0001144204-13-028728.txt : 20130514 0001144204-13-028728.hdr.sgml : 20130514 20130514163343 ACCESSION NUMBER: 0001144204-13-028728 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130514 DATE AS OF CHANGE: 20130514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EnerJex Resources, Inc. CENTRAL INDEX KEY: 0000008504 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 880422242 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30234 FILM NUMBER: 13842026 BUSINESS ADDRESS: STREET 1: 1600 N.E. LOOP 410 STREET 2: STE. 104 CITY: SAN ANTONIO STATE: TX ZIP: 78209 BUSINESS PHONE: 210-451-5545 MAIL ADDRESS: STREET 1: 1600 N.E. LOOP 410 STREET 2: STE. 104 CITY: SAN ANTONIO STATE: TX ZIP: 78209 FORMER COMPANY: FORMER CONFORMED NAME: MILLENNIUM PLASTICS CORP DATE OF NAME CHANGE: 20000525 FORMER COMPANY: FORMER CONFORMED NAME: AURORA CORP DATE OF NAME CHANGE: 19990825 10-Q 1 v341639_10q.htm QUARTERLY REPORT

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

þ      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2013

 

¨      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-30234

 

 

ENERJEX RESOURCES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   88-0422242

(State or other jurisdiction of incorporation or

organization)

  (I.R.S. Employer Identification No.)
     
4040 Broadway    
Suite 508    
San Antonio, Texas   78209
(Address of principal executive offices)   (Zip Code)

 

(210) 451-5545
(Registrant's telephone number, including area code)

 

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ        No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ       No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company)     Smaller reporting company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨     No  þ

 

The number of shares of Common Stock, $0.001 par value, outstanding on May 14, 2013 was 67,836,529 shares.

 

 
 

 

ENERJEX RESOURCES, INC.

FORM 10-Q

TABLE OF CONTENTS

 

    Page
PART I     FINANCIAL STATEMENTS  
ITEM 1. FINANCIAL STATEMENTS 2
  Condensed Consolidated Balance Sheets 2
  Condensed Consolidated Statements of Operations 3
  Condensed Consolidated Statements of Cash Flows 4
  Notes to Condensed Consolidated Financial Statements 5
  FORWARD-LOOKING STATEMENTS 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
ITEM 4. CONTROLS AND PROCEDURES 15
     
PART II    OTHER INFORMATION  
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. (REMOVED AND RESERVED) 15
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS 16
     
SIGNATURES  

 

i
 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

  March 31,   December 31, 
   2013   2012 
Assets          
Current assets:          
Cash  $464,404   $767,494 
Accounts receivable   1,207,085    1,221,962 
Marketable securities   1,018,573    1,018,573 
Deposits and prepaid expenses   334,502    374,592 
Total current assets   3,024,564    3,382,621 
           
Fixed assets, net of accumulated depreciation   291,453    309,877 
           
Oil properties using full-cost accounting, net of accumulated DD&A   34,292,208    33,202,898 
           
Total assets  $37,608,225   $36,895,396 
           
Liabilities and Stockholders' Equity          
Current liabilities:          
Accounts payable  $1,928,140   $2,384,090 
Accrued liabilities   518,202    590,205 
Derivative liability   927,148    757,181 
Note Payable   625,000    825,000 
Total current liabilities   3,998,490    4,556,476 
           
Asset retirement obligation   1,385,593    1,336,151 
Long-term debt   10,000,000    8,500,000 
Derivative liability   901,922    1,043,114 
Total non-current liabilities   12,287,515    10,879,265 
             Total liabilities   16,286,005    15,435,741 
Commitments & Contingencies          
Stockholders' Equity:          
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 4,779,460 shares issued and outstanding   4,780    4,780 
Common stock, $0.001 par value, 100,000,000  shares authorized; shares issued and outstanding 73,586,529  at March 31, 2013 and at December 31, 2012   73,587    73,587 
Treasury Stock, 5,750,000 shares   (2,551,000)   (2,551,000)
Equity based compensation unearned   (134,642)   (153,876)
Paid-in capital   45,368,277    45,352,096 
Accumulated other comprehensive income   (552,589)   (552,589)
Retained (deficit)   (20,886,193)   (20,713,343)
            Total stockholders' equity    21,322,220    21,459,655 
           
Total liabilities and stockholders' equity  $37,608,225   $36,895,396 

 

See Notes to Condensed Consolidated Financial Statements.

 

2
 

 

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2013   2012 
         
Oil revenues  $2,337,301   $1,902,892 
           
Expenses:          
Direct operating costs   782,072    609,079 
Depreciation, depletion and  amortization   444,537    422,603 
Professional fees   356,222    332,972 
Salaries   246,011    133,882 
Administrative expense   139,404    243,897 
Total expenses   1,968,246    1,742,433 
Income from operations  369,055   160,459 
           
Other income (expense):          
Interest expense   (118,245)   (67,660)
Gain (loss) on derivatives   (239,941)   (1,186,939)
Other income (loss)   9,167    12,458 
Total other income (expense)   (349,019)   (1,242,141)
Net income (loss)  $20,036   $(1,081,682)
           
Net income (loss) attributed to EnerJex Resources, Inc.  $20,036   $(1,135,894)
Net income attributed to non-controlling interest in subsidiary   -    54,212 
Net income (loss)  20,036   (1,081,682)
Preferred dividends   (192,887)   - 
Net (loss) attributable to EnerJex Resources, Inc. common stockholders  $(172,851)  $(1,081,682)
Net income (loss) per share basic and diluted  $(0.00)  $(0.02)
Weighted average shares   67,836,529    69,645,279 

  

See Notes to Condensed Consolidated Financial Statements.

 

3
 

 

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2013   2012 
Cash flows  from operating activities          
Net income (loss)  $20,036   $(1,081,682)
Depreciation, depletion and amortization   444,537    422,603 
Shares based payments issued for services   49,334    52,935 
Accretion of asset retirement obligation   28,193    22,397 
Loss on derivatives   28,775    763,734 
Loss on sale of fixed assets   7,785    - 
Changes in assets and liabilities:          
Accounts receivable   14,877    (274,102)
Deposits and prepaid expenses   26,171    (135,466)
Accounts payable   (455,950)   (1,287,925)
Accrued liabilities   (264,889)   170,863 
Cash flows from operating activities   (101,131)   (1,346,643)
           
Cash flows  from investing activities          
           
Purchase of fixed assets   (19,597)   - 
Additions to oil properties   (1,498,962)   (1,775,839)
Sales of oil properties   15,000    - 
Proceeds from sale of fixed assets   1,600    - 
Cash flows from investing activities   (1,501,959)   (1,775,839)
           
Cash flows  from financing activities          
Payments on long-term debt   -    (3,630)
Payments on notes payable   (200,000)   - 
Proceeds from borrowings   1,500,000    1,100,000 
    Distribution to non-controlling interest in subsidiary   -    (76,349)
Cash flows from financing activities   1,300,000    1,020,021 
           
Net (decrease) in cash   (303,090)   (2,102,461)
Cash – beginning   767,494    2,770,440 
Cash – ending  $464,404   $667,979 
           
Supplemental disclosures:          
Interest paid  $ 71,006   $45,263 
Income taxes paid  $-   $- 
           
Non-cash transactions:          
Share based payments issued for services  $49,334   $52,935 

 

See Notes to Condensed Consolidated Financial Statements.

 

4
 

 

EnerJex Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 

Note 1 – Basis of Presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation.  All such adjustments are of a normal recurring nature.  The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.  Certain amounts in the prior year statements have been reclassified to conform to the current year presentations.  The statements should be read in conjunction with the financial statements and footnotes thereto included in our Annual Report Form 10-K for the fiscal year ended December 31, 2012.

 

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., DD Energy, Inc., Black Sable Energy, LLC, and Working Interest, LLC and for the quarter ended March 31, 2013 and for the year ended December 31, 2012. The accounts of Rantoul Partners, a general partnership in which we held a majority and controlling interest are included in the Statement of Operations and Statement of Cash Flows for the quarter ended March 31, 2012. On December 31, 2012 we distributed all the assets of the partnership to the partners and dissolved Rantoul Partners. Accordingly the Rantoul Partners accounts are not reflected in the financial statements for the 2013 periods, however Rantoul Partners accounts are still reflected in certain 2012 financial statements. All intercompany transactions and accounts have been eliminated in consolidation.

