SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy) | 12 Months Ended |
Dec. 31, 2013 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ' |
NATURE OF OPERATIONS AND ORGANIZATION | ' |
NATURE OF OPERATIONS AND ORGANIZATION |
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Three Forks, Inc. (the "Company") was incorporated on March 28, 2012 in the |
State of Colorado. The Company's business plan focuses on the development as an |
independent energy company engaged in the acquisition, exploration, development |
and production of North American conventional oil and gas properties through the |
acquisition of leases and/or royalty interests and developing the properties for |
maximum cash flow. |
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On September 7, 2012, the Company acquired working interests between 10.12% and |
10.50% in five (5) producing oil and gas wells along with mineral interests in |
proved undeveloped leaseholds totaling approximately 320 acres located in Weld |
county Colorado valued at $1,477,990 as well as a 76.25% working interest in |
undeveloped leaseholds totaling approximately 120 acres located in Morgan county |
Colorado valued at $14,000 in exchange for the issuance of 700,000 shares of the |
Company's common stock valued at $1,400,000 or $2.00 per share and the |
assumption of certain debt in the amount of $91,990. In addition, the Company |
was required to fund an escrow account in the amount of $55,000 for legal |
services that may occur over a three year period from the date of the |
acquisition and this escrow account at December 31, 2013 and 2012 has a balance |
of $55,163 and $55,081 respectively. Effective January 1, 2013, the Company sold |
its entire interest in these oil and gas properties located in Weld county |
Colorado for $1,600,000 in cash. See Note 4 - Disposal Group Held for Sale. |
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On December 31, 2012, the Company entered into a Farmout Agreement ("Farmout") |
where the Company had a 100% working interest in 320gross/290net acres of |
mineral interests located in Archer county Texas subject to the Farmout. In |
consideration of Three Forks No 1 LLC, a Colorado limited liability company |
("LLC"), undertaking and paying it's pro rata portion of the costs associated |
with the drilling and completion of 9 wells in Archer county Texas on the |
Farmout property, the Company assigned 87% of the working interest in the |
Farmout to the LLC. Likewise, on January 1, 2013, the Company assigned 2% of the |
working interest in the Farmout to two members of the Board of Directors of the |
Company. |
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Three Forks LLC No 2 ("Three Forks No 2") was organized in the State of Colorado |
on December 4, 2013. The Company is the manager of the Three Forks No. 2 and the |
Company does not hold an equity interest in Three Forks No 2. Three Forks No 2 |
has been organized to fund and develop the proposed drilling of additional wells |
in Archer County, Texas. At December 31 2013, Three Forks No 2 has yet to |
commence operations. |
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Effective June 30, 2013 and September 1, 2013, the Company acquired a 37.5% and |
37.5% working interest, respectively or a total of 75% working interest in |
certain oil and gas properties located in Louisiana and Texas totaling |
approximately 1955 gross acres known as the Five Jab properties in exchange for |
$3,869,497 in cash plus the assumption of liabilities in the amount of $281,962 |
as part of a purchase sale and participation agreement dated February 27, 2013 |
as well as participate in a development program that includes the drilling and |
completion of additional wells |
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The Company's acquisition of the 75% of working interest in the oil and gas |
properties was accounted for as an acquisition for accounting purposes. |
INCOME TAXES | ' |
INCOME TAXES |
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The Company accounts for income taxes under the liability method as prescribed |
by ASC authoritative guidance. Deferred tax liabilities and assets are |
determined based on the difference between the financial statement and tax bases |
of assets and liabilities using enacted rates expected to be in effect during |
the year in which the basis difference reverses. The realizability of deferred |
tax assets are evaluated annually and a valuation allowance is provided if it is |
more likely than not that the deferred tax assets will not give rise to future |
benefits in the Company's income tax returns. |
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The Company has adopted ASC guidance regarding accounting for uncertainty in |
income taxes. This guidance clarifies the accounting for income taxes by |
prescribing the minimum recognition threshold an income tax position is required |
to meet before being recognized in the financial statements and applies to all |
income tax positions. Each income tax position is assessed using a two-step |
process. A determination is first made as to whether it is more likely than not |
that the income tax position will be sustained, based upon technical merits, |
upon examination by the taxing authorities. If the income tax position is |
expected to meet the more likely than not criteria, the benefit recorded in the |
financial statements equals the largest amount that is greater than 50% likely |
to be realized upon its ultimate settlement. At December, 2013 and 2012 there |
were no uncertain tax positions that required accrual. |
(LOSS) PER SHARE | ' |
(LOSS) PER SHARE |
