PetroShare (PRHRQ) 10-K 29 Mar 16 2015 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Mar. 28, 2016	Jun. 30, 2015
Document And Entity Information
Entity Registrant Name	PetroShare Corp.
Entity Central Index Key	1,568,079
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 0
Entity Common Stock, Shares Outstanding		21,728,191
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,015

Balance Sheets

Balance Sheets - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Current Assets:
Cash and cash equivalents	$ 3,011,291	$ 425,358
Accounts receivable - Crude oil and natural gas		1,004
Accounts receivable - Joint interest billing	$ 384,618	43,873
Deferred offering costs		109,965
Prepaid expenses and other assets	$ 29,119	26,413
Total current assets	3,425,028	$ 606,613
Crude Oil and Natural Gas Properties-using successful efforts method
Unproven crude oil and natural gas properties	715,594
Proven crude oil and natural gas properties	724,058	$ 718,861
Wells in progress	40,505	23,352
Less: Accumulated depletion and depreciation	(724,058)	(714,160)
Crude oil and natural gas properties, net	756,099	28,053
Property, plant and equipment, net	1,828	2,791
Other assets	3,851	3,851
Total Assets	4,186,806	641,308
Current Liabilities:
Accounts payable and accrued liabilities	312,590	86,826
Accounts payable - working interest owners	$ 949	26,458
Drilling advances		221,834
Total current liabilities	$ 313,539	$ 335,118
Long-term debt	1,062,185
Asset retirement obligation	34,776	$ 31,715
Total liabilities	$ 1,410,500	$ 366,833
Shareholders' Equity:
Preferred stock-$.01 par value: 10,000,000 shares authorized; no shares issued and outstanding
Common stock-$.001 par value: 100,000,000 shares authorized; 21,633,191 shares and 17,008,191 shares issued and outstanding, respectively	$ 21,633	$ 17,008
Additional paid in capital	8,124,443	4,103,862
Accumulated deficit	(5,369,770)	(3,846,395)
Total Shareholders' Equity	2,776,306	274,475
Total Liabilities and Shareholders' Equity	$ 4,186,806	$ 641,308

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock par value	$ .01	$ .01
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ .001	$ .001
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	21,633,191	17,008,191
Common stock shares outstanding	21,633,191	17,008,191

Statements of Operations

Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Revenues
Crude oil and natural gas revenue	$ 1,328	$ 7,394
Costs and Expenses
Lease operating expense	31,909	20,595
General and administrative expense	1,265,134	676,698
Depreciation, depletion, amortization and accretion	13,921	$ 715,958
Exploration costs	10,407
Loss on impairment of crude oil and natural gas properties	154,776	$ 1,236,842
Total Costs and Expenses	1,476,147	2,650,093
Operating (Loss)	(1,474,819)	(2,642,699)
Other Income (Expense)
Interest income	46	$ 37
Interest expense	(48,602)
Net (Loss)	$ (1,523,375)	$ (2,642,662)
Net (Loss) per Common Share
Basic and Diluted	$ (0.09)	$ (0.17)
Weighted Average Number of Common Shares Outstanding
Basic and Diluted	17,738,035	15,985,228

Statements of Changes in Shareh

Statements of Changes in Shareholders' Equity - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance, Shares at Dec. 31, 2013	14,764,750
Beginning Balance, Amount at Dec. 31, 2013	$ 14,765	$ 3,009,075	$ (1,203,733)	$ 1,820,107
Issuance of Common Shares for cash at $0.50 per share, net of offering costs, Shares	2,220,003
Issuance of Common Shares for cash at $0.50 per share, net of offering costs, Amount	$ 2,220	1,094,810		$ 1,097,030
Issuance of Common Shares in connection with Separation Agreement, Shares	23,438
Issuance of Common Shares in connection with Separation Agreement, Amount	$ 23	(23)
Share based compensation
Net (Loss)			$ (2,642,662)	$ (2,642,662)
Ending Balance Shares at Dec. 31, 2014	17,008,191
Ending Balance Amount at Dec. 31, 2014	$ 17,008	4,103,862	$ (3,846,395)	274,475
Issuance of Common Shares for cash at $1.00 per share, Shares	365,000
Issuance of Common Shares for cash at $1.00 per share, Amount	$ 365	364,635		365,000
Issuance of Common Shares for cash at $0.90 per share, net of offering costs, Shares	4,260,000
Issuance of Common Shares for cash at $0.90 per share, net of offering costs, Amount	$ 4,260	3,464,741		3,469,001
Share based compensation		191,205		191,205
Net (Loss)			$ (1,523,375)	(1,523,375)
Ending Balance Shares at Dec. 31, 2015	21,633,191
Ending Balance Amount at Dec. 31, 2015	$ 21,633	$ 8,124,443	$ (5,369,770)	$ 2,776,306

Statements of Changes in Share6

Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Statement of Stockholders' Equity [Abstract]
Issuance of Common Shares for cash price per share net of offering costs		$ 0.50
Issuance of Common Shares for cash price per share	$ 1
Issuance of Common Shares for cash price per share	$ 0.90

Statements of Cash Flows

Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities
Net (loss) for the year	$ (1,523,375)	$ (2,642,662)
Adjustments to reconcile net loss to net cash (used in) operating activities
Depreciation and depletion expense	10,861	715,123
Accretion of asset retirement obligation	3,061	$ 835
Share based compensation	191,205
Loss on impairment of crude oil and natural gas properties	$ 154,776	$ 1,236,842
Bad debt (recovery)		(424,951)
Changes in operating assets and liabilities
Accounts receivable - Joint interest billing	$ (339,741)	945,605
Deferred offering costs	109,965	(109,965)
Prepaid expenses and other assets	(2,705)	(14,227)
Accounts payable and accrued liabilities	$ 225,764	(1,707,264)
Accounts payable - related parties		(2,966)
Accounts payable - working interest partners	$ (25,509)	26,458
Drilling advances, net	(221,834)	(441,726)
Net cash (used) in operating activities	(1,417,532)	(2,418,898)
Cash flows from investing activities
Development of crude oil and natural gas properties	(177,126)	(532,779)
Acquisitions of crude oil and natural gas properties	$ (715,595)	(202,306)
Buyout of working interest partner		(1,142,237)
Proceeds from working interest partners		935,537
Net cash (used) in investing activities	$ (892,721)	$ (941,785)
Cash flows from financing activities
Repayment of long-term debt	(827,815)
Borrowing on long-term debt	1,890,000
Common stock issued for cash, net of offering costs	3,834,001	$ 1,097,030
Net cash provided by financing activities	4,896,186	1,097,030
Net increase (decrease) in cash	2,585,933	(2,263,653)
Cash
Beginning of year	425,358	2,689,011
End of year	$ 3,011,291	$ 425,358
Supplemental Disclosures of Cash Flow Information
Cash paid for interest
Cash paid for income taxes
Non Cash Investing and Financing Transactions
Issuance of common stock warrants in connection with common stock offering	$ 260,270
Repayment of long-term debt in connection with the assignment of an interest in crude oil and natural gas properties	$ 287,815

1. ORGANIZATION AND NATURE OF B

1. ORGANIZATION AND NATURE OF BUSINESS	12 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
1. ORGANIZATION AND NATURE OF BUSINESS	PetroShare Corp. (“PetroShare” or the “Company”) is a corporation that was organized under the laws of the State of Colorado on September 4, 2012 to investigate, acquire and develop crude oil and natural gas properties in the Rocky Mountain or mid-continent portion of the United States. Since inception, PetroShare has focused on financing activities and the acquisition, exploration and development of crude oil and natural gas prospects located in Moffat County, Colorado, known as the Buck Peak prospect, and Adams County, Colorado, known as the Todd Creek Farms prospect. As of December 31, 2015, the Company had drilled and completed two wells on the Buck Peak prospect. Under the terms of a leasing agreement with Kingdom Resources, LLC (“Kingdom”), a local property developer and mineral owner, the Company accepted an assignment of an oil and gas lease in Adams County, Colorado in February 2015 (“Kingdom Lease”), which the Company intends to develop as part of its Todd Creek Farms prospect. The Company closed on the Kingdom Lease acquisition on May 15, 2015. From its inception through April 1, 2014, PetroShare’s activities had been accounted for as those of a “Development Stage Enterprise” as set forth in Accounting Standards Codification No. 915 “Development Stage Entities” (“ASC 915”) which defined a development stage entity as one that had not commenced planned principal operations or one in which planned principal operations had commenced but had not generated significant revenue therefrom. Beginning in the fiscal quarter ended June 30, 2014, the Company elected to apply Accounting Standards Update (“ASU”) No. 2014-10 which, in addition to removing the definition of a development stage entity from ASC 915, allowed it to terminate the presentation of inception-to-date information.

