Arête Industries (ARET) 10-Q 6 Feb 17 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	6 Months Ended
	Jun. 30, 2016	Feb. 06, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	ARETE INDUSTRIES INC
Entity Central Index Key	820,901
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2
Trading Symbol	ARET
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,642,080
Entity Public Float		$ 0

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current Assets:
Cash	$ 265,778	$ 521,666
Accounts receivable - oil and gas sales	20,960	2,539
Subscription receivable		105,000
Prepaid expenses and other	25,345	32,554
Total Current Assets	312,083	661,759
Oil and gas properties, at cost, successful efforts method:
Proved properties	8,431,505	8,683,273
Unevaluated properties	154,977	154,836
Furniture and equipment	22,522	22,522
Total property and equipment	8,609,004	8,860,631
Less accumulated depreciation, depletion and amortization	(3,496,522)	(3,245,522)
Net Property and Equipment	5,112,482	5,615,109
TOTAL ASSETS	5,424,565	6,276,868
Accounts payable:
Trade accounts payable	130,987	64,896
Accounts payable - DNR Oil & Gas, Inc.	267,259	501,281
Accounts payable - directors and affiliates	31,398
Dividends payable	5,934
Dividends payable - directors and affiliates	41,536
Accrued interest expense	2,630	2,532
Accrued interest expense - directors and affiliates	14,074	9,442
Notes and advances payable - current portion:
Notes and advances payable	253,854	989,853
Notes and advances payable - directors and affiliates	134,354	13,152
Current portion of asset retirement obligations	419,094	409,621
Other accrued costs and expenses	101,077	68,577
Total Current Liabilities	1,402,197	2,059,354
Notes and advances payable, net of current portion:
Notes and advances payable	919,976	173,519
Notes and advances payable - Directors and affiliates	23,617	151,379
Asset retirement obligations, net of current portion	623,913	585,576
Total Long-Term Liabilities	1,567,506	910,474
Total Liabilities	2,969,703	2,969,828
Stockholders' Equity:
Common stock, no par value; 499,000,000 shares authorized, 14,642,080 and 14,295,413 issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	21,531,569	21,502,635
Accumulated deficit	(21,796,707)	(20,865,595)
Total Stockholders' Equity	2,454,862	3,307,040
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	5,424,565	6,276,868
Series A1 Preferred Stock [Member]
Stockholders' Equity:
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares: Series 1; 30,000 shares authorized, none issued and outstanding. Series 2; authorized 2,500 shares, 272 and 267 shares issued and outstanding in 2016 and 2015, respectively, liquidation preference $2,767,470 at June 30, 2016.
Series A2 Preferred Stock [Member]
Stockholders' Equity:
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares: Series 1; 30,000 shares authorized, none issued and outstanding. Series 2; authorized 2,500 shares, 272 and 267 shares issued and outstanding in 2016 and 2015, respectively, liquidation preference $2,767,470 at June 30, 2016.	$ 2,720,000	$ 2,670,000

CONSOLIDATED BALANCE SHEETS (U3

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Convertible preferred stock, face value	$ 10,000	$ 10,000
Convertible preferred stock, shares authorized	1,000,000	1,000,000
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	499,000,000	499,000,000
Common stock, shares issued	12,558,459	14,295,413
Common stock, shares outstanding	12,558,459	14,295,413
Series A1 Preferred Stock [Member]
Convertible preferred stock, face value	$ 10,000	$ 10,000
Convertible preferred stock, shares authorized	30,000	30,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0
Convertible preferred stock, liquidation preference	$ 0	$ 0
Series A2 Preferred Stock [Member]
Convertible preferred stock, face value	$ 10,000	$ 10,000
Convertible preferred stock, shares authorized	2,500	2,500
Convertible preferred stock, shares issued	272	267
Convertible preferred stock, shares outstanding	272	267
Convertible preferred stock, liquidation preference	$ 2,767,470	$ 2,670,000