 

Note 2 - Stock Options

 

A summary of stock options is as follows:

 

   Options   Weighted
Avg.
Exercise
Price
   Warrants   Weighted
Avg.
Exercise
Price
 
Outstanding December 31, 2012   1,685,000   $0.54    250,000   $0.70 
Granted   -    -    300,000    0.70 
Cancelled   -    -    -    - 
Exercised   -    -    -    - 
Outstanding March 31, 2013   1,685,000   $0.54    550,000   $0.70 

 

Note 3 – Fair Value Measurements

 

We hold certain financial assets which are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, "Fair Value Measurements" ("ASC Topic 820-10"). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

 

Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. We believe our debt approximates fair value at March 31, 2013.

 

Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. We consider the derivative liability to be Level 2. We determine the fair value of the derivative liability utilizing various inputs, including NYMEX price quotations and contract terms.

 

Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider our marketable securities to be Level 3.

 

5
 

 

Our derivative instruments consist of fixed price commodity swaps.

 

   Fair Value Measurement 
   Level 1   Level 2   Level 3 
Crude oil contracts  $-   $(1,829,070)  $- 
Marketable Securities  $-   $-   $1,018,573 

 

Note 4 - Asset Retirement Obligation

 

Our asset retirement obligations relate to the liabilities associated with the abandonment of oil wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:

 

Asset retirement obligations, December 31, 2012  $1,336,151 
Liabilities incurred during the period   21,249 
Accretion   28,193 
Asset retirement obligations, March 31, 2013  $1,385,593 

 

Note 5 - Derivative Instruments

 

We have entered into certain derivative or physical arrangements with respect to portions of our crude oil production to reduce our sensitivity to volatile commodity prices and/or to meet hedging requirements under our Credit Facility. We believe that these derivative arrangements, although not free of risk, allow us to achieve a more predictable cash flow and to reduce exposure to commodity price fluctuations. However, derivative arrangements limit the benefit of increases in the prices of crude oil. Moreover, our derivative arrangements apply only to a portion of our production.

 

We have an Intercreditor Agreement in place between us, our counterparty BP Corporation North America, Inc. ("BP"), and our agent Texas Capital Bank, N.A., which allows Texas Capital Bank to also act as agent for BP for the purpose of holding and enforcing any liens or security interests resulting from our derivative arrangements. Therefore, we are not required to post additional collateral, including cash.

 

The following derivative contracts were in place at March 31, 2013:

 

   Term   Monthly Volumes   Price/bbl   Fair Value 
Crude oil swap   7/13-12/15    

1,873

 bbls  $76.74    

(1,063,584

)
Crude oil swap   7/11-12/15    

2,536

 bbls  $83.70    

 (765,486

)
                  $

(1,829,070

)

 

Monthly volume is the weighted average throughout the period.

 

The total fair value is shown as a derivative instrument in both the current and non-current liabilities on the balance sheet. 

 

6
 

 

Note 6 – Note Payable

 

On November 30, 2012 the Company purchased two million shares of common stock and certain assets from a shareholder of the Company for consideration of $323,035 in cash (including an option payment that we previously made to the selling shareholder) and a promissory note of $825,000 bearing an interest rate of twenty-four hundredths percent (0.24%).

 

On March 28, 2013, we made a $200,488 payment on the promissory note consisting of $200,000 of principal and $488 of accrued interest. The remaining outstanding principal on the promissory note amortizes as follows: i) $200,000 plus accrued interest on or before June 30, 2013, ii) $200,000 plus accrued interest on or before September 30, 2013, and iii) $225,000 plus accrued interest on or before December 31, 2013.

 

Note 7 - Long-Term Debt

 

Senior Secured Credit Facility

 

On October 3, 2011, the Company, DD Energy, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and Working Interest, LLC ("Borrowers") entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement are to be used to refinance Borrowers prior outstanding revolving loan facility with Bank, dated July 3, 2008, and for working capital and general corporate purposes.

 

At our option, loans under the facility will bear a stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank's prime rate. The Floating Rate shall mean, at Borrower's option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or six months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company's Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).

 

We entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Texas Capital Bank, which closed on December 15, 2011. The Amendment reflects the addition of Rantoul Partners, as an additional Borrower and adds as additional security for the loans the assets held by Rantoul Partners.

  

On August 31, 2012, we entered into a Second Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Second Amendment reflects the following changes: (i) the reduction of the minimum interest rate to 3.75%, ii) an increase in the borrowing base to $7.0 million, iii) the addition of a provision resulting in an event of default if Robert G. Watson ceases to be the chief executive officer of any Borrower for any reason and a successor reasonably acceptable to Administrative Agent is not appointed within one hundred twenty days (120) thereafter, and iv) the addition of new leases to the collateral pool.

 

On November 2, 2012, we entered into a Third Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Third Amendment reflects the following changes: i) an increase in the borrowing base to $12.150 million, ii) the addition of a provision permitting the repurchase of up to $2,000,000 of common stock on or before December 31, 2013, subject to certain liquidity requirements, iii) the amendment of certain financial covenant definitions for the purposes of clarity, and iv) the provision of a limited waiver for the failure to comply with the Interest Coverage Ratio for the period ending December 31, 2011.

 

On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012 with Texas Capital Bank. The Fourth Amendment reflects the following changes: i) Texas Capital Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and ii) Texas Capital Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of Texas Capital Bank.

 

On April 16, 2013, Texas Capital Bank increased our current borrowing base to $19.5 million, of which we had borrowed $10.0 million as of March 31, 2013. We intend to conduct an additional borrowing base review in the second or third quarter of 2013 and we expect increases in production and the maturity of existing production to result in an additional borrowing base increases.

 

This senior secured credit facility matures on October 3, 2015, unless extended by mutual agreement. On the maturity date all obligations plus accrued interest must be repaid.

 

Note 8 – Commitments & Contingencies

 

As of March 31, 2013 the Company has an outstanding irrevocable letter of credit in the amount of $50,000 issued in favor of the Texas Railroad Commission. The letter of credit is required by the Texas Railroad Commission for all companies operating in the state of Texas with production greater than limits they prescribe.

 

Note 9 - Equity Transactions

 

On January 1, 2013, 300,000 warrants with a strike price equal to $.70 were issued to an investor relations consulting firm as compensation for service. Half of these warrants vested at March 31, 2013 and the other half of these warrants vest as of June 30, 2013. We expensed $16,180 as professional fees in the quarter ended March 31, 2013. We will expense $16,180 in the quarter ending June 30, 2013.

 

Note 10 - Subsequent Events

 

We have reviewed all material events through the date of this report in accordance with ASC 855-10.

 

On April 16, 2013 Texas Capital Bank, N.A. approved a borrowing base increase from $12.15 million to $19.5 million under the Company's $50 million senior secured revolving line of credit. This improvement resulted due to a significant increase in the estimated quantity and value of our producing oil reserves as of December 31, 2012. As of March 31, 2013, we had $10.0 million drawn under the credit facility, which currently bears interest at a rate of 3.75% per annum.

 

7
 

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact, contained in this report, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," or "should" or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors" or elsewhere in this report, which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. The factors impacting these risks and uncertainties include, but are not limited to:

 

·inability to attract and obtain additional development capital;
·inability to achieve sufficient future sales levels or other operating results;
·inability to efficiently manage our operations;
·effect of our hedging strategies on our results of operations;
·potential default under our secured obligations or material debt agreements;
·estimated quantities and quality of oil reserves;
·declining local, national and worldwide economic conditions;
·fluctuations in the price of oil;
·continued weather conditions that impact our abilities to efficiently manage our drilling and development activities;
·the inability of management to effectively implement our strategies and business plans;
·approval of certain parts of our operations by state regulators;
·inability to hire or retain sufficient qualified operating field personnel;
·increases in interest rates or our cost of borrowing;
·deterioration in general or regional (especially Eastern Kansas and South Texas) economic conditions;
·adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
·the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact the operations of companies or contractors we depend upon in our operations;
·inability to acquire mineral leases at a favorable economic value that will allow us to expand our development efforts;
·adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; and
·changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate.

