UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2020

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-18774

SPINDLETOP OIL & GAS CO.

(Exact name of registrant as specified in its charter)

(972-644-2581)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]

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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] 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 [ X ] No [ ]

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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).

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

Exchange Act. Yes [ ] No [ X ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common, as of the latest practicable date.

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

FORM 10-Q

For the quarter ended June 30, 2020

Index to Consolidated Financial Statements and Schedules

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Part I - Financial Information

Item 1. - Financial Statements

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND ORGANIZATION

The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's annual Form 10-K filing. Accordingly, the reader of this Form 10-Q may wish to refer to the Company's Form 10-K for the year ended December 31, 2019 for further information.

The consolidated financial statements presented herein include the accounts of Spindletop Oil & Gas Co., a Texas corporation ("the Company") and its wholly owned subsidiaries, Prairie Pipeline Co., a Texas corporation and Spindletop Drilling Company (“SDC”), a Texas corporation. All significant inter-company transactions and accounts have been eliminated.

In the opinion of management, the accompanying unaudited interim financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, the results of operations and changes in cash flows of the Company and its consolidated subsidiaries for the interim periods presented. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations.

2. COMMON STOCK

Effective April 6, 2020, and June 20, 2020, the Company repurchased 45,036 shares and 9,248 shares of its common stock as from a non-controlling, unaffiliated shareholder of the Company for a negotiated purchase price of $56,295 and $11,560 respectively, or $1.25 per share. The repurchased shares are held as Treasury Stock.

3. NOTES PAYABLE

On May 1, 2020, the Company was granted a loan (the “Loan”) in the amount of $402,573 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which was enacted March 27, 2020.

The Loan, which is in the form of a note dated April 9, 2020 issued by the Company, matures twenty-four months from the date of the note and bears interest at the rate of 0.98% per annum, payable monthly commencing on November 9, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties.

The PPP provides that loan and accrued interest may be forgiven after either an eight week period or a twenty-four week period as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. Under the CARES Act, the amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the period set forth in the CARES Act. It is our understanding that the Company’s lender has not begun accepting applications for loan forgiveness from borrowers who received loans at the same time we did.

The Company believes it has used the loan proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds should meet the conditions for forgiveness of at least a portion of the loan, we cannot assure you that the Company will be eligible for forgiveness of the loan, in whole or in part.

Subsequent Events

Management has evaluated subsequent events through August 19, 2020, the date on which the financial statements were available to be issued.

On July 23, 2020, SDC received notice of service of process from its registered agent in Louisiana of a lawsuit filed in Louisiana against SDC and multiple other oil and gas companies alleging a pollution claim for properties operated by the defendants. SDC plans to file an answer and defend itself.

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Item 2. - Management's Discussion and Analysis of Financial Condition and

Results of Operations

WARNING CONCERNING FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.

This Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors, that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the factors listed and described at Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K, which investors should review. There have been changes to the risk factors previously described in the Company’s Form 10-K. for the fiscal year ended December 31, 2019 (the “Form 10-K”), including significant global economic and pandemic factors occurring during the first quarter of 2020 and continuing into the second quarter of 2020 which are described in the following two paragraphs.

At the end of 2019, a novel strain of coronavirus (“COVID-19”) was reported in China. In the first quarter of 2020 and continuing currently, COVID-19 has spread to other countries including the U.S. This pandemic has drastically weakened the global demand for oil, putting unprecedented pressure on the price of oil. In addition, the delay through the end of the first quarter of 2020 of the Organization of Petroleum Exporting Countries and Russia to agree on production cuts, caused oil prices to drop dramatically in the first quarter of 2020 to as low as $6.00 per barrel which is approximately one-tenth of the oil price at the beginning of 2020. Additionally, during the second quarter of 2020, for the first time ever, the price of a barrel of oil plunged below zero dollars on the West Texas Intermediate Crude Index going as low as negative $37.63 due to concerns about dwindling capacity to store all the crude oil produced in excess of demand.

