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Document and Entity Information

v2.4.0.8
Document and Entity Information
9 Months Ended
Jan. 31, 2014
Mar. 17, 2014
Document And Entity Information    
Entity Registrant Name Petro River Oil Corp.  
Entity Central Index Key 0001172298  
Document Type 10-Q  
Document Period End Date Jan. 31, 2014  
Amendment Flag false  
Current Fiscal Year End Date --04-30  
Entity Current Reporting Status Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   818,567,746
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2014  

Condensed Consolidated Balance Sheets

v2.4.0.8
Condensed Consolidated Balance Sheets (USD $)
Jan. 31, 2014
Apr. 30, 2013
Current Assets:    
Cash and cash equivalents $ 9,204,795 $ 5,703,082
Accounts receivable 43,848 31,394
Prepaid expenses and other current assets 39,475 58,390
Total Current Assets 9,288,118 5,792,866
Oil and gas assets, net 13,671,884 13,423,089
Property, plant and equipment, net of accumulated depreciation of $313,405 and $310,700 1,832 4,538
Reclamation deposits 25,000 25,000
Other assets 6,000 5,500
Total Non-current Assets 13,704,716 13,458,127
Total Assets 22,992,834 19,250,993
Current Liabilities:    
Accounts payable and accrued expenses 677,988 871,094
Current portion of asset retirement obligations 342,608 213,302
Total Current Liabilities 1,020,596 1,084,396
Long-term liabilities:    
Asset retirement obligations, net of current portion 461,413 549,734
Total Long-Term Liabilities 461,413 549,734
Total Liabilities 1,482,009 1,634,130
Commitments and contingencies      
Stockholders' Equity:    
Preferred Shares - 5,000,000 authorized; par value $0.00001 per share; Preferred B shares - 29,500 authorized; 0 issued with a $100 stated value, par value $0.00001 per share      
Common shares - 2,250,000,000 authorized; par value $0.00001 per share; Issued and outstanding; 818,567,746 and 737,117,746 8,186 7,371
Additional paid-in capital 27,561,628 20,317,094
Members' deficiency and accumulated deficit (6,058,989) (2,707,602)
Total Stockholders' Equity 21,510,825 17,616,863
Total Liabilities and Stockholders' Equity 22,992,834 19,250,993
Preferred B Shares [Member]
   
Stockholders' Equity:    
Preferred Shares - 5,000,000 authorized; par value $0.00001 per share; Preferred B shares - 29,500 authorized; 0 issued with a $100 stated value, par value $0.00001 per share      

Condensed Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jan. 31, 2014
Apr. 30, 2013
Accumulated depreciation of Property, plant and equipment $ 313,405 $ 310,700
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 2,250,000,000 2,250,000,000
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares issued 818,567,746 737,117,746
Common stock, shares outstanding 818,567,746 737,117,746
Preferred B Shares [Member]
   
Preferred stock, shares authorized 29,500 29,500
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares issued      
Preferred shares, stated value per share $ 100 $ 100

Condensed Consolidated Statements of Operations (Unaudited)

v2.4.0.8
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 9 Months Ended
Jan. 31, 2014
Jan. 31, 2013
Jan. 31, 2014
Jan. 31, 2013
Revenue and Other Income        
Oil and natural gas sales $ 117,713 $ 91,113 $ 309,806 $ 101,450
Total Income 117,713 91,113 309,806 101,450
Operating Expenses        
Operating 85,983 30,535 232,694 80,542
General and administrative 1,634,241 143,368 3,351,460 520,851
Depreciation, depletion and accretion 27,251 40,646 80,279 84,546
Total Expenses 1,747,475 214,549 3,664,433 685,939
Operating loss (1,629,762) (123,436) (3,354,627) (584,489)
Other income (expenses)        
Interest and other income       3,245   
Interest expense and amortization of debt discount    (503,416) (5) (1,363,061)
Total other income (expenses)    (503,416) 3,240 (1,363,061)
Net Loss $ (1,629,762) $ (626,852) $ (3,351,387) $ (1,947,550)
Net Loss per Common Share Basic and Diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted Average Number of Common Shares Outstanding - Basic and Diluted 781,475,355 590,993,458 752,034,775 534,142,826

Condensed Consolidated Statements of Cash Flows (Unaudited)

v2.4.0.8
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
9 Months Ended
Jan. 31, 2014
Jan. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,351,387) $ (1,947,550)
Adjustments to reconcile net loss to net cash used in operating activities    
Share-based compensation 1,315,349   
Depreciation, depletion and amortization 39,294 84,546
Accretion of asset retirement obligation 40,985   
Changes in operating assets and liabilities:    
Accounts receivable (12,454) (81,024)
Prepaid expenses and other assets 18,415 (21,093)
Accounts payable and accrued expenses (113,106) (5,205)
Accrued interest payable   1,363,061
Net Cash Used in Operating Activities (2,062,904) (607,265)
Cash Flows From Investing Activities:    
Expenditures on oil and gas assets (285,383) (9,440,913)
Issuance of notes receivable to related party    (950,000)
Net Cash Used in Investing Activities (285,383) (10,390,913)
Cash Flows From Financing Activities:    
Proceeds from the issuance of common stock and warrants 6,500,000   
Stock issuance costs (650,000)   
Proceeds from issuance of demand notes    12,799,983
Net Cash Provided by Financing Activities 5,850,000 12,799,983
Change in cash and cash equivalents 3,501,713 1,801,805
Cash and cash equivalents, beginning of period 5,703,082 4,364,033
Cash and cash equivalents, end of period 9,204,795 6,165,838
Non-cash investing and financing activities:    
Conversion of accrued settlement liability into common stock $ 80,000   

Organization and Liquidity

v2.4.0.8
Organization and Liquidity
9 Months Ended
Jan. 31, 2014
Organization And Liquidity  
Organization and Liquidity

1.   Organization and Liquidity:

 

Petro River Oil Corp (the “Company”) is an enterprise engaged in the exploration and exploitation of heavy oil properties. The Company’s principal administrative office is located in Houston, Texas and its principal operations are in Kansas and Western Missouri.

