coverage ratio, and a funded debt to EBITDA ratio. The credit agreement also contains a covenant requiring ten percent availability under the current borrowing line in order to pay dividends on the Series A Preferred Stock. In addition, the credit agreement requires the guarantee of the Company. The Company was not in compliance with the loan covenants as of March 31, 2016; however, the Tenth Amendment provided a waiver of those violations until the occurrence of a Tenth Amendment Termination Date.
The Company was not in compliance with the funded debt to EBITDA, EBITDA to interest expense and current ratio covenants as of June 30, 2016. Accordingly, the Company anticipates working with its lenders to obtain an extension of its waivers until the closing of the merger. In the event that the Company does not obtain an extension or waiver of the violations, then the Companys outstanding indebtedness would become immediately due and payable.
The following summarizes interest expense for the three and six months ended June 30, 2016 and 2015.
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11. MERGER WITH PYRAMID OIL COMPANY AND GOODWILL |
6 Months Ended |
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Jun. 30, 2016 | |
Business Combinations [Abstract] | |
11. MERGER WITH PYRAMID OIL COMPANY AND GOODWILL | On September 10, 2014, a wholly owned subsidiary of Pyramid merged with and into Yuma Energy, Inc., a Delaware corporation (Yuma Co.), in exchange for 66,336,701 shares of common stock and Pyramid changed its name to Yuma Energy, Inc. (the merger). As a result of the merger, the former Yuma Co. stockholders received approximately 93% of the then outstanding common stock of the Company and thus acquired voting control. Although the Company was the legal acquirer, for financial reporting purposes the merger was accounted for as a reverse acquisition of Pyramid by Yuma Co. The transaction qualified as a tax-deferred reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code).
The merger was accounted for as a business combination in accordance with ASC 805 Business Combinations (ASC 805). ASC 805, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired net of the fair value of liabilities assumed in an acquisition. Certain assets and liabilities may be adjusted as additional information is obtained; but no later than one year from the acquisition date. The provisions of ASC 350, on Intangibles Goodwill and Other require that intangible assets with indefinite lives, including goodwill, be evaluated on an annual basis for impairment, or more frequently if events occur or circumstances change that could potentially result in impairment. The goodwill impairment test requires the allocation of goodwill and all other assets and liabilities to reporting units; however, the Company has only one reporting unit.
The drop in crude oil prices and the resulting decline in the Companys common share price since the merger caused the Company to test goodwill for impairment at June 30, 2015. Goodwill was determined to be fully impaired and as a result, the balance of $4,927,508 was written off at that time. |
12. INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12. INCOME TAXES | The following summarizes the income tax expense (benefit) and effective tax rates:
The differences between the U.S. federal statutory rate of 34% and the Companys effective tax rates for the three and six months ended June 30, 2016 and 2015 are due primarily to state taxes and nondeductible expenses. In addition, June 30, 2016 was impacted by the expected valuation allowance on our deferred tax asset at year-end, which affected our expected annual effective tax rate and the tax effect of nondeductible stock compensation.
The Company knows of no uncertain tax positions and has no unrecognized tax benefits for the six months ended June 30, 2016 or June 30, 2015. Valuation allowances are established when the Company determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. As of June 30, 2016, the Company anticipates that it will have a net deferred tax asset at year-end 2016, for which a valuation allowance will be required. The Company has considered the effect of the valuation allowance in the current period in determining its expected annual effective tax rate to record tax expense for the period ending June 30, 2016. No valuation allowance was established as of June 30, 2015. |
13. AT MARKET SECURITY SALES |
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Marketable Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
13. AT MARKET SECURITY SALES | The Company entered into an At Market Issuance Sales Agreement (Sales Agreement) with an investment banking firm (the Agent) on December 19, 2014. Under the Sales Agreement, the Company was able to sell both common stock and Series A Preferred Stock pursuant to the Registration Statement on Form S-3 of the Company filed on November 5, 2013 (Registration No. 333-192094), which became effective under the Securities Act on November 21, 2013. Upon the Companys delivery and the Agents acceptance of a placement notice, the Agent will use its commercially reasonable efforts, consistent with its sales and trading practices, to sell any shares subject to the placement notice. The Company initiated the sales of securities under the Sales Agreement on February 18, 2015, and as of June 30, 2016, the Company sold the following securities for the net proceeds listed below (the Company has made no sales of securities since the second quarter of 2015). The Company may not sell any securities under the Sales Agreement pursuant to the merger agreement with Davis.
