10-Q - ROYL - Equibles

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 EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-55912

ROYALE ENERGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	81-4596368
(State or other jurisdiction of<br> <br>incorporation or organization)	(I.R.S. Employer<br> <br>Identification No.)

1530 Hilton Head Rd, Suite 205

El Cajon, CA 92021

(Address of principal executive offices) (Zip Code)

(619) 383-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

At May 5, 2022, a total of 56,239,715 shares of registrant’s common stock were outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	18
Item 4. Controls and Procedures	18
PART II. OTHER INFORMATION	19
Item 1. Legal Proceedings	19
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3. Defaults Upon Senior Securities	19
Item 4. Mine Safety Disclosures	19
Item 5. Other Information	19
Item 6. Exhibits	19
Signatures	20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYALE ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2022
ASSETS	(unaudited)
Current Assets
Cash and Cash Equivalents		1,144,678	220,304
Restricted Cash		3,622,572	4,002,500
Other Receivables, net		483,894	413,133
Revenue Receivables		344,742	365,150
Prepaid Expenses		210,963	150,837
Deferred Drilling Costs		2,163,389	2,256,461
Prepaid Drilling to RMX Resources, LLC		710,744	276,423
Total Current Assets		8,680,982	7,684,808
Right of Use Assets - Leases		391,895	423,299
Other Assets		590,913	598,873
Oil and Gas Properties, (Successful Efforts Basis),<br><br> <br>Equipment and Fixtures, net		2,027,613	2,079,800
Total Assets		11,691,403	10,786,780

See notes to unaudited condensed consolidated financial statements.

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ROYALE ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

			December 31, 2021
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable and Accrued Expenses	5,718,759			5,160,484
Royalties Payable	623,405			623,405
Notes Payable	70,821			113,915
Due to RMX Resources, LLC	23,087			23,087
Accrued Liabilities	198,516			201,172
Asset Retirement Obligation - Current	654,964			648,536
Deferred Drilling Obligation	8,264,570			7,824,939
Operating Leases - Current	77,310			88,257
Total Current Liabilities	15,631,432			14,683,795
Noncurrent Liabilities:
Accrued Liabilities - Long Term	1,306,605			1,306,605
Accrued Unpaid Guaranteed Payments	1,616,205			1,616,205
Operating Leases - Long-Term	316,497			336,959
Asset Retirement Obligation	2,637,703			2,610,560
Total Liabilities	21,508,442			20,554,124
Mezzanine Equity:	****	****	****	****	****
Convertible Preferred Stock, Series B, 10 par value, 3.5% annual dividend, 2,300,406 and 2,280,289 shares issued and outstanding as of March 31, 2022 and December 31, 2021 respectively.	23,004,071			22,802,899
Stockholders' Equity (Deficit):	****	****	****	****	****
Common Stock, .001 Par Value, 280,000,000 Shares Authorized 56,239,715 shares issued and outstanding as of March 31, 2022 and December 31, 2021 respectively.	56,239			56,239
Additional Paid in Capital	54,058,554			54,058,554
Accumulated Deficit	(86,935,903	)		(86,685,036	)
Total Stockholders' Equity (Deficit)	(32,821,110	)		(32,570,243	)
Total Liabilities and Stockholders' Equity (Deficit)	11,691,403			10,786,780

All values are in US Dollars.

See notes to unaudited condensed consolidated financial statements.

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ROYALE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the 3<br><br> <br>months ended			For the 3<br><br> <br>months ended
	March 31, 2022			March 31, 2021
Revenues:	****	****	****	****	****	****
Oil, NGL and Gas Sales		507,214			398,937
Supervisory Fees and Other		9,291			2,326
Total Revenues		516,505			401,263
Costs and Expenses:	****	****	****	****	****	****
Oil and Gas Lease Operating		414,468			300,162
Depreciation, Depletion and Amortization		124,676			124,405
Bad Debt Expense		-			74
Legal and Accounting		188,271			218,763
Marketing		55,946			39,049
General and Administrative		537,467			564,983
Total Costs and Expenses		1,320,828			1,247,436
Gain on Turnkey Drilling		345,605			264,780
Loss From Operations		(458,718	)		(581,393	)
Other Income (Expense):
Interest Expense		(2,277	)		(835	)
Gain on Settlement of Accounts Payable		408,644			10,061
Loss Before Income Tax Expense		(52,351	)		(572,167	)
Income Tax Provision		-			-
Net Loss		(52,351	)		(572,167	)
Less: Preferred Stock Dividend		198,516			191,718
Less: Preferred Stock Dividend in Arrears		-			-
Net Loss available to common stock		(250,867	)		(763,885	)
Shares used in computing Basic and Diluted Net Loss per share		56,239,715			55,144,668
Basic and Diluted Loss per share		(0.00	)		(0.01	)

See notes to unaudited condensed consolidated financial statements.

