Emerald Oil 10K/A 2012 Annual report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

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

For the transition period from to

Commission File No. — 001-35097

EMERALD OIL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Montana	77-0639000
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1600 Broadway, Suite 1360 Denver, CO (Address of Principal Executive Offices)	80202 (Zip Code)

Registrant’s telephone number, including area code:(303) 323-0008
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange On Which Registered
Common Stock, $0.001 par value		NYSE MKT

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx 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. Yesx No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

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

Large Accelerated Filer¨

Accelerated Filerx

Non-Accelerated Filer¨

(Do not check if a smaller reporting company)

Smaller Reporting Company¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on the last business day of the registrant’s most recently completed second fiscal quarter (based on the closing sale price as reported by the NYSE MKT Equities) was approximately $83 million.

As of March 18, 2013, the registrant had 25,899,658 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends Emerald Oil Inc.’s (the “Company,” “we,” “us” or “our”) Annual Report on Form 10-K for the year ended December 31, 2012, originally filed with the SEC on March 18, 2013 (the “Original Filing”).

This Amendment is being filed to amend the Original Filing to (i) restate Item IA of Part I to include additional risk factors that were included in our quarterly report on Form 10-Q filed on November 8, 2012 but were excluded from the Original Filing and (ii) include the information required by Items 10 through 14 of Part III of Form 10-K, which information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K. General Instruction G(3) to Form 10-K permits the information in Items 10 through 14 of Part III to be included in the Form 10-K filing by incorporation by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We will file our definitive proxy statement outside such 120-day period and therefore, we are filing this Amendment to include Part III information in our Form 10-K. The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement into Part III of the Original Filing is hereby deleted. Defined terms in this Amendment not otherwise ascribed herein are as defined in the Original Filing. The Original Filing, as amended by this Amendment, is referred to herein as the Annual Report.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Part I, Item IA of the Original Filing is hereby amended and restated in its entirety, Part III, Items 10 through 14 of the Original Filing are hereby amended and restated in their entirety, and Part IV, Item 15 of the Original Filing is hereby amended and restated in its entirety. In addition, as required by Rule 12b-15, this Amendment contains new certifications by our Principal Executive Officer and Principal Financial Officer, filed as exhibits hereto. This Amendment No. 1 does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing. This Amendment does not reflect events occurring after the filing of the Original Filing or modify or update disclosures affected by subsequent events.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.

From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “target,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our company’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, nationally and/or in the communities in which our company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our company’s operations, products, services and prices.

We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements in Item 1A. Risk Factors and other sections of our Annual Report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the United States Securities and Exchange Commission (the “SEC”) which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

EMERALD OIL, INC.

TABLE OF CONTENTS

PART I	1

Item 1A. Risk Factors	1

PART III	15

Item 10. Directors, Executive Officers and Corporate Governance	15

Item 11. Executive Compensation	20

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	34

Item 13. Certain Relationships and Related Transactions, and Director Independence	37

Item 14. Principal Accountant Fees and Services	38

PART IV	39

Item 15. Exhibits and Financial Statement Schedules	39

SIGNATURES	44

EMERALD OIL, INC.

ANNUAL REPORT ON FORM 10-K/A

FOR FISCAL YEAR ENDED DECEMBER 31, 2012

PART I

Item 1A.Risk Factors

Described below are certain risks that we believe are applicable to our business and the oil and gas industry in which we operate. You should carefully consider the risks, uncertainties and other factors described below and all other information set forth in this Annual Report on Form 10-K. Any of the factors could materially and adversely affect our business, financial condition, operating results and prospects and could negatively impact the market price of our common stock. Also, you should be aware that the risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, of which we are not yet aware, or that we currently consider to be immaterial may also impair our business operations.

Acquisitions may prove to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities.

Our recent growth is due in large part to acquisitions of producing properties and undeveloped leasehold. We expect acquisitions to be instrumental to our future growth. Successful acquisitions require an assessment of a number of factors, including estimates of recoverable reserves, exploration potential, future oil and natural gas prices, operating costs and potential environmental and other liabilities. Such assessments are inexact and their accuracy is inherently uncertain. In connection with our assessments, we perform a review of the acquired properties that we believe is generally consistent with industry practices. However, such a review will not reveal all existing or potential problems, and does not involve a review of seismic data or independent environmental testing. In addition, our review may not permit us to become sufficiently familiar with the properties to fully assess their deficiencies and limitations, including any structural, subsurface and environmental problems that may exist or arise. As a result of these factors, we may not be able to acquire oil and natural gas properties that contain economically recoverable reserves or be able to complete future acquisitions on terms that we believe are acceptable or that, even if completed, do not contain problems that reduce the value of acquired property.

We may have difficulty integrating and managing the growth associated with our recent acquisitions.

Our recent acquisitions are expected to result in a significant growth in our assets, reserves and revenues and may place a significant strain on our financial, technical, operational and administrative resources. We may not be able to integrate the operations of the acquired assets without increases in costs, losses in revenues or other difficulties. In addition, we may not be able to realize the operating efficiencies, synergies, costs savings or other benefits expected from such acquisitions, particularly as we transition from our historical non-operated strategy to a balanced operated and non-operated approach. Any unexpected costs or delays incurred in connection with such integration could have an adverse effect on our business, results of operations or financial condition. We have hired or intend to hire approximately three new employees that we expect will be required to manage our operations and plan to add resources as needed as we scale up our business. However, we may experience difficulties in finding the additional qualified personnel. In an effort to stay on schedule with our planned activities, we intend to supplement our staff with contract and consultant personnel until we are able to hire new employees. Our ability to continue to grow after these acquisitions will depend upon a number of factors, including our ability to identify and acquire new exploratory prospects and other acquisition targets, our ability to develop then existing prospects, our ability to successfully adopt a balanced operated and non-operated approach, our ability to continue to retain and attract skilled personnel, the results of our drilling program and acquisition efforts, hydrocarbon prices and access to capital. We may not be successful in achieving or managing growth and any such failure could have a material adverse effect on us.

Properties that we acquire may not produce as projected, and we may not have identified all liabilities associated with the properties.

Our assessment of the properties in acquisitions may not reveal all existing or potential problems. In the course of our due diligence, we may not inspect every well. Inspections may not reveal structural or environmental problems. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations.

If we are not able to generate sufficient funds from our operations and other financing sources, we may not be able to finance our planned development activity, acquisitions or service our debt.

We have been dependent on debt and equity financing to fund our cash needs that are not funded from operations or the sale of assets and will continue to incur additional indebtedness to fund our operations. Low commodity prices, production problems, disappointing drilling results and other factors beyond our control could reduce our funds from operations and may restrict our ability to obtain additional financing or to pay interest and principal on our debt obligations. Furthermore, we have incurred losses in the past that may affect our ability to obtain financing. Quantifying or predicting the likelihood of any or all of these occurring is difficult in the current domestic and world economy. For these reasons, financing may not be available to us in the future on acceptable terms or at all. In the event additional capital is required but not available on acceptable terms, we would curtail our acquisition, drilling, development and other activities or could be forced to sell some of our assets on an untimely or unfavorable basis.

We have significant debt, trade payables, and other long-term obligations.

Our significant debt, trade payables, long-term obligations, and related interest and dividend payment requirements and scheduled debt maturities may have important negative consequences. For instance, they could:

make it more difficult or render us unable to satisfy these or our other financial obligations;

require us to dedicate a substantial portion of any cash flow from operations to the payment of overriding royalties or interest and principal due under our debt, which will reduce funds available for other business purposes;

increase our vulnerability to general adverse economic and industry conditions;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

place us at a competitive disadvantage compared to some of our competitors that have less financial leverage; and

limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes.

Our ability to overcome our negative working capital and to satisfy our financial obligations and commitments depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control. We cannot provide assurance that our business will generate sufficient cash flow or that future financings will be available to provide sufficient proceeds to meet these obligations. The inability to meet our financial obligations and commitments will impede the successful execution of our business strategy and the maintenance of our economic viability. Oil and natural gas prices are volatile, and low prices have had in the past and could have in the future a material adverse impact on our business. Our revenues, profitability and future growth and the carrying value of our properties depend substantially on the prices we realize for our oil and natural gas production. Our realized prices also affect the amount of cash flow available for capital expenditures and our ability to borrow and raise additional capital.

Restrictive debt covenants could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests.

Our credit facility contains a number of significant covenants that, among other things, restrict or limit our ability to:

pay dividends or distributions on our capital stock;

make certain loans and investments;

enter into certain transactions with affiliates;

create or assume certain liens on our assets;

merge or to enter into other business combination transactions;

enter into transactions that would result in a change of control of us; or

engage in certain other corporate activities.

Also, our credit facility requires us to maintain compliance with specified financial ratios and satisfy certain financial condition tests. We were not in compliance with the current ratio covenant as of December 31, 2012, and a waiver was obtained from the administrative agent. Our ability to comply with these ratios and financial condition tests may be affected by events beyond our control, and we cannot assure you that we will meet these ratios and financial condition tests. These financial ratio restrictions and financial condition tests could limit our ability to obtain future financings, make needed capital expenditures, withstand a future downturn in our business or the economy in general or otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the limitations that the restrictive covenants under our bank credit facility impose on us.

A breach of any of these covenants or our inability to comply with the required financial ratios or financial condition tests could result in a default under our credit facility. A default, if not cured or waived, could result in all indebtedness outstanding under our credit facility becoming immediately due and payable. If that should occur, we may not be able to pay all such debt or borrow sufficient funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable to us. If we were unable to repay those amounts, the lenders could accelerate the maturity of the debt or proceed against any collateral granted to them to secure such defaulted debt.

We have limited control over activities on properties that we do not operate.

We are not the operator on a significant portion of our properties. Because we are not the operator for these properties, our ability to exercise influence over the operations of these properties or their associated costs is limited. Our dependence on the operators and other working interest owners of these projects and our limited ability to influence operations and associated costs or control the risks could materially and adversely affect the realization of our targeted returns on capital in drilling or acquisition activities. The success and timing of our drilling and development activities on properties operated by others therefore depends upon a number of factors, including:

timing and amount of capital expenditures;

the operator’s expertise and financial resources;

the rate of production of reserves, if any;

approval of other participants in drilling wells; and

selection of technology.

In areas where we do not have the right to propose the drilling of wells, we may have limited influence on when, how and at what pace our properties in those areas are developed. Further, the operators of those properties may experience financial problems in the future or may sell their rights to another operator not of our choosing, both of which could limit our ability to develop and monetize the underlying natural gas reserves. In addition, the operators of these properties may elect to curtail the oil and natural gas production or to shut in the wells on these properties during periods of low oil or natural gas prices, and we may receive less than anticipated or no production and associated revenues from these properties until the operator elects to return them to production.

Delays in the development of or production curtailment at our material properties may adversely affect our financial position and results of operations.

The size of our operations and our capital expenditures budget limit the number of properties that we can develop in any given year. Complications in the development of any single major well or infrastructure installation may result in a material adverse effect on our financial condition and results of operations. In addition, relatively few wells contribute a substantial portion of our production. If we were to experience operational problems or adverse commodity prices resulting in the curtailment of production in any of these wells, our total production levels would be adversely affected, which would have a material adverse effect on our financial condition and results of operations.

The Williston Basin oil price differential could have adverse impacts on our revenues.

Generally, crude oil produced from the Bakken formation in North Dakota is high quality (36 to 44 degrees API, which is comparable to West Texas Intermediate Crude). However, due to takeaway constraints, oil prices in the Williston Basin generally have been from $8.00 to $12.00 less per barrel than prices for other areas in the United States, and as much as $22.00 less per barrel during 2012. This discount, or differential, may widen in the future, which would reduce the price we would receive for our production.

Drilling and completion costs for the wells we drill in the Williston Basin are comparable to other areas where there is no price differential. As a result of this reverse leverage effect, a significant, prolonged downturn in oil prices on a national basis could result in a ceiling limitation write-down of the oil and natural gas properties we hold. Such a price downturn also could reduce cash flow from our Williston Basin properties and adversely impact our ability to participate fully in other drilling. Our production in other areas could also be affected by adverse changes in differentials. In addition, changes in differentials could make it more difficult for us to effectively hedge our exposure to changes in commodity prices.

Shortages of equipment, services and qualified personnel could reduce our cash flow and adversely affect results of operations.

The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers, and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices and activity levels in new regions, causing periodic shortages. These problems can be particularly severe in certain regions such as the Williston Basin and the Sand Wash Basin. During periods of high oil and natural gas prices, the demand for drilling rigs and equipment has increased along with increased activity levels, and this may result in shortages of equipment. In addition, there has been a shortage of hydraulic fracturing capacity in many of the areas in which we operate. This shortage in hydraulic fracturing capacity could occur in the future. Higher oil and natural gas prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, oilfield equipment and services, and personnel in our exploration, production and midstream operations. These types of shortages and subsequent price increases could significantly decrease our profit margin, cash flow and operating results and/or restrict or delay our ability to drill those wells and conduct those operations that we currently have planned and budgeted, causing us to miss our forecasts and projections.

Successful exploitation of the Williston Basin is subject to risks related to horizontal drilling and completion techniques.

Operations in the Williston Basin involve utilizing the latest drilling and completion techniques, including horizontal drilling and completion techniques, to generate the highest possible cumulative recoveries and therefore generate the highest possible returns. Risks that are encountered while drilling include, but are not limited to, landing the well bore in the desired drilling zone, staying in the zone while drilling horizontally through the formation, running casing the entire length of the well bore and being able to run tools and other equipment consistently through the horizontal well bore. Completion risks include, but are not limited to, being able to fracture stimulate the planned number of stages, being able to run tools the entire length of the well bore during completion operations, and successfully cleaning out the well bore after completion of the final fracture stimulation stage. Ultimately, the success of these latest drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period.

The drilling and completion of a well in the Williston Basin frequently costs between $7.5 million and $13.0 million on a gross basis, which is significantly more expensive than a typical onshore conventional well. Accordingly, unsuccessful exploration or development activity affecting even a small number of wells could have a significant impact on our results of operations.

Our lack of diversification will increase the risk of an investment in us and our financial condition and results of operations may deteriorate if we fail to diversify.

Our business is focused primarily on a limited number of properties in North Dakota and Montana. We may choose to limit our focus to a single geographic area such as the Williston Basin, which could limit our flexibility. We previously committed to joint ventures with third parties to acquire and develop acreage; we may continue to participate in joint ventures in the future, although we intend to focus on operating our own properties. Our required capital commitments may grow if the opportunity presents itself and depend upon the results of initial testing and development activities. Larger companies have the ability to manage their risk by diversification. However, we lack diversification in terms of both the nature and geographic scope of our business. As a result, we will likely be impacted more acutely by factors affecting our industry or the regions in which we operate than if our business were more diversified enhancing our risk profile. If we cannot diversify our operations, our financial condition and results of operations could deteriorate.

We have a history of losses which may continue and negatively impact our ability to achieve our business objectives.

We incurred net losses of $62,296,099, $1,345,054 and $4,268,569 for the fiscal years ended December 31, 2012, 2011 and 2010, respectively. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the oil and natural gas industry. We cannot assure you that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether we will be able to increase our revenues. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on our business, financial condition and result of operations.

We have a limited operating history, and may not be successful in sustaining profitable business operations.

We have a limited operating history. The business of acquiring, exploring for, developing and producing hydrocarbon reserves is inherently risky. We have a limited operating history for you to consider in evaluating our business and prospects. Our operations are therefore subject to all of the risks inherent in acquiring, exploring for, developing and producing hydrocarbon reserves, particularly in light of our limited experience in undertaking such activities. We may never overcome these obstacles.

Our business is speculative and dependent upon the implementation of our business plan and our ability to enter into agreements with third parties for the rights to exploit potential oil and natural gas reserves on terms that will be commercially viable for us.

Competition in obtaining rights to explore and develop oil and natural gas reserves and to market our production may impair our business.