 

Petro River Oil LLC (“Petro”) was incorporated under the laws of the State of Delaware on March 3, 2011. Through proceeds received from the issuance of various promissory notes, on February 1, 2012, Petro purchased various interests in oil and gas leases, wells, records, data and related personal property located along the Mississippi Lime play in the state of Kansas from Metro Energy Corporation (“Metro”), a Louisiana company, and other interrelated entities, which were in financial distress. These assets were purchased by Petro from Metro through a court approved order as Metro was undergoing Chapter 11 Bankruptcy proceedings as a Debtor-In-Possession of these various oil and gas assets. Petro purchased these assets for cash consideration of $2,000,000 as well as a 25% non-managing membership interest in the Company. Subsequent to the Metro purchase the Company engaged Energy Source Advisors to renew a number of the leases acquired in the Metro purchase and to lease additional acreage. As a result of the asset purchase from Metro and the completion of the additional lease renewals and additional acreage purchases, the Company obtained a total of 115,000 gross/85,000 net acres of leases, having unproven reserves at the time of acquisition, in the Mississippi Lime play in Southeast Kansas for total cost of $12.2 million.

 

On April 23, 2013, the Company executed and consummated a securities purchase agreement (the “Securities Purchase Agreement”) by and among the Company, Petro, and the investors in Petro (the “Investors,”), namely, the holders of outstanding secured promissory notes of Petro (the “Notes”), and the members of Petro holding membership interests in Petro (the “Membership Interests”, and, together with the Notes, the “Acquired Securities”) sold by the Company (the “Share Exchange”).

 

In the Share Exchange, the Investors exchanged their Acquired Securities for 591,021,011 newly issued shares of common stock of the Company (“Common Stock”). As a result, upon completion of the Share Exchange, Petro became the Company’s wholly-owned subsidiary.

 

As a result of the Share Exchange, the Company acquired 100% of the member units of Petro and consequently, control of the business and operations of Petro. Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because Petro’s former members and note holders held 80% of the issued and outstanding shares of the Company as a result of the Share Exchange, Petro is deemed the accounting acquirer while the Company remains the legal acquirer. Petro adopted the fiscal year of the Company and its operations for the period from February 2, 2012 (Commencement of Operations) to October 31, 2012 were not material. Prior to the Share Exchange, all historical financial statements presented are those of Petro. The equity of the Company is the historical equity of Petro, retrospectively restated to reflect the number of shares issued by the Company in the transaction.

 

Liquidity and Management Plans

 

The Company is focused on developing its recently acquired Mississippi Lime acreage in Kansas and also its heavy oil properties in Missouri and Kentucky. Early reservoir projects in Kansas were focused on establishing proved reserve potential into the Bourbon Arch geological region of the Mississippi Lime play. The production response from this region established migration and asset production potential. The Company also engaged an extensive geologic study of its leasehold position using over 26,000 producers and 60 square miles of a proprietary 3D data set.

 

Projects related to the heavy oil reservoirs were in technical review. The Company has an extensive amount of technical and reservoir information on both Missouri and Kansas positions. The data is being utilized in the understanding and test phases to develop an economic heavy oil production reserve base.

 

The ultimate goal of the management of the Company is to maximize shareholder value. Specific targets include: increasing production by developing its acreage, increasing profitability margins by evaluating and optimizing its production, and executing its business plan to increase property values, prove its reserves, and expand its asset base.

 

At January 31, 2014, the Company had working capital of approximately $8,267,552 and has incurred losses since it commenced operations and utilized cash in its operating activities to date. In addition, Petro has a limited operating history. At January 31, 2014, the Company had cash and cash equivalents of approximately $9.2 million. Management believes that the current level of working capital is sufficient to maintain operations for at least the next 12 months. Management intends to continue to raise capital through debt and equity instruments in order to achieve its business plans.

Basis of Preparation

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Basis of Preparation
9 Months Ended
Jan. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Preparation

2.   Basis of Preparation:

 

The condensed consolidated financial statements and accompanying footnotes are prepared in accordance with US GAAP and include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

 

These condensed consolidated financial statements include the below wholly-owned subsidiaries:

 

Petro River Oil LLC, Petro Spring, LLC, and MegaWest Energy USA Corp. and its wholly owned subsidiaries:

 

MegaWest Energy Texas Corp.

MegaWest Energy Kentucky Corp.

MegaWest Energy Missouri Corp.

MegaWest Energy Kansas Corp.

MegaWest Energy Montana Corp.

 

The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the transition period from January 1, 2013 to April 30, 2013 filed with the Securities and Exchange Commission (the “SEC”) on August 28, 2013. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the transition period from January 1, 2013 to April 30, 2013 has been omitted. The results of operations for the interim periods presented are not necessarily indicative of results for the entire year ending April 30, 2014.

Significant Accounting Policies

v2.4.0.8
Significant Accounting Policies
9 Months Ended
Jan. 31, 2014
Accounting Policies [Abstract]  
Significant Accounting Policies

3.   Significant Accounting Policies:

 

(a)   Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation, depletion and accretion, income taxes, fair value of derivatives liabilities and other financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of January 31, 2014 and April 30, 2013, the Company had no estimated proven reserves.

 

(b)   Cash and Cash Equivalents:

 

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased to be cash equivalents. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

 

(c)   Oil and Gas Operations:

 

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the statement of operations. All of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least quarterly to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company performed a comparable study of unproven long-lived assets as of April 30, 2013 and determined that none of its long-term assets at April 30, 2013 were impaired. No material changes have occurred from April 30, 2013 (date of last comparable study) to January, 31, 2014.

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All the oil and gas properties with proven reserves were impaired to the salvage value prior to the merger. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period.

 

Ceiling Test: Under the full-cost method of accounting, a ceiling test is performed quarterly. The full-cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test determines a limit on the carrying value of oil and gas properties. The capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion, amortization, and impairment and the related deferred income taxes, may not exceed the estimated future net cash flows from proved oil and gas reserves, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, generally using current prices (with consideration of price changes only to the extent provided by contractual arrangements) as of the date of the latest balance sheet presented and including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, net of related tax effects, plus the cost of unevaluated properties and major development projects excluded from the costs being amortized. If capitalized costs exceed this limit, the excess is charged to expense and reflected as additional accumulated depreciation, depletion, amortization and impairment. In the application of the full-cost method, the term “current price” means the average price during the 12-month period prior to the end of the entity’s fiscal year determined as the un-weighted arithmetical average of the prices on the first day of each month within the 12-month period.

 

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. For the three and nine months ended January 31, 2014 and 2013, all oil and gas reserves were classified as unproven. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion, depreciation and amortization of oil and gas properties under the full cost method during the three and nine months ended January 31, 2014 and 2013.

 

(d)   Asset Retirement Obligations:

 

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the statement of operations.

