Quarterly report pursuant to Section 13 or 15(d)

OIL AND NATURAL GAS PROPERTIES

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OIL AND NATURAL GAS PROPERTIES
9 Months Ended
Jun. 30, 2017
Oil and Gas Exploration and Production Industries Disclosures [Abstract]  
OIL AND NATURAL GAS PROPERTIES

NOTE 3 – OIL AND NATURAL GAS PROPERTIES

 

In March 2014 and 2015, the Company was awarded a total of 23 Outer Continental Shelf blocks in the Central Gulf of Mexico. During the quarter ended June 30, 2016, the Company relinquished six of the lease blocks acquired. The capitalized lease costs of $2,610,678 associated with these blocks were recorded as impairment of oil and natural gas properties. The Company also deducted $280,000 as an impairment of certain capitalized exploration costs that were directly allocable to the relinquished blocks, for a total impairment deduction of $2,890,678 for the quarter ended June 30, 2016.  During the quarter ended June 30, 2017, the Company relinquished six lease blocks. The capitalized lease costs of $2,054,212 associated with these blocks were recorded as impairment of oil and natural gas properties. The Company also deducted $1,262,000 as an impairment of certain capitalized exploration costs that were directly allocable to the 2017 relinquished blocks, for a total impairment deduction of $3,316,212.

 

In May 2016, the Company entered into a letter agreement subject to execution of definitive documents (the “letter agreement”) with Texas South that sets out the terms and conditions of a proposed farm-out arrangement (the “Farm-out”) to develop two shallow-depth oil and gas prospects located on offshore Gulf of Mexico blocks currently leased by the Company. Through June 30, 2017 the Company received $400,000 under the terms of the letter agreement. In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to the capitalized costs of its oil & gas properties with no gain or loss recognition. The Company also received lease rental reimbursements of $63,147 for 2016 and $63,147 for 2017 under the terms of this letter agreement.

 

The Company paid $376,368 and $632,665 in gross annual lease rental payments to the BOEM for the nine months ended June 30, 2017 and the year ended September 30, 2016, respectively. The Company’s share of these amounts are included in unproved properties. 

 

For the year ended September 30, 2016, the Company incurred $1,354,674 in consulting fees and salaries and benefits associated with full-time geoscientists, and $463,497 associated with technological infrastructure, third party hosting services and seismic data. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to.  At June 30, 2016, a portion of these costs, $280,000, specifically related to leases relinquished in June 2016 were immediately impaired.  These remaining capitalized amounts when added to the amount paid in 2016 for lease rental payments of $632,665 and netted with the 2016 receipts from sale of a working interest of $400,000 as well as the relinquished leases impairment amount of $2,610,678 subtracting lease rentals receivable of $191,171 results in unproved oil and gas properties of $4,526,171, reflected on our balance sheet at September 30, 2016.

 

For the nine months ended June 30, 2017, the Company incurred $130,675 in consulting fees, salaries and benefits, $167,250 in stock option costs associated with geoscientists, and $34,073 associated with technological infrastructure and third party hosting services. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to. These capitalized amounts when added to the amount paid in 2017 for lease rental payments of $376,368 and netted with the 2017 receipts from working interest portion of annual rentals $118,680 as well as the relinquished leases impairment amount of $3,316,212 results in unproved oil and gas properties of $1,799,645 reflected on our balance sheet at June 30, 2017.