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues:
Oil sales	$ 260,574	$ 200,029	$ 414,557	$ 387,178
Natural gas sales	17,200	34,531	45,418	90,047
Royalty revenues	379	3,000	1,277	3,941
Sale of oil and natural gas properties				27,120
Total revenues	278,153	237,560	461,252	508,286
Oil and gas producing activities:
Lease operating expenses	204,897	198,069	487,455	414,868
Production taxes	21,953	19,374	36,067	37,799
Depreciation, depletion, amortization and accretion	120,268	133,988	298,810	341,957
Impairment			252,000
Gas gathering:
Operating expenses				1,406
Depreciation		11,055		22,110
General and administrative expenses:
Director fees	10,000	12,000	20,000	22,000
Investor relations	5,406	7,465	7,313	10,628
Legal, auditing and professional fees	56,713	61,290	85,884	73,855
Consulting fees executive services-Related Parties	24,232	36,000	40,732	83,400
Other administrative expenses	8,006	25,285	23,172	44,439
Depreciation		143		285
Total operating expenses	451,475	504,669	1,251,433	1,052,747
Operating loss	(173,322)	(267,109)	(790,181)	(544,461)
Interest income (expense), net	(22,237)	(31,522)	(44,952)	(58,680)
Total other expense	(22,237)	(31,522)	(44,952)	(58,680)
Loss before income taxes	(195,559)	(298,631)	(835,133)	(603,141)
Income tax benefit (expense)
Net loss attributable to Arete Industries, Inc.	(195,559)	(298,631)	(835,133)	(603,141)
Net Income Applicable to Common Stockholders:
Net loss	(195,559)	(298,631)	(835,133)	(603,141)
Preferred stock dividends declared	(47,470)		(95,979)
Net income (loss) applicable to common stockholders	$ (243,029)	$ (298,631)	$ (931,112)	$ (603,141)
Earnings (Loss) Per Share Applicable to Common Stockholders:
Basic	$ (0.02)	$ (0.02)	$ (0.06)	$ (0.05)
Diluted	$ (0.02)	$ (0.02)	$ (0.06)	$ (0.05)
Weighted Average Number of Common Shares Outstanding:
Basic	14,469,700	12,753,000	14,382,550	12,732,000
Diluted	14,469,700	12,753,000	14,382,550	12,732,000

CONDENSED STATEMENTS OF STOCKHO

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)	Preferred Class A Stock	Common Stock	Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2014		$ 21,294,887	$ (16,118,542)	$ 5,176,345
Beginning Balance, in Shares at Dec. 31, 2014		12,558,459
Common Stock Issued for Services - Related Parties		$ 32,516		32,516
Common Stock Issued for Services - Related Parties, in Shares		206,666
Common Stock Issued for Directors Fees		$ 75,232		75,232
Common Stock Issued for Directors Fees, in Shares		530,288
Issuance of common stock for oil and gas acquisition		$ 100,000		100,000
Issuance of common stock for oil and gas acquisition, in Shares		1,000,000
Issuance of Preferred stock Series A Two	$ 1,770,000			1,770,000
Issuance of Preferred stock Series A Two, in Shares	177
Preferred stock issued for settlement with a related party	$ 900,000			900,000
Preferred stock issued for settlement with a related party, in Shares	90
Net loss			(4,747,053)	(4,747,053)
Ending Balance at Dec. 31, 2015	$ 2,670,000	$ 21,502,635	(20,865,595)	3,307,040
Ending Balance, in Shares at Dec. 31, 2015	267	14,295,413
Common Stock Issued for Services - Related Parties		$ 25,334		25,334
Common Stock Issued for Services - Related Parties, in Shares		316,667
Issuance of common stock related to notes payable		$ 3,600		3,600
Issuance of common stock related to notes payable, in shares		30,000
Issuance of Preferred stock Series A Two	$ 50,000			50,000
Issuance of Preferred stock Series A Two, in Shares	5
Preferred stock dividends			(95,979)	(95,979)
Net loss			(835,133)	(835,133)
Ending Balance at Jun. 30, 2016	$ 2,720,000	$ 21,531,569	$ (21,796,707)	$ 2,454,862
Ending Balance, in Shares at Jun. 30, 2016	272	14,642,080

