TVC 10Q 03/31/07
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
AND EXCHANGE ACT OF 1934
For
the quarterly
period ended March 31, 2007 Commission
File No. 001-31852
Tri-Valley
Corporation
(Exact
name of registrant as specified in its charter)
Delaware 84-0617433
(State
or other
jurisdiction of
(I.R.S.
Employer Identification No.)
incorporation
or
organization)
4550
California Avenue, Suite 600, Bakersfield, California
93309
(Address
of principal executive offices)
(661)
864-0500
(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
x
No
o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (as defined in Rule 12b-2 of
the
Exchange Act). (Check one):
Large
accelerated filer o
Accelerated filer x
Non-accelerated filer o
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
The
number of shares of Registrant's common stock outstanding at April 30, 2007,
was
24,609,575.
TRI-VALLEY
CORPORATION
INDEX
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Page
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PART
I -
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FINANCIAL
INFORMATION
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3
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Item
1.
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Consolidated
Financial Statements
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3
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Item
2.
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Management's
Discussion and Analysis of Financial
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Condition
and Results of Operations
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14
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Item
3.
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Quantitative
and Qualitative Disclosures about Market Risk
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17
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Item
4.
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Controls
and Procedures
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17
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PART
II -
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OTHER
INFORMATION
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18
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Item
1A.
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Risk
Factors
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18
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Item
2.
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Unregistered
Sales of Equity Securities
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18
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Item
6.
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Exhibits
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18
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SIGNATURES
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19
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Page
Part
I - FINANCIAL INFORMATION
Item
1.
Unaudited Consolidated Financial Statements
TRI-VALLEY
CORPORATION
CONSOLIDATED
BALANCE SHEETS
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|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
(Audited)
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|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
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|
Cash
|
|
$
|
19,676,160
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|
$
|
15,598,215
|
|
Accounts
receivable, trade
|
|
|
808,062
|
|
|
377,278
|
|
Prepaid
expenses
|
|
|
262,194
|
|
|
42,529
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
20,746,416
|
|
|
16,018,022
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|
|
|
|
|
|
|
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Property
and equipment, net
|
|
|
|
|
|
|
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Proved
properties
|
|
|
1,371,959
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|
|
1,407,925
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|
Unproved
properties
|
|
|
2,627,064
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|
|
2,792,340
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|
Rigs
|
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|
5,740,748
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|
|
5,371,593
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|
Other
property and equipment
|
|
|
2,923,182
|
|
|
2,504,185
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|
|
|
|
|
|
|
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Total
property and equipment, net
|
|
|
12,662,953
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|
|
12,076,043
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|
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|
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Other
assets
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|
|
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|
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Deposits
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|
|
309,833
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|
|
309,833
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|
Investments
in partnerships
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|
|
17,400
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|
|
17,400
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|
Goodwill
|
|
|
212,414
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|
|
212,414
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Other
|
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20,413
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20,413
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|
|
|
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|
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Total
other assets
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|
|
560,060
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|
|
560,060
|
|
|
|
|
|
|
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Total
assets
|
|
$
|
33,969,429
|
|
$
|
28,654,125
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
Current
liabilities
|
|
|
|
|
|
|
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Notes
payable
|
|
$
|
546,927
|
|
$
|
619,069
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Notes
payable - related parties
|
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38,656
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|
|
501,036
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Accounts
payable and accrued expenses
|
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3,322,228
|
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2,237,116
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|
Amounts
payable to joint venture participants
|
|
|
115,184
|
|
|
280,815
|
|
Advances
from joint venture participants, net
|
|
|
6,877,053
|
|
|
5,408,909
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|
|
|
|
|
|
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Total
current liabilities
|
|
|
10,900,048
|
|
|
9,046,945
|
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|
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Non-Current
Liabilities
|
|
|
|
|
|
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Asset
retirement obligation
|
|
|
222,714
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|
216,714
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Long-term
portion of notes payable - related parties
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685,556
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|
|
698,963
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Long-term
portion of notes payable
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2,015,963
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|
2,047,885
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|
|
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|
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Total
non-current liabilities
|
|
|
2,924,233
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2,963,562
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Total
liabilities
|
|
|
13,824,281
|
|
|
12,010,507
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Stockholders'
equity
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Common
stock, $.001 par value; 100,000,000 shares
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|
authorized;
24,537,251 and 23,546,655 issued and
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outstanding
at March 31, 2007, and December 31,
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2006,
respectively
|
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24,397
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23,407
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Less:
common stock in treasury, at cost,
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100,025
shares
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|
(13,370
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)
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|
(13,370
|
)
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Capital
in excess of par value
|
|
|
34,247,474
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|
28,692,780
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Additional
paid in capital - warrants
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706,159
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|
247,313
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Additional
paid in capital - stock options
|
|
|
1,400,553
|
|
|
1,262,404
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|
Additional
paid in capital - Great Valley Drilling Company, LLC and Great Valley
Production Services Company, LLC
|
|
|
5,042,967
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|
|
5,438,087
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Accumulated
deficit
|
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|
(21,263,032
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)
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|
(19,007,003
|
)
|
|
|
|
|
|
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Total
stockholders' equity
|
|
|
20,145,148
|
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|
16,643,618
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|
|
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Total
liabilities and stockholder's equity
|
|
$
|
33,969,429
|
|
$
|
28,654,125
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|
The
accompanying notes are an integral part of these condensed financial
statements.
