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 ~~September~~March 3031, ~~2018~~2019

☐

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

Commission file number 000-54639

CITADEL EXPLORATION, INC.

(Exact name of registrant as specified in its charter)

Nevada		27-1550482
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

417 31^stStreet, Unit A, Newport Beach, CA		92663
(Address of principal executive offices)		(Zip Code)

(949) 612-8040
(Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes ☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer company ☐ Smaller reporting company ☒ ~~Emerging~~(Do ~~growth~~not ~~company~~check ☐if a smaller reporting 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 Exchange Act).

Yes ☐ No ☒

The number of shares of Common Stock, $0.001 par value, outstanding on ~~November~~May 1420, ~~2018~~2019 was 4548,~~000~~956,~~000~~ 151 shares.

CITADEL EXPLORATION, INC.

QUARTERLY PERIOD ENDED ~~SEPTEMBER 30~~MARCH 31, 2018

Index to Report on Form 10-Q

		Page No.
	PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1214
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1518
Item 4T.	Controls and Procedures	1519
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	1620
Item1A.	Risk Factors	1620
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1620
Item 3.	Defaults Upon Senior Securities	1721
Item 4.	Mine Safety Disclosures	1721
Item 5.	Other Information	1721
Item 6.	Exhibits	1722
	Signature	1822

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

~~CITADEL EXPLORATION, INC.~~-1-

~~CONSOLIDATED~~Table ~~BALANCE~~of ~~SHEETS~~Contents

	September 30,			December 31,
	2018			2017
ASSETS	(unaudited)
Current assets:
Cash	$	307,381		$	772,103
Unbilled and joint interest billing receivables		277,497			16,540
Prepaid expenses		66,687			29,280
Product inventory		—			20,107
Total current assets		651,565			838,030
Deposits		35,100			10,100
Restricted cash		200,000			200,000
Oil and gas properties, net (successful efforts basis)
Proved		5,923,193			5,018,086
Unproved		1,170,000			1,170,000
Fixed assets, net		71,237			82,969
Total assets	$	8,051,095		$	7,319,185
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,430,794		$	2,220,938
Accrued interest payable		330,585			459,416
Drilling obligation, net of discount of $63,000 and $126,000 as of September 30, 2018 and December 31, 2017 respectively		700,742			700,000
Notes payable, net		2,214,909			579,951
Total current liabilities		5,677,030			3,960,305
Asset retirement obligation		246,799			224,380
Related party production payment liability		300,000			300,000
Total liabilities		6,223,829			4,484,685
Stockholders' equity :
Common stock, $0.001 par value, 300,000,000 shares authorized , 45,000,000 and 44,449,742 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively		45,000			44,450
Series A Preferred stock, $20.00 par value, 500,000 shares authorized, 395,615 and 394,365 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively		7,912,300			7,887,300
Additional paid-in capital		6,014,828			5,691,239
Accumulated deficit		(12,144,862	)		(10,788,489	)
Total stockholders' equity		1,827,266			2,834,500
Total liabilities and stockholders' equity	$	8,051,095		$	7,319,185

CITADEL EXPLORATION, INC.

~~See~~CONSOLIDATED ~~Accompanying~~BALANCE ~~Notes to Unaudited Consolidated Financial Statements.~~SHEETS

~~-1-~~(Unaudited)

Table of Contents

	March 31,			December 31,
	2019			2018
ASSETS
Current assets:
Cash	$	94,322		$	86,441
Accounts receivable		39,269			135,824
Prepaid expenses		11,158			32,633
Total current assets		144,749			254,898

Long term assets Right-of-use asset		69,173			—
Deposits		35,100			35,100
Restricted cash		200,000			200,000
Oil and gas properties (successful efforts basis) Proved, net		5,612,675			5,685,535
Unproved		1,172,034			1,172,034
Fixed asset, net		63,415			67,326

Total assets	$	7,297,146		$	7,414,893

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,723,515		$	2,657,590
Accrued interest payable		478,350			390,224
Drilling obligation, net of discount of $21,000 and $42,000 as of March 31, 2019 and December 31, 2018 respectively		686,082			676,060
Notes payable, net of unamortized discount		2,398,628			2,353,003
Operating lease liability		69,173			—
Production payment liability - related party		300,000			300,000
Total current liabilities		6,655,748			6,376,877

Asset retirement obligation		253,880			250,358


Total liabilities		6,909,628			6,627,235

Stockholders' equity:
Common stock, $0.001 par value, 300,000,000 shares authorized, 48,956,151 and 45,000,004 shares issued and outstanding as of March 31, 2019 and December 31, 2018 respectively		48,957			45,000
Series A Preferred stock, $20.00 par value, 500,000 shares authorized, 400,615 and 395,615 shares issued and outstanding as of March 31, 2019 and December 31, 2018 respectively		8,012,300			7,912,300
Additional paid-in capital		6,146,914			6,150,871
Accumulated deficit		(13,820,653	)		(13,320,513	)
Total stockholders' equity		387,518			787,658

Total liabilities and stockholders' equity	$	7,297,146		$	7,414,893

~~CITADEL~~See ~~EXPLORATION,~~Accompanying ~~INC~~Notes to Unaudited Consolidated Financial Statements.

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~-2-

~~(unaudited)~~Table of Contents

	For the three months						For the nine months
	ended						ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue	$	320,774		$	46,824		$	928,092		$	133,472
Operating expenses:
Lease operating expense		202,562			94,069			676,937			216,844
General and administrative		75,204			60,632			219,843			178,821
Depreciation, depletion and amortization		135,387			8,844			407,685			26,965
Professional fees		40,951			37,738			183,237			160,855
Executive compensation		180,000			165,525			540,000			472,411
Total operating expenses		634,104			366,808			2,027, 702			1,055,896
Loss from operations		(313,330	)		(319,984	)		(1,099,610	)		(922,424	)
Other expenses:
Interest expense		(110,210	)		(198,070	)		(256,763	)		(572,636	)
Total other expenses		(110,210	)		(198,070	)		(256,763	)		(572,636	)
Loss before provision for income taxes		(423,540	)		(518,054	)		(1,356,373	)		(1,495,060	)
Income tax benefit		—			(2,188	)		—			(2,300	)
Net Loss	$	(423,540	)	$	(520,242	)	$	(1,356,373	)	$	(1,497,360	)
Series A preferred stock dividends		(199,433	)		—			(591,488	)		—
Net loss attributable to common stockholders	$	(622,973	)	$	(520,242	)	$	(1,947,861	)	$	(1,497,360	)
Weighted average number of common shares
- outstanding - basic and diluted		45,000,000			41,348,002			44,907,286			40,692,353
Net loss per share – basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.04	)

CITADEL EXPLORATION, INC.

~~See~~CONSOLIDATED ~~Accompanying~~STATEMENTS ~~Notes to~~OF ~~Unaudited Consolidated Financial Statements.~~OPERATIONS

~~-2-~~(Unaudited)

Table of Contents

	For the three months
	ended
	March 31,
	2019			2018

Revenue	$	175,592		$	212,554
Operating expenses:
Lease operating expense		169,020			285,796
General and administrative		56,806			73,126
Depreciation, amortization		75,024			133,426
Professional fees		21,973			80,645
Executive compensation		180,000			180,000
Total operating expenses		502,823			752,993

Other expenses:
Interest expense		(172,909	)		(11,476	)
Total other expenses		(172,909	)		(11,476	)
Loss before income taxes		(500,140	)		(551,915	)
(Provision) benefit for income taxes		—			—
Net loss	$	(500,140	)	$	(551,915	)


Series A preferred stock dividends		(195,755	)		(194,789	)
Net loss available to common stockholders	$	(695,895	)	$	(746,704	)

Weighted average number of common shares outstanding - basic and diluted		48,164,922			44,718,759
Net loss per share – basic and diluted	$	(0.01)		$	(0.02	)

~~CITADEL~~See Accompanying Notes to Unaudited Consolidated ~~EXPLORATION,~~Financial ~~INC~~Statements.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~-3-

~~(unaudited)~~Table of Contents

	For the nine months
	Ended
	September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,356,373	)	$	(1,497,479	)
Depreciation, depletion and accretion		407,684			20,989
Amortization of debt discount		151,807			—
Preferred stock dividend expense		—			406,800
Stock based compensation expense		90,051			—
Changes in operating assets and liabilities:
Increase in unbilled and joint interest billing receivables		(260,957	)		(2,065	)
Decrease (increase) in prepaid expenses		33,337			(12,414	)
Increase in deposits		(25,000	)		(200	)
Increase in accrued interest payable		100,557			161,189
Increase in accounts payable and accrued payables		329,857			286,321
Net cash used in operating activities		(529,037	)		(636,859	)
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and development of oil and gas properties		(1,383,024	)		(345,117	)
Property acquisitions		—			(600,000	)
Cash received from disposal of O&G asset		131,240			—
Purchase of equipment		(6,749	)		(2,215	)
Net cash used in investing activities		(1,258,533	)		(947,332	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock, net of costs		25,000			875,000
Proceeds from notes payable		1,420,612			672,552
Repayments to drilling liability		(62,258	)		—
Repayments of notes payable		(60,506	)		(55,617	)
Net cash provided by financing activities		1,322,848			1,491,935
Net increase in cash and restricted cash		(464,722	)		(92,256	)
Cash and restricted cash at beginning of year		972,103			433,793
Cash and restricted cash at end of the period	$	507,381		$	341,537
Supplemental disclosures of cash flow information:
Cash paid for interest		3,057			—
Reclass of inventory to O&G properties		20,107			—
Income taxes paid		—			2,300
Non-cash investing and financing activities:
Insurance premium financing		70,744			—
Shares issued to pay off bonus payable		20,000			—
Debt Discount from senior secured credit facility		214,087			—
Asset retirement obligation		12,128			—
Non-cash addition of senior loan facility for payment of San Benito litigation		100,000			—
Accrued interest payable rolled over to senior loan facility		229,388			—
Conversion from preferred stock issuable		—			6,514,600
Issuance for preferred stock for services		—			92,708
Issuance of common stock for preferred stock interest		—			406,800

CITADEL EXPLORATION, INC.

