Cautionary Notice Regarding Forward Looking Statements
The information contained in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those indicated in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although the Company's management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
This filing contains a number of forward-looking statements which reflect management's current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events or developments which management expects or anticipates will or may occur in the future, and non-historical information are forward looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," and variations of those words and similar expressions identify forward-looking statements. The foregoing are not the exclusive means of identifying forward looking statements, and their absence does not mean that a statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements.
Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Factors which could cause or contribute to such differences include, but are not limited to, the risks discussed in our Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Overview
The Company underwent a change of control in
The Company will, from time to time, seek strategic investors and other funding
to help it develop additional exploration and acquisition projects located
within the
THE OIL AND GAS INDUSTRY IS IN A SUBSTANTIAL DOWNTURN DUE TO THE COVID-19 PANDEMIC.
Our business and operations have been adversely affected by and are expected to continue to be adversely affected by the COVID-19 pandemic and the public health response.
As a result of the COVID-19 outbreak and the adverse public health developments, including voluntary and mandatory quarantines, travel restrictions and other restrictions, our operations, and those of our subcontractors, customers and suppliers, have experienced and are anticipated to continue to experience delays or disruptions and temporary suspensions of operations. In addition, our financial condition and results of operations have been and are likely to continue to be adversely affected by the coronavirus outbreak.
The timeline and potential magnitude of the COVID-19 outbreak and its
consequences are currently unknown. The continuation or amplification of this
virus could continue to more broadly affect
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The Company has experienced the effects of a negatively impacted domestic and international demand for crude oil and natural gas, which has contributed to price volatility, impacted the price we receive for oil and natural gas, and has materially and adversely affected the demand for and marketability of our production. For the Company, this means that our production may have to be shut-in for some of our wells at any point in time and we may hold, or continue to store some, or all of our oil production as inventory to be sold at a later date because to date we have refused to accept a loss price for our production. Our 2020 fiscal year end was negatively impacted by the pandemic response, and the negative impact of the pandemic is continuing to be experienced in the first quarter of the 2021 fiscal year. At this time, we expect that our financial results for the full fiscal year will be adversely impacted by the existence of and the government response to the COVID-19 pandemic.
Our Business Strategy
We are an Exploration and Production ("E&P") oil and natural gas company that
focuses on the acquisition, development, and exploration of crude oil and
natural gas properties in
Management believes that focusing on the development of existing small producing fields is one of the key differentiators of the Company. Oil and natural gas reserve development is a technologically oriented industry. Management believes that the use of current technology has greatly increased the success rate of finding commercial oil or natural gas deposits. In this context, success means the ability to make an oil/gas well that produces a commercialized quantity of hydrocarbons. In general, the Company expects to conduct 3D Seismic surveys to determine more accurate drilling locations and drilling depths beside its initial georadiometry technology application via its last 10 drilling projects. For short-term cash flow enhancement, the Company plans to seek large-reserve oil and gas properties with low production to acquire at the lowest cost possible and then implement effective Enhanced Oil Recovery ("EOR") methods to improve its current revenues and assets. For long-term cash flow enhancement, the Company plans to identify larger and more mature production opportunities while selecting capital and strategic operating partners to buyout via the Company's strategic joint venture partnerships, thus significantly increasing production via additional drilling and its EOR implementations.
We plan to execute the following business strategies:
Develop and Grow Our Hydrocarbon Resource Acreage Positions Using Outside
Development Expertise. We plan to continue to seek and acquire niche assets in
hydrocarbon-rich resource plays to improve our asset quality and expand our
drilling inventory. We plan to leverage our management team's expertise and
apply the latest available EOR technologies to economically develop our existing
property portfolio in Central West and
Acquire Small Producing Companies with Compelling Underlying Values. We identify acquisition opportunities of exploration and production companies with underlying assets to unlock the development potential and accelerate production using new technologies and capital infusion from capital partners.
Our operation strategy is to identify "niche" hydrocarbon land leases in
Our management's time in the petroleum markets and our ability to contract experienced geology expertise, allows us to identify and secure acreage with potential reserves. Management believes that the Company's near prospects as a public company could become attractive, even if our current business is still small and at a risky stage of transition and development.
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Our Competitive Strengths
Management believes that we have a number of competitive strengths that will allow us to successfully execute our business strategies:
Simple Capital Structure. We have a simple capital structure and de-risked inventory of quality locations with what we believe is upside potential to take advantage of the current recovery of oil prices to acquire potential production at reasonable cost. Management believes there are opportunities for profits to be made now that oil prices appear to have stabilized and if they continue to gradually rise higher.