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ROYALE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

	March 31, 2022			March 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		(52,351	)		(572,167	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:	****	****	****	****	****	****
Depreciation, Depletion and Amortization		124,676			124,405
Gain on Turnkey Drilling Programs		(345,605	)		(264,780	)
Gain on Settlement of Accounts Payable		(408,644	)		(10,061	)
Bad Debt Expense		-			74
Stock Based Compensation		-			118,736
Right of use asset depreciation		2,746			2,740
Changes in assets and liabilities:
Other & Revenue Receivables		(50,353	)		(67,934	)
Prepaid Expenses and Other Assets		(486,487	)		233,509
Accounts Payable and Accrued Expenses		878,548			410,062
Net Cash Used in Operating Activities		(337,470	)		(25,416	)
CASH FLOWS FROM INVESTING ACTIVITIES	****	****	****	****	****	****
Expenditures for Oil and Gas Properties and Other Capital Expenditures		(1,567,239	)		(1,524,806	)
Proceeds from Turnkey Drilling Programs		2,495,000			1,461,000
Net Cash Provided by (Used in) Investing Activities		927,761			(63,806	)
CASH FLOWS FROM FINANCING ACTIVITIES	****	****	****	****	****	****
Principal Payments on Long-Term Debt		(45,845	)		(2,588	)
Net Cash Used in Financing Activities		(45,845	)		(2,588	)
Net Change in Cash and Cash Equivalents	****	544,446		****	(91,810	)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		4,222,804			2,401,683
Cash, Cash Equivalents, and Restricted Cash at End of Period		4,767,250			2,309,873
Cash Paid for Interest		732			835
Cash Paid for Taxes		2,050			4,344
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING & FINANCING TRANSACTIONS:
Increase (Decrease) in Capital Accrued Balance		88,372			51,945

See notes to unaudited condensed consolidated financial statements.

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ROYALE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021(UNAUDITED)

	Common Stock				****	****	****	****	****	****	****	****
	Number of<br><br> <br>Shares Issued and<br><br> <br>Outstanding		Amount		Additional<br><br> <br>Paid in<br><br> <br>Capital		Accumulated<br><br> <br>Deficit			Total
December 31, 2020 Balance		54,605,488		54,605		53,883,479		(82,298,785	)		(28,360,701	)
Stock Issued in lieu of Compensation		1,023,413		1,023		117,713		-			118,736
Preferred Series B 3.5% Dividend		-		-		-		(191,718	)		(191,718	)
Net Loss		-		-		-		(572,167	)		(572,167	)
March 31, 2021 Balance		55,628,901		55,628		54,001,192		(83,062,670	)		(29,005,850	)
December 31, 2021 Balance		56,239,715		56,239		54,058,554		(86,685,036	)		(32,570,243	)
Stock Issued in lieu of Compensation		-		-		-		-			-
Preferred Series B 3.5% Dividend		-		-		-		(198,516	)		(198,516	)
Net Loss		-		-		-		(52,351	)		(52,351	)
March 31, 2022 Balance		56,239,715		56,239		54,058,554		(86,935,903	)		(32,821,110	)

See notes to unaudited condensed consolidated financial statements.

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ROYALE ENERGY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

– BASIS OF PRESENTATION: ACCOUNTING STANDARDS

In the opinion of management, the accompanying unaudited condensed consolidated financial statements (“statements”) include all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. The results of operations for the three-month period are not, in management’s opinion, indicative of the results to be expected for a full year of operations. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report as filed on Form 10-K.

Consolidation

The accompanying financial statements include the accounts of Royale Energy, Inc. (sometimes called the “Company” “we,” “our,” “us,” “Royale Energy,” or “Royale”), Royale Energy Funds, Inc. (“REF”), and Matrix Oil Management Corporation and its subsidiaries. All entities comprising the financial statements of Royale Energy have fiscal years ending December 31. All material intercompany accounts and transactions have been eliminated in the financial statements.

Liquidity and Going Concern

The primary sources of liquidity have historically been issuances of common stock, oil and gas sales through ongoing operations and the sale of oil and gas properties. There are factors that give rise to substantial doubt about the Company’s ability to meet liquidity demands, and we anticipate that our primary sources of liquidity will be from the issuance of debt and/or equity, the sale of oil and natural gas property participation interests through our normal course of business and the sale of non-strategic assets

At March 31, 2022, the Company’s consolidated financial statements reflect a working capital deficiency of $6,935,450 and a net loss of $52,351 for three months ended March 31, 2022. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management’s plans to alleviate the going concern by cost control measures that include the reduction of overhead costs and the sale of non-strategic assets. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, attempt to extend note repayments, and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

Use of Estimates

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the estimate of Company oil and gas reserves prepared by an independent engineering consultant. Such estimates are subject to numerous uncertainties inherent in the estimation of quantities of proven reserves. Estimated reserves are used in the calculation of depletion, depreciation and amortization, unevaluated property costs, impairment of oil and natural gas properties, estimated future net cash flows, taxes, and contingencies.

Revenue Recognition

The majority of our ongoing revenues are derived from the sale of crude oil and condensate, natural gas liquids ("NGLs") and natural gas under spot and term agreements with our customers.