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14. CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
14. CONTINGENCIES | Certain Legal Proceedings
From time to time, the Company is party to various legal proceedings arising in the ordinary course of business. While the outcome of lawsuits cannot be predicted with certainty, the Company is not currently a party to any proceeding that it believes, if determined in a manner adverse to the Company, could have a potential material adverse effect on its financial condition, results of operations, or cash flows.
Amanda Olivier, et al. v. Nabors Drilling USA, L.P., and Yuma Exploration and Production, Inc.
On July 9, 2014, Nabors Drilling USA, L.P. and other Nabors entities and Yuma Energy, Inc. and several of its wholly owned subsidiaries were named in a lawsuit filed in the District Court of Harris County, Texas, in the 80th Judicial District, concerning the death of an employee of Timco Services during the drilling of the Crosby 12-1 well. The Company has tendered its defense to its liability insurance carriers who are responding. There has been one unsuccessful mediation session. Depositions are being scheduled. Management believes that the Company has adequate insurance to meet this potential claim.
Ontiveros v. Pyramid Oil, LLC, Yuma Energy, Inc. et al.
In September 2015, a suit was filed against the Company and Pyramid Oil LLC styled Mark A. Ontiveros and Louise D. Ontiveros, Trustees of The Ontiveros Family Trust dated March 29, 2007 vs. Pyramid Oil, LLC, et al., Case Number 15CV02959 in the Superior Court of California, County of Santa Barbara, Cook Division. In the suit, the plaintiffs allege that the 1950 Community Oil and Gas Lease between them and Pyramid Oil LLC has expired by non-production. The Company claims that the lease is still in effect, as there is no cessation of production time frame set out in the lease; production had temporarily ceased, but was still profitable when measured over an appropriate time period; and the Company was conducting workover operations on a well on the lease in an effort to re-establish production when served with the quit claim deed demand from the plaintiffs attorney. All present owners of the minerals covered by the 1950 Community Oil and Gas Lease, with the exception of the plaintiffs, have executed amendments signifying their concurrence that the 1950 Community Oil and Gas Lease is still in force and effect. On June 23, 2016, Pyramid Oil LLC filed a First Amended Cross Complaint against Texican Energy Corporation and Everett Lawley alleging interference with contractual relations and prospective economic relations, and violation of the California Uniform Trade Secrets Act. The parties are presently in the process of document discovery. Management intends to defend the plaintiffs claims and pursue the cross claim vigorously.
Yuma Energy, Inc. v. Cardno PPI Technology Services, LLC Arbitration
On May 20, 2015, counsel for Cardno PPI Technology Services, LLC (Cardno PPI) sent a notice of the filing of liens totaling $304,209 on the Companys Crosby 14 No. 1 Well and Crosby 14 SWD No. 1 Well in Vernon Parish, Louisiana. The Company disputed the validity of the liens and of the underlying invoices, and notified Cardno PPI that applicable credits had not been applied. The Company invoked mediation on August 11, 2015 on the issues of the validity of the liens, the amount due pursuant to terms of the parties Master Service Agreement (MSA), and PPI Cardnos breaches of the MSA. Mediation was held on April 12, 2016; no settlement was reached.
On May 12, 2016, Cardno filed a lawsuit in Louisiana state court to enforce the liens; the Court entered an Order Staying Proceeding on June 13, 2016, ordering that the lawsuit be stayed pending mediation/arbitration between the parties. On June 17, 2016, the Company served a Notice of Arbitration on Cardno PPI, stating claims for breach of the MSA billing and warranty provisions. On July 15, 2016, Cardno PPI served a Counterclaim for $304,209 plus attorneys fees. The parties are currently engaged in the arbitrator selection process. Management intends to pursue the Companys claims and to defend the counterclaim vigorously.
Environmental Remediation Contingencies
As of June 30, 2016, there were no known environmental or other regulatory matters related to the Companys operations that were reasonably expected to result in a material liability to the Company. The Companys operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection.