2. BASIS OF PRESENTATION AND SU

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Basis of Presentation The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Loss Per Common Share (Loss) per share attributable to PetroShare shareholders is computed by dividing net (loss) by the weighted average number of common shares outstanding during the period. Diluted (loss) per share attributable to PetroShare shareholders is computed by dividing the net (loss) by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. The Company excluded potentially dilutive securities including; 2,200,000 stock options and 2,000,000 stock options for purposes of calculating diluted net loss per share, as of December 31, 2015 and 2014, respectively, as the effect of their inclusion would be anti-dilutive. Cash and Cash Equivalents PetroShare considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. PetroShare’s bank accounts periodically exceed federally insured limits. PetroShare maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote. Revenue Recognition We recognize revenue from the sale of crude oil and natural gas when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. In general, settlements for hydrocarbon sales may occur after the month in which the oil, natural gas or other hydrocarbon products were produced. We may estimate and accrue for the value of these sales using information available to us at the time our financial statements are generated. Differences are reflected in the accounting period that payments are received from the purchaser. Accounts Receivable – Crude oil and natural gas Accounts receivable – Crude oil and natural gas consists of amounts receivable from crude oil sold from the Company’s well interests. All of the Company’s accounts receivable is due from one party. Management continually monitors accounts receivable for collectability. Accounts Receivable – Joint interest billing Accounts receivable – Joint interest billing consists primarily of joint interest billings, which are recorded at the invoiced and to-be-invoiced amounts. Collateral is not required for such receivables, nor is interest charged on past due balances. Joint interest billing receivables are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself. As of December 31, 2015, three partners totaled 100% of the Company’s total joint interest billing receivable with no allowance for collectability indicated during the period. As of December 31, 2014, three partners totaled 100% of the Company’s total joint interest billing receivables with no allowance for collectability indicated during the year. Deferred Offering Costs The Company defers as other current assets the direct incremental costs of raising capital through equity offerings until such time as the offering is completed. At the time charged to operations during the period in which the offering is terminated. As of December 31, 2015, the Company’s deferred offering costs totaled $nil, with $109,965 recorded as of December 31, 2014. Crude Oil and Natural Gas Properties Proved. PetroShare follows the successful efforts method of accounting for its crude oil and natural gas properties. Under this method of accounting, all property acquisition costs and development costs are capitalized when incurred and depleted on a units-of-production basis over the remaining life of proved reserves and proved developed reserves, respectively. Costs of drilling exploratory wells are initially capitalized but are charged to expense if the well is determined to be unsuccessful. PetroShare assesses its proved crude oil and natural gas properties for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test compares estimated undiscounted future net cash flows to the assets’ net book value. If the net capitalized costs exceed estimated future net cash flows, then the cost of the property is written down to fair value. Fair value for crude oil and natural gas properties is generally determined based on estimated discounted future net cash flows. Impairment expense for proved properties is reported in exploration and impairment expense. Net carrying values of retired, sold or abandoned properties that constitute less than a complete unit of depreciable property are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in the statement of operations. Gains or losses from the disposal of complete units of depreciable property are recognized in earnings (loss). Unproved. Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. Undeveloped lease costs and unproved reserve acquisitions are capitalized, and individually insignificant unproved properties are amortized on a composite basis, based on past success, past experience and average lease-term lives. PetroShare evaluates significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified as proved properties and depleted on a unit-of-production basis. Impairment expense for unproved properties is reported in exploration and impairment expense. Exploratory. Geological and geophysical costs, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Costs of seismic studies that are utilized in development drilling within an area of proved reserves are capitalized as development costs. Amounts of seismic costs capitalized are based on only those blocks of data used in determining development well locations. To the extent that a seismic project covers areas of both developmental and exploratory drilling, those seismic costs are proportionately allocated between development costs and exploration expense. Costs of drilling exploratory wells are initially capitalized, pending determination of whether the well contains proved reserves. If an exploratory well does not contain proved reserves, the costs of drilling the well and other associated costs are charged to expense. Costs incurred for exploratory wells that contain reserves, which cannot yet be classified as proved, continue to be capitalized if (a) the well has found a sufficient quantity of reserves to justify completion as a producing well, and (b) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if the Company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well costs, net of any salvage value, are expensed. Property, Plant and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed when incurred. Asset Impairment Proved crude oil and natural gas properties are reviewed for impairment on a field-by-field basis each quarter, or when events and circumstances indicate a possible decline in the recoverability of the carrying value of such field. The estimated future undiscounted cash flows expected in connection with the field are compared to the carrying amount of the field to determine if the carrying amount is recoverable. If the carrying amount of the field exceeds its estimated undiscounted future cash flows, the carrying amount of the field is reduced to its estimated fair value. Due to the unavailability of relevant comparable market data, a discounted cash flow method is used to determine the fair value of proved properties. The discounted cash flow method utilizes the most recent third party reserve estimation report and estimates future cash flows based on management’s estimates of future crude oil and natural gas production, commodity prices based on commodity futures price strips, operating and development costs, and a risk-adjusted discount rate. The Company recognized impairment expense of $154,776 during the year ended December 31, 2015, while expense of $1,236,842 was recorded in 2014. Depreciation, Depletion and Amortization Depreciation, depletion and amortization of capitalized drilling and development costs of producing crude oil and natural gas properties, including related support equipment and facilities, are computed using the unit-of-production method on a field basis based on total estimated proved developed crude oil and natural gas reserves. Amortization of producing leaseholds is based on the unit-of-production method using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable crude oil and natural gas reserves are established based on estimates made by the Company and external independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated depreciation, depletion and amortization are eliminated from the accounts and the resulting gain or loss, if any, is recognized. Unit of production rates are revised whenever there is an indication of a need, but at least in conjunction with annual reserve reports. Revisions are accounted for prospectively as changes in accounting estimates. Depletion expense for the year ended December 31, 2015 was $9,898, and expense of $714,160 was recorded in 2014. Drilling Advances The Company’s drilling advances consist of cash provided to the Company from its joint interest partners for planned drilling activities. Advances are applied against the joint interest partner’s share of expenses incurred. As of December 31, 2015 and 2014, drilling advances totaled $nil and $221,834, respectively. Income Taxes PetroShare recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. PetroShare provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. Asset Retirement Obligation Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance with ASC 410, “Accounting for Asset Retirement Obligations.” The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of crude oil and natural gas properties is recorded generally upon the completion of a well. The net estimated costs are discounted to present values using a risk adjusted rate over the estimated economic life of the crude oil and natural gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method. The liability is periodically adjusted to reflect: (1) new liabilities incurred; (2) liabilities settled during the period; (3) accretion expense; and (4) revisions to estimated future cash flow requirements. The accretion expense is recorded as a component of depreciation, depletion, accretion and amortization expense in the accompanying statements of operations. Share Based Compensation PetroShare uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards in accordance with ASC 718, “Compensation.” The option-pricing model requires the input of highly subjective assumptions, including the option’s expected life, the price volatility of the underlying stock, and the estimated dividend yield of the underlying stock. PetroShare’s expected term represents the period that stock-based awards are expected to be outstanding and is determined based on the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. As there was insufficient historical data available to ascertain a forfeiture rate, the plain vanilla method was applied in calculating the expected term of the options. The Company’s common stock has limited New Accounting Pronouncements Recently Issued From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers." The standard requires an entity to recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 will supersede most of the existing revenue recognition requirements in US GAAP when it becomes effective and is required to be adopted using one of two retrospective application methods. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers – Deferral of the Effective Date," In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)." The new guidance addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The standard is effective for the annual period beginning after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of the new guidance on its financial statements. Recent Accounting Pronouncements Not Yet Adopted Various accounting standards and interpretations were issued in 2015 with effective dates subsequent to December 31, 2015. We have evaluated the recently issued accounting pronouncements that are effective in 2016 and believe that none of them will have a material effect on our financial position, results of operations or cash flows when adopted. Further, the Company is monitoring the joint standard-setting efforts of the Financial Accounting Standards Board and the International Accounting Standards Board. There are a large number of pending accounting standards that are being targeted for completion in 2016 and beyond, including, but not limited to, standards relating to revenue recognition, accounting for leases, fair value measurements, accounting for financial instruments, disclosure of loss contingencies and financial statement presentation. Because these pending standards have not yet been finalized, at this time the Company is not able to determine the potential future impact that these standards will have, if any, on its financial position, results of operations or cash flows.