	For the three months<br><br> <br>ended March 31,
	2022		2021
Oil & Condensate Sales	$	359,514	$	312,569
Natural Gas Sales		146,418		86,368
NGL Sales		1,282		-
Total	$	507,214	$	398,937

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The pricing in our hydrocarbon sales agreements are variable, determined using various published benchmarks which are adjusted for negotiated quality and location differentials. As a result, revenue collected under our agreements with customers is highly dependent on the market conditions and may fluctuate considerably as the hydrocarbon market prices rise or fall. Typically, our customers pay us monthly, within a short period of time after we deliver the hydrocarbon products. As such, we do not have any financing element associated with our contracts. We do not have any issues related to returns or refunds, as product specifications are standardized for the industry and are typically measured when transferred to a common carrier or midstream entity, and other contractual mechanisms (e.g., price adjustments) are used when products do not meet those specifications.

We often serve as the operator for jointly owned oil and gas properties. As part of this role, we perform activities to explore, develop and produce oil and gas properties in accordance with the joint operating arrangement and collective decisions of the joint parties. Other working interest owners reimburse us for costs incurred based on our agreements. We determined that these activities are not performed as part of customer relationships, and such reimbursements are recorded as cost reimbursements.

We commonly market the share of production belonging to other working interest owners as the operator of jointly owned oil and gas properties. Those marketing activities are carried out as part of the collaborative arrangement, and we do not purchase or otherwise obtain control of other working interest owners’ share of production. Therefore, we act as a principal only in regards to the sale of our share of production and recognize revenue for the volumes associated with our net production.

The Company frequently sells a portion of the working interest in each well it drills or participates in, to third-party investors and retains a portion of the prospect for its own account. The Company typically guarantees a cost to drill to the third-party drilling participants and records a loss or gain on the difference between the guaranteed price and the actual cost to drill the well. When monies are received from third parties for future drilling obligations, the Company records the liability as Deferred Drilling Obligations. Once the contracted depth for the drilling of the well is reached and a determination as to the commercial viability of the well (typically call “Casing Point Election” or “Logging Point”), the difference in the actual cost to drill and the guaranteed cost is recorded as income or expense depending on whether there was a gain or loss.

Crude oil and condensate

For the crude sales agreements, we satisfy our performance obligations and recognize revenue once customers take control of the crude at the designated delivery points, which include pipelines, trucks or vessels.

Natural gas and NGLs

When selling natural gas and NGLs, we engage midstream entities to process our production stream by separating natural gas from the NGLs. Frequently, these midstream entities also purchase our natural gas and NGLs under the same agreements. In these situations, we determined the performance obligation is complete and satisfied at the tailgate of the processing plant when the natural gas and NGLs become identifiable and measurable products. We determined the plant tailgate is the point in time where control, as defined in the new revenue standard, is transferred to midstream entities and they are entitled to significant risks and rewards of ownership of the natural gas and NGLs.

The amounts due to midstream entities for gathering and processing services are recognized as shipping and handling cost and included as lease operating expense in our consolidated statement of operations, since we make those payments in exchange for distinct services with the exception of natural gas sold to Pacific Gas & Electric (PG&E) where transportation is netted directly against revenue. Under some of our natural gas processing agreements, we have an option to take the processed natural gas and NGLs in-kind and sell to customers other than the processing company. In those circumstances, our performance obligations are complete after delivering the processed hydrocarbons to the customer at the designated delivery points, which may be the tailgate of the processing plant or an alternative delivery point requested by the customer.

Turnkey Drilling

Royale sponsors turnkey drilling arrangements in proved and unproved properties. The contracts require that participants pay Royale the full contract price upon execution of the drilling agreement. Each participant earns an undivided interest in the well bore at the completion of the well. A portion of the funds received in advance of the drilling of a well from a working interest participant are held for the expressed purpose of drilling a well. If something changes, the Company may designate these funds for a substitute well. Under certain conditions, a portion of these funds may be required to be returned to a participant. Once the well is drilled, the funds are used to satisfy the drilling cost.

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These Turnkey Agreements are managed by the Company for the participants of the well. The collections of pre-drilling AFE amounts are segregated by the Company and the gains and losses on the Turnkey Agreements are recorded in income or expense at the time of the casing point election in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 932-323-25 and 932-360. The Company manages the performance obligation for the well participants and only records revenue or expense at the time the performance obligation of the Turnkey Agreement has been satisfied.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same amounts shown in the statement of cash flows.

	March 31, 2022		December 31, 2021
Cash and Cash Equivalents	$	1,144,678	$	220,304
Restricted Cash		3,622,572		4,002,500
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	4,767,250	$	4,222,804

Equity Method Investments

Investments in entities over which we have significant influence, but not control, are accounted for using the equity method of accounting. Income from equity method investments represents our proportionate share of net income generated by the equity method investees and is reflected in revenue and other income in our condensed consolidated statements of operations. Equity method investments are included as noncurrent assets on the consolidated balance sheet.

Equity method investments are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value may have occurred as called for under ASC 323. When a loss is deemed to have occurred and is other than temporary, the carrying value of the equity method investment is written down to fair value, and the amount of the write-down is included in income.