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flows from Operating Activities:
Net income	$ (835,133)	$ (603,141)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	251,000	329,717
Accretion of discount on asset retirement obligations	47,810	34,635
Gain on sale of oil and gas properties		(27,120)
Common stock issued in exchange for services	25,334	28,500
Impairment expense	252,000
Changes in operating assets and liabilities:
Accounts receivable	(18,421)	86,601
Prepaid expenses and other	7,209	13,467
Accounts payable	66,091	29,496
Accounts payable - related parties and director's fees	31,398
Accounts payable - DNR Oil & Gas, Inc.	(234,022)
Other accrued expenses and accrued interest	37,230	78,754
Net cash provided by (used in) operating activities	(369,504)	(29,091)
Cash Flows from Investing Activities:
Capital expenditures for property and equipment	(373)	(93,116)
Proceeds from sale of oil and gas properties		50,000
Net cash provided by (used in)investing activities	(373)	(43,116)
Cash Flows from Financing Activities:
Proceeds from notes payable	125,500	60,000
Principal payments on notes payable	(118,002)	(12,270)
Proceeds received from subscription receivable	105,000
Preferred stock dividends paid	(48,509)
Net proceeds received from issuance of Series A Two Preferred Stock	50,000
Net cash (used in) financing activities	113,989	47,730
Net increase (decrease) in cash and equivalents	(255,888)	(24,477)
Cash and equivalents, beginning of year	521,666	30,755
Cash and equivalents, end of year	265,778	6,278
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	19,219	17,067
Accrued dividends	47,470
Common stock issued for loan closing costs	$ 3,600

