UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 15, 2020

 

 

FOOTHILLS EXPLORATION, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware   000-55872   27-3439423

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

10940 Wilshire Blvd., 23rd Floor

Los Angeles, CA 90024

(Address of principal executive offices) (Zip Code)

 

(424) 901-6655

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)  

Name of each exchange on which registered

N/A   N/A   N/A

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

     
 

 

Item 8.01. Other Events

 

Foothills Exploration, Inc. (“Foothills” or the “Company”) is hereby presenting information regarding its oil and natural gas prospective resources issued by an independent third-party engineering firm on January 6, 2020, for the Company’s interest in 16,387 acres located in the Wind River Basin, Wyoming, known as the Beaver Creek East Project, which indicates Prospective Resources of approximately 21 million barrels of undiscovered oil, with a PV-10 value of $372 million (after risk).

 

Oil and Natural Gas Resources Information

 

Foothills’ oil and gas prospective resources were independently prepared by Chapman Petroleum Engineering Ltd. out of Calgary Canada (“Chapman”). Chapman’s analysis included a review of the available technical data including the geological and geophysical interpretation presented by the Company, proposed contractual terms, information from relevant nearby wells or analogous reservoirs and the proposed program for each prospect.

 

Chapman reviewed this material with respect to the estimated resources and productivity that would be expected if a successful program, the anticipated capital costs (including drilling, completion and equipment), the average operating costs in the area and expected product prices. They also considered the availability of market access, and production and transportation infrastructure within economic reach of the area.

 

The economic analysis was performed for the Company’s interest position. Based on its analysis, after consideration of risk, Chapman has concluded that the potential of these prospects is of sufficient merit to justify the work program being proposed by the Company and furthermore, Chapman recommends and supports the Company’s participation.

 

The purpose of the report was to independently determine the feasibility of the Company undertaking the development of the prospective resources in the Beaver Creek East area, Wind River Basin, Wyoming, and determine the range of the magnitude of the prospective resources and the economic value before and after the consideration of risk.

 

Due to the risks involved in exploring for oil and gas reserves, Chapman’s assessment of the project cannot be considered a guarantee that any wells drilled will be successful.

 

     
 

 

In summary, Chapman’s analysis indicates that the Company’s Prospective Resources and economics (before income tax) as of August 31, 2019, for its leasehold position located in the Beaver Creek East Area of Wyoming’s Wind River Basin are as presented in Table 1 below.

 

Table 1

Summary of Company Prospective Resources and Economics

Before Income Tax

September 1, 2019

(as of August 31, 2019)

 

Foothills Exploration, LLC

 

Beaver Creek East Area, Wind River Basin, Wyoming, USA

 

    NET TO APPRAISED INTEREST  
    Resources     Cumulative Cash Flow (BIT) - M$  
    Oil     Conventional Natural Gas     NGL                                
    MSTB     MMcf     Mbbls     Discounted at:  
      Gross       Net       Gross       Net       Gross       Net       Undisc.       5%/yr     10%/yr     15%/yr     20%/yr
                                                                                         
Description                                                                                        
BEFORE RISK                                                                                        
Arithmetic Average                                                                                        
Development Program (Madison)     24,179       21,157       0       0       0       0       1,149,612       662,831       412,305       271,002       185,721  
Development Program (Tensleep)     30,381       26,583       0       0       0       0       1,603,601       838,816       495,441       317,188       214,834  
Development Program (Frontier, Dakota, Muddy Zones)     0       0       78,375       68,578       413       248       192,198       124,271       83,073       57,056       40,049  
Development Program (Phosphoria Zone)     0       0       28,487       24,926       150       90       27,925       13,182       4,669       (291 )     (3,172 )
Total Before Risk Arithmetic Average     54,560       47,740       106,862       93,504       562       357       2,973,337       1,639,100       995,487       644,954       437,431  
                                                                                         
AFTER RISK                                                                                        
Arithmetic Average After Risk                                                                                        
Development Program (Madison)     8,221       7,193       0       0       0       0       387,172       221,667       136,488       88,445       59,449  
Development Program (Tensleep)     12,760       11,165       0       0       0       0       670,264       349,055       204,837       129,971       86,982  
Development Program (Frontier, Dakota, Muddy Zones)     0       0       27,431       24,002       144       87       67,269       43,495       29,075       19,970       14,017  
Development Program (Phosphoria Zone)     0       0       10,255       8,973       54       32       10,053       4,746       1,681       (105 )     (1,142 )
Total After Risk Arithmetic Average     20,981       18,358       37,686       32,976       198       119       1,134,759       618,962       372,081       238,280       159,306  

 

M$ means thousands of dollars

MSTB means thousands of barrels

Mbbls means thousands of barrels  

NGL means natural gas liquids

 

Gross resources are the total of the Company's working interest share before deduction of royalties owned by others

 

Net resources are the total of the Company's working and/or royalty interest share after deducting the amounts attributable to royalties owned by others

 

Columns may not add precisely due to accumulative rounding of values throughout the report

 

The diagram below depicts the resource classification system used in Chapman’s report. The Company’s resources in the Wind River Basin are classified as “Prospective Resources.” See blue shaded section of diagram below.

 

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulation by application of future development projects. Prospective Resources have both an associated Chance of Discovery and a Chance of Development.

 

Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

 

     
 

 

 

The Company will need to initially raise $12 million to begin the work program described in the Chapman report.

 

Greater Green River Basin – Point of Rocks Project

 

Production is still currently shut-in on the asset. On September 17, 2019, the Company issued a current report on Form 8-K disclosing a PV-10 valuation of the proved oil and gas reserves on these properties at $1.98 million. The Company must now post all of the required surety bonds in order to finalize the transfer of operations from the seller, which it anticipates doing before the end of February. Foothills closed on the acquisition and paid for these properties in March 2019. The Seller has entered into formal proceedings to have Foothills complete all the obligations for bonding in a timely manner. The parties entered into an agreement that provides certain stipulations for the posting of the bonds and oversight of the wells during this time. The Company is also in discussions to have the note, which is collateralized by these properties, refinanced and assigned. No assurances can be made that the Company will be able to meet the lender’s payment obligations or regulatory bonding requirements. Failure to meet the obligations of the secured lender could result in the sale or divestiture of this asset.

 

Debt Management

 

Company management has been in ongoing discussions regarding payment of its notes with all of its debtholders. Management is currently working with the parties to either extend or repay the obligations to their satisfaction. Nevertheless, in the absence of an agreement with these parties, management remains committed to considering all available pathways to refinance or repay the notes so it can execute its business model.

 

Disclaimer:

 

Investors are urged to consider closely the disclosures and risk factors in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in the other reports and filings with the SEC, available from the Company’s offices or website. These forms can also be obtained from the SEC via the internet at www.sec.gov.

 

     
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: January 17, 2020

 

FOOTHILLS EXPLORATION, INC.

 

By: /s/ B. P. Allaire  
  B. P. Allaire  
  Chief Executive Officer  

 

     
 

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