Exploration, a subsidiary of the Company, has been named as one of 97 defendants in a matter entitled Board of Commissioners of the Southeast Louisiana Flood Protection Authority East, Individually and As the Board Governing the Orleans Levee District, the Lake Borgne Basin Levee District, and the East Jefferson Levee District v. Tennessee Gas Pipeline Company, LLC, et al., Civil District Court for the Parish of Orleans, State of Louisiana, No. 13-6911, Division J - 5, now removed as Civil Action No. 13-5410, before the United States District Court, Eastern District of Louisiana. Plaintiff filed the suit on July 24, 2013 seeking damages and injunctive relief arising out of defendants drilling, exploration, and production activities from the early 1900s to the present day in coastal areas east of the Mississippi River in Southeast Louisiana.
The suit alleges that defendants activities have caused removal, erosion, and submergence of coastal lands resulting in significant reduction or loss of the protection such lands afforded against hurricanes and tropical storms. Plaintiff alleges that it now faces increased costs to maintain and operate the man-made hurricane protection system and may reach the point where that system no longer adequately protects populated areas.
Plaintiff lists hundreds of wells, pipelines, and dredging events as possible sources of the alleged land loss. Exploration is named in association with 11 wells, four rights-of-way, and one dredging permit. The suit does not specify any deficiency or harm caused by any individual activity or facility.
Although the suit references various federal statutes as sources of standards of care, plaintiff claims that all causes of action arise under state law: negligence, strict liability, natural servitude of drain, public nuisance, private nuisance, and as third-party beneficiary under breach of contract.
The Company tendered its defense to its liability insurance carriers, who are responding. On February 13, 2015, the federal judge adjudicating the matter granted defendants Joint Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6), thereby dismissing plaintiffs claims with prejudice in the matter. On February 20, 2015, the Board of Orleans filed a notice of appeal to the U.S. Fifth Circuit. On February 29, 2016, oral arguments were held regarding the appeal, but as of July 31, 2016, no ruling on the appeal has been made. The Company will continue to contest plaintiffs legal arguments and factual assertions. At this point in the legal process, no evaluation of the likelihood of an unfavorable outcome or associated economic loss can be made; therefore no liability has been recorded on the Companys books.
Escheat Audits
The States of Louisiana, Texas, Minnesota, North Dakota and Wyoming have notified the Company that they will examine the Companys books and records to determine compliance with each of the examining states escheat laws. The review is being conducted by Discovery Audit Services, LLC. The Company has engaged Ryan, LLC to represent it in this matter. The exposure related to the audits is not currently determinable. |
15. AGREEMENT AND PLAN OF MERGER AND REORGANIZATION |
6 Months Ended |
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Jun. 30, 2016 | |
Agreement And Plan Of Merger And Reorganization | |
15. AGREEMENT AND PLAN OF MERGER AND REORGANIZATION | On February 10, 2016, the Company and privately held Davis entered into a definitive merger agreement for an all-stock transaction. Upon completion of the transaction, the Company will reincorporate in Delaware, implement a one for ten reverse split of its common stock, and convert each share of its existing Series A Preferred Stock into 35 shares of common stock prior to giving effect for the reverse split (3.5 shares post reverse split). Following these actions, the Company will issue additional shares of common stock in an amount sufficient to result in approximately 61.1% of the common stock being owned by the current common stockholders of Davis. In addition, the Company will issue approximately 3.3 million shares of a new Series D preferred stock to existing Davis preferred stockholders, which is estimated to have a conversion price of approximately $5.70 per share, after giving effect for the reverse split. The Series D preferred stock is estimated to have a liquidation preference of approximately $19.0 million at closing, and will be paid dividends in the form of additional Series D preferred stock at a rate of 7% per annum. Upon closing, there will be an aggregate of approximately 23.7 million shares of common stock outstanding (after giving effect to the reverse stock split and conversion of Series A Preferred Stock to common stock). The transaction is expected to qualify as a tax-deferred reorganization under Section 368(a) of the Code.
The merger agreement is subject to the approval of the shareholders of both companies, as well as the Companys preferred shareholders, and other customary conditions and approvals, including authorization to list the newly issued shares on the NYSE MKT. The parties anticipate completing the transaction in the third or fourth quarter of 2016.
