Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. United States
  4. OTC Markets
  5. Royale Energy, Inc.
  6. News
  7. Summary
    ROYL   US78074G2003

ROYALE ENERGY, INC.

(ROYL)
SummaryQuotesChartsNewsCompanyFinancials 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

ROYALE ENERGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/14/2021 | 03:43pm EDT

FORWARD-LOOKING STATEMENTS

In addition to historical information contained herein, this discussion contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, subject to various risks and uncertainties that could cause our actual results to differ materially from those in the "forward-looking statements". While we believe our forward-looking statements are based upon reasonable assumptions, there are factors that are difficult to predict and that are influenced by economic and other conditions beyond our control. Investors are directed to consider such risks and other uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.




RESULTS OF OPERATIONS



In late 2019 and continuing into 2021, there was a global outbreak of novel coronavirus (COVID-19) that has resulted in changes in global supply and demand of certain mineral and energy products. While the direct and indirect negative impacts that may affect the Company cannot be determined, they could have a prospective material impact. For more information, see Item 3 below.

For the three months ended March 31, 2021, we had a net loss of $572,167 compared to the net income of $384,362, during the three months ended March 31, 2020. The difference was primarily the result of a gain of $1.3 million relating to our equity method investment in RMX recorded during the three months ended March 31, 2020. During the fourth quarter in 2020, it was determined that an allowance for the full value of the asset was warranted so there was no comparative gain or loss in the current year period.

During the first three months of 2021, revenues from oil and gas production increased $24,452 or 6.5% to $398,937 from the 2020 first three months revenues of $374,485. This increase was mainly due to higher oil and natural gas commodity prices. The net sales volume of oil and condensate for the three months ended March 31, 2021, was approximately 5,574 barrels with an average price of $56.08 per barrel, versus 5,031 barrels with an average price of $47.87 per barrel for the first three months of 2020. This represents an increase in net sales volume of 543 barrels or 10.8%. This increase was due to wells drilled and placed into production during the year in 2020 and to lower volumes produced during the first quarter of 2020. The net sales volume of natural gas for the three months ended March 31, 2021, was approximately 29,659 Mcf with an average price of $2.91 per Mcf, versus 52,453 Mcf with an average price of $2.55 per Mcf for the same period in 2020. This represents a decrease in net sales volume of 22,794 Mcf or 43.5%. The decrease in natural gas production volume was due to certain wells that were offline and waiting on workovers and to lower volumes on existing wells due to natural declines.

Oil and natural gas lease operating expenses decreased by $103,291 or 25.6%, to $300,162 for the three months ended March 31, 2021, from $403,453 for the same period in 2020. This was lower due mainly to decreases in outside operated lease operating costs as certain non-operated wells were either disposed of during the year in 2020 or offline and waiting on workovers.

Depreciation, depletion and amortization expense increased to $124,405 from $79,935, an increase of $44,470 or 55.6% for the three months ended March 31, 2021, as compared to the same period in 2020. The depletion rate is calculated using production as a percentage of reserves. This increase in depletion expense was due to increased capitalized well costs for wells drilled during 2020 and to a decrease in expected recoverable reserves which increased the depletion rate.

At March 31, 2021, Royale Energy had a Deferred Drilling Obligation of $2,747,439. During the first three months of 2021, we disposed of $1,841,061 of drilling obligations upon completing the drilling of two oil wells in Texas, while incurring expenses of $1,576,280, resulting in a gain of $264,780. At March 31, 2020, Royale Energy had a Deferred Drilling Obligation of $4,025,589. During the first three months of 2020, we disposed of $2,382,086 of drilling obligations upon completing the drilling of two wells, one oil well in Southern California and one oil well in Texas, while incurring expenses of $2,344,311, resulting in a gain of $37,775.

General and administrative expenses increased by $43,920 or 8.4% to $564,983 for the three months ended March 31, 2021, from $521,063 for the same period in 2020. This increase was mainly due to absorption of a greater percentage of drilling management costs. Production and drilling overhead offset general and administrative costs. During the first quarter of 2020 four wells were completed. Marketing expense for the three months ended March 31, 2021, increased $4,655, or 13.5%, to $39,049, compared to $34,394 for the same period in 2020. Marketing expense varies from period to period according to the number of marketing events attended by personnel and their associated costs.

Legal and accounting expense increased to $218,763 for the three month period in 2021, compared to $86,535 for the same period in 2020, a $132,228 or 152.8% increase. These increases were primarily due to the timing of the receipt of invoices for audit related expenses during the periods in 2021 and 2020.

                                       17

--------------------------------------------------------------------------------

Table of Contents

During the three months ended March 31, 2020, we recorded a gain of $1,309,851, on investment in joint venture as our 20% share of RMX Resources, LLC's. As a result of recognizing an impairment for the full value of the investment, the company did not recognize any gain or loss in subsequent periods. See note Equity Method Investment in Note 1 above.

During the quarter ended March 31, 2021, we recorded a gain on settlement of $10,061 due to the payment by the SBA of the remaining balance on our PPP loan obtained in 2020. During the three months ended March 31, 2020, we recorded a loss on settlement of $31,500 related to a 2018 seismic sales agreement.

