Vadda Energy (BMVH) 10-Q 17 Oct 13 2013 Q2 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Sep. 30, 2013
Document And Entity Information
Entity Registrant Name	VADDA ENERGY CORP
Entity Central Index Key	1082492
Document Type	10-Q
Document Period End Date	30-Jun-13
Amendment Flag	FALSE
Current Fiscal Year End Date	-19
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		104,235,236
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

CONSOLIDATED_BALANCE_SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2013	Dec. 31, 2012
Assets:
Cash	$521,778	$358,519
Accounts receivable - net	48,936	59,146
Receivable from Affiliate	0	280,046
Deferred federal income taxes - current	29,930	29,930
Prepaid drilling costs	1,252,737	455,009
Total current assets	1,853,381	1,182,650
Oil and gas properties, using successful efforts method of accounting:
Proved properties	2,506,004	2,130,500
Other property and equipment	362,160	304,369
Less: Accumulated depletion and depreciation	-719,505	-636,645
Property and equipment, net	2,148,659	1,798,224
Investment in joint ventures - cost method	849,689	849,689
Deferred federal income tax - non-current	526,947	332,332
Other assets	56,210	56,210
Total Assets	5,434,886	4,219,105
Liabilities and Equity:
Accounts payable and accrued liabilities	315,067	298,095
Current portion of notes payable	11,202	7,852
Payable to affiliate	67,454	0
Payable to shareholders	12,319	45,319
Deferred revenue	7,838,223	5,796,556
Total current liabilities	8,244,265	6,147,822
Notes payable	22,887	0
Asset retirement obligation	228,420	223,296
Total long-term liabilities	251,307	223,296
Preferred stock, $.001 par value; 10,000,000 shares authorized; none issued or outstanding as of June 30, 2013 and December 31, 2012	0	0
Common stock, $.001 par value; 150,000,000 shares authorized; 104,235,236 and 104,235,236 issued and outstanding as of June 30, 2013 and December 31, 2012	104,235	104,235
Additional paid-in capital	7,136,111	6,948,359
Accumulated deficit	-8,794,988	-8,212,688
Total Vadda stockholders' deficit	-1,554,642	-1,160,094
Deficit attributable to noncontrolling interests	-1,506,044	-991,919
Total Deficit	-3,060,686	-2,152,013
Total Liabilities and Equity	$5,434,886	$4,219,105

CONSOLIDATED_BALANCE_SHEETS_Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred stock par value (in Dollars per share)	$0.00	$0.00
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value (in Dollars per share)	$0.00	$0.00
Common stock shares authorized	150,000,000	150,000,000
Common stock shares issued	104,235,236	104,235,236
Common stock shares outstanding	104,235,236	104,235,236

CONSOLIDATED_STATEMENTS_OF_OPE

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues:
Turnkey drilling revenues	$0	$0	$0	$2,664,474
Natural gas and oil sales	90,681	47,465	155,974	127,085
Revenues	90,681	47,465	155,974	2,791,559
Costs and expenses:
Turnkey drilling costs	0	10,000	0	1,268,976
Lease operating expense	64,504	14,577	107,965	51,769
General and administrative	541,123	366,401	1,063,314	884,518
Accretion expense	2,562	13,126	5,124	26,251
Depletion and depreciation	41,911	34,782	82,859	71,278
Total costs and expenses	650,100	438,886	1,259,262	2,302,792
Income (loss) before income taxes	-559,419	-391,421	-1,103,288	488,767
Income tax expense (benefit)	-94,680	-90,000	-194,615	141,000
Net income (loss)	-464,739	-301,421	-908,673	347,767
Net income (loss) attributable to noncontrolling interests	-173,445	633	-326,373	377,901
Net loss attributable to Vadda common stockholders	($291,294)	($302,054)	($582,300)	($30,134)
Basic and diluted loss per Vadda common share	$0	$0	($0.01)	$0
Weighted average number of common shares outstanding - basic and fully diluted	104,235,236	104,235,236	104,235,236	104,235,236

