Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x
The Company’s revenues for its most recent fiscal year were $1,631,388.
The aggregate market value of the voting and non-voting common equity held by nonaffiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, was $13,483,475 as of May 9, 2008.
As of May 8, 2008, there were 4,260,242 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): YES o NO x
TABLE OF CONTENTS
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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i
ii
ITEM 1. DESCRIPTION OF BUSINESS.
Oakridge Energy, Inc. (the “Company”) is engaged in the exploration for and development, production and sale of oil and gas primarily in Texas. The Company also holds certain real estate in Colorado for sale, which lands cover gas, coal and other mineral deposits. See “Oil and Gas Operations” and “Real Estate Held for Sale” below and “Item 6. – Management’s Discussion and Analysis or Plan of Operation.”
The Company is a Utah corporation incorporated in 1969. The Company’s executive offices are located at 4613 Jacksboro Highway, Wichita Falls, Texas 76302. The Company’s telephone number is (940) 322-4772.
The Company has restricted its oil and gas exploration activities in recent fiscal years as it has conserved its limited resources for utilization on (i) a secondary recovery water-flood project on its principal oil and gas producing property in Madison County, Texas, (ii) its proposed real estate development project adjacent to Durango, Colorado in La Plata County (the “Durango Property”), and (iii) reclamation of its Carbon Junction Coal Mine in La Plata County, Colorado. In fiscal 2008, the Company continued its participation in the water-flood project started in the last quarter of fiscal 2003 as well as its other oil and gas operations. See “Oil and Gas Operations” and “Real Estate Held for Sale” below and “Item 6. – Management’s Discussion and Analysis or Plan of Operation.”
During mid-2004, Sandra Pautsky, the Company’s Chief Executive Officer and principal shareholder, received treatment for cancer that was diagnosed in late 2003. In latter 2007, Ms. Pautsky underwent a second major procedure for her disease, has responded well to treatment and has resumed normal activities. Ms. Pautsky has been the principal force pushing the Company’s proposed real estate development project. Concerns regarding her health, the project size, the significant financial requirement by the Company, the number of years to complete, coupled with the risk involved to the Company in committing so much of its limited financial resources to one project caused the Company to decide after the end of fiscal 2004 to attempt to sell the Company’s approximately 1,866 acres of land located in La Plata County, Colorado.
On April 4, 2006, the Company signed a contract to sell the Durango Property for $40,000,000, which contained an election by the buyer to terminate its contract in accordance with provisions in the agreement. On June 12, 2006, the Company was notified of the buyer’s election to terminate its contract.
On October 18, 2006, the Company entered into a contract with another buyer for $35,000,000, with no provision to terminate the contract with the exception of proof of title. On November 29, 2006, the Company announced the failure of the buyer to make good delivery of installment earnest money deposits following the death of the buyer’s principal that resulted in the buyer’s contract default. The Company has not entered into any further contracts to sell the Durango Property. See “Real Estate - Decision to Sell Property” below and “Item 6. – Management’s Discussion and Analysis or Plan of Operation.”
The Company’s oil and gas operations are primarily conducted in Madison and other North Texas counties and to a lesser extent, Freestone, Red River, Panola, Gregg and Smith Counties of East Texas, Oklahoma, Colorado and Mississippi. The Company is the operator of only the leases in North Texas. All other oil and gas interests owned are participation interests whereby the Company owns a working or royalty interest in a property that is operated and maintained by another interest owner under an operating agreement. For the participation interests, the Company receives payment for its oil and gas sales from the purchaser or the operator and is billed by the operator for its ownership percentage of joint expenses relative to getting the oil and/or gas from the wells to a sales point.
The Company did not participate in the drilling of any exploratory or development wells in the fiscal year ended February 29, 2008; however, when the Company is offered a participation interest in a well or a lease, Ms. Pautsky and Danny Croker, the Company’s Vice President, select the exploration and development prospects in which the Company participates.