3. PROPERTY, PLANT AND EQUIPMEN

3. PROPERTY, PLANT AND EQUIPMENT	12 Months Ended
	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
3. PROPERTY, PLANT AND EQUIPMENT	Property and equipment balances were comprised of furniture, fixtures, and equipment and are shown below: December 31, 2015 December 31, 2014 Property, Plant and Equipment $ 4,385 $ 4,385 Accumulated Depreciation (2,557 ) (1,594 ) Total $ 1,828 $ 2,791 Depreciation expense recorded for the years ended December 31, 2015 and 2014 amounted to $963 and $963, respectively.

4. CRUDE OIL AND NATURAL GAS PR

4. CRUDE OIL AND NATURAL GAS PROPERTIES	12 Months Ended
	Dec. 31, 2015
Extractive Industries [Abstract]
4. CRUDE OIL AND NATURAL GAS PROPERTIES	Aggregate Capitalized Costs. December 31, 2015 December 31, 2014 Proved $ 724,058 $ 718,861 Wells in progress 40,505 23,352 Unproved 715,594 - Less: Accumulated depletion, depreciation and impairment (724,058 ) (714,160 ) Total $ 756,099 $ 28,053 Costs Incurred in Crude Oil and Natural Gas Activities. December 31, 2015 December 31, 2014 Exploration costs $ 10,407 $ - Development costs 177,126 532,279 Acquisition of properties Proved - 202,306 Unproved 715,595 - Total $ 903,128 $ 734,585 During the year ended December 31, 2015, depletion expense was $9,898 and depletion expense was $714,160 for the year ended December 31, 2014. The Company collected drilling advances from its working interest partners of $nil during year ended December 31, 2015. As of years ended December 31, 2015 and December 31, 2014, the Company had unused portions of these advances totaling $nil and $221,834, respectively. On May 15, 2015, the Company completed the acquisition of the Kingdom Lease, totaling approximately 1,280 gross acres (333 net acres) located in Adams County, Colorado. The Company’s interest was reduced to approximately 171 net acres by virtue of a participation agreement (“Participation Agreement”) that the Company executed with its lender, Providence Energy Operators, LLC (“Providence”). PetroShare intends to develop the Kingdom Lease area as part of its Todd Creek Farms prospect. PetroShare paid $785,630 and Kingdom conveyed to the Company an 80% net revenue interest in the acreage after accounting for landowner and other royalties. Pursuant to the provisions of the Participation Agreement, executed in connection with the Company’s line of credit (See Note 5), PetroShare assigned the right to acquire up to 50% of its interest in the Todd Creek Farms prospect to Providence in part consideration for extending the Company the line of credit, which Providence exercised with an effective date of June 1, 2015. The Company recorded the exercise of the option by reducing its acquisition costs in the Kingdom Lease by 50%. A reduction of acquisition costs in the amount of $287,815 was recorded, comprised of $392,815 net of $105,000 related to a one-time credit issued to the lender pursuant to the provisions of the Participation Agreement. The Company has recorded the net assignment of interest to Providence as a $287,815 non-cash payment against the outstanding line of credit. Between May 15, 2015 and December 31, 2015, the Company acquired approximately 77 additional net acres in the Todd Creek Prospect area and, as of December 31, 2015, the Todd Creek Farms prospect area covers approximately 1,460 gross and 244 net acres. Subsequent to December 31, 2015, the Company continued negotiation with an independent third party pursuant to a non-binding letter of intent executed on January 16, 2016 to acquire approximately 300 net acres and one producing well within its Todd Creek Farms prospect area. (See Note 12)

5. LINE OF CREDIT

5. LINE OF CREDIT	12 Months Ended
	Dec. 31, 2015
Debt Disclosure [Abstract]
5. LINE OF CREDIT	On May 13, 2015, the Company executed a Revolving Line of Credit Facility Agreement (“Line of Credit”) with Providence of up to $5,000,000, which is evidenced by a promissory note. The Line of Credit is secured by a deed of trust from PetroShare for the benefit of Providence, under which the Company pledged certain of its assets and oil and gas interests as collateral, including the Kingdom Lease. The Line of Credit was initially due and payable in its entirety, including all outstanding principal, interest, fees, expenses and other amounts on June 1, 2017. On February 24, 2016, the Company entered into the First Amendment to Revolving Line of Credit Facility Agreement (“First Amendment”) with Providence. The First Amendment extended the maturity date of any borrowing under the line of credit for one year to June 1, 2018. All other terms of the line of credit remain the same. (See Note 12) Interest on the outstanding principal balance of the line of credit begins accruing on the dates of advancements of principal at an annual rate equal to 8.0% simple interest. The Company is obligated to pay interest monthly after the Company receives its first production payment from a well associated with the Participation Agreement and/or in which the Company has or has had a working interest and in accordance with the terms of the promissory note. On May 13, 2015 the Company borrowed $1,000,000 against the Line of Credit. On July 17, 2015, the Company borrowed an additional $540,000 against the Line of Credit in anticipation of a proposed transaction. The transaction was never consummated and the Company repaid this amount on August 15, 2015. On September 14, 2015, the Company borrowed an additional $350,000 against the line of credit. During the three months ended September 30, 2015, the Company recorded a non-cash payment against the line of credit of $287,815 related to the assignment of a 50% interest in the Todd Creek Farms prospect to Providence (See Note 4). As of December 31, 2015, the outstanding balance on the line of credit was $1,062,185 plus accrued interest of $48,602.

6. ASSET RETIREMENT OBLIGATION

6. ASSET RETIREMENT OBLIGATION	12 Months Ended
	Dec. 31, 2015
Asset Retirement Obligation Disclosure [Abstract]
6. ASSET RETIREMENT OBLIGATION	For the purpose of determining the fair value of the asset retirement obligation incurred during the year ended December 31, 2015, the Company assumed an inflation rate of 2.5%, an estimated average asset life of 5.1 years, and a credit adjusted risk free interest rate of 8.0%. The following reconciles the value of the asset retirement obligation for the periods presented: December 31, 2015 December 31, 2014 Asset retirement obligation, beginning of year $ 31,715 $ - Liabilities settled - - Liabilities incurred - 30,880 Revisions in estimated liabilities - - Accretion 3,061 835 Asset retirement obligation, end of year $ 34,776 $ 31,715 Accretion expense recorded for the year ended December 31, 2015 was $2,230 and accretion expense recorded for the year ended December 31, 2014 was $835.