CONSOLIDATED_STATEMENTS_OF_CAS

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income (loss)	($908,673)	$347,767
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization	82,859	71,278
Accretion expense	5,124	26,251
Deferred tax expense (benefit)	-194,615	141,000
Changes in operating assets and liabilities:
Accounts receivable	10,210	-96,234
Prepaid drilling costs	-797,728	-22,413
Other assets	0	-22,208
Accounts payable and accrued liabilities	16,973	69,084
Payable to affiliates	347,500	8,651
Deferred revenues	2,041,667	-1,582,391
Net cash provided by (used in) operating activities	603,317	-1,059,215
Cash flows from investing activities:
Additions to oil and gas properties	-375,504	0
Additions to property and equipment	-57,791	-5,347
Net cash used in investing activities	-433,295	-5,347
Cash flows from financing activities:
Proceeds from note payable	35,000	0
Repayment of note payable	-8,763	-6,154
Repayment of shareholder payable	-33,000	0
Net cash used in financing activities	-6,763	-6,154
Net change in cash	163,259	-1,070,716
Cash balance, beginning of period	358,519	1,382,166
Cash balance, end of period	521,778	311,450
Non cash financing activities:
Non cash contribution to Vadda Energy Corporation	187,752	0
Non cash distribution to Mieka LLC owners	$187,752	$0

1_BASIS_OF_PRESENTATION

1. BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	Vadda Energy Corporation (“Vadda”) was originally incorporated in Florida in 1997. The foregoing consolidated financial statements include the accounts of Vadda, its wholly owned subsidiary, Mieka Corporation (“Mieka”) and Mieka LLC, a variable interest entity (“VIE”), which collectively are referred to as the “Company”.  All significant intercompany balances and transactions have been eliminated and all normal recurring adjustments have been recorded that are necessary for a fair presentation of the information contained herein.
	The accompanying interim consolidated financial statements and related notes are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and are expressed in U.S dollars, and have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnotes have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the years ended December 31, 2012 and 2011, and notes thereto contained in the Company’s audited financial statements filed as part of its Form 10-K for the year ended December 31, 2012. The results of operations for such periods are not necessarily indicative of the results expected for a full year or any future period.
	The Company is an independent developer and producer of natural gas and oil, with operations in Pennsylvania, Kentucky, and New York.

