Quarterly report pursuant to Section 13 or 15(d)

Oil and Gas Properties

v3.6.0.2
Oil and Gas Properties
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Note 5. Oil and Gas Properties

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the nine months ended September 30, 2016:

 

   

December 31,

2015

    Additions     Impairments    

September 30,

2016

 
Proved developed producing oil and gas properties                        
Canada cost center   $ 33,082     $ -     $ -     $ 33,082  
United States cost center     -       1,308,938       -       1,308,938  
Accumulated depreciation, depletion and amortization     (2,093 )     (49,752 )     -       (51,845 )
Proved developed producing oil and gas properties, net   $ 30,989     $ 1,259,186     $ -     $ 1,290,175  
                                 
Undeveloped and non-producing oil and gas properties                                
Canada cost center   $ 518,269     $ -     $ -     $ 518,269  
United States cost center     -       861,312       -       861,312  
Accumulated depreciation, depletion and amortization     (32,788 )     (27,873 )     -       (60,661 )
Undeveloped and non-producing oil and gas properties, net   $ 485,481     $ 833,439     $ -     $ 1,318,920  
                                 
Total Oil and Gas Properties, Net   $ 516,470     $ 2,092,625     $ -     $ 2,609,095  

 

On February 23, 2016, with an effective date of February 1, 2016, the Company closed on the acquisition of working interests in four leases with access to the mineral rights (oil and gas) concerning approximately 281 acres of property in Miami and Franklin Counties in eastern Kansas. This project produces oil from the Cherokee formation at a depth of approximately 600 feet. These leases offer the potential for several future drilling locations. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by the Company. The names of the four leases and Viking’s percentage ownership of the working interest of each lease is as follows:

 

Lease Name   Viking's Working Interest Percentage  
       
HAHN     32.299 %
JOHNSTON     84.041 %
WILSON, EAST     15.000 %
WILSON, WEST     55.003 %

 

As consideration for this transaction, the Company paid $1,350,000 plus 4,650,000 shares of common stock valued at $.085 per share, or $395,250.

 

The Company also purchased a 100% working interest (Net Revenue Interest of 83%) in certain Non-Producing Leases as follows: (i) three leases with access to the mineral rights (oil and gas) concerning approximately 270 acres of property in Miami and Franklin Counties in eastern Kansas; and (ii) 31 leases with access to the mineral rights (oil and gas) concerning approximately 5,500 acres of property in Cass and Bates Counties in Missouri. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by Viking. As consideration for this transaction, Viking agreed to issue the vendors 5,000,000 shares of common stock valued at $.085 per share or $425,000.

 

The total purchase of these oil and gas interests is summarized as follows, and is included in oil and gas properties on the balance sheet at September 30, 2016:

  

Cash consideration   $ 1,350,000  
Stock for producing interests     395,250  
Stock for non-producing interests     425,000  
         
Total purchase price   $ 2,170,250  

 

For the nine months ended September 30, 2016, the Company has included $135,334 of revenue providing $46,138 of net earnings in its consolidated statement of operations and comprehensive loss from the date of acquisition.

 

To facilitate these acquisitions, the Company borrowed $1,625,000 from private lenders pursuant to a 15% Senior Secured Convertible Promissory Note (the "Note"), arranged through a licensed broker/dealer, with the primary terms of the loan being as follows: (i) Term – 6 months; (ii) Rate – 15% per annum; (iii) Security – 1st ranking charge against company assets pursuant to a Security and Pledge Agreement (the "Security Agreement"); (iv) Conversion – the lenders have a right to convert all or part of the note into common stock of Viking at a price of $0.15 per share, subject to certain ownership restrictions; and (v) Warrants – the lenders were given an option to purchase, within the next 5 years, 4,062,500 shares of common stock of Viking at an exercise price of $0.20 per share pursuant to a Common Stock Purchase Warrant. Viking's CEO and director, James Doris, also personally guaranteed repayment of the loan and granted the lenders a security interest in his assets.

 

On September 28, 2016, the Company issued 2,400,000 common shares, at the current market value of $288,000 as a portion of the purchase price of additional oil and gas properties acquired on October 4, 2016. This amount is included as a deposit in other assets as of September 30, 2016.