History
A Bakersfield oil driller that dabbled in Alaskan and Californian minerals ran short of capital, leaned on its own chairman for loans, and filed for Chapter 11 in August 2012.
2003-2006: Listing, restatement and a push into new assets
Tri-Valley Corp's securities were cleared to trade on the American Stock Exchange in October 2003. The company, a Delaware corporation drilling from Bakersfield, California since 1963, soon had to correct itself. In November 2004 it told investors not to rely on its 2003 accounts or the first two quarters of 2004. Testing of its internal controls showed it had booked turnkey drilling money (cash from partners paying for wells) before the wells were finished. About $704,000 of 2003 profit moved into 2004, and a $442,000 cost on the Ekho well had been charged twice. Cash was unaffected and the auditor agreed.
In 2005 the company widened its reach. In May it bought Pleasant Valley Energy from Petrawest for 200,000 shares plus $500,000 cash for a net profits interest, gaining undeveloped California oil leases it had to spend $5 million developing over two years. These became the Oxnard heavy-oil project. In July its mining subsidiary, Select Resources, bought the idle Admiral Calder calcium carbonate quarry in Alaska from Sealaska for $3 million, only $1 million of it in cash. Later filings said no reserves meeting SEC standards had been established, about $2.7 million of equipment spending would be needed, and holding costs ran about $425,000 a year. In January 2006 it paid $2.85 million cash for the producing Tremblor Valley leases near Bakersfield, its first purchase of production rather than exploration acreage. In November 2006 it sold its half of the Tri-Western quarry venture for $10.2 million net and a Bakersfield industrial property for $3.6 million, bringing in around $12 million.
2007-2009: A quiet record, then a lifeline from the boardroom
The record is quiet for 2007 and 2008. By mid-2009 outside investors were no longer an easy source of money. In July vice chairman G. Thomas Gamble put $1 million into convertible preferred stock at $10 a share, when the common traded at $1.02, with an 8% dividend and warrants over 200,000 shares. In September NYSE Amex warned that shareholders' equity of $5.2 million was below the $6 million minimum for a company with five straight years of losses. The company submitted a recovery plan, and the exchange lifted the deficiency in December.
2010-2011: Dilution, restatement and the sale of minerals
In January 2010 the company raised $7.2 million by placing 5.2 million shares at $1.00 to $2.00 with 75 investors, for working capital and to speed up field development already underway. That month it also bought an extension to May 2010 on the Claflin lease at Edison Field, where an independent engineer credited 2.0 million barrels net of proved oil at shallow depth. In April it raised $5 million at $1.30 a share, with warrants over 2.3 million shares and a clause resetting the price if it later sold stock more cheaply. It also sold a spare steam generator for $700,000.
The clause soon cost it. In July two institutional investors received 842,000 shares for a total of $842 after the stock fell below $1.30. The same month the exchange issued a second equity deficiency notice, with equity at $915,942 in March 2010, though the company pointed to 305 barrels a day from Oxnard. In October Gamble, now chairman, swapped $3.55 million owed to him for preferred shares paying a 10% cash dividend and ranking ahead of the common. In December the company sold Admiral Calder for $2.5 million, ending its calcium carbonate business.
In April 2011 it raised $5.0 million gross by placing 10.1 million shares at $0.50, nearly three times as many shares as the April 2010 raise for the same dollars. In June and July it signed the Richardson gold project deal in Alaska, letting US Gold earn 60% by spending up to $5 million and drilling 30,000 feet, and banked a first $200,000 payment.
In August and October 2011 Gamble lent $150,000 and $1 million, repayable on demand. In October the company voided its 2010 annual accounts and four quarters. The April 2010 offering had been valued $6.5 million too high, its reset warrants should have been carried as liabilities costing $1.8 million more in losses, and $1.7 million of steam generators taken from the TVC OPUS 1 drilling partnership had never been recorded. In November Gamble lent a further $2 million through his family trust, and all $3.15 million was rolled into a secured senior note backed by pledges of both operating subsidiaries and a lien over Claflin. The Oxnard leases were kept out of the collateral.
2012: Default and Chapter 11
In April 2012 the company converted the loans into a $3.3 million senior secured note due April 2013, with a warrant over 3 million shares at $0.19 and a permanent 2% of Claflin oil revenue and 1% from every other lease. Gamble had left the chairmanship in November 2011. Days later it borrowed another $1.5 million from the trust at 14% and spent all of it settling the Hansen lawsuit.
In May the exchange issued a third deficiency notice, with equity at $4.4 million, and cited losses large relative to resources. The company then admitted it was already in default on the March note for missing one month's interest and being unable to pay its debts as they fell due. The trust, owed $4.98 million, reserved all remedies. In June the board chose to delist from NYSE Amex, citing an SEC inquiry into possible securities-law violations and unresolved OPUS partner claims. It took a new $1.35 million line, drawable at the trust's discretion, and retained FTI Consulting.
On 7 August 2012 Tri-Valley, both operating subsidiaries and the TVC OPUS 1 partnership filed for Chapter 11 in Delaware, days after the trust allowed an extra $294,258 of over-line borrowing. The filing was itself a default, making the full $7.2 million owed to the trust immediately payable. Shares on issue stood at 68.0 million at the end of 2012.
Written from the 31 story beats below (2003 to 9 Aug 2012), which come from the company's own announcements and filings.