 

   You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this report to conform our statements to actual results or changed expectations. For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see "Risk Factors" in this document and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

 

All references in this report to "we," "us," "our," "company" and "EnerJex" refer to EnerJex Resources, Inc. and our wholly-owned operating subsidiaries, EnerJex Kansas, Inc., DD Energy, Inc., Black Sable Energy, LLC, and Working Interest, LLC, unless the context requires otherwise. We report our financial information on the basis of a December 31st fiscal year end.

 

AVAILABLE INFORMATION

 

We file annual, quarterly and other reports and other information with the SEC.  You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.enerjex.com.  You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm.  Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at EnerJex Resources, Inc., 4040 Broadway, Suite 508, San Antonio, Texas 78209.

 

8
 

 

INDUSTRY AND MARKET DATA

 

The market data and certain other statistical information used throughout this report are based on independent industry publications, government publications, reports by market research firms or other published independent sources. In addition, some data are based on our good faith estimates.

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to our financial statements included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under ITEM 1A. Risk Factors and elsewhere in this report.

 

Overview

 

Our principal strategy is to acquire, develop, explore and produce domestic onshore oil properties. Our business activities are currently focused in Eastern Kansas and South Texas.

 

The Opportunity in Kansas

 

According to the Kansas Geological Survey, the State of Kansas has historically been one of the top 10 domestic oil producing regions in the United States. Approximately 44 million barrels of oil were produced in Kansas during 2012. Twenty companies accounted for approximately 35% of the state’s total production, with the remaining 65% produced by more than 3,500 active producers.

 

In addition to significant historical oil production levels in the region, we believe that a confluence of the following factors in Eastern Kansas and the surrounding region make it an attractive area for oil development activities:

 

·Numerous Acquisition Opportunities in Fragmented Markets. The exploration and production business in Eastern Kansas is highly fragmented and consists of many small operators that operate producing oil properties on relatively small budgets. Consequently, numerous acquisition opportunities with drilling and expansion potential exist in the area.

 

·Opportunity to Enhance Operational Efficiency of Mature Leases.  Many potential acquisition targets include significant opportunities for enhanced operational efficiencies and increased ultimate recoveries of oil through the application of modern engineering technologies, professional approaches to reservoir engineering and operations management, and the potential application of a number of enhanced oil recovery technologies.

 

·Opportunity to Reduce Operating Costs per Barrel Through Economies of Scale.  A significant portion of expenses at the field level are fixed (primarily labor and equipment). These costs are scalable, and lease operating expenses per barrel may be significantly reduced by increasing production in current areas of operation by drilling low risk development wells, acquiring producing properties in close proximity to existing operations, and utilizing modern enhanced oil recovery technologies.

 

·Large Oil Reserves in Place and Relatively Low Exploration Risk.  A majority of the oil reserves in Eastern Kansas are present at relatively shallow horizons (most at a depth of less than 3,000 feet) and contain significant volumes of oil in place. These shallow reservoirs often have relatively low reservoir pressure and lack a strong natural drive mechanism. As a result, the ultimate recovery of oil in place can be significantly increased through the application of secondary recovery technologies.

 

The Opportunity in South Texas

 

Technological advances in the oil industry have made great strides over the last decade, especially in the area of completion technologies, mainly through horizontal drilling and artificial fracture stimulation. Multiple sizeable oil deposits were discovered in South Texas during previous decades, but operators lacked the technology to economically produce oil from these reservoirs at the time of discovery. The availability of modern completion technologies coupled with the current commodity price environment provide an opportunity for operators to economically produce oil from reservoirs that were discovered in the past, yet were never fully developed due to technology and economic constraints.

 

9
 

 

Recent Developments

 

The following is a brief description of our most significant corporate developments that have occurred since the end of 2012:

 

·From January 1, 2013 through March 31, 2013, we drilled 4 new oil wells and 7 new secondary recovery water injection wells in our Mississippian Project located in Southeast Kansas.

 

·During the first quarter ended March 31, 2013, we drilled 5 new oil wells in our Cherokee Project located in Eastern Kansas.

 

Net Production, Average Sales Price and Average Production and Lifting Costs

 

The table below sets forth our net oil production (net of all royalties, overriding royalties and production due to others), the average sales prices, average production costs and direct lifting costs per unit of production for the periods ending March 31, 2013 and March 31, 2012.

  

   For the Three Months Ended 
   March 31, 
   2013   2012 
         
Net Production   26,537    19,485 
Oil (Bbl)          
           
Average Sales Prices          
Oil (per Bbl)  $88.07   $97.66 
           
Average Production Cost (1)          
Per Bbl of oil  $46.22   $52.95 
           
Average Lifting Costs (2)          
Per Bbl of oil  $29.47   $31.26 

 

(1) Production costs include all operating expenses, transportation expenses, depreciation, depletion and amortization, lease operating expenses and all associated taxes. Impairment of oil properties is not included in production costs.

 

(2) Direct lifting costs do not include impairment expense or depreciation, depletion and amortization.

 

Results of Operations for the Three Months Ended March 31, 2013 and 2012 compared.

 

Income:

  

   Three Months Ended   Increase / 
   March 31,   (Decrease) 
   2013   2012     
Oil revenues  $2,337,301   $1,902,892   $434,409 

 

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Revenues

 

Oil revenues for the three months ended March 31, 2013 were $2,337,301 compared to revenues of $1,902,892 for the three months ended March 31, 2012. Revenues increased primarily as a result of higher oil production.

 

Expenses:

 

   Three Months Ended   Increase / 
   March 31,   (Decrease) 
   2013   2012     
Production expenses:               
Direct operating costs  $782,072   $609,079   $172,993 
Depreciation, depletion and amortization   444,537    422,603    21,934 
Total production expenses   1,226,609    1,031,682    194,927 
                
General expenses:               
Professional fees   356,222    332,972    23,250 
Salaries   246,011    133,882    112,129 
Administrative expense   139,404    243,897    (104,493)
Total general expenses   741,637    710,751    30,886 
Total production and general expenses   1,968,246    1,742,433    225,813 
                
Income from operations   369,055    160,459    208,596 
                
Other income (expense)               
Interest expense   (118,245)   (67,660)   (50,585)
Gain (loss) on derivatives   (239,941)   (1,186,939)   946,998 
Other income (loss)   9,167    12,458    (3,291)
Total other income (expense)   (349,019)   (1,242,141)   893,122 
                
Net income (loss)  $20,036   $(1,081,682)  $1,101,718 

 

Direct Operating Costs

 

Direct operating costs primarily include direct labor and equipment costs related to pumping, gauging, pulling, well repairs, and general maintenance requirements. These costs also include certain contract labor costs, and other non-capitalized expenses. Direct operating costs for the three months ended March 31, 2013 were $782,072 compared to $609,079 for the three months ended March 31, 2012. Direct operating costs increased $172,993 compared to the prior year period due primarily to increased production.

 

Depreciation, Depletion and Amortization

 

Depreciation, depletion and amortization for the three months ended March 31, 2013 was $444,537 compared to $422,603 for the three months ended March 31, 2012.

 

Professional Fees

 

Professional fees for the three months ended March 31, 2013 were $356,222 compared to $332,972 for the three months ended March 31, 2012. Professional fees increased due primarily to higher legal fees.

 

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Salaries

 

Salaries for the three months ended March 31, 2013 were $246,011 compared to $133,882 for the three months ended March 31, 2012.   Salaries increased $112,129 due primarily to growth in the number of salaried employees.

 

Administrative Expenses

 

Administrative expenses for the three months ended March 31, 2013 were $139,404 compared to $243,897 for the three months ended March 31, 2012. Administrative expenses decreased $104,493 due primarily to management’s increased focus on reducing extraneous expenses.

 

Interest Expense

 

Interest expense for the three months ended March 31, 2013 was $118,245 compared to $67,660 for the three months ended March 31, 2012. Interest expense increased as a result of greater borrowings under our Credit Facility.

 

Gain (Loss) on Derivatives

 

We incurred a loss of $239,941 on our derivative contracts in the first quarter of 2013 compared to a loss of $1,186,939 for the three months ended March 31, 2012. The reduction in the loss was due primarily to the completion of contracts during the twelve month period ended March 31, 2013 and a decrease in the WTI benchmark price.