TRI-VALLEY
CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
the Three Months
|
|
|
|
Ended
March 31
|
|
|
|
2007
|
|
2006
|
|
Revenues
|
|
|
|
|
|
|
|
Sale
of oil and gas
|
|
$
|
164,186
|
|
$
|
318,722
|
|
Rig
income
|
|
|
1,250,503
|
|
|
-
|
|
Other
income
|
|
|
101,611
|
|
|
38,448
|
|
Interest
income
|
|
|
94,067
|
|
|
6,857
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
|
1,610,367
|
|
|
364,027
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
Oil
and gas lease expense
|
|
|
88,395
|
|
|
57,414
|
|
Mining
exploration expenses
|
|
|
63,456
|
|
|
200,586
|
|
Drilling
and development
|
|
|
232,496
|
|
|
42,561
|
|
Rig
operations
|
|
|
444,558
|
|
|
-
|
|
Depletion,
depreciation and amortization
|
|
|
253,123
|
|
|
111,668
|
|
Interest
|
|
|
76,896
|
|
|
83,041
|
|
Impairment
loss
|
|
|
246,862
|
|
|
458,564
|
|
General
and administrative
|
|
|
2,460,610
|
|
|
905,913
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
3,866,396
|
|
|
1,859,747
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations, before income taxes and
discontinued
operations
|
|
|
(2,256,029
|
)
|
|
(1,495,720
|
)
|
Tax
provision
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations, before discontinued
|
|
|
|
|
|
|
|
operations
|
|
|
(2,256,029
|
)
|
|
(1,495,720
|
)
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
|
-
|
|
|
(1,568,387
|
)
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(2,256,029
|
)
|
$
|
(3,064,107
|
)
|
|
|
|
|
|
|
|
|
Basic
net loss per share:
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
$
|
(.09
|
)
|
$
|
(.06
|
)
|
Income
(loss) from discontinued operations, net
|
|
$
|
-
|
|
$
|
(.07
|
)
|
Basic
loss per common share
|
|
$
|
(.09
|
)
|
$
|
(.13
|
)
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
24,537,251
|
|
|
22,938,902
|
|
|
|
|
|
|
|
|
|
Potentially
dilutive shares outstanding
|
|
|
27,608,334
|
|
|
25,660,058
|
|
No
dilution is reported since net income is a loss per SFAS 128
The
accompanying notes are an integral part of these condensed financial
statements.
TRI-VALLEY
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Three Months
|
|
|
|
Ended
March 31,
|
|
|
|
2007
|
|
2006
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,256,029
|
)
|
$
|
(3,064,107
|
)
|
Loss
from discontinued operations
|
|
|
-
|
|
|
(1,568,387
|
)
|
Loss
from continuing operations
|
|
$
|
(2,256,029
|
)
|
|
(1,495,720
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income to net cash used from operating
activities:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
253,123
|
|
|
111,668
|
|
Impairment,
dry hole and other disposals of property
|
|
|
252,862
|
|
|
458,564
|
|
Stock
options
|
|
|
138,149
|
|
|
-
|
|
Warrants
|
|
|
458,846
|
|
|
-
|
|
Changes
in operating capital:
|
|
|
|
|
|
|
|
Prepaids-(increase)
decrease
|
|
|
(219,665
|
)
|
|
-
|
|
Deposits-(increase)
decrease
|
|
|
-
|
|
|
(109,483
|
)
|
Accounts
receivable-(increase) decrease
|
|
|
(430,785
|
)
|
|
(320,821
|
)
|
Trade
accounts payable-increase (decrease)
|
|
|
550,590
|
|
|
215,603
|
|
Advances
from Great Valley Drilling, LLC-increase (decrease)
|
|
|
-
|
|
|
748,000
|
|
Accounts
payable to joint venture
|
|
|
|
|
|
|
|
participants
and related parties-increase (decrease)
|
|
|
(165,631
|
)
|
|
273,139
|
|
Advances
from joint venture participants - increase (decrease)
|
|
|
1,468,144
|
|
|
109,552
|
|
|
|
|
|
|
|
|
|
Net
cash provided (used in) continuing operations
|
|
|
49,604
|
|
|
(9,498
|
)
|
Net
cash provided by (used in) discontinued operations
|
|
|
-
|
|
|
(1,155,817
|
)
|
Net
cash provided (used) by operating activities
|
|
|
49,604
|
|
|
(1,165,315
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1,086,894
|
)
|
|
(1,655,315
|
)
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) continuing operations
|
|
|
(1,086,894
|
)
|
|
(499,044
|
)
|
Net
cash provided by (used in) discontinued operations
|
|
|
-
|
|
|
(1,156,271
|
)
|
|
|
|
|
|
|
|
|
Net
Cash Provided (Used) by Investing Activities
|
|
|
(1,086,894
|
)
|
|
(1,655,315
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
Proceeds
from long-term debt
|
|
|
-
|
|
|
1,268,755
|
|
Principal
payments on long-term debt
|
|
|
(45,329
|
)
|
|
(214,312
|
)
|
Net
proceeds from additional paid in capital - stock options
|
|
|
138,149
|
|
|
52,060
|
|
Net
proceeds from additional paid in capital - warrants
|
|
|
458,846
|
|
|
-
|
|
Net
proceeds from additional paid in capital - Great Valley Drilling/Great
Valley Production
|
|
|
(395,120
|
)
|
|
-
|
|
Stock
issuance costs
|
|
|
(706,875
|
)
|
|
-
|
|
Proceeds
from issuance of common stock
|
|
|
5,665,564
|
|
|
617,832
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) continuing operations
|
|
|
5,115,235
|
|
|
1,724,335
|
|
Net
cash provided by (used in) discontinued operations
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided (Used) by Financing Activities
|
|
|
5,115,235
|
|
|
1,724,335
|
|
TRI-VALLEY
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
|
|
|
|
|
|
Net
Increase in Cash and Cash Equivalents
|
|
|
4,077,945
|
|
|
59,522
|
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
15,598,215
|
|
|
4,876,921
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
19,676,160
|
|
$
|
4,936,443
|
|
|
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
76,896
|
|
$
|
155,841
|
|
Cash
paid for taxes
|
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
TRI-VALLEY
CORPORATION
NOTES
TO CONDENSED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED
March
31, 2007 and 2006
(Unaudited)
NOTE
1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description
of Business
Tri-Valley
Corporation (“TVC” or the Company), a Delaware corporation formed in 1971, is in
the business of exploring, acquiring and developing petroleum and metal and
mineral properties and interests therein. Tri-Valley has five subsidiaries
and
four operating segments or business lines.