During the first half of 2020 and continuing subsequent to the end of the quarter, attempts at containment of COVID-19 have resulted in decreased economic activity which has adversely affected the broader global economy. As the economy dramatically stalled, the demand for oil and natural gas substantially weakened. Many countries around the world, as well as the majority of the states in the United States, ordered their citizens to stay home in order to contain the spread of the virus. As part of the “shelter in place” and “stay at home” orders in effect during the first half of the year, fewer businesses than normal are open, less people are traveling to work, and more people are working from home which has reduced the demand for oil and natural gas. Airlines have dramatically cut back on flights as the number of passengers has fallen off. Fewer cars on the road and planes in the sky mean far less demand for oil. At this time, the full extent to which COVID-19 will negatively impact the global economy and our business is uncertain, but pandemics or other significant public health events will most likely have a material adverse effect on our business and results of operations.

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The Company has felt the negative effects of these plummeting product prices and implemented cost cutting measures including temporary company-wide reductions in compensation for Company employees, including key and technical employees and officers, effective April 1, 2020. To further reduce expenses, the Company temporarily shut in wells that were not profitable when commodity prices plummeted. The Company is forecasting that oil and natural gas prices will remain lower than 2019 prices through the end of 2020, which the Company believes may cause an operating loss for all of 2020 in spite of the Company’s cost cutting measures. Operating losses are very likely to continue until oil and natural gas prices return to substantially higher levels on a continued basis.

Other uncertainties regarding the global economic and financial environment could lead to an extended national or global economic recession. A slowdown in economic activity caused by a recession would likely reduce national and worldwide demand for oil and natural gas and result in lower commodity prices for long periods of time. Costs of exploration, development and production have not yet adjusted to current economic conditions, or in proportion to the significant reduction in product prices. Prolonged, substantial decreases in oil and natural gas prices would likely have a material adverse effect on the Company’s business, financial condition, and results of operations, and could further limit the Company's access to liquidity and credit, and could hinder its ability to satisfy its capital requirements.

In the past several years, capital and credit markets have experienced volatility and disruption. Given the levels of market volatility and disruption, the availability of funds from those markets may diminish substantially. Further, arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards, or altogether ceased to provide funding to borrowers.

Due to these potential capital and credit market conditions, the Company cannot be certain that funding will be available in amounts or on terms acceptable to the Company. The Company is evaluating whether current cash balances and cash flow from operations alone would be sufficient to provide working capital to fully fund the Company's operations. Accordingly, the Company is evaluating alternatives, such as joint ventures with third parties, or sales of interest in one or more of its properties. Such transactions, if undertaken, could result in a reduction in the Company's operating interests or require the Company to relinquish the right to operate the property. There can be no assurance that any such transactions can be completed or that such transactions will satisfy the Company's operating capital requirements. If the Company is not successful in obtaining sufficient funding or completing an alternative transaction on a timely basis on terms acceptable to the Company, the Company would be required to curtail its expenditures or restructure its operations, and the Company would be unable to continue its exploration, drilling, and recompletion program, any of which would have a material adverse effect on its business, financial condition, and results of operations.

There could be adverse legislation which if passed, would significantly curtail our ability to attract investors and raise capital. Proposed changes in the Federal income tax laws which would eliminate or reduce the percentage depletion deduction and the deduction for intangible drilling and development costs for small independent producers, will significantly reduce the investment capital available to those in the industry as well as our Company. Lengthening the time to expense seismic costs will also have an adverse effect on our ability to explore and find new reserves.

Other sections of this report may also include suggested factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks may emerge from time to time and it is not possible for management to predict all such matters; nor can we assess the impact of all such matters on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and current reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise.

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Results of Operations

Six months ended June 30, 2020 compared to six months ended June 30, 2019

Oil and gas revenues for the first six months of 2020 were $1,092,000, as compared to $2,375,000 for the same period in 2019, a decrease of approximately $1,283,000 or 54.0%

Oil sales for the first six months of 2020 were approximately $608,000 compared to approximately $1,350,000 for the first six months of 2019, a decrease of approximately $742,000 or 55.0%. Oil sales volumes for the first six months of 2020 were approximately 12,300 bbls, compared to approximately 20,400 bbls during the same period in 2019, a decrease of approximately 8,100 bbls, or 39.7%.