 

Net Income (Loss)

 

Net income for the three months ended March 31, 2013 was $20,036 compared to a net loss of $1,081,682 for the three months ended March 31, 2012.  The increase in Net Income during the first quarter 2013 compared to the prior year period was primarily a result of the non-cash write up of our derivative portfolio, increased revenue resulting from increased production and decreased operating expenses per barrel.

 

Liquidity and Capital Resources

 

Liquidity is a measure of a company's ability to meet potential cash requirements. We have historically met our capital requirements through debt financing, revenues from operations and the issuance of equity securities. We believe that our historical means of meeting our capital requirements will provide us with adequate liquidity to fund our operations and capital program in 2013.

 

The following table summarizes total current assets, total current liabilities and working capital.

 

The working capital deficit as of March 31, 2012 includes approximately $492k of accounts payable to Hush Blackwell LLP, which are currently in dispute. The working capital deficit also includes $625k of outstanding principal on a promissory note related to the common stock and asset repurchase from Enutroff, LLC. The promissory note will fully amortize during 2013 and is therefore considered a current liability.

 

    March 31, 
2013
    December 31,
2012
   
Increase /
(Decrease)
 
                   
Current Assets   $ 3,024,564     $ 3,382,621      $ (358,057 )
                         
Current Liabilities   $ 3,998,490     $ 4,556,476      $ 557,986  
                         
Working Capital   $ (973,926 )   $ (1,173,855 )    $ 199,929  

  

Senior Secured Credit Facility

 

On October 3, 2011, the Company and DD Energy, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and Working Interest, LLC ("Borrowers") entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement are to be used to refinance Borrowers prior outstanding revolving loan facility with Bank, dated July 3, 2008, and for working capital and general corporate purposes.

 

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At our option, loans under the facility will bear stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank's prime rate. The Floating Rate shall mean, at Borrower's option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or six months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company's Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).

 

We entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Texas Capital Bank, which closed on December 15, 2011. The Amendment reflects the addition of Rantoul Partners, as an additional Borrower and adds as additional security for the loans the assets held by Rantoul Partners.

 

On August 31, 2012, we entered into a Second Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Second Amendment reflects the following changes: (i) the reduction of the minimum interest rate to 3.75%, ii) an increase in the borrowing base to $7.0 million, iii) the addition of a provision resulting in an event of default if Robert G. Watson ceases to be the chief executive officer of any Borrower for any reason and a successor reasonably acceptable to Administrative Agent is not appointed within one hundred twenty days (120) thereafter, and iv) the addition of new leases to the collateral pool.

 

On November 2, 2012, we entered into a Third Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Third Amendment reflects the following changes: i) an increase in the borrowing base to $12.150 million, ii) the addition of a provision permitting the repurchase of up to $2,000,000 of common stock on or before December 31, 2013, subject to certain liquidity requirements, iii) the amendment of certain financial covenant definitions for the purposes of clarity, and iv) the provision of a limited waiver for the failure to comply with the Interest Coverage Ratio for the period ending December 31, 2011.

 

On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012 with Texas Capital Bank. The Fourth Amendment reflects the following changes: i) Texas Capital Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and ii) Texas Capital Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of Texas Capital Bank.

 

On April 16, 2013, Texas Capital Bank increased our current borrowing base to $19.5 million, of which we had borrowed $10.0 million as of March 31, 2013. We intend to conduct an additional borrowing base review in the second or third quarter of 2013 and we expect increases in production and the maturity of existing production to result in an additional borrowing base increase.

 

Satisfaction of our cash obligations for the next 12 months

 

We intend to meet our near term cash obligations through financings under our credit facility with Texas Capital Bank and through cash flow generated from operations.

 

Summary of product research and development

 

We do not anticipate performing any significant product research and development under our plan of operation.

 

Expected purchase or sale of any significant equipment

 

We anticipate that we will purchase the necessary production and field service equipment required to produce oil during our normal course of operations over the next twelve months.

 

Significant changes in the number of employees

 

There have been no significant changes in the number of our employees since December 31, 2012. We currently have 20 full-time employees, including field personnel. As production and drilling activities increase or decrease, we may have to continue to adjust our technical, operational and administrative personnel as appropriate. We are using and will continue to use independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service providers may enhance our ability to contain operating expenses, general expenses, and capital costs.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

Our critical accounting estimates include the value of our oil and gas properties, asset retirement obligations, and share-based payments.

 

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Oil Properties

 

The accounting for our business is subject to special accounting rules that are unique to the oil industry. There are two allowable methods of accounting for oil business activities: the successful efforts method and the full-cost method. We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities.

 

Under the full-cost method, capitalized costs are amortized on a composite unit-of-production method based on proved oil reserves. Depreciation, depletion and amortization expense is also based on the amount of estimated reserves. If we maintain the same level of production year over year, the depreciation, depletion and amortization expense may be significantly different if our estimate of remaining reserves changes significantly. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and otherwise if impairment has occurred. Unevaluated properties are assessed individually when individual costs are significant.

 

We review the carrying value of our oil properties under the full-cost accounting rules of the SEC on a semi-annual basis. This semi-annual review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, oil prices increase sufficiently such that an excess above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

 

The process of estimating oil reserves is very complex, requiring significant decisions in the evaluation of available geological, geophysical, engineering and economic data. The data for a given property may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions. As a result, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various properties increase the likelihood of significant changes in these estimates.

 

As of December 31, 2012, approximately 100% of our proved reserves were evaluated by an independent petroleum consultant. All reserve estimates are prepared based upon a review of production histories and other geologic, economic, ownership and engineering data.

 

Asset Retirement Obligations

 

The asset retirement obligation relates to the plug and abandonment costs when our wells are no longer useful. We determine the value of the liability by obtaining quotes for this service and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future however we monitor the costs of the abandoned wells and we will adjust this liability if necessary.

 

Share-Based Payments

 

The value we assign to the options and warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and warrants, we determine an estimate of the volatility of our stock. We need to estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is reasonable, and we review the assumptions used to determine this whenever we issue a new equity instruments. If we have a material error in our estimate of the volatility of our stock, our expenses could be understated or overstated.

 

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Effects of Inflation and Pricing

 

The oil industry is very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry puts extreme pressure on the economic stability and pricing structure within the industry. Material changes in prices impact revenue stream, estimates of future reserves, borrowing base calculations of bank loans and value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil companies and their ability to raise capital, borrow money and retain personnel. We anticipate business costs and the demand for services related to production and exploration will fluctuate while the commodity prices for oil remains volatile.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting Company as defined by Rule 12b-2 under the Securities Exchange Act of 1934, and are not required to provide the information required under this item.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Our Chief Executive Officer, Robert G. Watson, Jr. and our Chief Financial Officer, Douglas M. Wright evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on the evaluation, Mr. Watson and Mr. Wright have concluded that our disclosure controls and procedures are effective in timely altering him to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS.

 

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this transition report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.

 

On January 23, 2012, we filed a petition seeking recovery of damages arising from breach of contract, legal malpractice, breach of fiduciary duty and fraud in the Circuit Court of Jackson County, Missouri against attorneys Jeffrey T. Haughey, Robert K. Green, and the law firm Husch Blackwell LLP f/k/a Husch Blackwell Sanders, LLC.  The petition in this action, EnerJex Resources, Inc., v. Haughey, et al., alleges, among other things, that the defendants violated their fiduciary duties and defrauded us in connection with our stock offering in 2008.  The petition alleges economic loss of approximately $50 million and demands judgment for unspecified actual and punitive damages together with repayment of legal fees paid of over $484,000.  There can be no assurance of the outcome in the litigation, including whether and in what amount we may recover damages. On June 30, 2012, the defendants answered the complaint and filed a counterclaim against us for $492,133.95. This amount is already reflected as a liability under accounts payable on our balance sheet.

 

15
 

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6.  EXHIBITS.

 

Exhibit

No.