Organization and Nature of Oper

Organization and Nature of Operations	6 Months Ended
	Jun. 30, 2016
Organization And Nature Of Operations
Organization and Nature of Operations	Note 1 - Organization and Nature of Operations Arête Industries, Inc. ("Arête" or the "Company"), is a Colorado corporation that was incorporated on July 21, 1987. The Company seeks to focus on acquiring interests in traditional oil and gas ventures, and seek properties that offer profit potential from overlooked and by-passed reserves of oil and natural gas, which may include shut-in wells, in-field development, stripper wells, re-completion and re-working projects. In addition, the Company's strategy includes purchase and sale of acreage prospective for oil and natural gas and seeking to obtain cash flow from the sale and farm out of such prospects.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies
Summary of Significant Accounting Policies	Note 2 - Summary of Significant Accounting Policies Basis of presentation These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and accounting principles generally accepted in the United States ("GAAP") for interim financial information. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to financial statements included in Arête's Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of normal recurring accruals necessary for a fair presentation of the financial position as of June 30, 2016, and December 31, 2015, and the results of operations, changes in stockholders' equity, and cash flows for the quarters ended June, 30, 2016, and 2015. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for a full year. The Company's 2015 Annual Report on Form 10-K includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. In connection with the preparation of its unaudited condensed financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2016, through the filing date of this report. Liquidity and Management's Plans The Company has incurred net operating losses during the six months ended June 30, 2016, and for the fiscal year ended December 31, 2015. The Company also has negative working capital at June 30, 2016, and is currently in default with one of its creditors for which it has a note payable. This history of operating losses, negative working capital and defaults, along with low commodity prices, may adversely affect the Company's ability to access the capital it needs to continue operations on terms acceptable to the Company when such capital is needed. However, due to the Company's limited capital raise (see Note 6 - Stock transactions and preferred stock dividends), its entry into extensions of some of its notes payable to long-term debt (see Note 7 - Notes and advances payable) and the acquisition of additional producing wells and properties at the end of 2015, the Company believes that it can raise additional capital to fund its current operations over, at least 12 months from the date of this filing. The Company's ability to continue as a going concern is dependent upon its ability to secure other sources of financing and attain profitable operations. The Company continues to pursue additional sources of financing but there can be no assurance that such financing will be completed on terms favorable to the Company, if at all. Use of estimates Preparation of the Company's financial statements in accordance with GAAP requires management to make various assumptions, judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts initially established. The most significant areas requiring the use of assumptions, judgments and estimates relate to the volumes of natural gas and oil reserves used in calculating depreciation, depletion and amortization ("DD&A"), the amount of expected future cash flows used in determining possible impairments of oil and gas properties and the amount of future capital costs used in these calculations. Assumptions, judgments and estimates also are required in determining future asset retirement obligations and impairments of undeveloped properties. Oil and Gas producing activities The Company's oil and gas exploration and production activities are accounted for using the successful efforts method. Under this method, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has proved reserves. If an exploratory well does not result in proved reserves, the costs of drilling the well are charged to expense and included within cash flows from investing activities in the Statements of Cash Flows. The costs of development wells are capitalized whether productive or nonproductive. Oil and gas lease acquisition costs are also capitalized. Other exploration costs, including certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production DD&A rate. A gain or loss is recognized for all other sales of proved properties and is classified in other operating revenues. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts. The Company estimates the expected undiscounted future cash flows of its oil and gas properties and compares such undiscounted future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value include, but are not limited to, recent sales prices of comparable properties, the present value of estimated future cash flows, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the expected cash flows projected. Once incurred, a write-down may not be reversed in a later period. For the six month periods ended June 30, 2016 and 2015, the Company recorded impairment expense of $252,000 and $0, respectively, against its oil and gas properties. The provision for DD&A of oil and gas properties is calculated based on proved reserves on a field-by-field basis using the unit-of-production method. Natural gas is converted to barrel equivalents, BOE, at the rate of six Mcf of natural gas to one barrel of oil. Estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values, are taken into consideration. Unproved oil and gas properties are periodically assessed for impairment on a project-by-project basis. These impairment assessments are affected by the results of exploration activities, commodity price outlooks, planned future sales or expirations of all or a portion of such projects. If the estimated future net cash flows attributable to such projects are not expected to be sufficient to fully recover the costs invested in each project, the Company will recognize an impairment loss at that time. There was no provision for impairment recorded against its unproved property for the six month periods ended June 30, 2016 and 2015. Revenue recognition The Company records revenues from the sale of crude oil, natural gas and natural gas liquids ("NGL") when delivery to the purchaser has occurred and title has transferred. The Company uses the sales method to account for gas imbalances. Under this method, revenue is recorded on the basis of gas actually sold by the Company. In addition, the Company will record revenue for its share of gas sold by other owners that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company also reduces revenue for other owners' gas sold by the Company that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company's remaining over and under produced gas balancing positions are considered in the Company's proved oil and gas reserves. Gas imbalances at June 30, 2016 and December 31, 2015 were not material. Earnings per share Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income (loss) attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding and other dilutive securities. The only potentially dilutive securities for the diluted earnings per share calculations consist of Series A2 preferred stock that is convertible into common stock at an exchange price of $2.00 per common share. As of June 30, 2016, the convertible preferred stock had an aggregate liquidation preference of $2,720,000 and was convertible to 1,360,000 shares of common stock. These shares were excluded from the earnings per share calculation because they would be anti-dilutive. The following table sets forth the calculation of basic and diluted earnings per share: Three month periods ended Six month periods ended 2016 2015 2016 2015 Net loss available to common shareholders – Basic $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Plus: Preferred stock dividends — — — — Net loss available to common shareholders – Diluted $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Weighted average common shares outstanding – Basic 14,469,700 12,753,000 14,382,550 12,732,000 Add: Dilutive effect of stock options — — — — Add: Dilutive effect of preferred stock — — — — Weighted average common shares outstanding – Diluted 14,469,700 12,753,000 14,382,550 12,732,000 Net loss per common share: Basic $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) Diluted $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) New accounting pronouncements In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 changes certain guidance related to the recognition, measurement, presentation and disclosure of financial instruments. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted for the majority of the update, but is permitted for two of its provisions. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements. In February 2016, FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the way lease expenses are accounted for. This update is effective for fiscal years beginning after December 15, 2018 and for interim periods beginning the following year. This update should be applied using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements. In January 2017, FASB issued ASU 2017-01, "Business Combinations." These amendments clarify the definition of a business. The amendments affect all reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements.