 

Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

 

(e)   Oil and Gas Revenue:

 

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

 

(f)   Per Share Amounts:

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three and nine months ended January 31, 2014 and 2013, presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

The Company had the following common stock equivalents at January 31, 2014:

 

As at   January 31, 2014  
Stock Options     88,228,281  
Stock Purchase Warrants     40,625,000  
Compensation Warrants     230,000  
      129,083,281  

 

At January 31, 2013 the Company had no common stock equivalents.

 

(g)   Fair Value of Financial Instruments:

 

All financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and accounts payable and accrued expenses are to be recognized on the balance sheet initially at carrying value. The carrying value of these assets approximate their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

  

(h)   Subsequent Events:

 

The Company evaluates subsequent events through the date when condensed consolidated financial statements are issued.

 

(i)   Recent Accounting Pronouncements:

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated condensed financial statements.

Oil and Gas Assets

v2.4.0.8
Oil and Gas Assets
9 Months Ended
Jan. 31, 2014
Extractive Industries [Abstract]  
Oil and Gas Assets

4.   Oil and Gas Assets:

 

The following table summarizes the oil and gas assets by project:

 

Cost   Missouri     Kentucky     Montana     Kansas     Other     Total  
Balance, May 1, 2013   $ 918,991     $ -     $ 75,000     $ 12,329,098     $ 100,000     $ 13,423,089  
Additions                             285,383               285,383  
Depreciation, and amortization     -       -       -       (36,588 )     -       (36,588 )
                                                 
Balance January 31, 2014   $ 918,991     $ -     $ 75,000     $ 12,577,893     $ 100,000     $ 13,671,884  

 

The following are descriptions of the Company’s oil and gas assets. The assets are disclosed based on the historical ownership of both Petro and the Company.

 

Kansas

 

Through proceeds received from the issuance of various promissory notes, on February 1, 2012 Petro purchased various interests in oil and gas leases, wells, records, data and related personal property located along the Mississippi Lime play in the state of Kansas from Metro Energy Corporation (“Metro”), a Louisiana company and other interrelated entities, which were in financial distress. These assets were purchased by Petro from Metro through a court approved order as Metro was undergoing Chapter 11 Bankruptcy proceedings as a Debtor-In-Possession of these various oil and gas assets. Petro purchased these assets for cash considerations of $2,000,000 as well as a 25% non-managing membership interest in the Company. Subsequent to the Metro purchase the Company engaged Energy Source Advisors to renew a number of the leases acquired in the Metro purchase and to lease additional acreage. As a result of the asset purchase from Metro and the completion of the additional lease renewals and additional acreage purchases, the Company obtained a total of 115,000 gross/85,000 net acres of leases, having unproven reserves at the time of acquisition, in the Mississippi Lime play in Southeast Kansas for total cost of $12.2 million. The Company also acquired over 60 square miles of proprietary 3D seismic data over prospective Mississippi Lime acreage in the same area. During the three and nine months ended January 31, 2014, the Company capitalized approximately an additional $49,000 and $285,000 in Kansas oil and gas expenditures. As of January 31, 2014, management concluded that no impairment expense was necessary on these assets.

 

Kentucky

 

As a result of the share exchange, the Company acquired Kentucky lease holdings which include a 37.5% working interest in 27,150 unproved gross acres (10,181 net acres). The Kentucky property is mainly undeveloped land and therefore was not assigned any reserve value under the Company’s independent reserve reports.

 

Currently, the Company is carrying these oil and gas assets at $0, the carrying value of the assets acquired through the share exchange.

 

Missouri

 

At April 30, 2013, the Company’s Missouri lease holdings totaled 22,832 gross acres with 98.4% working interest.

 

On separate pilot projects at Deerfield, the Company built two 500 barrel of oil per day steam drive production facilities (Marmaton River and Grassy Creek) comprised of 116 production wells, 39 steam injection wells and 14 service and observation wells. Throughout the Deerfield area, the Company has drilled 73 exploration/delineation wells with a 67% success rate.

 

As of January 31, 2014, all Missouri assets were carried at salvage value, since the Company’s current business plans do not contemplate raising the necessary capital to develop these properties.

 

Montana

 

The Montana leasehold is in the Devils Basin prospect and totals 1,175 gross acres (881 net). The Company currently owns a 75% working interest in this prospect, but has no immediate plans to develop this property. On April 17, 2012 the Teton Prospect leases totaling 2,807 gross acres (1137 net) expired.

 

As January 31, 2014, all Montana assets were carried at salvage value.

 

Other

 

Other property consists primarily of four used steam generators and related equipment that will be assigned to future projects. As of January 31, 2014, management concluded that impairment was not necessary as all other assets were carried at salvage value.

Asset Retirement Obligations

v2.4.0.8
Asset Retirement Obligations
9 Months Ended
Jan. 31, 2014
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations

5.   Asset Retirement Obligations:

 

The total future asset retirement obligation was estimated based on the Company’s ownership interest in all wells and facilities, the estimated legal obligations required to retire, dismantle, abandon and reclaim the wells and facilities and the estimated timing of such payments. The Company estimated the present value of its asset retirement obligations at both January 31, 2014 and April 30, 2013, based on a future undiscounted liability of $1,087,292. These costs are expected to be incurred within one to 24 years. A credit-adjusted risk-free discount rate of 10% and an inflation rate of 2% were used to calculate the present value.

 

Changes to the asset retirement obligation were as follows:

 

    January 31, 2014     April 30, 2013  
Balance, beginning of period   $ 763,036     $ 143,035  
Additions     -       615,784  
Disposition     -       -  
Revisions     -       -  
Accretion     40,985       4,217  
      804,021       763,036  
Less: Current portion for cash flows expected to be incurred within one year     (342,608 )     (213,302 )
Long-term portion, end of period   $ 461,413     $ 549,734  

 

As of January 31, 2014 and April 30, 2013, the Company has $25,000 of reclamation deposits with authorities to secure certain abandonment liabilities in Missouri.