2_SUMMARY_OF_SIGNIFICANT_ACCOU

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2013
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Vadda Energy Corporation (“Vadda”) was originally incorporated in Florida in 1997. The foregoing consolidated financial statements include the accounts of Vadda, its wholly owned subsidiary, Mieka Corporation (“Mieka”) and Mieka LLC, a variable interest entity (“VIE”), which collectively are referred to as the “Company”.  All significant intercompany balances and transactions have been eliminated and all normal recurring adjustments have been recorded that are necessary for a fair presentation of the information contained herein.
	The accompanying interim consolidated financial statements and related notes are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and are expressed in U.S dollars, and have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnotes have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the years ended December 31, 2012 and 2011, and notes thereto contained in the Company’s audited financial statements filed as part of its Form 10-K for the year ended December 31, 2012. The results of operations for such periods are not necessarily indicative of the results expected for a full year or any future period.
	The Company is an independent developer and producer of natural gas and oil, with operations in Pennsylvania, Kentucky, and New York.
	NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	Oil and Gas Producing Activities
	The Company’s oil and gas producing activities were accounted for using the successful efforts method of accounting. Costs to acquire leasehold rights in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and costs of support equipment and facilities are capitalized.  Costs to drill exploratory wells that do not find proved reserves, delay rentals and geological and geophysical costs are expensed.
	The Company earns carried working interests in wells drilled by joint ventures that it manages. Upon the successful completion of a well, the joint ventures are assigned leasehold rights on acreage that comprises the legal spacing for the well. When a joint venture sells ownership interests in excess of the total offering amount, such additional interests reduce the Company’s carried working interest. The joint ventures typically pay 100% of the drilling and completion costs. The Company also intends to have ownership in wells drilled on leases in which the joint ventures do not participate.
	Turnkey Drilling Revenue Recognition
	In its role as the managing venturer of various oil and gas drilling joint ventures, the Company enters into turnkey drilling agreements with operators whereby a profit is earned by arranging the drilling and completion of prospect wells funded by the individual joint ventures. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” revenue is deferred until wells are completed as producing wells or determined to be nonproductive. The associated drilling costs of wells are deferred until revenue is recognized. The Company did not recognize any turnkey drilling revenue or turnkey drilling costs on completed wells during the six months ended June 30, 2013. During the six months ended June 30, 2012, the Company recognized $2,664,474 of turnkey drilling revenue and $1,268,976 of turnkey drilling costs on two completed gas wells. As of June 30, 2013 and December 31, 2012, the Company had $7,838,223 and $5,796,556, respectively, in deferred turnkey drilling revenue.  The Company had deferred drilling costs related to turnkey agreements in the amount of $1,252,737 and $455,009, respectively, as of June 30, 2013 and December 31, 2012.
	No drilling costs are incurred by the Company for its carried working interests retained in wells drilled by managed joint ventures.
	Depletion and Depreciation
	Estimates of natural gas and oil reserves utilized in the calculation of depletion are prepared using certain assumptions. Reserve estimates are based upon existing economic and operating conditions with no provision for price and cost escalations except by contractual arrangements.  Natural gas and oil reserve estimates are inherently imprecise and are subject to change as more current information becomes available. Capitalized costs are depleted and amortized using the units of production method, based upon reserve estimates.
	Impairments
	The carrying value of oil and gas properties is assessed for possible impairment on at least an annual basis, or as circumstances warrant, based on geological analysis or changes in proved reserve estimates. When impairment occurs, an adjustment is recorded as a reduction of the asset carrying value.
	Asset Retirement Obligations
	A provision has been recorded for the estimated liability for the plugging and abandonment of natural gas and oil wells at the end of their productive lives. The liability and the associated increase in the related asset are recorded in the period in which the asset retirement obligation, or ARO, is incurred. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset.
	The estimated liability is calculated annually using the estimated remaining lives of the wells based on reserve estimates and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted risk-free rate. At the time of abandonment, the Company recognizes a gain or loss on abandonment to the extent that actual costs do not equal the estimated costs.
	The Company recognized $2,562 and $5,124 of accretion expense during the three and six months ended June 30, 2013, and $13,126 and $26,251 during the three and six months ended June 30, 2012.
	Recently Issued Accounting Standards
	The SEC and FASB continually adopt new reporting requirements and makes revisions to existing disclosures required for oil and gas companies, which are intended to provide investors with a more meaningful and comprehensive understanding of such information. No new pronouncements were issued that would impact the Company’s financial position or operations as of June 30, 2013.

3_INCOME_TAXES

3. INCOME TAXES	6 Months Ended
	Jun. 30, 2013
Income Tax Disclosure [Abstract]
INCOME TAXES	The Company computes quarterly income taxes under the effective tax rate method based on applying an anticipated annual effective rate to its quarterly net income (loss), except for discrete items. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs. For the three and six months ended June 30, 2013, the Company’s overall effective tax rate on pre-tax income from operations used was 16.9% and 17.6% respectively. This is less than the 34% statutory tax rate because there is a full valuation reserve against the tax impact of Vadda’s net loss since it is determined to be unrecognizable in future periods.
	Based on net income and losses for the three months and six months ended June 30, 2013 and 2012, the Company had an estimated income tax benefit of $94,680 and $194,615 for the three and six months ended June 30, 2013, an estimated income tax benefit of $90,000 for the three months ended June 30, 2012 and an income tax expense of $141,000 for the six months ended June 30, 2012.

4_RELATED_PARTY_TRANSACTIONS

4. RELATED PARTY TRANSACTIONS	6 Months Ended
	Jun. 30, 2013
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	Pursuant to an arrangement between the Company and Mieka LLC, an entity wholly owned by the Company’s principal stockholders, Mieka LLC provides drilling and completion services on wells owned by the Company. During the three months ended June 30, 2013 and 2012, the Company incurred drilling costs associated with turnkey drilling contracts with Mieka LLC of $1,003,417 and $306,249, respectively. During the six months ended June 30, 2013 and 2012, the Company incurred drilling costs associated with turnkey drilling contracts with Mieka LLC of $1,689,417 and $763,582, respectively. As of June 30, 2013 and December 31, 2012, the Company was obligated to pay $1,566,508 and $1,562,206, respectively, to Mieka LLC.
	During the six months ended June 30, 2013, Mieka LLC was charged an administrative fee of $48,000 from Vadda Energy Corporation and $204,000 from Mieka. This activity is eliminated in the consolidated financial statements.
	During the six months ended June 30, 2013, Daro and Anita Blankenship, principal shareholders of the Company, received aggregate compensation from the Company of $52,000 and $65,000, respectively. During the six months ended June 30, 2012, they received aggregate compensation of $50,000 and $62,500, respectively. As of June 30, 2013 and December 31, 2012, the Company was obligated to pay Daro and Anita Blankenship $12,319 and $45,319 in repayment of a previous loan. As of June 30, 2013 the Company had payables to affiliates of $67,454. As of December 31, 2012 the Company had receivables from affiliates of $280,046.
	Martin N. Mayrath is a principal of Mayrath & Co., PC, which has been engaged to perform the function of Chief Financial Officer, in addition to providing tax services. The Company paid to Mayrath & Co. a total of $30,784 and $37,226 for its services in the quarters ended June 30, 2013 and June 30, 2012 respectively.