  Description
2.1   Agreement and Plan of Merger between Millennium Plastics Corporation and Midwest Energy, Inc. effective August 15, 2006 (incorporated by reference to Exhibit 2.3 to the Form 8-K filed on August 16, 2006)
3.1   Amended and Restated Articles of Incorporation, as currently in effect (incorporated by reference to Exhibit 3.1 to the Form 10-Q filed on August 14, 2008)
3.2   Amended and Restated Bylaws, as currently in effect (incorporated by reference to Exhibit 3.3 to the Form SB-2 filed on February 23, 2001)
4.1   Article VI of Amended and Restated Articles of Incorporation of Millennium Plastics Corporation (incorporated by reference to Exhibit 1.3 to the Form 8-K filed on December 6, 1999)
4.2   Article II and Article VIII, Sections 3 & 6 of Amended and Restated Bylaws of Millennium Plastics Corporation (incorporated by reference to Exhibit 4.1 to the Form SB-2 filed on February 23, 2001)
4.3   Specimen common stock certificate (incorporated by reference to Exhibit 4.3 to the Form S-1/A filed on May 27, 2008)
4.4   Certificate of Designation (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on January 6, 2011).
10.1   Credit Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.33 to the Form 10-K filed on July 10, 2008)
10.2   Promissory Note to Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.34 to the Form 10-K filed on July 10, 2008)
10.3   Amended and Restated Mortgage, Security Agreement, Financing Statement and Assignment of Production and Revenues with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.35 to the Form 10-K filed on July 10, 2008)
10.4   Security Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.36 to the Form 10-K filed on July 10, 2008)
10.5   Letter Agreement with Debenture Holders dated July 3, 2008 (incorporated by reference to Exhibit 10.37 to the Form 10-K filed on July 10, 2008)
10.6†   C. Stephen Cochennet Employment Agreement dated August 1, 2008 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 1, 2008)
10.7†   Dierdre P. Jones Employment Agreement dated August 1, 2008 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 1, 2008)
10.8†   Amended and Restated EnerJex Resources, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 16, 2008)
10.9   Form of Officer and Director Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 16, 2008)
10.10   Euramerica Letter Agreement Amendment dated September 15, 2008 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on September 18, 2008)
10.11   Euramerica Letter Agreement Amendment dated October 15, 2008 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on October 21, 2008)
10.12(a) †   C. Stephen Cochennet Rescission of Option Grant Agreement dated  November 17, 2008 (incorporated by reference to Exhibit 10.38(a) to the Form 10-Q filed on February 23, 2009)
10.12(b) †   Dierdre P. Jones Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(b) to the Form 10-Q filed on February 23, 2009)
10.12   Daran G. Dammeyer Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(c) to the Form 10-Q filed on February 23, 2009)
10.12(d)   Darrel G. Palmer Rescission of Option Grant Agreement dated November  17, 2008 (incorporated by reference to Exhibit 10.38(d) to the Form 10-Q filed on February 23, 2009)
10.12(e)   Dr. James W. Rector Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(e) to the Form 10-Q filed on February 23, 2009)

 

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10.12(f)   Robert G. Wonish Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(f) to the Form 10-Q filed on February 23, 2009)
10.13   Letter Agreement with Debenture Holders dated June 11, 2009 (incorporated by reference to  Exhibit 10.1 to the Form 8-K filed on June 16, 2009)
10.14   Joint Operating Agreement with Pharyn Resources to explore and develop the Brownrigg Lease Press Release dated June 1, 2009 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on June 5, 2009)
10.15   Amendment 4 to Joint Exploration Agreement effective as of  November 6, 2008 between MorMeg, LLC and EnerJex Resources, Inc.  (incorporated by reference to Exhibit 10.15 to the Form 10-K filed July 14, 2009)
10.16   Waiver from Texas Capital Bank, N.A. dated  July 14, 2009 (incorporated by reference to Exhibit 10.16 to Form 10-K filed July 14, 2009)
10.17   First Amendment to Credit Agreement dated August 18, 2009 (incorporated by reference to the Exhibit 10.12 to the Form 10-Q filed August 18, 2009)
10.18   Debenture Holder Amendment Letter dated November 16, 2009 (incorporated by reference to the Exhibit 10.13 to the Form 10-Q filed November 20, 2009)
10.19   Standby Equity Distribution Agreement with Paladin Capital Management, S.A. dated December 3, 2009 (incorporated by reference to Exhibit 10.52 to the Form S-1 filed on December 9, 2009)
10.20   Amendment 5 to Joint Exploration Agreement effective as of December 31, 2009 between MorMeg LLC and EnerJex Resources, Inc. (incorporated by reference to Exhibit 10.15 to the Form 10-Q filed on February 16, 2010)
10.21   Second Amendment to Credit Agreement dated January 13, 2010 (incorporated by reference to Exhibit 10.16 to the Form 10-Q filed on February 16, 2010)
10.22   Debenture Holder Amendment Letter dated January 27, 2010 (incorporated by reference to Exhibit 10.17 to the Form 10-Q filed on February 16, 2010)
10.23   Waiver from Texas Capital Bank, N.A. dated  February 10, 2009 (incorporated by reference to Exhibit 10.18 to the Form 10-Q filed on February 16, 2010)
10.24   Amendment 6 to Joint Exploration Agreement effective as of March 31, 2010 between MorMeg LLC and EnerJex Resources, Inc. (incorporated by reference to Exhibit 10.24 to the Form 10-K filed on July 15, 2010)
10.25   Debenture Holder Amendment Letter dated April 1, 2010 (incorporated by reference to Exhibit 10.25 to the Form 10-K filed on July 15, 2010)
10.26   Separation and Settlement Agreement with C. Stephen Cochennet dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 28, 2010).
10.27   Securities Purchase and Asset Acquisition Agreement between Enerjex Resources, Inc. and West Coast Opportunity Fund, LLC; Montecito Venture Partners, LLC; J&J Operating Company, LLC and Frey Living Trust dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 6, 2011).
10.28   Stock Repurchase Agreement between Enerjex Resources, Inc. and Working Interest Holdings, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on January 6, 2011).
10.29   Securities Purchase Agreement between Enerjex Resources, Inc. and various Investors dated December 31, 2010 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on January 6, 2011).
10.30   Employment Agreement between Enerjex Resources, Inc. and Robert G. Watson dated December 31, 2010 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on January 6, 2011).
10.31   Joint Development Agreement between Enerjex Resources, Inc. and Haas Petroleum, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 27, 2011).
10.32   Joint Operating Agreement between Enerjex Resources, Inc. and Haas Petroleum, LLC and MorMeg, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on January 27, 2011).
10.33   Third Amendment to Credit Agreement dated September 29, 2010 (incorporated by reference to Exhibit 10.33 to the Transition Report on Form 10-K filed on April 21, 2011).
10.34   Fourth Amendment to Credit Agreement dated December 31, 2010 (incorporated by reference to Exhibit 10.34 to the Transition Report on Form 10-K filed on April 21, 2011).
10.35   Letter Agreement with Registrant, James Loeffelbein, John Loeffelbein and J&J Operating dated January 14, 2011 (incorporated by reference to Exhibit 10.1 on Form 8-K filed on January 18, 2011).
10.36   Form of Securities Purchase Agreement among Registrant and Investors dated March 31, 2011 (incorporated by reference to Exhibit 10.1 on Form 8-K filed on April 4, 2011).
10.37   Form of Warrant among Registrant and Investors dated March 31, 2011 (incorporated by reference to Exhibit 10.2 on Form 8-K filed on April 4, 2011).

 

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10.38   Form of Stock Redemption Agreement among Registrant and Working Interest Holdings, LLCs dated March 31, 2011 (incorporated by reference to Exhibit 10.1 on Form 8-K filed on April 4, 2011).
10.39   Amended and Restated Credit Agreement dated October 3, 2011 (incorporated herein by reference to Exhibit 10.1 on Form 8-K filed on October 6, 2011).
10.40   Option and Joint Development Agreement by and among Registrant and MorMeg, LLC dated August 2011 (incorporated herein by reference to Exhibit 10.1 on Form 8-K filed on November 15, 2011).
10.41   Rantoul Partners General Partnership Agreement dated December 14, 2011 (incorporated herein by reference to Exhibit 10.1 on Form 8-K filed on December 14, 2011).
10.42   First Amendment to Amended and Restated Credit Agreement dated December 14, 2011 (incorporated herein by reference to Exhibit 10.2 on Form 8-K filed on December 14, 2011).
10.43   First Amendment to General Partnership Agreement for Rantoul Partners dated March 30, 2012 (incorporated herein by reference to Exhibit 10.1 on Form 8-K filed on April 5, 2012).
31.1   Certification of Chief Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

† Indicates management contract or compensatory plan or arrangement.