7. ACCOUNTS PAYABLE AND ACCRUED

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	12 Months Ended
	Dec. 31, 2015
Accounts Payable And Accrued Liabilities
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	Accounts payable and accrued liability balances were comprised of trade accounts payable and accrued liabilities, drilling advances, crude oil and natural gas distributions payable and are shown below: December 31, 2015 December 31, 2014 Trade payables and accrued liabilities $ 263,988 $ 86,826 Accrued interest payable 48,602 - Drilling advances - 221,834 Crude oil and natural gas distributions payable 949 26,458 Total $ 313,539 $ 335,118

8. SHAREHOLDERS' EQUITY

8. SHAREHOLDERS' EQUITY	12 Months Ended
	Dec. 31, 2015
Equity [Abstract]
8. SHAREHOLDERS' EQUITY	Common Stock As of December 31, 2015 and December 31, 2014, PetroShare had 100,000,000 shares of common stock authorized with a par value of $0.001 per share. As of December 31, 2015 and December 31, 2014, 21,633,191 and 17,008,191 shares were issued and outstanding, respectively. On September 22, 2014, the Company filed a registration statement on Form S-1, along with the Company’s prospectus, registering for sale 4,600,000 shares of common stock in its initial public offering. The registration statement was declared effective on February 4, 2015. In accordance with the terms of the prospectus, the offering was to expire on April 5, 2015, unless extended by the Board of Directors. On April 3, 2015, the Board of Directors unanimously approved the extension of the offering period for an additional 60 days, through June 4, 2015. On June 4, 2015 the Board of Directors unanimously approved the extension of the offering period for an additional 30 days through July 6, 2015. Following expiration of the self-underwritten offering on July 6, 2015, the Company engaged a broker-dealer to act as its underwriter for the offering. Pursuant to the engagement of the underwriter, on July 15, 2015, the Company filed a post-effective amendment to its registration statement on Form S-1. The post-effective amendment, among other things, disclosed the compensation the Company was to pay the underwriter and updated the Company’s prospectus with certain information related to the Company’s financial condition and business operations. On November 12, 2015, the SEC declared the post-effective amendment effective. On November 19, 2015 the Company closed its public offering of 4,600,000 shares of the Company’s common stock at $1.00 per share. The Company’s common stock became available for trading on the OTCQB on November 23, 2015, under the symbol PRHR. Activity for the year ended December 31, 2015 included the following: • 4,600,000 shares of common stock were issued under the terms of the public offering; 340,000 at $1.00 per share sold by the Company prior to engaging an underwriter as described above and 4,260,000 shares at $0.90 per share. The Company received gross proceeds of $4,174,000, and incurred offering costs, commissions and expenses related to the offering of $364,999. • In December 2015, 25,000 shares of common stock were issued at $1.00 per share to one accredited investor pursuant to a private placement of the Company’s common stock. (See Note 12) • Subsequent to December 31, 2015, 95,000 shares of common stock were issued at $1.00 per share to one accredited investor pursuant to a private placement of our common stock. (See Note 12) Activity for the year ended December 31, 2014 included the following: • The Company conducted a private placement of its common stock between May and July 2014. Pursuant to the private placement, the Company sold 2,220,003 shares of common stock at $0.50 per share for gross proceeds of $1,110,002 and recognized $12,972 in offering costs for net proceeds of $1,097,030. • In October 2014, the Board of Directors authorized the issuance of 23,438 shares of common stock in connection with the execution of a separation agreement with a former officer of the Company. Preferred Stock As of December 31, 2015, PetroShare had 10,000,000 shares of preferred stock authorized with a par value of $0.01 per share. As of December 31, 2015 and 2014, there were no shares of preferred stock issued or outstanding. Warrants In connection with the Company’s public offering which closed on November 19, 2015 as described in Common Stock

9. STOCK BASED COMPENSATION

9. STOCK BASED COMPENSATION	12 Months Ended
	Dec. 31, 2015
Share-based Compensation [Abstract]
9. STOCK BASED COMPENSATION	During the year ended December 31, 2015, the Board of Directors granted non-qualified options to employees and consultants of the Company under the Company’s Equity Incentive Plan (“Plan”) to acquire 275,000 of PetroShare’s common stock. The options are exercisable at $1.00 and expire three years from the date of grant. A summary of activity under the Plan for the years ended December 31, 2015 and 2014 is as follows: Number of Shares Weighted Average Exercise Price Remaining Contractual Term (Years) Outstanding Options, December 31, 2013 2,000,000 $ 0.25 8.96 Granted - - - Exercised - - - Forfeited - - - Outstanding, December 31, 2014 2,000,000 $ 0.25 7.96 Exercisable, December 31, 2014 2,000,000 $ 0.25 7.96 Outstanding Options, December 31, 2014 2,000,000 $ 0.25 7.96 Granted 275,000 1.00 2.90 Exercised - - - Forfeited - - - Outstanding, December 31, 2015 2,275,000 $ 0.33 6.50 Exercisable, December 31, 2015 2,200,000 $ 0.30 6.72 The fair value of each share-based award was estimated on the date of the grant using the Black-Scholes pricing model that incorporates key assumptions including volatility of 158%-188%, dividend yield of 0%, and risk free interest rates of 0.70% -1.23%. As PetroShare’s common stock has limited In connection with the issuance of the options to purchase its common stock, PetroShare recorded share-based compensation of $191,205 and $nil for the years ended December 31, 2015 and 2014, respectively. Unvested share based compensation amounted to $60,510 and $nil for the years ended December 31, 2015 and 2014, respectively. Subsequent to December 31, 2015, the Company issued 1,125,000 options to purchase its common stock at an exercise price of $1.00 in connection with (1) the appointment of its Chief Financial Officer (250,000 options) and (2) the execution of an employment agreement with its Chief Operating Officer (875,000 options). (See Notes 11 and 12)

10. PROVISION FOR INCOME TAXES

10. PROVISION FOR INCOME TAXES	12 Months Ended
	Dec. 31, 2015
Income Tax Disclosure [Abstract]
10. PROVISION FOR INCOME TAXES	Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. PetroShare has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. No uncertain tax positions have been identified as of December 31, 2015. PetroShare is in a position of cumulative reporting losses for the current and preceding reporting periods. The volatility of energy prices is not readily determinable by management. At this date, this fact pattern does not allow PetroShare to project sufficient sources of future taxable income to offset tax loss carry-forwards and net deferred tax assets. Under these circumstances, it is management’s opinion that the realization of these tax attributes does not reach the “more likely than not criteria” under ASC 740, “Income Taxes.” As a result, PetroShare’s deferred tax assets as of December 31, 2015 and 2014 are subject to a full valuation allowance. Net deferred tax assets and liabilities consist of the following components as of December 31, 2015 and 2014: 2015 2014 Deferred tax assets - current: Exploration costs $ - $ - Deferred tax assets - noncurrent: NOL carryover 2,245,166 1,005,208 Stock based compensation 242,011 175,546 Asset retirement obligation 12,887 11,752 Total deferred tax assets 2,500,064 1,192,506 Deferred tax liabilities - current: Prepaid expenses (6,464 ) (4,185 ) Intangible drilling costs (15,010 ) (10,395 ) Total deferred tax liabilities (21,474 ) (14,580 ) Valuation allowance (2,478,590 ) (1,177,926 ) Net deferred tax assets $ - $ - The income tax provision differs from the amount of income tax determined by applying the US federal tax rate to the pretax loss from continuing operations for the years ended December 31, 2015 and 2014 due to the following: 2015 2014 Tax at statutory federal rate $ (517,948 ) $ (898,505 ) Permanent difference 1,203 801 State taxes, net of federal (46,551 ) (80,754 ) Depletion and impairment (722,959 ) - Change in valuation allowance 1,300,664 968,837 Other (14,909 ) 9,621 Provision (benefit) for income taxes $ - $ - At December 31, 2015, the Company had net operating loss carry-forwards of approximately $6,058,878 that may be offset against future taxable income from the years 2016 through 2035. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. The Company files income tax returns in the US federal jurisdiction and in the state of Colorado. The Company is currently subject to US federal, state and local income tax examinations by tax authorities since inception of the Company.

