Quarterly report pursuant to Section 13 or 15(d)

OIL AND NATURAL GAS PROPERTIES

v3.22.1
OIL AND NATURAL GAS PROPERTIES
6 Months Ended
Mar. 31, 2022
Extractive Industries [Abstract]  
OIL AND NATURAL GAS PROPERTIES

NOTE 3 – OIL AND NATURAL GAS PROPERTIES

 

The Company currently has under lease two federal Outer Continental Shelf blocks and has licensed 2.2 million acres of three-dimensional (3-D) seismic data in its area of concentration. Our two leases expire on June 30, 2022, and October 31, 2025, respectively.

 

The Company, as the operator of two wells drilled in the United States Gulf of Mexico, has incurred tangible and intangible drilling costs for the wells in process and has billed its working interest partners for their respective share of the drilling costs to date. The intangible drilling and all other costs related to the first well have been impaired. The second well, Tau, was drilled to a measured depth of 15,254 feet, as compared to the originally permitted 29,857 foot measured depth. Producible hydrocarbon zones were not established to that depth, but hydrocarbon shows were encountered. Complex geomechanical conditions required two by-pass wellbores, one sidetrack wellbore, and eight casing strings to reach that depth. Equipment limitations prevented further drilling operations. The Company has determined that the optimum way to test the Tau Prospect is through a redrill. However, the Biden administration’s actions regarding oil and gas exploration on federal lands and the volatility of commodity prices have impacted the timing of a potential redrill.

 

As of March 31, 2022, the Company’s oil and natural gas properties consisted of unproved properties, wells in process and no proved reserves. During the six months ended March 31, 2022 and 2021, an impairment charge of approximately $3.1 million and nil has been recorded. The impairment charge was recorded because without the commencement of drilling the Tau #2 well or a lease extension being granted, one of the Tau Prospect lease blocks will expire on June 30, 2022. Interest has not been capitalized for the six months ended March 31, 2022 and 2021, respectively, and approximately $0.06 million and $0.03 million of general and administrative expenses have been capitalized to oil and natural gas properties for the six months ended March 31, 2022 and 2021, respectively.