The oil and natural gas industry is highly competitive. Other oil and natural gas companies may seek to acquire oil and natural gas leases and other properties and services we intend to target with our investments. This competition is increasingly intense as prices of oil and natural gas on the commodities markets rise. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors or in funding joint ventures with our prospective partners. Competitors include a variety of potential investors and larger companies, which, in particular, may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests. If we are unable to compete effectively or adequately respond to competitive pressures, this inability may materially adversely affect our results of operation and financial condition.

Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.

Our ability to successfully acquire additional properties, to discover reserves, to participate in exploration opportunities and to identify and enter into commercial arrangements with customers depend on developing and maintaining close working relationships with industry participants, our ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. These realities are subject to change and may impair our ability to grow.

To further develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures with other private parties and contractual arrangements with other oil and natural gas companies, including those that supply equipment and other resources that we will use in our business. Our ability to successfully operate joint ventures depends on a variety of factors, many of which will be entirely outside our control. We may not be able to establish strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to undertake in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations.

We may not be able to effectively manage our growth, which may harm our profitability.

Our strategy envisions expanding our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We may not be able to:

meet our capital needs;

expand our systems effectively or efficiently or in a timely manner;

allocate our human resources optimally;

identify and hire qualified employees or retain valued employees; or

incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.

Our business may suffer if we do not attract and retain talented personnel.

Our success will depend in large measure on the abilities, expertise, judgment, discretion, integrity and good faith of our management and other personnel in conducting our business. We have a small management team, and the loss of key individuals or the inability to attract and suitably qualified personnel could materially adversely impact our business.

Our success depends on the ability of our management, employees and exploration partners to interpret market and geological data correctly and to interpret and respond to economic market and other conditions in order to locate and adopt appropriate investment opportunities, monitor such investments, and ultimately, if required, to successfully divest such investments.

Lower oil and natural gas prices, decreases in value of undeveloped acreage, lease expirations and material changes to our plans of development may cause us to record ceiling test write-downs.

We use the full cost method of accounting to account for our oil and natural gas operations. Accordingly, we capitalize the cost to acquire, explore for and develop oil and natural gas properties. Under full cost accounting rules, the net capitalized costs of oil and natural gas properties may not exceed a “full cost ceiling” which is based upon the present value of estimated future net cash flows from proved reserves, including the effect of hedges in place, discounted at 10%, plus the lower of cost or fair market value of unproved properties. If at the end of any fiscal period we determine that the net capitalized costs of oil and natural gas properties exceed the full cost ceiling, we must charge the amount of the excess to earnings in the period then ended. This is called a “ceiling test write-down.” This charge does not impact cash flow from operating activities, but does reduce our net income and stockholders’ equity. We recognized a ceiling test write-down for the year ended December 31, 2012 of approximately $61.9 million and we may recognize write-downs in the future if commodity prices decline or if we experience substantial downward adjustments to our estimated proved reserves.

Our hedging activities could result in financial losses or could reduce our net income or increase our net loss, which may adversely affect our business.

In order to manage our exposure to price risks in the marketing of our oil and natural gas production, we may enter into oil and natural gas price hedging arrangements with respect to a portion of expected production that we fund. Such transactions may limit our potential gains and increase our potential losses if oil and natural gas prices were to rise substantially over the price established by the hedge. In addition, such transactions may expose us to the risk of loss in certain circumstances, including instances in which:

production is less than expected;

there is a widening of price differentials between delivery points for our production and the delivery point assumed in the hedge arrangement; or

the counterparties to our hedging agreements fail to perform under the contracts.

Exploration for oil and natural gas is risky and may not be commercially successful, and the advanced technologies we and our operating partners use cannot eliminate exploration risk, which could impair our ability to generate revenues from our operations.

Our future success will depend on the success of our exploration, development and production program. Oil and natural gas exploration involves a high degree of risk. These risks are more acute in the early stages of exploration. Our ability to generate a return on our investments, revenues and our resulting financial performance are significantly affected by the prices we receive for oil and natural gas produced from wells on our acreage. Especially in recent years, the prices at which oil and natural gas trade in the open market have experienced significant volatility, and will likely continue to fluctuate in the foreseeable future due to a variety of influences including, but not limited to, the following:

domestic and foreign demand for oil and natural gas by both refineries and end users;

the introduction of alternative forms of fuel to replace or compete with oil and natural gas;

domestic and foreign reserves and supply of oil and natural gas;

competitive measures implemented by our competitors and domestic and foreign governmental bodies;

weather conditions; and

domestic and foreign economic volatility and stability.

A significant decrease in oil and natural gas prices could also adversely impact our ability to raise additional capital to pursue future drilling activities.

Our expenditures on exploration may not result in new discoveries of oil or natural gas in commercially viable quantities. It is difficult to project the costs of implementing an exploratory drilling program due to the inherent uncertainties of drilling in unknown formations, the costs associated with encountering various drilling conditions, such as over-pressured zones and tools lost in the hole, and changes in drilling plans and locations as a result of prior exploratory wells or additional seismic data and interpretations thereof.

Even when used and properly interpreted, three-dimensional (3-D) seismic data and visualization techniques only assist geoscientists in identifying subsurface structures and hydrocarbon indicators. They do not allow the interpreter to know conclusively if hydrocarbons are present or economically producible. In addition, the use of 3-D seismic data becomes less reliable when used at increasing depths. We could incur losses as a result of expenditures on unsuccessful wells. If exploration costs exceed estimates, or if exploration efforts do not produce results which meet expectations, the exploration efforts may not be commercially successful, which could adversely impact our ability to generate revenues from our operations.

We may not be able to develop oil and natural gas reserves on an economically viable basis, and our reserves and production may decline as a result.

If we succeed in discovering oil and/or natural gas reserves, these reserves may not be capable of the production levels we project or in sufficient quantities to be commercially viable. On a long-term basis, our viability depends on our ability to find or acquire, develop and commercially produce additional oil and natural gas reserves. Without the addition of reserves through acquisition, exploration or development activities, our reserves and production will decline over time as reserves are produced. Our future reserves will depend not only on our ability to develop then-existing properties, but also on our operating partners’ ability to identify and acquire additional suitable producing properties or prospects, to find markets for the oil and natural gas we may develop and to effectively distribute our production.

Future oil and natural gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-downs of connected wells resulting from extreme weather conditions, problems in storage and distribution and adverse geological and mechanical conditions. We will not be able to eliminate these conditions completely in any case. Therefore, these conditions could diminish our revenue and cash flow levels and result in the impairment of our oil and natural gas interests.

We may not be able to drill wells on a substantial portion of our acreage.

We may not be able to drill on a substantial portion of our acreage for various reasons. We may not generate or be able to raise sufficient capital to do so. Future deterioration in commodities pricing may also make drilling some acreage uneconomic. Our actual drilling activities and future drilling budget will depend on drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, lease expirations, gathering system and pipeline transportation constraints, regulatory approvals and other factors. In addition, any drilling activities we are able to conduct may not be successful or add additional proved reserves to our overall proved reserves, which could have a material adverse effect on our future business, financial condition and results of operations.

Certain of our undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.

A large portion of our acreage is not currently held by production. Unless production in paying quantities is established on units containing these leases during their terms, these leases will expire. If our leases expire, we will lose our right to develop the related properties. Our drilling plans for these areas are subject to change based upon various factors, many of which are beyond our control, including drilling results, oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system and pipeline transportation constraints, and regulatory approvals. Further, some of our acreage is located in sections where we do not hold the majority of the acreage and therefore it is likely that we will not be named operator of these sections. On our acreage that we do not operate, we have less control over the timing of drilling and there is therefore additional risk of expirations occurring in those sections.

Prices and markets for oil and natural gas are unpredictable and tend to fluctuate significantly, which could reduce profitability, growth and the value of our business.

Oil and natural gas are commodities whose prices are determined based on world demand, supply and other factors, all of which are beyond our control. World prices for oil and natural gas have fluctuated widely in recent years, and we expect that prices will fluctuate in the future. Price fluctuations will have a significant impact upon our revenue, the return from our reserves and on our financial condition generally. Price fluctuations for oil and natural gas commodities may also impact the investment market for companies engaged in the oil and natural gas industry. Prices may not remain at current levels. Decreases in the prices of oil and natural gas may have a material adverse effect on our financial condition, the future results of our operations and quantities of reserves recoverable on an economic basis.

Penalties we may incur could impair our business.

Failure to comply with government regulations could subject us to civil and criminal penalties, could require us to forfeit property rights, and may affect the value of our assets. We may also be required to take corrective actions, such as installing additional equipment or taking other actions, each of which could require us to make substantial capital expenditures. We could also be required to indemnify our employees in connection with any expenses or liabilities that they may incur individually in connection with regulatory action against them. As a result, our future business prospects could deteriorate due to regulatory constraints, and our profitability could be impaired by our obligation to provide such indemnification to our employees.

We may have difficulty distributing our oil and natural gas production, which could harm our financial condition.

In order to sell the oil and natural gas that we are able to produce from the Williston Basin and the Sand Wash Basin, we may have to make arrangements for storage and distribution to the market. We will rely on local infrastructure and the availability of transportation for storage and shipment of our products, but infrastructure development and storage and transportation facilities may be insufficient for our needs at commercially acceptable terms in the localities in which we operate. This situation could be exacerbated to the extent that our operations are conducted in remote areas that are difficult to access, such as areas that are distant from shipping and/or pipeline facilities. These factors may affect our ability to explore and develop properties and to store and transport our oil and natural gas production, which may increase our expenses.

We may be unable to obtain additional capital that we will require to implement our business plan, which could restrict our ability to grow.

We expect that our cash position, revenues from oil and natural gas sales, proceeds from our recent preferred stock offering, and availability on our credit facility will be sufficient to fund our 2013 drilling program.

Our credit facility limits our borrowings to the lesser of the borrowing base and the total commitments. Our borrowing base was $27.5 million as of December 31, 2012. Our borrowing base is determined semi-annually, and may also be redetermined at the election of us or the banks between the scheduled redeterminations. Lower oil and natural gas prices may result in a reduction in our borrowing base at the next redetermination. A reduction in our borrowing base could require us to repay any indebtedness in excess of the borrowing base. Additionally, our credit facility contains covenants limiting our ability to incur additional indebtedness and requiring us to maintain certain financial ratios.

Future acquisitions and future exploration, development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of capital and cash flow.

We may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our planned expansion of operations in the future.

Any additional capital raised through the sale of equity will dilute the ownership percentage of our shareholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities. In addition, we have granted and will continue to grant equity incentive awards under our equity incentive plans, which may have a further dilutive effect.

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets (both generally and in the oil and natural gas industry in particular), our limited operating history, the location of our oil and natural gas properties and prices of oil and natural gas on the commodities markets (which will impact the amount of asset-based financing available to us) and the departure of key employees. Further, if oil or natural gas prices on the commodities markets decline, our revenues will likely decrease and such decreased revenues may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition.

Estimates of proved oil and natural gas reserves are uncertain and any material inaccuracies in these reserve estimates will materially affect the quantities and the value of our reserves.

This Annual Report on Form 10-K contains estimates of our proved oil and natural gas reserves. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The process of estimating oil and natural gas reserves is complex. This process requires significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise. Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves will vary from those estimated. Any significant variance could materially affect the estimated quantities and the value of our reserves. Our properties may also be susceptible to hydrocarbon drainage from production by other operators on adjacent properties. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and natural gas prices and other factors, many of which are beyond our control.

At December 31, 2012, approximately 63% of our estimated reserves were classified as proved undeveloped. Recovery of proved undeveloped reserves requires significant capital expenditures and successful drilling operations. The reserve data assumes that we will make significant capital expenditures to develop our reserves. Although we have prepared estimates of these oil and natural gas reserves and the costs associated with development of these reserves in accordance with SEC regulations, actual capital expenditures will likely vary from estimated capital expenditures, development may not occur as scheduled and actual results may not be as estimated.

Seasonal weather conditions and other factors could adversely affect our ability to conduct drilling activities.

Our operations could be adversely affected by weather conditions and wildlife restrictions on federal leases. In the Williston Basin and the Sand Wash Basin, drilling and other oil and natural gas activities cannot be conducted as effectively during the winter months. Winter and severe weather conditions limit and may temporarily halt the ability to operate during such conditions. These constraints and the resulting shortages or high costs could delay or temporarily halt our oil and natural gas operations and materially increase our operating and capital costs, which could have a material adverse effect on our business, financial condition, and results of operations.

Our ability to sell our production and/or receive market prices for our production may be adversely affected by transportation capacity constraints and interruptions.

If the amount of oil or natural gas being produced by us and others exceeds the capacity of the various transportation pipelines and gathering systems currently available in our operating areas, it will be necessary for new transportation pipelines and gathering systems to be built. Or, in the case of oil and condensate, it will be necessary for us to rely more heavily on trucks to transport our production, which is more expensive and less efficient than transportation via pipeline. Currently, we anticipate that additional pipeline capacity will be required in the Bakken and Three Forks formations to transport oil and condensate production, which increased substantially during 2012 and is expected to continue to increase. The construction of new pipelines and gathering systems is capital intensive and construction may be postponed, interrupted or cancelled in response to changing economic conditions and the availability and cost of capital. In addition, capital constraints could limit our ability to build gathering systems to transport our production to transportation pipelines. In such event, costs to transport our production may increase materially or we might have to shut in our wells awaiting a pipeline connection or capacity and/or sell our production at much lower prices than market or than we currently project, which would adversely affect our results of operations. A portion of our production may also be interrupted, or shut in, from time to time for numerous other reasons, including as a result of weather conditions, accidents, loss of pipeline or gathering system access, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions.

Title to the properties in which we have an interest may be impaired by title defects.

Title to oil and natural gas interests is often not capable of conclusive determination without incurring substantial expense. Title defects may exist in many of our oil and natural gas interests. In addition, we may be unable to obtain adequate insurance for title defects on a commercially reasonable basis or at all. If title defects do exist, it is possible that we may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. If our property rights are reduced, our ability to conduct our exploration, development and production activities may be impaired.

Environmental risks may adversely affect our business.

All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and natural gas operations. Legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner in which we expect may result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. The application of environmental laws to our business may cause us to curtail our production or increase the costs of our production, development or exploration activities.

Federal or state hydraulic fracturing legislation could increase our costs or restrict our access to oil and natural gas reserves.

Hydraulic fracturing using fluids other than diesel is currently exempt from regulation under the federal Safe Drinking Water Act, but opponents of hydraulic fracturing have called for further study of the technique’s environmental effects and, in some cases, a moratorium on the use of the technique. Several proposals have been submitted to Congress that, if implemented, would subject all hydraulic fracturing to regulation under the Safe Drinking Water Act. Further, the EPA’s Office of Research and Development (ORD) is conducting a scientific study to investigate the possible relationships between hydraulic fracturing and drinking water. The results of that study could advance the development of additional regulations. Apart from federal regulatory initiatives, states have been considering or implementing new requirements for hydraulic fracturing, including restricting its use in environmentally sensitive areas. Similarly, some localities have significantly limited or prohibited drilling activities, or are considering doing so.

Although it is not possible at this time to predict the final outcome of the ORD’s study or the requirements of any additional federal or state legislation or regulation regarding hydraulic fracturing, any new federal, state, or local restrictions on hydraulic fracturing that may be imposed in areas where we conduct business, such as the Bakken and Three Forks areas, could significantly increase our operating, capital and compliance costs as well as delay or halt our ability to develop oil and natural gas reserves. See Item 1. Business —Governmental Regulation and Environmental Matters —Hydraulic Fracturing.

Federal legislation could have an adverse impact on our ability to use derivative instruments to reduce the effects of commodity prices, interest rates and other risks associated with our business.