· |
Tri-Valley
Oil & Gas Company (“TVOG”) operates the oil & gas activities. TVOG
derives the majority of its revenue from oil and gas drilling and
turnkey
development. TVOG primarily generates its own exploration prospects
from
its internal database, and also screens prospects from other geologists
and companies. TVOG generates these geological “plays” within a certain
geographic area of mutual interest. The prospect is then presented
to
potential co-ventures. The company deals with both accredited individual
investors and energy industry companies. TVOG serves as the operator
of
these co-ventures. TVOG operates both the oil and gas production
segment
and the drilling and development segment of our business
lines.
|
· |
Select
Resources Corporation (“Select”) was created in late 2004 to manage, grow
and operate Tri-Valley’s mineral interests. Select operates the minerals
segment of our business lines.
|
· |
Great
Valley Production Services, LLC, (“GVPS”) was formed in 2006 to operate
oil production services, well work over and drilling rigs, primarily
for
TVOG. However, from time to time TVOG may contract various units
to third
parties when not immediately needed for TVOG projects. Tri-Valley
has sold
49% of the ownership interest to private parties and has retained
a 51%
ownership interest in this subsidiary. Operations began in the third
quarter of 2006.
|
· |
Great
Valley Drilling Company, LLC (“GVDC”) was formed in 2006 to operate oil
drilling rigs, primarily in Nevada where Tri-Valley has 17,000 acres
of
prospective oil leases. However, because rig availability is so extremely
scarce in Nevada, GVDC has an exceptional opportunity to do contract
drilling for third parties in both petroleum and geothermal projects.
For
the time being GVDC, whose operation began in the first quarter of
2007,
expects its primary activity will be contract drilling for third
parties.
Tri-Valley has sold 49% of the ownership interest to private parties
and
has retained a 51% ownership interest in this subsidiary. TVC is
exercising its option to buy back the minority interest in GVDC and
expects to be finalized by the end of June 2007, at which time GVDC
will
be 100% owned by TVC. The repurchase cost is expected to be about
$1.7
million.
|
· |
Tri-Valley
Power Corporation is inactive at the present
time.
|
Basis
of Presentation
The
financial information included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The results of operations for the three-month
period ended March 31, 2007, are not necessarily indicative of the results
to be
expected for the full year.
The
accompanying consolidated financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles in the United States of America; and, therefore, should
be
read in conjunction with our Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 31, 2007, for the year ended
December 31, 2006.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, TVOG, Select, Tri-Valley Power Corporation, since
their inception. GVPS and GVDC, where the Company has retained a 51% ownership
interest, are also included in the consolidation. Other partnerships in which
the Company has an operating or nonoperating interest in which the Company
is
not the primary beneficiary and owns less than 51%, are proportionately
combined. This includes Opus I, Martins-Severin, Martins-Severin Deep, and
Tri-Valley Exploration 1971-1 partnerships. All material intra and intercompany
accounts and transactions have been eliminated in combination and consolidation.
NOTE
2 - PER SHARE COMPUTATIONS
Per
share
computations are based upon the weighted-average number of common shares
outstanding during each year. Common stock equivalents are not included in
the
computations since their effect would be anti-dilutive.
NOTE
3 - SUMMARY OF RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS
Asset
Retirement Obligation
In
March
2005, the Financial Accounting Standards Board issued FASB Interpretation
No. 47, “Accounting
for Conditional Asset Retirement Obligations”,
Under
the provisions of FIN No. 47, the term conditional asset retirement
obligation as used in SFAS No. 143, “Accounting
for Asset Retirement Obligations”, refers
to
a legal obligation to perform an asset retirement activity in which the timing
and/or method of settlement are conditional on a future event that may or may
not be within the control of the entity while the obligation to perform the
asset retirement activity is unconditional. Accordingly, an entity is required
to recognize a liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably estimated.