 

18
 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ENERJEX RESOURCES, INC.  
(Registrant)  
   
By: /s/ Robert G. Watson, Jr.  
  Robert G. Watson, Jr. Chief Executive Officer  
   
Date: May 14, 2013  

 

19

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MGO>]P/?[N@&+89+I<6]ZZ*1*^[BNLYL[._\`)RTR`U10TZ3RI\K8/TI_A[(, MWCF]KUOCZI^EOU`U38_[[Y;\G/0$E"@:KAG#>$;THY-/CAO&7^:QDU2__.?68DNXV6_P]-.8X_RE M.",W([;I9",%@_P;_03)N^!5>XI53ZA_?5TU%(#W/G>Q#NZ`WVKJ>N)";CEL M+O9=QG8,8Q?^99;9"/BF>93X<_0E@"G!2&M2DWU'3IP-OJ8QXPRQTQE??`0[ M^1Z`Y'05./*[PF;$KWR=+8."E_\`#Y+-\9BQM@@U=_-]*^LN(^7=W,B/L]OR MG](Q/;XXZ`27/9=41RGGP\RMO/;^4^7)['L] MWKV?+=O'_1Z`RE/EN\GN>S[G:/9W]G?V?MXY]>W_`%=`??H`Z`.@#H`Z`.@# $H#__V3\_ ` end EX-31.1 3 v341639_ex31-1.htm EXHIBIT 31.1

 

EXHIBIT 31.1

CERTIFICATION

 

I, Robert G. Watson, Jr. Chief Executive Officer of EnerJex Resources, Inc., certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: May 14, 2013

 

/s/ Robert G. Watson, Jr.  
Robert G. Watson, Jr.  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

EX-31.2 4 v341639_ex31-2.htm EXHIBIT 31.2

 

EXHIBIT 31.2

CERTIFICATION

 

I, Douglas M. Wright Chief Financial Officer of EnerJex Resources, Inc., certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: May 14, 2013

 

/s/ Douglas M. Wright  
Douglas M. Wright  
Chief Financial Officer  

 

 

EX-32.1 5 v341639_ex32-1.htm EXHIBIT 32.1

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Robert G. Watson, Jr., certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of EnerJex Resources, Inc. on Form 10-Q for the quarterly period ended March 31, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EnerJex Resources, Inc.

 

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:    May 14, 2013  
   
/s/ Robert G. Watson, Jr.  
Robert G. Watson, Jr.  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

EX-32.2 6 v341639_ex32-2.htm EXHIBIT 32.2

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Douglas M. Wright, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of EnerJex Resources, Inc. on Form 10-Q for the quarterly period ended March 31, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EnerJex Resources, Inc.

 

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:    May 14, 2013  
   
/s/ Douglas M. Wright  
Douglas M. Wright  
Chief Financial Officer  

 

 

 

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Long-Term Debt - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
First Amendment | Rantoul Partners
 
Debt Instrument [Line Items]  
Line of credit facility, maximum borrowing capacity 50,000,000
Second Amendment
 
Debt Instrument [Line Items]  
Line of credit facility, current borrowing capacity 7,000,000
Second Amendment | Minimum
 
Debt Instrument [Line Items]  
Debt Instrument, Interest Rate Increase 3.75%
Third Amendment
 
Debt Instrument [Line Items]  
Line of Credit Facility, Increase, Additional Borrowings 12,150,000
Provision To Repurchase Common Stock 2,000,000
Fourth Amendment
 
Debt Instrument [Line Items]  
Line of credit facility, current borrowing capacity 19,500,000
Line of credit facility, borrowed amount 10,000,000
Line of Credit | Federal Funds Rate
 
Debt Instrument [Line Items]  
Debt instrument interest rate, margin 0.50%
Line of Credit | Base Rate | Minimum
 
Debt Instrument [Line Items]  
Debt instrument interest rate, margin 0.00%
Line of Credit | Base Rate | Maximum
 
Debt Instrument [Line Items]  
Debt instrument interest rate, margin 0.75%
Line of Credit | Floating Rate | Minimum
 
Debt Instrument [Line Items]  
Debt instrument interest rate, margin 2.25%
Line of Credit | Floating Rate | Maximum
 
Debt Instrument [Line Items]  
Debt instrument interest rate, margin 3.00%
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Asset Retirement Obligation
3 Months Ended
Mar. 31, 2013
Asset Retirement Obligation [Abstract]  
Asset Retirement Obligation

Note 4 - Asset Retirement Obligation

 

Our asset retirement obligations relate to the liabilities associated with the abandonment of oil wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:

 

Asset retirement obligations, December 31, 2012   $ 1,336,151  
Liabilities incurred during the period     21,249  
Accretion     28,193  
Asset retirement obligations, March 31, 2013   $ 1,385,593
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Subsequent Events - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Line of Credit, Current $ 10,000,000
Line of Credit Facility, Interest Rate During Period 3.75%
Texas Capital Bank [Member]
 
Line of credit facility, current borrowing capacity 12,150,000
Line of credit facility, maximum borrowing capacity 19,500,000
Long-term Line of Credit $ 50,000,000
XML 18 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements
3 Months Ended
Mar. 31, 2013
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 3 – Fair Value Measurements

 

We hold certain financial assets which are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, "Fair Value Measurements" ("ASC Topic 820-10"). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

 

Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. We believe our debt approximates fair value at March 31, 2013.

 

Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. We consider the derivative liability to be Level 2. We determine the fair value of the derivative liability utilizing various inputs, including NYMEX price quotations and contract terms.

 

Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider our marketable securities to be Level 3.

 

Our derivative instruments consist of fixed price commodity swaps.

 

    Fair Value Measurement  
    Level 1     Level 2     Level 3  
Crude oil contracts   $ -     $ (1,829,070 )   $ -  
Marketable Securities   $ -     $ -     $ 1,018,573
XML 19 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Balance Sheets (USD $)
Mar. 31, 2013
Dec. 31, 2012
Current assets:    
Cash $ 464,404 $ 767,494
Accounts receivable 1,207,085 1,221,962
Marketable securities 1,018,573 1,018,573
Deposits and prepaid expenses 334,502 374,592
Total current assets 3,024,564 3,382,621
Fixed assets, net of accumulated depreciation 291,453 309,877
Oil properties using full-cost accounting, net of accumulated DD&A 34,292,208 33,202,898
Total assets 37,608,225 36,895,396
Current liabilities:    
Accounts payable 1,928,140 2,384,090
Accrued liabilities 518,202 590,205
Derivative liability 927,148 757,181
Note Payable 625,000 825,000
Total current liabilities 3,998,490 4,556,476
Asset retirement obligation 1,385,593 1,336,151
Long-term debt 10,000,000 8,500,000
Derivative liability 901,922 1,043,114
Total non-current liabilities 12,287,515 10,879,265
Total liabilities 16,286,005 15,435,741
Commitments & Contingencies      
Stockholders' Equity:    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 4,779,460 shares issued and outstanding 4,780 4,780
Common stock, $0.001 par value, 100,000,000 shares authorized; shares issued and outstanding 73,586,529 at March 31, 2013 and at December 31, 2012 73,587 73,587
Treasury Stock, 5,750,000 shares (2,551,000) (2,551,000)
Equity based compensation unearned (134,642) (153,876)
Paid-in capital 45,368,277 45,352,096
Accumulated other comprehensive income (552,589) (552,589)
Retained (deficit) (20,886,193) (20,713,343)
Total stockholders' equity 21,322,220 21,459,655
Total liabilities and stockholders' equity $ 37,608,225 $ 36,895,396
XML 20 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
Basis of Presentation
3 Months Ended
Mar. 31, 2013
Organization, Consolidation and Presentation Of Financial Statements [Abstract]  
Basis of Presentation

Note 1 – Basis of Presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation.  All such adjustments are of a normal recurring nature.  The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.  Certain amounts in the prior year statements have been reclassified to conform to the current year presentations.  The statements should be read in conjunction with the financial statements and footnotes thereto included in our Annual Report Form 10-K for the fiscal year ended December 31, 2012.

 

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., DD Energy, Inc., Black Sable Energy, LLC, and Working Interest, LLC and for the quarter ended March 31, 2013 and for the year ended December 31, 2012. The accounts of Rantoul Partners, a general partnership in which we held a majority and controlling interest are included in the Statement of Operations and Statement of Cash Flows for the quarter ended March 31, 2012. On December 31, 2012 we distributed all the assets of the partnership to the partners and dissolved Rantoul Partners. Accordingly the Rantoul Partners accounts are not reflected in the financial statements for the 2013 periods, however , Rantoul Partners accounts are still reflected in certain 2012 financial statements. All intercompany transactions and accounts have been eliminated in consolidation.