Average oil prices received were $38.78 per bbl in the first half of 2020 compared to $54.67 per bbl in the first half of 2019, a decrease of approximately $15.89 per bbl or 29.1%.

Natural gas revenue for the first six months of 2020 was $484,000 compared to $1,025,000 for the same period in 2019, a decrease of approximately $541,000 or 52.8%. Natural gas sales volumes for the first six months of 2020 were approximately 392,000 mcf compared to approximately 445,000 mcf during the first six months of 2019, a decrease of approximately 53,000 mcf or 11.9%.

Average gross natural gas prices received were $1.23 per mcf in the first six months of 2020 as compared to $2.30 per mcf in the same time period in 2019, a decrease of approximately $1.07 per mcf or 46.5%.

In general, revenues from oil and gas producing operations experienced a significant decrease for the six months ended 2020 compared to the same period in 2019. In addition, the second quarter results from operations also experienced a significant decline over the same period in 2019 as well as a decline from operations during the first quarter of 2020. The declines result in part from decreased oil and gas prices, as well as production declines. A significant number of both operated wells and non-operated wells were shut-in during the second quarter of 2020 due to the low oil and gas prices. Operators shut in wells, where practicable, waiting for the low oil prices to rebound. Prices have rebounded slightly, but not to pre second quarter 2019 levels.

Revenues from lease operations were $119,000 in the first six months of 2020 compared to $187,000 in the first six months of 2019, a decrease of approximately $68,000 or 36.4%. This decrease is due to a reduction in field supervision charges. Revenues from lease operations are derived from field supervision charged to operated leases along with operator overhead charged to operated leases.

Revenues from gas gathering, compression and equipment rental for the first six months of 2020 were $45,000 compared to $66,000 for the same period in 2019, a decrease of approximately $21,000 or 31.8%. These revenues are derived from gas volumes produced and transported through our gas gathering systems.

Real estate revenue was approximately $134,000 during the first six months of 2020 compared to $119,000 for the first six months of 2019, an increase of approximately $15,000, or 12.6%. The increase is due to new office leases signed during the period.

Interest income was $103,000 during the first six months of 2020 as compared to $113,000 during the same period in 2019, a decrease of approximately $10,000 or 8.9%. Interest income is due to the Company investing its funds in both long-term and short-term certificates of depository accounts paying higher rates of interest than those received in money market accounts.

Other revenues for the first six months of 2020 were $19,000 as compared to $22,000 for the same time period in 2019, a decrease of approximately $3,000 or 13.6%.

Lease operating expenses in the first six months of 2020 were $462,000 as compared to $821,000 in the first six months of 2019, a net decrease of $359,000, or 43.7%. Of this net decrease, approximately $53,000 is due in part to net decreases in operating expenses billed by third-party operators on non-operated properties that were shut in during the second quarter of 2020. The remaining net decrease of approximately $306,000 represents overall increases and decreases in well expenditures on various operated properties.

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Production taxes, gathering and marketing expenses in the first six months of 2020 were approximately $256,000 as compared to $388,000 for the first six months of 2019, a decrease of approximately $132,000, or 34.0%. This decrease relates directly to the decrease in oil and gas revenues as described in the above paragraphs.

Pipeline and rental expenses for the first six months of 2020 were $4,000 compared to $19,000 for the same time period in 2019, a decrease of approximately $15,000 or 79.0%. The decrease in 2020 is due to non-recurring repair and maintenance expenses in the first half of 2019.

Real estate expenses in the first six months of 2020 were approximately $67,000 compared to $72,000 during the same period in 2019, a decrease of approximately $5,000 or 6.9%.

Depreciation, depletion, and amortization expenses for first six months of 2020 were $135,000 as compared to $270,000 for the same period in 2019, a decrease of $135,000, or 50.0%. $105,000 of the amount for the first six months of 2020 was for amortization of the full cost pool of capitalized costs compared to $239,000 for the same period of 2019, a decrease of $134,000 or 56.1%. The Company re-evaluated its proved oil and natural gas reserve quantities as of December 31, 2019. This re-evaluated reserve base was reduced for oil and gas reserves that were produced or sold during the first six months of 2020 and adjusted for newly acquired reserves or for changes in estimated production curves and future price assumptions.

