COJAX OIL AND GAS CORPORATION Management's Discussion and Analysis of Financial Condition and Results of
Operations analyzes the major elements of our balance sheets and statements of
operations. This section should be read in conjunction with our Annual Report on
Form 10-K for the year ended
Overview
CoJax is a growth-oriented independent exploration and production company based
in
Business Description and Plan of Operation
CoJax is currently engaged in oil and natural gas acquisition, exploration,
development, and production in
Our goal is to increase stockholder value by investing in oil and natural gas projects with attractive rates of return on capital employed. We plan to achieve this goal by exploiting and developing our existing oil and natural gas properties and pursuing strategic acquisitions of additional properties, while remaining cash flow positive, maintaining low operating costs, and striving to show a gain in annual production while reducing the Company's debt.
Executive Summary - First Quarter 2022 Developments and Highlights
COVID-19 Impact
In December of 2020, the
The daily new infections peaked in the first quarter of 2021 and have seen an
overall steady decline, giving states the ability to reopen to certain extents.
In
Results of Operations - For the Three Months Ended
As indicated below, production has virtually stopped, and the existing operations are at a maintenance level. The Company will not be able to increase production until sufficient financial resources are obtained. Additionally, the Company may need to write down the Barrister oil rights if production cannot be resumed.
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Oil and natural gas sales. For the three months ended
Oil and gas production costs. Our lease operating expenses were
Production taxes. Production taxes as a percentage of oil and natural gas sales
were 0% during the three months ended
Depreciation, depletion, amortization, and accretion. Our depreciation,
depletion, amortization, and accretion expense was
General and administrative expenses. General and administrative expense
increased by
For the Three Months
Ended March 31,
2022 2021
General and administrative expense (excluding Stock Based
360,000 220,000
General and administrative expense $471,172 $241,413 Interest expense. Interest expense increased from
Net income (loss). For the three months ended
Sales volumes and commodity prices received
The following table presents our sales volumes and received pricing information
for the three-month periods ended
For the Three Months
Ended March 31,
2022 2021
Oil volume (Bbls) - 183
Natural gas volume (Mcf) - -
Total Production (Boe) - 183
Average Sales Price:
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Oil price (per Bbl) - 45.66
Gas price (per Mcf) - -
Total per BOE - 45.66
Capital Resources and Liquidity
For the three months ended
The COVID-19 pandemic reduced global economic activity and negatively impacted energy demand during the previous twelve months. Demand for oil and natural gas is slowly returning to pre-pandemic levels as COVID-19 vaccine rates and economic activity have increased. Additionally, we have implemented several additional initiatives to maximize free cash flow, reduce our debt level, maximize our liquidity position and ultimately realize greater shareholder value.
Capital Resources for Future Acquisition and Development Opportunities
We continuously evaluate potential acquisitions and development opportunities.
To the extent possible, we intend to acquire producing properties and/or
developed undrilled properties rather than exploratory properties. We do not
intend to limit our evaluation to any one state. We presently have no intention
to evaluate offshore properties or properties located outside of
Effects of Inflation and Pricing
The oil and natural gas industry is very cyclical and the demand for goods and services of oil field companies, suppliers, and others associated with the industry puts pressure on the economic stability and pricing structure within the industry. Typically, as prices for oil and natural gas increase, so do all associated costs. Material changes in prices impact the current revenue stream, estimates of future reserves, borrowing base calculations of bank loans, and the value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil and natural gas companies and their ability to raise capital, borrow money and retain personnel. We anticipate business costs will vary in accordance with commodity prices for oil and natural gas, and the associated increase or decrease in demand for services related to production and exploration.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements, and it is not anticipated that the Company will enter into any off-balance sheet arrangements.
Disclosures About Market Risks
Like other natural resource producers, the Company faces certain unique market risks associated with the exploration and production of oil and natural gas.
The most salient risk factors are the volatile prices of
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oil and gas, operational risks, the ability to integrate properties and businesses, and certain environmental concerns and obligations.