5_EQUITY_TRANSACTIONS

5. EQUITY TRANSACTIONS	6 Months Ended
	Jun. 30, 2013
Equity [Abstract]
EQUITY TRANSACTIONS	During the quarter ended June 30, 2013, Mieka LLC paid $375,503 in drilling costs for the Potter Lumber #2 well in return for a 43.7% working interest (37.1% net revenue interest) in such well. Fifty percent of such working interest was contributed by Mieka LLC to Vadda as an equity contribution. Vadda then contributed such working interest to Mieka as a capital contribution to Mieka, which contribution is appropriately eliminated in consolidation. After the consummation of these transactions, Mieka LLC and Mieka each hold a 21.8% working interest (18.6% net revenue interest) in the Potter Lumber #2 well, with a capitalized value of $187,752 each in oil and gas properties.

6_LEASES

6. LEASES	6 Months Ended
	Jun. 30, 2013
Leases [Abstract]
LEASES	At the end of September 2012, the Company relocated its principal offices to Flower Mound, Texas under a new lease agreement entered into in May 2012. The lease provides approximately 7,800 square feet of office space for a term of 6 ½ years. After an initial six-month rent abatement period, basic rent for the following 12 months will be $9,775 monthly.

7_NOTES_PAYABLE

7. NOTES PAYABLE	6 Months Ended
	Jun. 30, 2013
Debt Disclosure [Abstract]
NOTES PAYABLE	In May 2013 the Company obtained an installment loan in the principal amount of $35,000 to purchase a Ford F350 truck. Under the terms of the loan agreement, the loan bears interest at the rate of 4.5% per year and the Company has a monthly payment obligation of $1,042 until the loan’s maturity in May 2016. As of June 30, 2013, the remaining unpaid principal balance was $34,089.

8_LIQUIDITY_AND_GOING_CONCERN

8. LIQUIDITY AND GOING CONCERN	6 Months Ended
	Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
LIQUIDITY AND GOING CONCERN	The Company evaluated the ability to continue as a going concern through the year ended December 31, 2013 due to the following factors:
		·	recurring operating losses;
		·	working capital deficiencies;
		·	negative cash flows from operating activities; and
		·	accumulated deficits.
	Cash flow from operations is the Company’s most significant source of liquidity. The Company generates operating cash flow from two primary sources:
		·	Turnkey oil and gas drilling joint ventures, from which the Company generally receives turnkey fees (which generate profits to the extent the turnkey price the Company charges to the joint ventures exceeds the actual costs necessary to acquire leases and drill, test and complete wells for such joint ventures) and carried working interests in such wells (which generate monthly revenue and cash flow to the extent such wells produce natural gas and oil), as well as interests in such joint ventures purchased by the Company (which also generate monthly revenue and cash flow to the extent such wells produce natural gas and oil in commercial quantities); and
		·	Natural gas and oil sales, which are generally attributable to working interests owned and held directly by the Company in wells on producing oil and gas properties (which generate monthly revenue and cash flow to the extent such wells produce natural gas and oil in commercial quantities) and carried working interests in such wells (which also generate monthly revenue and cash flow to the extent such wells produce natural gas and oil), as well as overriding royalty interests and reversionary interests (which may generate additional monthly revenue and cash flow to the extent such wells produce natural gas and oil in commercial quantities).
	The Company’s plan to generate cash flows to meet ongoing drilling obligations and fund general and administrative expenses through the remainder of 2013 is to execute the following:
		·	continue to generate turnkey drilling revenues and profits;
		·	obtain carried interests in wells drilled by new joint ventures; and
		·	directly participate in wells drilled in the Marcellus Shale, Utica Shale and oil sands in New York and Pennsylvania.
	The Company may not be able to raise additional capital or generate turnkey drilling revenues or profits in amounts sufficient to fund ongoing drilling obligations and general and administrative expenses. If the Company cannot continue to raise additional capital or start generating sufficient cash flow from operations the Company may have to significantly delay the timing of expenditures for drilling and/or administrative expenses to meet its current obligations or consider curtailing operations. Although the Company typically retains a significant degree of control over the timing of its capital expenditures, the Company may not always be able to defer or accelerate certain capital expenditures to address any potential liquidity issues, although largely discretionary. The Company has been able to generate significant funds from the sale of interests in its joint ventures in 2013 to allow the Company to continue as a going concern, including a total of $735,000 from July 1, 2013 through September 30, 2013. The Company expects to continue to generate additional investment to fund operations through the year ended December 31, 2013; however, the Company cannot give any assurance of its ability to do so.