The
fair value of a liability for the conditional asset retirement obligation is
required to be recognized when incurred—generally upon acquisition,
construction, or development and/or through the normal operation of the asset.
We have adopted FIN No. 47 as of December 31, 2005. Adoption of this
pronouncement did not have a significant effect on our 2005 or 2006 consolidated
financial statements, and we do not expect this pronouncement to have a
significant effect on our future reported financial position or earnings.
Accounting
Changes
In
May 2005, SFAS No. 154, Accounting
Changes and Error Corrections,
a
replacement of APB Opinion No. 20 and FASB Statement No. 3 was issued.
SFAS No. 154 requires retrospective application to prior period financial
statements for changes in accounting principles, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. SFAS No. 154 also requires that retrospective application of a
change in accounting principle be limited to the direct effects of the change.
Indirect effects of a change in accounting principle should be recognized in
the
period of the accounting change. SFAS No. 154 became effective for our
fiscal year beginning January 1, 2006. There was no effect for our fiscal
year ending December 31, 2006, and we do not expect this pronouncement to have
a
significant effect on our future reported financial position or results of
operations.
NOTE
3 - Recently Issued Accounting Pronouncements (Continued)
Accounting
for Uncertainty in Income Taxes
In
July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, “Accounting
for Uncertainty in Income Taxes
- An
interpretation of FASB Statement No. 109” (“FIN 48”).
This
Interpretation provides a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns. We adopted this
Interpretation in the first quarter of 2007 with no effect to the Company and
do
not expect the adoption to have a material impact on our financial position
or
results of operations.
Fair
Value Measurements
In
September 2006, the FASB issued SFAS No. 157, “Fair
Value Measurements.”
This
Statement replaces multiple existing definitions of fair value with a single
definition, establishes a consistent framework for measuring fair value and
expands financial statement disclosures regarding fair value measurements.
This
Statement applies only to fair value measurements that already are required
or
permitted by other accounting standards and does not require any new fair value
measurements. SFAS No. 157 is effective for fiscal years beginning subsequent
to
November 15, 2007. We will adopt this Statement in the first quarter of 2008
and
do not expect the adoption to have a material impact on our financial position
or results of operations.
Effects
of Prior Year Misstatements
In
September 2006, Staff Accounting Bulletin (“SAB”) No. 108, “Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements.”
Registrants must quantify the impact on current period financial statements
of
correcting all misstatements, including both those occurring in the current
period and the effect of reversing those that have accumulated from prior
periods. This SAB was adopted at December 31, 2006. The adoption of
SAB No. 108 had no effect on our financial position or on the results
of our operations.
The
Fair Value Option for Financial Assets and Financial
Liabilities
In
February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial
Liabilities,”
which
permits an entity to measure certain financial assets and financial liabilities
at fair value. The objective of SFAS No. 159 is to improve financial reporting
by allowing entities to mitigate volatility in reported earnings caused by
the
measurement of related assets and liabilities using different attributes,
without having to apply complex hedge accounting provisions. Under SFAS No.
159,
entities that elect the fair value option (by instrument) will report unrealized
gains and losses in earnings at each subsequent reporting date. The fair value
option election is irrevocable, unless a new election date occurs. SFAS No.
159
establishes presentation and disclosure requirements to help financial statement
users understand the effect of the entity’s election on its earnings, but does
not eliminate disclosure requirements of other accounting standards. Assets
and
liabilities that are measured at fair value must be displayed on the face of
the
balance sheet. This statement is effective beginning January 1, 2008; We are
evaluating this pronouncement, but do not expect the adoption to have a material
impact on our financial position or results of operations.
Change
in Categorization of Rigs
Due
to
our rapidly growing rig operations, we created a separate category for our
rig
equipment. In the first quarter of 2006 rig equipment was included in other
property and equipment. For comparability purposes, those amounts are now shown
separately.
NOTE
4 - NOTES PAYABLE
In
January 2007, a note payable to Gary D. Borgna and Julie R. Borgna, and
Equipment 2000 secured by rig equipment in the amount of $300,000 was paid.
Mr.
Borgna is the general manager of GVDC.
In
March
2007, a promissory note issued to F. Lynn Blystone and Patricia L. Blystone
in
the amount of $150,000 was paid in full. Mr. Blystone is the Chairman, President
and Chief Executive Officer of Tri-Valley Corporation.
NOTE
5 - CHANGES IN SECURITIES
Common
Stock
During
the first quarter of 2007, the Company issued 990,596 shares of common stock.
Three employees exercised employee stock options issued in previous years to
purchase 3,000 shares of common stock totaling $1,500. An employee exercised
stock options in a cashless exercise for 12,935 shares of common stock. A former
director exercised his stock options and was issued 270,000 shares for a total
consideration of $348,000. The Company’s directors received 10,000 shares for
services. We issued 33,333 shares of stock upon the exercise of warrants which
were issued in 2006. These warrants were exercised at $9.00 per share for a
total consideration of $299,997. The remaining 661,328 shares were issued in
private placements at prices of $8.00 and $8.50 per share, for a total
consideration of $5,590,624. Total stock issuance cost for the first quarter
was
$706,875.
Warrants
During
the first quarter of 2007, the Company issued warrants to accredited investors
in conjunction with the sale of 661,661 shares of restricted common stock.