~~See~~CONSOLIDATED ~~Accompanying~~STATEMENTS ~~Notes~~OF ~~to Unaudited~~STOCKHOLDERS’ ~~Consolidated Financial Statements.~~EQUITY

~~-3-~~(Unaudited)

Table of Contents

									Additional
	Common Stock				Preferred Stock				Paid-In			Accumulated			Total
	Shares		Amount		Shares		Amount		Amount			Deficit			Equity
Balance at December 31, 2017		44,449,742	$	44,450		394,365	$	7,887,300	$	5,691,239		$	(10,788,489	)	$	2,834,500
Common shares issued for services rendered		450,262		450		—		—		89,602			—			90,052
Common shares issued to settle bonus payable		100,000		100		—		—		19,900			—			20,000
Preferred shares issued for cash		—		—		1,250		25,000		—			—			25,000
Debt discount on warrants issued		—		—		—		—		158,666			—			158,666
Net loss		—		—		—		—		—			(551,915	)		(551,915	)
Balance at March 31, 2018		45,000,004	$	45,000		395,615	$	7,912,300	$	5,959,407		$	(11,340,404	)	$	2,576,303


Balance at December 31, 2018		45,000,004	$	45,000		395,615	$	7,912,300	$	6,150,871		$	(13,320,513	)	$	787, 658
Common shares issued for special preferred stock dividends		3,956,147		3,957		—		—		(3,957	)		—			—
Preferred shares issued for cash		—		—		5,000		100,000		—			—			100,000
Net loss		—		—		—		—		—		$	(500,140	)	$	(500,140	)
Balance at March 31, 2019		48,956,151	$	48,957	$	400,615	$	8,012,300	$	6,146,914		$	(13,820,653	)	$	387,518

~~CITADEL~~See ~~EXPLORATION,~~Accompanying ~~INC~~Notes to Unaudited Consolidated Financial Statements.

~~Notes to Unaudited Consolidated Financial Statements~~-4-

~~NOTE~~Table 1of ~~– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Contents

~~Basis~~CITADEL ofEXPLORATION, ~~presentation~~INC.

~~The~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~unaudited~~OF ~~interim financial~~CASH statements and notes for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.FLOWS

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim consolidated financial statements be read in conjunction with the financial statements of the Company for the period ended September 30, 2018 and notes thereto included in the Company’s 10-K annual report and all amendments. The Company follows the same accounting policies in the preparation of interim reports.(Unaudited)

Results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

	For the three months
	Ended
	March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(500,140	)	$	(551,915	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation, depletion and amortization		75,024			133,426
Stock based compensation expense		—			90,051
Amortization of debt discount		83,918			—
Changes in operating assets and liabilities:
Decrease (increase) in other receivable		96,555			(82,420	)
Decrease (increase) in prepaid expenses		21,475			23,984
Increase (decrease) in accrued interest payable		88,126			10,349
Increase (decrease) in accounts payable and accrued payables		80,412			(131,492	)
Net cash used in operating activities		(54,630	)		(508,017	)
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and development of oil and gas properties		(9,218	)		(1,039,413	)
Cash received from disposal of O&G asset		—			100,215
Net cash used in investing activities		(9,218	)		(939,198	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock		100,000			25,000
Proceeds from notes payable		—			920,612
Proceeds (payments) from (to) drilling liability		(10,978	)		—
Repayments of notes payable		(17,293	)		(19,229	)
Net cash provided by financing activities		71,729			926,383
Net increase in cash and restricted cash		7,881			(520,832	)
Cash and restricted cash at beginning of year		286,441			972,103
Cash and restricted cash at end of the period	$	294,322		$	451,271

Supplemental disclosures of cash flow information:
Income taxes paid	$	—		$	—
Interest paid		—			—

Non-cash investing and financing activities:
ROU asset and operating lease obligation recognized upon adoption of Topic 842 in 2019		92,231			—

Shares issued to pay off bonus payable		—			20,000
Common shares issued for preferred dividends in 2019		3,957			—
Debt discount from senior secured credit facility		—			158,667
Asset retirement obligation		—			12,128
O&G property purchased still in AP		14,487			26,248
Non-cash addition of senior loan facility for payment of San Benito litigation		—			100,000
Accrued interest payable rolled over to senior loan facility		—			229,388

~~Principles~~See ofAccompanying ~~consolidation~~Notes to Unaudited Consolidated Financial Statements.

The consolidated financial statements include the accounts of Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC, the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC will be collectively referred herein to as the “Company”.-5-

~~Nature~~Table of ~~operations~~Contents

~~Currently~~CITADEL EXPLORATION, ~~the Company is focused on the acquisition and development of oil and gas properties in California~~INC.

~~Impairment~~Notes to Unaudited Consolidated Financial Statements

~~The~~NOTE ~~Company~~1 ~~evaluates~~– ~~the impairment~~SUMMARY ofOF ~~its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate~~SIGNIFICANT ~~that~~ACCOUNTING the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. As of September 30, 2018, management believes that no impairment indicators exist.POLICIES

~~Use~~Basis of ~~estimates~~presentation

The ~~preparation~~interim of consolidated financial statements included herein, presented in ~~conformity~~accordance with United States generally accepted accounting principles ~~requires~~and ~~management~~stated toin ~~make~~US ~~estimates~~dollars, have ~~and~~been ~~assumptions that~~prepared ~~affect~~by the ~~reported~~Company, ~~amounts~~without ofaudit, ~~assets~~pursuant ~~and~~to ~~liabilities~~the ~~and~~rules ~~disclosure of contingent assets~~ and ~~liabilities~~regulations ~~at the date~~ of the ~~consolidated~~ ~~financial~~Securities ~~statements~~ and ~~the~~Exchange ~~reported amounts of revenue and expenses during the reporting period~~Commission. ~~Actual results~~ ~~could~~Certain ~~differ~~information ~~significantly~~and ~~from~~footnote ~~those~~disclosures ~~estimates.~~normally ~~The~~included ~~accounting~~in ~~policies~~financial ~~most~~statements ~~affected~~prepared byin ~~management’s~~accordance ~~estimates~~with ~~and~~generally ~~assumptions~~accepted ~~are~~accounting ~~the~~principles ~~following:~~have ~~the~~been ~~reliance~~or onomitted ~~estimates~~pursuant ~~of proved reserves~~ to ~~compute~~such ~~the~~rules ~~provision~~and ~~for depreciation~~regulations, ~~depletion~~although ~~and amortization and to determine~~ the ~~amount~~Company ofbelieves ~~any~~that ~~impairment of proved properties;~~ the ~~valuation of unproved acreage and proved crude oil and~~disclosures ~~natural~~are ~~gas~~adequate ~~properties~~ to ~~determine~~make the ~~amount~~information ofpresented ~~any~~not impairment of crude oil and natural gas properties; judgement regarding the productive status of in-progress exploratory wells to determine the amount of any provision for abandonment and estimates regarding abandonment liabilitiesmisleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 and notes thereto included in the Company’s 10-4-K annual report and all amendments. The Company follows the same accounting policies in the preparation of interim reports.

~~Table~~Results of ~~Contents~~operations for the interim period are not indicative of annual results.

~~CITADEL~~Principles ~~EXPLORATION,~~of ~~INC.~~consolidation

~~Notes~~The consolidated financial statements toinclude ~~Unaudited~~the ~~Consolidated~~accounts ~~Financial~~of ~~Statements~~Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC, the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Citadel Exploration, Inc., Citadel Exploration, LLC and Citadel Kern Bluff, LLC will be collectively referred herein to as “we”, “our or the “Company”.

~~NOTE 1~~Nature –of ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~operations

~~Fair~~Currently, ~~value~~the Company is focused on the acquisition and development of ~~financial~~oil ~~instruments~~and gas properties in California.

The carrying value of the Company’s financial instruments, including cash, due to shareholders/related parties and accounts and other payables approximate their fair values due to the immediate or short-term maturity of these instruments. It is management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments.Impairment

~~Reclassification~~The Company evaluates the impairment of its proved oil and ~~comparative~~natural ~~figures~~gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. As of March 31, 2019, management believes that no impairment indicators exist.

Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit.-6-

~~Cash~~Table ~~and~~of ~~cash equivalents~~Contents

~~The~~CITADEL ~~Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had no cash equivalents as of September 30~~EXPLORATION, ~~2018 and December 31, 2017~~INC.

~~Earnings~~Notes ~~per~~to ~~share~~Unaudited Consolidated Financial Statements

~~The~~NOTE ~~Company~~1 ~~follows~~– ~~ASC~~SUMMARY ~~Topic~~OF ~~260~~SIGNIFICANT toACCOUNTING ~~account~~POLICIES ~~for the earnings per share. Basic earnings per common share~~ (~~“EPS”~~CONTINUED) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

~~Disaggregation~~Use of ~~revenue~~estimates

The ~~Company~~preparation ~~does~~of ~~not~~consolidated ~~disaggregate~~financial ~~revenue,~~statements asin ~~all~~conformity ~~revenue~~with isgenerally ~~generated~~accepted ~~from~~accounting ~~oil~~principles atrequires ~~one~~management ~~property~~to ~~located~~make inestimates ~~California.~~and ~~Revenues~~assumptions ~~for~~that affect the ~~three~~reported ~~months~~amounts ~~ending~~of ~~September 30,~~assets ~~2018~~and liabilities and ~~2017~~disclosure ~~were~~of ~~$320,774~~contingent assets and ~~$46,824,~~liabilities ~~respectively.~~at ~~Revenues~~the ~~for~~date of the ~~nine~~consolidated financial ~~months~~statements ~~ending~~and ~~September~~the ~~30,~~reported ~~2018~~amounts of revenue and ~~2017~~expenses ~~were~~during the reporting period. Actual results could differ ~~$928,092~~significantly ~~and~~from ~~$133,472,~~those ~~respectively~~estimates.