The Company’s principal producing oil and gas property for the past nine fiscal years has been its 25% working interest in the BSR (Sub-Clarksville) Field in Madison County, Texas (the “Madison County, Texas Property”). The Madison County, Texas Property was responsible for approximately 60% and 58%, respectively, of the Company’s total oil and gas revenues for the 2007 and 2008 fiscal years. The property consists of 24 producing wells with proven developed reserves.
The Madison County, Texas Property is fully developed for its primary oil and gas reserves and has been for approximately ten years. Only two wells currently remain as flowing wells and all others have been placed on the pump. Additionally, as a result of the aging of the field, tubing and rod replacements and other age-related issues have required higher than normal maintenance costs in the last couple of years. As the Madison County, Texas Property aged and production declined, a decision was made to install a secondary recovery project on the property. The Company’s independent petroleum engineers have estimated that 464,885 barrels of proven undeveloped secondary oil reserves are recoverable to the Company’s interest in the property by water-flooding the reservoir. In fiscal 2003, Texas Railroad Commission approval of the water-flooding project was obtained, the property was unitized and the project commenced effective as of December 1, 2002.
As a part of the water-flood process, there are currently three water injection wells and one water supply well. The project may ultimately require converting a total of nine producing wells to water injection wells and converting another producing well to a water supply well. The operator of the Madison County, Texas Property is currently in the process of permitting two additional wells to be converted to injection wells. The three current injection wells are down-dip in the field and the two new wells will be central to the field and more up-dip. If the interior injection response is as expected, it is possible that some up-dip infill drilling may be advantageous to the field. Also, it is hoped that wells on the eastern and western areas of the Madison County, Texas Property may respond more favorably to the additional injection. When the field was set up for injection, infrastructure was installed that would permit injection at any well. Wells that are located nearby and up-dip to current injection wells have begun to respond to injection, although there can be no assurance that the waterflood will be successful.
The Company’s remaining investment cost for the water-flooding project is estimated to be approximately $375,000, which includes its share of the cost for a proposed water plant and distribution system and conversion costs mentioned above. See “Item 6. – Management’s Discussion and Analysis or Plan of Operation - Results of Operations.”
Surface ownership, gravel mining contract and surface lease: The Company’s gravel property is located on approximately 63.5 acres of the approximately 1,865.7 acres of land owned by the Company in fee in La Plata County, Colorado. Four Corners Materials (“FCM”) mined sand, gravel and rock products from its Ewing Mesa Pit #1 pursuant to a contract and surface lease effective January 1, 1994, for a term of eight years. After the expiration of the contract, gravel mining continued pursuant to an oral agreement between the Company and FCM.
Permit and permitted acres: The original Ewing Mesa Pit #1 gravel permit area covered 33.06 acres, but, with the Company’s consent, FCM added an adjacent 11.9 acres (9.9 acres in one transaction, 2.0 acres in another transaction) of the Company’s land to the gravel permit area, providing FCM additional gravel reserves to mine.
In mid-2002, FCM filed a permit amendment with the Colorado Division of Reclamation, Mining, and Safety (the “CDRMS”) for a gravel permit to cover 97.31 acres pursuant to an agreement between the Company and FCM regarding complete reclamation by FCM of the Company’s coal mine at the Company’s expense and to allow for additional acres to be included in FCM’s gravel mining operation. The 97.31 acres included the 33.06 acres included in the original gravel permit, the 9.9 acres additional gravel acres included under FCM’s previous gravel permit and 54.35 acres permitted under the Company’s coal permit. On June 12, 2003, the CDRMS approved Ewing Mesa Pit #1, Amendment #1 to expand the permit area from 33.06 to 97.31 acres. On August 22, 2003, FCM requested that the CDRMS cease processing its financial warranty for its gravel permit amendment. On September 2, 2003, the CDRMS stated that a permit would not be issued until the CDRMS received and approved performance and financial warranties. Further, the CDRMS stated that the permit area for Ewing Mesa Pit #1 remained at the original 33.06 acres, which had previously been mined. Following this action by FCM, and the resulting