220,443 warrants were attached to these restricted shares. The warrants are
exercisable for a period of two years from the date of issuance. The warrants
are exercisable at $9.50 to $10.00, depending on when they were issued. The
warrants were valued using the Black-Scholes option-pricing model, which
resulted in charges to additional paid in capital of $533,179 and resulted
in
charges to stock issuance expense of $272,542.
NOTE
6 - STOCK BASED COMPENSATION EXPENSE
Stock
Based Compensation
Compensation
expense charged against income for stock based awards in the first quarter
of
2007 and 2006 was $231,949 and $52,060, pre-tax, respectively, and is included
in general and administrative expense in the Consolidated Statement of
Operations.
NOTE
6 - STOCK BASED COMPENSATION EXPENSE (Continued)
For
further information regarding stock based compensation, please refer to Note
5
of the Notes to the Consolidated Financial Statements in the Annual Report
on
Form 10-K for the year ended December 31, 2006.
NOTE
7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
The
Company reports operating segments according to SFAS No. 131, “Disclosure
about Segments of an Enterprise and Related Information”.
The
Company identifies reportable segments by product. The Company includes revenues
from both external customers and revenues from transactions with other operating
segments in its measure of segment profit or loss.
The
Company's operations are classified into four principal industry segments.
Following is a summary of segmented information the first quarter of 2007 and
the first quarter of 2006:
|
|
Three
Months Ended March 31, 2007
|
|
Three
Months Ended March 31, 2006
|
|
|
|
|
|
|
|
Sales
and Other Operating Revenues
|
|
|
|
|
|
|
|
Oil
& Gas
|
|
$
|
292,447
|
|
$
|
357,289
|
|
Rigs
|
|
|
1,313,099
|
|
|
-
|
|
Minerals
|
|
|
4,821
|
|
|
6,738
|
|
Drilling
and Development
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Consolidated
Sales and Operating Revenues
|
|
|
1,610,367
|
|
|
364,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
|
|
|
|
|
|
Oil
& Gas
|
|
$
|
(2,229,540
|
)
|
$
|
(1,087,475
|
)
|
Rigs
|
|
|
303,409
|
|
|
-
|
|
Minerals
|
|
|
(329,898
|
)
|
|
(1,976,632
|
)
|
Drilling
and Development
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Consolidated
Net Income (Loss)
|
|
$
|
(2,256,029
|
)
|
$
|
(3,064,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2007
|
|
|
|
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
|
|
|
Oil
& Gas
|
|
$
|
23,000,692
|
|
$
|
18,517,488
|
|
Rigs
|
|
|
8,786,068
|
|
|
7,853,046
|
|
Minerals
|
|
|
2,182,669
|
|
|
2,283,591
|
|
Drilling
and Development
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Consolidated
Total Assets
|
|
$
|
33,969,429
|
|
$
|
28,654,125
|
|
|
|
|
|
|
|
|
|
NOTE
8 -
INCOME TAXES
At
December 31, 2006, the Company had available net operating loss carry forwards
for financial statements and federal income tax purposes of approximately $18
million.
The
components of the net deferred tax assets were as follows:
|
|
|
December
31,
|
|
|
March
31,
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
5,398,000
|
|
$
|
5,520,000
|
|
Statutory
depletion carryforwards
|
|
|
496,000
|
|
|
496,000
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
5,894,000
|
|
|
6,016,000
|
|
Valuation
allowance
|
|
|
(5,894,000
|
)
|
|
(6,016,000
|
)
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
$
|
-
|
|
A
full
valuation allowance has been established for the deferred tax assets generated
by net operating loss and statutory depletion carryforwards due to the
uncertainty of future utilization. The net operating loss expires in 2024 for
federal purposes and 2025 for state purposes. Depletion carryforwards have
an
indefinite life. The reconciliation of federal taxable income
follows:
|
|
|
December
31,
|
|
|
March
31,
|
|
|
|
|
2006
|
|
|
2006
|
|
Income
(loss) before tax
|
|
$
|
(940,512
|
)
|
$
|
(2,256,029
|
)
|
|
|
|
|
|
|
|
|
Computed
"expected" tax (benefit)
|
|
$
|
(376,000
|
)
|
$
|
(902,000
|
)
|
State
tax liability
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Utilization
(non-utilization) of operating loss carryover
|
|
|
376,000
|
|
|
902,000
|
|
Total
income tax provision
|
|
$
|
-
|
|
$
|
-
|
|
NOTE
9 - SUBSEQUENT EVENTS
In
May
2007, the Company has sent a letter to all members of GVDC, informing them
that
the Company is exercising its option to buy back all interest in GVDC. Payments
will be made to all members by the end of June, and this subsidiary will then
be
100 percent owned by Tri-Valley Corporation. The repurchase cost is expected
to
be about $1.7 million.
Item
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Business
Review
Notice
Regarding Forward-Looking Statements
This
report contains forward-looking statements. The words, "anticipate," "believe,"
"expect," "plan," "intend," "estimate," "project," "could," "may," "foresee,"
and similar expressions are intended to identify forward-looking statements.
These statements include information regarding expected development of
Tri-Valley's business, lending activities, relationship with customers, and
development in the oil and gas industry. Should one or more of these risks
or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed,
estimated or otherwise indicated.
Oil
and Gas Operations
The
petroleum activities during the first quarter of 2007 involved the drilling
of
two wells, reworking of existing wells and the conversion of two wells to
commence waterflood operations in the South Belridge field.