Historically, we have entered into a number of commodity derivative contracts in order to hedge a portion of our oil and natural gas production and, periodically, interest expense. The Dodd-Frank Act, which was passed by Congress and signed into law in July 2010, provides for statutory and regulatory requirements for certain derivative transactions, which are broadly referred to as “swaps” and which include oil and gas hedging transactions and interest rate swaps. Swaps designated by the Commodities Futures Trading Commission (CFTC) and swaps within certain classes of swaps designated by the CFTC will be required to be submitted for clearing on a derivative clearing organization and, if accepted for clearing, cleared on the derivative clearing organization. Transactions in swaps accepted for clearing must be executed on a board of trade designated as a contract market or a swap execution facility if such swaps are made available for trading on such a board of trade or swap execution facility. The Dodd-Frank Act provides an exception from application of the Act's clearing requirement that commercial end-users may elect for swaps they use to hedge or mitigate commercial risks. Although we believe we will be able to elect such exception with respect to most, if not all, of our swaps, if we cannot do so with respect to many of the swaps we enter into, our ability to execute our hedging program efficiently will be adversely affected. In addition, any of our existing swaps, as well as swaps that we enter before such swaps become subject to the clearing requirement, that fall within a class of swaps becoming subject to the clearing requirement will have to be submitted for clearing unless we meet certain reporting requirements.

We anticipate that, under regulations adopted under the Dodd-Frank Act and relevant derivative clearing organization and other rules, if we do not qualify as a commercial end-user we will be required to post cash collateral for those of our derivative transactions constituting swaps (including our interest rate swaps and commodities-related swaps) that we need to clear on a derivative clearing organization. Moreover, the CFTC and the federal regulators of banks and other financial institutions have proposed regulations imposing margin requirements for non-cleared swaps that, if adopted, could require us to post cash or other types of collateral for our non-cleared swaps, if any, from time to time in certain circumstances. Posting cash collateral or margin with respect to our swaps could cause liquidity issues for us by reducing our ability to use our cash for capital expenditures or other partnership purposes. A requirement to post cash collateral or margin could therefore reduce our ability to execute strategic hedges to reduce commodity price uncertainty and, thus, to protect cash flows. In addition, even if we are not required to post cash collateral or margin for our swaps, the banks and other derivatives dealers who are the contractual counterparties to our swaps will be required to comply with the Dodd-Frank Act’s requirements, and the costs of their compliance will likely be passed on to customers, including us, thus increasing our costs of engaging in hedging transactions, decreasing the benefits of those transactions to us and reducing our cash flows. If we reduce our use of derivatives as a result of the new legislation and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures. Increased volatility may make us less attractive to certain types of investors. Finally, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and natural gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and natural gas. If the legislation and regulations result in lower commodity prices, our revenues could be adversely affected. Any of these consequences could adversely affect our business, financial condition and results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be harmed. We cannot be certain that our efforts to maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to continue to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain effective internal controls, or difficulties encountered in implementing or improving our internal controls, could harm our operating results or cause us to fail to meet certain reporting obligations.

We will rely on technology to conduct our business and our technology could become ineffective or obsolete.

We rely on technology, including geographic and seismic analysis techniques and economic models, to develop our reserve estimates and to guide our exploration, development and production activities. We will be required to continually enhance and update our technology to maintain our efficacy and to avoid obsolescence. The costs of doing so may be substantial, and may be higher than the costs that we anticipated for technology maintenance and development. If we are unable to maintain the efficacy of our technology, our ability to manage our business and to compete may be impaired. Further, even if we are able to maintain technical effectiveness, our technology may not be the most efficient means of reaching our objectives, in which case we may incur higher operating costs than we would were our technology more efficient.

Losses and liabilities from uninsured or underinsured drilling and operating activities could have a material adverse effect on our financial condition and operations.

We maintain several types of insurance to cover our operations, including worker’s compensation and comprehensive general liability. Amounts over base coverages are provided by primary and excess umbrella liability policies. We also expect to maintain operator’s extra expense coverage, which covers the control of drilling or producing wells as well as redrilling expenses and pollution coverage for wells out of control.

We may not be able to maintain adequate insurance in the future at rates we consider reasonable, or we could experience losses that are not insured or that exceed the maximum limits under our insurance policies. If a significant event that is not fully insured or indemnified occurs, it could materially and adversely affect our financial condition and results of operations.

We are subject to various governmental regulations and environmental risks that may cause us to incur substantial costs.

From time to time, in varying degrees, political developments and federal and state laws and regulations affect our operations. In particular, price controls, taxes, and other laws relating to the oil and natural gas industry, changes in these laws, and changes in administrative regulations have affected and in the future could affect crude oil and natural gas production, operations, and economics. We cannot predict how agencies or courts will interpret existing laws and regulations or the effect these adoptions and interpretations may have on our business or financial condition.

Our business is subject to laws and regulations promulgated by federal, state, and local authorities, including but not limited to the U.S. Congress, the U.S. Environmental Protection Agency (the “EPA”), the Bureau of Land Management, the Industrial Commission of North Dakota, and the Montana Board of Oil and Gas Conservation, relating to the exploration for, and the development, production, and marketing of, crude oil and natural gas, as well as safety matters. Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. We may be required to make significant expenditures to comply with governmental laws and regulations. The discharge of crude oil, natural gas, or other pollutants into the air, soil, or water may give rise to significant liabilities on our part to the government and third parties and may require us to incur substantial costs of remediation.

On April 17, 2012, the EPA approved final regulations under the U.S. Federal Clean Air Act (the “CAA”) that, among other things, require additional emissions controls for natural gas and natural gas liquids production, including New Source Performance Standards to address emissions of sulfur dioxide and volatile organic compounds (“VOC”) and a separate set of emission standards to address hazardous air pollutants frequently associated with such production activities. The final regulations require the reduction of VOC emissions from natural gas wells through the use of reduced emission completions or “green completions” on all hydraulically fractured wells constructed or refractured after January 1, 2015. For well completion operations occurring at such well sites before January 1, 2015, the final regulations allow operators to capture and direct flowback emissions to completion combustion devices, such as flares, in lieu of performing green completions. These regulations also establish specific new requirements regarding emissions from dehydrators, storage tanks and other production equipment. We are currently reviewing this new rule and assessing its potential impacts. Compliance with these requirements could increase our costs of development and production, though we do not expect these requirements to be any more burdensome to us than to other similarly situated companies involved in oil and natural gas exploration and production activities.

The adoption of climate change legislation by Congress could result in increased operating costs, create delays in our obtaining air pollution permits for new or modified facilities, and result in reduced demand for the oil and natural gas we produce.

According to certain scientific studies, emissions of carbon dioxide, methane, nitrous oxide, and other gases commonly known as greenhouse gases (“GHG”) may be contributing to global warming of the earth’s atmosphere and to global climate change. In response to the scientific studies, legislative and regulatory initiatives have been underway to limit GHG emissions. The U.S. Supreme Court determined that GHG emissions fall within the definition of an “air pollutant,” and in response, the EPA promulgated an endangerment finding paving the way for regulation of GHG emissions under the CAA. The EPA has also promulgated rules requiring owners or operators of certain petroleum and natural gas systems that emit 25,000 metric tons or more of GHG per year from a facility to report such emissions, and we are subject to this reporting requirement. In addition, the EPA promulgated rules that significantly increase the GHG emission threshold that would identify major stationary sources of GHG subject to CAA permitting programs. As currently written and based on our current operations, we are not subject to federal GHG permitting requirements. Regulation of GHG emissions is new and highly controversial, and further regulatory, legislative, and judicial developments are likely to occur. Such developments may affect how these GHG initiatives will impact us. Further, apart from these developments, recent judicial decisions that have allowed certain tort claims alleging property damage to proceed against GHG emissions sources may increase our litigation risk for such claims. Due to the uncertainties surrounding the regulation of and other risks associated with GHG emissions, we cannot predict the financial impact of related developments on us.

Legislation or regulations that may be adopted to address climate change could also affect the markets for our products by making our products more or less desirable than competing sources of energy. To the extent that our products are competing with higher GHG emitting energy sources, such as coal, our products could become more desirable in a market with more stringent limitations on GHG emissions. To the extent that our products are competing with lower GHG emitting energy sources, such as solar and wind, our products could become less desirable in the market with more stringent limitations on GHG emissions. We cannot predict with any certainty at this time how these possibilities may affect our operations. Any laws or regulations that may be adopted to restrict or reduce emissions of GHG could require us to incur increased operating costs and could have an adverse effect on demand for the oil and natural gas we produce, depending on the applicability to our operations and the refining, processing, and use of oil and natural gas.

Federal legislation regarding derivatives could have an adverse effect on our ability and cost of entering into derivative transactions.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Reform Act”), which, among other provisions, establishes federal oversight and regulation of the over-the-counter derivatives market and entities that participate in that market. Many of the statutory provisions require implementing regulations of the Commodities Futures Trading Commission (the “CFTC”) and the SEC. The CFTC has issued final rules further defining the terms “swap dealer,” “major swap participant” and “swap.” The completion of this definitional rulemaking satisfies prerequisites for certain substantive components of the legislation and regulations to take effect, including registration and other requirements applicable to swap dealers.

The CFTC has issued a final rule on position limits for certain futures and option contracts in the major energy markets and for swaps that are economically related. Certain bona fide hedging transactions or positions are exempt from these position limits. The financial reform legislation may require us to comply with margin requirements and with certain clearing and trade-execution requirements in connection with our derivative activities. The financial reform legislation will impose significant new regulation on those of our derivatives counterparties that are swap dealers, which may increase their costs and in certain cases may cause or require them to spin off some of their derivatives activities to separate entities, which may not be as creditworthy as the current counterparties. The new legislation and new regulations could significantly increase the cost of derivative contracts (including through requirements to post collateral which could adversely affect our available liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure existing derivative contracts, and increase our potential exposure to less creditworthy counterparties. If we reduce our use of derivatives or commodity prices become more volatile and hedging markets become less liquid as a result of the legislation and regulations, our results of operations may become more volatile and cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures, our results of operations, or our cash flows.

PART III

Item 10.Directors, Executive Officers and Corporate Governance

Board of Directors

Our Articles of Incorporation, as amended, specify that the number of directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of our Board. Our Board is currently composed of eight directors, and our Board has adopted a resolution to reduce the number of members of our Board to seven directors to be effective upon the adjournment of the 2013 Annual Meeting of our Shareholders (the “2013 Annual Meeting”). One of our current directors, Lyle Berman, has elected to retire from the Board following the adjournment of our 2013 Annual Meeting.

On July 26, 2012, we acquired Emerald Oil North America, Inc. (formerly Emerald Oil, Inc.) for approximately 1.66 million shares of our common stock and made a strategic decision to add operating capabilities and focus on growing operating acreage in the Williston Basin in North Dakota and Montana. We refer to this acquisition as the “Emerald Acquisition.” In connection with the closing of the Emerald Acquisition, Joseph Lahti, Myrna McLeroy, Loren J. O’Toole, Josh Sherman and Mitchell Thompson resigned from our Board of Directors, and Mike Krzus, Duke R. Ligon, McAndrew Rudisill, Seth Setrakian and Daniel L. Spears were appointed as directors. Also in connection with the closing of the Emerald Acquisition, our Board appointed Mike Krzus as Chief Executive Officer, McAndrew Rudisill as President, Paul Wiesner as Chief Financial Officer, and Karl Osterbuhr as Vice President of Exploration and Business Development, and our Board appointed James Russell (J.R.) Reger, formerly our Chief Executive Officer, as Executive Chairman, and Mitchell Thompson, formerly our Chief Financial Officer, as Chief Accounting Officer.

On February 19, 2013, we completed a private offering with affiliates of White Deer Energy L.P. (“White Deer Energy”), pursuant to which, in exchange for a cash investment of $50 million, we issued 500,000 shares of Series A Perpetual Preferred Stock, $0.001 par value per share, 5,114,633 shares of Series B Voting Preferred Stock, $0.001 par value per share, and warrants to purchase an initial aggregate 5,114,633 shares of our common stock, at an initial exercise price of $5.77 per share. In connection with the White Deer Energy private offering and pursuant to the obligations under the related Securities Purchase Agreement and the Preferences, Limitations and Relative Rights of Series A Perpetual Preferred Stock set forth in our Articles of Incorporation, the holders of the Series A Perpetual Preferred Stock selected Thomas J. Edelman to serve on our Board as the director designee of the holders of the Series A Perpetual Preferred Stock.

Directors

Certain biographical information relating to each of our directors is set forth below:

Name	Age	Year First Became a Director
Lyle Berman	71	2002
Thomas J. Edelman	62	2013
Mike Krzus	55	2012
Duke R. Ligon	71	2012
James Russell (J.R.) Reger	38	2010
McAndrew Rudisill	34	2012
Seth Setrakian	41	2012
Daniel L. Spears	40	2012

Lyle Bermanhas been a director since our inception in March 2002 and was Chairman of the Board from that time until July 26, 2012. Mr. Berman served as our Chief Executive Officer from February 25, 2004 until April 1, 2005. Since January 1999, Mr. Berman has served as the Chairman of the Board and Chief Executive Officer of Lakes Entertainment, Inc. (NASDAQ GM: LACO) (“Lakes”), a company that develops and manages Indian-owned casinos. From November 1999 until May 2000, Mr. Berman served as President of Lakes. Mr. Berman currently serves on the board of directors of PokerTek, Inc. (NASDAQ CM: PTEK), an electronic table game manufacturer, and Redstone American Grill, a privately held restaurant chain. Mr. Berman served as a director of Black Ridge Oil & Gas, Inc., formerly known as Ante5, Inc., from the time of its spin-off from the Company until November 12, 2010, and served as the Chairman of the board of directors of Grand Casinos, Inc. from October 1991 through December 1998. Mr. Berman served as Chief Executive Officer of Rainforest Cafe, Inc. from February 1993 until December 2000. Mr. Berman’s qualifications to sit on the Board include his decades of experience in owning, operating and managing a wide variety of companies both large and small, public and private, in industries as diverse as gaming, television production, restaurants and apparel.

Thomas J. Edelman has been a director since February 2013. Mr. Edelman is currently Managing Partner of White Deer Energy L.P., an energy private equity fund. Mr. Edelman founded Patina Oil & Gas Corporation and served as its Chairman and Chief Executive Officer from its formation in 1996 through its merger with the Noble Energy, Inc. in 2005, when he joined its board of directors. Mr. Edelman co-founded Snyder Oil Corporation and was its President from 1981 through 1997. Mr. Edelman served as Chairman and Chief Executive Officer and later as Chairman of Range Resources Corporation (NYSE: RRC), an oil and natural gas company, from 1988 through 2003. From 1980 to 1981, he was with The First Boston Corporation and from 1975 through 1980 with Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman serves as a director of Noble Energy, Inc. (NYSE: NBL), an oil and natural gas company, PostRock Energy Corporation (NASDAQ: PSTR), an independent oil and natural gas company, President of Lenox Hill Neighborhood House, a Trustee and Chair of the Investment Committee of The Hotchkiss School and is a member of the board of directors of Georgetown University. Mr. Edelman brings a strong financial and executive management background to our Board. Mr. Edelman holds an M.B.A. in Finance from Harvard Business School and a B.A. in Political Economy from Princeton University. Mr. Edelman’s qualifications to sit on the Board include his extensive experience with investment banking and private equity funds, as well as the financial aspects of our business through leadership of large independent oil and natural gas companies, serving as President and CEO of several independent oil and natural gas companies and his knowledge and expertise of the oil and natural gas industry.

Mike Krzus has been a director and served as our Chief Executive Officer since July 2012. Mr. Krzus has over 30 years experience managing technical and business areas in upstream oil and natural gas, liquefied natural gas and geothermal. Prior to joining us, Mr. Krzus was the Chief Executive and Operating Officer of Emerald Oil & Gas NL, a petroleum exploration and production company based in Perth, Australia, since February 12, 2009 and was its Managing Director from August 13, 2009 before reverting to a non-executive director on being appointed our Chief Executive Officer in July 2012. Starting as a petroleum engineer with Home Oil in Calgary in 1983, Mr. Krzus then proceeded to Woodside Petroleum Ltd (Australia’s largest operating oil company) in 1986 where he held various management and executive positions involving oil and natural gas field development (including a four-year secondment to Shell International SIPM where he led natural gas and oil field development teams in the Netherlands), exploration and production business development, company business planning and evaluations, joint venture management and technical capability management. Before leaving Woodside Petroleum Ltd in 2007, Mr. Krzus was responsible for its sub-surface technical oil and natural gas development capability and technology and its capital gating approval process. Prior to joining Emerald Oil & Gas NL, Mr. Krzus managed a geothermal exploration company that was a subsidiary of Eden Energy. Mr. Krzus is a member of the Society of Petroleum Engineers (SPE) and Graduate member of the Australian Institute of Company Directors (AICD). Mr. Krzus holds a Diploma in Oil and Gas Technology from the British Columbia Institute of Technology and a BSc in Petroleum Engineering from Tulsa University. Mr. Krzus’ qualifications to sit on the Board include his role as our Chief Executive Officer, his experience in the energy industry, his petroleum engineering background and his years of experience in oil and natural gas development and production and technical and business management of upstream oil and natural gas companies.