Other Receivables

Other receivables consist of joint interest billing receivables from direct working interest investors and industry partners. We provide for uncollectible accounts receivable using the allowance method of accounting for bad debts. Under this method of accounting, a provision for uncollectible accounts is charged directly to bad debt expense when it becomes probable the receivable will not be collected. The allowance account is increased or decreased based on past collection history and management’s evaluation of accounts receivable. All amounts considered uncollectible are charged against the allowance account and recoveries of previously charged off accounts are added to the allowance. At March 31, 2022 and December 31, 2021, the Company maintained an allowance for uncollectable accounts of $2,761,398, for receivables from direct working interest investors whose expenses on non-producing wells were unlikely to be collected from revenue.

Fair Value Measurements

According to Fair Value Measurements and Disclosures Topic of the FASB ASC, assets and liabilities that are measured at fair value on a recurring and nonrecurring basis in period subsequent to initial recognition, the reporting entity shall disclose information that enable users of its financial statements to assess the inputs used to develop those measurements and for recurring fair value measurements using significant unobservable inputs, the effect of the measurements on earnings for the period.

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Carrying amounts of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values as of the balance sheet dates because of their generally short maturities.

The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

At March 31, 2022 and December 31, 2021, Royale Energy does not have any financial assets measured and recognized at fair value on a recurring basis. The Company estimates asset retirement obligations (ARO’s) pursuant to the provisions of ASC 410, “Asset Retirement and Environmental Obligations”. The estimates of the fair value the ARO’s are based on discounted cash flow projections using numerous estimates, assumptions and judgements regarding such factors as the existence of a legal obligation for an ARO, amounts and timing of settlements, the credit-adjusted risk-free rate to be used and inflation rates.

The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and gas properties. Given the unobservable nature of the inputs, including plugging costs and reserve lives, the initial measurement of the asset retirement obligation liability is deemed to use Level 3 inputs.

Fair Values - Non-recurring

The Company applies the provisions of the fair value measurement standard to its non-recurring, non-financial measurements including oil and natural gas property impairments and other long-lived asset impairments. These items are not measured at fair value on a recurring basis but are subject to fair value adjustments only in certain circumstances.

Dividends on Series B Convertible Preferred Stock

The Series B Convertible Preferred Stock, (“Preferred Shares”) has an obligation to pay a 3.5% cumulative dividend, in kind or cash, on a quarterly basis. The Board of Directors authorized the issuance of Preferred shares, for the settlement of dividends accumulated through December 31, 2022. The Company accrued $198,516 and $191,718 for dividends related to the Preferred shares during the first quarters of 2022 and 2021, respectively. Each quarter, the Company charges retained earnings for the accumulating dividend as the amounts add to the liquidation preference of the Preferred Shares. For further information regarding the Preferred Shares see Note 3, below.

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ACCOUNTING STANDARDS

Not Yet Adopted

ASU 2016-13, Credit Impairment

In June of 2016, the FASB issued ASC Topic 326, Financial Instruments – Credit Losses. This new guidance replaces the current incurred loss impairment model with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. This new Current Expected Credit Losses (“CECL”) model applies to (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and financial assets measured at fair value, and (4) beneficial interests in securitized financial assets. This ASU was effective for SEC filers beginning after December 15, 2019; however, on November 15, 2019, the FASB issued ASU 2019-10, which delayed the effective date for “smaller reporting companies.” Therefore, ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission, or the “SEC”) such as Royale, for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under the modified retrospective method. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. Adoption of this standard is not expected to have a material impact on our consolidated financial statements and cash flows.

NOTE 2

–

OIL AND GAS PROPERTY AND EQUIPMENT AND FIXTURES

Oil and gas properties, equipment and fixtures consist of the following:

	March 31,			December 31,
	2022			2021
	(Unaudited)
Oil and Gas	****	****	****	****	****	****
Producing properties, including drilling costs	$	5,529,568		$	5,509,568
Undeveloped properties		167,281			128,362
Lease and well equipment		3,317,718			3,317,718
		9,014,567			8,955,648
Accumulated depletion, depreciation & amortization		(6,990,637	)		(6,879,531	)
Net capitalized costs Total		2,023,930			2,076,117
Commercial and Other	****	****	****	****	****	****
Vehicles		40,061			40,061
Furniture and equipment		1,097,428			1,097,428
		1,137,489			1,137,489
Accumulated depreciation		(1,133,806	)		(1,133,806	)
		3,683			3,683
Net capitalized costs Total	$	2,027,613		$	2,079,800

The guidance set forth in the Continued Capitalization of Exploratory Well Costs paragraph of the Extractive Activities Topic of the FASB ASC requires that we evaluate all existing capitalized exploratory well costs and disclose the extent to which any such capitalized costs have become impaired and are expensed or reclassified during a fiscal period.

Depreciation, depletion and amortization, based on cost less estimated salvage value of the asset, are primarily determined under either the unit-of-production method or the straight-line method, which is based on estimated asset service life taking obsolescence into consideration. Maintenance and repairs are expensed as incurred. Major renewals and improvements are capitalized and the assets replaced are retired.

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The project construction phase commences with the development of the detailed engineering design and ends when the constructed assets are ready for their intended use. Interest costs, to the extent they are incurred to finance expenditures during the construction phase, are included in property, plant and equipment and are depreciated over the service life of the related assets.

