Petrolia Energy Corp

Between Oct 2021 and Jan 2022, Petrolia agreed to sell 11,000 shares of a new Series C Convertible Preferred Stock at $10.00 each (about $110,000) to accredited investors. Each share converts at $0.01 per common share, so the 11,000 shares could become up to 11,000,000 common shares (before accrued dividends), which would dilute existing holders. Dividends are 8% a year, paid in extra preferred shares (11% if still outstanding after Dec 31, 2023), and the Series C ranks ahead of common and Series B on liquidation. The filing says the money is to pay lawyers to consider legal action against Blue Sky Resources, the operator of its Canadian properties, and former officers; the filing also calls Blue Sky's CEO the father of the company's 'former' CEO, which indicates Zel Khan has left that role. This marks a break from the earlier close dealings with Blue Sky. The text is cut off, so the rest of the stated purpose is not shown.

capital raising announcement

This filing, made in Nov 2021 about events from 2019-2020, reports the settlement of a lawsuit by LazyDRanch Slick, LLC over the company's SUDS wells in Creek County, Oklahoma. A Feb 2020 court judgment of $1,988,372 plus 6.75% interest was released in an Aug 2020 settlement: Petrolia agreed to pay $75,000 (already paid in full) and to do remediation work costing up to $200,000 (excluding plugging four wells) within 24 months of Aug 19, 2020, and some of that work is done (power lines, transformers, posts, flowlines and surface equipment removed). It resolves a large legal claim on the SUDS asset, though the remaining remediation and the effort to remove the property from the SUDS unit are still obligations.

material agreement

On Oct 25, 2021, Petrolia created a new Series B Preferred Stock and issued one share each to its three directors (James Burns, Leo Womack and Ivar Siem) for their board service. Together these three shares carry 60% of all shareholder votes, so the filing itself states a change of control: the three directors now control every shareholder vote, whatever number of common shares others hold. The Series B has no dividends, no liquidation preference and no conversion rights, and cannot be transferred. This is a new thread and weakens the influence of ordinary shareholders.

capital raising announcement

On Aug 31, 2021, Petrolia signed a letter agreement to sell its Canadian subsidiary, Petrolia Canada Corporation, to Blue Sky Resources, an affiliate of CEO Zel Khan, for CAD $6.5 million (about US$5.15 million) less contingent liabilities. The subsidiary holds the 50% Utikuma Lake interest and a 28% interest in the Luseland, Hearts Hill and Cuthbert fields. CAD $200,000 was received as a nonrefundable deposit, with CAD $2M due at closing (scheduled Sept 30, 2021), CAD $1M on Oct 31 (less Utikuma-related contingent liabilities) and CAD $3.3M on Dec 31, 2021. This sells back the Canadian assets bought from Blue Sky in 2018 and 2020.

material agreement

On May 29, 2020, Petrolia bought a 50% working interest in about 28,000 acres in the Utikuma Lake area, Alberta (about 565 bopd; 2P reserves 4.7 MMboe) from Blue Sky Resources, again a related party of CEO Zel Khan, for CAD $2.7 million (about US$2 million). It was funded by about US$1 million from an existing credit line and a US$1 million short-term bridge loan maturing Jan 30, 2021. This returns to Canadian assets bought from Blue Sky after the 2018 Bow sale, and adds short-term debt.

debt financing

On Aug 31, 2018, Petrolia sold Bow Energy, acquired in February, back to Blue Sky Resources, a company owned by the father of CEO Zel Khan. Blue Sky returned 70,807,417 Petrolia shares, which the company plans to cancel, and took on $1,696,332 of Bow payables. Petrolia keeps 20% of Bow Energy International Holdings (the Indonesian interests), a carry of up to the next $10 million of costs, and a 3% royalty on the Bohorok PSC after cost recovery. This largely reverses the February deal and removes most of the dilution it brought. Separately, on Aug 17 three directors lent $90,000 through 12% convertible notes due Oct 17, 2018, convertible at $0.10 (up to 900,000 shares), with matching warrants (90,000 shares) at $0.10; up to $160,000 more is contemplated.