9_VARIABLE_INTERESTS_ENTITIES_

9. VARIABLE INTERESTS ENTITIES (VIE)	6 Months Ended
	Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
VARIABLE INTERESTS ENTITIES (VIE)	Management performs an analysis of the Company’s variable interests to determine if those type interests are held in other entities. The analysis primarily is based on a qualitative review, but also includes quantitative considerations in evaluating the variable interests. Qualitative analyses are performed based on an evaluation of the design by the entity, its organizational structure, to include decision-making ability, and financial arrangements. When used to supplement qualitative analyses, quantitative analyses are based on forecasted cash flows of the entity.
	GAAP requires reporting entities to consolidate variable interest entities when they have variable interests that provide a controlling financial interest in variable interest entities. Entities that consolidate variable interest entities are referred to as primary beneficiaries.
	Mieka, LLC (“VIE”), an entity under common control of the Company, was evaluated as a variable interest entity of the Company. The VIE’s only source of revenue is from the drilling of oil and gas wells contracted with the Company through certain turnkey contracts entered into by the Company. The VIE also is an investor in certain joint ventures of the Company. The relationship was evaluated to determine if the arrangement gave the Company a variable interest in a variable interest entity and to determine whether the Company was the primary beneficiary that would result in consolidating the VIE.
	The Company was considered to be the primary beneficiary as a result of the obligation to absorb losses that could be significant to the VIE. Additionally, since future revenue for the VIE is dependent upon the Company entering into future turnkey contracts or drilling programs, the Company directs activities that most significantly impact economic performance of the VIE. The Company was determined to be the primary beneficiary of the VIE for 2013 and 2012 and the VIE has been included in the consolidated financial statements as of and for the years ended December 31, 2012 and 2011 and as of and for the six months ended June 30, 2013.
	The table below reflects the amount of assets and liabilities from the VIE included in the consolidated balance sheets as of June 30, 2013 and December 31, 2012.
		30-Jun-13			31-Dec-12
	Assets:
	Cash	$	390,936		$	278,032
	Accounts receivable from affiliates		1,566,508			1,562,206
	Prepaid drilling cost		1,252,737			455,009
	Oil and gas properties		187,752			–
	Investment in joint ventures		612,500			612,500
	Other assets		150,290			60,602
	Total assets	$	4,160,723		$	2,968,349
	Liabilities and Equity:
	Accounts payable, accrued liabilities, and notes payable	$	156,595		$	139,513
	Deferred revenue		5,510,172			3,820,755
	Total liabilities	$	5,666,767		$	3,960,268
	Retained earnings (accumulated deficit)		(1,506,044	)	$	(991,919	)
	Total stockholders’ equity (deficit)		(1,506,044	)		(991,919	)
	Total Liabilities and Equity	$	4,160,723		$	2,968,349

