Document and Entity Information | 9 Months Ended | |
|---|---|---|
Sep. 30, 2011 | Nov. 08, 2011 | |
| Document And Entity Information | ||
| Entity Registrant Name | New Western Energy Corp. | |
| Entity Central Index Key | 0001479488 | |
| Document Type | 10-Q | |
| Document Period End Date | Sep. 30, 2011 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Is Entity a Well-known Seasoned Issuer? | No | |
| Is Entity a Voluntary Filer? | No | |
| Is Entity's Reporting Status Current? | Yes | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 64,226,867 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2011 |
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
|---|---|---|
| Stockholders' Equity | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 64,226,867 | 63,973,533 |
| Common stock, shares outstanding | 64,226,867 | 63,973,533 |
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
| Income Statement [Abstract] | ||||
| Revenues | $ 42,567 | $ 42,567 | $ 9,569 | |
| Expenses | ||||
| Depreciation and depletion | 426 | 426 | 1,278 | 1,278 |
| General and administrative | 63,608 | 41,420 | 195,465 | 91,148 |
| Exploration expenses | 1,287 | 538 | 40,541 | 18,646 |
| Oil and gas production | 14,490 | 27,993 | 692 | |
| Total expenses | 79,811 | 42,384 | 265,277 | 111,764 |
| Other income (expenses) | ||||
| Interest expense | (1,250) | (1,438) | (1,250) | (5,802) |
| Gain on sale of oil and gas property | (25,000) | |||
| Other income | 2,300 | |||
| Total other income | (1,250) | (1,438) | 23,750 | (3,502) |
| Loss from operations before income tax | (38,494) | (43,822) | (198,960) | (105,697) |
| Provision for income tax | 800 | |||
| Net Loss | (38,494) | (43,822) | (198,960) | (106,497) |
| Other Comprehensive (Gain) Loss: | ||||
| Unrealized gain on marketable securities | (52,500) | |||
| Comprehensive (income) loss | $ 14,006 | $ (43,822) | $ (198,960) | $ (106,497) |
| Basic and diluted net loss per share | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 |
| Weighted average number of shares outstanding | 64,201,504 | 63,434,026 | 64,156,219 | 62,791,582 |
Nature of operations, Basis of presentation and ongoing concern | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Nature of operations, Basis of presentation and ongoing concern |
NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN
New Western Energy Corporation (the “Company”) was incorporated in the State of Nevada on September 25, 2008. The Company’s principal business is the acquisition, exploration and development of, and production from oil, gas and mineral properties located in the United States.
On December 1, 2010, the Company formed an entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas started its operations in January 2011.
On July 29, 2011, the Company entered into a non-binding Letter of Intent to acquire the business operations of a third party production company, and made an earnest deposit of $17,000 (secured by a lien in the seller's interest in 2 oil wells) as of September 30, 2011. The Company expects to sign a definitive agreement to complete the acquisition on or about December 31, 2011.
Basis of presentation
The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at September 30, 2011, and the results of operations and cash flows for the three months and nine month periods ended September 30, 2011 and 2010. The balance sheet as of December 31, 2010 is derived from the Company’s audited financial statements.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Report on Form 10 for the fiscal year ended December 31, 2010, as filed with the Securities and Exchange Commission.
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company currently has on ongoing Regulation D private placement equity offering and has raised $76,000 during the nine months ended September 30, 2011 and through the date of this report. At September 30, 2011, the Company has working capital of $126,049, and incurred a net loss of $198,960 during the nine months ended September 30, 2011 and cash used in operating activities during the nine months ended September 30, 2011 was $288,659. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||
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Sep. 30, 2011 | |||||||||||||||
| Notes to Financial Statements | |||||||||||||||
| Summary of Significant Accounting Policies |
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary New Western Texas Oil and Gas Corporation. All intercompany balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of marketable securities, valuation of accounts, notes and other receivables, valuation of long-lived assets and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Fair value of Financial Instruments and Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
As of September 30, 2011, the level of fair value measurements for instruments accounted for at fair value was as follows:
The Company’s other financial instruments consist principally of cash, accounts receivable, accounts payable and amounts due to related parties. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Marketable Securities
The Company invests in various marketable securities and accounts for such investments in accordance with ASC 320, “Investments - Debt and Equity Securities”.
Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. Trading securities that the Company may hold are treated in accordance with ASC 320 with any unrealized gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Investments classified as held-to-maturity are carried at amortized cost. In determining realized gains and losses, the cost of the securities sold is based on the specific identification method.