The
Lundin-Weber D-344-30 was drilled and completed in the South Belridge field.
The
D-344-30 was a 3/4 mile westerly step-out well on evaluating the Diatomite
zone.
It was drilled to a total depth of 1929’ and eight cores were taken; three cores
in the Tulare zone; three cores in the Etchegoin zone and two cores in the
Diatomite zone. These cores will help the Company to better evaluate the best
approach to develop this area. The well was completed and fraced in the
Diatomite zone and is waiting on a steam generator to stimulate the Diatomite
zone via steam. The Lundin-Weber D-188-31 well was drilled 3/4 of a mile south
of the D-344-30 well in the South Belridge field. It was drilled to a depth
of
1804’. The Company is waiting on the pending results of the D-344-30 well in
order to best develop this well.
Nine
formerly idle wells were reworked and returned to production in the
Belridge-Carneros field. Also in the Belridge-Carneros field, the Company
instituted field operations for a waterflood operation in the Etchegoin zone
by
converting two wells to be used as injectors in two 9-spot programs from
existing wells. When complete, the program will consist of two injector wells
and 16 producing wells.
The
Company has acquired a fleet of steam generators to provide downhole heat and
repressure the formations for enhanced recovery. These are being refurbished
to
meet new environmental regulations before going into service starting in May
2007.
Rig
Operations
On
February 9, GVDC spudded its first contract well in Nevada. It completed its
operations in March. GVDC is in talks with multiple third parties for possible
long-term contracts for this rig.
During
the first quarter, GVPS drilled two wells and reworked nine wells for Tri-Valley
Oil and Gas. In May, Rig #105, a 105-foot high “double” with a 250,000-pound
pulling capacity, will be completed and put into production which will increase
our total working rigs to three. Two more rigs, Rigs #96A & #96B, are also
being remanufactured to be put into the fleet. Upon their completion expected
in
July and August our total working rigs will be five. Because these rigs all
have
the newest engines and other improvements including digital controls, they
are
actually better than when new.
The
tactical reason for purchasing the rig fleet is to enable Tri-Valley to work
on
its growing inventory of wells and drill new ones as needed rather than be
delayed for months or even a year because of unavailability of contractor
supplied rigs. The strategic reason is that as other property owners experience
delays in timely service of their wells and production begins to decline they
will tend to want to sell and the only logical bidders will be the few companies
like Tri-Valley with the equipment to service additional
properties.
Mining
Activities
Precious
Metals
Mineral
programs in the first quarter consisted largely of continued assessment and
compilation of the geologic information collected in previous work programs
associated with the Richardson and Shorty Creek properties in Alaska, and the
design of potential sampling programs for 2007. Select began soliciting large
precious metal mining companies as potential joint-venture partners to fund
larger scale exploration on both the Richardson and Shorty Creek
properties.
Base
Metals
Select
carried out further reconnaissance work associated with the FARJK claims, a
target oxide copper property, located in Nye County, Nevada. Select staked
claims associated with the original FARJK claims and conducted a preliminary
sampling program on the site.
Select
continued its arrangement with Duluth Metals Limited, a Canadian corporation,
by
providing management and technical assistance to Duluth Metals in its current
copper-nickel-PGE drilling program in Northern Minnesota and on other management
activities.
Industrial
Minerals
During
the first quarter, Select carried out a maintenance and repair program at the
Admiral Calder calcium carbonate mine in Alaska. Select began soliciting calcium
carbonate mining and processing companies as potential joint-venture partners
to
fund larger scale development and operations on the Admiral Calder
mine.
In
2006,
Select arranged to evaluate some 200 industrial mineral properties in Nevada
from the inventory of Newmont Mining Corporation for future development
opportunities. In March 2007, after visiting a number of Newmont’s industrial
mineral properties and reviewing deal terms with the Trabits Group, the proposed
development and operation arrangement between Newmont/Trabits and Select was
terminated.
Select
also reviewed a number of industrial mineral projects in six western states,
covering barite, sand & gravel, aggregate, limestone, dolomite, calcium
carbonate, cinder, and other industrial mineral commodities. Some of these
projects and opportunities are pending further review.
Results
of Operations
For
the
quarter ended March 31, 2007, revenue was $1.6 million, compared to $370,000
in
the first quarter of 2006, an increase of $1.2 million. We had an operating
loss
of about $2.3 million in the first quarter of 2007, compared to a loss of $3.1
million in the first quarter of 2006. Non-cash amounts included in the loss
for
the first quarter is depreciation, depletion and amortization of $252,000;
stock
compensation expense of $232,000; warrant expense of $273,000 and impairment
write-off of $247,000.
The
Company's revenues from the sale of oil and gas decreased from $319,000 in
the
first quarter of 2006 to $164,000 in the first quarter of 2007 due to a needed
repair on a gas well. Rig income increased from no income in the first quarter
of 2006 to $1,250,000 in first quarter 2007, due to our recently formed GVPS
and
GVDC. Other income increased from $44,000 in the first quarter of 2006 to
$102,000 in the first quarter of 2007. This was due to the increase in the
overhead we charged for the producing wells and due to the increase in the
number of the producing wells we service. Interest income increased from $7,000
in the first quarter of 2006 to $94,000 in the same period of 2007, because
we
held more cash in the first quarter of 2007 compared to the same period of
2006.