A depletion rate of 4.184% for the first quarter of 2020 and a depletion rate of 0.813% for the second quarter of 2020 was calculated and applied to the Company’s full cost pool of capitalized oil and natural gas properties compared to rates of 3.191% and 3.554% for the first two quarters of 2019 respectively.

Asset Retirement Obligation (“ARO”) expense for the first six months of 2020 was approximately $60,000 as compared to approximately $94,000 for the same time period in 2019, a decrease of approximately $34,000 or 36.2%. The ARO expense is calculated to be the discounted present value of the estimated future cost to plug and abandon the Company’s producing wells.

General and administrative expenses for the first six months of 2020 were approximately $1,391,000 as compared to approximately $1,491,000 for the same time period of 2019, a decrease of approximately $100,000 or 6.7%. The decrease is from reduced salary, wages, other personnel costs, and reduced office, computer, and other expenses.

Three months ended June 30, 2020 compared to three months ended June 30, 2019

Oil and natural gas revenues for the three months ended June 30, 2020 were $348,000, compared to $1,210,000 for the same time period in 2019, a decrease of $862,000, or 71.2%, due to low oil prices and the shutting in of production during the second quarter of 2020.

Oil sales for the second quarter of 2020 were approximately $118,000 compared to approximately $734,000 for the same period of 2019, a decrease of approximately $616,000 or 83.9%. Oil volumes sold for the second quarter of 2020 were approximately 3,200 bbls compared to approximately 10,200 bbls during the same period of 2019, a decrease of approximately 7,000 bbl or 68.6%.

Average oil prices received were approximately $23.46 per bbl in the second quarter of 2020 compared to $54.67 per bbl during the same period of 2019, a decrease of approximately $31.21 per bbl, or 57.1%.

Natural gas revenues for the second quarter of 2020 were $230,000 compared to $476,000 for the same period in 2019, a decrease of $246,000 or 51.7%. Natural gas volumes sold for the second quarter of 2020 were approximately 190,000 mcf compared to approximately 237,000 mcf during the same period of 2019, a decrease of approximately 47,000 mcf, or19.8%.

Average gross natural gas prices received were approximately $1.06 per mcf in the second quarter of 2020 as compared to approximately $2.10 per mcf during the same period in 2019, a decrease of approximately $1.04 or 49.5%.

Revenues from lease operations for the second quarter of 2020 were approximately $44,000 compared to approximately $132,000 for the second quarter of 2019, a decrease of approximately $88,000 or 66.7%. This decrease is due to a reduction in field supervision charges. Revenues from lease operations are derived from field supervision charged to operated leases along with operator overhead charged to operated leases.

Revenues from gas gathering, compression and equipment rental for the second quarter of 2020 were approximately $18,000, compared to approximately $33,000 for the same period in 2019, a decrease of approximately $15,000 or 45.5%. These revenues are derived from gas volumes produced and transported through our gas gathering systems.

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Revenues from gas gathering, compression and equipment rental for the second quarter of 2020 were approximately $18,000, compared to approximately $33,000 for the same period in 2019, a decrease of approximately $15,000 or 45.5%. These revenues are derived from gas volumes produced and transported through our gas gathering systems.

Real estate revenue was approximately $70,000 during the second quarter of 2020 compared to $59,000 for the same time period in 2019. The increase is due to higher rental rates and new office leases signed during the period.

Interest income for the second quarter of 2020 was approximately $59,000 as compared with approximately $42,000 for the same period in 2019, an increase of approximately $17,000 or 40.5%. Interest income is derived from investments in both short-term and long-term certificates of deposit as well as money market accounts at banks.

Other revenues for second quarter of 2020 were approximately $9,000 as compared with approximately $11,000 for the same period in 2019, a decrease of approximately $2,000 or 18.2%.