XML 21 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
Changes in Asset Retirement Obligations (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Reconciliation of Changes in Asset Retirement Obligations [Line Items]    
Asset retirement obligations, December 31, 2012 $ 1,336,151  
Liabilities incurred during the period 21,249  
Accretion 28,193 22,397
Asset retirement obligations, March 31, 2013 $ 1,385,593  
XML 22 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note Payable - Additional Information (Detail) (USD $)
Share data in Millions, unless otherwise specified
1 Months Ended 3 Months Ended
Nov. 30, 2012
Mar. 31, 2013
March 28 2013 [Member]
Subsequent Event [Member]
Mar. 31, 2013
June 30 2013 [Member]
Subsequent Event [Member]
Mar. 31, 2013
September 30 2013 [Member]
Subsequent Event [Member]
Mar. 31, 2013
December 31 2013 [Member]
Subsequent Event [Member]
Stock Repurchased and Retired During Period, Shares 2        
Payments for Repurchase of Common Stock $ 323,035        
Notes Payable 825,000        
Debt Instrument, Interest Rate, Stated Percentage (0.24%)        
Debt Instrument, Periodic Payment, Principal   200,000 200,000 200,000 225,000
Debt Instrument, Periodic Payment, Interest   488      
Debt Instrument, Periodic Payment   $ 200,488      
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Stock Options
3 Months Ended
Mar. 31, 2013
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Stock Options

Note 2 - Stock Options

 

A summary of stock options is as follows:

 

    Options     Weighted
Avg.
Exercise
Price
    Warrants     Weighted
Avg.
Exercise
Price
 
Outstanding December 31, 2012     1,685,000     $ 0.54       250,000     $ 0.70  
Granted     -       -       300,000       0.70  
Cancelled     -       -                  
Exercised     -       -       -       -  
Outstanding March 31, 2013     1,685,000     $ 0.54       550,000     $ 0.70
XML 25 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2013
Dec. 31, 2012
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 4,779,460 4,779,460
Preferred stock, shares outstanding 4,779,460 4,779,460
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 73,586,529 73,586,529
Common stock, shares outstanding 73,586,529 73,586,529
Treasury Stock, shares 5,750,000 5,750,000
XML 26 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2013
Fair Value Measurements [Abstract]  
Variable to Fixed Price Commodity Swaps Derivative Instruments

Our derivative instruments consist of fixed price commodity swaps.

 

    Fair Value Measurement  
    Level 1     Level 2     Level 3  
Crude oil contracts   $ -     $ (1,829,070 )   $ -  
Marketable Securities   $ -     $ -     $ 1,018,573
XML 27 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information
3 Months Ended
Mar. 31, 2013
May 14, 2013
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2013  
Document Fiscal Year Focus 2013  
Document Fiscal Period Focus Q1  
Trading Symbol ENRJ  
Entity Registrant Name EnerJex Resources, Inc.  
Entity Central Index Key 0000008504  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock Shares Outstanding   67,836,529
XML 28 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Asset Retirement Obligation (Tables)
3 Months Ended
Mar. 31, 2013
Asset Retirement Obligation [Abstract]  
Changes in Asset Retirement Obligations
The following shows the changes in asset retirement obligations:

 

Asset retirement obligations, December 31, 2012   $ 1,336,151  
Liabilities incurred during the period     21,249  
Accretion     28,193  
Asset retirement obligations, March 31, 2013   $ 1,385,593
XML 29 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Statements of Operations (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Oil revenues $ 2,337,301 $ 1,902,892
Expenses:    
Direct operating costs 782,072 609,079
Depreciation, depletion and amortization 444,537 422,603
Professional fees 356,222 332,972
Salaries 246,011 133,882
Administrative expense 139,404 243,897
Total expenses 1,968,246 1,742,433
Income from operations 369,055 160,459
Other income (expense):    
Interest expense (118,245) (67,660)
Gain (loss) on derivatives (239,941) (1,186,939)
Other income (loss) 9,167 12,458
Total other income (expense) (349,019) (1,242,141)
Net income (loss) 20,036 (1,081,682)
Net income (loss) attributed to EnerJex Resources, Inc. 20,036 (1,135,894)
Net income attributed to non- controlling interest in subsidiary 0 54,212
Net income (loss) 20,036 (1,081,682)
Preferred dividends (192,887) 0
Net (loss) attributable to EnerJex Resources, Inc. common stockholders $ (172,851) $ (1,081,682)
Net income (loss) per share basic and diluted $ 0.00 $ (0.02)
Weighted average shares 67,836,529 69,645,279
XML 30 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Long-Term Debt
3 Months Ended
Mar. 31, 2013
Long-Term Debt [Abstract]  
Long-Term Debt

Note 7 - Long-Term Debt

 

Senior Secured Credit Facility

 

On October 3, 2011, the Company, DD Energy, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and Working Interest, LLC ("Borrowers") entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement are to be used to refinance Borrowers prior outstanding revolving loan facility with Bank, dated July 3, 2008, and for working capital and general corporate purposes.

 

At our option, loans under the facility will bear a stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank's prime rate. The Floating Rate shall mean, at Borrower's option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or six months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company's Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).

 

We entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Texas Capital Bank, which closed on December 15, 2011. The Amendment reflects the addition of Rantoul Partners, as an additional Borrower and adds as additional security for the loans the assets held by Rantoul Partners.

  

On August 31, 2012, we entered into a Second Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Second Amendment reflects the following changes: (i) the reduction of the minimum interest rate to 3.75%, ii) an increase in the borrowing base to $7.0 million, iii) the addition of a provision resulting in an event of default if Robert G. Watson ceases to be the chief executive officer of any Borrower for any reason and a successor reasonably acceptable to Administrative Agent is not appointed within one hundred twenty days (120) thereafter, and iv) the addition of new leases to the collateral pool.

 

On November 2, 2012, we entered into a Third Amendment to the Amended and Restated Credit Agreement with Texas Capital Bank. The Third Amendment reflects the following changes: i) an increase in the borrowing base to $12.150 million, ii) the addition of a provision permitting the repurchase of up to $2,000,000 of common stock on or before December 31, 2013, subject to certain liquidity requirements, iii) the amendment of certain financial covenant definitions for the purposes of clarity, and iv) the provision of a limited waiver for the failure to comply with the Interest Coverage Ratio for the period ending December 31, 2011.

 

On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012 with Texas Capital Bank. The Fourth Amendment reflects the following changes: i) Texas Capital Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and ii) Texas Capital Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of Texas Capital Bank.

 

On April 16, 2013, Texas Capital Bank increased our current borrowing base to $19.5 million, of which we had borrowed $10.0 million as of March 31, 2013. We intend to conduct an additional borrowing base review in the second or third quarter of 2013 and we expect increases in production and the maturity of existing production to result in an additional borrowing base increases.

 

This senior secured credit facility matures on October 3, 2015 unless extended by mutual agreement. On the maturity date all obligations plus accrued interest must be repaid.

XML 31 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note Payable
3 Months Ended
Mar. 31, 2013
Notes Payable [Abstract]  
Note Payable

Note 6 – Note Payable

 

On November 30, 2012 the Company purchased two million shares of common stock and certain assets from a shareholder of the Company for consideration of $323,035 in cash (including an option payment that we previously made to the selling shareholder) and a promissory note of $825,000 bearing an interest rate of twenty-four hundredths percent (0.24%).

 

On March 28, 2013, we made a $200,488 payment on the promissory note consisting of $200,000 of principal and $488 of accrued interest. The remaining outstanding principal on the promissory note amortizes as follows: i) $200,000 plus accrued interest on or before June 30, 2013, ii) $200,000 plus accrued interest on or before September 30, 2013, and iii) $225,000 plus accrued interest on or before December 31, 2013.