Costs
and
expenses were approximately $3.86 million more in the first quarter of 2007,
an
increase of approximately 12% over the same period in 2006 when cost and
expenses were $3.43 million. Oil and gas lease expense increased from $57,000
in
the first quarter of 2006 to $88,000 in the same period of 2007, as we incurred
new expenses to operate the wells we acquired at the end of 2006. We spent
$63,000 on mining exploration in the first quarter of 2007, which was $1.1
million dollars less than the same period in 2006. The 2007 expenses were lower
mainly because of the disposition in late 2006 of our industrial minerals
investment and decreased activity in our minerals operations. Drilling and
development expenses increased from $43,000 in the first quarter of 2006 to
$232,000 in the first quarter of 2007, reflecting an increase in our drilling
activities. Rig operations expense increased from no income in the first quarter
of 2006 to $445,000 in the first quarter of 2007, due to new rig operations
by
our recently formed GVPS and GVDC. Depletion, depreciation and amortization
decreased from $275,000 in the first quarter of 2006 to $253,000 in the same
period of 2007, because the increased property and equipment from our rig
operations was more than offset by the disposition of the Company’s interest in
its industrial minerals investment in November 2006.
We
also
recognized impairment losses of $247,000, primarily on the write-off of our
ONYX
Ranch prospect. During our regular evaluation of our prospects, we determined
that this and three other properties are no longer viable.
General
and administrative costs more than doubled to $2.5 million in the first quarter
in 2007 compared to $1.2 million in the first quarter of 2006, due primarily
to
the expenses of our recently formed drilling subsidiaries.
Capital
Resources and Liquidity
In
2002
through the first quarter of 2007, our drilling activities have been largely
funded by selling interests in our OPUS I drilling partnership. We do not borrow
in order to fund drilling activities. Our continued drilling activity relies
on
our ability to raise money for projects through drilling partnerships or other
joint ventures.
Current
assets were about $20.7 million at March 31, 2007, up from $16.0 million at
year
end 2006. Cash on hand was increased from $15.6 million at year end 2006 to
$19.7 million at March 31, 2007. The increase in cash was due to private
placements of stock.
Current
liabilities rose to about $10.9 million at March 31, 2007, from $9.0 million
at
year end 2006, due primarily to an increase of $1.1 million in accounts payable
and an increase of about $1.5 million in advances from joint venture
participants.
Operating
Activities
We
had a
positive cash flow of $49,604 for the three months ended March 31, 2007 compared
to a negative cash flow of $1,165,769 for the same period in 2006, the positive
cash flow in the current period is due mainly to our loss from operations being
offset by our increase in advances from joint venture participants. Our loss
from operations was approximately $2.3 million for the three months ended March
31, 2007 compared to a $3.1 million loss for the same period in
2006.
The
largest component of positive cash flow in the first quarter of 2007 was receipt
of advances of more than $1.4 million from joint venture participants for future
drilling operations, which exceeded advances received in the first quarter
of
2006 by $1.3 million. These do not contribute to operating revenues at the
time
received but are held in cash until expended in drilling and operations. We
cannot predict the levels at which we will continue to receive funds for
additional drilling, and in the past we have experienced wide swings in receipt
of these funds from quarter to quarter. We do not commit to drilling activities
unless and until we have sufficient advances in hand to fund a particular
project.
Investing
Activities
Cash
used
in investing activities was $1.1 million for the first three months of 2007.
Most of this was used towards the refurbishing of the new rigs for GVPS and
the
reminder was for the acquisitions of equipment for TVOG.
Financing
Activities
Net
cash
provided by financing activities was $5.1 million for the first quarter. We
received $5.6 million from sales of restricted shares of common stock in
privately negotiated transactions including the exercise of stock options by
employees. We used $395,000 to buy back membership units in GVDC and GVPS.
We
used $45,000 to pay down principal on long-term debt. We received $458,000
in
proceeds from warrants issued in conjunction with the issuance of restricted
shares of common stock in privately negotiated transactions which had warrants
attached and had stock issuance costs of $706,000. We expect to use these funds
for working capital. We have not planned any private placement of equity
securities for the remainder of 2007, but we may continue to receive funds
from
privately negotiated transactions. We do not have a targeted or budgeted amount
of equity financing activities.
Liquidity
During
the remainder of 2007, we expect to expend approximately $25 million on drilling
activities. Funds for these activities will be provided by sales of partnership
interests in the Opus I drilling partnership, which will still be raising funds
for development purposes. Tri-Valley’s portion is expected to be approximately
$6 million. We are analyzing results of four recent development test wells
on
our Temblor West producing property adjoining the South Belridge oil field
in
order to design the optimum development plan for the property and have began
work on a fifth well. We expect to drill several wells there in 2007. Also,
at
our Pleasant Valley property in the Oxnard oilfield we project one vertical
development test well, one horizontal injector and one horizontal producer
in
2007. We will drill at least one shallow well in the Moffat Ranch East gas
field
and one deep wildcat exploration well for an aggregate expenditure in the range
of $25 million for the remainder of the year. Tri-Valley’s share will be in the
range of $6 million as most of the expense will be carried by joint venture
partners. Our ability to complete our planned drilling activities in 2007
depends on some factors beyond our control, such as availability of equipment
and personnel. Our actual capital commitments for the remainder of fiscal year
2007 are less than $3 million, but to expend $25 million we will require
additional capital from the OPUS partnership or other outside parties. For
the
remainder of fiscal year 2007, we expect expenditures of approximately $ 1.3
million on mining activities, including mining lease and exploration expenses.