Oil and Gas Prices
The price we receive for our oil and natural gas will heavily influence our revenue, profitability, access to capital, and future rate of growth. Oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. The prices we receive for our production depend on numerous factors beyond our control. These factors include, without limitation, the following: worldwide and regional economic conditions impacting the global supply and demand for oil and natural gas; the price and quantity of imports of foreign oil and natural gas; the level of global oil and natural gas inventories; localized supply and demand fundamentals; the availability of refining capacity; price and availability of transportation and pipeline systems with adequate capacity; weather conditions, natural disasters, and public health threats; governmental regulations; speculation as to the future price of oil and the speculative trading of oil and natural gas futures contracts; price and availability of competitors' supplies of oil and natural gas; energy conservation and environmental measures; technological advances affecting energy consumption; the price and availability of alternative fuels and energy sources; and domestic and international drilling activity.
A substantial or extended decline in oil or natural gas prices may result in impairments of our proved oil and gas properties and may materially and adversely affect our future business, financial condition, cash flows, and results of operations.
Transportation of
CoJax is presently committed to using the services of the existing gatherers in its present areas of production. This gives such gatherers certain short-term relative monopolistic powers to set gathering and transportation costs.
Obtaining the services of an alternative gathering company would require substantial additional costs since an alternative gatherer would be required to lay a new pipeline and/or obtain new rights-of-way.
Competition in the Oil and Natural Gas Industry
We operate in a highly competitive environment for developing and acquiring properties, marketing oil and natural gas, and securing equipment and trained personnel. As a relatively small oil and natural gas company, many large producers possess and employ financial, technical, and personnel resources substantially greater than ours. Those companies may be able to develop and acquire more prospects and productive properties than our financial or personnel resources permit. It is also significant that more favorable prices can usually be negotiated for larger quantities of oil and/or gas products, such that CoJax views itself as having a price disadvantage compared to larger producers.
Retention of Key Personnel
We depend to a large extent on the services of our officers. These individuals have extensive experience in the energy industry, as well as expertise in evaluating and analyzing producing oil and natural gas properties and drilling prospects, maximizing production from oil and natural gas properties, and developing and executing financing strategies. The loss of any of these individuals could have a material adverse effect on our operations and business prospects. Our success may be dependent on our ability to continue to hire, retain and utilize skilled executive and technical personnel.
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Environmental and Regulatory Risks
Our business and operations are subject to and impacted by a wide array of federal, state, and local laws and regulations governing the exploration for and development, production, and marketing of oil and natural gas, the operation of oil and natural gas wells, taxation, and environmental and safety matters. Many laws and regulations require drilling permits and govern the spacing of wells, rates of production, water, waste use and disposal, prevention of waste hydraulic fracturing, and other matters. From time to time, regulatory agencies have imposed price controls and limitations on production in order to conserve supplies of oil and natural gas. In addition, the production, handling, storage, transportation, and disposal of oil and natural gas, byproducts thereof, and other substances and materials produced or used in connection with oil and natural gas operations are subject to regulation under federal, state, and local laws and regulations.
Compliance with these regulations may constitute a significant cost and effort for CoJax. To date, no specific accounting for environmental compliance has been maintained or projected by CoJax. CoJax does not presently know of any environmental demands, claims, adverse actions, litigation, or administrative proceedings in which it or the acquired properties are involved or subject to or arising out of its predecessor operations.
In the event of a violation of environmental regulations, these environmental regulatory agencies have a broad range of alternative or cumulative remedies including ordering a cleanup of any spills or waste material and restoration of the soil or water to conditions existing prior to the environmental violation; fines; or enjoining further drilling, completion or production activities.
Going Concern
There can be no assurance that the Company will be able to achieve its business plan, raise additional capital, or secure the additional financing necessary to implement its current operating plan. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company has yet to achieve profitable operations, expects to incur further losses in the development of its business, has negative cash flows from operating activities, and is dependent upon future issuances of equity or other financings to fund ongoing operations, all of which raises substantial doubt about 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 generate future profitable operations or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern. Still, it considers that the Company will be able to obtain additional funds by equity financing or related party advances. However, there is no assurance of additional funding being available or on acceptable terms, if at all.
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