~~Recent~~Fair ~~accounting~~value ~~pronouncements~~of financial instruments

InThe ~~May~~carrying ~~2014,~~value of the ~~FASB issued~~Company’s ~~ASC~~financial ~~updated No. 2014-09~~instruments, ~~Revenue~~including ~~from Contracts with Customers (Topic 606 (ASU 2014-09). Under the amendments in this update~~cash, ~~recognition~~ ofdue ~~revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration~~ to ~~which~~shareholders/related ~~the entity expects to be entitled in exchange for those goods or services. In addition~~parties, ~~the~~accounts ~~new standard requires that reporting companies disclose the nature, amount, timing,~~ and ~~uncertainty~~other ofpayables ~~revenue~~ and ~~cash~~notes ~~flows~~payable ~~arising from contracts with~~approximate ~~customers.~~their ~~The~~fair ~~amendments~~values indue ~~this~~to ~~update~~the ~~are~~immediate ~~effective~~or ~~for~~short-term ~~fiscal~~maturity ~~years~~of ~~and~~these ~~interim periods within those years beginning after December 15, 2017 and supersedes any previous revenue recognition guidance~~instruments. ~~Implementation~~It ofis ~~Topic 606,~~management’s ~~which~~opinion ~~was~~that ~~adopted by~~ the Company ~~as of January 1, 2018, was done using the modified retrospective approach. Adoption~~ ofis ~~this new standard did~~ not ~~have~~exposed anto ~~impact~~significant ~~on the Company’s balance sheet~~interest, ~~statement~~price ofor ~~operations,~~credit ~~statement~~risks ofarising ~~stockholders’ equity~~from orthese ~~statement~~financial ~~of cash flows~~instruments.

~~In November 2016, the FASB issued ASU 2016-18, “Statement of~~ Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). The update is effective for years beginning December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. These accounting pronouncements were adopted by the Company as of January 1, 2018. The purpose of Update 2016 -18 is to clarify guidance and ~~presentation related to restricted~~ cash ~~in the Statements of Cash Flows. The amendment requires beginning-of-period and end-of- period total amounts shown on the Statements of Cash Flows to include cash and cash~~ equivalents ~~as well as restricted cash and restricted cash equivalents. Adoption of this new standard did not have a material impact on the Company’s financial statements.~~

~~-5-~~The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had no cash equivalents as of March 31, 2019 and December 31, 2018.

~~Table~~Earnings ofper ~~Contents~~share

~~CITADEL~~The ~~EXPLORATION~~Company follows ASC Topic 260 to account for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, ~~INC~~if any, are anti-dilutive they are not considered in the computation.

~~Notes to Unaudited Consolidated Financial Statements~~-7-

~~NOTE~~Table 2of ~~– GOING CONCERN~~Contents

~~The~~CITADEL ~~accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern~~EXPLORATION, ~~which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business~~INC. In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing. There can be no assurance that the Company will be successful to raise sufficient cash to operate over the 12 months immediately following the issuance of its financial reports. The Company incurred a net loss in the amount of $1,356,373 for the period ended September 30, 2018. The Company has incurred net losses since entering the crude oil and natural gas exploration industry and as of September 30, 2018 has an accumulated deficit of $12,144,862 and a working capital deficit of $5,025,465 which raises substantial doubt about the Company’s ability to continue as a going concern.

~~The~~Notes ~~ability of the Company~~ to ~~continue as~~Unaudited aConsolidated ~~going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the~~Financial achievement of significant operating revenues. These unaudited consolidated financial statements as of September 30, 2018, do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.Statements

NOTE 31 – ~~OIL~~SUMMARY ~~AND~~OF ~~GAS~~SIGNIFICANT ACCOUNTING ~~PROPERTIES~~POLICIES (CONTINUED)

~~Oil~~Revenue ~~and~~Recognition ~~natural gas properties, buildings and equipment consist of the following:~~Policy

	September			December
	30, 2018			31, 2017
	(unaudited )
Oil and Natural Gas:
Proved properties	$	4,137,287		$	3,468,306
Unproved properties		1,170,000			1,170,000
Facilities		2,297, 724			2,244,716
		7,605,0 11			6,883,022
Less oil property impairment		—			(562,030	)
Less accumulated depreciation, depletion, and amortization		(511,818	)		(132,906	)
	$	7,093,193		$	6,188,086

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers, and the series of related ASU’s that followed under ASC Topic 606 (collectively, “Topic 606”). Under Topic 606, revenue will generally be recognized upon delivery of our produced oil volumes to our customers. Our customer sales contract is only for oil as we do not produce any natural gas volumes for sale. Under Topic 606, each unit (barrel) of commodity product represents a performance obligation which is sold at variable prices, determinable on a daily basis. The pricing provisions of our contracts are primarily tied to market index with certain adjustments based on factors such as delivery, product quality and prevailing supply and demand conditions in geographic areas in which we operate. We will allocate the transaction price to the performance obligation and recognize revenue upon delivery of the commodity product when the customer obtains control. Control of our produced oil volumes passes to our customers when the oil is measured by a trucking oil ticket. The Company has no control over the commodities after that point and the measurement at those points dictates the amount on which the customer’s payment is based. Our oil revenue stream includes volumes burdened by royalty and other joint owner working interests. Our revenues are recorded and presented on our financial statements net of the royalty and other joint owner working interests. Our revenue stream does not include any payments for services or ancillary items other than the sale of oil. We record revenue in the month our production is delivered to the purchaser. However, settlement statements and payments for our oil sales may not be received for up to 60 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized. Topic 606 will not change our pattern of timing of revenue recognition. We utilized the modified retrospective method for adoption of Topic 606, and in accordance with this method our consolidated financial statements for periods prior to January 1, 2018 were not materially affected or revised. The Company does not disaggregate revenue, as all revenue is generated from oil at one property located in California.

~~Total accumulated depreciation totaled $511,818~~Recent and $132,906, respectively, as of September 30, 2018 and December 31, 2017, respectively. For the period ending September 30, 2018 and September 30, 2017 total depletion expense totaled $378,912 and $12,588, respectively.pronouncements

~~NOTE~~In 4February –2016, ~~RESTRICTED~~the ~~CASH~~ Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. ASU 2016-02 and these additional ASUs are now codified as Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). ASC 842 supersedes the lease accounting guidance in Accounting Standards Codification 840 “Leases” (“ASC 840”) and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company’s consolidated financial statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Company’s historical accounting policy. As of the date of implementation on January 1, 2019, the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s consolidated balance sheet of approximately $92,231. As the right of use asset and the lease payable obligation were the same upon adoption of ASC 842, there was no cumulative effect impact on the Company’s retained earnings.

Restricted cash consists of one bond totaling $200,000 which is a blanket bond that will cover up to 50 wells. This bond was required in the normal course of business in the oil and gas industry. The bond totaling $200,000 was purchased in August 2015 following the acquisition of the Kern Bluff Oil Field. The detail breakdown of restricted cash and cash is depicted in the Consolidated Statement of Cash Flows as follows:-8-

	Nine Months Ended
	September 30,
	2018		2017
Cash and restricted cash at end of period	$	507,381	$	341,537
Cash at end of period	$	307,381	$	141,537
Restricted cash at end of period		200,000		200,000
Cash and restricted cash, end of period	$	507,381	$	341,537

Table of Contents

~~-6-~~CITADEL EXPLORATION, INC.

~~Table~~Notes ofto ~~Contents~~Unaudited Consolidated Financial Statements

~~CITADEL~~NOTE ~~EXPLORATION,~~2 ~~INC.~~– GOING CONCERN

~~Notes~~The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring startup costs and expenses. As a result, the Company has experienced recurring losses resulting in an accumulated deficit and a working capital deficit as of March 31, 2019 of $13,820,653 and $6,510,999, respectively. In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing. These factors raised substantial doubt as to ~~Unaudited~~the ~~Consolidated~~Company’s ~~Financial~~ability ~~Statements~~ to continue as a going concern.

~~NOTE~~There 5can –be ~~DEPOSITS~~ no assurance that the Company will be successful to raise sufficient cash to operate over the 12 months immediately following the issuance of its financial reports.

The ~~Company~~ability ~~had~~of ~~deposits~~the atCompany ~~September~~to continue ~~30,~~as ~~2018~~a ~~and~~going ~~December~~concern ~~31,~~is ~~2017~~dependent ~~totaling~~upon ~~$35,100~~its ~~and~~ability ~~$10,100,~~to ~~respectively,~~raise ~~which~~additional ~~pertain~~capital ~~to:~~from athe ~~natural~~sale ~~gas~~of ~~deposit~~common tostock ~~purchase~~and, ultimately, the ~~gas~~achievement ~~per~~of ~~contract;~~significant ~~deposit~~operating onrevenues. ~~building~~These ~~rent;~~unaudited ~~and~~consolidated afinancial ~~deposit~~statements todo ~~the~~not ~~County~~include ofany ~~San~~adjustments relating ~~Benito~~to ~~for~~the arecoverability ~~drilling~~and ~~program~~classification ~~which~~of werecorded ~~are~~asset inamounts ~~the process~~or amounts and classification of ~~trying~~liabilities tothat ~~have~~might result ~~the~~from ~~County~~this ~~refund~~uncertainty.

NOTE 6 3 – ~~NOTES~~OIL ~~PAYABLE~~AND GAS PROPERTIES

~~Notes~~Oil ~~payable~~and ~~consists~~natural gas properties, buildings and equipment consist of the following:

	September			December
	March 31, 2019			December 31, 2018
	30, 2018			31, 2017
Oil and Natural Gas:
	(unaudited )
Proved properties	$	4,116,671		$	4,121,940
Note payable to an entity for the financing of insurance premiums, unsecured; 7.99% interest, due February 2019		34,847			14,548
Unproved properties		1,172,034			1,172,034
Debt Discount on Senior Secured Facility Loan		(125,280	)		—
Facilities		2,231,561			2,231,561
Senior Secured Facility Loan 10% interest; due March 31, 2019		2,250,000			—
		7,520,266			7,525,535
Chandler/Lloyd Trust-Notes Payable 10% interest		—			500,000
Less - accumulated depreciation, depletion, and amortization		(735,557	)		(667,966	)
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due December 2022		28,075			32,351
	$	6,784,709		$	6,857,569
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022		27,267			33,052
Total – Notes Payable	$	2,214,909		$	579,951

InFor ~~March of 2018,~~ the ~~Company~~three ~~closed~~months onended aMarch $331,~~000,000~~ ~~senior~~2019 ~~secured~~and ~~credit~~March ~~facility.~~31, ~~The~~2018 ~~facility~~total ~~bears~~depreciation ~~10% interest~~ and ~~has~~depletion aexpense ~~one-year~~amounted ~~term. For every two dollars drawn on the facility, the investor receives one five-year warrant~~ to ~~purchase common stock at a price of~~ $~~0.10. The Company has drawn $2~~75,~~250,000~~024 ~~on the facility~~ and ~~issued 1~~$133,~~125~~426,~~000~~ ~~warrants~~respectively. The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method. Future drawdowns are at the discretion of the lender. The senior secured facility is secured by a deed of trust on the Kern Bluff Oil Field. Proceeds from the first draw where used to retire the previous bridge loan and accrued interest. The balance was used for general corporate purposes, including the drilling of a well.

