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Property
 9 Months Ended
Sep. 30, 2023
Property, Plant and Equipment [Abstract]  
Property

Note 3 – Property

 

The Company follows the successful efforts method of accounting for its oil and natural gas activities. Under this method, costs to acquire oil and natural gas properties and costs incurred to drill and equip development and exploratory wells are deferred until exploration and completion results are evaluated. Exploration drilling costs are expensed if recoverable reserves are not found. Upon sale or retirement of oil and natural gas properties, the costs and related accumulated depreciation, depletion and amortization are eliminated from the accounts and the resulting gain or loss is recognized.

 

Costs incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred.

 

Depletion is calculated on a units-of-production basis at the field level based on total proved developed reserves.

 

On August 9, 2023, the Company and a subsidiary of Energy Evolution Master Fund, Ltd., a related party, collectively acquired additional working interests in certain of the Company’s New Mexico properties. The Company paid $2.1 million in cash and acquired 10% of the total acquired working interests in the transaction. The subsidiary of Energy Evolution Master Fund, Ltd. acquired the other 90% of the acquired working interest (“EEF Interest”). The Company has a one-year option to acquire the EEF Interest for $5 million, subject to adjustments (“Purchase Option”). In exchange for the Purchase Option, the Company issued 67,000 shares of common stock valued at approximately $601,000 and reflected in Utility and Other Deposits. The Company has the right to extend the initial one-year Purchase Option period for two successive one-year periods by agreeing to issue an additional 42,000 shares of common stock prior to the end of the one-year period then in effect. The Purchase Option may be exercised by the Company at any time during the one-year period then in effect by sending written notice to Energy Evolution Master Fund, Ltd. prior to the expiration of such one-year period. 

 

Proved oil and natural gas properties are reviewed for impairment at least annually, or as indicators of impairment arise. There have been no indicators of impairment during the nine months ended September 30, 2023.

 

Aggregate capitalized costs of oil and natural gas properties are as follows:

   September 30, 2023   December 31, 2022 
Proved properties  $69,756,380   $52,831,131 
Unproved properties   3,158,299    2,865,556 
Work in process   1,706,199    8,289,652 
Gross capitalized costs   74,620,878    63,986,339 
           
Depreciation, depletion, amortization and impairment   (22,014,050)   (20,116,696)
Total oil and gas properties, net  $52,606,828   $/43,869,643 
           

 

Depletion and amortization expense for the three months ended September 30, 2023 and 2022 was approximately $677,000 and $500,000, respectively. Depletion and amortization expense for the nine months ended September 30, 2023 and 2022 was approximately $1,897,000 and $1,331,000, respectively.

 

Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years.

   September 30, 2023   December 31, 2022 
Other property and equipment, at cost  $2,795,308   $1,878,325 
Less: Accumulated depreciation   (927,397)   (436,796)
Other property and equipment, net  $1,867,911   $1,441,529 
           

  

Depreciation expense for the three months ended September 30, 2023 and 2022 was approximately $51,000 and $39,000, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 was approximately $164,000 and $99,000, respectively.