The Company periodically reviews its investments in marketable securities and impairs any securities whose decrease in value is considered other than temporary. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments.
Net Earnings (Loss) Per Share
The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. At September 30, 2011, there were Class A Warrants outstanding for 2,685,000 common shares, Class B Warrants outstanding for 3,115,200 common shares and Class C Warrants outstanding for 426,666 common shares that if exercised, may dilute future earnings per share.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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Marketable Securities | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities |
NOTE 3: MARKETABLE SECURITIES
Marketable securities classified as available-for-sale consisted of the following at September 30, 2011:
As of September 30, 2011, the Company evaluated its marketable securities holdings by valuing the securities according to the quoted price of the securities on the stock exchange. It is the Company’s policy to assess its marketable securities for impairment on a quarterly basis, or more frequently if warranted by circumstances. The Company recorded an unrealized gain of $52,500 (reversing an unrealized loss of $52,500 as of June 30, 2011) and $0 on the marketable securities for the three months and nine months period ended September 30, 2011 compared to $0 for the same periods in 2010. The Company did not own any marketable securities during or as of December 31, 2010.
Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in the statement of operations and comprehensive income (loss).
The Company did not sell its marketable securities during the three months and nine months period ended September 30, 2011 and 2010, respectively.
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Oil and Gas Properties and Related Obligations | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and Gas Properties and Related Obligations |
NOTE 4: OIL AND GAS PROPERTIES AND RELATED OBLIGATIONS
The Company's aggregate capitalized costs related to oil properties consist of the following:
Changes in the Uncompleted Wells, Equipment and Facilities were as follows:
There were no exploration well costs capitalized for more than one year following the completion of drilling.
Doshier Lease, Nowata County, Oklahoma
On October 8, 2009, the Company entered into an Agreement to acquire the Doshier Lease with RC Oil Co, Inc. (“Operator”). The Doshier Lease is comprised of 7 wells to be re-worked in Nowata County, Oklahoma. The property spans 80-acres in an area surrounded by many producing oil leases. The Company purchased a 75 percent working interest (60.94% net revenue interest) in the Doshier Lease in exchange for $200,000 payable in cash. As of December 31, 2009, $100,000 of cash was still due and recorded in oil, gas and mineral properties obligations. The Company has a right of first refusal to purchase an additional 75% in all future wells developed by the Operator which the Operator presently owns. On April 30, 2010, the Company and the Operator negotiated to amend the Agreement and agreed to reduce the purchase consideration for Doshier Lease to $100,000. Accordingly, the property and the obligation was reduced by $100,000 on April 30, 2010. During 2010, the Company incurred costs of $50,000 to work-over the oil wells and capitalized such costs. As of December 31, 2010, the Company had paid in cash to the Operator the balance owed of $100,000 for purchase of Doshier Lease and $50,000 in work-over costs.
On May 5, 2011, the Company sold its ownership interest in Doshier Lease to XnE, Inc., a third party, in exchange for a total consideration of $175,000, comprising of cash consideration of $25,000 and 7,500,000 shares of common stock of XnE, Inc. valued at $150,000. The common stock received was valued at its fair value on the date of issuance. As of September 30, 2011, the Company received cash of $17,500 and 7,500,000 shares of common stock of XnE, Inc. and the remaining balance of cash consideration of $7,500 was recorded as a note receivable from XnE, Inc. Pursuant to the sale of Doshier lease, the Company recognized a gain of $25,000 and recorded it in the accompanying statements of operations for the nine month period ended September 30, 2011.
Texas Lease
On January 27, 2011, the Company’s subsidiary New Western Texas acquired a 50% working interest (39.66 % net revenue interest) in 160 acres of oil and gas leases in Jones County, Texas for $8,000 cash. Subsequently additional acquisition costs of $7,312 were incurred. The lease was purchased subject to a Venture Agreement with a third party (Venture partner) who holds the other 50% working interest and will act as the operator for a stipulated fee. Both parties will evenly split operating expenses of the lease. Operating proceeds after royalty interests and expenses shall be distributed 50% to the Company. Additionally, a stipulated portion of the Venture partner working interest proceeds shall also be distributed to the Company until the Company recovers its acquisition and development costs of the particular lease. Subsequent to any lease purchase under this Venture Agreement, the Company may decline to develop a property in which case the Venture partner must repurchase the working interest from the Company at the then fair value of the lease working interest. The Company is required to provide the operator with a prepaid amount of $10,000 to be used to fund operating expenses within 3 days of a request by the Venture partner. During the nine months ended September 30, 2011, the Company incurred $36,973 of capitalizable equipment costs classified as uncompleted wells equipment and facilities and $40,541 of non-capitalizable exploratory costs relating to the Texas lease that were expensed as incurred.
