Trio Petroleum Corp. (TPET) – Q1 2025 (Jan 31, 2025) 10-Q Filing Report
Executive Summary
This report analyzes Trio Petroleum Corp.’s (TPET) 10-Q filing for the quarter ended January 31, 2025. TPET is an oil and gas exploration and development company. The company reported minimal revenue, continued net losses, and raises substantial doubt about its ability to continue as a going concern. The company is reliant on raising capital to fund operations. The company has been successful in raising capital in the past, but there is no guarantee that it will be able to do so in the future. Given the current financial situation, a **sell** recommendation is warranted.
Company Overview
Trio Petroleum Corp. is a California-based oil and gas exploration and development company with operations in Monterey County, California, and Uintah County, Utah. The company focuses on the South Salinas Project, McCool Ranch Oil Field, and Asphalt Ridge Project. The company is an emerging growth company.
Detailed Analysis
Financial Statement Analysis
Condensed Balance Sheets
|
January 31, 2025 (Unaudited) |
October 31, 2024 |
Change |
| Cash |
$1,961,201 |
$285,945 |
$1,675,256 |
| Total Current Assets |
$2,015,019 |
$565,219 |
$1,449,800 |
| Total Assets |
$13,212,303 |
$11,684,338 |
$1,527,965 |
| Total Current Liabilities |
$1,467,963 |
$2,590,699 |
-$1,122,736 |
| Total Liabilities |
$1,519,749 |
$2,641,790 |
-$1,122,041 |
| Total Stockholders’ Equity |
$11,692,554 |
$9,042,548 |
$2,650,006 |
Key Observations:
- Cash significantly increased due to proceeds from the ATM agreement.
- Total assets increased, driven by the increase in cash and oil and gas properties.
- Total liabilities decreased, primarily due to the repayment of promissory notes and related party debt.
- Stockholders’ equity increased, reflecting the net effect of share issuances and the net loss.
Condensed Statements of Operations
|
Three Months Ended January 31, 2025 (Unaudited) |
Three Months Ended January 31, 2024 |
Change |
| Revenues, Net |
$10,819 |
$0 |
$10,819 |
| Exploration Expense |
$24,721 |
$84,594 |
-$59,873 |
| General and Administrative Expense |
$711,546 |
$957,690 |
-$246,144 |
| Stock-Based Compensation Expense |
$490,314 |
$407,618 |
$82,696 |
| Net Loss |
($1,615,525) |
($1,702,048) |
$86,523 |
| Basic and Diluted Net Loss per Common Share |
($0.33) |
($1.08) |
$0.75 |
Key Observations:
- The company generated minimal revenue.
- Exploration and G&A expenses decreased, but stock-based compensation increased.
- Net loss decreased slightly, but remains significant.
- Loss per share improved, but is still substantial.
Condensed Statements of Cash Flows
|
Three Months Ended January 31, 2025 (Unaudited) |
Three Months Ended January 31, 2024 |
Change |
| Net Cash Used in Operating Activities |
($920,485) |
($774,431) |
-$146,054 |
| Net Cash Used in Investing Activities |
($160,779) |
($522,767) |
$361,988 |
| Net Cash Provided by Financing Activities |
$2,756,520 |
$84,022 |
$2,672,498 |
| Net Change in Cash |
$1,675,256 |
($1,213,176) |
$2,888,432 |
Key Observations:
- Operating activities continue to consume cash.
- Investing activities used less cash compared to the prior year.
- Financing activities provided significant cash, primarily from the ATM agreement.
- The net change in cash was positive due to financing activities.
Management’s Discussion and Analysis (MD&A) Insights
- Management acknowledges the going concern uncertainty due to accumulated deficit and dependence on raising capital.
- The company is focused on the South Salinas Project, McCool Ranch Oil Field, and Asphalt Ridge Project.
- The company is taking steps to launch a Carbon Capture and Storage (CCS) project as part of the South Salinas Project.
- The company is evaluating the impact of production on the reserve determination for the wells and fields.
Risks and Opportunities
Risks:
- Going Concern: The company’s ability to continue as a going concern is highly uncertain.
- Limited Revenue: The company generates minimal revenue.
- Dependence on Financing: The company relies heavily on raising capital to fund operations.
- Operational Risks: Oil and gas operations are subject to various operational and environmental risks.
- Regulatory Risks: The company is subject to environmental and other regulations.
- Delisting Notice: The company received a delisting notice from NYSE American in November 2024.
Opportunities:
- South Salinas Project: Potential for development and production.
- McCool Ranch Oil Field: Restarted production and potential for additional development.
- Asphalt Ridge Project: Potential for heavy oil production.
- Carbon Capture and Storage (CCS) Project: Potential revenue stream and environmental benefits.
Uncommon Metrics
- ATM Agreement: The company is actively using an “at-the-market” agreement to issue and sell shares of its common stock.
- Debt Conversions: The company is converting debt into equity, which impacts the share count and dilution.
Conclusion and Actionable Insights
Trio Petroleum Corp. faces significant financial challenges, including minimal revenue, continued net losses, and a dependence on raising capital. While the company has opportunities for growth and development, the risks outweigh the potential rewards. The company’s ability to continue as a going concern is highly uncertain.
Recommendation: Sell. The company’s financial situation and dependence on raising capital make it a high-risk investment.