|12 Months Ended|
Dec. 31, 2022
|Extractive Industries [Abstract]|
NOTE 4. EVALUATED PROPERTIES
The acquired properties and current properties can be summarized as follows:
SCHEDULE OF ACQUIRED PROPERTIES AND CURRENT PROPERTIES
U.S. Properties – Minerva-Rockdale Field (“NOACK”) Field
On November 1, 2018, the Company sold 83% leasehold net revenue interest and 100% working interest in the NOACK Field Assets, i.e., the Company’s leasehold in the Noack Farms, Minera Lease and all related leases and assets located in Milam County, Texas (the “NOACK Assets”) to Crossroads Petroleum LLC (“CP”) for $375,000. The terms of this agreement included $260,000 to be paid as a deposit with the balance of $115,000 to be paid by December 31, 2018. On April 15, 2019, the Company foreclosed on the property since CP did not satisfy all of the contractual payment requirements. On April 15, 2019, the remaining unpaid receivable balance was $120,000 which was written off as a loss on sale of property. Note that previous payments of $255,000 were forfeited to the Company and no reimbursement to CP was made.
On August 6, 2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the sale of the same NOACK property with Flowtex Energy LLC. (“FT”). The purchaser agreed to pay $400,000 for the NOACK Assets including a $20,000 deposit that was received on August 15, 2019, and the remaining balance of $380,000 to be received by September 30, 2019. By December 31, 2020, FT had made cumulative payments of $375,000, resulting in a $25,000 account receivable to the Company at December 31, 2020 which is included in other current assets. The $400,000 was recorded as a gain on sale of properties. On July 6, 2021, the remaining $25,000 accounts receivable was settled via the purchaser remitting a cash payment of $8,995, as well as paying (on the Company’s behalf) $16,005 of outstanding property tax invoices previously incurred by the Company.
U.S. Properties – Slick Unit Dutcher Sand (“SUDS”) Field
The Slick Unit Dutcher Sand (SUDS) field is located in Creek County, Oklahoma. Petrolia owns a 100% working interest (WI) with an approximately 76.5% net revenue interest (NRI) in the 2,530 acre field. The SUDS West unit is approximately 1,670 acres and the SUDS East unit is approximately 860 acres.
As of December 31, 2022, SUDS total estimated net proved reserves were approximately 346 thousand barrels of oil equivalent (MBoe) and total estimated net probable reserves were approximately 153 thousand barrels of oil equivalent (MBoe).
On January 13, 2023, the Company received an Incident and Complaint Investigation Report issued by the Oklahoma Corporation Commission (OCC) due to a mineral owner complaint. The OCC issued a plug or produce order for SUDS West unit and SUDS East unit. The Company has received two extensions of time and is working with the OCC to implement a production plan to bring both units into compliance.
The SUDS field is currently shut-in while the Company completes a review of the land and lease records currently being conducted by a petroleum landman. PEC has also initiated a detailed reservoir and historical waterflood sweeping pattern analysis. The Company is currently awaiting the outcome of the review of the SUDS subsurface geology. PEC is finalizing a SUDS capital budget with the intent to commence further field development in Q3 2023.
The SUDS field is still burdened with the Lazy D Ranch Slick, LLC (Plaintiff) vs. Petrolia Energy Corporation (Defendant) litigation, including the Statement of Judgment dated February 20, 2020 and the Settlement Agreement and Release dated August 2020.
U.S. Properties – Twin Lakes San Andres Unit (“TLSAU”) Field
The Twin Lakes San Andres Unit (TLSAU) field is located in Chaves County, New Mexico. As of December 31, 2022, it was determined that PEC does not own any TLSAU leases, and therefore has no reserves.
It is estimated that PEC has 29 wells that need to be plugged and abandoned, plus surface remediated. The estimated cost of the TLSAU well plugging and abandonment, and surface remediation obligations are approximately $1.2 million.
Luseland, Hearts Hill and Cuthbert fields
On June 29, 2018, the Company acquired a 25% working interest in approximately 41,526 acres located in the Luseland, Hearts Hill, and Cuthbert fields, located in Southwest Saskatchewan and Eastern Alberta, Canada. The working interest was acquired from Blue Sky (a related party). Blue Sky had previously acquired an 80% working interest in the Canadian Properties from Georox Resources Inc., who had acquired the Canadian Properties from Cona Resources Ltd. and Cona Resources Partnership prior to the acquisition by the Company.
The effective date of the acquisition was June 1, 2018. The acquisition of the Canadian Properties was evidenced and documented by a Memorandum of Understanding between the Company and Blue Sky dated June 29, 2018 and a Conveyance between the parties dated as of the same date, pursuant to which the Company agreed to acquire the Working Interest in consideration for $1,428,581 in Canadian dollars (“CAD”) (approximately $1,096,216 in U.S. dollars) of which CAD $1,022,400 (approximately $782,441 in U.S. dollars) was paid in cash (the “Cash Payment”) and CAD $406,181 (approximately $313,775 in U.S. dollars) was evidenced by a promissory note (the “Acquisition Note”). The Cash Payment was made with funds borrowed by the Company pursuant to the terms of that certain $1,530,000 May 9, 2018, Amended and Restated Loan Agreement entered with Bow and a third party (the “Loan Agreement” and the “Lender”). The amount owed under the Loan Agreement accrues interest at the rate of 12% per annum (19% upon the occurrence of an event of default) and is due and payable on May 11, 2021.