 

Expected timing of asset retirement obligations:

 

Year Ending April 30,      
2014     339,443  
2015     135,556  
2016     81,181  
2017     212,000  
Thereafter     319,112  
      1,087,292  
Effect of discount     (283,271 )
Total   $ 804,021  

Related Party Transactions

v2.4.0.8
Related Party Transactions
9 Months Ended
Jan. 31, 2014
Related Party Transactions [Abstract]  
Related Party Transactions

6.   Related Party Transactions:

 

Employment Agreements:

 

  a)   Upon completion of the Share Exchange, the Company entered into an Employment Agreement with Scot Cohen, the Company’s Executive Chairman (the “Employment Agreement”). On November 20, 2013, the Company amended the Employment Agreement with Scot Cohen. Based on this amendment, the Company granted Mr. Cohen 41,666,667 fair value options to purchase an equal amount of shares of common stock of the Company. The options have a term of 10 years and an exercise price of $0.059. These options will vest in five equal installments, with the first 20% vesting immediately upon grant (as consideration for the service period from April 29, 2013 to November 20, 2013), and the remaining options vesting in four equal installments on the anniversary of the grant date.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $2,006,227. For the three and nine months ended January 31, 2014, the Company expensed $59,947 and $478,197, respectively, to general and administrative expenses.
       
  b)   On November 22, 2013, Petro River Oil Corp. entered into an employment agreement with Ruben Alba. Under the terms of this agreement, Mr. Alba will receive an annual base salary of $120,000. Mr. Alba was also granted 12,500,000 stock options of the Company pursuant to the Company’s 2012 Equity Compensation Plan (the “Plan”), to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Alba’s continued employment with the Company.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $575,839. For the three and nine months ended January 31, 2014, the Company expensed $137,255, to general and administrative expenses.

  

  c)   On November 22, 2013, the Company entered into an employment agreement with Gary Williky, who was appointed Executive Vice President of Business Development of the Company on November 20, 2013. Under the terms of this agreement, Mr. Williky will receive an annual base salary of $120,000. Mr. Williky was also granted 6,250,000 stock options of the Company pursuant to the Plan, to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Williky’s continued employment with the Company.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $287,919. For the three and nine months ended January 31, 2014, the Company expensed $68,627, to general and administrative expenses.
       
  d)   On November 25, 2013, the Company entered into an employment agreement with Luis Vierma. Under the terms of this agreement, Mr. Vierma will receive an annual base salary of $84,000. Mr. Vierma was also granted 6,250,000 stock options of the Company pursuant to the Plan, to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Vierma’s continued employment with the Company.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $287,919. For the three and nine months ended January 31, 2014, the Company expensed $68,627, to general and administrative expenses.
       
  e)   On November 26, 2013, the Company entered into a consulting agreement with Brio Financial Group (“Brio”) and its Managing Member, David Briones, was appointed the Chief Financial Officer of the Company on August 15, 2013. Under the terms of this agreement, Brio will receive a monthly consulting fee of $7,500, as well as a grant of 750,000 stock options of the Company pursuant to the Plan. The options will vest in six installments. The first 125,000 options vested immediately upon execution of the consulting agreement, and the remaining 5 installments will vest monthly, on the 26th of each subsequent month.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 65%; and a discount rate of 0.12%. The grant date fair value of the award was $8,764. For the three and nine months ended January 31, 2014, the Company expensed $3,408, to general and administrative expenses.
       
  f)   On November 27, 2013, the Company entered into an employment agreement with Daniel Smith. Under the terms of this agreement, Mr. Smith will receive an annual base salary of $120,000. Mr. Smith was also granted 12,500,000 stock options of the Company pursuant to the Company’s 2012 Equity Compensation Plan (the “Plan”), to vest in five equal installments. The first installment vested immediately upon granting. The final four installments will vest on the anniversaries of the initial grant date, subject to the following conditions: (i) the adoption by the Company of an amendment to the Plan, approved by a vote of the shareholders of the Company, to increase the number of shares permitted to be granted under the Plan, and to put in place a stock option grant limitation in accordance with §162(m) of the Internal Revenue Code of 1986, as amended; and (ii) Mr. Smith’s continued employment with the Company.
       
      The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the award was $575,839. For the three and nine months ended January 31, 2014, the Company expensed $137,255, to general and administrative expenses.

 

Board of Director Grants:

 

On November 20, 2013, the Company’s Board of Directors authorized the grants of 3,389,832 stock options to four members of the Board. The option grants have an exercise price equal to the closing price of shares of the Company’s common stock as of the date of the grant. All options granted vested immediately upon grant and have a maturity of ten years.

 

The Company computed the economic benefit of the grants as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the awards were $147,442. For the three and nine months ended January 31, 2014, the Company expensed $147,442, to general and administrative expenses.

 

Separation and Release Agreement:

 

In addition, in June and July of 2013, the Company signed a series of agreements with Jeffrey Freedman, former Chief Executive Officer, in relation to his departure from the Company. Pursuant to these agreements, the Company has provided to Mr. Freedman the sum of $12,000 and issued 465,116 options to purchase common stock with a $56,047 aggregate fair value as of the July 24, 2013 option grant date. These options will expire on July 23, 2016 and have an exercise price of $0.215. The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.215; Exercise price of $0.215; expected volatility of 88%; and a discount rate of 0.64%. The options were immediately vested and the Company recorded the $56,047 into general and administrative expense on the date of grant.

Equity

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Equity
9 Months Ended
Jan. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity

7.   Equity:

 

Securities Purchase Agreement:

 

On December 12, 2013, the Company signed a Securities Purchase Agreement (the “Agreement”) with Petrol Lakes Holding Limited (“Petrol Lakes”). Pursuant to the terms of the Agreement, Petrol Lakes agreed to purchase: (i) 81,250,000 shares of the Company’s common stock, at a per share price of $0.08, for an aggregate purchase price of $6,500,000; and (ii) a warrant to purchase shares of the Company’s common stock. Under the terms of the warrant, Petrol Lakes may purchase up to 40,625,000 shares of the Company’s common stock at a per share price of $0.1356, for an aggregate purchase price of $6,500,000. The warrant, which is exercisable in whole or in part, will expire on December 12, 2015. The Company paid issuances costs of $650,000.

 

Stock Options:

 

As of January 31, 2014, the Company has one equity incentive plan. The number of shares reserved for issuance in aggregate under the plan is limited to 90 million shares. The exercise price, term and vesting schedule of stock options granted are set by the board of directors at the time of grant. Stock options granted under the plan may be exercised on a cashless basis, if such exercise is approved by the Board. In a cashless exercise, the employee receives a lesser amount of shares in lieu of paying the exercise price based on the quoted market price of the shares on the trading day immediately preceding the exercise date.

 

As of April 30, 2013, the Company had 290,000 options outstanding and exercisable with a weighted average exercise price of $0.50. The options expire during April to June 2014. As of January 31, 2014, the Company had a total of 88,228,281 options outstanding and 24,394,947 exercisable with a weighted average exercise price of $0.06.