~~NOTE 7 – STOCKHOLDERS’ EQUITY~~ -9-

~~The~~Table ~~Company is authorized to issue 300,000,000 shares~~ of ~~its $0.001 par value common stock. The Company is authorized to issue 500,000 shares of Series A Convertible Participating Preferred Stock.~~Contents

~~For~~CITADEL ~~the nine-months ended September 30~~EXPLORATION, ~~2018,~~ ~~the Company issued 450,262 and 100,000 common shares for $90,051 of services rendered and $20,000 of bonus payable, respectively~~INC. For the six and nine month s ended June 30, 2018 and September 30, 2018 the common stock balances were the same. The Company also issued 1,250 preferred shares for $25,000 cash. For the nine-months ended September 30, 2018 , the Company incurred a net loss of $1,356,37 3. For the six and nine months ended June 30, 2018 and September 30, 2018 the preferred stock balances were the same.

OnNotes ~~December 15, 2017, the Company adopted the 2017 Restricted Stock Unit Plan (RSU) authorizing the issuance of 10,000,000 restricted stock units~~ to ~~management~~Unaudited ~~and~~Consolidated ~~future employees.~~ Financial Statements

~~-7-~~NOTE 4 – CASH AND RESTRICTED CASH

~~Table~~Amounts in consolidated balance sheets included as cash and restricted cash on the Company’s consolidated statements of ~~Contents~~cash flows are as follows:

CITADEL EXPLORATION, INC.

	March 31, 2019		December 31, 2018

Cash	$	94,322		86,441
Restricted cash – long term		200,000		200,000
Total cash and restricted cash	$	294,322	$	286,441

~~Notes~~Restricted tocash ~~Unaudited~~consists ~~Consolidated~~of ~~Financial~~one bond ~~Statements~~totaling $200,000 as of March 31, 2019. This bond was required in the normal course of business in the oil and gas industry. The bond totaling $200,000 was purchased in August 2015 following the acquisition of the Kern Bluff Oil Field. This was a blanket bond, which will cover 50 wells.

NOTE 85 – ~~STOCK OPTION PLAN~~DEPOSITS

The ~~following~~Company ishad adeposits ~~summary~~ of ~~the status~~$35,100 offor ~~all~~March ~~the Company’s stock options as of September 30~~31, ~~2018~~2019 and ~~changes~~December ~~during~~31, ~~the period ended on that date:~~2018.

	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)
Outstanding as of December 31, 2017		9,500,000	$	0.20		3.26
Granted		500,000	$	0.20		6.84
Exercised		—	$	0.00		—
Cancelled		—	$	0.00		—
Outstanding as of September 30, 2018		10,000,000	$	0.20		2.73
Exercisable at September 30, 2018		10,000,000	$	0.20		2.73

NOTE 6 – NOTES PAYABLE

~~NOTE~~Notes 9payable –consists ~~WARRANTS~~of the following:

In March 2018, the Company closed on a $3,000,000 Senior Secured Credit Facility. As of September 30, 2018, the Company has drawn $2,250,000. As per the terms of the facility, the Company has issued 1,125,000 warrants to the lender. The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method

	March 31, 2019 (unaudited)		December 31, 2018
Note payable to an entity for the financing of insurance premiums, unsecured; 7.75% interest, due March 2018	$	—	$	13,939
				—
Senior Secured Facility Loan 10% interest; due March 31, 2019.		2,350,000		2,350,000
Unamortized debt discount		—		(62,924	)

Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due October 2022		23,928		25,598
Note payable to an entity for the financing of a company vehicle, secured; 4.95% interest, due November 2022		24,700		26,390
Total – Notes Payable	$	2,398,628	$	2,353,003

	Number of Warrants		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)
Outstanding at December 31, 2017		—	$	0.00		—
Granted		1,125,000	$	0.10		4. 58
Exercised		—	$	0.00		—
Cancelled		—	$	0.00		—
Total outstanding at September 30, 2018		1,125,000	$	0.10		4.58
Exercisable at September 30, 2018		1,125,000	$	0.10		4. 58

-10-

~~-8-~~Table of Contents

~~Table~~CITADEL ofEXPLORATION, ~~Contents~~INC.

~~CITADEL~~Notes ~~EXPLORATION,~~to ~~INC.~~Unaudited Consolidated Financial Statements

~~Notes~~NOTE to6 ~~Unaudited~~– ~~Consolidated~~NOTES ~~Financial Statements~~PAYABLE (CONTINUED)

~~NOTE~~In March of 2018, the Company closed on a $3,000,000 senior secured credit facility. The facility bears 10% –interest ~~RELATED~~and ~~PARTY~~has ~~TRANSACTIONS~~a one-year term. For every two dollars drawn on the facility, the investor receives one five-year warrant to purchase common stock at a price of $0.10. The Company has drawn down $2,350,000 on the facility and issued 1,175,000 warrants. The warrants were valued using the relative fair value and the amount recorded as a debt discount amortized over the life of the line of credit using effective interest method. Future drawdowns are at the discretion of the lender. The senior secured facility is secured by a deed of trust on the Kern Bluff Oil Field. Proceeds from the first draw where used to retire the previous bridge loan and accrued interest. Subsequent draws were used for general corporate purposes. The facility required the Company to achieve $1,000,000 in EBITDA as of December 31, 2018, which it did not attain. As such, the Company was in default of the facility’s covenants as of January 1, 2019 requiring the Company to pay a default interest rate of 15%. As of March 31, 2019 the Company was in default on its loan. The lender granted the Company a 45-day extension to refinance the loan. At this time, the Company has not been able to refinance the loan and remains in default.

~~During~~NOTE ~~the~~7 ~~nine months~~– ~~ended~~STOCKHOLDERS’ ~~September~~EQUITY 30, 2018, the Company purchased $125,217 of equipment from Grey Energy. Grey Energy is owned by a member of the Board of Directors of the Company. As of the end of the period, the Company had a production payment liability of $300,000 outstanding to a related party. The CEO & CFO continue to defer $20,000 a month of their $30,000 per month salary. For the nine-month period ended September 30, 2018, the CEO & CFO deferred $360,000 in salary.

~~Pursuant~~The toCompany ~~the~~is ~~adoption~~authorized ofto ~~the~~issue ~~2017 Restricted Stock Unit Plan (RSU)~~300,000,000 shares ~~the~~of ~~Company~~its ~~issued~~$0.001 ~~5,500,000~~par ~~shares~~value tocommon ~~three employees~~stock.

InThe ~~March~~Company ofis ~~2018 the Board of Directors~~ authorized a ~~2% Overriding Royalty Interest (ORRI)~~ to ~~two~~issue ~~members~~500,000 shares of ~~management. The~~Series ~~Company~~A ~~plans~~Convertible toParticipating ~~begin~~Preferred ~~paying this accrued ORRI in the fourth quarter of 2018~~Stock.

~~NOTE~~In 11January –of ~~DRILLING~~2019, ~~OBLIGATION~~we issued 3,956,147 shares of our common stock valued at $0.20 as dividend payment on our Series A Preferred Stock.

~~The~~In ~~Company~~March ~~entered into a joint venture agreement with investors to drill two wells in the fourth quarter~~ of ~~2017. The $700~~2019,~~000~~ ~~liability~~we ~~has~~sold an ~~18% rate of return. The~~additional ~~Company originally booked a debt discount of $126~~5,000 ~~and~~shares ~~will~~of beSeries ~~amortized~~A ~~over~~Convertible ~~the~~Participating ~~next~~Preferred 18Stock ~~months.~~for ~~During~~cash ~~the~~proceeds ~~nine-month~~of ~~ended September 30, 2018, the company amortized~~ $63100,000 ~~of the debt discount~~. ~~During the period, the Company paid $62,258 towards this obligation from oil production.~~

NOTE 128 – ~~REVISION~~STOCK OFOPTION ~~PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS~~PLAN

~~During~~The ~~the~~following ~~three~~is ~~months~~a ~~ended~~summary ~~September 30,~~of ~~2018,~~ the ~~Company identified errors in its financial statements for the second~~ status ~~quarter~~ of ~~the~~all ~~period~~of ~~ended September 30 , 2018, as included in~~ the Company’s ~~10-Q~~stock ~~for~~options ~~the~~as ~~period ended June 30, 2018, related to the restatement~~ of ~~prior~~March ~~period revenues. Specifically~~31, ~~the~~2019 ~~Company~~and ~~accounted~~changes ~~for~~during ~~a Joint Venture Partner as a royalty owner in~~ the three ~~and six~~ months ended ~~June~~March 3031, ~~2018. The Company made adjustments in the current quarter relating to this.~~2019:

The Company assessed the effect of the above errors in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to any of the Company’s prior interim and annual financial statements.

	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Life (Years)
Outstanding at December 31, 2018		10,000,000	$	0.20	$	—		2.48
Exercisable at December 31, 2018		10,000,000	$	0.20	$	—		2.48
Outstanding at March 31, 2019		10,000,000	$	0.20	$	—		2.23
Exercisable at March 31, 2019		10,000,000	$	0.20	$	—		2.23

The Company determined that the correction of the cumulative amounts of the errors would be material to its consolidated financial statements for the three and nine months ended September 30, 2018. Therefore, the Company revised its previously-issued financial statements for the second quarter of fiscal 2018. The balance sheet as of June 30, 2018 and the statement of operations for the three and six months ended June 30, 2018 included in this Form 1011- ~~Q are revised as described below for those adjustments.~~

~~All~~Table ~~financial information contained in the accompanying notes to these financial statements has been revised to reflect the correction~~ of ~~these errors.~~Contents

~~-9-~~CITADEL EXPLORATION, INC.