Lease operating expenses in the second quarter of 2020 were $170,000 as compared to $493,000 in the second quarter of 2019, a net decrease of approximately $323,000, or 65.5%. Of this net decrease, approximately $ 251,000 is from overall decreases in well expenditures on various operated properties, offset by a $72,000 reduction in net operating expenses billed by third-party operators on non-operated properties

Production taxes, gathering, transportation and marketing expenses for the second quarter of 2020 were approximately $122,000 as compared to $194,000 during the second quarter of 2019, a net decrease of approximately $72,000 or 37.1%. These decreases relate directly to the decrease in oil and gas revenues as described in the above paragraphs.

Pipeline and rental expenses for the second quarter of 2020 were $1,000 compared to $16,000 for the same time period in 2019, a decrease of approximately $15,000, or 93.8%. The decrease in 2020 is due to non-recurring repair and maintenance expenses incurred in the second quarter of 2019.

Real estate expenses during the second quarter 2020 were approximately $29,000 compared to approximately $33,000 for the same period in 2019, a decrease of approximately $4,000 or 12.1%.

Depreciation, depletion, and amortization expenses for the second quarter of 2020 were $34,000 as compared to $148,000 for the same period in 2019, a decrease of $114,000, or 77.0%. $19,000 of the amount for the second quarter of 2020 was for amortization of the full cost pool of capitalized costs compared to $132,000 for the second quarter of 2019, a decrease of $113,000 or 85.6%. The Company re-evaluated its proved oil and natural gas reserve quantities as of December 31, 2019. This re-evaluated reserve base was reduced for oil and gas reserves that were produced or sold during the first six months of 2020 and adjusted for newly acquired reserves or for changes in estimated production curves and future price assumptions. A depletion rate of 4.184% for the first quarter of 2020 and a depletion rate of 0.813% for the second quarter of 2020 was calculated and applied to the Company’s full cost pool of capitalized oil and natural gas properties compared to rates of 3.191% and 3.554% for the first two quarters of 2019 respectively

Asset Retirement Obligation (“ARO”) expense for the second quarter of 2020 was approximately $30,000 as compared to approximately $47,000 for the same time period in 2019, a decrease of approximately $17,000 or 36.2%. The ARO expense is calculated to be the discounted present value of the estimated future cost to plug and abandon the Company’s producing wells.

General and administrative expenses for the second quarter of 2020 were $669,000 compared to $783,000 for the same period in 2019, a decrease of approximately $114,000 or 14.6%. The decrease comes from decreased salary, wages, and other personnel costs, as well as decreases in office, computer, and other expenses.

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Financial Condition and Liquidity

The Company's operating capital needs, as well as its capital spending program are generally funded from cash flow generated by operations. The Company is operating at a loss and projects to continue to operate at a deficient through the end of the year unless oil and natural gas prices rebound substantially. Because future cash flow is subject to a number of variables, such as the level of production and the sales price of oil and natural gas, the Company can provide no assurance that its operations will provide cash sufficient to maintain current levels of capital spending. Accordingly, the Company may be required to seek additional financing from third parties in order to fund its exploration and development programs.

Item 4. - Controls and Procedures

(a) As of the end of the period covered by this report, Spindletop Oil & Gas Co. carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15. Based upon the evaluation, the Company's Principal Executive Officer and Principal Financial and Accounting Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report.

(b) There have been no changes in the Company's internal controls over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect the Company's internal controls over financial reporting.

Part II – Other Information

Item 5. – Other Information

Effective March 1, 2020, the Company acquired additional working interests of 3.281% with a net revenue interest of 2.567% in its operated Weise 28-1 well located in Wheeler Co., Texas. The acquisition brings the Company’s total working interest in the well to 36.446% with a net revenue interest of 29.187%.

Effective May 1, 2020, the Company acquired additional working interest of 6.05% with a net revenue interest of 4.84% in its operated Opal #1 well located in Martin Co., Texas. The acquisition brings the Company’s total working interest in the well to 61.908% with a net revenue interest of 49.527%.

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Item 6. - Exhibits

The following exhibits are filed herewith or incorporated by reference as indicated.

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* filed herewith

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.