 

The following table summarizes information about the options outstanding and exercisable at January 31, 2014:

 

    Options     Weighted Average
Exercise Prices
 
             
Outstanding – April 30, 2013     290,000     $ 0.50  
Exercisable – April 30, 2013     290,000     $ 0.50  
Granted     87,938,281     $ 0.06  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding January 31, 2014     88,228,281     $ 0.06  
Exercisable – January 31, 2014     24,394,947     $   0.07  
                 
Outstanding - Aggregate Intrinsic Value           $ 2,344,281  
                 
Exercisable - Aggregate Intrinsic Value           $ 633,547  

 

Intrinsic value is the Company’s current per share fair value as quoted on the Over the Counter Bulletin Board on the balance sheet date ($0.0858) less the current exercise price.

 

Other than the issuances disclosed in Note 6 and below, during the three and nine months ended January 31, 2014, the Company had no other stock based compensation expense. The Company had no stock based compensation during the three and nine months ended January 31, 2013.

 

As of January 31, 2014, the Company has $2,849,138 in unrecognized stock based compensation expense which will be amortized over a weighted average exercise period of 3.80 years.

 

Advisor Grants:

 

On November 20, 2013, the Board of Directors authorized the grant of fair value option grants to two consultants. The option grants have an exercise price equal to the closing price of shares of the Company’s common stock as of the date of the grant. One consultant was granted 2,333,333 fair value options and the second consultant was granted 1,833,333 fair value options. All options granted vested immediately upon grant and mature in ten years.

 

The Company computed the economic benefit of the grant as of the date of grant utilizing a Black-Scholes option pricing model. The Company utilized the following assumptions: common share value based on the fair value of the Company’s common stock as quoted on the Over the Counter Bulletin Board, $0.059; Exercise price of $0.059; expected volatility of 96%; and a discount rate of 2.80%. The grant date fair value of the awards was $218,491. For the three and nine months ended January 31, 2014, the Company expensed $218,491, respectively, to general and administrative expenses.

 

Warrants:

 

As of January 31, 2014 and April 30, 2013, the Company had 40,855,000 and 230,000 warrants outstanding and exercisable with a weighted average exercise price of $0.1376 and a weighted average remaining life of 1.85 years. The aggregate intrinsic value of the warrants was $0. Intrinsic value is the Company’s current per share fair value as quoted on the Over the Counter Bulletin Board on the balance sheet date ($0.0858) less the current exercise price.

Contingency and Contractual Obligations

v2.4.0.8
Contingency and Contractual Obligations
9 Months Ended
Jan. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Contingency and Contractual Obligations

8.   Contingency and Contractual Obligations:

 

As a result of the Share Exchange, the Company inherited the following contingencies:

 

(a) In January 2010, the Company experienced a flood in its Calgary office premises as a result of a broken water pipe. There was significant damage to the premises rendering them unusable until remediation had been completed by the landlord. Pursuant to the lease contract, the Company has asserted that rent should be abated during the remediation process and accordingly, the Company has not paid rent since December 2009. During the remediation process, the Company engaged an independent environmental testing company to test for air quality and for the existence of other potentially hazardous conditions. The testing revealed the existence of potentially hazardous mold and the consultant provided specific written instructions for the effective remediation of the premises. During the remediation process, the landlord did not follow the consultant’s instructions and correct the potentially hazardous mold situation and subsequently in June 2010 gave notice and declared the premises to be ready for occupancy. The Company re-engaged the consultant to re-test the premises and the testing results again revealed the presence of potentially hazardous mold. The Company has determined that the premises are not fit for re-occupancy and considers the landlord to be in default of the lease and the lease terminated.

 

The landlord disputes the Company’s position and has given notice that it considers the Company to be in default of the lease for failure to re-occupy the premises.

 

In addition, the landlord has previously claimed that the Company owes monthly rent for the premises from January 2010 to June 30, 2010 in the amount of $247,348 and has claimed that, as a result of the alleged default, pursuant to the terms of the lease, the Company owes three months accelerated rent in the amount of $114,837. The landlord has previously also asserted that the Company would be liable for an amount up to the full lease obligation of $1,596,329 which otherwise would have been due as follows:

 

Year Ended April 30      
2011   $ 473,055  
2012     473,055  
2013     473,055  
2014     177,164  
Total   $ 1,596,329  

 

On January 30, 2014, the landlord filed a Statement of Claim against the Company in the amount aggregating approximately $759,000. The Company is currently assessing the current revised claim and has until March 31, 2014 to respond. At which time it plans to aggressively challenge such claims.

 

(b) On March 15, 2013, a former employee of the Company (VP-Operations) commenced an action in the Court of Queen’s Bench of Alberta claiming wrongful termination and seeking severance in an amount approximating US$185,000. On May 3, 2013, the Company reached a settlement with the former employee and entered into a formal settlement and release of claims agreement. As consideration for full settlement and mutual release, the Company issued the former employee 200,000 shares of common stock of the Company, valued at $0.40 per share or $80,000, and paid $50,000 during the nine months ended January 31, 2014, respectively.

 

(c) The Company is from time to time involved in legal proceedings in the ordinary course of business. It does not believe that any of these claims and proceedings against it is likely to have, individually or in the aggregate, a material adverse effect on its financial condition or results of operations.

Subsequent Events

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Subsequent Events
9 Months Ended
Jan. 31, 2014
Subsequent Events [Abstract]  
Subsequent Events

9.   Subsequent Events:

 

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent event(s) to be disclosed.

Significant Accounting Policies (Policies)

v2.4.0.8
Significant Accounting Policies (Policies)
9 Months Ended
Jan. 31, 2014
Accounting Policies [Abstract]  
Use of Estimates

(a)   Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation, depletion and accretion, income taxes, fair value of derivatives liabilities and other financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of January 31, 2014 and April 30, 2013, the Company had no estimated proven reserves.

Cash and Cash Equivalents

(b)   Cash and Cash Equivalents:

 

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased to be cash equivalents. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

Oil and Gas Operations

(c)   Oil and Gas Operations:

 

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the statement of operations. All of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least quarterly to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company performed a comparable study of unproven long-lived assets as of April 30, 2013 and determined that none of its long-term assets at April 30, 2013 were impaired. No material changes have occurred from April 30, 2013 (date of last comparable study) to January, 31, 2014.

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All the oil and gas properties with proven reserves were impaired to the salvage value prior to the merger. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period.