2_SUMMARY_OF_SIGNIFICANT_ACCOU1

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2013
Accounting Policies [Abstract]
Oil and Gas Producing Activities	Oil and Gas Producing Activities
	The Company’s oil and gas producing activities were accounted for using the successful efforts method of accounting. Costs to acquire leasehold rights in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and costs of support equipment and facilities are capitalized.  Costs to drill exploratory wells that do not find proved reserves, delay rentals and geological and geophysical costs are expensed.
	The Company earns carried working interests in wells drilled by joint ventures that it manages. Upon the successful completion of a well, the joint ventures are assigned leasehold rights on acreage that comprises the legal spacing for the well. When a joint venture sells ownership interests in excess of the total offering amount, such additional interests reduce the Company’s carried working interest. The joint ventures typically pay 100% of the drilling and completion costs. The Company also intends to have ownership in wells drilled on leases in which the joint ventures do not participate.
Turnkey Drilling Revenue Recognition	Turnkey Drilling Revenue Recognition
	In its role as the managing venturer of various oil and gas drilling joint ventures, the Company enters into turnkey drilling agreements with operators whereby a profit is earned by arranging the drilling and completion of prospect wells funded by the individual joint ventures. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” revenue is deferred until wells are completed as producing wells or determined to be nonproductive. The associated drilling costs of wells are deferred until revenue is recognized. The Company did not recognize any turnkey drilling revenue or turnkey drilling costs on completed wells during the six months ended June 30, 2013. During the six months ended June 30, 2012, the Company recognized $2,664,474 of turnkey drilling revenue and $1,268,976 of turnkey drilling costs on two completed gas wells. As of June 30, 2013 and December 31, 2012, the Company had $7,838,223 and $5,796,556, respectively, in deferred turnkey drilling revenue.  The Company had deferred drilling costs related to turnkey agreements in the amount of $1,252,737 and $455,009, respectively, as of June 30, 2013 and December 31, 2012.
	No drilling costs are incurred by the Company for its carried working interests retained in wells drilled by managed joint ventures.
Depletion and Depreciation	Depletion and Depreciation
	Estimates of natural gas and oil reserves utilized in the calculation of depletion are prepared using certain assumptions. Reserve estimates are based upon existing economic and operating conditions with no provision for price and cost escalations except by contractual arrangements.  Natural gas and oil reserve estimates are inherently imprecise and are subject to change as more current information becomes available. Capitalized costs are depleted and amortized using the units of production method, based upon reserve estimates.
Impairments	Impairments
	The carrying value of oil and gas properties is assessed for possible impairment on at least an annual basis, or as circumstances warrant, based on geological analysis or changes in proved reserve estimates. When impairment occurs, an adjustment is recorded as a reduction of the asset carrying value.
Asset Retirement Obligations	Asset Retirement Obligations
	A provision has been recorded for the estimated liability for the plugging and abandonment of natural gas and oil wells at the end of their productive lives. The liability and the associated increase in the related asset are recorded in the period in which the asset retirement obligation, or ARO, is incurred. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset.
	The estimated liability is calculated annually using the estimated remaining lives of the wells based on reserve estimates and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted risk-free rate. At the time of abandonment, the Company recognizes a gain or loss on abandonment to the extent that actual costs do not equal the estimated costs.
	The Company recognized $2,562 and $5,124 of accretion expense during the three and six months ended June 30, 2013, and $13,126 and $26,251 during the three and six months ended June 30, 2012.
Recently Issued Accounting Standards	Recently Issued Accounting Standards
	The SEC and FASB continually adopt new reporting requirements and makes revisions to existing disclosures required for oil and gas companies, which are intended to provide investors with a more meaningful and comprehensive understanding of such information. No new pronouncements were issued that would impact the Company’s financial position or operations as of June 30, 2013.

9_VARIABLE_INTERESTS_ENTITIES_1

9. VARIABLE INTERESTS ENTITIES (VIE) (Tables)	6 Months Ended
	Jun. 30, 2013
Variable Interests Entities Vie Tables
Assets and liabilities from the VIE included in the consolidated balance sheets		30-Jun-13			31-Dec-12
	Assets:
	Cash	$	390,936		$	278,032
	Accounts receivable from affiliates		1,566,508			1,562,206
	Prepaid drilling cost		1,252,737			455,009
	Oil and gas properties		187,752			–
	Investment in joint ventures		612,500			612,500
	Other assets		150,290			60,602
	Total assets	$	4,160,723		$	2,968,349
	Liabilities and Equity:
	Accounts payable, accrued liabilities, and notes payable	$	156,595		$	139,513
	Deferred revenue		5,510,172			3,820,755
	Total liabilities	$	5,666,767		$	3,960,268
	Retained earnings (accumulated deficit)		(1,506,044	)	$	(991,919	)
	Total stockholders’ equity (deficit)		(1,506,044	)		(991,919	)
	Total Liabilities and Equity	$	4,160,723		$	2,968,349