11. COMMITMENTS AND CONTINGENCI

11. COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Dec. 31, 2015
Commitments And Contingencies
11. COMMITMENTS AND CONTINGENCIES	Operating leases and agreements PetroShare leases its office facilities under a three-year non-cancelable operating lease agreement expiring in June 2016. The following is a schedule by year of future minimum rental payments required under the operating lease agreement. Year ending December 31, Amount 2016 12,810 $ 12,810 Lease expense totaled $25,518 and $23,563 for the years ended December 31, 2015 and December 31, 2014 respectively. Employment agreements On March 1, 2013, PetroShare executed an employment agreement with Frederick J. Witsell, PetroShare’s President. The one-year agreement provided for an annual salary of $150,000 and could be terminated by PetroShare at any time with cause or with 30-days’ notice without cause in which latter case all consideration due under the agreement was payable immediately upon termination. Pursuant to the terms of the agreement, Mr. Witsell’s employment was to continue after the initial term on a year-to-year basis unless terminated pursuant to the terms of the contract. On November 1, 2013, PetroShare executed an employment agreement with Stephen J. Foley, PetroShare’s Chief Executive Officer. The one-year agreement provided for an annual salary of $150,000 and could be terminated by PetroShare at any time with cause or with 30-days’ notice without cause in which latter case the Company was obligated to pay severance payments equal to twelve months of base salary from the date of termination. Pursuant to the terms of the agreement, Mr. Foley’s employment was to continue after the initial term on a year-to-year basis unless terminated pursuant to the terms of the contract. Effective March 1, 2016, the Company entered into amended and restated employment agreements with Messrs. Foley and Witsell. (See Note 12)

12. SUBSEQUENT EVENTS

12. SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2015
Subsequent Events [Abstract]
12. SUBSEQUENT EVENTS	On January 1, 2016, the Company appointed Paul D. Maniscalco as its Chief Financial Officer and William B. Lloyd as its Chief Operating Officer. (See Note 11) On February 25, 2016, the Board of Directors approved a form of amended and restated executive employment in order to provide uniform terms of employment for the Company’s executive officers. Effective March 1, 2016, the Company entered into an amended and restated employment agreement with each Stephen J. Foley and Fredrick J. Witsell. The Company also executed an executive employment agreement with William B. Lloyd as Chief Operating Officer. For each of the foregoing executives, the employment agreements provide for an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms; base compensation in the amount of $156,000 per year; provisions for termination under various circumstances, and payment of severance under certain circumstances. Additionally, Mr. Lloyd was granted an option to purchase up to 875,000 shares of the Company’s common stock at a price of $1.00 per share. The option vests as follows: (i) 125,000 shares on the effective date of his appointment, and (ii) 750,000 shares on January 1, 2017, provided that Mr. Lloyd remains an employee or consultant to the Company during that time. The options are subject to the terms and conditions of the Company’s Equity Incentive Plan. (See Note 9) On February 24, 2016, the Company entered into the First Amendment to Revolving Line of Credit Facility Agreement (“First Amendment”) with Providence. The First Amendment extended the maturity date of any borrowing under the line of credit for one year to June 1, 2018. All other terms of the line of credit remain the same. (See Note 5) Subsequent to December 31, 2015, 95,000 shares of common stock were issued at $1.00 per share to one accredited investor pursuant to a private placement of the Company’s common stock. (See Note 8) Subsequent to December 31, 2015, the Company issued 1,125,000 options to purchase its common stock at an exercise price of $1.00. (See Notes 9 and 11) Subsequent to December 31, 2015, the Company continued negotiation with an independent third party pursuant to a non-binding letter of intent executed on January 16, 2016 to acquire approximately 300 net acres of oil and gas leases and one producing well within the Company’s Todd Creek Farms prospect area. (See Note 4)

13. UNAUDITED CRUDE OIL AND NAT

13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION	12 Months Ended
	Dec. 31, 2015
Unaudited Crude Oil And Natural Gas Reserves Information
13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION	The Company did not obtain a reserve report from an independent petroleum engineer at December 31, 2015. At December 31, 2014, the Company had ascribed a nominal value to the standardized measure of estimated discounted future net cash flows related to its reserves ($4,701). The market for crude oil and natural gas has been volatile during the year ended December 31, 2015, resulting in the 12-month average price of crude oil on the first day of each month to be $50.28 per barrel (WTI). As the result of volatile crude oil prices coupled with nominal estimated reserve volumes, the Company’s management deemed that is was not economically prudent to obtain a reserve report for the year December 31, 2015. Based on management’s analysis, as of December 31, 2015, the Company has ascribed no value related to proved reserves. As of December 31 2014, 100% of the estimated oil and gas reserves presented herein were derived from the report prepared by independent petroleum engineering firm Cawley, Gillespie & Associates, Inc., dated March 3, 2015. Proved developed reserves are reserves expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are reserves expected to be recovered through wells yet to be completed. Analysis of Changes in Proved Reserves. Proved Reserves December 31, 2015 December 31, 2014 Crude Oil Natural Gas Crude Oil Natural Gas (Bbls) (Mcf) (Bbls) (Mcf) Proved Reserves: Balance, beginning of year 159 - - - Revisions of previous estimates (122 ) - - - Extensions and discoveries (1) - - 250 - Sales of reserves in place - - - - Improved recovery - - - - Purchase of reserves - - - - Production (37 ) - (91 ) - Balance, end of year - - 159 - Proved developed reserves: Balance, beginning of year (2) - - - - Balance, end of year - - - - Proved undeveloped reserves: Balance, beginning of year (2) - - - - Balance, end of year - - - - ________________________ (1) Extensions and discoveries – Reflect the drilling and ultimate completion of two wells in November and December 2014. (2) The Company had no proved developed or proved undeveloped reserves as of December 31, 2015, 2014, or 2013. The table below sets forth a standardized measure of the estimated discounted future net cash flows attributable to the Company’s proved crude oil and natural gas reserves. Estimated future cash inflows were computed by applying the 12-month average price of crude oil and natural gas on the first day of each month to the estimated future production of proved crude oil and natural gas reserves of $94.99 per barrel and $4.35 per MMBtu, respectively, as of December 31, 2014. The Company had no reserves in place as of December 31, 2015. The future production costs represent the estimated future expenditures to be incurred in producing and developing the proved reserves, assuming continuation of existing economic conditions. Discounting the annual net cash flows at 10% illustrates the impact of timing on these future cash flows. Standardized Measure of Estimated Discounted Future Net Cash Flows December 31, 2015 2014 Future cash inflows $ 4,701 $ 13,361 Future cash outflows: Production cost (2,633 ) (7,782 ) Development cost - - Future income tax - - Future net cash flows 2,068 5,579 Adjustment to discount future annual net cash flows at 10% (2,068 ) (878 ) Standardized measure of discounted future net cash flows $ - $ 4,701 The following table summarizes the principal factors comprising the changes in the standardized measure of estimated discounted net cash flows for the year ended December 31, 2015 and 2014: Changes in Standardized Measure of Estimated Discounted Future Net Cash Flows 2015 2014 Standardized measure, beginning of year $ 4,701 $ - Sales of crude oil and natural gas, net of production cost (2,633 ) - Net change in sales prices, net of production cost - - Discoveries, extensions and improved recoveries, net of future development cost - 4,701 Change in future development costs - - Development costs incurred during the period that reduced future development cost - - Sales of reserves in place - - Revisions of quantity estimates (2,068 ) - Accretion of discount - - Net change in income tax - - Purchase of reserves - - Changes in timing of rates of production - - Standardized measure, end of year $ - $ 4,701