Bad debt expense for the periods ended March 31, 2021 and 2020 were $74 and $186,168, respectively. During the period in 2020 approximately $106,000 was related to revenue receivable from an industry partner whose collectability was in doubt. Approximately $80,000 of the expenses in 2020 arose from identified uncollectable receivables relating to our oil and natural gas properties either plugged and abandoned or scheduled for plugging and abandonment and our period end oil and natural gas reserve values. We periodically review our accounts receivable from working interest owners to determine whether collection of any of these charges appears doubtful. By contract, the Company may not collect some charges from its Direct Working Interest owners for certain wells that ceased production or had been sold during the year, to the extent that these charges exceed production revenue.

Interest expense decreased to $835 for the three months ended March 31, 2021, from $4,030 for the same period in 2020, a $3,195 decrease. This decrease was mainly due to lower principal balances on notes payable during the three-month period in 2021.

CAPITAL RESOURCES AND LIQUIDITY

At March 31, 2021, we had current assets totaling $4,813,096 and current liabilities totaling $9,150,829, a $4,337,733 working capital deficit. We had $310,617 in cash and $1,999,256 in restricted cash at March 31, 2021, compared to $255,112 in cash and $2,146,571 in restricted cash at December 31, 2020.

In accordance with ASC 480-10-S99 the Company reclassified the Series B Convertible Preferred Stock from Permanent Equity to Mezzanine capital as a result of the change in voting rights provided at the time it of issuance. For more information, see Note 3 - Series B Convertible Preferred Stock.

At March 31, 2021, our other receivables, which consist of joint interest billing receivables from direct working interest investors and industry partners, totaled $526,252, compared to $462,777 at December 31, 2020, a $63,475 increase. This increase was mainly due to higher receivables from direct working interest owners for lease operating expenses for new wells that began production at the end of 2020. At March 31, 2021, revenue receivable was $208,534, an increase of $4,385, compared to $204,149 at December 31, 2020, due to higher commodity prices during the quarter in 2021. At March 31, 2021, our accounts payable and accrued expenses totaled $4,622,556, an increase of $461,447 from the accounts payable at December 31, 2020, of $4,161,109, which was mainly due to drilling costs of two wells during the first quarter in 2021.

The Company has had recurring operating and net losses and cash used in operations and the financial statements reflect a working capital deficiency of $4,337,733 and an accumulated deficit of $83,062,670. These factors raise substantial doubt about our ability to continue as a going concern. We anticipate that our primary sources of liquidity will be from the sale of oil and gas in the course of normal operations, the sale of oil and gas property, sales of participation interest and possible issuance of debt and/or equity. If the Company is unable to generate sufficient cash from operations or financing sources, it may become necessary to curtail, suspend or cease operations, sell property, or enter into financing transaction(s) on less favorable terms; any such outcomes could have a material adverse effect on the Company's business, results of operations, financial position and liquidity. Additionally, management has, and plans to continue, to increase revenue and reduce overhead and Lease Operating Expense (LOE) costs.

Operating Activities. Net cash used by operating activities totaled $25,416 and $733,512 for the three months ended March 31, 2021 and 2020, respectively. This decrease in cash used was mainly due to the difference in accounts payable and accrued expenses during the quarters related mainly to the wells drilled during the periods.

Investing Activities. Net cash used by investing activities totaled $63,806 and $544,948 for the three months ended March 31, 2021 and 2020, respectively. During the period in 2021, we received approximately $1.46 million in direct working interest investor turnkey drilling investments while our drilling expenditures were approximately $1.5 million in the drilling and completing of two Texas oil wells. During the period in 2020, we received approximately $1.2 million in direct working interest investor turnkey drilling investments while our drilling expenditures were approximately $1.7 million in the drilling and completing of one Southern California oil well and one Texas oil wells.

Financing Activities. Net cash used by financing activities totaled $2,588 and $58,010 for the three months ended March 31, 2021 and 2020, respectively. During the period in 2021, the total used was for financing lease payments while during the period in 2020, approximately $56,000 were principal payments on our notes payable and $2,437 was for financing lease payments.

                                       18

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

All news about ROYALE ENERGY, INC.
08/16ROYALE ENERGY : Management's Discussion and Analysis of Financial Condition and Results of..
AQ
08/16Royale Energy, Inc. Reports Earnings Results for the Second Quarter Ended June 30, 2021
CI
05/25ROYALE ENERGY : Letter from Moss Adams, LLP to the Securities and Exchange Commission, dat..
PU
05/25ROYALE ENERGY : Engagement of New Independent Registered Public Accounting Firm (Form 8-K)
PU
05/25ROYALE ENERGY, INC. : Changes in Registrant's Certifying Accountant (form 8-K)
AQ
05/14ROYALE ENERGY : Management's Discussion and Analysis of Financial Condition and Results of..
AQ
05/14Royale Energy, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2021
CI
03/30ROYALE ENERGY : Management's Discussion and Analysis of Financial Condition and Results of..
AQ
03/30Royale Energy, Inc. Reports Earnings Results for the Full Year Ended December 31, 2020
CI
03/30Royale Energy, Inc. Auditor Raises 'Going Concern' Doubt
CI
More news