~~Table~~Notes ofto ~~Contents~~Unaudited Consolidated Financial Statements

~~CITADEL~~NOTE ~~EXPLORATION,~~9 ~~INC.~~– WARRANTS

~~Notes~~The toCompany ~~Unaudited~~did ~~Consolidated~~not ~~Financial~~issue any new warrants ~~Statements~~during the three months ended March 31, 2019. Warrant activity for the three months ended March 31, 2019 is as follows:

NOTE 12 – REVISION OF PREVIOUSLY-ISSUED INTERIM FINANCIAL STATEMENTS (CONTINUED)

	Number of Warrants		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)
Outstanding at December 31, 2018		1,175,000	$	0.10		4.34
Granted		—	$	0.00		—
Exercised		—	$	0.00		—
Outstanding at March 31, 2019		1,175,000	$	0.10		4.10

~~The~~NOTE ~~following~~10 ~~tables~~– ~~present~~RELATED ~~the~~PARTY ~~effect of the aforementioned revisions on the Company’s consolidated balance sheet for the six months ended June 30, 2018:~~TRANSACTIONS

	Six Months Ended June 30, 2018
	As Reported			Revision			As Restated
Drilling obligation, net of discount of $84,000 as of June 30, 2018		707,129			(34,871	)		672,258
Accounts payable and accrued liabilities		2,175,964			(21,872	)		2,154,092
Total current liabilities		4,920,137			(56,743	)		4,863,394
Total liabilities		5,463,421			(56,743	)		5,406,678
Accumulated deficit		(11,778,065	)		56,743			(11,721,322	)
Total stockholders' equity		2,138,642			56,743			2,195,385
Total liabilities and stockholders’ equity		7,602,063			—			7,602,063

During the period the Company did not have any purchases of equipment from related parties; historically the Company had purchased oil field equipment from one of its board members. As of March 31, 2019 and December 31, 2018, the Company had a production payment liability of $300,000 outstanding to a related party. The Company also has accrued interest related to a loan of $233,085 due to a related party.

~~The~~NOTE ~~following~~11 ~~tables~~– ~~present~~DRILLING ~~the effect of the aforementioned revisions on the Company’s consolidated statement of operations for the three and six months ended June 30, 2018:~~ OBLIGATION

	Three Months Ended June 30, 2018
	As Reported			Revision		As Restated
Revenue	$	299,989			84,455		384,444
Lease operating expense		150,546			33,819		184,365
Total operating expenses		630,527			33,819		664,346
Loss from operations		(330,538	)		50,636		(279,902	)
Loss before provision for income taxes		(437,661	)		50,636		(387,025	)
Net loss		(437,661	)		50,636		(387,025	)
Net loss attributable to common stockholders		(634,927	)		50,636		(584,291	)
Net loss per share (basic and diluted)		(0.01	)		—		(0.01	)

The Company entered into a joint venture agreement with investors to drill two wells in the fourth quarter of 2017. The $700,000 liability has an 18% rate of return. The Company originally booked a debt discount of $126,000 on this obligation which is amortized over a period of 18 months. Amortization of debt discount for each of the three months ended March 31, 2019 and 2018 amounted to $21,000.

	Six Months Ended June 30, 2018
	As Reported			Revision		As Restated
Revenue	$	512,542			94,776		607,318
Lease operating expense		436,342			38,033		398,309
Total operating expenses		1,355,565			38,033		1,317,532
Loss from operations		(843,023	)		56,743		(786,280	)
Loss before provision for income taxes		(989,576	)		56,743		(932,833	)
Net loss		(989,576	)		56,743		(932,833	)
Net loss attributable to common stockholders		(1,381,631	)		56,743		(1,324,888	)
Net loss per share (basic and diluted)		(0.03	)		—		(0.03	)

NOTE 12 – SUBSEQUENT EVENTS

~~-10-~~On April 15, 2019 the Company executed an extension agreement with its Senior Secured lender which extended the maturity date of the loan to May 15, 2019. The Company was not able to settle the loan on the extended maturity date and is currently in default of its obligation. We continue to work with our lender to refinance the loan. The loan is secured by a deed of trust on the Kern Bluff Oil Field.

~~Table~~On May 1, 2019 Armen Nahabedian tendered his resignation as Director, CEO & President of ~~Contents~~the Company.

~~FORWARD~~-~~LOOKING STATEMENTS~~12-

~~This~~Table ~~Quarterly Report on Form 10-Q contains forward-looking statements and involves risks and uncertainties that could materially affect expected results~~ of ~~operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding:~~Contents

oFORWARD-LOOKING ~~exploration risks such as drilling unsuccessful wells;~~STATEMENTS

oThis ~~our~~Quarterly ~~ability~~Report on toForm ~~operate~~10-Q ~~profitably;~~contains forward-looking statements and involves risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding:

o ~~our~~exploration ~~ability~~risks tosuch ~~efficiently~~as ~~and~~drilling ~~effectively~~unsuccessful ~~finance our operations~~wells;

o ~~inability~~our ability to ~~achieve~~operate ~~future sales levels or other operating results~~profitably;

o ~~inability~~our ability to ~~raise~~efficiently ~~additional~~and ~~financing~~effectively ~~for~~finance ~~working~~our ~~capital~~operations;

o inability to ~~efficiently~~achieve ~~manage~~future ~~our~~sales ~~operations~~levels or other operating results;

o inability to ~~hire~~raise oradditional ~~retain~~financing ~~sufficient~~for ~~qualified~~working ~~operating field personnel~~capital;

o ~~the~~ inability ~~of management~~ to ~~effectively~~efficiently ~~implement~~manage our ~~strategies and business plans~~operations;

o ~~the~~inability ~~unavailability~~to ofhire ~~funds~~or ~~for~~retain ~~capital~~sufficient ~~expenditures~~qualified ~~and/or~~operating ~~general~~field ~~working capital~~personnel;

o ~~deterioration~~the ininability ~~general~~of ormanagement ~~regional~~to ~~economic~~effectively ~~conditions~~implement our strategies and business plans;

o the ~~fact~~unavailability ~~that~~of ~~our~~funds ~~accounting~~for ~~policies~~capital ~~and~~expenditures ~~methods are fundamental to how we report our financial condition~~ and/or ~~results~~general ofworking ~~operations, and they may require management to make estimates about matters that are inherently uncertain~~capital;

o ~~changes~~deterioration in ~~U.S.~~general ~~GAAP~~ or inregional ~~the~~economic ~~legal, regulatory and legislative environments in the markets in which we operate~~conditions;

o ~~adverse~~the ~~state~~fact orthat ~~federal~~our ~~legislation~~accounting orpolicies ~~regulation~~and ~~that~~methods ~~increases~~are ~~the~~fundamental ~~costs~~to how we report our financial condition and results of ~~compliance~~operations, orand ~~adverse~~they ~~findings~~may byrequire amanagement ~~regulator~~to ~~with~~make ~~respect~~estimates toabout ~~existing~~matters ~~operations~~that are inherently uncertain;

Aso ~~well~~changes as other statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in ~~the forward-looking statements~~U. ~~Factors~~S. ~~that~~GAAP ~~could cause~~ or ~~contribute to such differences include, but are not limited to, those discussed~~ in ~~this Quarterly Report on Form 10-Q, and in particular,~~ the ~~risks discussed under the heading “Risk Factors” in Part II~~legal, ~~Item~~regulatory 1A and ~~those~~legislative ~~discussed~~environments in ~~other documents we file with~~ the ~~Securities~~markets ~~and~~in ~~Exchange~~which ~~Commission. We~~we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.operate;

~~References~~o inadverse ~~the following~~state ~~discussion~~or ~~and~~federal ~~throughout~~legislation ~~this~~or ~~quarterly~~regulation ~~report~~that toincreases ~~“we”, “our”, “us”, “Citadel”, “~~the ~~Company”,~~costs ~~and~~of ~~similar terms refer to Citadel Exploration~~compliance, ~~Inc.~~or ~~and~~adverse ~~its~~findings ~~subsidiary,~~by ~~unless~~a ~~otherwise~~regulator ~~expressly stated~~with orrespect ~~the~~to ~~context~~existing ~~otherwise requires.~~operations;

~~AVAILABLE~~As ~~INFORMATION~~well as other statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed under the heading “Risk Factors” in Part II, Item 1A and those discussed in other documents we file with the Securities and Exchange Commission. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

WeReferences ~~file annual, quarterly and other reports~~in ~~and other information with~~ the ~~SEC.~~following ~~You~~discussion ~~can read these SEC filings~~ and ~~reports~~throughout ~~over~~this ~~the~~quarterly ~~Internet~~report ~~at the SEC's website at www.sec.gov or on our website at www.citadelexploration.com. You can also obtain copies of the documents at prescribed rates by writing~~ to ~~the Public Reference Section of the SEC at 100 F Street~~“we”, NE“our”, ~~Washington~~“us”, ~~DC 20549 on official business days between the hours~~“Citadel”, ~~of 10:00 am and 3:00 pm. Please call~~ “the ~~SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders~~Company”, ~~including~~and ~~audited~~similar ~~financial~~terms ~~statements,~~refer ~~at no charge upon receipt of a written request~~ to ~~us at~~ Citadel Exploration, Inc., ~~417~~and ~~31st Street~~its subsidiary, ~~Unit~~unless A,otherwise ~~Newport~~expressly stated ~~Beach,~~or ~~California~~the ~~92663~~context otherwise requires.

~~-11-~~AVAILABLE INFORMATION

~~Table~~We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov or on our website at www.citadelexploration.com. You can also obtain copies of ~~Contents~~the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Citadel Exploration, Inc., 417 31st Street, Unit A, Newport Beach, California 92663.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~-13-

~~Overview~~Table of Contents

~~Citadel~~ITEM ~~is an energy company engaged in the exploration and development of oil and natural gas properties~~2. ~~Our~~MANAGEMENT’S ~~properties~~DISCUSSION ~~are~~AND ~~located~~ANALYSIS inOF ~~the~~FINANCIAL ~~San~~CONDITION ~~Joaquin Basin~~AND ofRESULTS ~~California.~~OF Subject to availability of capital, we strive to implement an accelerated development program utilizing capital resources, a regional operating focus, an experienced management and technical team, and enhanced recovery technologies to attempt to increase production and increase returns for our stockholdersOPERATIONS. Our corporate strategy is to build value in the Company through the acquisition of oil and gas leases with significant upside potential, successful exploration and exploitation and the efficient development of these assets.