Duke R. Ligon has been a director since July 2012. Mr. Ligon has served as Chairman of PostRock Energy Corporation (NASDAQ: PSTR), an independent oil and natural gas company, since October 2010 and as Chairman and Director of one of PostRock’s predecessor entities since 2006. Mr. Ligon has more than 40 years of legal expertise in corporate securities, litigation, governmental affairs and mergers and acquisitions. He is an attorney and served as senior vice president and general counsel of Devon Energy Corporation (NYSE: DVN), an independent natural gas and oil exploration and production company, from January 1997 until he retired in February 2007. From 2007 to 2010, Mr. Ligon served as a strategic legal advisor to Love’s Travel Stops & Country Stores, Inc., a privately held chain of fuelling stations and attached convenience stores, and currently is the manager and owner of Mekusukey Oil Company, LLC, a privately held oil and natural gas company. Prior to joining Devon, Mr. Ligon practiced law for 12 years and last served as a partner at the law firm of Mayer Brown LLP in New York City. In addition, Mr. Ligon was Senior Vice President and Managing Director for Investment Banking at Bankers Trust Co., a privately held commercial bank, in New York City for 10 years. Mr. Ligon also serves as a member of the board of directors of Panhandle Oil and Gas, Inc. (NYSE: PHX), an oil and natural gas company, as a member of the board of directors of Vantage Drilling Company (AMX: VTG), an offshore drilling contractor, Chairman of the Board of Blueknight Energy Partners, LP (NASDAQ: BKEP), a midstream energy business, Chairman of the Board of SteelPath MLP Funds, a privately held mutual fund providing access to the Master Limited Partnership asset class, member of the board of directors of SteelPath Energy Infrastructure Investment Company, an MLP focused investment manager, Chairman of the Board of Security State Bank, member of the board of directors of Heritage Trust Company, member of the board of directors of Orion California LP, a privately held oil and natural gas company. He was formerly on the board of directors of SteelPath MLP Funds Trust, TransMontaigne Partners L.P. (NYSE: TLP), TEPPCO Partners, L.P. (NYSE: TPP), and member of the Advisory Committee of LegalShield, a privately held prepaid legal services company (formerly Pre-Paid Legal Services, Inc. where he was a board member and Chairman of the Special Committee that negotiated the recent sale to MidOcean Partners). Mr. Ligon received an undergraduate degree in chemistry from Westminster College and a law degree from the University of Texas School of Law. Mr. Ligon’s qualifications to sit on the Board include his experience as senior vice president and general counsel of Devon Energy Corporation and his expertise in corporate securities, litigation, governmental affairs and mergers and acquisitions, as well as his service on a number of boards of directors of other publicly traded companies, primarily in the energy industry.

James Russell (J.R.) Reger has served as our Executive Chairman since July 2012, served on our Board since April 2010 and served as our Chief Executive Officer from April 2010 to July 2012. Mr. Reger was the Chief Executive Officer of Plains Energy Investments, Inc. from December 2009 to April 2010. Mr. Reger was born and raised in Billings, Montana and is the fourth generation in a family of oil and natural gas explorers and developers dating back more than 60 years. From May 2004 to July 2006, Mr. Reger developed Williston Basin leaseholds as a Principal of Reger Oil, LLC based in Billings, Montana. From August 2006 to December 31, 2009, Mr. Reger was the President of South Fork Exploration, LLC, a lease acquisition and development company with assets in North Dakota, Montana and Wyoming. Mr. Reger holds a B.A. in Finance from Baylor University in Waco, Texas. Mr. Reger’s qualifications to sit on the Board include his role as founder and executive officer of the Company since 2010, and his knowledge and understanding of the energy industry, especially in North Dakota and Montana.

McAndrew Rudisill has been a director and served as our President since July 2012. Mr. Rudisill has 12 years of investment management and investment banking experience in the natural resources sector. Prior to joining us, Mr. Rudisill was Executive Chairman of Emerald Oil, Inc., which we acquired in July 2012, from 2011 to 2012. Mr. Rudisill was the Managing Partner and founder of Pelagic Capital Advisors LP from 2007 to 2011. Prior to forming Pelagic Capital Advisors LP, Mr. Rudisill was a co-founder and Managing Partner of BrightStream Asset Management which focused on investments in natural resources from 2005 to 2007. Before co-founding BrightStream, Mr. Rudisill was an Analyst and Managing Director at North Sound Capital from 2003 to 2005 where he was responsible for investments in global natural resources. Mr. Rudisill currently serves as a Non-Executive Director of Ochre Group Holdings Limited (ASX: OGH), an Australia based mineral resources exploration company, serves as a non-executive director of Emerald Oil & Gas NL (ASX: EMR), a petroleum exploration and production company based in Perth Australia, and serves as a trustee of the Tiger Foundation, which is a philanthropic organization focused on serving New York City. Mr. Rudisill's investment career began at JPMorgan, where he worked as an investment banker. Mr. Rudisill holds a B.A. cum laude with high honors in Economics from Middlebury College in Middlebury, Vermont. Mr. Rudisill’s qualifications to sit on the Board include his role as our President and his public and private equity investment experience, investment banking experience and dealings with structuring numerous transactions in the energy industry.

Seth Setrakian has been a director since July 2012. Mr. Setrakian has 15 years of investment management experience. Mr. Setrakian currently is a Partner and Co-Head of Domestic Equities of First New York Securities, LLC, a privately held principal trading firm. Prior to First New York, Mr. Setrakian was a Partner of Helios Partners and Seneca Capital, both U.S.-based private investment firms. Mr. Setrakian’s career began at Arthur Andersen, where he was an associate in the Corporate Finance group. Mr. Setrakian graduated summa cum laude, with a B.S. in Accounting, from Pennsylvania State University. Mr. Setrakian’s qualifications to sit on the Board include his extensive capital markets expertise, his involvement with publicly traded energy companies and background in finance and strategic management.

Daniel L. Spears has been a director since July 2012. Mr. Spears has 16 years of investment management and investment banking experience in the natural resources sector. Mr. Spears is a partner and portfolio manager at Dallas, Texas based Swank Capital, LLC, an energy infrastructure investment management company, and its wholly owned investment manager, Cushing MLP Asset Management, LP. Mr. Spears was an investment banker in the Natural Resources Group at Bank of America Securities LLC for eight years. Mr. Spears also worked in the Global Energy and Power Investment Banking Group at Salomon Smith Barney. Mr. Spears serves on the board of directors of Lonestar Midstream, L.P., a private midstream master limited partnership, PostRock Energy Corporation (NASDAQ: PSTR), an independent oil and natural gas company, and Central Energy, LP, a private distribution-focused master limited partnership trading in the over-the-counter market. Mr. Spears received his B.S. in Economics from the Wharton School of the University of Pennsylvania. Mr. Spears’ qualifications to sit on the Board include his investment banking and money management expertise and his expertise related to public and private companies in the energy industry, as well as his service on a number of boards of directors of other publicly traded companies, primarily in the energy industry.

Executive Officers

The following provides information about our current executive officers. Information with respect to Messrs. Krzus, Reger and Rudisill is set forth in “—Directors,” above.

Name	Age	Positions
Mike Krzus	55	Chief Executive Officer and Director
James Russell (“J.R.”) Reger	38	Executive Chairman and Director
McAndrew Rudisill	34	President and Director
Paul Wiesner	48	Chief Financial Officer and Secretary
Mitchell R. Thompson	32	Chief Accounting Officer
David Veltri	55	Chief Operating Officer

Paul Wiesnerhas been our Chief Financial Officer since the closing of the Emerald Acquisition in July 2012. Mr. Wiesner has over 25 years of experience with public and private oil and natural gas companies in senior financial and accounting positions. Prior to joining us, Mr. Wiesner was the Chief Financial Officer of Tracker Resource Development II, LLC from 2008 to 2011 a private oil exploration company focused in the North Dakota Bakken which sold for $1.05B. From 2005 to 2008, Mr. Wiesner was Chief Financial Officer, Secretary and Treasurer for Storm Cat Energy Corporation a publically traded coalbed methane gas exploration company focused in the Powder River Basin of Wyoming. In November 2008, while Mr. Wiesner served as an executive officer, entities affiliated with Storm Cat Energy filed for protection under Chapter 11 of the Federal bankruptcy laws in the U.S. Bankruptcy Court for the District of Colorado. From 2002 to 2005, Mr. Wiesner served as Chief Financial Officer of NRT Colorado, Inc. d/b/a Coldwell Banker Residential Colorado a residential real estate company with 22 offices and 2000 agents. Prior to 2002, Mr. Wiesner held financial positions with various private companies focused on oil and natural gas exploration, mid-stream natural gas gathering, mining and high technology products. Mr. Wiesner graduated with a Bachelor of Arts degree from Claremont McKenna College and holds an MBA from the MIT Sloan School of Management.

Mitchell R. Thompson has been our Chief Accounting Officer since the closing of the Emerald Acquisition in July 2012. Prior to then, Mr. Thompson served as our Chief Financial Officer from April 2010 to July 2012 and as a director from January 2011 to July 2012. Mr. Thompson was Chief Financial Officer of Plains Energy Investments, Inc. from December 1, 2009 until its merger with us in April 2010. From November 2008 to December 1, 2009, Mr. Thompson was with Anderson ZurMuehlen & Co., P.C. in Billings, Montana where he was an assurance manager. From September 2004 to November 2008, Mr. Thompson held various positions with Grant Thornton LLP in Minneapolis, where he last served as a senior associate. Mr. Thompson has been a licensed CPA since 2006 and holds a B.S. and Master’s in Accounting from Montana State University.

David Veltri has been our Chief Operating Officer since November 30, 2012. Mr. Veltri has over 31 years of oil and natural gas industry experience with a major oil company and several independent oil companies, where he has managed and provided engineering for all phases of upstream and mid-stream oil and natural gas operations, covering North Dakota, Wyoming, the Rocky Mountains, the Southern U.S., Mid-Continent, Louisiana, Texas and various international locations. Most recently, Mr. Veltri served as an independent petroleum engineering consultant from October 2011 through November 2012. From August 2008 through September 2011, Mr. Veltri served as Vice President/General Manager of Baytex Energy USA Ltd., where he managed business unit operations, capital drilling programs, lease maintenance and producing properties in the Williston Basin in North Dakota. From September 2006 to July 2008, Mr. Veltri was Production Manager at El Paso Exploration and Production Company, where he managed producing oil and natural gas properties located in northern New Mexico. Mr. Veltri received a Bachelor of Science in Mining and Engineering from West Virginia University.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and certain beneficial owners of more than 10% of our common stock to file with the SEC reports of ownership (Form 3) and changes in ownership (Forms 4 and 5) of our common stock. The reporting persons are required to furnish us with copies of all reports filed pursuant to Section 16(a). Based solely upon review of these SEC reports and written representations to us from certain reporting persons, we believe that during fiscal year 2012, all applicable filing obligations under Section 16(a) have been met by all of the reporting persons, except McAndrew Rudisill and Paul Wiesner each did not timely file his Form 3 and two Forms 4, J.R. Reger and Mitch Thompson each did not timely file three Forms 4, Lyle Berman, and Mike Krzus each did not timely file two Forms 4, Duke Ligon, Seth Setrakian and Dan Spears each filed one late Form 4, Marty Beskow did not timely file his Form 3 and two Forms 4, Karl Osterbuhr and David Veltri did not timely file his Form 3 and one Form 4, and Joseph Lahti, Myrna McLeroy, Loren O’Toole and Josh Sherman (all former directors) each did not timely file one Form 4.

Code of Ethics and Business Conduct

The Board has adopted a Code of Ethics and Business Conduct that applies to all employees, consultants, directors and officers, including our principal executive officer, principal financial officer, and principal accounting officer. Our Code of Ethics and Business Conduct addresses such topics as protection and proper use of our assets, compliance with applicable laws and regulations, accuracy and preservation of records, accounting and financial reporting, company opportunities, gifts and political contributions, relationships with government officials, conflicts of interest and insider trading. Our Code of Ethics and Business Conduct is available on our website at www.emeraldoil.com. Emerald intends to include on its website any amendment to, or waiver from, a provision of the Code of Ethics and Business Conduct that applies to the principal executive officer, principal financial officer, principal accounting officer and controller that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K. A copy of our Code of Ethics and Business Conduct will be provided to any person, without charge, upon request to the Secretary at 1600 Broadway, Suite 1360, Denver, Colorado 80202.

Current Committee Membership

Our Board has three standing committees, the Audit Committee, the Compensation Committee and the Governance/Nominating Committee. The following table sets forth the membership of each of our committees.

Audit Committee	Governance/Nominating Committee	Compensation Committee
Lyle Berman(1)	Duke R. Ligon	Duke R. Ligon
Duke R. Ligon*	Seth Setrakian	Seth Setrakian*
Daniel L. Spears	Daniel L. Spears*	Daniel L. Spears

* Chairman of Committee

(1) Mr. Berman will retire upon the adjournment of the 2013 Annual Meeting, and Mr. Edelman will be appointed to serve on the Audit Committee.

Audit Committee

Our Board has determined that our Audit Committee is comprised entirely of independent directors, as defined by the listing standards of the NYSE MKT stock exchange and applicable SEC rules. In addition, our Board has determined that Mr. Spears is an “audit committee financial expert,” as defined under the applicable rules of the SEC. Each member of our Audit Committee possesses the financial qualifications required of Audit Committee members set forth in the rules and regulations of the NYSE MKT stock exchange and under the Securities Exchange Act of 1934, as amended.

Board’s Role in Risk Oversight

Our Board retains primary responsibility for risk oversight. To assist the Board in carrying out its oversight responsibilities, members of our senior management report to the Board and its committees on areas of risk, and our Board committees consider specific areas of risk inherent in their respective areas of oversight and report to the full Board regarding their activities. For example, our Audit Committee periodically discusses with management our major financial risk exposures and the steps management has taken to monitor and control such exposures. Our Compensation Committee considers employee-related risks as it evaluates the performance of our executive officers and determines our executive compensation. Our Governance/Nominating Committee focuses on issues relating to Board composition and corporate governance matters. In addition, to ensure that our Board has a broad view of our overall risk management process, the Board periodically reviews our long-term strategic plans and the principal issues and risks that we may face, as well as the processes through which we manage risk.

Shareholder Communications with the Board of Directors

Shareholders may communicate directly with the Board. All communications should be directed to our Secretary at the address below and should prominently indicate on the outside of the envelope that it is intended for the Board or for non-management directors, and our Secretary will forward the communications to all specified directors. If no director is specified, the communication will be forwarded to the entire Board. Shareholder communications to the Board should be sent to:

Emerald Oil, Inc. Board of Directors
Attention: Secretary
1600 Broadway, Suite 1360
Denver, Colorado 80202

There have been no material changes to the procedures by which shareholders may recommend director nominees to the our Board since our 2012 Annual Meeting of Shareholders.

Item 11. Executive Compensation

Introduction

Our compensation programs are generally, designed, structured and administered under the oversight of our Compensation Committee and subject to the approval of our Board of Directors. On July 26, 2012, we completed the Emerald Acquisition. In connection with the Emerald Acquisition, Joseph Lahti, Myrna McLeroy, Loren J. O’Toole II, Josh Sherman and Mitchell R. Thompson resigned as directors, and Duke R. Ligon, Seth Setrakian, Daniel L. Spears, Mike Krzus and McAndrew Rudisill, each of whom were previously employed by Emerald Oil, Inc. or previously served on the board of directors of Emerald Oil, Inc., were appointed to our Board of Directors. Following the Emerald Acquisition, our Compensation Committee consisted of Messrs. Setrakian (Chairman), Ligon and Spears.