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(Loss) per share requires presentation of both basic and diluted (loss) per |
common share. Common share equivalents, if used, would consist of any options, |
warrants and contingent shares, and would not be included in the weighted |
average calculation since their effect would be anti-dilutive due to the net |
(loss). At December 31, 2013 and December 31, 2012, the Company had outstanding |
6,615,559 and 0, respectively options, warrants or contingent shares. |
USE OF ESTIMATES | ' |
USE OF ESTIMATES |
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The preparation of financial statements in conformity with generally accepted |
accounting principles in the United States of America requires management to |
make estimates and assumptions that affect the reported amount of assets and |
liabilities and disclosures of contingent assets and liabilities at the date of |
the financial statements and the reported amounts of revenues and expenses |
during the reporting period. Actual results could differ from those estimates, |
and such differences may be material to the financial statements. |
CONCENTRATION OF CREDIT RISK | ' |
CONCENTRATION OF CREDIT RISK |
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The Company, from time to time during the periods covered by these financial |
statements, may have bank balances in excess of its insured limits. Management |
has deemed this a normal business risk. |
CASH AND CASH EQUIVALENTS | ' |
CASH AND CASH EQUIVALENTS |
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For purposes of the statement of cash flows, the Company considers all cash and |
highly liquid investments with initial maturities of three months or less to be |
cash equivalents. |
ACCOUNTS RECEIVABLE | ' |
ACCOUNTS RECEIVABLE |
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Accounts receivable are stated at their cost less any allowance for doubtful |
accounts. The allowance for doubtful accounts is based on the management's |
assessment of the collectability of specific customer accounts and the aging of |
the accounts receivable. If there is deterioration in a major customer's |
creditworthiness or if actual defaults are higher than the historical |
experience, the management's estimates of the recoverability of amounts due to |
the Company could be adversely affected. Based on the management's assessment, |
there is no reserve recorded at December, 2013 and 2012. |
REVENUE RECOGNITION | ' |
REVENUE RECOGNITION |
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The Company recognizes revenue from the exploration and production of the |
Company's oil and gas properties in the period of production. |
OIL AND GAS PRODUCING ACTIVITIES | ' |
OIL AND GAS PRODUCING ACTIVITIES |
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The Company follows the full cost method of accounting for oil and natural gas |
operations. Under this method all productive and nonproductive costs incurred in |
connection with the acquisition, exploration, and development of oil and natural |
gas reserves are capitalized. No gains or losses are recognized upon the sale or |
other disposition of oil and natural gas properties except in transactions that |
would significantly alter the relationship between capitalized costs and proved |
reserves. Unproved properties with significant acquisition costs are assessed |
annually on a property-by-property basis and any impairment in value is charged |
to expense. If the unproved properties are determined to be productive, the |
related costs are transferred to proved oil and natural gas properties and are |
depleted. Proceeds from sales of partial interests in unproved leases are |
accounted for as a recovery of cost without recognizing any gain or loss until |
all costs have been recovered. The costs of unproved oil and natural gas |
properties are excluded from the amortizable base until the time that either |
proven reserves are found or it has been determined that such properties are |
impaired. As properties become proved, the related costs transfer to proved oil |
and natural gas properties using full cost accounting. There were capitalized |
costs of $5,614,987 and $0 included in the amortization base at December 31, |
2013 and 2012, respectively and the Company did not expense any capitalized |
costs for the year ended December 31, 2013 and for the period March 28, 2012 |
(inception) through December 31, 2012. |
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The Company performs a quarterly "ceiling test" calculation to test its oil and |
gas properties for possible impairment. The primary components impacting this |
calculation are commodity prices, reserve quantities added and produced, overall |
exploration and development costs, depletion expense, and tax effects. If the |
net capitalized cost of the Company's oil and gas properties subject to |
amortization (the carrying value) exceeds the ceiling limitation, the excess |
would be charged to expense. The ceiling limitation is equal to the sum of the |
present value discounted at 10% of estimated future net cash flows from proved |
reserves, the cost of properties not being amortized, the lower of cost or |
estimated fair value of unproved properties included in the costs being |
amortized, and all related tax effects. At December 31, 2013, the calculated |
value of the ceiling limitation exceeded the carrying value of the Company's oil |
and gas properties subject to the test, and no impairment was necessary. |
PROPERTY AND EQUIPMENT | ' |
PROPERTY AND EQUIPMENT |
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Management capitalizes additions to property and equipment. Expenditures for |