Our revenues, profitability and future growth depend substantially on prevailing prices for oil and natural gas and our ability to find, develop and acquire oil and gas reserves that are economically recoverable.Overview

Citadel is an energy company engaged in the exploration and development of oil and natural gas properties. Our ~~Operations~~properties are located in the San Joaquin Basin of California. Subject to availability of capital, we strive to implement an accelerated development program utilizing capital resources, a regional operating focus, an experienced management and technical team, and enhanced recovery technologies to attempt to increase production and increase returns for our stockholders. Our corporate strategy is to build value in the Company through the acquisition of oil and gas leases with significant upside potential, successful exploration and exploitation and the efficient development of these assets.

Our ~~principal~~revenues, ~~strategy~~profitability isand tofuture ~~focus~~growth depend substantially on ~~the~~prevailing ~~acquisition~~prices offor oil and natural gas ~~mineral~~and ~~leases~~our ~~that~~ability ~~have known hydrocarbons or are in close proximity~~ to ~~known~~ ~~hydrocarbons that have been underdeveloped. Once acquired~~find, wedevelop ~~strive to implement an accelerated development program utilizing capital resources, a regional operating focus, an experienced management~~ and ~~technical~~acquire ~~team, and enhanced recovery technologies to attempt to increase production and increase returns for our stockholders. Our~~ oil and ~~natural~~ gas ~~acquisition~~reserves ~~and~~that ~~development activities~~ are ~~currently~~economically ~~focused in the State of California~~recoverable.

OnOur July 31, 2015 Citadel acquired approximately 1,100 acres of leases, production facilities and equipment that encompassed the Kern Bluff Oil Field. As consideration for this acquisition Citadel issued 6,000,000 shares of common stock and paid $2,000,000 in cash. The transaction was financed via a $3,500,000 one-year term loan from Cibolo Creek Partners, of Midland Texas. In March of 2016, Cibolo Creek Partners converted the $3,500,000 term loan into Series A Convertible Participating Preferred Stock.Operations

InOur ~~December~~principal ~~of 2015,~~strategy ~~Citadel~~is ~~shifted~~to ~~its CAPEX~~ focus toon ~~remediation of~~ the ~~existing~~acquisition ~~acquired~~of ~~facilities.~~oil Atand ~~the~~natural ~~time~~gas ofmineral ~~purchase,~~leases ~~the~~that ~~oil~~have atknown ~~Kern~~hydrocarbons ~~Bluff was~~or ~~being~~are ~~processed~~in byclose ~~temporary~~proximity ~~facilities~~to known ~~installed~~hydrocarbons bythat ~~the~~have ~~previous~~been ~~owner~~underdeveloped. AsOnce ~~production~~acquired, ~~increased~~we instrive ~~September,~~to itimplement ~~quickly~~an ~~became apparent~~accelerated ~~that~~development ~~these~~program ~~facilities~~utilizing capital ~~were~~resources, ~~not~~a ~~capable~~regional ofoperating ~~processing~~focus, ~~the~~an ~~additional~~experienced ~~volumes~~management ofand ~~oil~~technical team, and ~~water~~enhanced ~~being~~recovery ~~produced.~~technologies to ~~The~~attempt ~~existing permanent~~to ~~facilities~~increase ~~were~~production ~~built~~and inincrease ~~the~~returns ~~1970’s~~for byour ~~Gulf~~stockholders. ~~Oil~~Our oil and ~~require~~natural ~~extensive~~gas ~~remediation~~acquisition ~~including~~and ~~new~~development activities ~~pipe,~~are ~~valves,~~currently ~~flanges and~~focused ~~tank~~in ~~repair~~the State of California.

InOn July ~~of 2016~~31, ~~Citadel~~2015 ~~completed~~Citadel ~~its~~acquired ~~facility~~approximately ~~upgrades;~~1,100 ~~the~~acres ~~new~~of leases, production facilities ~~have~~and ~~production~~equipment ~~capacity~~that ofencompassed ~~500~~the ~~BOPD~~Kern Bluff Oil Field. As consideration for this acquisition Citadel ~~drilled~~issued ~~three~~6,000,000 ~~wells~~shares of common stock and paid $2,000,000 in ~~June~~cash. The transaction was financed via a $3,500,000 one-year term loan from Cibolo Creek Partners, of Midland Texas. In March of 2016, ~~and~~Cibolo ~~returned~~Creek toPartners converted ~~production~~the 9$3,500,000 ~~idle~~term ~~wells~~loan into Series A Convertible Participating Preferred Stock.

In December of ~~2017~~2015, ~~Citadel~~ ~~completed~~Citadel ~~the~~shifted ~~installation~~its ofCAPEX afocus ~~25MM~~to ~~BTU~~remediation ~~steam~~of ~~generator~~the existing acquired facilities. ~~The~~At the time of purchase, the oil ~~and~~at Kern Bluff was isbeing ~~characterized~~processed asby ~~heavy~~temporary ~~oil,~~facilities ~~therefore~~installed ~~requiring stimulation~~by ~~via~~the ~~steam~~previous ~~injection~~owner. ~~This~~As ~~steam~~production ~~generator~~increased ~~has~~in ~~capacity~~September, it quickly became apparent that these facilities were not capable of ~~over~~processing ~~1,400~~the ~~barrels~~additional volumes of ~~steam~~oil ~~per~~and ~~day~~water ~~(BOSPD)~~being ~~which~~produced. ~~will~~The ~~allow~~existing permanent facilities were built in the ~~Company~~1970’s toby ~~steam~~Gulf ~~approximately~~Oil 50and ~~wells~~require ~~per~~extensive ~~year~~remediation including new pipe, valves, flanges and tank repair.

In ~~February~~July of ~~2018~~2016, Citadel completed ~~the~~its ~~drilling~~facility ~~of three new wells~~upgrades. The ~~company~~new ~~currently~~facilities ~~has~~have ~~approximately 14 wells on~~ production ~~and~~capacity ~~has~~of ~~seen field~~500 ~~wide~~BOPD. ~~production~~Citadel ~~increase~~drilled ~~from~~three ~~approximately~~wells in 20June ~~barrels~~of ~~per~~2016 ~~day~~and returned to ~~approximately~~production ~~100~~9 ~~barrels~~idle ~~per day~~wells.

In December ~~July~~ of ~~2018~~2017, Citadel ~~announced~~completed itthe ~~had~~installation ~~produced~~of ~~3,000~~a ~~barrels~~25MM ofBTU steam generator. The oil inat ~~the~~Kern ~~month~~Bluff ofis ~~June,~~characterized ~~equating~~as toheavy oil, ~~100~~therefore ~~barrels~~requiring ~~per~~stimulation ~~day~~via ~~average~~steam injection. ~~The~~This ~~Company anticipates~~steam ~~drilling~~generator uphas tocapacity ~~four~~of ~~vertical~~over ~~wells~~1,400 inbarrels ~~the~~of ~~fourth~~steam ~~quarter~~per day ~~2018~~(BOSPD) ~~and~~which ~~return~~will upallow the Company to 7steam ~~idle~~approximately 50 wells toper ~~production~~year.

-1214-

Table of Contents

~~Going~~In ~~Concern~~February of 2018, Citadel completed the drilling of three new wells. The company currently has approximately 14 wells on production and has seen field wide production increase from approximately 20 barrels per day to approximately 100 barrels per day.

~~The~~In ~~consolidated financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate~~ the ~~continuance~~first quarter of ~~the~~2019, ~~Company~~California asexperienced a ~~going~~spike ~~concern,~~in ~~which~~natural ~~contemplates~~gas ~~the~~prices ~~realization~~due ofto ~~assets~~cold weather, and ~~liquidation~~pipeline ~~of liabilities in the normal course of business~~outages. As ~~shown~~such on the ~~accompanying~~Company ~~consolidated~~did not ~~financial~~perform ~~statements,~~any ascyclic ofsteam ~~September~~injection ~~30, 2018~~during the ~~Company~~quarter, ~~has~~this ~~incurred~~resulted anin ~~accumulated~~field ~~deficit~~wide inproduction ~~the~~dropping ~~amount~~to ofapproximately ~~$12,144,862 and~~ 30-50 abarrels ~~working~~of ~~capital~~oil ~~deficit~~per ~~of $5,025,465~~day. In ~~addition, for~~The ~~the~~Company ~~nine~~anticipates ~~months~~steaming ~~ended~~up ~~September~~to ~~30,~~6 ~~2018,~~wells ~~net~~during ~~losses~~the ~~totaled~~second ~~$1,356,373.~~quarter ~~These~~with ~~conditions~~a ~~raise~~goal ~~substantial~~of ~~doubt~~exiting ~~about~~ the ~~Company’s~~second quarter ~~ability~~at to80-100 ~~continue~~barrels asof aoil ~~going~~per ~~concern~~day.

~~The~~On ~~future~~May ~~of the~~1, ~~Company~~2019 ~~is dependent upon its ability to obtain financing and upon future profitable operations from~~ the Company’s ~~development~~CEO of& ~~its oil~~President ~~and~~tendered ~~gas~~his ~~business opportunities~~resignation.

~~RESULTS~~Going ~~OF OPERATIONS~~Concern

~~Results~~The ofconsolidated financial ~~Operations~~statements ~~for~~included ~~the~~in ~~Three~~this ~~Months~~filing have been prepared in conformity with generally accepted accounting principles that ~~Ended~~contemplate ~~September~~the 30continuance of the Company as a going concern, ~~2018~~which contemplates the realization of assets and ~~September~~liquidation 30of liabilities in the normal course of business. As shown on the accompanying consolidated financial statements, ~~2017~~the Company has incurred an accumulated deficit and ~~the~~working ~~Nine~~capital ~~Months~~deficit ~~Ended~~in ~~September~~the 30amount of $13,~~2018~~820,653 and ~~September~~$6,510,999, 30respectively,~~2017~~ as of March 31, 2019. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

~~During~~The ~~the~~future ~~three-month~~of ~~period ended September~~the ~~30,~~Company ~~2018~~is ~~and~~dependent ~~September~~upon ~~30,~~its ~~2017~~ability ~~the~~to ~~Company~~obtain ~~generated~~financing ~~$320,774~~ and ~~$46,824,~~upon ~~respectively,~~future profitable operations from the ~~sale~~development of ~~oil.~~its ~~During the nine-month~~oil ~~period ended September 30, 2018~~ and ~~September~~gas ~~30,~~business ~~2017 the Company generated $928,092 and $133,472, respectively, from the sale of oil~~opportunities.