2. BASIS OF PRESENTATION AND 21

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
Basis of Presentation	The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Use of Estimates	The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Loss Per Common Share	(Loss) per share attributable to PetroShare shareholders is computed by dividing net (loss) by the weighted average number of common shares outstanding during the period. Diluted (loss) per share attributable to PetroShare shareholders is computed by dividing the net (loss) by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. The Company excluded potentially dilutive securities including; 2,200,000 stock options and 2,000,000 stock options for purposes of calculating diluted net loss per share, as of December 31, 2015 and 2014, respectively, as the effect of their inclusion would be anti-dilutive.
Cash and Cash Equivalents	PetroShare considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. PetroShare’s bank accounts periodically exceed federally insured limits. PetroShare maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote.
Revenue Recognition	We recognize revenue from the sale of crude oil and natural gas when production is delivered to, and title has transferred to, the purchaser and to the extent the selling price is reasonably determinable. In general, settlements for hydrocarbon sales may occur after the month in which the oil, natural gas or other hydrocarbon products were produced. We may estimate and accrue for the value of these sales using information available to us at the time our financial statements are generated. Differences are reflected in the accounting period that payments are received from the purchaser.
Accounts Receivable - Crude oil and natural gas	Accounts receivable – Crude oil and natural gas consists of amounts receivable from crude oil sold from the Company’s well interests. All of the Company’s accounts receivable is due from one party. Management continually monitors accounts receivable for collectability.
Accounts Receivable - Joint interest billing	Accounts receivable – Joint interest billing consists primarily of joint interest billings, which are recorded at the invoiced and to-be-invoiced amounts. Collateral is not required for such receivables, nor is interest charged on past due balances. Joint interest billing receivables are collateralized by the pro rata revenue attributable to the joint interest holders and further by the interest itself. As of December 31, 2015, three partners totaled 100% of the Company’s total joint interest billing receivable with no allowance for collectability indicated during the period. As of December 31, 2014, three partners totaled 100% of the Company’s total joint interest billing receivables with no allowance for collectability indicated during the year.
Deferred Offering Costs	The Company defers as other current assets the direct incremental costs of raising capital through equity offerings until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated. As of December 31, 2015, the Company’s deferred offering costs totaled $nil, with $109,965 recorded as of December 31, 2014.
Crude Oil and Natural Gas Properties	Proved. PetroShare follows the successful efforts method of accounting for its crude oil and natural gas properties. Under this method of accounting, all property acquisition costs and development costs are capitalized when incurred and depleted on a units-of-production basis over the remaining life of proved reserves and proved developed reserves, respectively. Costs of drilling exploratory wells are initially capitalized but are charged to expense if the well is determined to be unsuccessful. PetroShare assesses its proved crude oil and natural gas properties for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test compares estimated undiscounted future net cash flows to the assets’ net book value. If the net capitalized costs exceed estimated future net cash flows, then the cost of the property is written down to fair value. Fair value for crude oil and natural gas properties is generally determined based on estimated discounted future net cash flows. Impairment expense for proved properties is reported in exploration and impairment expense. Net carrying values of retired, sold or abandoned properties that constitute less than a complete unit of depreciable property are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in the statement of operations. Gains or losses from the disposal of complete units of depreciable property are recognized in earnings (loss). Unproved. Unproved properties consist of costs to acquire undeveloped leases as well as costs to acquire unproved reserves. Undeveloped lease costs and unproved reserve acquisitions are capitalized, and individually insignificant unproved properties are amortized on a composite basis, based on past success, past experience and average lease-term lives. PetroShare evaluates significant unproved properties for impairment based on remaining lease term, drilling results, reservoir performance, seismic interpretation or future plans to develop acreage. When successful wells are drilled on undeveloped leaseholds, unproved property costs are reclassified as proved properties and depleted on a unit-of-production basis. Impairment expense for unproved properties is reported in exploration and impairment expense. Exploratory. Geological and geophysical costs, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Costs of seismic studies that are utilized in development drilling within an area of proved reserves are capitalized as development costs. Amounts of seismic costs capitalized are based on only those blocks of data used in determining development well locations. To the extent that a seismic project covers areas of both developmental and exploratory drilling, those seismic costs are proportionately allocated between development costs and exploration expense. Costs of drilling exploratory wells are initially capitalized, pending determination of whether the well contains proved reserves. If an exploratory well does not contain proved reserves, the costs of drilling the well and other associated costs are charged to expense. Costs incurred for exploratory wells that contain reserves, which cannot yet be classified as proved, continue to be capitalized if (a) the well has found a sufficient quantity of reserves to justify completion as a producing well, and (b) the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if the Company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well costs, net of any salvage value, are expensed.
Property, Plant and Equipment	Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed when incurred.
Asset Impairment	Proved crude oil and natural gas properties are reviewed for impairment on a field-by-field basis each quarter, or when events and circumstances indicate a possible decline in the recoverability of the carrying value of such field. The estimated future undiscounted cash flows expected in connection with the field are compared to the carrying amount of the field to determine if the carrying amount is recoverable. If the carrying amount of the field exceeds its estimated undiscounted future cash flows, the carrying amount of the field is reduced to its estimated fair value. Due to the unavailability of relevant comparable market data, a discounted cash flow method is used to determine the fair value of proved properties. The discounted cash flow method utilizes the most recent third party reserve estimation report and estimates future cash flows based on management’s estimates of future crude oil and natural gas production, commodity prices based on commodity futures price strips, operating and development costs, and a risk-adjusted discount rate. The Company recognized impairment expense of $154,776 during the year ended December 31, 2015, while expense of $1,236,842 was recorded in 2014.
Depreciation, Depletion and Amortization	Depreciation, depletion and amortization of capitalized drilling and development costs of producing crude oil and natural gas properties, including related support equipment and facilities, are computed using the unit-of-production method on a field basis based on total estimated proved developed crude oil and natural gas reserves. Amortization of producing leaseholds is based on the unit-of-production method using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable crude oil and natural gas reserves are established based on estimates made by the Company and external independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated depreciation, depletion and amortization are eliminated from the accounts and the resulting gain or loss, if any, is recognized. Unit of production rates are revised whenever there is an indication of a need, but at least in conjunction with annual reserve reports. Revisions are accounted for prospectively as changes in accounting estimates. Depletion expense for the year ended December 31, 2015 was $9,898, and expense of $714,160 was recorded in 2014.
Drilling Advances	The Company’s drilling advances consist of cash provided to the Company from its joint interest partners for planned drilling activities. Advances are applied against the joint interest partner’s share of expenses incurred. As of December 31, 2015 and 2014, drilling advances totaled $nil and $221,834, respectively.
Income Taxes	PetroShare recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered. PetroShare provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Asset Retirement Obligation	Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance with ASC 410, “Accounting for Asset Retirement Obligations.” The estimated fair value of the future costs associated with dismantlement, abandonment and restoration of crude oil and natural gas properties is recorded generally upon the completion of a well. The net estimated costs are discounted to present values using a risk adjusted rate over the estimated economic life of the crude oil and natural gas properties. Such costs are capitalized as part of the related asset. The asset is depleted on the units-of-production method. The liability is periodically adjusted to reflect: (1) new liabilities incurred; (2) liabilities settled during the period; (3) accretion expense; and (4) revisions to estimated future cash flow requirements. The accretion expense is recorded as a component of depreciation, depletion, accretion and amortization expense in the accompanying statements of operations.
Share Based Compensation	PetroShare uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards in accordance with ASC 718, “Compensation.” The option-pricing model requires the input of highly subjective assumptions, including the option’s expected life, the price volatility of the underlying stock, and the estimated dividend yield of the underlying stock. PetroShare’s expected term represents the period that stock-based awards are expected to be outstanding and is determined based on the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. As there was insufficient historical data available to ascertain a forfeiture rate, the plain vanilla method was applied in calculating the expected term of the options. The Company’s common stock has limited
New Accounting Pronouncements	Recently Issued From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers." The standard requires an entity to recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 will supersede most of the existing revenue recognition requirements in US GAAP when it becomes effective and is required to be adopted using one of two retrospective application methods. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers – Deferral of the Effective Date," In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)." The new guidance addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The standard is effective for the annual period beginning after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of the new guidance on its financial statements.
Recent Accounting Pronouncements Not Yet Adopted	Various accounting standards and interpretations were issued in 2015 with effective dates subsequent to December 31, 2015. We have evaluated the recently issued accounting pronouncements that are effective in 2016 and believe that none of them will have a material effect on our financial position, results of operations or cash flows when adopted. Further, the Company is monitoring the joint standard-setting efforts of the Financial Accounting Standards Board and the International Accounting Standards Board. There are a large number of pending accounting standards that are being targeted for completion in 2016 and beyond, including, but not limited to, standards relating to revenue recognition, accounting for leases, fair value measurements, accounting for financial instruments, disclosure of loss contingencies and financial statement presentation. Because these pending standards have not yet been finalized, at this time the Company is not able to determine the potential future impact that these standards will have, if any, on its financial position, results of operations or cash flows.

