Trio Petroleum (TPET) - 2024 Q4 - Annual Report

Financial Performance and Losses - The company reported revenues of $213,204 for the year ended October 31, 2024, with a net loss of$9,626,797 and cash flows used in operating activities of $3,840,744[99] - For the year ended October 31, 2023, the company generated no revenues, reported a net loss of$6,544,426, and cash flows used in operating activities of $4,036,834[99] - As of October 31, 2024, the company had an accumulated deficit of$20,073,679, raising substantial doubt about its ability to continue as a going concern[99] - The company is in the exploration stage and has generated substantial net losses, with future performance uncertain due to lack of historical data and operational risks[119] Permits and Regulatory Challenges - The company currently has permits from Monterey County for the HV-1, HV-2, HV-3A, and HV-4 wells, allowing each well to be tested for an 18-month period[103] - The company is seeking additional permits from regulatory agencies, including conditional use permits, drilling permits, and permits for long-term production[104] - The company's operations are vulnerable to delays and obstacles in obtaining necessary permits from federal, state, county, and local agencies[101] - Compliance with environmental, health, and safety regulations may result in material liabilities and costs[140] Operational Risks and Dependencies - The company's contractor model for drilling operations makes it dependent on the availability of drilling rigs and personnel, which could hinder operations[105] - The company may face challenges in securing drilling rigs, equipment, and personnel, which could delay exploration and development plans[123] - Oil and natural gas operations face operational risks including fires, blowouts, spills, and equipment failures[136][137] - Development schedules for oil and natural gas projects are subject to delays and cost overruns due to equipment and personnel availability[138] - The company's operations may be dependent on unreliable or costly sources of electricity and natural gas[143] Capital and Financial Risks - The company operates in a highly capital-intensive industry, with significant upfront costs for oil and gas exploration and production, and no guarantee of covering expenses through production[113] - Future cash flow is dependent on variables such as market prices of oil and gas, reserves, ability to acquire new reserves, and operating expenses[114] - The company requires substantial additional capital for exploration, appraisal, development, and production activities, which may not be available on favorable terms[124] - A decline in global or local oil and natural gas prices could significantly impact the company's revenue, profitability, and ability to finance operations[128] - The company may incur substantial losses from future operations due to inadequate insurance coverage[142] Exploration and Production Uncertainties - The company faces substantial uncertainties in estimating asset characteristics, including size and quality, due to reliance on geological and engineering interpretations[115] - Drilling wells is speculative, with significant costs that may exceed estimates, and no assurance of discoveries or additions to reserves[118] - Seismic studies do not guarantee the presence or economic viability of oil and gas reserves[122] - Oil and natural gas exploration and production activities are subject to numerous risks, including the risk that drilling will not result in commercially viable production[133] - Undeveloped discoveries may not produce oil and natural gas in commercial quantities or at anticipated costs, potentially leading to project abandonment[135] Market and Regulatory Risks - Marketability of future oil and natural gas production is affected by factors such as price fluctuations, transportation availability, and government regulations[134] - Climate change regulations and energy transition issues may constrain and impede the oil and gas industry[144] - Acquisitions and integration of significant assets may be difficult and could adversely affect the company's results of operations[148][149] - Inflationary pressures have increased construction material and labor costs, particularly for steel, cement, and other materials, leading to higher budgeted construction costs[160] Stock Market and Listing Issues - The company's common stock began trading on the NYSE American in April 2023 under the symbol "TPET," but there is no assurance of an active and liquid trading market continuing[162] - On February 26, 2024, the company received a notice from NYSE American for non-compliance with continued listing standards due to low stock price, but trading continued with a ".BC" designation[165] - On May 1, 2024, the company regained compliance with NYSE American listing requirements as the 30-day average stock price reached $0.25 ($5.00 post-reverse split)[166] - On November 5, 2024, NYSE American suspended trading of the company's common stock due to low selling price, but trading resumed on November 15, 2024, after a reverse stock split[167] - If delisted from NYSE American, the company's common stock may trade over-the-counter, potentially reducing liquidity, market price, and analyst coverage[168] - Delisting could subject the company's common stock to "penny stock" rules, imposing additional sales practice requirements on broker-dealers and limiting liquidity[169] - The company's share price has been highly volatile, trading between $60.00 and$1.12 (post-reverse split) since its IPO[171] - The company's stock price may be influenced by factors such as oil and natural gas prices, exploration success, regulatory developments, and general market conditions[176] Corporate Governance and Reporting - The company is classified as an "emerging growth company" under the JOBS Act, exempting it from certain reporting requirements for up to five years[175] - The company is classified as a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[266] - The company does not intend to pay dividends on its common stock in the foreseeable future[178] Related Party Transactions and Conflicts - The company faces potential conflicts of interest in negotiations with related parties, such as Lafayette Energy Corp and Trio LLC, due to overlapping management roles[106] - The company acquired an approximate 22% working interest in the McCool Ranch Oil Field from Trio LLC in October 2023[109] Financial Statement Risks - The company's financial statements do not include adjustments for potential impairments or contingent liabilities that may arise if it cannot fulfill operational commitments[100]