New
Accounting Pronouncements
See
Note
3 to our unaudited consolidated financial statements.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
Tri-Valley
Corporation does not engage in hedging activities and does not use commodity
futures or forward contracts in its cash management functions.
Item
4. Controls and Procedures
Disclosure
Controls
As
of
March 31, 2007, an evaluation was performed under the supervision and with
the
participation of our management, including our Chief Executive Officer and
Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. These controls and procedures are based
on
the definition of disclosure controls and procedures in Rule 13a-15(e) and
Rule
15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on that
evaluation, our management, including the CEO and CFO concluded that our
disclosure controls and procedures were not effective as of March 31, 2007.
Management is in the process of remediating the Company’s controls and
procedures.
Management,
including our CEO and CFO, do not expect that our disclosure controls and
procedures or internal control over financial reporting will prevent all errors
and fraud. In designing and evaluating our control system, management recognized
that any control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance of achieving the desired control
objectives. Further, the design of a control system must reflect the fact that
there are resource constraints, and management necessarily was required to
apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Because of the inherent limitations in all control systems,
no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any that may affect our operations have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake.
During
the first quarter of 2007, there were no changes in the Company's internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II - OTHER INFORMATION
Item
1A. Risk
Factors
There
have been no material changes from the risk factors previously disclosed in
our
Annual Report on Form 10-K for the fiscal year ended December 31,
2006.
Item
2. Unregistered Sales of Equity Securities
On
February 20, 2007, the Company issued 600,000 shares of restricted common stock
in with a private investor at $8.50 per share for a total of $5,100,000. The
price of our common stock on the American Stock Exchange on that date was $8.13.
Attached to the stock were 200,000 warrants exercisable at $10.00 for a period
of two years. On February 26, the Company issued 33,333 shares of restricted
common stock to a private investor who exercised warrants at $9.00 per share
which were purchased in 2006. The proceeds were $299,997. The price of our
common stock on the American Stock Exchange on that date was $8.55. On March
29,
the Company issued 61,328 shares of restricted common stock in with a private
investor at $8.00 per share for a total of $490,624. The price of our common
stock on the American Stock Exchange on that date was $7.37. Attached to the
stock were 20,443 warrants exercisable at $9.50 for a period of two years.
The
Company also issued 10,000 shares of restricted common stock to directors for
services.
All
of
these transactions were conducted in reliance on the exemption from registration
requirements of the Securities Act of 1933 contained in Section 4(2) of that
Act.
Item
6. Exhibits
Item Description
31.1 Rule
13a-14(a)/15d-14(a) Certification
31.2 Rule
13a-14(a)/15d-14(a) Certification
32.1 18
U.S.C.
Section 1350 Certification
32.2 18
U.S.C.
Section 1350 Certification
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.
TRI-VALLEY
CORPORATION
May
10,
2007 /s/F.
Lynn Blystone
F.
Lynn
Blystone
President
and Chief Executive Officer
May
10,
2007 /s/
Arthur M. Evans
Arthur
M.
Evans
Chief
Financial Officer
Exhibit
31.1
I,
F.
Lynn Blystone, Chairman, President and Chief Executive Officer of Tri-Valley
Corporation, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Tri-Valley
Corporation;
|
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 report;
|
4.
|
The
registrant's other certifying officer(s) and I are responsible
for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15) 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 (the registrant’s fourth fiscal in the case of an annual
report) 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 officers 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 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 10, 2007
|
/s/F.
Lynn Blystone
|
|
F.
Lynn Blystone, Chairman, President and
CEO
|
Exhibit
31.1
I,
Arthur
M. Evans, Chief Financial Officer of Tri-Valley Corporation, certify
that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Tri-Valley
Corporation;
|
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 report;
|
4.
|
The
registrant's other certifying officer(s) and I are responsible
for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15) 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 (the registrant’s fourth fiscal in the case of an annual
report) 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 officers 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 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 10, 2007
|
/s/Arthur
M. Evans
|
|
Arthur
M. Evans, Chief Financial Officer
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Exhibit
32.1
Certification
Pursuant to 18 U.S.C. § 1350
The
undersigned, F. Lynn Blystone, Chairman, President and Chief Executive Officer
of Tri-Valley Corporation, a Delaware corporation (the "Company"), pursuant
to
18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley
Act of
2002, hereby certifies that:
(1)
|
the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31,
2007 (the "Report") fully complies with the requirements of Section
13(a)
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 10, 2007
|
/s/F.
Lynn Blystone
|
|
F.
Lynn Blystone, Chairman, President and
CEO
|
Exhibit
32.2
Certification
Pursuant to 18 U.S.C. § 1350
The
undersigned, Arthur M. Evans, Chief Financial Officer of Tri-Valley Corporation,
a Delaware corporation (the "Company"), pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002, hereby certifies
that:
(1)
|
the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31,
2007 (the "Report") fully complies with the requirements of Section
13(a)
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 10, 2007
|
/s/Arthur
M. Evans
|
|
Arthur
M. Evans, Chief Financial Officer
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