XML 32 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivative Contracts (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Derivative [Line Items]  
Fair Value (1,829,070)
Crude Oil Swap | Derivative Instrument 1
 
Derivative [Line Items]  
Monthly Volumes Bbls 1,873
Price per Bbl 76.74
Fair Value (1,063,584)
Crude Oil Swap | Derivative Instrument 2
 
Derivative [Line Items]  
Monthly Volumes Bbls 2,536
Price per Bbl 83.70
Fair Value (765,486)
Crude Oil Swap | Minimum | Derivative Instrument 1
 
Derivative [Line Items]  
Term 2013-07
Crude Oil Swap | Minimum | Derivative Instrument 2
 
Derivative [Line Items]  
Term 2011-07
Crude Oil Swap | Maximum | Derivative Instrument 1
 
Derivative [Line Items]  
Term 2015-12
Crude Oil Swap | Maximum | Derivative Instrument 2
 
Derivative [Line Items]  
Term 2015-12
XML 33 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivative Instruments (Tables)
3 Months Ended
Mar. 31, 2013
Derivative Instruments [Abstract]  
Derivative Contracts

The following derivative contracts were in place at March 31, 2013:

 

    Term     Monthly Volumes     Price/bbl     Fair Value  
Crude oil swap     7/13-12/15      

1,873

bbls   $ 76.74      

(1,063,584

)
Crude oil swap     7/11-12/15      

2,536

bbls   $ 83.70      

 (765,486

)
                            $

(1,829,070

)
XML 34 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events
3 Months Ended
Mar. 31, 2013
Subsequent Events [Abstract]  
Subsequent Events

Note 10 - Subsequent Events

 

We have reviewed all material events through the date of this report in accordance with ASC 855-10.

 

On April 16, 2013 Texas Capital Bank, N.A. approved a borrowing base increase from $12.15 million to $19.5 million under the Company's $50 million senior secured revolving line of credit. This improvement resulted due to a significant increase in the estimated quantity and value of our producing oil reserves as of December 31, 2012. As of March 31, 2013, we had $10.0 million drawn under the credit facility, which currently bears interest at a rate of 3.75% per annum.

XML 35 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments And Contingencies
3 Months Ended
Mar. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8 – Commitments & Contingencies

 

As of March 31, 2013 the Company has an outstanding irrevocable letter of credit in the amount of $50,000 issued in favor of the Texas Railroad Commission. The letter of credit is required by the Texas Railroad Commission for all companies operating in the state of Texas with production greater than limits they prescribe.

XML 36 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Equity Transactions
3 Months Ended
Mar. 31, 2013
Equity [Abstract]  
Equity Transactions

Note 9 - Equity Transactions

 

On January 1, 2013, 300,000 warrants with a strike price equal to $.70 were issued to an investor relations consulting firm as compensation for service. Half of these warrants vested at March 31, 2013 and the other half of these warrants vest as of June 30, 2013. We expensed $16,180 as professional fees in the quarter ended March 31, 2013. We will expense $16,180 in the quarter ending June 30, 2013.

XML 37 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stock Options (Tables)
3 Months Ended
Mar. 31, 2013
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Summary of Stock Options

A summary of stock options is as follows:

 

    Options     Weighted
Avg.
Exercise
Price
    Warrants     Weighted
Avg.
Exercise
Price
 
Outstanding December 31, 2012     1,685,000     $ 0.54       250,000     $ 0.70  
Granted     -       -       300,000       0.70  
Cancelled     -       -                  
Exercised     -       -       -       -  
Outstanding March 31, 2013     1,685,000     $ 0.54       550,000     $ 0.70
XML 38 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Variable to Fixed Price Commodity Swaps (Detail) (Fair Value, Measurements, Recurring, USD $)
Mar. 31, 2013
Fair Value, Inputs, Level 2
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Crude oil contracts $ (1,829,070)
Fair Value, Inputs, Level 3
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Marketable Securities $ 1,018,573
XML 39 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments And Contingencies - Additional Information (Detail) (Texas Railroad Commission [Member], USD $)
Mar. 31, 2013
Texas Railroad Commission [Member]
 
Letters of Credit Outstanding, Amount $ 50,000
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Condensed Consolidated Statements of Cash Flows (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Cash flows from operating activities    
Net income (loss) $ 20,036 $ (1,081,682)
Depreciation, depletion and amortization 444,537 422,603
Shares based payments issued for services 49,334 52,935
Accretion of asset retirement obligation 28,193 22,397
Loss on derivatives 28,775 763,734
Loss on sale of fixed assets 7,785 0
Changes in assets and liabilities:    
Accounts receivable 14,877 (274,102)
Deposits and prepaid expenses 26,171 (135,466)
Accounts payable (455,950) (1,287,925)
Accrued liabilities (264,889) 170,863
Cash flows from operating activities (101,131) (1,346,643)
Cash flows from investing activities    
Purchase of fixed assets (19,597) 0
Additions to oil properties (1,498,962) (1,775,839)
Sales of oil properties 15,000 0
Proceeds from sale of fixed assets 1,600 0
Cash flows from investing activities (1,501,959) (1,775,839)
Cash flows from financing activities    
Payments on long-term debt 0 (3,630)
Payments on notes payable (200,000) 0
Proceeds from borrowings 1,500,000 1,100,000
Distribution to non-controlling interest in subsidiary 0 (76,349)
Cash flows from financing activities 1,300,000 1,020,021
Net (decrease) in cash (303,090) (2,102,461)
Cash - beginning 767,494 2,770,440
Cash - ending 464,404 667,979
Supplemental disclosures:    
Interest paid 71,006 45,263
Income taxes paid 0 0
Non-cash transactions:    
Share based payments issued for services $ 49,334 $ 52,935
XML 42 R10.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivative Instruments
3 Months Ended
Mar. 31, 2013
Derivative Instruments [Abstract]  
Derivative Instruments

Note 5 - Derivative Instruments

 

We have entered into certain derivative or physical arrangements with respect to portions of our crude oil production to reduce our sensitivity to volatile commodity prices and/or to meet hedging requirements under our Credit Facility. We believe that these derivative arrangements, although not free of risk, allow us to achieve a more predictable cash flow and to reduce exposure to commodity price fluctuations. However, derivative arrangements limit the benefit of increases in the prices of crude oil. Moreover, our derivative arrangements apply only to a portion of our production.

 

We have an Intercreditor Agreement in place between us, our counterparty BP Corporation North America, Inc. ("BP"), and our agent Texas Capital Bank, N.A., which allows Texas Capital Bank to also act as agent for BP for the purpose of holding and enforcing any liens or security interests resulting from our derivative arrangements. Therefore, we are not required to post additional collateral, including cash.

 

The following derivative contracts were in place at March 31, 2013:

 

    Term     Monthly Volumes     Price/bbl     Fair Value  
Crude oil swap     7/13-12/15      

1,873

bbls   $ 76.74      

(1,063,584

)
Crude oil swap     7/11-12/15      

2,536

bbls   $ 83.70      

 (765,486

)
                            $

(1,829,070

)

 

Monthly volume is the weighted average throughout the period.

 

The total fair value is shown as a derivative instrument in both the current and non-current liabilities on the balance sheet.

XML 43 R27.htm IDEA: XBRL DOCUMENT v2.4.0.6
Equity Transactions - Additional Information (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Professional Fees $ 356,222 $ 332,972
Warrant [Member]
   
Stock Issued During Period, Shares, Issued for Services 300,000  
Share Price $ 0.70  
Professional Fees 16,180  
Accrued Professional Fees, Current $ 16,180  
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Summary of stock options and warrants (Detail) (USD $)
3 Months Ended
Mar. 31, 2013
Options  
Options Outstanding 1,685,000
Options Granted 0
Options Cancelled 0
Options Exercised 0
Options Outstanding 1,685,000
Weighted Ave. Exercise Price  
Weighted Average Exercise Price Outstanding $ 0.54
Weighted Average Exercise Price Granted $ 0
Weighted Average Exercise Price Cancelled $ 0
Weighted Average Exercise Price Exercised $ 0
Weighted Average Exercise Price Outstanding $ 0.54
Warrants  
Warrants Outstanding 250,000
Warrants Granted 300,000
Warrants Exercised 0
Warrants Outstanding 550,000
Weighted Ave. Exercise Price  
Weighted Ave. Exercise Price Outstanding $ 0.70
Weighted Ave. Exercise Price Granted $ 0.70
Weighted Ave. Exercise Price Exercised $ 0
Weighted Ave. Exercise Price Outstanding $ 0.70