asset acquisition disposition

Effective June 29, 2018, Petrolia bought a 25% working interest in Canadian oil and gas fields (Luseland, Hearts Hill, Cuthbert; about 41,526 acres, 240 oil and 12 gas wells producing) from Blue Sky Resources, whose President is the father of CEO Zel Khan and which is the company's largest shareholder. The price was CAD $1,428,581 (about US$1,089,150): CAD $1,022,400 in cash, paid from the $1,530,000 Bow loan, plus a CAD $406,181 note at 9% due Nov 30, 2018 (extendable six months if 25% is paid). The press release says the 25% nets about 322 boepd. This appears to be the acquisition the loan's extra $800,000 was reserved for (inference), and it is a related-party deal.

debt financing

Bow, now Petrolia's subsidiary, raised its loan with a third-party lender by $800,000 to $1,530,000 at 12% interest, due May 11, 2021, with monthly payments of $50,818 from July 15, 2018. The extra $800,000 can only be used for a future oil and gas acquisition that the company is discussing; if no acquisition closes it is expected to be repaid immediately. The lender also gets 500,000 restricted shares and warrants over 2,320,000 shares. This is new debt after the 2017 debt conversions, and it adds modest dilution.

capital raising announcement

The Bow Energy acquisition announced in December 2017 closed on Feb 27, 2018, after more than 99% of Bow shareholders' votes and a court approval on Feb 23. Petrolia issues 106,156,712 shares (plus rounding), assumes Bow's warrants and certain options, and Bow becomes a wholly-owned subsidiary with its Indonesian working interests. This resolves the pending deal and brings large dilution; Bow's financial statements and pro forma figures are still to be filed by amendment.

asset acquisition disposition

Petrolia signed an agreement on Nov 30, 2017 to buy Bow Energy Ltd, a Canadian-listed company with interests in several Indonesian (North Sumatra) production-sharing contracts, in an all-share deal. Bow holders would receive 106,156,712 Petrolia shares (1.15 per Bow share), against Petrolia's 107,889,886 shares outstanding, so the deal would roughly double the share count. Bow's market value is stated as $4,615,509 versus Petrolia's $10,788,989. This is a new direction beyond the Texas, Oklahoma and New Mexico assets, and the deal had not yet closed.

asset acquisition disposition

Petrolia converted the remaining $2,000,000 of the Jovian production payment note into 12,749,286 shares (at $0.14) and 21,510 Series A preferred shares ($10 each), cancelling that note. It also converted Rick Wilber's $550,000 of convertible notes into 55,000 preferred shares, and reported closing a $2,000,000 Series A preferred offering begun April 11, 2017 (9% non-cumulative dividend, converts at 71.429 common shares per preferred share). This resolves the Jovian and Wilber debt threads, at the cost of more dilution. The press release says all long-term debt has been converted to equity; Jovian is a related party, and Beasley and Khan abstained.

capital raising announcement

Petrolia converted $2,000,000 of the debt it owed Jovian (the seller of the SUDS field) into 10,000,000 new shares at $0.20 plus 10,000,000 warrants ($0.20 on 6,000,000 and $0.35 on 4,000,000). That covers the whole $1,000,000 note and $1,000,000 of the $3,000,000 production payment note, leaving $2,000,000 owing. Filing says it cuts debt and expected annual interest by about $50,000, but it dilutes existing shareholders. Jovian is a related party; directors Beasley and Khan abstained. This continues the Jovian debt thread from the October 2016 SUDS purchase.

capital raising announcement

Petrolia bought Dead Aim Investments' 60% working interest in the Twin Lakes San Andres Unit (New Mexico), taking its stake from 40% to 100%. The price was $639,675: forgiveness of the $316,800 value of the Orbit Petroleum bankruptcy estate note (the $1.3M face value note Dead Aim had assumed) plus a write-off of $322,875 of Dead Aim's receivables owed to Petrolia. No shares or new cash are mentioned as payment. This resolves the open question over the defaulted Orbit note, which is used here as consideration. The board was also enlarged from five to seven seats.

asset acquisition disposition

The company raised its SUDS field (Creek County, Oklahoma) interest from 10% to 100% by buying 90% from Jovian, the company linked to CEO Zel Khan. It paid with two notes totaling $4,000,000 for 50% (a $1,000,000 note at 5% due December 31, 2016 and a $3,000,000 production payment note) and 24,308,985 restricted shares worth $4,373,186 for 40%. This continues the 2015 SUDS purchase, adds debt secured by the field, and heavily dilutes shareholders. Counterparty is tied to the CEO (related party).