On June 17, 2016, Yuma Delaware Merger Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (Yuma Delaware), filed a Registration Statement on Form S-4 (Form S-4) with the SEC to effectuate (i) the proposed reincorporation of the Company from California to Delaware through the merger of the Company with and into Yuma Delaware (the reincorporation), and (ii) the proposed merger of Yuma Merger Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Yuma Delaware (Merger Subsidiary), with and into Davis, with Davis becoming a wholly-owned subsidiary of Yuma Delaware (the Davis merger). In order to complete the Davis merger, the Companys holders of common stock and preferred stock must vote to approve and adopt the reincorporation and the merger. |
16. GREATER MASTERS CREEK FIELD AREA |
6 Months Ended |
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Jun. 30, 2016 | |
Greater Masters Creek Field Area | |
16. GREATER MASTERS CREEK FIELD AREA | During the first quarter of 2016, the Company shut-in 14 Austin Chalk wells in Beauregard, Rapides and Vernon Parishes, Louisiana due to low oil and natural gas prices. Since production was not restarted from these wells, the associated leases have expired, reducing the Companys proved reserves from year-end 2015 by approximately 1,629 MBoe, acreage by 22,021 gross (18,140 net) acres, operated proved undeveloped locations by three, and operated non-proved undeveloped locations by seven.
In addition, during the first quarter of 2016, the Company received notice from the operator of certain wells in Rapides and Vernon Parishes, Louisiana, that certain wells in which the Company has an interest were shut-in due to current economic conditions. The operator has since sold its interest. Since the operator and the subsequent operator have not restarted production from these wells, the associated leases have expired, reducing the Companys proved reserves by approximately 285 MBoe from year-end 2015, acreage by 18,895 gross (3,737 net) acres, non-operated proved undeveloped locations by three, and non-operated non-proved undeveloped locations by 18.
In April 2016, a party to the participation agreement dated July 31, 2013 relating to the Companys Greater Masters Creek Area exercised its option to participate under the participation agreement for a four percent working interest.
On April 4, 2016, the Company entered into an amendment effective March 1, 2016 to an oil and gas lease in the Greater Masters Creek Field area with a certain mineral owner for acreage that was not held by production as of March 31, 2016. The total acreage is approximately 25,139 acres and, by virtue of the Company conducting certain location clean-up operations, the lease has now been extended until December 31, 2016. This extension is subject to certain additional performance criteria, including the posting of a bond to cover P&A costs for wells located on this mineral owners property, or plugging and abandoning six of the mineral owners wells by December 31, 2016 at an estimated net cost of $426,000. If the leased acreage expires, the Companys proved reserves from year-end 2015 would be reduced by approximately 5,096 MBoe, the number of operated proved undeveloped locations and operated non-proved locations would be reduced by 13 and 16, respectively. |
17. TEXAS SOUTHEASTERN GAS MARKETING COMPANY |
6 Months Ended |
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Jun. 30, 2016 | |
Texas Southeastern Gas Marketing Company | |
17. TEXAS SOUTHEASTERN GAS MARKETING COMPANY | As of January 1, 2016, the Company decided to discontinue the operations of Texas Southeastern Gas Marketing Company due to the limited volumes of natural gas that it marketed, as well as the costs associated with accounting for the entity. Texas Southeastern Gas Marketing Company is not a significant subsidiary, and this discontinuation of operations does not represent a strategic shift in business for the Company. |
18. SUBSEQUENT EVENTS |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
18. SUBSEQUENT EVENTS | The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements, except as noted below or already recognized or disclosed in the Companys filings with the SEC.