Royale Energy uses the “successful efforts” method to account for its exploration and production activities. Under this method, Royale Energy accumulates its proportionate share of costs on a well-by-well basis with certain exploratory expenditures and exploratory dry holes being expensed as incurred and capitalizes expenditures for productive wells. Royale Energy amortizes the costs of productive wells under the unit-of-production method.

Royale Energy carries, as an asset, exploratory well costs when the well has found a sufficient quantity of reserves to justify its completion as a producing well and where Royale Energy is making sufficient progress assessing the reserves and the economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expense. Other exploratory expenditures, including geophysical costs and annual lease rentals, are expensed as incurred.

Acquisition costs of proved oil and gas properties are amortized using a unit-of-production method, computed on the basis of total proved oil and gas reserves.

Capitalized exploratory drilling and development costs associated with productive depletable extractive properties are amortized using unit-of-production rates based on the amount of proved developed reserves of oil and gas that are estimated to be recoverable from existing facilities using current operating methods. Under the unit-of-production method, oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the lease or field storage tank.

Production costs are expensed as incurred. Production involves lifting the oil and gas to the surface and gathering, treating, field processing and field storage of the oil and gas. The production function normally terminates at the outlet valve on the lease or field production storage tank. Production costs are those incurred to operate and maintain Royale Energy’s wells and related equipment and facilities. They become part of the cost of oil and gas produced. These costs, sometimes referred to as lifting costs, include such items as labor costs to operate the wells and related equipment; repair and maintenance costs on the wells and equipment; materials, supplies and energy costs required to operate the wells and related equipment; and administrative expenses related to the production activity. Proved oil and gas properties held and used by Royale Energy are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Royale Energy estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts and whether carrying amounts should be impaired. The Company performs the evaluation of carrying amounts at least annually or when economic events or commodity prices indicate that a substantial and measurable change in future cash flows has occurred. Cash flows used in impairment evaluations are developed using updated evaluation assumptions for crude oil and natural gas commodity prices. Annual volumes are based on field production profiles, which are also updated annually.

Impairment analyses are generally based on proved reserves. An asset group would be further assessed if the undiscounted cash flows were less than its’ carrying value. Impairments are measured by the amount the carrying value exceeds fair value. During the three months ended March 31, 2022 and 2021, no impairment losses were incurred.

Significant unproved properties are assessed for impairment individually, and valuation allowances against the capitalized costs are recorded based on the estimated economic chance of success and the length of time that Royale Energy expects to hold the properties. The valuation allowances are reviewed at least annually.

Upon the sale or retirement of a complete field of a proved property, Royale Energy eliminates the cost from its books, and the resulting gain or loss is recorded to Royale Energy’s Statement of Operations. Upon the sale of an entire interest in an unproved property where the property has been assessed for impairment individually, a gain or loss is recognized in Royale Energy’s Statement of Operations. If a partial interest in an unproved property is sold, any funds received are accounted for as a recovery of the cost in the interest retained with any excess funds recognized as a gain. Should Royale Energy’s turnkey drilling agreements include unproved property, total drilling costs incurred to satisfy its obligations are recovered by the total funds received under the agreements. Any excess funds are recorded as a Gain on Turnkey Drilling Programs, and any costs not recovered are capitalized and accounted for under the “successful efforts” method.

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Royale Energy sponsors turnkey drilling agreement arrangements in unproved properties as a pooling of assets in a joint undertaking, whereby proceeds from participants are reported as Deferred Drilling Obligations, and then reduced as costs to complete its obligations are incurred with any excess booked against its property account to reduce any basis in its own interest. Gains on Turnkey Drilling Programs represent funds received from turnkey drilling participants in excess of all costs Royale incurs during the drilling programs (e.g., lease acquisition, exploration and development costs), including costs incurred on behalf of participants and costs incurred for its own account; and are recognized only upon making this determination after Royale’s obligations have been fulfilled.

The contracts require the participants pay Royale Energy the full contract price upon execution of the agreement. Royale Energy completes the drilling activities typically between 10 and 30 days after drilling begins. The participant retains an undivided or proportional beneficial interest in the property and is also responsible for its proportionate share of operating costs. Royale Energy retains legal title to the lease. The participants purchase a working interest directly in the well bore.

In these working interest arrangements, the participants are responsible for sharing in the risk of development, but also sharing in a proportional interest in rights to revenues and proportional liability for the cost of operations after drilling is completed and the interest is conveyed to the participant.

A certain portion of the turnkey drilling participant’s funds received are non-refundable. The Company holds all funds invested as Deferred Drilling Obligations until drilling is complete. Occasionally, drilling is delayed for various reasons such as weather, permitting, drilling rig availability and/or contractual obligations. At March 31, 2022 and December 31, 2021, Royale Energy had Deferred Drilling Obligations of $8,264,570 and $7,824,939, respectively.

If Royale Energy is unable to drill the wells, and a suitable replacement well is not found, Royale would retain the non-refundable portion of the contract and return the remaining funds to the participant. Included in Restricted Cash are amounts for use in completion of turnkey drilling programs in progress.

