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5. OIL AND GAS PROPERTIES | 9 Months Ended
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Sep. 30, 2015
Oil and Gas Property [Abstract] |
OIL AND GAS PROPERTIES | NOTE 5 – OIL AND GAS PROPERTIES The following table summarizes the Company’s oil and gas activities by classification for the nine months ended September 30, 2015 (in thousands):
|  | December 31, |  |  |  |  |  |  |  |  |  |  |  | September 30, |
|  | 2014 |  |  | Additions |  |  | Disposals |  |  | Transfers |  |  | 2015 |
Oil and gas properties, subject to amortization |  | $ | 24,057 |  |  | $ | 45,551 |  |  | $ | (3,401 | ) |  | $ | 289 |  |  | $ | 66,496 |
Oil and gas properties, not subject to amortization |  |  | 8,159 |  |  |  | - |  |  |  | (7,870 | ) |  |  | (289 | ) |  |  | - |
Asset retirement costs |  |  | 76 |  |  |  | 73 |  |  |  | (1 | ) |  |  | - |  |  |  | 148 |
Accumulated depreciation, depletion and impairment |  |  | (10,237 | ) |  |  | (4,682 | ) |  |  | 10,652 |  |  |  | - |  |  |  | (4,267 | )
Total oil and gas assets |  | $ | 22,055 |  |  | $ | 40,942 |  |  | $ | (620 | ) |  | $ | - |  |  | $ | 62,377 |
The depletion recorded for production on proved properties for the three and nine months ended September 30, 2015, amounted to $1,064,000 and $3,345,000. The depletion recorded for production on proved properties for the three and nine months ended September 30, 2014, amounted to $264,000 and $740,000, respectively. The Company recorded impairment expense for all unproved leasehold costs for the three and nine months ended September 30, 2015, in the amount of $-0- and $1,337,000, respectively, as a result of a revision of management's plans to our re-leasing program due to the decrease in commodity pricing. During the three and nine months ended September 30, 2014, the Company recorded impairment expense related to expired lease acreage of $322,000 and $354,000, respectively. During the nine months ended September 30, 2015, additions to oil and gas properties subject to amortization consisted of completion costs of $2,086,000 primarily related to seven non-operated wells in the D-J Basin. Acquisition of Properties from Golden Globe Energy (US) LLC (“GGE”). On February 23, 2015 (the “Closing”), the Company’s wholly-owned subsidiary, Red Hawk Petroleum, LLC (“Red Hawk”), completed the acquisition of approximately 12,977 net acres of oil and gas properties and interests in 53 gross wells located in the Denver-Julesburg Basin, Colorado (the “Acquired Assets”) from GGE. As consideration for the acquisition of the Acquired Assets, the Company (i) issued to GGE 3,375,000 restricted shares of the Company’s common stock and 66,625 restricted shares of the Company’s newly-designated Amended and Restated Series A Convertible Preferred Stock (the “Series A Preferred”) (see Note 12), (ii) assumed approximately $8.35 million of subordinated notes payable from GGE pursuant to an Assumption and Consent Agreement and an Amendment to Note and Security Agreement (see Note 9), and (iii) provided GGE with a one-year option to acquire the Company’s interest in its Kazakhstan opportunity for $100,000 payable upon exercise of the option pursuant to a Call Option Agreement. The effective date of the transaction was January 1, 2015, with the exception of all revenues and refunds attributable to GGE’s approximate 49.7% interest in each of the Loomis 2-1H, Loomis 2-3H and Loomis 2-6H wells, which revenues and refunds the Company owns from the date of first production, which totaled approximately $700,000. The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired (in thousands):
Purchase price on February 23, 2015 |  |  |  |
Fair value of common stock issued |  | $ | 2,734 |
Fair value of Series A Preferred stock issued |  |  | 28,402 |
Assumption of subordinated notes payable |  |  | 8,353 |
Kazakhstan option issued |  |  | 5,000 |
Total purchase price |  | $ | 44,489 |
Fair value of net assets at February 23, 2015 |  |  |  |
Accounts receivable – oil and gas |  | $ | 1,578 |
Oil and gas properties, subject to amortization |  |  | 43,562 |
Prepaid expenses and other assets |  |  | 100 |
Total assets |  |  | 45,240 |
Accounts payable |  |  | (664) |
Asset retirement obligations |  |  | (87) |
Total liabilities |  |  | (751) |
Net assets acquired |  | $ | 44,489 |
Disposition of Oil and Gas Properties In February 2015, the Company sold to MIE Jurassic Energy Corporation (“MIEJ”), an affiliate of MIE Holdings, all of the direct interests in approximately 945 net acres and interests in three wells owned by the Company with a recorded value of $1,186,000 resulting in a gain on sale of oil and gas properties of $275,000. See Note 8. In March 2014, the Company acquired oil and gas properties from Continental Resources Inc. (“Continental”). The Company entered into a note purchase agreement with RJ Credit LLC (“RJ Credit”) to finance the acquisition. As a part of this agreement, the Company conveyed 50% of its note receivable with Asia Sixth (defined and described under Note 6), 50% of its interest in the oil and gas properties acquired, and a 50% interest in Pacific Energy Development MSL, LLC. The following table presents the loss on sale to RJ Credit associated with each of these items (in thousands):
|  | Allocated Proceeds |  |  | Historical Cost |  |  | Loss on Sale |
Note receivable |  | $ | 3,055 |  |  | $ | 5,000 |  |  | $ | (1,945 | )
Oil and gas properties |  | $ | 8,747 |  |  | $ | 14,267 |  |  | $ | (5,520 | )
Mississippian Asset |  | $ | 1,615 |  |  | $ | 2,643 |  |  | $ | (1,028 | )
The following table presents the Company’s supplemental consolidated pro forma total revenues, lease operating costs, net income (loss) and net loss per common share as if the D-J Basin Acquisition completed in February 2015 had occurred on January 1, 2015 and the acquisition of D-J Basin Assets completed in March 2014 from Continental and simultaneous dispositions had occurred on January 1, 2014 (in thousands, except per share amounts).
|  | For the Nine Months Ended |
|  | September 30, 2015 |
|  | PEDEVCO |  |  | Net Acquisitions/Dispositions |  |  | Combined |
Revenue |  | $ | 4,593 |  |  | $ | 780 |  |  | $ | 5,373 |
Lease operating costs |  | $ | (1,434 | ) |  | $ | (275 | ) |  | $ | (1,709 | )
Net income (loss) |  | $ | (15,081 | ) |  | $ | 505 |  |  | $ | (14,576 | )
Net income (loss) per common share |  | $ | (0.37 | ) |  | $ | 0.01 |  |  | $ | (0.36 | )
| For the Nine Months Ended |
| September 30, 2014 |
| PEDEVCO |  | Net Acquisitions/Dispositions |  | Combined |
Revenue |  | $ | 4,192 |  |  | $ | 1,401 |  |  | $ | 5,593 |
Lease operating costs |  | $ | (1,367 | ) |  | $ | (1,288 | ) |  | $ | (2,655 | )
Net income (loss) |  | $ | (22,169 | ) |  | $ | 113 |  |  | $ | (22,056 | )
Net loss per common share |  | $ | (0.81 | ) |  | $ | 0.00 |  |  | $ | (0.81 | )

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- Definition The entire disclosure for oil and gas enterprises that follow the full cost method of accounting for investments in oil and gas properties. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 932 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-10.(c)(7)) -URI http://asc.fasb.org/extlink&oid=50486907&loc=d3e511914-122862 + Details
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