Quarterly report pursuant to Section 13 or 15(d)

SUBSEQUENT EVENTS

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SUBSEQUENT EVENTS
9 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS

 

Due to a combination of the COVID-19 pandemic and related pressures on the global supply-demand balance for crude oil and related products, commodity prices have significantly declined in recent months, and oil and gas operators have reduced exploration budgets and activity. The Company has evaluated the effect of these factors on its business and the Company has determined that these factors will most likely cause a delay in the Company’s 2020 drilling program. The Company continues to monitor the economic environment and evaluate the impact on the business.

 

On July 27, 2020, the Company entered into an agreement with holders of the Convertible Debentures to modify the existing arrangement. At the date of modification, the remaining principal under the Convertible debentures was $1.9 million. Pursuant to the modified agreement, the payment terms were changed to as follows:

 

$50,000 on the date of the Agreement;

$700,000 on or before August 21, 2020;

$750,000 on or before September 30, 2020; and

Any remaining principal amount outstanding on or before November 30, 2020.

 

Upon the timely payment by the Company of the amounts set forth above, all other amounts due on the Debentures, including any interest or fees accrued or that will accrue or become due or payable on the Debentures, will be extinguished.

 

In addition, the holder agreed to limit their conversion right to $300,000 of outstanding principal between the date of modification and November 30, 2020. The Company further agreed to reduce the exercise price on the warrants to purchase 50,000,000 shares of common stock held by the holder from $0.04 per share to $0.02 per share. The Company plans to use a portion of the proceeds from the insurance settlement, discussed below, to make the payments set forth above.

 

On July 27, 2020, the Company entered into a settlement with the Underwriters of a well control events insurance policy covering certain claims associated with the drilling of the Company’s Tau Prospect during May 2019. In accordance with the settlement, in lieu of the insurer paying for the redrill of the well and for a complete release of any further liability under the insurance policy, the Company will receive $6,575,000 in cash net to its 25% working interest. Approximately $6.0 million of this amount has been received through the filing date of this report. The Company intends to apply the proceeds from the insurance settlement to pay amounts due on the Convertible Debentures and other payables, as well as fund other general corporate purposes including expenditures associated with the Company’s drilling program.