Amendment to Form S-4
On August 4, 2016, Yuma Delaware filed Amendment No. 1 to the Form S-4 with the SEC in connection with the proposed reincorporation of the Company from California to Delaware and the proposed merger with Davis. |
4. FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements by hierarchy |
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5. COMMODITY DERIVATIVE INSTRUMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative instruments |
*Price is a weighted average |
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Schedule of derivative assets and liablities |
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Sales of natural gas and crude oil |
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Schedule reconciliation of the components of accumulated other comprehensive income (loss) in the Consolidated Statements of Changes in Equity |
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8. STOCK-BASED COMPENSATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule stock option activity |
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Schedule unvested restricted stock units |
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Stock Appreciation Rights (SARs) [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company's stock-based activity |
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Restricted Stock Agreements (RSAs) [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company's stock-based activity |
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9. EARNINGS (LOSS) PER COMMON SHARE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potentially dilutive securities |
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10. DEBT AND INTEREST EXPENSE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
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Schedule interest expense |
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12. INCOME TAXES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule income tax expense (benefit) and effective tax rates |
|
13. AT MARKET SECURITY SALES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Summary of sales of securities and the net proceeds |
|
5. COMMODITY DERIVATIVE INSTRUMENTS (Details) |
Dec. 31, 2017
bbl
MMBbls
$ / MMBTU
$ / bbl
|
Dec. 31, 2016
bbl
MMBbls
$ / MMBTU
$ / bbl
|
|||
---|---|---|---|---|---|
Swaps | |||||
Volume | MMBbls | 245,068 | ||||
Price(NYMEX) | $ / MMBTU | [1] | 2.628 | |||
Volume | bbl | 64,333 | ||||
Price(LLS) | 62.27 | ||||
Ceiling sold price (call) (WTI) | 40.00 | ||||
3-Way Collars | |||||
Volume | MMBbls | 248,023 | ||||
Ceiling sold price (call) (NYMEX) | $ / MMBTU | [1] | 3.280 | |||
Floor purchased price (put) (NYMEX) | $ / MMBTU | [1] | 2.946 | |||
Floor sold price (short put) (NYMEX) | $ / MMBTU | [1] | 2.381 | |||
Volume | bbl | 113,029 | 23,449 | |||
Ceiling sold price (call) (WTI) | 77.00 | 47.15 | |||
Put Spread | |||||
Floor purchased price (put) (WTI) | 60.00 | 40.00 | |||
Floor sold price (short put) (WTI) | 45.00 | 30.00 | |||
|
5. COMMODITY DERIVATIVE INSTRUMENTS (Details 1) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Asset commodity derivatives: | ||
Current assets | $ 1,433,402 | $ 3,069,115 |
Noncurrent assets | 661,835 | 1,841,120 |
Total | 2,095,237 | 4,910,235 |
Liability commodity derivatives: | ||
Current liabilities | (597,200) | (411,068) |
Noncurrent liabilities | (342,020) | (770,579) |
Total | (939,220) | (1,181,647) |
Total commodity derivative instruments | $ 1,156,017 | $ 3,728,588 |
5. COMMODITY DERIVATIVE INSTRUMENTS (Details 2) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Commodity Derivative Instruments Details 2 | ||||
Sales of natural gas and crude oil | $ 3,124,424 | $ 5,534,894 | $ 6,056,010 | $ 10,107,573 |
ain realized from sale of commodity derivatives | 0 | 0 | 0 | 4,030,000 |
Other gains (losses) realized on commodity derivatives | 557,693 | (255,049) | 1,716,807 | 651,785 |
Unrealized losses on commodity derivatives | (1,784,395) | (1,441,930) | (2,572,571) | (5,308,196) |
Total revenue from natural gas and crude oil | $ 1,897,722 | $ 3,837,915 | $ 5,200,246 | $ 9,481,162 |
5. COMMODITY DERIVATIVE INSTRUMENTS (Details 3) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Balance, beginning of period, before tax | $ 0 | $ 63,091 |
