FieldPoint Petroleum Corporation, a Colorado corporation (the “Company”), was formed on March 11, 1980, to acquire and enhance mature oil and natural gas field production in the mid-continent and the Rocky Mountain regions. Since 1980, the Company had engaged in oil and natural gas operations and, in 1986, divested all oil and natural gas assets and operations. From December 1986, until its reverse acquisition on December 31, 1997, the Company did not engage in oil and natural gas operations. Since the reverse acquisition on December 31, 1997 the Company has been in the oil and natural gas exploration and production business.
Our long-term business strategy is to create value by growing reserves and production in a cost efficient manner and at attractive rates of return by pursuing the strategies discussed below. The Company recognizes that the ability to implement its business strategy is largely dependent on the ability to raise additional debt or equity capital to regain compliance with our line of credit agreement (“the Loan Agreement”) before we can fund future acquisition, exploration, drilling and development activities. The Company’s capital resources are discussed more thoroughly in Part II, Item 7, in Management’s Discussion and Analysis.
In response to deteriorating and volatile commodity prices, we halted our drilling activity beginning in 2015, which has led to a natural decline in production. Commodity prices have continued to remain volatile. As of December 31, 2018 and 2017, the Company had a working capital deficit of approximately $3,166,000 and $3,122,000, respectively, primarily due to the classification of our line of credit with Citibank as a current liability. The Loan Agreement provides for certain financial covenants and ratios measured quarterly, which include a current ratio, leverage ratio and interest coverage ratio requirements. The Company was out of compliance with all three ratios as of December 31, 2018 and 2017, and we do not expect to regain compliance in 2019. These factors raise substantial doubt about our ability to continue as a going concern. See Note 2 to our consolidated financial statements in this report for additional information regarding our plans to improve our leverage and our ability to regain compliance with the financial covenants under our revolving credit facility.