 

Ceiling Test: Under the full-cost method of accounting, a ceiling test is performed quarterly. The full-cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test determines a limit on the carrying value of oil and gas properties. The capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion, amortization, and impairment and the related deferred income taxes, may not exceed the estimated future net cash flows from proved oil and gas reserves, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, generally using current prices (with consideration of price changes only to the extent provided by contractual arrangements) as of the date of the latest balance sheet presented and including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, net of related tax effects, plus the cost of unevaluated properties and major development projects excluded from the costs being amortized. If capitalized costs exceed this limit, the excess is charged to expense and reflected as additional accumulated depreciation, depletion, amortization and impairment. In the application of the full-cost method, the term “current price” means the average price during the 12-month period prior to the end of the entity’s fiscal year determined as the un-weighted arithmetical average of the prices on the first day of each month within the 12-month period.

 

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. For the three and nine months ended January 31, 2014 and 2013, all oil and gas reserves were classified as unproven. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion, depreciation and amortization of oil and gas properties under the full cost method during the three and nine months ended January 31, 2014 and 2013.

Asset Retirement Obligations

(d)   Asset Retirement Obligations:

 

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the statement of operations.

 

Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

Oil and Gas Revenue

(e)   Oil and Gas Revenue:

 

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

Per Share Amounts

(f)   Per Share Amounts:

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three and nine months ended January 31, 2014 and 2013, presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

The Company had the following common stock equivalents at January 31, 2014:

 

As at   January 31, 2014  
Stock Options     88,228,281  
Stock Purchase Warrants     40,625,000  
Compensation Warrants     230,000  
      129,083,281  

 

At January 31, 2013 the Company had no common stock equivalents.

Fair Value of Financial Instruments

(g)   Fair Value of Financial Instruments:

 

All financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and accounts payable and accrued expenses are to be recognized on the balance sheet initially at carrying value. The carrying value of these assets approximate their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Subsequent Events

(h)   Subsequent Events:

 

The Company evaluates subsequent events through the date when condensed consolidated financial statements are issued.

Recent Accounting Pronouncements

(i)   Recent Accounting Pronouncements:

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated condensed financial statements.

Significant Accounting Policies (Tables)

v2.4.0.8
Significant Accounting Policies (Tables)
9 Months Ended
Jan. 31, 2014
Accounting Policies [Abstract]  
Schedule of Common Stock Equivalents

The Company had the following common stock equivalents at January 31, 2014:

 

As at   January 31, 2014  
Stock Options     88,228,281  
Stock Purchase Warrants     40,625,000  
Compensation Warrants     230,000  
      129,083,281  

Oil and Gas Assets (Tables)

v2.4.0.8
Oil and Gas Assets (Tables)
9 Months Ended
Jan. 31, 2014
Extractive Industries [Abstract]  
Schedule of Oil and Gas Assets

The following table summarizes the oil and gas assets by project:

 

Cost   Missouri     Kentucky     Montana     Kansas     Other     Total  
Balance, May 1, 2013   $ 918,991     $ -     $ 75,000     $ 12,329,098     $ 100,000     $ 13,423,089  
Additions                             285,383               285,383  
Depreciation, and amortization     -       -       -       (36,588 )     -       (36,588 )
                                                 
Balance January 31, 2014   $ 918,991     $ -     $ 75,000     $ 12,577,893     $ 100,000     $ 13,671,884  

Asset Retirement Obligations (Tables)

v2.4.0.8
Asset Retirement Obligations (Tables)
9 Months Ended
Jan. 31, 2014
Asset Retirement Obligation Disclosure [Abstract]  
Schedule of Changes to Asset Retirement Obligation

Changes to the asset retirement obligation were as follows:

 

    January 31, 2014     April 30, 2013  
Balance, beginning of period   $ 763,036     $ 143,035  
Additions     -       615,784  
Disposition     -       -  
Revisions     -       -  
Accretion     40,985       4,217  
      804,021       763,036  
Less: Current portion for cash flows expected to be incurred within one year     (342,608 )     (213,302 )
Long-term portion, end of period   $ 461,413     $ 549,734  

Schedule of Expected Timing of Asset Retirement Obligations

Expected timing of asset retirement obligations:

 

Year Ending April 30,      
2014     339,443  
2015     135,556  
2016     81,181  
2017     212,000  
Thereafter     319,112  
      1,087,292  
Effect of discount     (283,271 )
Total   $ 804,021  

Equity (Tables)

v2.4.0.8
Equity (Tables)
9 Months Ended
Jan. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Options Outstanding and Exercisable

The following table summarizes information about the options outstanding and exercisable at January 31, 2014:

 

    Options     Weighted Average
Exercise Prices
 
             
Outstanding – April 30, 2013     290,000     $ 0.50  
Exercisable – April 30, 2013     290,000     $ 0.50  
Granted     87,938,281     $ 0.06  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding January 31, 2014     88,228,281     $ 0.06  
Exercisable – January 31, 2014     24,394,947     $   0.07  
                 
Outstanding - Aggregate Intrinsic Value           $ 2,344,281  
                 
Exercisable - Aggregate Intrinsic Value           $ 633,547  

Contingency and Contractual Obligations (Tables)

v2.4.0.8
Contingency and Contractual Obligations (Tables)
9 Months Ended
Jan. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Contractual Lease Obligations for Fiscal Years

The landlord has previously also asserted that the Company would be liable for an amount up to the full lease obligation of $1,596,329 which otherwise would have been due as follows:

 

Year Ended April 30      
2011   $ 473,055  
2012     473,055  
2013     473,055  
2014     177,164  
Total   $ 1,596,329  

Organization and Liquidity (Details Narrative)

v2.4.0.8
Organization and Liquidity (Details Narrative) (USD $)
9 Months Ended
Jan. 31, 2014
acre
Apr. 30, 2013
Jan. 31, 2013
Apr. 30, 2012
Cash paid for purchase assets $ 2,000,000      
Non-Managing membership interest 25.00%      
Land subject to leases, gross 115,000      
Land subject to leases, net 85,000      
Value of leased land 12,200,000      
Number of stock newly issued during the period 591,021,011      
Working capital deficiency 8,267,552      
Cash and cash equivalents $ 9,204,795 $ 5,703,082 $ 6,165,838 $ 4,364,033
Petro [Member]
       
Percentage of ownership interest 100.00%      
Petro's Former's Holder [Member]
       
Percentage of ownership interest 80.00%      

Significant Accounting Policies (Details Narrative)

v2.4.0.8
Significant Accounting Policies (Details Narrative)
9 Months Ended
Jan. 31, 2014
Accounting Policies [Abstract]  
Derivative instruments qualifying as cash flow hedges, discounted rate 10.00%