Also in connection with the Emerald Acquisition, our Board of Directors appointed the Mike Krzus as Chief Executive Officer, McAndrew Rudisill as President, Paul Wiesner as Chief Financial Officer, and Karl Osterbuhr as Vice President of Exploration and Business Development, each of whom were former officers of Emerald Oil, Inc. In addition, our Board appointed J.R. Reger, our former Chief Executive Officer, and Mitchell R. Thompson, our former Chief Financial Officer, as our Executive Chairman and Chief Accounting Officer, respectively. Following the Emerald Acquisition, we changed our name from Voyager Oil & Gas, Inc. to Emerald Oil, Inc., and we shifted from our previous business model that focused on participating in non-operated wells developed by other operators to our current operated program over which we have control of the timing of well development and design of our wells. Going forward, we plan to participate in significantly fewer non-operated wells and grow reserves through our operated well development program.

As a result of the changes in the composition of our Board of Directors, Compensation Committee and senior management and our change in business model following the Emerald Acquisition, our compensation programs changed substantially, and the following discussion reflects those changes.

For the purposes of our discussion, our named executive officers for 2012 are as follows:

Name		Title
Mike Krzus		Chief Executive Officer (our principal executive officer)
James Russell (J.R.) Reger		Executive Chairman
McAndrew Rudisill		President
Paul Wiesner		Chief Financial Officer (our principal financial officer)
Mitchell R. Thompson		Chief Accounting Officer

Compensation Objectives and Philosophy

Our future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate the most qualified individuals in the oil and natural gas industry. We design our compensation programs to reward performance and to attract, retain and motivate employees at all levels. Our goal is to establish pay levels for our named executive officers that are competitive with comparable positions in our industry and in the regions in which we operate, while maintaining an atmosphere of teamwork, recognizing overall business results and individual achievement, and attaining our strategic objectives by tying the interest of our executive officers and employees with our shareholders through the use of equity-based compensation.

Our overall compensation philosophy is that rewards to executives should reflect and reinforce our company-wide focus on financial management and bottom-line performance. We believe this approach increases the likelihood that we will experience sustained profitability and generate greater shareholder value over time. In 2012, we compensated our named executive officers primarily in the form of a base salary and the grant of equity awards in the form of both restricted stock awards and stock options, which we believed aligned the interests of our executive management with our shareholders as a whole.

We intend for the amount of compensation paid to each executive officer to reflect the officer’s experience and individual performance, as well as our overall performance, all measured in the context of the oil and natural gas industry and locations in which we operate. Our objectives are to attract, retain and motivate executives of outstanding ability. In order to motivate each executive officer to achieve his potential, certain components of our total compensation package are dependent on corporate and individual performance and are therefore at risk. Generally, as an executive officer’s responsibility and ability to impact our financial performance increases, the individual’s performance-based compensation increases as a portion of his total compensation. Ultimately, executive officers with greater roles and responsibilities associated with achieving our performance targets should bear a greater proportion of the risk if those goals are not achieved and should receive a greater proportion of the reward if the goals are met or surpassed.

Our Board and the Compensation Committee is currently considering the compensation awarded to, earned by, or paid to its executive officers in the future. Specifically, it is considering the following:

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the objectives of our compensation programs;

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various elements that our compensation program is designed to reward;

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each element of compensation;

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the reasons each element is considered important;

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the methods for determining the amounts (and, where applicable, the formula) for each element to pay; and

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how each compensation element fit into our overall compensation objectives and affect decisions regarding other elements.

Compensation Committee

Our Compensation Committee oversees the design and administration of our executive compensation program according to the processes and procedures discussed in this Annual Report. To implement our compensation objectives and philosophy, our Board and Compensation Committee:

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consider individual performance, competence and leadership when setting base compensation, as well as Company-specific financial and business improvement goals to promote a cohesive, performance-focused culture among our executive team;

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compare our compensation programs with the executive compensation policies, practices and levels at comparable companies in our industry selected for comparison by our Compensation Committee, based upon size, complexity and growth profile; and

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structure compensation among the executive officers so that our named executive officers, with their greater responsibilities for achieving performance and strategic objectives, bear a greater proportion of the risk and rewards associated with achieving those goals.

Setting Executive Compensation

The Compensation Committee selects the elements of executive compensation and determines the level of each element, the mix among the elements and total compensation based upon the objectives and philosophies set forth above, and by considering a number of factors, including:

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each executive officer’s position and the level of responsibility;

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the skills and experiences required by an executive officer’s position;

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the executive officer’s experience and qualifications;

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the competitive environment for comparable executive officer talent having similar experience, skills and responsibilities;

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our performance compared to specific objectives;

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individual performance measures;

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the executive officer’s current and historical compensation levels;

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the executive officer’s length of service;

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compensation equity and consistency across all executive positions; and

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the stock ownership of each executive officer.

As a means of assessing the competitive market for executive talent, we review competitive compensation data gathered in comparative third-party surveys that we believe to be relevant, considering our size and industry. For 2012, our Compensation Committee did not engage an independent compensation consultant, but may in the future.

Employment Agreements, Termination and Change of Control

As part of the Emerald Acquisition, entered into employment agreements with our named executive officers, J.R. Reger (Executive Chairman), Mike Krzus (Chief Executive Officer), McAndrew Rudisill (President), Paul Wiesner (Chief Financial Officer) and Mitchell R. Thompson (Chief Accounting Officer). We also entered into an employment agreement with Karl Osterbuhr (Vice President of Exploration and Business Development). Each agreement terminates on December 31, 2014 with automatic annual extensions unless we or the officer elects not to extend the agreement by providing at least 60 days prior written notice to the other party that the term will not be extended.

Each agreement provided for a base salary, initial stock awards under the 2011 Plan consisting of options and restricted stock units, 25% of which vested upon execution of the employment agreements and 75% of which vests in equal annual increments over three years, and an annual short-term incentive award, which will range from up to 100% to 200% of the officer’s base salary and the performance criteria as set by the Compensation Committee (the “STI Award”). For 2012, Messrs. Reger, Krzus and Rudisill received a base salary of $290,000 per year, an initial equity award consisting of options to acquire 89,286 shares of common stock and 29,762 restricted stock units and an STI Award of up to 200% of base salary, entitlement to standing execution goals, and exposure to the Compensation Committee’s annual discretionary bonus allocation; Mr. Wiesner received a base salary of $275,000 per year, an initial equity award consisting of options to acquire 44,643 shares of common stock and 14,881 restricted stock units, and an STI Award of up to 100% of base salary, entitlement to standing execution goals, and exposure to the Compensation Committee’s annual discretionary bonus allocation; and Mr. Thompson received a base salary of $225,000 per year, an initial stock award consisting of options to acquire 71,429 shares of common stock and 23,810 restricted stock units and an STI Award of up to 125% of base salary, entitlement to standing execution goals, and exposure to the Compensation Committee’s annual discretionary bonus allocation. In addition, Messrs. Krzus and Rudisill are entitled to reasonable relocation expenses, including a housing allowance of $7,500 per month through December 2014. The employment agreements limited equity-related grants made the officers for 12 months following the closing of the Emerald Acquisition to the initial equity awards, and our Board authorized an amendment to the employment agreements in October 2012 to remove this limitation, as the Board did not want to limit its flexibility to grant additional equity awards.

Each of these officer employment agreements provides for severance and change-in-control payments in the event we terminate an officer’s employment “without cause” or if the officer terminates for “good reason.” A change of control is deemed to occur when individuals constituting the Board at the beginning of any two-year period cease to constitute a majority thereof, or if the voting securities outstanding immediately prior to a merger, consolidation or reorganization cease to represent at least 50% of the combined voting power of the outstanding securities immediately after such merger, consolidation or reorganization. If we terminate an officer without cause or the officer resigns for good reason, if the agreement is not extended at the end of each term without cause or for good reason, or if we terminate an officer without cause or the officer resigns for good reason within 12 months of a change of control, then that officer will receive all accrued but unpaid base salary, any unpaid STI Award in respect of any completed fiscal year ending prior to the date of such termination or resignation, a lump-sum cash payment equal to two times the target STI Award for the fiscal year in which the termination or resignation occurs, a lump-sum payment equal to two years of the officer’s base salary, partial payment of the officer’s health coverage, if continued, and immediate vesting of all equity or equity-related awards previously awarded to the officer. Upon termination by us without cause or by an officer for good reason, the officer will receive all amounts payable on the 60^th day following the date of the officer’s termination of employment. If we terminate an officer for cause or if an officer resigns without good reason, the officer will only be entitled to obligations that have accrued under his employment agreement, and any unvested equity awards will be cancelled, and the officer will not have any further rights under the employment agreements, including any STI Award that has not been paid as of the date of termination.

Each agreement provides that in the event we terminate an officer’s employment “without cause,” as a result or a change in control or as a result of non-extension by us, or if the officer terminates his employment for “good reason”, the officer agrees that, for a period ending one year from the date of his termination of employment, the officer will not (i) engage in certain activities described in the employment agreements that are deemed competitive with our business in any county in the United States where we hold mineral lease interests, (ii) encourage any person to leave our employ, hire or engage as a consultant any person who is or was our employee or consultant until six months after such individual’s employment or consulting relationship with us has been terminated, or (iii) encourage certain persons to cease doing business with us or interfere with certain of our business relationships.

The following table shows the potential payments to our named executive officers in the event of their termination of employment as of December 31, 2012 and using the closing price of our common stock on December 31, 2012 to value the early vesting of equity-related awards. The table below assumes that we have paid in full the named executive officer’s base salary and STI Awards. Because the price of our common stock is subject to fluctuation, we cannot assure you that these scenarios would produce similar results as those disclosed if a termination occurs in the future.

Name	Severance Payments($)		Early Vesting of Equity or Equity- related Awards($)		Other(1)		Total($)
Without Cause/For Good Reason/ Non-Extension/Change of Control
Mike Krzus		1,740,000		1,659,655		—		3,399,655
Paul Wiesner		1,100,000		1,169,809		—		2,269,809
James Russell (J.R.) Reger		1,740,000		1,659,655		—		3,399,655
McAndrew Rudisill		1,740,000		1,659,655		—		3,399,655
Mitchell R. Thompson		1,012,500		645,673		—		1,658,173

(1) Upon termination, if the executive officer elects to continue to participate in any group medical, dental, vision and /or prescription drug plan benefits to which the executive officer and /or his eligible dependents would be entitled under Section 4980B of the Code (COBRA), we will pay the excess of (i) the COBRA cost of such coverage over (ii) the amount the executive officer would have had to pay for such coverage if the executive officer had remained employed with us during the period the executive officer is entitled to coverage under COBRA. As a result of the various considerations involved in calculating the excess amount, we are unable to provide an accurate estimate of such costs, but do not believe such costs would be material.

Executive Compensation Components for Fiscal Year 2012

The principal elements of our executive officer compensation program for fiscal year 2012 were:

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base salary;

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incentive awards paid with both restricted stock units and/or cash at the discretion of the Compensation Committee, based upon short-term incentive (“STI”) awards, standing execution achievement (“SEA”) awards, and discretionary awards; and

●

limited perquisites and other benefits generally made available to our employees.

In allocating compensation across these elements, the Compensation Committee followed the general compensation objectives and philosophies outlined above to place a substantial percentage of an executive officer’s compensation at risk, subject to achievement of specific performance objectives and long-term equity value creation. In addition, the Compensation Committee generally placed a greater proportion of total compensation at risk for our named executive officers, based on their greater responsibility for, and ability to influence, overall company performance.

Awards were allocated based upon both long- and short-term goals and with a preference for equity incentives when available under the 2011 Equity Incentive Plan. STI awards were based upon three to five corporate goals which the Compensation Committee believed would benefit our shareholders. STI awards are only available to those officer’s with employment agreements that specifically call for STI awards. In 2012, the Compensation Committee determined that because of the growth trajectory of the company, STI awards would be based upon the achievement of semi-annual corporate goals in 2012 and through the first half of 2013. SEA goals are based upon defined quarterly achievement hurdles that provide a pool of compensation that management can allocate to incentivize all executives and employees to achieve specific quarterly operational and financial objectives. Discretionary awards may be granted at the discretion of the Compensation Committee with Board approval and are focused on the long-term alignment of executives with shareholders.

STI awards, standing execution goal awards and annual discretionary awards may be paid in restricted stock units or cash depending upon availability under the 2011 Equity Incentive Plan. In the event shares are not available for grant under the 2011 Equity Incentive Plan, cash will be used.

Base Salary

Base salary provides executives with a fixed, regular, non-contingent earnings stream. As a component of total compensation, our Compensation Committee has set base salaries at a level that it believes attract and retain an experienced management team in our market that would us to grow and create shareholder value, while making base salary a smaller component of overall compensation than is provided in the form of equity incentive awards.

In connection with the Emerald Acquisition, we entered into new employment agreements with each of our named executive officers. The employment agreements established initial base salaries of $290,000 for each of Messrs. Krzus, Reger and Rudisill, $275,000 for Mr. Wiesner and $225,000 for Mr. Thompson. We review base salaries for our executive officers annually to determine if a change is appropriate, considering various factors, including comparisons to base salaries paid for comparable roles by other companies in the oil and natural gas industry, individual contributions to the Company and base salaries paid within our Company. For 2013, we increased the base salaries of certain of the named executive officers based upon performance in 2012. Information regarding the increases in base salaries of the named executive officers is discussed below under “—Compensation for 2013.”

Incentive Awards

We believe that a high level of quality long term performance is achieved through an ownership culture that encourages performance by our executive officers through the use of stock and stock based awards. The 2011 Plan was established to provide our employees, including our named executive officers, with incentives to help align their interests with the interests of shareholders. We have historically elected to use stock options and restricted stock grants as the primary equity incentive vehicles. We believe stock options and restricted stock grants provide incentives for our named executive officers’ performance because the value of the awards is tied directly to our stock price and provides retention incentives with delayed vesting.

In March 2012 under the terms of his employment agreement in effect prior to the Emerald Acquisition, Mr. Reger received 9,524 shares of common stock, 21,429 restricted stock units vesting monthly over a 12-month period and 26,190 restricted stock units vesting quarterly over a 36-month period, of which 11,904 restricted stock units vested prior to the Emerald Acquisition. Also in March 2012 under the terms of his prior employment agreement, Mr. Thompson received 4,761 shares of common stock, 10,716 restricted stock units vesting monthly over a 12-month period and 13,095 restricted stock units vesting quarterly over a 36-month period, of which 5,953 restricted stock units vested prior to the Emerald Acquisition. Messrs. Reger and Thompson forfeited their remaining 35,715 and 17,858 unvested restricted stock units, respectively, upon completion of the Emerald Acquisition and entering into new employment agreements.

Following the Emerald Acquisition, our named executive officers were subject to the terms of their respective employment agreements, which provided for an initial equity grant to each of our named executive officers. Upon closing of the Emerald Acquisition, Messrs. Krzus, Reger and Rudisill each received 29,762 restricted stock units and options to purchase 89,286 shares of common stock; Mr. Wiesner received 14,881 restricted stock units and options to purchase 44,643 shares of common stock, and Mr. Thompson received 23,810 restricted stock units and options to purchase 71,429 shares of common stock, of which 25% vested upon grant and the remaining vest in equal installments over three years from the date of grant.

Each of the named executive officer’s employment agreements also provide for STI awards ranging from 100% to 200% of base salary, entitlement to SEA awards based on defined quarterly achievement hurdles, and exposure to the Compensation Committee’s discretionary bonus allocation.

For 2012, the Compensation Committee set forth the following STI goals:

●

aggressively expanding our core operated Williston Basin acreage position;

●

transitioning to an operated business model while maintaining a balanced non-operated acreage portfolio;

●

rapidly developing undrilled leasehold acreage to generate reserves, production and cash flow; and

●

maintaining a strong liquidity position and conservative balance sheet.