3. PROPERTY, PLANT AND EQUIPM22

3. PROPERTY, PLANT AND EQUIPMENT (Tables)	12 Months Ended
	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Property and equipment	December 31, 2015 December 31, 2014 Property, Plant and Equipment $ 4,385 $ 4,385 Accumulated Depreciation (2,557 ) (1,594 ) Total $ 1,828 $ 2,791

4. CRUDE OIL AND NATURAL GAS 23

4. CRUDE OIL AND NATURAL GAS PROPERTIES (Tables)	12 Months Ended
	Dec. 31, 2015
Extractive Industries [Abstract]
Aggregate Capitalized Costs	December 31, 2015 December 31, 2014 Proved $ 724,058 $ 718,861 Wells in progress 40,505 23,352 Unproved 715,594 - Less: Accumulated depletion, depreciation and impairment (724,058 ) (714,160 ) Total $ 756,099 $ 28,053
Costs Incurred in Crude Oil and Natural Gas Activities	December 31, 2015 December 31, 2014 Exploration costs $ 10,407 $ - Development costs 177,126 532,279 Acquisition of properties Proved - 202,306 Unproved 715,595 - Total $ 903,128 $ 734,585

6. ASSET RETIREMENT OBLIGATION

6. ASSET RETIREMENT OBLIGATION (Tables)	12 Months Ended
	Dec. 31, 2015
Asset Retirement Obligation Disclosure [Abstract]
Asset retirement obligation	December 31, 2015 December 31, 2014 Asset retirement obligation, beginning of year $ 31,715 $ - Liabilities settled - - Liabilities incurred - 30,880 Revisions in estimated liabilities - - Accretion 3,061 835 Asset retirement obligation, end of year $ 34,776 $ 31,715

7. ACCOUNTS PAYABLE AND ACCRU25

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)	12 Months Ended
	Dec. 31, 2015
Accounts Payable And Accrued Liabilities Tables
Accounts Payable and Accrued Liabilities	December 31, 2015 December 31, 2014 Trade payables and accrued liabilities $ 263,988 $ 86,826 Accrued interest payable 48,602 - Drilling advances - 221,834 Crude oil and natural gas distributions payable 949 26,458 Total $ 313,539 $ 335,118

9. STOCK BASED COMPENSATION (Ta

9. STOCK BASED COMPENSATION (Tables)	12 Months Ended
	Dec. 31, 2015
Stock Based Compensation Tables
Stock option activity	Number of Shares Weighted Average Exercise Price Remaining Contractual Term (Years) Outstanding Options, December 31, 2013 2,000,000 $ 0.25 8.96 Granted - - - Exercised - - - Forfeited - - - Outstanding, December 31, 2014 2,000,000 $ 0.25 7.96 Exercisable, December 31, 2014 2,000,000 $ 0.25 7.96 Outstanding Options, December 31, 2014 2,000,000 $ 0.25 7.96 Granted 275,000 1.00 2.90 Exercised - - - Forfeited - - - Outstanding, December 31, 2015 2,275,000 $ 0.33 6.50 Exercisable, December 31, 2015 2,200,000 $ 0.30 6.72

10. PROVISION FOR INCOME TAXES

10. PROVISION FOR INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2015
Provision For Income Taxes Tables
Components of Deferred Tax Assets and Liabilities	2015 2014 Deferred tax assets - current: Exploration costs $ - $ - Deferred tax assets - noncurrent: NOL carryover 2,245,166 1,005,208 Stock based compensation 242,011 175,546 Asset retirement obligation 12,887 11,752 Total deferred tax assets 2,500,064 1,192,506 Deferred tax liabilities - current: Prepaid expenses (6,464 ) (4,185 ) Intangible drilling costs (15,010 ) (10,395 ) Total deferred tax liabilities (21,474 ) (14,580 ) Valuation allowance (2,478,590 ) (1,177,926 ) Net deferred tax assets $ - $ -
Income Tax Provision	2015 2014 Tax at statutory federal rate $ (517,948 ) $ (898,505 ) Permanent difference 1,203 801 State taxes, net of federal (46,551 ) (80,754 ) Depletion and impairment (722,959 ) - Change in valuation allowance 1,300,664 968,837 Other (14,909 ) 9,621 Provision (benefit) for income taxes $ - $ -

11. COMMITMENTS AND CONTINGEN28

11. COMMITMENTS AND CONTINGENCIES (Tables)	12 Months Ended
	Dec. 31, 2015
Commitments And Contingencies Tables
Operating Lease Agreement Schedule	Year ending December 31, Amount 2016 12,810 $ 12,810

13. UNAUDITED CRUDE OIL AND N29

13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION (Tables)	12 Months Ended
	Dec. 31, 2015
Unaudited Crude Oil And Natural Gas Reserves Information Tables
Proved Reserves	Proved Reserves December 31, 2015 December 31, 2014 Crude Oil Natural Gas Crude Oil Natural Gas (Bbls) (Mcf) (Bbls) (Mcf) Proved Reserves: Balance, beginning of year 159 - - - Revisions of previous estimates (122 ) - - - Extensions and discoveries (1) - - 250 - Sales of reserves in place - - - - Improved recovery - - - - Purchase of reserves - - - - Production (37 ) - (91 ) - Balance, end of year - - 159 - Proved developed reserves: Balance, beginning of year (2) - - - - Balance, end of year - - - - Proved undeveloped reserves: Balance, beginning of year (2) - - - - Balance, end of year - - - -
Standardized Measure of Estimated Discounted Future Net Cash Flows	December 31, 2015 2014 Future cash inflows $ 4,701 $ 13,361 Future cash outflows: Production cost (2,633 ) (7,782 ) Development cost - - Future income tax - - Future net cash flows 2,068 5,579 Adjustment to discount future annual net cash flows at 10% (2,068 ) (878 ) Standardized measure of discounted future net cash flows $ - $ 4,701
Changes in Standardized Measure of Estimated Discounted Future Net Cash Flows	2015 2014 Standardized measure, beginning of year $ 4,701 $ - Sales of crude oil and natural gas, net of production cost (2,633 ) - Net change in sales prices, net of production cost - - Discoveries, extensions and improved recoveries, net of future development cost - 4,701 Change in future development costs - - Development costs incurred during the period that reduced future development cost - - Sales of reserves in place - - Revisions of quantity estimates (2,068 ) - Accretion of discount - - Net change in income tax - - Purchase of reserves - - Changes in timing of rates of production - - Standardized measure, end of year $ - $ 4,701