Significant Accounting Policies - Schedule of Common Stock Equivalents (Details)

v2.4.0.8
Significant Accounting Policies - Schedule of Common Stock Equivalents (Details)
Jan. 31, 2014
Jan. 31, 2013
Common stock equivalent shares 129,083,281   
Stock Options [Member]
   
Common stock equivalent shares 88,228,281   
Stock Purchase Warrants [Member]
   
Common stock equivalent shares 40,625,000   
Compensation Warrants [Member]
   
Common stock equivalent shares 230,000   

Oil and Gas Assets (Details Narrative)

v2.4.0.8
Oil and Gas Assets (Details Narrative) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 12 Months Ended
Jan. 31, 2014
acre
Apr. 30, 2013
Jan. 31, 2014
Kansas [Member]
acre
Jan. 31, 2014
Kansas [Member]
acre
Apr. 30, 2013
Kansas [Member]
Jan. 31, 2014
Kentucky [Member]
acre
Apr. 30, 2013
Kentucky [Member]
Apr. 30, 2013
Missouri [Member]
wells
acre
Boe
Jan. 31, 2014
Missouri [Member]
Jan. 31, 2014
Montana [Member]
Apr. 30, 2013
Montana [Member]
Jan. 31, 2014
Montana [Member]
Devils Basin Prospect [Member]
acre
Apr. 17, 2012
Montana [Member]
Teton Prospect [Member]
acre
Cash paid for purchase assets $ 2,000,000     $ 2,000,000                  
Non-Managing membership interest 25.00%     25.00%                  
Gross acres of oil and gas leases 115,000   115,000 115,000       22,832       1,175 2,807
Land subject to leases, net 85,000   85,000 85,000               881 1,137
Value of leased land 12,200,000   12,200,000 12,200,000                  
Additional oil and gas expenditures     285,000 49,000                  
Percentage of working interest           37.50%   98.40%       75.00%  
Unproved gross mineral acres oil and gas leases           27,150              
Net mineral acres oil and gas leases       385   10,181              
Oil and gas assets $ 13,671,884 $ 13,423,089 $ 12,577,893 $ 12,577,893 $ 12,329,098       $ 918,991 $ 918,991 $ 75,000 $ 75,000    
Number of barrel of oil built per day               500          
Number of production wells               116          
Number of steam injection wells               39          
Number of service and observation wells               14          
Number of drilled exploration or delineation wells               73          
Percentage of success rate               67.00%          

Oil and Gas Assets - Schedule of Oil and Gas Assets (Details)

v2.4.0.8
Oil and Gas Assets - Schedule of Oil and Gas Assets (Details) (USD $)
9 Months Ended
Jan. 31, 2014
Balance at beginning $ 13,423,089
Additions 285,383
Depreciation, Depletion and amortization (36,588)
Balance at end 13,671,884
Missouri [Member]
 
Balance at beginning 918,991
Depreciation, Depletion and amortization   
Balance at end 918,991
Kentucky [Member]
 
Balance at beginning   
Depreciation, Depletion and amortization   
Balance at end   
Montana [Member]
 
Balance at beginning 75,000
Depreciation, Depletion and amortization   
Balance at end 75,000
Kansas [Member]
 
Balance at beginning 12,329,098
Additions 285,383
Depreciation, Depletion and amortization (36,588)
Balance at end 12,577,893
Other [Member]
 
Balance at beginning 100,000
Depreciation, Depletion and amortization   
Balance at end $ 100,000

Asset Retirement Obligations (Details Narrative)

v2.4.0.8
Asset Retirement Obligations (Details Narrative) (USD $)
9 Months Ended
Jan. 31, 2014
Apr. 30, 2013
Asset Retirement Obligation Disclosure [Abstract]    
Future undiscounted liability $ 1,087,292 $ 1,087,292
Costs are expected to be incurred, minimum period 1 year  
Costs are expected to be incurred, maximum period 24 years  
Credit-adjusted risk-free discount rate 10.00%  
Percentage of inflation rate 2.00%  
Reclamation deposits $ 25,000 $ 25,000

Asset Retirement Obligations - Schedule of Changes to Asset Retirement Obligation (Details)

v2.4.0.8
Asset Retirement Obligations - Schedule of Changes to Asset Retirement Obligation (Details) (USD $)
9 Months Ended 12 Months Ended
Jan. 31, 2014
Jan. 31, 2013
Apr. 30, 2013
Asset Retirement Obligation Disclosure [Abstract]      
Balance, beginning of period $ 763,036 $ 143,035 $ 143,035
Additions      615,784
Disposition        
Revisions        
Accretion 40,985    4,217
Balance, end of period 804,021   763,036
Less: Current portion for cash flows expected to be incurred within one year (342,608)   (213,302)
Long-term portion, end of period $ 461,413   $ 549,734

Asset Retirement Obligations - Schedule of Expected Timing of Asset Retirement Obligations (Details)

v2.4.0.8
Asset Retirement Obligations - Schedule of Expected Timing of Asset Retirement Obligations (Details) (USD $)
Jan. 31, 2014
Apr. 30, 2013
Apr. 30, 2012
Jan. 31, 2014
2014 [Member]
Jan. 31, 2014
2015 [Member]
Jan. 31, 2014
2016 [Member]
Jan. 31, 2013
2017 [Member]
Jan. 31, 2014
Thereafter [Member]
Jan. 31, 2014
Total [Member]
Asset retirement obligations $ 342,608 $ 213,302   $ 339,443 $ 135,556 $ 81,181 $ 212,000 $ 319,112 $ 1,087,292
Effect of discount (283,271)                
Total $ 804,021 $ 763,036 $ 143,035            

