History
A shell company turned Texas oil explorer grew through share-funded deals with a related party, then reversed course, leaving directors in voting control and legal action against Blue Sky under consideration.
2012-2014: A shell becomes an oil company
The company began as Art Design, Inc. In May 2012 control passed to a new team led by Michael Smith, founder of Kingman Energy LLC, with Rick Wilber as a director. The plan was to move into oil and gas by buying, from a related party, a 100% working interest (75% net revenue interest) in a 200-acre lease in the Minerva-Rockdale field, Milam County, Texas, for $475,000. At that point 10,820,600 shares were outstanding.
Renamed Rockdale Resources Corporation, it sold 5,781,798 shares at $0.70 in August 2012 for $4,047,250. After that, funding came mostly from Wilber. In June 2013 he lent $350,000 on a 6% convertible note secured on three wells, with a warrant for 1,000,000 shares at $0.80. In January 2014 his financing was restated, adding a $200,000 secured note and widening his collateral. In October 2013 the company signed a new lease with Noack Farms on the 623.29 acres holding all its wells, cutting the royalty from 25% to 1/6th. A February 2014 private placement of units at $0.30 a share, with warrants attached, followed.
2015-2017: Buying Oklahoma and New Mexico
In September 2015 Zel Khan became CEO and the company moved to Houston. It bought a 10% interest in the SUDS field in Creek County, Oklahoma from a company owned by Jovian Resources, paying 10,586,805 shares, 33% of its stock, at $0.06. In November it bought 15% of the Twin Lakes San Andres Unit in New Mexico, and took over as field operator. The unit had 130 wells, only 6 online. It also acquired a defaulted $1.3 million note for six million shares.
Now named Petrolia Energy Corporation, it added a further 25% of Twin Lakes in September 2016 for 3.5 million shares. In October it bought the remaining 90% of SUDS from Jovian, a company tied to Khan, for $4,000,000 of notes and 24,308,985 shares. In February 2017 it took Twin Lakes to 100% by buying Dead Aim Investments' 60%, paying with the defaulted note and written-off receivables rather than shares or cash.
The debt was then turned into equity. In May 2017, $2,000,000 owed to Jovian became 10,000,000 shares and warrants. In July the remaining $2,000,000 Jovian note became 12,749,286 shares and Series A preferred stock, Wilber's $550,000 of notes became preferred stock, and a $2,000,000 Series A offering closed. The company said all long-term debt had been converted to equity. Shares on issue rose from 19.4 million at the end of 2014 to 111.7 million at the end of 2017.
2018-2019: Indonesia, and a reversal
In November 2017 Petrolia agreed to buy Bow Energy Ltd, with Indonesian production-sharing contracts, in an all-share deal. It closed in February 2018 with 106,156,712 new shares issued. In May, Bow raised its loan to $1,530,000 at 12%, due May 2021, with the extra $800,000 reserved for an acquisition. In July, Petrolia bought a 25% interest in Canadian fields (Luseland, Hearts Hill, Cuthbert) from Blue Sky Resources, whose president is Khan's father, for CAD $1,428,581, paying cash from the loan plus a note.
In August 2018 Petrolia sold Bow back to Blue Sky. Blue Sky returned 70,807,417 Petrolia shares, to be cancelled, and took on $1,696,332 of Bow payables. Petrolia kept 20% of Bow Energy International Holdings, a carry of up to the next $10 million of costs, and a 3% royalty on the Bohorok contract. Three directors also lent $90,000 on convertible notes. The record for 2019 is quiet.
2020-2022: Canada, lawsuit and a change of control
In May 2020 Petrolia bought 50% of about 28,000 acres at Utikuma Lake, Alberta, from Blue Sky for CAD $2.7 million, funded by about US$1 million from a credit line and a US$1 million bridge loan due January 2021. A lawsuit by LazyDRanch Slick over the SUDS wells produced a $1,988,372 judgment in February 2020, released in an August 2020 settlement. Petrolia paid $75,000 and agreed to remediation work costing up to $200,000, excluding plugging four wells, within 24 months. Some work was done.
On August 31, 2021, it signed a letter agreement to sell its Canadian subsidiary to Blue Sky for CAD $6.5 million, less contingent liabilities, and received a CAD $200,000 deposit. On October 25, 2021, it issued Series B preferred shares to its three directors, James Burns, Leo Womack and Ivar Siem, which together carry 60% of all votes.
Between October 2021 and January 2022 it agreed to sell 11,000 Series C preferred shares at $10 each, about $110,000. These could convert into up to 11,000,000 common shares. The money was to pay lawyers to consider legal action against Blue Sky, still operating the Canadian properties, and former officers. Zel Khan was by then described as the former CEO. As of March 3, 2022, whether the Canadian sale closed was unclear.
Written from the 23 story beats below (2012 to 3 Mar 2022), which come from the company's own announcements and filings.