repairs and maintenance are charged to expense. Property and equipment are |
carried at cost. Adjustment of the asset and the related accumulated |
depreciation accounts are made for property and equipment retirements and |
disposals, with the resulting gain or loss included in the statement of |
operations. The Company has not capitalized any internal costs for the year |
ended December 31, 2013 and for the period March 28, 2012 (inception) through |
December 31, 2012. |
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Other property and equipment, such as office furniture and equipment, and |
computer hardware and software, are recorded at cost. Costs of renewals and |
improvements that substantially extend the useful lives of the assets are |
capitalized. Maintenance and repair costs are expensed when incurred. |
DEPRECIATION | ' |
DEPRECIATION |
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For financial reporting purposes, depreciation and amortization of other |
property and equipment is computed using the straight-line method over the |
estimated useful lives of assets at acquisition. For income tax reporting |
purposes, depreciation of other equipment is computed using the straight-line |
and accelerated methods over the estimated useful lives of assets at |
acquisition. |
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Depreciation and depletion of capitalized acquisition, exploration and |
development costs are computed on the units-of-production method by individual |
fields on the basis of the total estimated units of proved reserves as the |
related proved reserves are produced. |
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Depreciation and amortization of oil and gas property and other property and |
equipment for the year ended December 31, 2013 and for the period March 28, 2012 |
(inception) through December 31, 2012 is $64,589 and $449, respectively. |
IMPAIRMENT OF LONG-LIVED ASSETS | ' |
IMPAIRMENT OF LONG-LIVED ASSETS |
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In accordance with authoritative guidance on accounting for the impairment or |
disposal of long-lived assets, as set forth in Topic 360 of the ASC, the Company |
assesses the recoverability of the carrying value of its non-oil and gas |
long-lived assets when events occur that indicate an impairment in value may |
exist. An impairment loss is indicated if the sum of the expected undiscounted |
future net cash flows is less than the carrying amount of the assets. If this |
occurs, an impairment loss is recognized for the amount by which the carrying |
amount of the assets exceeds the estimated fair value of the assets. No events |
occurred during the year ended December 31, 2013 and for the period March 28, |
2012 (inception) through December 31, 2012 that would be indicative of possible |
impairment. |
OTHER COMPREHENSIVE INCOME | ' |
OTHER COMPREHENSIVE INCOME |
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The Company has no material components of other comprehensive loss and |
accordingly, net loss is equal to comprehensive loss for the period. |
SHARE-BASED COMPENSATION | ' |
SHARE-BASED COMPENSATION |
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The Company accounts for share-based payment accruals under authoritative |
guidance on stock compensation as set forth in the Topics of the ASC. The |
guidance requires all share-based payments to employees and non-employees, |
including grants of employee and non-employee stock options, to be recognized in |
the financial statements based on their fair values. |
GOING CONCERN AND MANAGEMENTS' PLANS | ' |
GOING CONCERN AND MANAGEMENTS' PLANS |
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As shown in the accompanying financial statements for the period ended December |
31, 2013, the Company has reported an accumulated deficit of $2,508,492. At |
December 31, 2013, the Company has current assets of $518,186, including cash |
and cash equivalents of $121,174 and current liabilities of $2,929,355 but has |
acquired major proved oil and gas properties as described elsewhere in this |
Annual Report. |
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To the extent the Company's operations are not sufficient to fund the Company's |
capital and current growth requirements the Company will attempt to raise |
capital through the sale of additional shares of stock. At the present time, the |
Company cannot provide assurance that it will be able to raise funds through the |
further issuance of equity in the Company. |
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The accompanying financial statements have been prepared assuming that the |
Company will continue as a going concern, however, the above conditions raise |
substantial doubt about the Company's ability to do so. The financial statements |
do not include any adjustment to reflect the possible future effect on the |
recoverability and classification of assets or the amounts and classifications |
of liabilities that may result should the Company be unable to continue as a |
going concern. |
RECENT ACCOUNTING PRONOUNCEMENTS | ' |
RECENT ACCOUNTING PRONOUNCEMENTS |
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The Company has reviewed all recently issued but not yet effective accounting |
pronouncements and does not believe the future adoption of any such |
pronouncements may be expected to cause a material impact on its financial |
condition or results of operations. |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS |
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The Company evaluates events and transactions after the balance sheet date but |
before the financial statements are issued. |