2_SUMMARY_OF_SIGNIFICANT_ACCOU2

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Accounting Policies [Abstract]
Depletion, depreciation and amortization			$82,859	$71,278
Recognized turnkey drilling revenue	0	0	0	2,664,474
Recognized turnkey drilling cost	0	10,000	0	1,268,976
Deferred turnkey drilling revenue	7,838,223		7,838,223		5,796,556
Deferred turnkey drilling cost	1,252,737		1,252,737		455,009
Accretion expense	$2,562	$13,126	$5,124	$26,251

3_INCOME_TAXES_Narrative

3. INCOME TAXES (Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Estimated income tax benefit	($94,680)	($90,000)	($194,615)	$141,000

4_RELATED_PARTY_TRANSACTIONS_N

4. RELATED PARTY TRANSACTIONS (Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Payable to affiliates	$67,454		$67,454		$0
Receivables from affiliates	280,046		280,046		0
Mieka LLC [Member]
Drilling costs associated with turnkey drilling contracts	1,003,417	306,249	1,689,417	763,582
Obligations to pay related parties	1,566,508		1,566,508		1,562,206
Anita Blankenship [Member]
Obligations to pay related parties	12,319		12,319		45,319
Aggregate compensation received			52,000	50,000
Daro Blankenship [Member]
Aggregate compensation received			65,000	62,500
Daro and Anita Blankenship [Member]
Obligations to pay related parties	45,319		45,319		45,319
Mayrath & Co., PC
Professional fees	$30,784	$37,226

6_LEASES_Narrative

6. LEASES (Narrative)	6 Months Ended
	Jun. 30, 2013
Leases [Abstract]
Lease description	At the end of September 2012, the Company relocated its principal offices to Flower Mound, Texas under a new lease agreement entered into in May 2012. The lease provides approximately 7,800 square feet of office space for a term of 6 ½ years. After an initial six-month rent abatement period, basic rent for the following 12 months will be $9,775 monthly.

7_NOTES_PAYABLE_Narrative

7. NOTES PAYABLE (Narrative) (USD $)	6 Months Ended
	Jun. 30, 2013
Debt Disclosure [Abstract]
Note payable original amount	$35,000
Interest rate	4.50%
Maturity date	31-May-16
Note payable balance	$34,089

9_VARIABLE_INTERESTS_ENTITIES_2

9. VARIABLE INTERESTS ENTITIES (VIE) (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash	$521,778	$358,519	$311,450	$1,382,166
Accounts receivable from affiliates	48,936	59,146
Prepaid drilling cost	1,252,737	455,009
Other assets	56,210	56,210
Total assets	5,434,886	4,219,105
Liabilties and Equity
Accounts payable, accrued liabilities and notes payable	315,067	298,095
Deferred revenue	7,838,223	5,796,556
Total liabilities	8,244,265	6,147,822
Retained Earnings (accumulated deficit)	-8,794,988	-8,212,688
Total stockholders' equity (deficit)	-1,554,642	-1,160,094
Total Liabilities and Equity	5,434,886	4,219,105
Variable Interests Entities [Member]
Assets
Cash	390,936	278,032
Accounts receivable from affiliates	1,566,508	1,562,206
Prepaid drilling cost	1,252,737	455,009
Oil and gas properties	187,752
Investment in joint ventures	612,500	612,500
Other assets	150,290	60,602
Total assets	4,160,723	2,968,349
Liabilties and Equity
Accounts payable, accrued liabilities and notes payable	156,595	139,513
Deferred revenue	5,510,172	3,820,755
Total liabilities	5,666,767	3,960,268
Retained Earnings (accumulated deficit)	-1,506,044	-991,919
Total stockholders' equity (deficit)	-1,506,044	-991,919
Total Liabilities and Equity	$4,160,723	$2,968,349