NORRIS INDUSTRIES, INC. Cautionary Notice Regarding Forward Looking Statements
The information contained in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those indicated in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although the Company's management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
This filing contains a number of forward-looking statements which reflect management's current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events or developments which management expects or anticipates will or may occur in the future, and non-historical information are forward looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," and variations of those words and similar expressions identify forward-looking statements. The foregoing are not the exclusive means of identifying forward looking statements, and their absence does not mean that a statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements.
Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Factors which could cause or contribute to such differences include, but are not limited to, the risks discussed in our Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Overview
For near- to medium-term cash flow enhancement, the Company will plan to focus on existing fields and to selectively consider larger-reserve oil and gas properties with low production to acquire at reasonable cost and then implement effective Enhanced Oil Recovery ("EOR") methods to improve its current revenues and assets. For long-term cash flow enhancement, the Company plans to identify other oil-field related, and niche enterprises to consider for bolt on, or diversified acquisition targets to grow Company revenues. This may be with use of capital partners to buyout via the Company's strategic joint venture partnerships, and to raise outside capital to fund any potential future acquisition.
The Company's long-term objective is to increase shareholder value by growing
reserves, production, and cash flow. As result we may seek to identify and
consider acquisition opportunities of oilfield services companies and other
non-oilfield companies that align with our operational plan to implement a
diversified growth strategy. One of the Company's objectives is to focus on
improving its existing fields and to look for additional reserve oil and gas
concessions and production opportunities, aiming to participate with capital
partners for a transaction related to buyouts and joint ventures. The Company
will continue to conserve capital to be able to focus on smaller oil and natural
gas properties in West, Central West, East and
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The Company will consider plans to tap into the high potential leases of the
During the 2022 fiscal year, we performed an analysis of our oil and gas
properties in light of recovery from the COVID-19 pandemic, and the increase in
oil and gas prices and anticipated economic conditions in our industry. As a
result, there was no impairment expense to the carrying value of our oil and gas
properties in the
Our business and operations were adversely affected by and are expected to continue to be adversely affected by the recent COVID-19 pandemic and the public health response and may be adversely affected in the future by other similar outbreaks. Our operations, and those of our subcontractors, customers and suppliers, have experienced and are anticipated to continue to experience delays or disruptions and temporary suspensions of operations. In addition, our financial condition and results of operations have been and are likely to continue to be adversely affected by the coronavirus outbreak and has somewhat recovered due to significant recovery of oil and gas prices.
The future potential impacts of the COVID-19 outbreak is currently still
unknown. The continuation or amplification of this virus could continue to
affect
The coronavirus pandemic has resulted in a widespread health crisis that may adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect our operating results. Other contagious diseases in the human population could have similar adverse effects.
These unprecedented situations may continue to affect the same for the
foreseeable future. As the impact from COVID-19, and
These potential impacts, while uncertain, have already impacted our 2023 results of operations, and are anticipated to have an unknown impact on multiple future quarters' results as well.
Our Business Strategy
We are a small Exploration and Production ("E&P") oil and natural gas company
that focuses on the acquisition, development, and exploration of crude oil and
natural gas properties in
Management believes that focusing on the development of existing small producing fields is one of the key differentiators of the Company. Oil and natural gas reserve development is a technologically oriented industry. Management believes that the use of current generally available technology has greatly increased the success rate of finding commercial oil or natural gas deposits. In this context, success means the ability to make an oil/gas well that produces a commercialized quantity of hydrocarbons.
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We plan to execute the following business strategies:
Develop and Grow Our Hydrocarbon Resource Acreage Positions Using Outside
Development Expertise. We plan to continue to seek and acquire niche assets in
hydrocarbon-rich resource plays to improve our asset quality and expand our
drilling inventory. We plan to leverage our management team's expertise and
apply the latest available EOR technologies to economically develop our existing
property portfolio in Central West and
The Company's long-term objective is to increase shareholder value by growing reserves, production, and cash flow. As result we may seek to identify and consider acquisition opportunities of oilfield services companies and other non-oilfield companies to implement a diversified growth strategy.
Our management's time in the petroleum markets and our ability to contract experienced geology expertise, allows us to identify and secure acreage with potential reserves. Management believes that the Company's near prospects as a public company could become attractive as a potential merger candidate for acquisition of a private enterprise.
Our Competitive Strengths
Management believes that we have a number of competitive strengths that will allow us to successfully execute our business strategies:
Simple Capital Structure. We have a simple capital structure and de-risked inventory of quality locations with what we believe is upside potential to take advantage of the current recovery of oil prices to acquire potential production at reasonable cost. Management believes there are opportunities for profits to be made now that oil prices appear to have stabilized and if they continue to gradually rise higher.
Moderate Risk Exploration Practice. Unlike many major oil companies that often drill very deep wells with a high degree of risk, we focus on shallow well exploration (sub 5,000 feet) that is less expensive and has lower risk factors. The basis for management's belief that the wells that can be drilled in the prospective leases will have the capacity to produce a reasonable amount of hydrocarbon and due to our recent studies of the general areas where we are prospecting the projects. That is our most important exploration practice.