Our Compensation Committee established SEA goals to be divided among all executive and employee team members at the discretion of our executive officers who manage their respective team members. For 2012, the Compensation Committee established the following SEA goals:

●

$75,000 for each successfully drilled well that is operated by us and generates similar or superior well results to surrounding wells, based upon 30-day initial production rates;

●

$90,000 for converting non-operated acreage into 1280-acre drilling spacing units in which we are designated as the operator and have at least a 35% working interest;

●

1.5% of the total transaction value for the completion of acquisitions of acreage and production in the Williston Basin upon demonstrating to the Compensation Committee that the transaction is value accretive;

●

0.75% of the gross amount of completed equity raises upon demonstrating to the Compensation Committee the value added as a result of the equity raise; and

●

0.25% of the gross amount of debt refinancings or the issuance of debt securities upon demonstrating to the Compensation Committee the requirement of the debt refinance or debt issuance and the competitiveness of the debt transaction in relation to our size and the capital market conditions.

Based upon the achievement of the parameters established by the Compensation Committee for making STI awards, standing SEA awards, and discretionary awards, our named executive officers received the following equity awards in November 2012: each of Messrs. Krzus, Reger and Rudisill—441,661 restricted stock units and $103,019 in cash; Mr. Wiesner—318,127 restricted stock units and $74,213 in cash; and Mr. Thompson—158,045 restricted stock units and $36,869 in cash. One-third of the restricted stock unit grants vested upon grant and the remaining two-thirds of the restricted stock unit grants vest in equal annual installments over two on the anniversary date of the grants.

In the future, our Compensation Committee and Board may grant equity incentive awards on a semi-annual or annual basis and from time to time may make one-time grants to recognize promotion or consistent long-term contribution, or for specific incentive purposes. We may also make grants in connection with the hiring of new executive officers and employees. The Compensation Committee will have the authority to administer any equity incentive plan under which we make equity or equity-based awards, including the 2011 Plan.

Although we do not have any stock retention or ownership guidelines, our Board and Compensation Committee intend to encourage our executives to continue to have a financial stake in the Company in order to align the interests of our shareholders and management. We will continue to evaluate whether to implement a stock ownership policy for our officers and directors.

Perquisites and Other Benefits

In addition to the compensation discussed above, our named executive officers are eligible for the same healthcare and other benefits that are available to all our employees generally. We offered limited perquisites to our named executive officers. We provided each of Messrs. Krzus, Reger, Rudisill and Thompson with an allowance for the use of an automobile. In addition, we provided for a housing allowance and moving expenses for Messrs. Krzus and Rudisill for relocating to Denver, Colorado from their respective areas of residence.

Compensation for 2013

Subsequent to December 31, 2012, as part of the analysis of executive compensation that is undertaken annually by our Compensation Committee, we approved increases in the base salaries of our named executive officers. For 2013, the base salary of Messrs. Krzus, Reger and Rudisill was increased from $290,000 to $350,000, the base salary of Mr. Wiesner was increased from $275,000 to $305,000, and the base salary of Mr. Thompson was increased from $225,000 to $235,000. These changes in base salary were made to move closer in line to peer comparable executive salaries and to reflect the better capitalization and cash flows of the Company.

Compensation Committee Interlocks and Insider Participation

Following the Emerald Acquisition on July 26, 2012, the Compensation Committee consisted of Duke R. Ligon, Seth Setrakian and Daniel L. Spears. Prior to the Emerald Acquisition the Compensation Committee consisted of Joseph Lahti, Myrna McLeroy, Josh Sherman and Loren J. O’Toole II. None of our Compensation Committee members was ever an officer of the Company or had any related party transaction relationship with us of a type that is required to be disclosed under Item 404 of Regulation S-K. None of our executive officers has served as a member of the compensation or similar committee or board of directors of any entity that has one or more executive officers who served on our Compensation Committee during fiscal year 2012.

Our non-employee directors receive equity awards, which may be in the form of stock option grants, shares of restricted stock or restricted stock units, as compensation for their services as directors, as well as cash compensation for their services as directors. All of our directors are reimbursed for their reasonable expenses in attending Board and committee meetings.

Compensation Risk Assessment

The Compensation Committee conducted a risk assessment of our employee compensation programs, including our executive compensation programs, and concluded that our employee compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and do not incentivize executives or other employees to take unnecessary or excessive risks. As a result, we believe that risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on us. Despite this belief, our Compensation Committee has resolved to periodically review our compensation programs and make any necessary adjustments to the program and its incentives to account for changes in our risk profile.

Stock Ownership/Retention Guidelines and Other Policies

We do not have any stock ownership guidelines or a stock retention policy. We have adopted an Insider Trading Policy that applies to all of our officers and employees and all members of the Board. The Insider Trading Policy prohibits short sales of our common stock and the trading of our securities on a short-term basis, and requires that any of our common stock purchased in the open market be held for a minimum of six months. This policy also states that employees should not “margin” our common stock or enter into hedging transactions with respect to our common stock.

Consideration of 2011 Say-On-PayShareholder Vote

In 2011, we held our first shareholder advisory vote on the compensation paid to our named executive officers in 2010, which resulted in an excess of 95% of votes cast approving such compensation. As recommended by our Board, shareholders expressed their preference for a three year advisory vote on executive compensation, and we have implemented that recommendation. The next shareholder advisory vote on compensation paid to our named executive officers will be held at the 2014 Annual Meeting of Shareholders. The next shareholder advisory vote on the frequency of shareholder advisory votes on compensation will be held at the 2017 Annual Meeting of Shareholders. The Compensation Committee considered many factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Compensation Committee’s assessment of the interaction of our compensation programs with our corporate business objectives and review of data of certain companies the Compensation Committee deemed to be in our peer group, each of which is evaluated in the context of the Compensation Committee’s duty to act as the directors determine to be in the best interests of our shareholders. While each of these factors bore on the Compensation Committee’s decisions regarding the named executive officer’s compensation, the Compensation Committee did not make any material changes to our executive compensation program and policies as a result of the 2011 “say on pay” advisory vote. Following the Emerald Acquisition and the shift in our business plan from a non-operated program to transitioning to an operator, our compensation policies have changed, as the responsibilities of our officers and other personnel have significantly increased. We review our compensation programs and philosophy on an annual basis and will consider various factors in determining overall compensation, including the next shareholder advisory vote.

Conclusion

The Board concluded that the base salary and equity incentives for each of the named executive officers, as well as the total compensation received by those named executive officers, in fiscal year 2012 were reasonable and appropriate in light of our goals and competitive requirements. The amounts were in our best interests and our shareholders’ best interest because they enabled us to attract, retain, motivate and fairly reward talent and furthered the philosophies of ensuring the accomplishment of our financial objectives and aligning the interests of management with those of long-term shareholders.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the annual report on Form 10-K.

Seth Setrakian, Chair

Duke R. Ligon

Daniel L. Spears

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides information regarding the compensation earned during the years ended December 31, 2012, 2011 and 2010 by our named executive officers.

	Year		Salary($)			Bonus($)			Stock Awards ($)(1)			Options Awards ($)(1)			All Other Compensation ($)(2)		Total($)
Michael Krzus		2012		120,833	(3)		103,019			2,017,443	(4)		456,740	(5)		90,260		2,788,295
Chief Executive Officer		2011		—			—			—			—			—		—
		2010		—			—			—			—			—		—

Paul Wiesner		2012		114,583	(6)		74,213			1,401,900	(7)		228,370	(8)		7,461		1,826,527
Chief Financial Officer		2011		—			—			—			—			—		—
		2010		—			—			—			—			—		—

James Russell (J.R.) Reger		2012		120,833	(3)		253,019	(9)		2,467,431	(10)		456,740	(5)		16,405		3,314,428
Executive Chairman(11)		2011		—			—			—			—			28,236		28,236
		2010		—			—			—			—			—		—

McAndrew Rudisill		2012		120,833	(3)		103,019			2,017,443	(4)		456,740	(5)		60,260		2,758,295
President		2011		—			—			—			—			—		—
		2010		—			—			—			—			—		—

Mitchell R. Thompson		2012		140,417	(12)		186,869	(9)		1,050,166	(13)		365,391	(14)		18,759		1,761,601
Chief Accounting Officer(11)		2011		70,000			—			—			—			23,642		93,642
		2010		70,000			5,833			—			—			—		75,833

(1) The grant date fair value of each of the restricted stock and restricted stock unit awards was based on the closing price of our common stock on the date of the grant. We used the Black-Scholes option valuation model to calculate the value of the stock options, based upon an exercise price equal to the closing price of our common stock on the date of grant, utilizing the provisions of FASB ASC Topic 718. See Note 6 to our financial statements for the fiscal year ended December 31, 2012 included in our Annual Report on Form 10-K for fiscal year 2012 for additional discussion of our valuation of stock options.

(2) The following items are reported in the “All Other Compensation column for the year ended December 31, 2012:

Name	Insurance Benefits($)		Automobile Allowance($)		Moving Expenses($)		Taxes Paid (share vesting gross-up)($)		Total($)
Mike Krzus		7,461		5,299		77,500		—		90,260
Paul Wiesner		7,461		—		—		—		7,461
J.R. Reger		2,412		4,485		—		9,508		16,405
McAndrew Rudisill		7,461		5,299		47,500		—		60,260
Mitchell R. Thompson		7,461		4,944		—		6,354		18,759

(3) Messrs. Krzus, Reger and Rudisill received an annual base salary of $290,000 beginning July 26, 2012 upon completion of the Emerald Acquisition. Mr. Reger did not receive salary compensation prior to July 26, 2012, and Messrs. Krzus and Rudisill were not employed by us prior to July 26, 2012.

(4) Upon completion of the Emerald Acquisition and in connection with entering into employment agreements, Messrs. Krzus and Rudisill each received 7,440 shares of common stock and 22,321 restricted stock units. The restricted stock units vest annually in equal increments over three years. In November 2012, Messrs. Krzus and Rudisill received 147,204 shares of common stock and 294,407 restricted stock units related to achievement of short-term incentives under their respective employment agreements. The restricted stock units vest annually in equal increments over two years.

(5) Upon completion of the Emerald Acquisition and in connection with entering into employment agreements, Messrs. Krzus, Reger and Rudisill each received stock options to purchase 89,286 shares of common stock, of which 22,321 stock options vested immediately, and the remaining 66,965 stock options vest equally on an annual basis over three years on the anniversary of the grant.

(6) Mr. Wiesner received an annual base salary of $275,000 beginning July 26, 2012 upon the completion of the Emerald Acquisition. Mr. Wiesner was not employed by us prior to July 26, 2012.

(7) Upon completion of the Emerald Acquisition and under the terms of his new employment agreement, Mr. Wiesner was granted 3,720 shares of common stock and 11,161 restricted stock units under the terms. The restricted stock units vest annually in equal increments over three years. In November 2012, Mr. Wiesner received 106,042 shares of common stock and 212,085 restricted stock units related to achievement of short-term incentives under his employment agreement. The restricted stock units vest annually in equal increments over two years.

(8) Upon completion of the Emerald Acquisition and in connection with entering into his employment agreement, Mr. Wiesner received stock options to purchase 44,643 shares of common stock under the terms of his new employment agreement, of which 11,161 stock options vested immediately upon grant and the remaining 33,482 stock options vest equally on an annual basis over three years on the anniversary of the grant.

(9) Messrs. Reger and Thompson received a mid-year bonus payment of $150,000 each prior to the Emerald Acquisition.

(10) In March 2012, Mr. Reger received 9,524 shares of common stock as compensation under his prior employment agreement. Mr. Reger also received 21,429 restricted stock units vesting monthly over a 12-month period and 26,190 restricted stock units vesting quarterly over a 36-month period, of which 11,904 restricted stock units vested prior to the Emerald Acquisition. Mr. Reger forfeited the remaining 35,715 unvested restricted stock units upon completion of the Emerald Acquisition and entering into a new employment agreement. Upon completion of the Emerald Acquisition, Mr. Reger received 7,440 shares of common stock and 22,321 restricted stock units under his new employment agreement. The restricted stock units vest annually in equal increments over three years. In November 2012, Mr. Reger was granted 147,204 shares of common stock and 294,407 restricted stock units related to achievement of short-term incentives under his employment agreement. The restricted stock units vest annually in equal increments over two years.

(11) Prior to the completion of the Emerald Acquisition, Mr. Reger served as our Chief Executive Officer and Mr. Thompson served as our Chief Financial Officer.

(12) Following the completion of the Emerald Acquisition, Mr. Thompson began receiving an annual base salary of $225,000 beginning July 26, 2012. Prior to July 26, 2012, Mr. Thompson’s annual base salary was $80,000.

(13) In March 2012, Mr. Thompson received 4,761 shares of common stock as compensation under the terms of his prior employment agreement. Mr. Thompson also received 10,716 restricted stock units vesting monthly over a 12-month period and 13,095 restricted stock units vesting quarterly over a 36-month period, of which 5,953 restricted stock units vested prior to the Emerald Acquisition. Mr. Thompson forfeited the remaining 17,858 unvested restricted stock units in connection with the completion of the Emerald Acquisition and entering into a new employment agreement. Upon the completion of the Emerald Acquisition, Mr. Thompson received 5,952 shares of common stock and 17,857 restricted stock units under the terms of his new employment agreement. The restricted stock units vest annually in equal increments over three years. In November 2012, Mr. Thompson received 52,682 shares of common stock and 105,363 restricted stock units related to the achievement of short-term incentives under his employment agreement. The restricted stock units vest annually in equal increments over two years.

(14) In July 2012, Mr. Thompson received stock options to purchase 71,429 shares of common stock under his new employment agreement, of which 17,857 stock options vested immediately and the remaining 53,572 stock options vest annually in equal increments over three years.

Grants of Plan-Based Awards

The following table provides information regarding plan-based awards granted in the year ended December 31, 2012 to our named executive officers.

Name	Grant Date	All Other Stock Awards: Number of Restricted Shares/Units (#)		All Other Option Awards: Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($)(1)
Mike Krzus	Jul 26		29,762						233,334
	Jul 26				89,286		7.84		456,740
	Nov 15		441,611						1,784,108

Paul Wiesner	Jul 26		14,881						116,667
	Jul 26				44,643		7.84		228,370
	Nov 15		318,127						1,285,233

James Russell (J.R.) Reger	Mar 15		21,428						449,988
	Jul 26		29,762						233,334
	Jul 26				89,286		7.84		456,740
	Nov 15		441,611						1,784,108

McAndrew Rudisill	Jul 26		29,762						233,334
	Jul 26				89,286		7.84		456,740
	Nov 15		441,611						1,784,108

Mitchell R. Thompson	Mar 15		10,714						224,994
	Jul 26		23,810						186,670
	Jul 26				71,429		7.84		365,391
	Nov 15		158,045						638,502

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the number of securities underlying outstanding plan awards for each named executive officer as of December 31, 2012.

	Option Awards							Share Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)(2)
Mike Krzus		22,321		66,965		7.84	7/26/2022
									22,321	(3)		116,962
									294,407	(4)		1,542,693

Paul Wiesner		11,161		33,482		7.84	7/26/2022
									11,161	(3)		58,484
									212,085	(4)		1,111,325

James Russell (J.R.) Reger		186,077		—		6.86	12/1/2019
		22,321		66,965		7.84	7/26/2022
									22,321	(3)		116,962
									294,407	(4)		1,542,693

McAndrew Rudisill		22,321				7.84	7/26/2022
									22,321	(3)		116,962
									294,407	(4)		1,542,693

Mitchell R. Thompson		37,216		—		6.86	12/1/2019
		17,857		53,572		7.84	7/26/2022
									17,857	(3)		93,571
									105,363	(4)		552,102

(1) Represents unvested stock options that vest in three equal installments on July 26, 2013, 2014 and 2015.

(2) Calculated based upon the closing market price of our common stock as of December 31, 2012, the last trading day of our 2012 fiscal year ($5.24) multiplied by the number of unvested awards at year end.

(3) Represents unvested restricted stock units that vest in three equal installments on July 26, 2013, 2014 and 2015.