Related Party Transactions (Details Narrative)

v2.4.0.8
Related Party Transactions (Details Narrative) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended
Jan. 31, 2014
Jan. 31, 2013
Jan. 31, 2014
Jan. 31, 2013
Apr. 30, 2013
Nov. 26, 2013
Brio Financial Group [Member]
Jan. 31, 2014
Brio Financial Group [Member]
Jan. 31, 2014
Brio Financial Group [Member]
Jan. 31, 2014
Mr.Cohen [Member]
Jan. 31, 2014
Mr.Cohen [Member]
Nov. 22, 2013
Ruben Alba [Member]
Jan. 31, 2014
Ruben Alba [Member]
Jan. 31, 2014
Ruben Alba [Member]
Nov. 22, 2013
Gary Williky [Member]
Jan. 31, 2014
Gary Williky [Member]
Jan. 31, 2014
Gary Williky [Member]
Nov. 25, 2013
Luis Vierma [Member]
Jan. 31, 2014
Luis Vierma [Member]
Jan. 31, 2014
Luis Vierma [Member]
Nov. 27, 2013
Daniel Smith [Member]
Jan. 31, 2014
Daniel Smith [Member]
Jan. 31, 2014
Daniel Smith [Member]
Nov. 20, 2013
Board Of Director [Member]
Jan. 31, 2014
Board Of Director [Member]
Jan. 31, 2014
Board Of Director [Member]
Jul. 24, 2013
Jeffrey Freedman [Member]
Jan. 31, 2014
Jeffrey Freedman [Member]
Number of option granted to purchase common stock     87,938,281     750,000       41,666,667 12,500,000     6,250,000     6,250,000     12,500,000     3,389,832     465,116  
Option term     3 years 9 months 18 days             10 years                                  
Option exercise price $ 0.07   $ 0.07   $ 0.50       $ 0.059 $ 0.059                                  
Percentage of option vested immediately upon the grant                   20.00%                                  
Fair value of exercise price $ 0.059   $ 0.059       $ 0.059 $ 0.059 $ 0.059 $ 0.059   $ 0.059 $ 0.059   $ 0.059 $ 0.059   $ 0.059 $ 0.059   $ 0.059 $ 0.059   $ 0.059 $ 0.059   $ 0.215
Fair value of expected volatility     96.00%         65.00%   96.00%     96.00%     96.00%     96.00%     96.00%     96.00%   88.00%
Fair value of discount rate       2.80%       0.12%   2.80%     2.80%     2.80%     2.80%     2.80%     2.80%   0.64%
Granted fair value               $ 8,764   $ 2,006,227     $ 575,839     $ 287,919     $ 287,919     $ 575,839     $ 147,442    
General and administrative 1,634,241 143,368 3,351,460 520,851     3,408 3,408 59,947 478,197   137,255 137,255   68,627 68,627   68,627 68,627   137,255 137,255   147,442 147,442   56,047
Annual base salary                     120,000     120,000     84,000     120,000              
Monthly consulting fees           7,500                                          
Number of options vested immediately upon execution           125,000                                          
Payment to related parties                                                   12,000  
Options to purchase common stock, aggregate fair market value                                                   $ 56,047  
Options expiration date                                                   Jul. 23, 2016  

Equity (Details Narrative)

v2.4.0.8
Equity (Details Narrative) (USD $)
0 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended
Dec. 12, 2013
Jan. 31, 2014
Jan. 31, 2013
Apr. 30, 2013
Jan. 31, 2014
Warrant [Member]
Apr. 30, 2013
Warrant [Member]
Nov. 20, 2013
Consultant One [Member]
Nov. 20, 2013
Consultant Two [Member]
Jan. 31, 2014
Mr.Cohen [Member]
Issuance and sale of common stock 81,250,000                
Issuance and sale of common stock price per share $ 0.08                
Warrants issued to purchase of common stock $ 6,500,000                
Warrants issued to purchase of common stock shares 40,625,000                
Warrants issued to purchase of common stock price per share $ 0.1356 $ 0.1376              
Warrants expiration date Dec. 12, 2015                
Payment for issuances costs 650,000 650,000               
Purchase option granted for common stock   87,938,281         2,333,333 1,833,333 41,666,667
Fair value of exercise price   $ 0.059             $ 0.059
Fair value of expected volatility   96.00%             96.00%
Fair value of discount rate     2.80%           2.80%
Shares reserved for issuance under equity incentive plan   90,000,000              
Number of options, outstanding   87,938,281   290,000          
Number of options, exercisable   24,394,947   290,000          
Weighted average exercise price of options   $ 0.06   $ 0.50          
Stock based compensation   0 0            
Compensation cost related to non-vested stock options not yet recognized   0              
Unrecognized stock based compensation expense   2,849,138              
Weighted average period   3 years 9 months 18 days             10 years
Number of warrants, outstanding         40,855,000 230,000      
Number of warrants, exercisable         40,855,000 230,000      
Warrants outstanding, weighted average exercise price         $ 0.1376 $ 0.1376      
Warrants outstanding, weighted avg. Life remaining         1 month 24 days        
Aggregate Intrinsic Value         0        
General and administrative   $ 218,491 $ 218,491            

Equity - Summary of Options Outstanding and Exercisable (Details)

v2.4.0.8
Equity - Summary of Options Outstanding and Exercisable (Details) (USD $)
9 Months Ended
Jan. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Options Outstanding, beginning 290,000
Granted 87,938,281
Exercised   
Forfeited/Cancelled   
Option Outstanding, ending 87,938,281
Options Exercisable, Beginning balance 290,000
Options Exercisable, Ending balance 24,394,947
Weighted Average Exercise Prices Outstanding, beginning $ 0.50
Granted $ 0.06
Exercised   
Forfeited/Cancelled   
Weighted Average Exercise Prices Outstanding, ending $ 0.06
Weighted Average Exercise Prices, Exercisable, Beginning $ 0.50
Weighted Average Exercise Prices, Exercisable, Ending $ 0.07
Options Outstanding, Aggregate Intrinsic Value $ 2,344,281
Options Exercisable, Aggregate Intrinsic Value $ 633,547

Contingency and Contractual Obligations (Details Narrative)

v2.4.0.8
Contingency and Contractual Obligations (Details Narrative) (USD $)
0 Months Ended 6 Months Ended 9 Months Ended
Jan. 30, 2014
Mar. 15, 2013
Jun. 30, 2010
Jan. 31, 2014
Commitments and Contingencies Disclosure [Abstract]        
Landlord received claims     $ 247,348  
Accrued rent       114,837
Maximum lease obligations       1,596,329
Landlord filed a statement against company for the amount 759,000      
Approximate wrongful termination amount   185,000    
Stock issued during period for consideration of settlement to non employee, shares       200,000
Per share Price       $ 0.40
Stock issued during period for consideration of Settlement to non employee       80,000
Cash payment to non employee       $ 50,000

Contingency and Contractual Obligations - Schedule of Contractual Lease Obligations for the Fiscal Years (Details)

v2.4.0.8
Contingency and Contractual Obligations - Schedule of Contractual Lease Obligations for the Fiscal Years (Details) (USD $)
Jan. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
2011 $ 473,055
2012 473,055
2013 473,055
2014 177,164
Total $ 1,596,329