Under The Radar Asset Base. Management believes our local West Texas E&P team has a special talent in acquiring local "prime time" hydrocarbon land leases with sub-300 barrels of oil per day ("bopd") wells that have large hydrocarbon reserves. Management believes that these "under the radar" prospective leases have multi-year drilling inventory and reasonable production history with high upside potential and not readily accessible to the public for auctions, thus adding to our competitive advantage on these "under the radar" opportunities. It is because management also believes that these highly valuable leases are not economically justifiable for the major oil and gas companies in the region because such companies need the wells they drill to produce at least 300 barrels ("Bbls") of oil per day per well.
Technologies
Oil and natural gas reserve development is a technologically oriented industry; many techniques developed by the industry are now used in other industries, including the space program. Management believes that technological innovations have made it possible for the oil and natural gas industry to furnish the fuels that power the world economy. Management also believes that technology has greatly increased the success rate of finding commercial oil or natural gas deposits. In this context, success rate means the ability to make an oil/gas well that can produce a commercialized quantity of hydrocarbon.
At NRIS, we focus on core basic field EOR management practices and contract outside experts to provide us the understanding of complex mineralogy in shale reservoirs to better determine zones prone to fracture stimulation. This technology can suggest where to frack by providing us with available data to deliver us a greater chance of success. Our field engineers, geologists and petrophysicists work together for better drilling decisions.
5 Sales Strategy
Our sales strategy in relation to spot pricing will be to produce less when the
sales price is lower and produce more when the sales price is higher. To
maintain the lowest production cost, we will aim to have our inventory be as low
as possible, in some instances virtually zero. Our E&P core team has business
relationships with BML, Transport Oil, and
As such, crude oil will be picked up from our leases as needed during the calendar month. At the end of the month the crude total sales will be tallied by lease and the 30-day average of the daily closing of oil will be tabulated. On or about the 25th of the following month the proceeds checks' will be issued to the financial parties of record.
Operational Plans
Overall, we seek to acquire on a selective basis, oil and gas reserve concessions with existing production. To maintain our operations and complete any acquisitions we intend to raise capital via equity or debt, be this from our control owner, or other third-party financing sources, including the capital markets. The Company is still in the process of assessing the wells it holds, or recently acquired and is reviewing its options.
As result of COVID-19 the Company took a pause on any activity in the past year. Now that energy prices appear to have stabilized, the Company may review new acquisition opportunities, and when it does, will follow model which is based on a concept that has been proven in the past to be an effective and successful path of development for many other well- known E&P players:
a) The financed acquisition of mature smaller oil fields that have potential for instituting EOR incremental production processes; and
b) Develop strategic partnerships with existing operators to share production increases garnered through the implementation of this EOR plan.
The Company has plans to limit its operating budget for current wells to basic maintenance and has not determined whether to spend for any new drill programs in the near future
Results of Operations
Comparison of the Three Months Ended
Revenues
The Company generated revenues of
Operating Expenses
Total operating expenses for the three months ended
Depletion and Accretion Expenses
For the three months ended
6 Other Income (Expense)
For the three months ended
Net Loss
We had a net loss in the amount of
Comparison of the Nine Months Ended
Revenues
The Company generated revenues of
Operating Expenses
Operating expenses for the nine months ended
Depletion and Accretion Expenses
For the nine months ended
Other Income (Expense)
For the nine months ended
Net Loss
We had a net loss in the amount of
Liquidity and Capital Resources
As of
Net cash used by operating activities during the nine months ended
Net cash provided by financing activities for nine months ended
The Company will seek capital from various third party sources and to the extent necessary from its officers and significant stockholders, from time to time. There is no assurance that it will be able to obtain financing of any amount or of any specific nature. If obtained the terms may have restrictive covenants or obligations that will be difficult to meet or may be too onerous for the Company to accept. Any financing accepted by the Company may have a dilutive effect on the outstanding equity of the Company and may restrict the payment of dividends.
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The Company currently has a secured, convertible note entered into effective
On
The Company will require additional financing to support its operations and to
pursue its acquisition program. As of
To date, the funding during the past four fiscal years to support operations and facilitate some acquisitions has been provided by the largest shareholder of the Company. This individual does not have any legal obligation to continue to provide funding to the Company. Yet the majority owner has indicated a willingness, and provided some assurances, to selectively review and determine added funding for certain low risk initiatives on those oil and gas wells in which the Company has either a 100% or a majority working interest in order to increase its existing production. Our majority shareholder expects, but is not legally obligated, to provide funding for the Company's capital expenditure program for fiscal year 2023. Such funding may be provided in the form of loans, issuance of equity or other means.
The consolidated financial statements of the Company have been prepared on a
going concern basis. The Company will either have to increase its operating
revenues to a point to be able to cover its operating expenses or obtain funding
from other investors or lenders. There is no assurance that the Company will be
able to increase its revenues or obtain funding. The Company believes that it
will experience revenue disruption and declines as a result of the COVID-19
pandemic and the government response thereto as well as the war and general
political instability in
On
Off-Balance Sheet Arrangements
As of
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