Losses on properties sold are recognized when incurred or when the properties are held for sale and the fair value of the properties is less than the carrying value.

NOTE 3

–

SERIES B PREFERRED STOCK

The Series B Convertible Preferred Stock is convertible at the option of the security holder at the rate of ten shares of common stock for one share of Series B Convertible Preferred Stock. The Series B Preferred Stock has never been registered under the Securities Exchange Act of 1934, and no market exists for the shares. Additionally, the Series B Convertible Preferred shares will automatically convert to common at any time in which the Volume Weighted Average Price (“VWAP”) of the common stock exceeds $3.50 per share for 20 consecutive trading days, the shares are registered with the SEC and the volume of common shares trades exceeds 200,000 shares per day. The shareholders of the Series B Convertible Preferred may vote the number of shares into which they would be entitled to convert, beginning in 2020.

In accordance with ASC 480-10-S99-1.02, the Company has determined that the conversion or redemption of these shares are outside the sole control of the Company and that they should be classified in mezzanine or temporary equity as redeemable noncontrolling interest beginning at the reporting period ended March 31, 2020.

For 2022 and 2021, the board authorized the payment of each quarterly dividend of Series B Convertible Preferred shares, as Paid-In-Kind shares (“PIK”) to be paid immediately following the end of the quarter. For the quarter ending March 31, 2022, the Company accrued 19,852 shares with a value of $198,516. During 2022 and 2021 no cash was used to pay dividends on Series B preferred shares.

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NOTE 4

–

LOSS PER SHARE

Basic and diluted loss per share are calculated as follows:

	For the period ending
	March 31, 2022						March 31, 2021
	Basic			Diluted			Basic			Diluted
Net Loss	$	(52,351	)		(52,351	)	$	(572,167	)		(572,167	)
Less: Preferred Stock Dividend		198,516			198,516			191,718			191,718
Less: Preferred Stock Dividend In Arrears								-			-
Net Loss Attributable to Common Shareholders		(250,867	)		(250,867	)		(763,885	)		(763,885	)
Weighted average common shares outstanding		56,239,715			56,239,715			55,144,668			55,144,668
Effect of dilutive securities		-			-			-			-
Weighted average common shares, including Dilutive effect		56,239,715			56,239,715			55,144,668			55,144,668
Per share:
Net Loss	$	(0.00	)		(0.00	)	$	(0.01	)		(0.01	)

For the three months ended March 31, 2022 and 2021, Royale Energy had dilutive securities of 26,468,423 and 26,119,183, respectively. In both periods, these securities were not included in the dilutive loss per share, due to their antidilutive nature.

NOTE 5

–

INCOME TAXES

Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. At the end of 2015, management reviewed the reliability of the Company’s net deferred tax assets, and due to the Company’s continued cumulative losses in recent years, the Company concluded it is not “more-likely-than-not” its deferred tax assets will be realized. As a result, the Company will continue to record a full valuation allowance against the deferred tax assets in 2022.

A reconciliation of Royale Energy’s provision for income taxes and the amount computed by applying the statutory income tax rates at March 31, 2022 and 2021, respectively, to pretax income is as follows:

	For the quarter ended
	March 31, 2022			March 31, 2021
Tax benefit computed at statutory rate of 21% at March 31, 2022 and 2021, respectively	$	(10,994	)	$	(116,427	)
Increase (decrease) in taxes resulting from:
State tax / percentage depletion / other
Other non-deductible expenses		3			(1,924	)
Change in valuation allowance		10,991			118,351
Provision (benefit)	$	-		$	-

NOTE 6

–

ISSUANCE OF COMMON STOCK

During the three months ended March 31, 2021, in lieu of cash payments for salaries and board fees, Royale issued 1,023,413 shares of its Common stock valued at approximately $118,736 to an executive officer and board members. There were no Common shares issued during the same period of 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

In addition to historical information contained herein, this discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, subject to various risks and uncertainties that could cause our actual results to differ materially from those in the “forward-looking statements”. While we believe our forward-looking statements are based upon reasonable assumptions, there are factors that are difficult to predict and that are influenced by economic and other conditions beyond our control. Investors are directed to consider such risks and other uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2022, AS COMPARED TO THE QUARTER ENDED MARCH 31, 2021

For the three months ended March 31, 2022 and 2021, we had net losses of $52,351 and $572,167, respectively. The difference was primarily due to a gain on settlement of accounts payable during the first quarter in 2022 of approximately $409,000. During the quarter we also participated in the drilling of two oil wells in southern California and recognized a gain on turnkey drilling of $345,605 while during the same period in 2021 we drilled two oil wells in Texas and recognized a gain of $264,780.

During the first three months of 2022, revenues from oil and gas production increased $108,277 or 27.1% to $507,214 from the 2021 first three months revenues of $398,937. This increase was mainly due to higher oil and natural gas commodity prices. The net sales volume of oil and condensate for the three months ended March 31, 2022, was approximately 3,889 barrels with an average price of $92.44 per barrel, versus 5,574 barrels with an average price of $56.08 per barrel for the first three months of 2021. This represents a decrease in net sales volume of 1,685 barrels or 30.2%, which was due to lower production volumes due to natural declines in our wells. The net sales volume of natural gas for the three months ended March 31, 2022, was approximately 33,527 Mcf with an average price of $4.37 per Mcf, versus 29,659 Mcf with an average price of $2.91 per Mcf for the same period in 2021. This represents an increase in net sales volume of 3,868 Mcf or 13.0%. The increase in natural gas production volume was due to certain non-operated wells that had been offline which were brought back online at the end of 2021.