Oil and Gas Properties

Oil and Gas Properties	6 Months Ended
	Jun. 30, 2016
Extractive Industries [Abstract]
Oil and Gas Properties	Note 3 - Oil and Gas Properties The following table sets forth information concerning the Company's oil and gas properties: June 30, December 31, Proved oil and gas properties at cost, net of impairment $ 8,431,505 $ 8,683,273 Unproved oil and gas properties at cost, net of impairment 154,977 154,836 Accumulated depreciation, depletion and amortization (3,474,000 ) (3,223,000 ) Oil and gas properties, net $ 5,112,482 $ 5,615,109 During the six month periods ended June 30, 2016 and 2015, the Company recorded depletion expense of $251,000 and $307,322 respectively. The Company recorded impairment expense of $252,000 and $0 for the six month periods ended June 30, 2016 and 2015, respectively. Acquisitions In 2011, the Company entered into a purchase and sale agreement ("DNR and Tindall PSA") and other related agreements and documents with Tucker Family Investments, LLLP, which is referred to as "Tucker"; DNR Oil & Gas, Inc. which is referred to as "DNR"; and Tindall Operating Company, which is referred to as "Tindall", and collectively are referred to as the "Sellers", for the purchase of certain oil and gas operating properties in Colorado, Kansas, Wyoming, and Montana. DNR is owned primarily by an officer and director of the Company, Charles B. Davis, and he is an affiliate of Tucker and Tindall. The consideration for the purchase was determined by bargaining between management of the Company and Mr. Davis, and the Company used reports of independent engineering firms to analyze the purchase price. The base purchase price was paid in full on September 29, 2011. On January 19, 2016, but effective December 31, 2015, (the "Effective Date") the Company entered into a Settlement Agreement with Tucker, DNR and Tindall regarding the DNR and Tindall PSA and other related matters. In consideration of the amounts indicated below, the parties (i) terminated Exhibits C and C-2 to the DNR and Tindall PSA for all purposes; (ii) extinguished all liabilities of the Company under Exhibit C of the DNR and Tindall PSA including $250,000 related to the increase in oil prices after the acquisition; (iii) agreed that the promissory note of $792,151 due to DNR (See Note 7 – Notes and Advances Payable) and accrued interest thereon was paid in full; and (iv) released each other against any and all claims which have been raised or could have been raised among them. Specifically, Exhibits C and C-2 to the DNR and Tindall PSA related to potential payments that would have needed to have been made by the Company in the event oil prices increased to certain levels and related to certain payments to have been made by the Company in the event it sold certain properties purchased under the DNR and Tindall PSA. Exhibits C and C-2 were terminated and extinguished (including any amounts owed thereunder including an alleged amount of $250,000 under Exhibit C to the DNR and Tindall PSA) in exchange for 25 fully paid nonassessable restricted shares of our 7% Series A2 Convertible Preferred Stock. Consideration to pay the above promissory note in full consisted of the issuance to DNR of 65 fully paid, nonassessable restricted shares of its 7% Series A2 Convertible Preferred Stock, and paying DNR $303,329 in cash, which was paid January 19, 2016. A description of the terms of the 7% Series A2 Convertible Preferred Stock, including its terms of conversion into shares of the Company's common stock is set forth below in Note 6 - Stock transactions and preferred stock dividends. The Company recorded an expense of $141,099 included in other operating expense in the statement of operations at December 31, 2015, as a result of this transaction. At June 30, 2016, the Company's only remaining liabilities to DNR related to oil and gas operations are recorded in Accounts payable – DNR Oil & Gas, Inc. on the balance sheet. On December 30, 2015, the Company completed an asset acquisition pursuant to a purchase and sale agreement executed on November 25, 2015, but effective December 1, 2015 (the "Wellstar Purchase and Sale Agreement ") with Wellstar Corporation (the "Seller"), an unaffiliated corporation. The assets acquired were producing oil and gas leases in Sumner County, Kansas and Kimball County, Nebraska (collectively, the "Properties" and individually, the "Padgett Properties" and the "Nebraska Properties"). The Company acquired 51% of Seller's interest (ranging from 47% to 100% of the working interests) in the Padgett Properties and acquired 100% of the Seller's interest (100% of the working interests) in the Nebraska Properties for aggregate consideration of $1,100,000 and the issuance of 1,000,000 shares of the Company's restricted common stock valued at $0.10 per share at the date of closing, or $100,000.

