History
Wentworth Energy moved from a shell into East Texas oil and gas on heavy convertible-note debt, then spent years in default disputes and restatements before deregistering in 2011.
2005-2006: From shell to oil and gas
In March 2005 the company, now named Wentworth Energy, raised $31,000 by selling 1,550,000 shares at $0.02 each, and signed a letter of intent to buy Wentworth Oil & Gas, Inc. At the end of that month it also agreed to buy KLE Mineral Holdings, LLC for $12,250,000, made up of 7,500,000 shares and $1,000,000 cash. The record never reports that deal completing. On June 1, 2005 the Oil & Gas share exchange closed, giving Wentworth 86.76% of that company after it issued 1,416,000 of its own shares.
Financing came in small, dilutive pieces. In September 2005 a $1 million Coach Capital line of credit was signed, convertible into shares at $0.90. In October Wentworth took an oil sands lease in Utah for 1,000,000 shares, but cancelled the deal in November and the shares were cancelled. It kept about 1,900 acres of other Asphalt Ridge oil sands leases acquired in December 2005. In January 2006 Cornell Capital Partners bought $1,500,000 of 10% convertible debentures.
2006: The big bet on the Ball minerals
In July 2006 Wentworth agreed to issue $32,350,000 of senior secured convertible notes, with warrants for 46,214,286 shares. The notes paid 9.15% interest, were secured on all company assets and converted at about $1.40, with a full-ratchet clause that lowers the price if cheaper shares are issued later. On July 26 the money bought 90% of the P.D.C. Ball Limited Partnership mineral and royalty estate in Texas for $17,660,000 cash and 1,500,000 shares, and 100% of Barnico Drilling for 2,500,000 shares and $5,000,000 cash. Executives and Barnico's founder received consulting deals and 2,350,000 options each at $1.50.
On November 1, 2006 Wentworth signed a lease and joint operating agreement with Marathon Oil over about 9,000 acres in Freestone County, with royalties of 21.5% on deep production and 23% on upper zones. In December it said its 2005 accounts and five quarterly reports could not be relied on because of accounting errors.
2007-2008: Default and restructuring
In May 2007 three noteholders demanded redemption of $24,000,000 of principal, claiming over $33,600,000. Wentworth disputed parts of the claims and said it lacked the funds. On October 31, 2007 the notes were restructured at $48,776,572 plus a new $5,000,000 note. The conversion price fell to $0.65, still with a full ratchet, and the due date was set at October 31, 2010. Defaults were waived, and the Cornell debentures were restated at $1,418,573. The result was more debt and heavier potential dilution.
The accounting then unravelled again. In August 2008 the 2007 annual accounts and first-quarter 2008 report were withdrawn after SEC staff questioned how the restructuring was recorded. In November 2008 they were withdrawn again, this time because about $2.1 million of option compensation expense should have been booked in late 2007.
2009-2011: Quiet record and withdrawal
The record is quiet for 2009 and most of 2010. On November 10, 2010 the board said the first- and second-quarter 2010 statements could not be relied on, because an extra 5.85% of default interest on the Senior Notes had not been recorded: $786,482 for the first quarter and $1,572,964 for six months. The six-month net loss rose from $1,602,190 to $3,175,154, and the June 30, 2010 stockholders' deficit rose from $49,646,082 to $51,219,046. On March 17, 2011 Wentworth deregistered its securities, ending its obligation to file reports with the SEC.
Written from the 18 story beats below (2005 to 17 Mar 2011), which come from the company's own announcements and filings.