The Working Interest will be held in the name of the Company’s wholly-owned Alberta, Canada, subsidiary, Petrolia Canada Corporation. The Acquisition Note which was dated June 8, 2018, bears interest at the rate of 9% per annum, beginning on August 1, 2018 and is due and payable on November 30, 2018, provided that the Company has the right to extend the maturity date for a period six months with 10 days’ notice to Blue Sky, in the event the Company pays 25% of the principal amount of the Acquisition Note at the time of extension.
On September 17, 2018, the Company entered a Memorandum of Understanding (“MOU”) with Blue Sky. Pursuant to the MOU, the Company obtained the rights to acquire an additional 3% working interest in the Canadian Properties, increasing our Working Interest to 28%. Total consideration paid from the Company to Blue Sky for the additional 3% Working Interest was $150,000.
On February 16, 2022, the Company entered into both a Purchase and Sale Agreement and a Debt Settlement Agreement with Prospera Energy. Prospera agreed to purchase the Company’s twenty-eight percent (28%) working interest in the Cuthbert, Luseland and Heart Hills assets in Saskatchewan and Alberta. Under these agreements Prospera will forgive $2,061,614 CAD in accounts payable from the Company, arising from joint interest billings. Prospera will also issue a $510,000 CAD convertible debenture to Petrolia Canada, which can be converted to common share units. Lastly, Prospera will pay the Company $75,000 CAD in five equal installments. The original purchase price of the assets was $1,622,756 CAD, with an additional $1,711,142 CAD of Asset Retirement Cost recognized at the time of purchase. On the effective date of the sale, the Asset Retirement Obligation was $2,312,897 CAD and the Accumulated Depletion was $3,333,898 CAD. The transaction resulted in a gain of $4,959,512 CAD ($3,919,323 USD) See Form 8-K reference in Exhibits section below. The agreement was effective on October 1, 2021.
On May 1, 2020, Petrolia Energy Corporation acquired a 50% working interest in approximately 28,000 acres located in the Utikuma Lake area in Alberta, Canada. The property is an oil-weighted asset currently producing approximately 500 bpd of light oil. The working interest was acquired from Blue Sky Resources Ltd. in an affiliated party transaction as Zel C. Khan, the Company’s former Chief Executive Officer, is related to the ownership of Blue Sky. Blue Sky acquired a 100% working interest in the Canadian Property from Vermilion Energy Inc. via Vermilion’s subsidiary Vermilion Resources. The effective date of the acquisition was May 1, 2020. The total purchase price of the property was $2,000,000 (CAD), with $1,000,000 of that total due initially. The additional $1,000,000 was contingent on the future price of WTI crude. At the time WTI price exceeded $50/bbl, the Company would pay an additional $750,000 CAD. In addition, at the time WTI price exceeded $57/bbl the Company would pay an additional $250,000 CAD (for a cumulative contingent total of $1,000,000 CAD). The price of WTI crude exceeded $50/bbl on January 6, 2021 and exceeded $57/bbl on February 8, 2021. The additional payments due were netted with the accounts receivable balance from previous Joint Interest Billing statements from BSR. The total USD value of the addition was $787,250, using prevailing exchange rates on the respective dates. Included in the terms of the agreement, the Company also funded their portion of the Alberta Energy Regulator (“AER”) bond fund requirement $763,754 CAD ($563,904 USD), necessary for the wells to continue in production after the acquisition. Additional funds in the amount of $490,624 CAD ($362,245 USD) remain in the other current asset balance for future payments to BSR, related to the acquisition.
On December 2, 2020, Petrolia Canada Corporation received $602,404.84 CAD from the proceeds of a secured royalty interest loan between Blue Sky Resources and Prairie Sky Royalty related to the Utikuma asset.
On August 21, 2021, the Company signed a Letter Agreement to divest the Company’s wholly owned Canada subsidiary, Petrolia Canada Corporation (PCC) and its assets in consideration for $6,500,000 in Canadian dollars (approximately $5,150,000 in U.S. dollars) less any contingent liabilities. The buyer is Blue Sky Resources Ltd. (“Blue Sky”), an affiliated party to Zel C. Khan, the Company’s former Chief Executive Officer. Petrolia Canada Corporation assets include a 50% working interest in approximately 28,000 acres located in the Utikuma Lake area in Alberta, Canada, and 28% working interest in the Luseland, Hearts Hill, and Cuthbert fields located in Southwest Saskatchewan and Eastern Alberta. The Company received a non-refundable deposit of $200,000 CAD on August 31, 2021. The remaining payment schedule is as follows: $2,000,000 CAD on the Closing Date (scheduled for September 30, 2021), $1,000,000 CAD on October 31, 2021, less Petrolia’s contingent liabilities associated with the acquisition of Utikuma, and $3,300,000 CAD on December 31, 2021. See Form 8-K reference in Exhibits section below. This transaction did not close, and the $200,000 CAD has been added to other payables to Blue Sky Resources.
On May 5, 2023, the Company was notified by Blue Sky Resources (BSR), the operator of our Utikuma asset that the Province of Alberta has declared a state of emergency due to wildfires in Alberta. We were informed that because of wildfires in the vicinity of our oilfield assets, the field was shut in and all personnel were evacuated, and that the highway to the Slave Lake area has been closed. Early assessments of the situation indicate that our Utikuma facilities may have incurred major damage.
The entire disclosure for properties used in normal conduct of oil and gas exploration and producing operations. This disclosure may include property accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef