CAMBER ENERGY, INC. You should read the following discussion and analysis in conjunction with the financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In preparing the management's discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 or the Reform Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: our ability to raise capital and the terms thereof; ability to gain an adequate player base to generate the expected revenue; competition with established gaming websites; adverse changes in government regulations or polices; and other factors referenced in this Form 10-Q.
The use in this Form 10-Q of such words as "believes", "plans", "anticipates", "expects", "intends", and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company's estimates and assumptions only as of the date of this Report. Except for the Company's ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.
Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company's forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
PLAN OF OPERATIONS Company Overview
(i) Power Generation & Solutions; (ii) Clean Energy; and (iii) Natural Resources. Power Generation & Solutions:
Through its approximately 60.5% majority-owned subsidiary,
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Clean Energy:
The Company recently entered into a license agreement with
The Company is also exploring other renewable energy-related opportunities and/or technologies, which are currently generating revenue, or have a reasonable prospect of generating revenue within a reasonable period of time.
Natural Resources:
Through wholly-owned subsidiaries, Viking owns interests in oil and gas
properties the
The following overview provides a background related to various operations and acquisition efforts over the last several years:
Oil & Gas Activity Previous Acquisitions:
The Company's previous acquisitions in the oil & gas sector include the following:
· On December 22, 2017 , the Company completed an acquisition of 100% of the
membership interests of Petrodome Energy, LLC ("Petrodome"), a
privately-owned company, with working interests in multiple oil and gas
fields across Texas , Louisiana and Mississippi , comprising approximately
11,700 acres. As a part of this acquisition, the Company retained an
operational office and staff in Houston, Texas , which provided the Company
the capability of operating many of its own wells internally. This
expertise has since been utilized to evaluate potential oil and gas
acquisitions, evaluate the management of the Company's oil and gas assets,
and evaluate and develop new drilling prospects.
· On December 28, 2018 , the Company, through its then newly formed Ichor
Energy Holdings, LLC subsidiary ("Ichor Energy Holdings "), completed an
acquisition of working interests in oil and gas leases in Texas (primarily
in Orange and Jefferson Counties) and Louisiana (primarily in Calcasieu
Parish ), which included 58 producing wells and 31 salt water disposal
wells.
· On May 10, 2019 , Petrodome Louisiana Pipeline LLC ("Petrodome LA"), a
subsidiary of Petrodome, acquired a majority working interest in 6 gas
wells (including 2 producing gas wells), 1 producing oil well and 1 salt
water disposal well located in the East Mud Lake Field in Cameron Parish,
Louisiana , with leases to mineral rights (oil and gas) concerning
approximately 765 acres.
· On February 3, 2020 , the Company, through its then newly formed
majority-owned Elysium Energy Holdings, LLC subsidiary ("Elysium Energy
Holdings "), acquired interests in oil and gas properties located in Texas
and Louisiana , which included leases, working interests, and over-riding
royalty interests in oil and gas properties in Texas (approximately 72
wells in 11 counties) and Louisiana (approximately 55 wells in 6
parishes), along with associated equipment.
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Disposals of
On
On
Other Acquisitions Simson-Maxwell Acquisition
On
ESG Clean Energy License
On
The Company intends to sell, lease, sub-license the Intellectual Property to
third parties using, among others,
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Potential Merger with Camber Energy, Inc.
On
Upon the terms and subject to the conditions set forth in the Merger Agreement,
at the effective time of the Merger (the "Effective Time"), each share: (i) of
common stock, par value
At the Effective Time, each outstanding Company equity award, will be converted into the right to receive the merger consideration in respect of each share of Viking Common Stock underlying such equity award and, in the case of Company stock options, be converted into vested Camber stock options based on the merger exchange ratio calculated as provided above (the "Exchange Ratio").
The Merger Agreement provides, among other things, that effective as of the
Effective Time,
The Merger Agreement also provides that, during the period from the date of the
Merger Agreement until the Effective Time, each of
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The completion of the Merger is subject to customary conditions, including (i) adoption of the Merger Agreement by Camber's stockholders and approval of the Share Issuance by Camber's stockholders, (ii) receipt of required regulatory approvals, (iii) effectiveness of a registration statement on Form S-4 for the Camber common stock to be issued in the Merger (the "Form S-4"), and (iv) the absence of any law, order, injunction, decree or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. Each party's obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) subject to certain exceptions, performance by the other party of its obligations under the Merger Agreement and (iii) the absence of any material adverse effect on the other party, as defined in the Merger Agreement.
Additional closing conditions to the Merger include that in the event the NYSE American determines that the Merger constitutes, or will constitute, a "back-door listing" / "reverse merger", Camber (and its common stock) is required to qualify for initial listing on the NYSE American, pursuant to the applicable guidance and requirements of the NYSE as of the Effective Time.
The Merger Agreement can be terminated (i) at any time with the mutual consent
of the parties? (ii) by either Camber or Company if any governmental consent or
approval required for closing is not obtained, or any governmental entity issues
a final non-appealable order or similar decree preventing the Merger? (iii) by
either Company or Camber if the Merger shall not have been consummated on or
before
The Merger deadline of
Going Concern Qualification
The Company's consolidated financial statements included herein have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company generated a net loss of
As of
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As described in Note 2, in
Further, oil and gas price volatility and the impact of the global COVID-19 pandemic have already had and may continue to have a negative impact on the Company's financial position and results of operations. Negative impacts could include but are not limited to: the Company's ability to sell its products and services, reduction in the selling price of the Company's products and services, possible disruption of production as a result of worker illness or mandated production shutdowns, the Company's ability to maintain compliance with loan covenants and/or refinance existing indebtedness, and access to new capital and financing.
Management believes it will be able to leverage the expertise and relationships of its operational and technical teams to enhance existing assets and identify new development and acquisition opportunities in order to improve operations.
Nonetheless, these conditions raise substantial doubt regarding the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to utilize the resources in place to generate future profitable operations, to develop additional acquisition opportunities, and to obtain the necessary financing to meet its obligations and repay its liabilities arising from business operations when they come due. Management believes the Company may be able to continue to develop new opportunities and may be able to obtain additional funds through debt and / or equity financings to facilitate its business strategy; however, there is no assurance of additional funding being available. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.
RESULTS OF CONTINUING OPERATIONS
The following discussion of the financial condition and results of operation of
the Company for the three and nine months ended
Liquidity and Capital Resources
As of
Restricted cash in the amount of
Pursuant to the Term Loan Credit Agreement to which
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Pursuant to the Term Loan Credit Agreement to which
On
Three months ended
Revenue
The Company had gross revenues of
Expenses
The Company's operating expenses decreased by
Income (Loss) from Operations
The Company generated an income from operations for the three months ended
Other Income (Expense)
The Company had other expense of
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Net Income (Loss)
The Company had a net loss of
Nine months ended
Revenue
The Company had gross revenues of
Expenses
The Company's operating expenses decreased by
Income (loss) from Operations
The Company generated an income from operations for the nine months ended
Other Income (Expense)
The Company had other expense of
Net Income (Loss)
The Company had a net loss of
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our financial statements, as well as the sufficiency of the disclosures pertaining to our accounting policies in the footnotes accompanying our financial statements. Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under GAAP. We also describe the most significant estimates and assumptions we make in applying these policies. See "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements.
Oil and Gas Property Accounting
The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred.
The full cost method requires the Company to calculate quarterly, by cost center, a "ceiling," or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes, exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved not properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.
Proved Reserves
Estimates of our proved reserves included in this report are prepared in
accordance with
i. the quality and quantity of available data;
ii. the interpretation of that data;
iii. the accuracy of various mandated economic assumptions; and
iv. the judgment of the persons preparing the estimate.
Our proved reserve information included in this report was predominately based on estimates. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate.
In accordance with
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The estimates of proved reserves materially impact depreciation, depletion, amortization and accretion ("DD&A") expense. If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce from higher-cost fields.
Asset Retirement Obligation
Asset retirement obligations ("ARO") primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. We determined our ARO by calculating the present value of estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation's inception, with an offsetting increase to proved properties. Periodic accretion of discount of the estimated liability is recorded as accretion expense in the accompanying consolidated statements of operations.
ARO liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated ARO.
Commodity derivatives
The Company does not designate its commodities derivative instruments as hedges and therefore does not apply hedge accounting. Changes in fair value of derivative instruments subsequent to the initial measurement are recorded as change in fair value on derivative liability, in other income (expense). The estimated fair value amounts of the Company's commodity derivative instruments have been determined at discrete points in time based on relevant market information which resulted in the Company classifying such derivatives as Level 2. Although the Company's commodity derivative instruments are valued using public indices, as well as the Black-Sholes model, the instruments themselves are traded with unrelated counterparties and are not openly traded on an exchange.
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