Moderate Risk Exploration Practice. Unlike many major oil companies that often drill very deep wells with a high degree of risk, we focus on shallow well exploration (sub 5,000 feet) that is less expensive and has lower risk factors. The basis for management's belief that the wells that can be drilled in the prospective leases will have the capacity to produce a reasonable amount of hydrocarbon and due to our recent studies of the general areas where we are prospecting the projects. That is our most important exploration practice.
Under The Radar Asset Base. Management believes our local West Texas E&P team has a special talent in acquiring local "prime time" hydrocarbon land leases with sub-300 barrels of oil per day ("bopd") wells that have large hydrocarbon reserves. Management believes that these "under the radar" prospective leases have multi-year drilling inventory and reasonable production history with high upside potential and not readily accessible to the public for auctions, thus adding to our competitive advantage on these "under the radar" opportunities. It is because management also believes that these highly valuable leases are not economically justifiable for the major oil and gas companies in the region because such companies need the wells they drill to produce at least 300 barrels ("Bbls") of oil per day per well.
Technologies
Oil and natural gas reserve development is a technologically oriented industry; many techniques developed by the industry are now used in other industries, including the space program. Management believes that technological innovations have made it possible for the oil and natural gas industry to furnish the fuels that power the world economy. Management also believes that technology has greatly increased the success rate of finding commercial oil or natural gas deposits. In this context, success rate means the ability to make an oil/gas well that can produce a commercialized quantity of hydrocarbon.
At NRIS, we focus on core basic field EOR management practices and contract outside experts to provide us the understanding of complex mineralogy in shale reservoirs to better determine zones prone to fracture stimulation. This technology can suggest where to frack by providing us with available data to deliver us a greater chance of success. Our field engineers, geologists and petrophysicists work together for better drilling decisions.
Sales Strategy
Our sales strategy in relation to spot pricing will be to produce less when the sales price is lower and produce more when the sales price is higher. To maintain the lowest production cost, we will aim to have our inventory be as low as possible, in some instances virtually zero. Our E&P core team has business relationships with BML, Transport Oil, and Lion Oil Trading & Transportation, for oil sales and WTG Jameson for gas sales. The Company entered into production agreements with BML, Lion Oil and WTG Jameson so that, as our tier 1 buyer, they can handle pick-up and sales of our crude oil stock to refineries and gas via local gas pipelines.
As such, crude oil will be picked up from our leases as needed during the calendar month. At the end of the month the crude total sales will be tallied by lease and the 30-day average of the daily closing of oil will be tabulated. On or about the 25th of the following month the proceeds checks' will be issued to the financial parties of record.
5 Operational Plans
Overall, we seek to acquire on a selective basis, oil and gas reserve concessions with existing production. To maintain our operations and complete any acquisitions we intend to raise capital via equity or debt, be this from our control owner, or other third-party financing sources, including the capital markets. The Company is still in the process of assessing the wells it holds, or recently acquired and is reviewing its options to make improvements in the future to address underperformance.
The Company shifted its E&P plan on regional acquisition(s) to a focus in the
As result of COVID-19 the Company will likely take a pause on any activity until such time has elapsed that energy prices have stabilized. If the Company does review any acquisitions it will follow model which is based on a concept that has been proven in the past to be an effective and successful path of development for many other well- known E&P players:
a) the financed acquisition of mature smaller oil fields that have potential for
instituting EOR incremental production processes; and
b) Develop strategic partnerships with existing operators to share production
increases garnered through the implementation of this EOR plan.
The Company has plans to curtail its operating budget for each wells to basic maintenance and does not plan any new drill programs in the near future.
Results of Operations
Comparison of the Three Months Ended
Revenues
The Company generated revenues of
Operating Expenses
Operating expenses for the three months ended
Other Income (Expense)
For the three months ended
6 Net Loss
We had a net loss in the amount of
Liquidity and Capital Resources
As of
Net cash used by operating activities during the three months ended
Net cash provided by investing activities during the three months ended
Net cash provided by financing activities for three months ended
The Company will seek capital from various third party sources and to the extent necessary from its officers and significant stockholders, from time to time. There is no assurance that it will be able to obtain financing of any amount or of any specific nature. If obtained the terms may have restrictive covenants or obligations that will be difficult to meet or may be too onerous for the Company to accept. Any financing accepted by the Company may have a dilutive effect on the outstanding equity of the Company and may restrict the payment of dividends.
The Company currently has a secured, convertible note entered into effective
On
The original loan amount and the advances are secured by all the assets of the
Company and are convertible into common stock of the Company at the rate of
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In addition, in
Off-Balance Sheet Arrangements
As of
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