Fair Value Measurements

Fair Value Measurements	6 Months Ended
	Jun. 30, 2016
Fair Value Disclosures [Abstract]
Fair Value Measurements	Note 4 – Fair Value Measurements FASB ASC 820, "Fair Value Measurements and Disclosures", establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: - Level 1 – Observable inputs, such as unadjusted quoted prices in active markets, for substantially identical assets and liabilities. - Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability. - Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management. The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Upon completion of wells, the Company records an asset retirement obligation at fair value using Level 3 assumptions. Nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis upon impairment. The carrying amounts of other financial instruments including cash and cash equivalents, accounts receivable, account payables, accrued liabilities and long term debt in our balance sheet approximates fair value as of June 30, 2016 and December 31, 2015.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2016
Income Taxes
Income Taxes	Note 5 - Income taxes The book to tax temporary differences resulting in deferred tax assets and liabilities are primarily net operating loss carry forwards of approximately $8.3 million which expire in 2018 through 2035. A 100% valuation allowance has been established against the deferred tax assets, as utilization of the loss carry forwards and realization of other deferred tax assets cannot be reasonably assured. For the period ended June 30, 2016, the Company did not recognize any income tax benefit due to the valuation allowance. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. As of June 30, 2016, the Company had no unrecognized tax benefits.

Stock transactions and preferre

Stock transactions and preferred stock dividends	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
Stock transactions and preferred stock dividends	Note 6 - Stock transactions and preferred stock dividends Common stock On May 11, 2016, the Company issued 316,667 shares of restricted common stock to its Chief Financial Officer as compensation for services performed from January 1 through May 31, 2016. On June 29, 2016, the Company issued 30,000 shares of restricted common stock as a loan closing cost related to one of its notes payable valued at $3,600 (see Note 7 – Notes and advances payable). Preferred stock On December 11, 2015, the Company began a private placement of its Series A2 7% Preferred Convertible Stock with a maximum amount of 600 shares at $10,000 per share or $6,000,000. At June 30, 2016, the Company had $2,720,000 (272 shares) outstanding. 177 shares ($1,770,000) were sold for cash during the fiscal year ended December 31, 2015, 90 shares ($900,000) were issued to DNR as part of the consideration for a settlement entered into with DNR during fiscal year ended December 31, 2015 and 5 shares ($50,000) were sold on January 7, 2016.