Oil and natural gas lease operating expenses increased by $114,306 or 38.1%, to $414,468 for the three months ended March 31, 2022, from $300,162 for the same period in 2021. These increases were mainly due to higher trucking and water disposal costs due to increases in manpower and fuel costs from outside vendors, and higher plugging costs of non-operated wells.

The aggregate of supervisory fees and other income was $9,291 for three months ended March 31, 2022, an increase of $6,965 from $2,326 during the same period in 2021. This increase was due to higher rental income and compressor fee income during the quarter in 2022.

Depreciation, depletion and amortization expense increased to $124,676 from $124,405, an increase of $271 or 0.2% for the three months ended March 31, 2022, as compared to the same period in 2021. The depletion rate is calculated using production as a percentage of reserves. This increase in depletion expense was due to a decrease in expected recoverable reserves which increased the depletion rate.

At March 31, 2022, Royale Energy had a Deferred Drilling Obligation of $8,264,570. During the first three months of 2022, we removed $2,055,369 of drilling obligations as we participated in the completing the drilling of two oil wells in southern California, while incurring expenses of $1,709,764, resulting in a gain of $345,605. At March 31, 2021, Royale Energy had a Deferred Drilling Obligation of $2,747,439. During the first three months of 2021, we removed $1,841,061 of drilling obligations upon completing the drilling of two oil wells in Texas, while incurring expenses of $1,576,280, resulting in a gain of $264,780.

General and administrative expenses decreased by $27,516 or 4.9% from $564,983 for the three months ended March 31, 2021 to $537,467 for the same period in 2022. The decrease was due to higher operations and drilling overhead offsets along with lower employee recruitment fees during the quarter in 2022. For the first 3 months of 2022, marketing expenses increased $16,897 or 43.3% to $55,946, compared to $39,049 when compared to the first three months of 2021. Marketing expense varies from period to period according to the number of marketing events attended by personnel and their associated costs.

Legal and accounting expense decreased to $188,271for the three-month period in 2022, compared to $218,763 for the same period in 2021, a $30,492 or 13.9% decrease. This decrease was primarily due to lower audit related expenses during the period in 2022.

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During the three months ended March 31, 2022, we recorded a gain of $408,644 on settlement of accounts payable for a reduced amount. During the first quarter of 2021, we recorded a gain on settlement of $10,061 due to the payment by the SBA of the remaining balance on our PPP loan obtained in 2020.

Bad debt expense for the three months ended March 31, 2022, and 2021 were $0 and $74, respectively. We periodically review our accounts receivable from working interest owners to determine whether collection of any of these charges appears doubtful. By contract, the Company may not collect some charges from its Direct Working Interest owners for certain wells that ceased production or had been sold during the year, to the extent that these charges exceed production revenue.

Interest expense increased to $2,277 for the three months ended March 31, 2022, from $835 for the same period in 2021, a $1,442 increase.

CAPITAL RESOURCES AND LIQUIDITY

At March 31, 2022, we had current assets totaling $8,680,982 and current liabilities totaling $15,631,432, a $6,950,450 working capital deficit. We had $1,144,678 in cash and $3,622,572 in restricted cash at March 31, 2022, compared to $220,304 in cash and $4,002,500 in restricted cash at December 31, 2021.

In accordance with ASC 480-10-S99 the Company reclassified the Series B Convertible Preferred Stock from Permanent Equity to Mezzanine capital as a result of the change in voting rights provided at the time it of issuance. For more information, see Note 3 – Series B Convertible Preferred Stock.

At March 31, 2022, our other receivables, which consist of joint interest billing receivables from direct working interest investors and industry partners, totaled $483,894 compared to $413,133 at December 31, 2021, a $70,761 increase. This increase was mainly due to accounts receivables from direct working interest owners for lease operating expenses for two wells that were brought online during the first quarter 2022. At March 31, 2022, revenue receivable was $344,742, a decrease of $20,408, compared to $365,150 at December 31, 2021, due the netting of revenue receivables due from an industry partner for drilling and operating costs during the period in 2022. At March 31, 2022, our accounts payable and accrued expenses totaled $5,718,759 an increase of $558,275 from the accounts payable at December 31, 2021 of $5,160,484, which was mainly due to drilling costs and lease operating costs during the first quarter in 2022.

The Company has had recurring operating and net losses and cash used in operations and the financial statements reflect a working capital deficiency of $6,935,450 and an accumulated deficit of $86,935,903. These factors raise substantial doubt about our ability to continue as a going concern. We anticipate that our primary sources of liquidity will be from the sale of oil and gas in the course of normal operations, the sale of oil and gas property, sales of participation interest and possible issuance of debt and/or equity. If the Company is unable to generate sufficient cash from operations or financing sources, it may become necessary to curtail, suspend or cease operations, sell property, or enter into financing transaction(s) on less favorable terms; any such outcomes could have a material adverse effect on the Company’s business, results of operations, financial position and liquidity. Additionally, management has, and plans to continue, to increase revenue and reduce overhead and Lease Operating Expense (LOE) costs.