asset acquisition disposition

Now named Petrolia Energy Corporation (and a Texas corporation), the company bought a further 25% interest in the Twin Lakes San Andres Unit from Whistler Ventures for 3.5 million restricted shares worth $350,000 ($0.10 per share), bringing its stake to 40% including the 15% bought in 2015. The filing cites internal estimates of about 2.56 million barrels of oil equivalent. It continues the build-up of this field and dilutes shareholders.

asset acquisition disposition

The company bought a 15% working interest in the Twin Lakes San Andres Unit in New Mexico, plus equipment, for $196,875: $50,000 cash and a $146,875 note due December 31, 2015 at 10%, secured by 1,000,000 shares. It also acquired a $1.3 million defaulted note (from a bankruptcy trustee, owed by Canyon E&P) for six million shares, and becomes field operator November 15, 2015. The unit has 130 wells, only 6 online. It also sold 28 units ($168,000) in the new offering, including to directors and the CEO's affiliate, set director pay and options, and adopted a 4,000,000-share incentive plan. This extends the company's move beyond Texas and adds dilution and debt.

asset acquisition disposition

The company bought a 10% working interest in the SUDS field in Creek County, Oklahoma from SUDS Properties LLC (owned by Jovian Resources) for 10,586,805 restricted shares, 33% of its outstanding stock, adding about 151,000 barrels of proven reserves. The new CEO and President, Zel Khan, is a former manager of Jovian; he gets a $160,000 salary (deferrable, with warrants) and 1,000,000 restricted shares. The shares were priced at $0.06 and the May 2015 offering was closed early because of lower oil and share prices. A new unit offering at $6,000 per unit began September 1. The company has moved to Houston, and the share issuance heavily dilutes existing holders.

asset acquisition disposition

The company began a private placement of units at $10,000.20 each (33,334 shares at $0.30 plus a warrant for 33,334 shares at $0.75, exercisable to August 5, 2019). The first sales were 22.5 units for about $225,000, with more expected on the same terms by August 5, 2014. One buyer already held about 8.8% (1,319,045 shares) and runs a consulting firm the company has a contract with; this matches the Mercadyne/David Baker holding disclosed earlier, though the filing does not name him (inference). New shares and warrants will dilute existing holders.

capital raising announcement

The company restated its financing with Rick Wilber: the September 2013 $100,000 note and warrant were replaced by a $200,000 secured note (6%, due September 30, 2016, convertible at $0.30) and a warrant for 570,000 shares at $0.80. The filing also widens the security for his earlier $350,000 note, so his collateral now covers the two-acre tract around each well. The new note is secured by one Milam County well and its two-acre tract. This continues the Wilber financing and puts more of the company's assets behind it.

capital raising announcement

The company signed a new lease with Noack Farms on the same 623.29 acres in Milam County where all its current wells sit, and released its earlier lease (which carried a 25% royalty) so the new one could take effect. The new lease cuts the royalty to 1/6th, and the company paid $3,116.45 and issued 100,000 shares to Noack, and also agreed to defend and indemnify Noack. The company says the new terms suit its business plan and economic situation better.

material agreement termination

The company raised $350,000 from director Rick Wilber through a 6% convertible note due June 17, 2016, convertible at $0.30 per share, plus a warrant for 1,000,000 shares at $0.80 per share. The note is secured by three of the company's Milam County oil wells, and the company says it plans to use part of the money to drill two new wells in the Minerva-Rockdale Field. Marc Spezialy is now signing as CEO. Shareholders face possible dilution if the note converts or the warrant is exercised.

capital raising announcement

Now named Rockdale Resources Corporation, the company sold 5,781,798 shares to private investors at $0.70 per share on August 31, 2012, for $4,047,250, with no commissions. This new money adds to the share count and is the funding for the Minerva-Rockdale oil push, though the filing does not say how the money will be used.

capital raising announcement

Control of Art Design, Inc. moved to a new team: Michael Smith (CEO, founder of Kingman Energy LLC) and Rick Wilber were appointed directors, Marc Spezialy became financial officer, and the Sheehans resigned as officers (and will resign as directors). The company also plans a related-party deal with Kingman Operating Company: $475,000 for a 100% working interest (75% net revenue interest) in a 200-acre lease in the Minerva-Rockdale field, Milam County, Texas, plus $275,000 for drilling and an option on an adjacent 300-acre lease for $1,275,000. This is the company's move into oil and gas; 10,820,600 shares were outstanding, with Smith (via Kingman Energy) holding 14.6% and Wilber 10.0%.

business combination