Vivakor, Inc. (NASDAQ:VIVK) is a socially responsible operator, acquirer and developer of technologies and assets in the oil and gas industry, as well as related environmental solutions. The company's efforts are primarily focused on operating crude oil gathering, storage and transportation facilities, as well as contaminated soil remediation services.
Business Overview
Vivakor currently operates crude oil gathering, storage and transportation facilities that sell crude oil in amounts up to 60,000 barrels per month under agreements with a large energy company. The company also owns a 120,000 barrel crude oil storage tank near Colorado City, Texas that is connected to the Lotus pipeline system, with plans to further connect the tank to major pipeline systems.Vivakor's soil remediation services specialize in the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and other hydrocarbon-based substances utilizing its patented Remediation Processing Centers (RPCs). The company's proprietary process allows it to successfully recover the hydrocarbons which can then be used to produce asphaltic cement and/or other petroleum-based products. Vivakor is currently focusing its soil remediation efforts on a project in Kuwait and an upcoming project in the Houston, Texas area.
Financials
Annual Performance
For the fiscal year 2023, Vivakor reported annual revenue of $59,321,752 and a net loss of $10,738,625. The company's annual operating cash flow was -$764,902 and its annual free cash flow was -$4,085,820.Quarterly Performance
For the three months ended March 31, 2024, Vivakor generated revenue of $16,021,391, up 3.07% from the same period in 2023. Cost of revenue increased 6.57% to $14,953,254, leading to a gross profit of $1,068,137, down 29.41% year-over-year. Operating expenses increased 1.78% to $2,685,059.The company reported a net loss of $1,910,543 for the first quarter of 2024, compared to a net loss of $2,817,167 in the prior year period. Vivakor's operating cash flow was -$1,829,679 and free cash flow was -$1,028,885 in Q1 2024.
Liquidity and Capital Resources
As of March 31, 2024, Vivakor had cash and cash equivalents of $767,273 and a working capital deficit of approximately $37 million. The company has current obligations to pay approximately $20.4 million in debt, of which $15.3 million can be satisfied through the issuance of registered common stock.Vivakor has historically financed its operations primarily through debt financing, private and public equity offerings, and working interest agreements. In fiscal year 2023, the company raised approximately $3 million through debt financings with individual investors and $2.2 million through a sale leaseback agreement. During the first quarter of 2024, Vivakor raised an additional $3 million through additional debt financing.
The company has entered into merger and acquisition agreements with anticipated closing dates in 2024 that are projected to provide substantial cash flow and adequate working capital to finance its day-to-day operations and current obligations. However, as these transactions have not closed as of the date of this filing, they were not considered probable as of March 31, 2024.
Vivakor's ability to continue as a going concern is dependent on its ability to raise additional capital and execute its growth strategy. The company's working capital deficit and accumulated deficit raise substantial doubt about its ability to continue as a going concern.
Recent Developments
On February 5, 2024, Vivakor entered into a Loan and Security Agreement and issued a $3 million secured promissory note to Cedarview Opportunities Master Fund LP. The company will use the proceeds to fund general working capital and repay certain indebtedness.Additionally, on February 26, 2024, Vivakor entered into an Agreement and Plan of Merger with Empire Energy Acquisition Corp. and Empire Diversified Energy, Inc. Pursuant to the merger agreement, Empire Diversified Energy will merge with a wholly-owned subsidiary of Vivakor, with Empire Diversified Energy surviving as a wholly-owned subsidiary of Vivakor.
On March 21, 2024, Vivakor entered into a Membership Interest Purchase Agreement to acquire Endeavor Crude, LLC, Equipment Transport, LLC, Meridian Equipment Leasing, LLC, and Silver Fuels Processing, LLC for a purchase price of up to $169 million, subject to post-closing adjustments.
Risks and Challenges
Vivakor faces several risks and challenges that could impact its future performance, including:- Ability to raise additional capital and execute its growth strategy - Potential impairment of long-lived assets due to changes in market conditions or demand - Concentration of revenue from a limited number of large customers - Exposure to fluctuations in commodity prices, particularly crude oil and natural gas liquids - Regulatory and environmental compliance risks associated with its operations
Outlook
While Vivakor has faced challenges in recent years, the company's diversified business model, focus on growth, and recent strategic initiatives provide a path forward. The pending merger with Empire Diversified Energy and the acquisition of the Endeavor entities are expected to significantly expand Vivakor's scale and capabilities, positioning the company for long-term success.However, the company's ability to execute its growth strategy and maintain its financial stability remains a key concern. Investors should closely monitor Vivakor's progress in addressing its liquidity issues and integrating its recent acquisitions to assess the company's long-term prospects.