Operating Activities. Net cash used in operating activities totaled $337,470 and $25,416 for the three months ended March 31, 2022 and 2021, respectively. This difference in cash used was mainly due to higher accounts payable during the period in 2022 for drilling and lease operating expenses in our fields in Texas and southern California.

Investing Activities. Net cash provided by investing activities totaled $927,761 and net cash used in investing activities totaled $63,806 for the three months ended March 31, 2022, and 2021, respectively. During the three-month period in 2022, we received approximately $2.5 million in direct working interest investor turnkey drilling investments while our drilling expenditures were approximately $1.6 million as we participated in the drilling and completing of two southern California oil wells. During the period in 2021, we received approximately $1.46 million in direct working interest investor turnkey drilling investments while our drilling expenditures were approximately $1.5 million in the drilling and completing of two Texas oil wells.

Financing Activities. Net cash used in financing activities totaled $45,845 and $2,588 for the three months ended March 31, 2022, and 2021, respectively. During the period in 2022, the total was used for principal payments on our notes payable while during the period in 2021, the total was used for financing lease payments.

Critical Accounting Estimates

Our critical accounting policies are further disclosed in Note 1 to the consolidated financial statements included in our 2021 Annual Report on Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures of a registrant designed to ensure that information required to be disclosed by the registrant in the reports that it files or submits under the Exchange Act is properly recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include processes to accumulate and evaluate relevant information and communicate such information to a registrant’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

As of March 31, 2022, the Company’s management, including its Chief Executive and Chief Financial Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as required by Rule 13a-15 of the Exchange Act. Based on the evaluation described above, the company concluded that there was a material weakness in 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. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As a result of the review by the CFO and CEO, the material weakness was identified as listed below.

●

In connection with the audit of our 2021 and 2020 consolidated financial statements, management has identified a material weakness that exists because we did not maintain effective controls over our financial close and reporting process, and has concluded that the financial close and reporting process needs additional formal procedures to ensure that appropriate reviews occur on all financial reporting analysis. Management is in the process of designing and implementing updated control procedures that it believes will mitigate this material weakness.

Because of the material weaknesses described above, our management was unable to conclude that our internal control over financial reporting was effective as of the end of period to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Notwithstanding the material weaknesses described above, our management, including our Chief Executive Officer and Chief Financial Officer, believes that the consolidated financial statements contained in this Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the fiscal periods presented in conformity with U.S. generally accepted accounting principles. In addition, the material weakness described did not result in the restatements of any of our audited or unaudited consolidated financial statements or disclosures for any previously reported periods.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Except for the actions described above, that were taken to address the material weaknesses, there were no changes in our internal controls during the period ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be involved in various legal proceedings or may be subject to claims that arise in the ordinary course of business. The outcome of any such claims or proceedings cannot be predicted with certainty. As of the date of this filing, management is not aware of any such claims against the Company.

Item 1A. Risk Factors

Not applicable to smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the period covered by this report, we have not issued any unregistered shares.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

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. § 1350 Certification
32.2	18 U.S.C. § 1350 Certification
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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.

	ROYALE ENERGY, INC.
Date: May 23, 2022	/s/ Johnny Jordan
	Johnny Jordan, Chief Executive Officer
Date: May 23, 2022	/s/ Ronald Lipnick
	Ronald Lipnick, Interim Chief Financial Officer

ex_377665.htm

Exhibit 31.1

I, Johnny Jordan, certify that:

I have reviewed this report on Form 10-Q of Royale Energy, Inc.;
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;
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;
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(e)) 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) 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 the 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 23, 2022	/s/ Johnny Jordan
	Johnny Jordan, Chief Executive Officer

ex_377666.htm

Exhibit 31.2

I, Ronald Lipnick, certify that:

I have reviewed this report on Form 10-Q of Royale Energy, Inc.;
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;
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;
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(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

The registrant’s other certifying officer(s) 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 the registrant’s board of directors (or persons performing the equivalent functions)

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 23, 2022	/s/ Ronald Lipnick
	Ronald Lipnick, Interim Chief Financial Officer

ex_377667.htm

Exhibit 32.1

Certification Pursuant to 18 U.S.C. § 1350

The undersigned, Johnny Jordan, Chief Executive Officer of Royale Energy, Inc., 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, to his knowledge:

(1) the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2022 (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 23, 2022	By:	/s/ Johnny Jordan
		Johnny Jordan, Chief Executive Officer

ex_377668.htm

Exhibit 32.2

Certification Pursuant to 18 U.S.C. § 1350

The undersigned, Ronald Lipnick, Chief Financial Officer of Royale Energy, Inc., 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, to his knowledge:

(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 23, 2022	By:	/s/ Ronald Lipnick
		Ronald Lipnick, Interim Chief Financial Officer