(4) Represents unvested restricted stock units that vest in two equal installments on November 15, 2013 and 2014.

Option Exercises and Stock Vested

The following table summarizes option exercises and the vesting of restricted stock and restricted stock units for our named executive officers in 2012.

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)(1)
Mike Krzus		—		—		154,644		653,034
Paul Wiesner		—		—		109,762		457,574
James Russell (J.R.) Reger		—		—		176,072		1,005,362
McAndrew Rudisill		—		—		154,644		653,034
Mitchell R. Thompson		—		—		69,348		435,650

(1) The value realized equals the fair market value of our common stock on the date of vesting, multiplied by the number of shares vested.

DIRECTOR COMPENSATION

Non-Employee Director Compensation

In connection with the closing of the Emerald Acquisition on July 26, 2012, Joseph Lahti, Myrna McLeroy, Loren J. O’Toole, Josh Sherman and Mitchell Thompson resigned from our Board, and Mike Krzus, Duke R. Ligon, McAndrew Rudisill, Seth Setrakian and Daniel L. Spears were appointed as directors. Prior to the Emerald Acquisition, our directors did not receive fees or cash compensation for their services, but were entitled to reimbursement for their actual out-of-pocket expenses associated with attending meetings and carrying out their obligations as directors.

Following the completion of the Emerald Acquisition, our Governance/Nominating Committee determined that our non-employee directors would receive an $80,000 annual cash retainer, a $1,500 fee for each Board meeting attended in person, a $1,000 fee for each committee meeting attended in person, a $500 fee for attending a Board or committee meeting telephonically. In addition, our non-employee directors are reimbursed for their actual out-of-pocket expenses associated with attending meetings and carrying out their obligations as directors. During 2012, our non-employee directors received equity-based awards in the form of restricted stock units under our 2011 Plan, and we expect to make an annual equity award under our 2011 Plan to our non-employee directors in the form of restricted stock units for 2013. Directors who are employees of our company receive no compensation for their services as director.

The following table discloses the cash, equity awards and any other compensation earned paid or awarded to each of our non-employee directors who served as a director during 2012.

Name	Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)(2)		Option Awards ($)(3)		Total ($)
Lyle Berman	$	36,400	$	364,594	$	32,123	$	433,117
Duke R. Ligon	$	37,400	$	364,594	$	—	$	401,994
Seth Setrakian	$	35,400	$	364,594	$	—	$	399,994
Daniel L. Spears	$	37,400	$	364,594	$	—	$	401,994
Joseph Lahti(4)	$	—	$	—	$	32,123	$	32,123
Myrna McLeroy(4)	$	—	$	—	$	32,123	$	32,123
Loren J. O’Toole(4)	$	—	$	—	$	32,123	$	32,123
Josh Sherman(4)	$	—	$	—	$	32,123	$	32,123

(1) Includes portion of annual cash fee retainer for the period from the Emerald Acquisition to December 31, 2012 and Board and committee meeting fees for each non-employee director during fiscal 2012 as more fully explained above.

(2) Includes the grant date fair value of restricted stock units granted in 2012 in accordance with the Financials Accounting Standards Board Accounting Standards Codification Topic 718 for stock-based compensation. On November 15, 2012, each non-employee director received 90,246 restricted stock units, 1/3 of which vested on the grant date, 1/3 vest on the first anniversary of the grant date and the remaining 1/3 vest on the second anniversary of the grant date, and had a grant date fair value of $4.04 per share. These amounts do not necessarily correspond to the actual cash value that will be recognized by the directors. As of December 31, 2012, each of Messrs. Berman, Ligon, Setrakian and Spears held 60,164 unvested restricted stock units.

(3) On May 24, 2012, we granted each of our then-serving non-employee directors an option to purchase 3,571 shares of common stock at an exercise price of $13.30 per share, which represented the fair market value of our common stock on the date of grant. In connection with the closing of the Emerald Acquisition, we accelerated the vesting of all non-vested unexercised options held by our non-employee directors, which had an associated expense of $166,790 per director. We used the Black-Scholes option valuation model to calculate stock the value of the options at the date of grant and the value associated with accelerating the non-vested options as of the date of closing the Emerald Acquisition. As of December 31, 2012, Mr. Berman held vested, unexercised stock options to purchase 24,283 shares of common stock at exercise prices ranging from $13.30 to $33.96 per share; Messrs. Lahti, O’Toole and Ms. McLeroy held vested, unexercised stock options to purchase 21,427 shares of common stock at exercise prices ranging from $13.30 to $21.00 per share; and Mr. Sherman held vested, unexercised stock options to purchase 28,570 shares of common stock at exercise prices ranging from $13.30 to $25.90 per share.

(4) On July 26, 2012 in connection with the closing of the Emerald Acquisition, Messrs. Lahti, O’Toole, Sherman and Ms. McLeroy resigned as members of the Board.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Security Ownership of Certain Beneficial Owners

The following table sets forth as of April 19, 2013 certain information regarding beneficial ownership of our common stock by:

•

each person known to us to beneficially own 5% or more of our common stock;

•

each executive officer named in the Summary Compensation Table on page 25, who in this Annual Report are collectively referred to as the “named executive officers”;

•

each of our directors; and

•

all of our executive officers (as that term is defined under the rules and regulations of the Securities and Exchange Commission) and directors as a group.

We have determined beneficial ownership in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Beneficial ownership generally means having sole or shared voting or investment power with respect to securities. Unless otherwise indicated in the footnotes to the table, each shareholder named in the table has sole voting and dispositive power with respect to the shares of common stock set forth opposite the shareholder’s name. We have based our calculation of the percentage of beneficial ownership on 25,899,658 shares of common stock and 5,114,633 shares of Series B Voting Preferred Stock outstanding on April 19, 2013, plus common stock deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act. Each share of Series B Voting Preferred Stock is part of a unit consisting of one share of Series B Voting Preferred Stock and a warrant representing the right to purchase one share of common stock. Unless otherwise noted, the address of each beneficial owner listed on the table is c/o Emerald Oil, Inc., 1600 Broadway, Suite 1360, Denver, Colorado 80202.

Name and Address	Amount and Nature of Beneficial Ownership of Common Stock		Percent of Common Stock(1)			Amount and Nature of Beneficial Ownership of Series B Voting Preferred Stock		Percent of Series B Voting Preferred Stock(1)			Percent of Voting Securities Beneficially Owned
Certain Beneficial Owners:
Edelman & Guill Energy L.P.⁽²⁾		5,114,633		16.5	%		5,114,633		100	%		16.5	%
O-CAP Management, L.P.⁽³⁾		2,043,583		7.9	%		—		—			6.6	%
Emerald Oil & Gas NL⁽⁴⁾		1,662,174		6.4	%		—		—			5.4	%
FMR LLC⁽⁵⁾		1,427,314		5.5	%		—		—			4.6	%
T. Rowe Price Associates, Inc^.(6)		1,375,000		5.3	%		—		—			4.4	%
Executive Officers and Directors:
James Russell (J.R.) Reger⁽⁷⁾		622,191		2.4	%		—		—			2.0	%
Michael Krzus⁽⁸⁾⁽⁹⁾		1,768,124		6.8	%		—		—			5.7	%
McAndrew Rudisill^(8)(10)		1,768,124		6.8	%		—		—			5.7	%
Paul Wiesner⁽¹¹⁾		70,817		*			—		—			*
Mitchell R. Thompson⁽¹²⁾		86,182		*			—		—			*
Lyle Berman^(13)(14)		349,638		1.3	%		—		—			1.1	%
Thomas J. Edelman⁽²⁾		5,114,633		16.5	%		5,114,633		100	%		16.5	%
Duke R. Ligon⁽¹⁴⁾		16,545		*			—		—			*
Seth Setrakian⁽¹⁴⁾		16,545		*			—		—			*
Daniel L. Spears⁽¹⁴⁾		16,545		*			—		—			*
All current directors and executive officers as a group (11 persons)⁽¹⁴⁾		8,256,462		26.3	%		—		—			26.3	%

*Less than one percent.

(1)

Unless otherwise indicated, each shareholder has sole voting and investment power with respect to all shares of common stock indicated as being beneficially owned by such shareholder. Shares of common stock that are not outstanding, but which a designated shareholder has the right to acquire within 60 days, are included in the number of shares beneficially owned by such shareholder and are deemed to be outstanding for purposes of determining the percentage of outstanding shares beneficially owned by such shareholder, but not for purposes of determining the percentage of outstanding shares beneficially owned by any other designated shareholder.

(2)

Includes 4,943,729 units consisting of (i) a warrant to purchase 4,943,729 shares of common stock and (ii) 4,943,729 shares of Series B Voting Preferred Stock held by WDE Emerald Holdings LLC and 170,904 units consisting of (i) a warrant to purchase 170,904 shares of common stock and (ii) 170,904 shares of Series B Voting Preferred Stock held by White Deer Energy FI L.P., which are members of a “group” for purposes of Section 13(d) of the Exchange Act. Such group includes White Deer Energy L.P., White Deer Energy TE L.P., Edelman & Guill Energy L.P., Edelman & Guill Energy Ltd., Thomas J. Edelman and Ben A. Guill. White Deer Energy L.P. and White Deer Energy TE L.P. are the members of WDE Emerald Holdings LLC. By virtue of being members of WDE Emerald Holdings LLC, White Deer Energy L.P. and White Deer Energy TE L.P. may be deemed to possess voting and dispositive power with respect to 4,784,950 shares of common stock underlying the warrant and the 4,784,950 shares of Series B Voting Preferred Stock beneficially owned by WDE Emerald Holdings LLC. Edelman & Guill Energy L.P. is the general partner of White Deer Energy L.P., White Deer Energy TE L.P. and White Deer Energy FI L.P.; Edelman & Guill Energy Ltd. is the general partner of Edelman & Guill Energy L.P.; and Messrs. Edelman and Guill are the directors of Edelman & Guill Energy Ltd. Accordingly, each of Edelman & Guill Energy L.P., Edelman & Guill Energy Ltd., and Messrs. Edelman and Guill may be deemed to control the investment decisions of (i) White Deer Energy L.P. and White Deer Energy TE L.P. and, therefore, WDE Emerald Holdings LLC and (ii) White Deer Energy FI L.P. The members of the aforementioned “group” disclaim beneficial ownership of the shares of common stock underlying the warrants held by WDE Emerald Holdings LLC and White Deer Energy FI L.P. except to the extent of their respective pecuniary interests therein. The business address for each member of the aforementioned “group” is 700 Louisiana, Suite 4770, Houston, TX 77002.

(3)

The number of shares indicated is based on the Schedule 13G filed with the Securities Exchange Commission jointly by O-CAP Management, L.P., O-CAP GP, LLC, O-CAP Advisors, LLC, Michael E. Olshan and Jared S. Sturdivant on January 14, 2013. The 2,043,583 shares of common stock are held by CAP Offshore Master Fund, L.P. and O-CAP Partners, L.P., for each of which O-CAP Management, L.P. serves as the investment manager and O-CAP Advisors, LLC serves as the general partner. CAP GP, LLC serves as the general partner of O-CAP Management, L.P. Michael E. Olshan and Jared S. Sturdivant serve as managing members of both O-CAP Advisors, LLC and O-CAP GP, LLC. 2,043,583 shares are held by a managed account for which O-CAP Management, L.P. acts as sub-advisor and has sole investment discretion and voting authority with respect to such shares. The business address for O-CAP Management, L.P. is 623 Fifth Avenue, Suite 2601, New York, NY 10022.

(4)

The number of shares indicated is based on the Schedule 13D filed with the Securities Exchange Commission by Emerald Oil & Gas NL on April 10, 2013. The business address for Emerald Oil & Gas NL is Suite 2, 12 Parliament Place, West Perth, Western Australia, C3 6005.

(5)

The number of shares indicated is based on the Schedule 13G/A filed with the Securities Exchange Commission by FMR LLC on January 10, 2013. Included in the shares of common stock that are beneficially owned by FMR LLC are (a) 1,363,400 shares beneficially owned by Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC and an investment adviser registered under the Section 203 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), and (b) 63,914 shares beneficially owned by Pyramis Global Advisors Trust Company, an indirect wholly owned subsidiary of FMR LLC and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as a result of its serving as investment manager of institutional accounts owning such shares. FMR LLC has sole voting power with respect to 63,914 shares and sole dispositive power with respect to 1,427,314 shares. The business address for FMR LLC is 82 Devonshire Street, Boston, MA 02109.

(6)

The number of shares indicated is based on the Schedule 13G filed with the Securities Exchange Commission by T. Rowe Price Associates, Inc. on February 13, 2013. T. Rowe Price Associates, Inc. has sole voting power with respect to 132,500 shares and sole dispositive power with respect to 1,375,000 shares. The business address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.

(7)

Includes 170,373 shares of common stock held by South Fork Exploration, LLC, of which Mr. Reger owns 100% the issued membership units, warrants to purchase 186,077 shares of common stock that have vested but have not been exercised, and options to acquire 22,321 shares of common stock. Does not include 316,728 unvested restricted stock units and unvested options to purchase 66,965 shares of common stock.

(8)

Includes 1,662,174 shares held by Emerald Oil & Gas NL, which Messrs. Krzus and Rudisill comprise two of the five members of the board of directors of Emerald Oil & Gas NL. Messrs. Krzus and Rudisill disclaim beneficial ownership of the shares of common stock held by Emerald Oil & Gas NL, except to the extent of their respective pecuniary interests therein.

(9)

Includes options to acquire 22,321 shares of common stock. Does not include 316,728 unvested restricted stock units and unvested options to purchase 66,965 shares of common stock.

(10)

Includes options to acquire 22,321 shares of common stock. Does not include 316,728 unvested restricted stock units and unvested options to purchase 66,965 shares of common stock.

(11)

Includes options to acquire 11,161 shares of common stock. Does not include 223,246 unvested restricted stock units and unvested options to purchase 11,161 shares of common stock.

(12)

Includes warrants and options to acquire 55,073 shares of common stock. Does not include 123,220 unvested restricted stock units and unvested options to purchase 71,429 shares of common stock.

(13)

Includes 266,342 shares held by the Lyle Berman Irrevocable Trust and 28,931 shares held by the Berman Consulting Corp.

(14)

Does not include 60,164 unvested restricted stock units.

Securities Authorized for Issuance Under Equity Compensation Plans

For information with respect to our common shares issuable under our equity compensation plans as of December 31, 2012, see “Equity Compensation Plan Information” in Item 5 of ourannual report on Form 10-K filed on March 18, 2013, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Related Party Transactions

Review and Approval of Transactions

A majority of the disinterested members of the Audit Committee must approve any proposed transaction between us and any officer or director, any shareholder owning in excess of 5% of our common stock, immediate family member of an officer or director, or an entity that is substantially owned or controlled by one of these individuals. The only exceptions to this policy are for transactions that are available to all of our employees in general or involve less than $25,000. If the proposed transaction involves executive or director compensation, it must also be approved by the Compensation Committee. Similarly, in accordance with our Code of Ethics and Business Conduct, if a significant company opportunity is presented to any of our officers or directors, such officer or director must first present the opportunity to the Board for consideration. At each meeting of the Audit Committee, the Audit Committee meets with our management to discuss any proposed related party transactions. If a related party transaction is approved, management will update the Audit Committee with any material changes to the approved transaction at its regularly scheduled meetings.

White Deer Energy Investment

In February 2013, we entered into a securities purchase agreement with WDE Emerald Holdings LLC and White Deer Energy FI L.P., affiliates of White Deer Energy (collectively, “White Deer Energy”). The transactions contemplated by the purchase agreement were consummated on February 19, 2013. At the closing, in exchange for a cash investment of $50 million, we issued to White Deer Energy 500,000 shares of Series A Perpetual Preferred Stock, 5,114,633 shares of Series B Voting Preferred Stock and warrants to purchase an initial aggregate amount of 5,114,633 shares of our common stock at an initial exercise price of $5.77 per share. The Series A Perpetual Preferred Stock, the Series B Voting Preferred Stock and the warrants are referred to herein as the “Securities.” As of April 19, 2013, White Deer Energy has the right under the warrants to acquire, approximately 16.5% of our common stock.