3. PROPERTY, PLANT AND EQUIPM30

3. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Abstract]
Property, Plant and Equipment	$ 4,385	$ 4,385
Accumulated Depreciation	(2,557)	(1,594)
Total	$ 1,828	$ 2,791

3. PROPERTY, PLANT AND EQUIPM31

3. PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property Plant And Equipment Details Narrative
Depreciation expense	$ 963	$ 963

4. CRUDE OIL AND NATURAL GAS 32

4. CRUDE OIL AND NATURAL GAS PROPERTIES (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Extractive Industries [Abstract]
Proved	$ 724,058	$ 718,861
Wells in progress	40,505	23,352
Unproved	715,594	0
Less: Accumulated depletion, depreciation and impairment	(724,058)	(714,160)
Total	$ 756,099	$ 28,053

4. CRUDE OIL AND NATURAL GAS 33

4. CRUDE OIL AND NATURAL GAS PROPERTIES (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Extractive Industries [Abstract]
Exploration costs	$ 10,407
Development costs	$ 177,126	$ 532,279
Acquisition of properties
Proved		$ 202,306
Unproved	$ 715,595
Total	$ 903,128	$ 734,585

6. ASSET RETIREMENT OBLIGATIO34

6. ASSET RETIREMENT OBLIGATION (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Asset Retirement Obligation Disclosure [Abstract]
Asset retirement obligation, beginning of year	$ 31,715
Liabilities settled
Liabilities incurred		$ 30,880
Revisions in estimated liabilities
Accretion	$ 3,061	$ 835
Asset retirement obligation, end of year	$ 34,776	$ 31,715

7. ACCOUNTS PAYABLE AND ACCRU35

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Accounts Payable And Accrued Liabilities Details
Trade payables and accrued liabilities	$ 263,988	$ 86,826
Accrued interest payable	$ 48,602
Drilling advances		221,834
Crude oil and natural gas distributions payable	$ 949	26,458
Total	$ 313,539	$ 335,118

9. STOCK BASED COMPENSATION (De

9. STOCK BASED COMPENSATION (Details) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Stock Based Compensation Details
Outstanding Number of Options, Beginning balance	2,000,000	2,000,000
Options granted	275,000
Options exercised
Options forfeited
Outstanding Number of Options, Ending balance	2,275,000	2,000,000
Exercisable, end of period	2,200,000	2,000,000
Outstanding, beginning, Weighted-Average Exercise Price	$ 0.25	$ 0.25
Options granted	$ 1
Options exercised
Options forfeited
Outstanding, ending, Weighted-Average Exercise Price	$ 0.33	$ 0.25
Exercisable Weighted Average Exercise Price	$ 0.30	$ .25
Contractual Life of Outstanding Options, beginning	7 years 11 months 16 days	8 years 11 months 16 days
Contractual Life of Outstanding Options, granted	2 years 10 months 24 days
Contractual Life of Outstanding Options, ending	6 years 6 months	7 years 11 months 16 days
Exercisable Average Remaining Contractual Life (in years)	6 years 8 months 19 days	7 years 11 months 16 days

10. PROVISION FOR INCOME TAXE37

10. PROVISION FOR INCOME TAXES (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets - current:
Exploration costs
Deferred tax assets - noncurrent:
NOL carryover	$ 2,245,166	$ 1,005,208
Stock based compensation	242,011	175,546
Asset retirement obligation	12,887	11,752
Total deferred tax assets	2,500,064	1,192,506
Deferred tax liabilities - current:
Prepaids expenses	(6,464)	(4,185)
Intangible drilling costs	(15,010)	(10,395)
Total deferred tax liabilities	(21,474)	(14,580)
Valuation allowance	$ (2,478,590)	$ (1,177,926)
Net deferred tax assets

10. PROVISION FOR INCOME TAXE38

10. PROVISION FOR INCOME TAXES (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Provision For Income Taxes Details 1
Tax at statutory federal rate	$ (517,948)	$ (898,505)
Permanent difference	1,203	801
State taxes, net of federal	(46,551)	$ (80,754)
Depletion and impairment	(722,959)
Change in valuation allowance	1,300,664	$ 968,837
Other	$ (14,909)	$ 9,621
Provision (benefit) for income taxes

11. COMMITMENTS AND CONTINGEN39

11. COMMITMENTS AND CONTINGENCIES (Details)	Dec. 31, 2015USD ($)
Commitments And Contingencies Details
2,016	$ 12,810
Total	$ 12,810

13. UNAUDITED CRUDE OIL AND N40

13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION (Details) - bbl		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014
Crude Oil (Bbls)
Proved Reserves:
Balance, beginning of year		159
Revisions of previous estimates		(122)
Extensions and discoveries	[1]		250
Sales of reserves in place
Improved recovery
Purchase of reserves
Production		(37)	(91)
Balance, end of year			159
Balance, beginning of year	[2]
Balance, end of year				[2]
Proved undeveloped reserves:
Balance, beginning of year	[2]
Balance, end of year				[2]
Natural Gas (Mcf)
Proved Reserves:
Balance, beginning of year
Revisions of previous estimates
Extensions and discoveries	[1]
Sales of reserves in place
Improved recovery
Purchase of reserves
Production
Balance, end of year
Balance, beginning of year	[2]
Balance, end of year				[2]
Proved undeveloped reserves:
Balance, beginning of year	[2]
Balance, end of year				[2]
[1]	Extensions and discoveries - Reflect the drilling and ultimate completion of two wells in November and December 2014.
[2]	The Company had no proved developed or proved undeveloped reserves as of December 31, 2015, 2014, or 2013.

13. UNAUDITED CRUDE OIL AND N41

13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION (Details 1) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Unaudited Crude Oil And Natural Gas Reserves Information Details 1
Future cash inflows	$ 4,701	$ 13,361
Future cash outflows:
Production cost	$ (2,633)	$ (7,782)
Development cost
Future income tax
Future net cash flows	$ 2,068	$ 5,579
Adjustment to discount future annual net cash flows at 10%	$ (2,068)	(878)
Standardized measure of discounted future net cash flows		$ 4,701

13. UNAUDITED CRUDE OIL AND N42

13. UNAUDITED CRUDE OIL AND NATURAL GAS RESERVES INFORMATION (Details 2) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Unaudited Crude Oil And Natural Gas Reserves Information Details 2
Standardized measure, beginning of year	$ 4,701
Sales of crude oil and natural gas, net of production cost	$ (2,633)
Net change in sales prices, net of production cost
Discoveries, extensions and improved recoveries, net of future development cost		$ 4,701
Change in future development costs
Development costs incurred during the period that reduced future development cost
Sales of reserves in place
Revisions of quantity estimates	$ (2,068)
Accretion of discount
Net change in income tax
Purchase of reserves
Changes in timing of rates of production
Standardized measure, end of year		$ 4,701