Balance, beginning of period, after tax | 0 | 38,801 |
Sale of unexpired contracts previously subject to hedge accounting rules before tax | 0 | (119,917) |
Sale of unexpired contracts previously subject to hedge accounting rules after tax | 0 | (73,749) |
Other reclassifications due to expired contracts previously subject to hedge accounting rules, before tax | 0 | 56,826 |
Other reclassifications due to expired contracts previously subject to hedge accounting rules, after tax | 0 | 34,948 |
Balance, end of period, before tax | 0 | 0 |
Balance, end of period, after tax | $ 0 | $ 0 |
6. ASSET IMPAIRMENTS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Asset Impairments | ||
Non-cash asset impairment charge to write down oil and gas properties | $ 11,015,589 | |
Non-cash asset impairment to write off goodwill | $ 4,927,508 |
8. STOCK-BASED COMPENSATION (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Granted | 0 |
RSA | |
Unvested shares as of January 1, 2016 | 2,514,434 |
Granted | 132,244 |
Forfeited | (132,244) |
Vested | (983,804) |
Unvested shares as of June 30, 2016 | 1,530,630 |
Weighted Average Grant-Date Fair Value | |
Beginning of period | $ / shares | $ 0.87 |
Granted | $ / shares | 0.21 |
Forfeited | $ / shares | 0.73 |
Vested | $ / shares | 0.68 |
End of period | $ / shares | $ 0.95 |
8. STOCK-BASED COMPENSATION (Details 1) |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Granted | 0 |
SARs [Member] | |
Unvested shares as of January 1, 2016 | 1,912,419 |
Granted | 103,745 |
Forfeited | (103,745) |
Vested | (789,117) |
Unvested shares as of June 30, 2016 | 1,123,302 |
Weighted Average Grant-Date Fair Value | |
Beginning of period | $ / shares | $ 0.30 |
Granted | $ / shares | 0.03 |
Forfeited | $ / shares | 0.32 |
Vested | $ / shares | 0.24 |
End of period | $ / shares | $ 0.32 |
8. STOCK-BASED COMPENSATION (Details 3) - RSUs |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Unvested shares as of January 1, 2016 | shares | 80,278 |
Vested on April 1, 2016 | shares | (80,278) |
Unvested shares as of June 30, 2016 | shares | 0 |
Beginning of period | $ / shares | $ 2.72 |
Vested on April 1, 2016 | $ / shares | 2.72 |
End of period | $ / shares | $ 0.00 |
9. EARNINGS (LOSS) PER COMMON SHARE (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Earnings Loss Per Common Share Details | ||||
Restricted Stock Awards | 2,041,498 | 640,499 | 2,239,594 | 1,271,916 |
Restricted Stock Units | 0 | 95,424 | 0 | 95,424 |
Total | 2,041,498 | 735,923 | 2,239,594 | 1,367,340 |
10. DEBT AND INTEREST EXPENSE (Details) - USD ($) |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Total Debt | $ 29,800,000 | $ 30,063,635 |
Less: current portion | (29,800,000) | (30,063,635) |
Total long-term debt | 0 | 0 |
Variable rate revolving credit facility payable [Member] | ||
Total Debt | 29,800,000 | 29,800,000 |
Installment loan due February 29, 2016 [Member] | ||
Total Debt | 0 | 108,894 |
Installment loan due June 11, 2016 [Member] | ||
Total Debt | $ 0 | $ 154,741 |
10. DEBT AND INTEREST EXPENSE (Details 1) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Debt Disclosure [Abstract] | ||||
Credit agreement | $ 259,649 | $ 280,113 | $ 517,377 | $ 521,407 |
Credit agreement commitment fees | 0 | 9,331 | 0 | 25,159 |
Amortization of credit agreement loan costs | 195,516 | 71,613 | 457,990 | 136,757 |
Insurance installment loan | 291 | 3,471 | 1,961 | 5,197 |
Other interest charges | 89 | 186 | 5,029 | 1,023 |
Capitalized interest | (129,149) | (250,336) | (253,313) | (483,158) |
Total interest expense | $ 326,396 | $ 114,378 | $ 729,044 | $ 206,385 |
12. INCOME TAXES (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Taxes Tables | ||||
Consolidated net income (loss) before income taxes | $ (15,766,990) | $ (11,190,584) | $ (19,973,009) | $ (17,168,158) |
Income tax expense (benefit) | $ (692,302) | $ (1,640,910) | $ (1,225,235) | $ (3,935,492) |
Effective tax rate | 4.40% | 14.70% | 6.10% | 22.90% |
13. AT MARKET ISSUANCE SALES AGREEMENT (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
shares
| |
Net Proceeds | $ 2,233,546 |
COMMON STOCK | |
Shares | shares | 1,347,458 |
Net Proceeds | $ 1,363,160 |
Series A Preferred Stock | |
Shares | shares | 46,857 |
Net Proceeds | $ 870,386 |
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