Cumulative dividends on the Series A Perpetual Preferred Stock accrue at an annual rate of 10%. The dividends are payable quarterly in arrears, commencing on March 31, 2013. Prior to April 1, 2015, we have the option, upon obtaining shareholder approval, to pay dividends on the outstanding shares of Series A Perpetual Preferred Stock either (x) in cash or (y) by issuance of (A) additional shares of Series A Perpetual Preferred Stock equal to the accrued and unpaid dividends divided by $100.00, and (B) an additional warrant (a “PIK Warrant”) to purchase shares of common stock equal to the accrued and unpaid dividend amount at an exercise price equal to such volume-weighted average price. However, we may not issue additional shares of Series A Perpetual Preferred Stock or PIK Warrants unless and until we obtain shareholder approval to issue the additional securities.

Pursuant to the purchase agreement, White Deer Energy obtained the right to designate one member of our Board. This right to designate a member of the Board will terminate if no shares of Series A Perpetual Preferred Stock remain outstanding. Upon closing, we increased the size of our Board to consist of eight directors, and Thomas J. Edelman was selected as the initial Series A Perpetual Preferred Stock director. Upon the occurrence of certain events of default under our credit agreement, White Deer Energy will be entitled to elect a number of additional directors that, together with the initial director to be designated by White Deer Energy, would constitute the greatest number of members of our Board that does not exceed 25% of total number of members of our Board to serve as additional members of our Board. At closing, we also entered into an indemnification agreement with each member of our Board, including Mr. Edelman.

Upon a change of control or Liquidation Event, as defined in the purchase agreement, White Deer Energy has the right, but not the obligation, to elect to receive from us, in exchange for all, but not less than all, of the shares of Series A and Series B Preferred Stock and the warrants issued pursuant to the purchase agreement and shares of common stock issued upon exercise thereof that are then held by White Deer Energy,an additional cash payment necessary to achieve a minimum internal rate of return of 25%. The calculation will take into account all cash inflows from and cash outflows to White Deer Energy.

In connection with closing, we also granted White Deer Energy certain registration rights. The registration rights agreement requires us to file a resale registration statement to register the shares of our common stock issuable upon exercise of the warrants held by White Deer Energy if, at any time on or after 90 days from the closing, White Deer Energy makes a written request to us for registration of the securities. Under the registration rights agreement, we are required to use our commercially reasonable efforts to cause such resale registration statement to become effective within 120 days after its filing.

If we fail to file the registration statement when required or the registration statement does not become effective when required, we will be required to pay liquidated damages to White Deer Energy. The amount of liquidated damages will equal 0.25% of the product of the exercise price per share of the common stock underlying the warrants held by White Deer Energy times the number of shares of common stock, or common stock underlying the warrants, held by White Deer Energy per 30-day period for the first 60 days, increasing by an additional 0.25% of such product per 30-day period for each subsequent 60 days, up to a maximum of 1.0% of such product per 30-day period. We will be required to pay any liquidated damages in cash. If, however, the payment of cash will result in a breach of any of our credit facilities or other material indebtedness, then we can pay liquidated damages in additionally issued shares of our common stock.

If White Deer Energy elects to dispose of registrable securities under the resale registration statement in an underwritten offering and reasonably anticipates gross proceeds from such underwritten offering would be at least $20 million, we will be required to take all such reasonable actions as are requested by the managing underwriters to expedite and facilitate the registration and disposition of the securities in the offering. In addition, if we propose to register certain offerings of securities under the Securities Act of 1933, then White Deer Energy will have “piggy-back” rights, subject to quantity limitations determined by underwriters if the offering involves an underwriting, to request that we register their registrable securities.

We generally will bear the registration expenses incurred in connection with registrations. We have agreed to indemnify White Deer Energy against certain liabilities in connection with any registration effected under the registration rights agreement.

Director Independence

Our Board has determined that all of our non-employee directors, Duke R. Ligon, Seth Setrakian and Daniel L. Spears, are independent directors, as defined by the listing standards of the NYSE MKT stock exchange. Our Board has also determined that Thomas J. Edelman, the designee of the Series A Perpetual Preferred Stock, is an independent director, as defined by the listing standards of the NYSE MKT stock exchange. Our employee directors are Mike Krzus (Chief Executive Officer), McAndrew Rudisill (President) and J.R. Reger (Executive Chairman).

Our Board has also determined that our Audit Committee, our Governance/Nominating Committee and our Compensation Committee are each comprised entirely of independent directors, as defined by the listing standards of the NYSE MKT stock exchange.

Item 14. Principal Accountant Fees and Services

Our Audit Committee has engaged the firm of BDO USA, LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2013. BDO USA, LLP also served as our independent registered public accounting firm for the fiscal year ending December 31, 2012.

Audit Fees

The following table presents fees for professional services provided by BDO USA, LLP to us for the audit of our annual financial statements, the review of our interim financial statements, and other services for the fiscal years ended December 31, 2012 and December 31, 2011.

Category	Fiscal Year		Fees
Audit Fees⁽¹⁾		2012	$	323,320
		2011	$	171,000

Audit-Related Fees⁽²⁾		2012	$	15,610
		2011	$	—

Tax Fees⁽³⁾		2012	$	—
		2011	$	2,000

All Other Fees⁽⁴⁾		2012	$	1,510
		2011	$	15,720

(1)

Audit fees represent fees billed for professional services provided for the audit of our annual financial statements and review of our quarterly financial statements in connection with the filing of current and periodic reports.

(2)

Audit-related fees represent fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements in connection with the filing of periodic reports. Audit-related fees are fees billed for assurance and related services in connection with the Emerald Acquisition and related regulatory filings.

(3)

Tax fees represent fees billed for professional services for tax compliance, tax advice and tax planning which included preparation of tax returns.

(4)

All other fees to BDO USA, LLP represent fees billed for compensation consulting services in connection with a study of compensation programs related to named executive officers and non-employee directors of a broad peer group of exploration and production companies.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee pre-approved the engagement of BDO as our principal independent registered public accounting firm to perform audit services for us. The Audit Committee pre-approves all auditing services and permitted non-audit services, including the fees and terms of those services, to be performed for us by the independent auditor prior to engagement. One hundred percent (100%) of the audit services, audit-related services, tax-related services and compensation consulting services referenced above were pre-approved by our Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as Part of this Report:

1. Financial Statements

See Index to Financial Statements on page F- 1 to our annual report on Form 10-K filed on March 18, 2013.

2. Financial Statement Schedules

All schedules are omitted because they are either not applicable or required information is shown in the financial statements or notes thereto.

3. Exhibits

The exhibits set forth in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report.

Exhibit Index

Exhibit No.	Description	Reference
2.1	Securities Purchase Agreement dated July 9, 2012, among Voyager Oil & Gas, Inc., Emerald Oil & Gas NL and Emerald Oil, Inc.	Exhibit 2.1 to the current report on Form 8-K of the registrant filed on July 10, 2012.
2.1	Purchase and Sale Agreement, dated as of September 6, 2012, by and between Emerald WB LLC and Slawson Exploration Company, Inc.	Exhibit 2.1 to the current report on Form 8-K of the registrant filed on September 10, 2012.
2.3	Letter Agreement dated as of January 7, 2013, by and between Emerald Oil, Inc. and East Management Services, LP.	Exhibit 2.1 to the current report on Form 8-K of the registrant filed on January 8, 2013
3.1	Articles of Incorporation of Voyager Oil & Gas, Inc.	Exhibit 3.1 to our current report on Form 8-K filed on June 2, 2011
3.2	Articles of Merger, dated as of May 31, 2011, by and betweenVoyager Oil & Gas, Inc., a Delaware corporation, and Voyager Oil& Gas 1, Inc., a Montana corporation.	Exhibit 2.1 to the current report on Form8-K of the registrant filed on June 2, 2011.
3.3	Articles of Amendment to the Articles of Incorporation	Exhibit 3.1 to the current report on Form 8-K of the registrant filed on October 24, 2012.
3.4	Articles of Amendment to the Articles of Incorporation	Exhibit 3.1 to the current report on Form 8-K of the registrant filed on February 19, 2013.
3.5	Amended Bylaws of Emerald Oil, Inc.	Exhibit 3.2 to the quarterly report on Form 10-Q of the registrant filed on November 8, 2012.
4.1	Specimen Certificate of Common Stock, par value $0.001 per shareof Emerald Oil, Inc.	Exhibit 4.1 to our current report on Form 8-K filed on October 24, 2012.
4.2	Form of Vesting Warrant.	Exhibit 4.2 to the Form S-3 registration statement of the registrant filed on April 30, 2010 (File No. 333-166402).
4.3	Form of Warrant.	Exhibit 4.3 to the Form S-3 registration statement of the registrant filed on April 30, 2010 (File No. 333-166402).
4.4	Form of Restricted Stock Award Agreement.	Exhibit 4.4 to the Form S-3 registration statement of the registrant filed on April 30, 2010 (File No. 333-166402).
4.5	Form of Lock-Up Agreement.	Exhibit 4.5 to the Form S-3 registration statement of the registrant filed on April 30, 2010 (File No. 333-166402).
4.7	Form of Warrant issued to investors in the February 2011 private placement.	Exhibit 5.1 to the Form S-3 registration statement of the registrant filed on February 11, 2011 (File No. 333-172210).
4.8	Form of Warrant issued to investors in the February 2013 private placement.	Exhibit 4.1 to the current report on Form 8-K of the registrant filed on February 19, 2013.
10.1	Securities Purchase Agreement dated February 1, 2011.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed on February 7, 2011.
10.2	Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan.	Exhibit 10.1 to the quarterly report on Form 10-Q of the registrant filed on August 9, 2011.
10.3	Form of Incentive Stock Option Agreement under the Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan.	Exhibit 10.1 to the quarterly report on Form 10-Q of the registrant filed on November 8, 2011.
10.4	Form of Nonqualified Stock Option Agreement under the Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan	Exhibit 10.2 to the quarterly report on Form 10-Q of the registrant filed on November 8, 2011.

Exhibit No.	Description	Reference
10.5	Form of Restricted Stock Agreement under the Voyager Oil & Gas,Inc. 2011 Equity Incentive Plan.	Exhibit 10.3 to the quarterly report on Form 10-Q of the registrant filed on November 8, 2011.
10.6	Form of Restricted Stock Unit Agreement under the Voyager Oil &Gas, Inc. 2011 Equity Incentive Plan.	Exhibit 10.4 to the quarterly report on Form 10-Q of the registrant filed on November 8, 2011.
10.7	Amendment to Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan.	Exhibit 4.1 to the current report on Form 8-K of the registrant filed on February 22, 2012.
10.8	Employment Agreement with James Russell Reger dated July 26, 2012	Exhibit 10.2 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.9	Employment Agreement with McAndrew Rudisill dated July 26, 2012.	Exhibit 10.3 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.10	Employment Agreement with Mike Krzus dated July 26, 2012	Exhibit 10.4 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.11	Employment Agreement with Mitchell R. Thompson dated July 26,2012	Exhibit 10.5 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.12	Employment Agreement with Paul Wiesner dated July 26, 2012.	Exhibit 10.6 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.13	Employment Agreement with Karl Osterbuhr dated July 26, 2012	Exhibit 10.7 to the current report on Form 8-K of the registrant filed on July 31, 2012.
10.14	Employment Agreement with Martin J. Beskow dated March 30, 2012.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed onApril 5, 2012.
10.15	Amendment to 2011 Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed onOctober 24, 2012.
10.16	Amendment No. 1 to Employment Agreement with James Russell Reger dated November 15, 2012.	Exhibit 10.2 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.17	Amendment No. 1 to Employment Agreement with McAndrew Rudisill dated November 15, 2012.	Exhibit 10.3 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.18	Amendment No. 1 to Employment Agreement with Mike Krzus dated November 15, 2012.	Exhibit 10.4 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.19	Amendment No. 1 to Employment Agreement with Mitchell R. Thompson dated November 15, 2012.	Exhibit 10.5 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.20	Amendment No. 1 to Employment Agreement with Paul Wiesner dated November 15, 2012.	Exhibit 10.6 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.21	Amendment No. 1 to Employment Agreement with Karl Osterbuhr dated November 15, 2012.	Exhibit 10.7 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.22	Second Amendment to Employment Agreement with Mike Krzus effective as of March 16, 2013.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed on March 14, 2013.
10.23	Second Amendment to Employment Agreement with McAndrew Rudisill effective as of March 16, 2013.	Exhibit 10.2 to the current report on Form 8-K of the registrant filed on March 14, 2013.

Exhibit No.	Description	Reference
10.24	Second Amendment to Employment Agreement with J.R. Reger effective as of March 16, 2013.	Exhibit 10.3 to the current report on Form 8-K of the registrant filed on March 14, 2013.
10.25	Second Amendment to Employment Agreement with Paul Wiesner effective as of March 16, 2013.	Exhibit 10.4 to the current report on Form 8-K of the registrant filed on March 14, 2013.
10.26	Second Amendment to Employment Agreement with Karl Osterbuhr effective as of March 16, 2013.	Exhibit 10.5 to the current report on Form 8-K of the registrant filed on March 14, 2013.
10.27	Credit Agreement dated November 20, 2012, among Emerald Oil, Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and the Lenders party thereto	Exhibit 10.1 to the current report on Form 8-K of the registrant filed on November 21, 2012.
10.28	First Amendment to Credit Agreement dated as of February 18, 2013, among Emerald Oil, Inc., the Guarantors, the Lenders and Wells Fargo Bank, N.A., as administrative agent for the Lenders.	Exhibit 10.3 to the current report on Form 8-K of the registrant filed on February 19, 2013.
10.29	Securities Purchase Agreement dated February 1, 2013, among Emerald Oil, Inc., WDE Emerald Holdings LLC and White Deer Energy FI L.P.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed on February 6, 2013.
10.30	Registration Rights Agreement dated February 19, 2013, among Emerald Oil, Inc., WDE Emerald Holdings LLC and White Deer Energy FI L.P.	Exhibit 10.1 to the current report on Form 8-K of the registrant filed on February 19, 2013.
10.31	Form of Indemnification Agreement.	Exhibit 10.2 to the current report on Form 8-K of the registrant filed on February 19, 2013.
14.1	Code of Ethics.	Exhibit 14.1 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
16.1	Letter from Mantyla McReyonlds, LLC dated October 6, 2011.	Exhibit 16.1 to the current report on Form 8-K of the registrant filed on October 7, 2011.
21.1	List of Subsidiaries.	Exhibit 21.1 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
23.1	Consent of Independent Registered Public Accounting Firm BDO USA, LLP.	Exhibit 23.1 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
23.2	Consent of Independent Registered Public Accounting FirmMantyla McReyonlds LLC.	Exhibit 23.2 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
23.3	Consent of Netherland, Sewell & Associates, Inc.	Exhibit 23.3 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
24.1	Power of Attorney (included on signature pagethe annual report on Form 10-K of the registrant filed on March 18, 2013).	Exhibit 24.1 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

Exhibit No.	Description	Reference
32.1	Certification 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.	Filed herewith.
32.2	Certification 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.	Filed herewith.
99.1	Report of Netherland, Sewell & Associates, Inc.	Exhibit 99.1 to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.INS	XBRL Instance Document.	Exhibit 101.INS to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.SCH	XBRL Schema Document.	Exhibit 101.SCH to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.CAL	XBRL Calculation Linkbase Document.	Exhibit 101.CAL to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.DEF	XBRL Definition Linkbase Document.	Exhibit 101.DEF to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.LAB	XBRL Label Linkbase Document.	Exhibit 101.LAB to the annual report on Form 10-K of the registrant filed on March 18, 2013.
101.PRE	XBRL Presentation Linkbase Document.	Exhibit 101.PRE to the annual report on Form 10-K of the registrant filed on March 18, 2013.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: April 30, 2013	EMERALD OIL, INC.
	By:	/s/ MICHAEL KRZUS
		Michael Krzus
		Chief Executive Officer (principal executive officer)

Emerald Oil (EOGSF) Inactive 10-K/A2012 FY Annual report (amended)