~~Operating expenses~~RESULTS ~~totaled~~OF $634,104 during the three-month period ended September 30, 2018 which was an increase over the period ended September 30, 2017 of $267,296. For the nine-month period ended September 30, 2018, operating expenses totaled $2,027,702 which was an increase over the period nine -month ended September 30, 2017 of $971,806. Operating expenses consisted of lease operating expense, general and administrative costs, depletion, depreciation, and amortization, professional fees, and executive compensation. The increase consisted primarily of an increase in lease operating expenses and depreciation and depletion.OPERATIONS

~~General~~Results ~~and administrative~~of ~~fees~~Operations ~~increased~~for ~~from $60,632 to $75,204 from~~ the ~~three-month period ended~~ ~~September~~Three ~~30,~~Months ~~2017~~Ended toMarch ~~the three-month period ended September 30~~31, ~~2018.~~2019 ~~For the nine-month period ended September 30, 2017 to the nine- month period ended September 30, 2018, general~~ and ~~administrative~~March ~~fees increased from $178~~31,~~821~~ ~~to $219,84 3. The increase was primarily due to insurance, marketing, meals and entertainment expenses.~~2018

~~Professional~~During ~~fees increased from $37,738 to $40,951 from~~ the three-month period ended ~~September~~March 3031, ~~2017~~2019 towe ~~the~~generated ~~three-month period ended September 30~~$175,592 ~~2018. For~~from the ~~nine-month~~sale ~~period~~of ~~ended~~oil. ~~September 30,~~During ~~2017 to~~ the ~~nine~~three-month period ended ~~September~~March 3031, 2018 ~~professional~~we ~~fees increased~~generated ~~from~~ $~~160~~212,~~855~~554 tofrom ~~$183,237. The increase was primarily due to services provided to~~ the ~~Company~~sale ~~for~~of ~~accounting, consulting and legal~~oil.

~~Executive~~Operating ~~compensation~~expenses ~~increased~~totaled ~~from~~ $~~165~~502,~~525~~823 toduring ~~$180,000 from~~ the three-month period ended ~~September~~March 3031, ~~2017~~2019 towhich ~~the~~was ~~three-month~~a decrease of $250,170 over the period ended ~~September~~March 3031, 2018. ~~For~~Operating ~~the~~expenses ~~nine-month~~consisted ~~period~~of ~~ended~~lease ~~September~~operating 30expense, ~~2017~~general toand ~~the nine-month~~administrative ~~period ended~~costs, ~~September~~amortization 30and depreciation, professional ~~2018~~fees, and executive compensation. ~~increased~~The decrease in revenue arose from ~~$472,41 1~~the Company’s decision to ~~$540,000. The~~not ~~increase~~cyclic ~~was~~steam wells ~~due~~during toa ~~the~~period ~~salary~~of ~~increase~~higher ~~based~~than ~~upon~~normal ~~the~~natural ~~employment~~gas ~~agreement~~prices.

~~Liquidity~~General and ~~Capital~~administrative fees ~~Resources~~decreased from $73,126 to $56,806 from the three-month period ended March 31, 2018 to the three-month period ended March 31, 2019. This decrease was primarily due less marketing, meals and entertainment expenses.

The Company has established a capital budget for 2018 of $6,000,000 to return to production up to 10 wells and drill up to 20 vertical wells and 1 horizontal well. The Company’s ability to complete this capital budget will be highly dependent on higher oil prices and access to capital.-15-

AsTable of September 30, 2018, the Company had $651,565 of current assets; of this amount $277,497 was unbilled and joint interest billing receivables, and $66,687 was prepaid expenses. The following table provides detailed information about the net cash flow for the quarters ended September 30, 2018 and September 30, 2017 as presented in this quarterly report. To date, we have financed our operations through the issuance of stock and borrowings from related parties and an unrelated third party.Contents

Professional fees decreased from $80,645 to $21,973 from the three-13month period ended March 31, 2018 to the three-month period ended March 31, 2019. The decrease was primarily due to a reduction in legal costs, engineering services, and accounting services provided to the Company.

~~Table~~Executive ofcompensation remained ~~Contents~~the same at $180,000 from the three-month period ended March 31, 2018 to the three-month period ended March 31, 2019.

~~The~~Liquidity ~~following table sets forth a summary of our cash flows for the nine months ended September 30, 2018~~ and ~~2017:~~Capital Resources

	Nine Months Ended
	September 30,
	2018			2017
Net cash used in operating activities	$	(529,037	)	$	(636,859	)
Net cash used in investing activities		(1,258,533	)		(947,332	)
Net cash provided by financing activities		1,322,848			1,491,935
Net change in cash and restricted cash		(464,722	)		(92,256	)
Cash and restricted cash, beginning of period		972,103			433,793
Cash and restricted cash, end of period	$	507,381		$	341,537

The Company has established a capital budget for 2019 of $3,000,000 to drill up to 10 wells. The Company’s ability to complete this capital budget will be highly dependent on oil prices and access to capital.

~~Operating~~As of ~~activities~~March 31, 2019, the Company had $144,749 of current assets; of this amount $94,322 was cash. The following table provides detailed information about the net cash flow for the quarters ended March 31, 2019 and March 31, 2018 as presented in this quarterly report. To date, we have financed our operations through the issuance of stock and borrowings from related parties and an unrelated third party.

The ~~net~~following ~~loss~~table insets ~~the~~forth ~~period~~a summary ~~was~~of ~~greater~~our ~~than the non-~~cash ~~adjustments~~flows tofor ~~reconcile~~ the ~~changes~~three inmonths ~~the~~ended ~~balance~~March ~~sheet and statement of operations~~31, ~~which~~2019 isand ~~the reason cash used in operating activities was negative.~~2018:

Investing activities

	Three Months Ended March 31,
	2019			2018
Net cash used in operating activities	$	(54,630	)	$	(508,017	)
Net cash used in investing activities		(9,218	)		(939,198	)
Net cash provided by financing activities		71,729			926,383
Net change in cash and restricted cash		7,881			(520,832	)
Cash and restricted cash, beginning of period		286,441			972,103
Cash and restricted cash, end of period	$	294,322		$	451,271

~~For~~Operating ~~the nine-month period ended September 30, 2018 and September 30, 2017, the net cash used in investing~~ activities ~~consisted of drilling expenses and facility upgrades on oil and gas properties totaling $1,258, 533 and $947,332 respectively.~~

~~Financing~~The net loss in the period was greater than the non-cash adjustments to reconcile the changes in the balance sheet and statement of operations, which is the reason cash used in operating activities was negative.

AsInvesting ~~of September 30, 2018, we continue to use traditional and/or debt financing as well as the issuance of stock to provide the capital we need to run our business.~~activities

~~Without cash flow from~~The ~~operations~~net ~~we will require additional~~ cash ~~resources,~~used ~~including the sale of equity or debt securities, to meet our planned capital~~in investing ~~expenditures~~activities ~~and~~consisted ~~working capital requirements for the next 12 months. We will require additional cash resources due to changed business conditions, implementation~~ of ~~our~~drilling ~~strategy~~expenses ~~to successfully develop our Kern Bluff Oil Field,~~ and orfacility ~~acquisitions~~upgrades weon ~~may decide~~oil ~~to pursue. If our own financial resources~~ and ~~then~~gas ~~current~~properties ~~cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale~~ of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us$9,218 ~~if at all. Any failure by us to raise additional funds~~ on ~~terms~~the ~~favorable~~Company’s ~~to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects~~properties.

~~Our~~Financing ability to obtain additional capital through additional equity and/or debt financing, and Joint Venture or Working Interest partnerships will also be important to our expansion plans. In the event we experience any significant problems assimilating acquired assets into our operations or cannot obtain the necessary capital to pursue our strategic plan, we may have to reduce the growth of our operations. This may materially impact our ability to increase revenue and develop our assets.activities

~~Contractual~~The net ~~Obligations~~cash provided by financing activities consisted of proceeds from the preferred stock offering, totaling $100,000.

An operating lease for rental office space was entered into beginning March 1, 2013 for two years at $2,150 per month. The original lease was amended to include additional space at a price of $1,100 per month for the same term. The original term of the lease expired on March 1, 2015. As such our office lease is now on a month to month basis at a rate of $3,000 per month.-16-

~~-14-~~Table of Contents

~~Table~~The Company made payments of ~~Contents~~$17,293 in the period ending March 31, 2019 to auto loans and the financing of insurance premiums.

~~Off-Balance~~As ~~Sheet~~of ~~Arrangements~~March 31, 2019, we continue to use traditional and/or debt financing as well as through the issuance of stock to provide the capital we need to run our business.

AsWithout cash flow from operations we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the ~~date~~next 12 months. We will require additional cash resources due to changed business conditions, implementation of ~~this~~our ~~report~~strategy to successfully develop our Kern Bluff Oil Field, and or acquisitions we ~~did~~may ~~not~~decide ~~have~~to ~~any~~pursue. ~~off-balance~~If ~~sheet~~our ~~arrangements~~own ~~that~~financial ~~have~~resources orand then current cash-flows from operations are ~~reasonably~~insufficient ~~likely~~to satisfy our capital requirements, we may seek to ~~have~~sell aadditional ~~current~~equity or ~~future~~debt securities or obtain a credit facility. The sale of additional ~~effect~~equity onsecurities will result in dilution to our ~~financial~~stockholders. ~~condition,~~The ~~changes~~incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial ~~condition,~~covenants ~~revenues~~that could restrict our operations or ~~expenses,~~modify ~~results~~our plans ofto ~~operations,~~grow ~~liquidity~~the business. Financing may not be available in amounts or on terms acceptable to us, ~~capital~~if at all. Any failure by us ~~expenditures~~to raise additional funds on terms favorable to us, or ~~capital~~at ~~resources~~all, ~~that~~will islimit ~~material~~our ability to ~~investors~~expand our business operations and could harm our overall business prospects.