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Mineral Properties and related obligations | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||
| Mineral Properties and related obligations |
NOTE 5: MINERAL PROPERTIES AND RELATED OBLIGATIONS
The Company’s aggregate capitalized costs related to mineral properties consist of the following:
Since there was no production of minerals during the nine months ended September 30, 2011 and 2010, no depletion expense relating to mineral properties has been recorded during the three month and nine month periods ended September 30, 2011 and 2010, respectively.
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Notes Payable | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Notes Payable |
NOTE 6: NOTES PAYABLE
On July 28, 2011, the Company executed a Promissory Note (“Note”) for $50,000 from a stockholder for its working capital requirements. The Note shall be payable in full, including principal and interest, by July 31, 2012. The Note is unsecured and bears an interest rate of 10% per annum and is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans. The Company recorded an interest expense of $833 for the three months ended September 30, 2011 in the accompanying consolidated financial statements.
On August 30, 2011, the Company executed a Promissory Note (“Note”) for $50,000 from a stockholder for its working capital requirements. The Note shall be payable in full, including principal and interest, by January 31, 2013. The Note is unsecured and bears an interest rate of 10% per annum and is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans. The Company recorded an interest expense of $417 for the three months ended September 30, 2011 in the accompanying consolidated financial statements.
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Related Party Transactions and Balances | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Related Party Transactions and Balances |
NOTE 7: RELATED PARTY TRANSACTIONS AND BALANCES
Payable to Related party
At September 30, 2011 and December 31, 2010, there was $70,252 and $2,252, respectively due to the Chief Executive Officer for advances made to the Company. Amounts due to related party are unsecured, non-interest bearing and due on demand without specific repayment terms. In addition, compensation payable to the Chief executive Officer pursuant to the terms of an employment agreement amounted to $60,000 and $0 as of September 30, 2011 and December 31, 2010, respectively.
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Commitments and Contingencies | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Commitments and Contingencies |
NOTE 8: COMMITMENTS AND CONTINGENCIES
Legal Costs and Contingencies
In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.
If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable. As of September 30, 2011, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
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Stockholders' Equity | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Stockholders' Equity |
NOTE 9: STOCKHOLDERS' EQUITY
The Company’s capitalization at September 30, 2011 was 100,000,000 authorized common shares and 5,000,000 authorized preferred shares, both with a par value of $0.0001 per share.
Common Stock and Warrants
On January 11, 2011, the Company sold, pursuant to a private placement for up to 3,000,000 Units, 170,000 Units to an accredited investor for cash proceeds of $51,000 or $0.30 per Unit, each Unit consisting of one share of common stock and one redeemable Class C Warrant to purchase one share of common stock at an exercise price of $1.00 per share. Such warrants expire on December 31, 2013. The Class C warrants are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemption is given.
On July 28, 2011, the Company sold 83,333 Units to an accredited investor for cash proceeds of $25,000 or $0.30 per Unit, each Unit consisting of one share of common stock and one redeemable Class C Warrant to purchase one share of common stock at an exercise price of $1.00 per share. Such warrants expire on December 31, 2013. The Class C warrants are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemption is given.
As a result of all stock and warrant issuances as of September 30, 2011, the Company had 64,226,867 shares of common stock issued and outstanding, and 2,685,000 Warrant A, 3,115,200 Warrant B and 426,666 Warrant C outstanding for conversion into common stock.
The Company has not adopted any stock option plans as of September 30, 2011.
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Concentrations | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Concentrations |
NOTE 10: CONCENTRATIONS
Concentration of Operators
The Company’s oil leases are obtained from two separate lessors who also act as the operator for all leased properties. One operator uses its own equipment to extract oil and gas, and therefore, the Company does not own or lease any production equipment related to these leases. The Company also has one mineral lease with another lessor. There has been no activity on the mineral lease other than initial lease acquisition costs relating to the mineral lease as of September 30, 2011.
Concentration of Customer
The Company sells its oil product to one customer.
Concentration of Credit Risk
The Company’s financial instruments that are potentially exposed to credit risk consist primarily of cash and cash equivalents. At certain times, the demand deposits held in banks may exceed the federally insured limits. No amounts exceeded federally insured limits as of September 30, 2011 and December 31, 2010, respectively. The Company has not experienced any losses related to these deposits.
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Subsequent Events | 9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Notes to Financial Statements | |
| Subsequent Events |
NOTE 11: SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date these consolidated financial statements were issued.
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