~~Operation~~Our ~~Plan~~ability to obtain additional capital through additional equity and/or debt financing, and Joint Venture or Working Interest partnerships will also be important to our expansion plans. In the event we experience any significant problems assimilating acquired assets into our operations or cannot obtain the necessary capital to pursue our strategic plan, we may have to reduce the growth of our operations. This may materially impact our ability to increase revenue and develop our assets.

~~Our~~Contractual plan is to focus on the acquisition and drilling of prospective oil and natural gas mineral leases. Once we have tested a prospect as productive, subject to availability of capital, we will implement a development program with a regional operating focus in order to increase production and increase returns for our stockholders. Exploration, acquisition and development activities are currently focused in California. Depending on availability of capital, and other constraints, our goal is to increase stockholder value by finding and developing oil and natural gas reserves at costs that provide an attractive rate of return on our investments.Obligations

WeAn ~~expect~~operating lease for rental office space was entered into beginning March 1, 2013 for two years at $2,150 per month. The original lease was amended to ~~achieve~~include ~~these~~additional ~~results~~space ~~by:~~at a price of $1,100 per month for the same term. The original term of the lease expired on March 1, 2015. As such our office lease is now on a month to month basis at a rate of $3,000 per month.

•Off-Balance ~~Investing~~Sheet ~~capital in exploration and development drilling and in secondary and tertiary recovery of oil as well as natural gas;~~Arrangements

•As ~~Using~~of the ~~latest~~date ~~technologies~~of this ~~available~~report, we did not have any off-balance sheet arrangements that have or are reasonably likely to ~~the~~have ~~oil~~a ~~and~~current ~~natural~~or ~~gas~~future effect ~~industry~~on our financial condition, changes in ~~our~~financial condition, revenues or expenses, results of operations;, liquidity, capital expenditures or capital resources that is material to investors.

~~• Finding additional oil and natural gas reserves on the properties we acquire.~~-17-

InTable ~~addition to raising additional capital we plan to take on Joint Venture (JV) or Working Interest (WI) partners who may contribute to the capital costs~~ of drilling and completion and then share in revenues derived from production. This economic strategy may allow us to utilize our own financial assets toward the growth of our leased acreage holdings, pursue the acquisition of strategic oil and gas producing properties or companies and generally expand our existing operations.Contents

~~Our~~Operation future financial results will depend primarily on: (i) the ability to continue to source and screen potential projects; (ii) the ability to discover commercial quantities of natural gas and oil; (iii) the market price for oil and natural gas; and (iv) the ability to fully implement our exploration and development program, which is dependent on the availability of capital resources. There can be no assurance that we will be successful in any of these respects, that the prices of oil and gas prevailing at the time of production will be at a level allowing for profitable production, or that we will be able to obtain additional funding to increase our currently limited capital resources.Plan

~~Item~~Our 3plan is to focus on the acquisition and drilling of prospective oil and natural gas mineral leases. ~~Quantitative~~Once we have tested a prospect as productive, subject to availability of capital, we will implement a development program with a regional operating focus in order to increase production and ~~Qualitative~~increase ~~Disclosure~~returns ~~About~~for our stockholders. Exploration, acquisition and development activities are currently focused ~~Market~~in ~~Risk~~California. Depending on availability of capital, and other constraints, our goal is to increase stockholder value by finding and developing oil and natural gas reserves at costs that provide an attractive rate of return on our investments.

~~This~~We ~~item~~expect into ~~not applicable as we are currently considered a smaller~~achieve ~~reporting~~these ~~company.~~results by:

~~Item~~• ~~4T.~~Investing ~~Controls~~capital in exploration and ~~Procedures~~development drilling and in secondary and tertiary recovery of oil as well as natural gas;

~~Evaluation~~• ofUsing ~~Disclosure~~the ~~Controls~~latest technologies available to the oil and ~~Procedures~~natural gas industry in our operations;

~~Our~~• ~~Chief~~Finding ~~Executive~~additional ~~Officer, Armen~~oil ~~Nahabedian,~~ and ~~our~~natural ~~Chief~~gas ~~Financial~~reserves Officer, Philip McPherson evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on that evaluation and assessment, Mr. Armen Nahabedian and Mr. Philip McPherson concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in the ~~reports~~properties ~~that~~ we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosureacquire.

~~-15-~~In addition to raising additional capital we plan to take on Joint Venture (JV) or Working Interest (WI) partners who may contribute to the capital costs of drilling and completion and then share in revenues derived from production. This economic strategy may allow us to utilize our own financial assets toward the growth of our leased acreage holdings, pursue the acquisition of strategic oil and gas producing properties or companies and generally expand our existing operations.

~~Table~~Our future financial results will depend primarily on: (i) the ability to continue to source and screen potential projects; (ii) the ability to discover commercial quantities of ~~Contents~~natural gas and oil; (iii) the market price for oil and natural gas; and (iv) the ability to fully implement our exploration and development program, which is dependent on the availability of capital resources. There can be no assurance that we will be successful in any of these respects, that the prices of oil and gas prevailing at the time of production will be at a level allowing for profitable production, or that we will be able to obtain additional funding to increase our currently limited capital resources.

~~Changes~~Item in3. ~~Internal~~Quantitative ~~Control~~and ~~Over~~Qualitative ~~Financial Reporting~~Disclosure About Market Risk

~~There~~This ~~were~~item ~~no changes~~ in ~~our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially~~not ~~affected,~~applicable oras we are ~~reasonably~~currently ~~likely~~considered toa ~~materially~~smaller ~~affect, our internal control over financial~~ reporting company.

~~Limitations on Effectiveness of Controls and Procedures~~-18-

InTable ~~designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance~~ of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.Contents

~~PART~~Item ~~II—OTHER~~4T. ~~INFORMATION~~Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Financial Officer, Philip McPherson evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on that evaluation and assessment, Mr. Philip McPherson concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

-19-

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

~~From~~ Various ~~time to time~~lawsuits, claims ~~we may become involved in various lawsuits~~ and ~~legal~~other ~~proceedings~~contingencies ~~which~~ arise in the ordinary course of ~~business.~~the ~~However, litigation~~Company’s isbusiness ~~subject~~activities. toWhile ~~inherent~~the ~~uncertainties,~~ultimate ~~and~~outcome of anthe ~~adverse~~aforementioned ~~result~~contingencies inare ~~these~~not ordeterminable ~~other~~at ~~matters~~this ~~may arise from~~ time, tomanagement ~~time~~believes that ~~may~~ ~~harm~~any ~~our~~liability ~~business.~~or Atloss ~~this~~resulting therefrom ~~time,~~will ~~we are~~ not ~~engaged~~materially inaffect ~~any~~the ~~legal~~financial ~~proceedings~~position, ~~where~~results ~~by a court~~ of ~~law~~operations ~~will~~or ~~assess~~cash ~~any~~flows ~~monetary damages~~of ~~against~~ the Company.

Item 1A. Risk Factors.

Our significant ~~business~~ business risks are described in Item 1A. to Part I of Form 10-K for the year ended December 31, ~~2017~~2018 (filed April 16, ~~2018~~2019) to which reference is made herein.

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

Stock Issuances pursuant to Subscription Agreements

In March of 2017, ~~the~~ the Company filed the appropriate paperwork with the State of Nevada, authorizing the issuance of up to 500,000 shares of Series A A Preferred Stock, 500,000 shares of Series B Preferred Stock and 500,000 shares of Series C Preferred Stock. The ~~company~~Company also ~~increased~~ increased the authorized amount of common shares from 100,000,000 to 300,000,000. As of ~~September~~March 3031st, ~~2018~~ 2019, we have issued ~~395~~ 400,615 of Series A Preferred Shares, and zero shares of Series B or C.

We believe that the issuance and sale of the above securities were exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2), Regulation D and/or Regulation S. The securities were issued directly by us and did not ~~involve~~ involve a public offering or general solicitation. The recipient of the securities was afforded an opportunity for effective access to to files and records of our company that contained the relevant information needed to make her investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipient, immediately prior to issuing the securities, had such knowledge and experience in our financial and business matters that she was capable of evaluating the merits and risks of its investment. The recipient had the opportunity to speak with our management on several occasions prior to her investment decision. There were no commissions paid on the issuance and sale of the shares.

Option Grants

Our option grants ~~are~~ are described in Form 10-K for the year ended December 31, ~~2017~~2018 (filed April 16, ~~2018~~2019) to which reference is made herein.

Subsequent Stock Issuances

None.

-1620-

Table of Contents

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities from the time of our inception on November 6, 2006 through the period ended ~~September~~March 3031, ~~2018~~2019.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

2012 Stock Incentive Plan

On September 1, 2012, we adopted the 2012 Stock Incentive Plan. We have reserved for issuance an aggregate of 10,000,000 shares of common stock under our 2012 Stock Incentive Plan. To date 10,000,000 options and no shares of common stock have been granted under this plan.

Our employment agreements with executive officers are described in Form 10-K for the year ended December 31, ~~2017~~2018 (filed April 116, ~~2018~~2019) to which reference is made herein.

~~Item 6. Exhibits.~~-21-

Exhibit No.	Description
10.4	2012 Stock Incentive Plan
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d- 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d- 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

Table of Contents

*Item ~~XBRL (Extensible~~6. Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sectionsExhibits.

-17-

Exhibit No.		Description
10.4		2012 Stock Incentive Plan

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

~~Table~~* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of ~~Contents~~a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

~~SIGNATURE~~-22-

~~Pursuant~~Table ~~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.~~Contents

CITADEL EXPLORATION, INC.
Date: November 14, 2018	By:	/S/ Armen Nahabedian
		Armen Nahabedian
		Chief Executive Officer
	(Principal Executive Officer and duly authorized signatory)

SIGNATURE

~~-18-~~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.

	CITADEL EXPLORATION, INC.


Date: May 20, 2019	By:	/S/ Philip McPherson
		Philip McPherson
		Chief Financial Officer
		(Principal Executive Officer and duly authorized signatory)

-23-

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