Notes and advances payable

Notes and advances payable	6 Months Ended
	Jun. 30, 2016
Notes And Advances Payable
Notes and advances payable	Note 7 - Notes and advances payable Notes payable consist of the following as of the date indicated: June 30, 2016 December 31, 2015 Officers, directors and affiliates: Note payable, interest 7.0%, due January 2019 (1) 37,243 43,803 Collateralized note payable (2) 120,728 120,728 Total officers, directors and affiliates 157,971 164,531 Less: Current portion of officers, directors, and affiliates 134,354 13,152 Long-term portion of officers, directors, and affiliates $ 23,617 $ 151,379 Unrelated parties: Notes payable, interest at 7.5%, due April 2016 (3) $ 100,000 $ 100,000 Note payable, due March 2017 (4) 165,953 169,660 Note payable, interest variable (see below) due June 28, 2018 (5) 523,000 616,105 Note payable, interest at 7.0%, due August 2016 (6) 62,000 62,000 Notes payable, interest at 7.0%, due January 2017 (7) 27,718 32,606 Notes payable, interest at 7.0%, due January 2016, Extended to May 2016 (8) 183,000 183,000 Notes payable, interest at 4.957%, due October 2017 (9) 15,759 — Notes payable, net of discount, interest at 7.0%, due June 29, 2018 (10) 96,400 — Total unrelated parties 1,173,830 1,163,371 Less: Current portion of unrelated parties 253,854 989,853 Long-term portion of unrelated parties $ 919,976 $ 173,519 (1) In January 2014, we memorialized certain short-term liabilities with owed to one of our directors, Charlie Davis, into a formal promissory note. This note accrues interest at an annual rate of 7.0% with monthly payments equal to $1,316 (principal and interest) and will mature on January 1, 2019. (2) On April 29, 2013, the Company executed a promissory note under which the Company agreed to pay Apex Financial Services Corp, a Colorado corporation, ("Apex") the principal sum of $120,728, with interest accruing at an annual rate of 7.5%, with principal and interest due on March 31, 2017. The Company also agreed to assign 75% of its operating income from its oil and gas operations and any lease or well sale or any other asset sales to Apex to secure the debt. Apex is 100% owned by the CEO, director, and shareholder of the Company, Nicholas L. Scheidt. The Company paid a loan fee to Apex of $10,000. In the event of default on the note and failure to cure the default in ten days, Apex may accelerate payment and the annual interest rate on the note will accrue at 18%. Default includes failure to pay the note when due or if the Company borrows any other monies or offers security in the Company or in the collateral securing the note prior to the note being paid in full. The Company obtained a default waiver from Apex related to the new notes entered into through the six month period ended June 30, 2016. The Company has not had operating income or had any lease or well sales in the current fiscal year; therefore, no payments have been made to Apex through June 30, 2016. (3) On March 28, 2012, the Company executed a promissory note with Pikerni, LLC ("Pikerni"). This note was extended and amended on April 1, 2015,extending the maturity date of the note to April 1, 2016, with principal payments of $5,000 due on June 30, 2015, September 30, 2015, December 31, 2015, and March 31, 2016, and the remaining principal balance of $80,000 due on April 1, 2016. The note accrues interest at an annual rate of 7.5% and is payable quarterly. The Company did not make any of the principal payments and was in default on this note, however, in January 2016 the Company entered into an extension agreement with Pikerni, with an effective date of June 15, 2016. The principal amount of $100,000 was extended to March 30, 2018, with interest continuing to accrue at an annual rate of 7.5% and interest payments continuing to be paid in 90-day intervals. (4) On March 28, 2012, the Company executed a Promissory Note with Fairfield Management Group, LLC, subsequently assigned to Donald Prosser (former CFO and Director) ("Prosser") during the fiscal year ended December 31, 2015. The note has a principal balance of $150,000, accrues interest at 7.5% payable monthly and has a maturity date of March 31, 2016, which was subsequently extended to March 31, 2017. On December 31, 2013, the Company executed a promissory note with Mr. Prosser for $28,500. This note accrues interest at a rate of 7.0% with monthly payments equal to $564 (principal and interest) and matures on January 1, 2019. (5) On January 28, 2014, we entered into a line of credit loan agreement for $1,500,000 due January 15, 2015, subsequently extended to June 28, 2018. The terms of the note are as follows: 1) the accrued interest is payable monthly starting February 28, 2014, 2) the interest rate is variable based on an index calculated based on a prime rate as published by the Wall Street Journal index plus an add on index with the current and minimum rate of 6.5%, (6) On August 15, 2014, the Company redeemed the remaining 10 shares of Series A-1 Convertible Preferred Stock outstanding for consideration of $77,500, of which $15,500 was paid in cash and the remaining amount as a promissory note for $62,000. The note accrues interest at 7% per annum, payable in two installments as follows; a. A payment of $31,000, plus accrued and unpaid interest was payable on August 15, 2015 b. A payment of $31,000, plus accrued and unpaid interest was payable on August 15, 2016 The Company did not make the August 15, 2015, or August 15, 2016, principal payment and is currently in default on this note. The Company is negotiating new terms with the note holder. (7) On December 31, 2013, the Company executed a promissory note with Pikerni for $49,500. This note accrues interest at a rate of 7.0% per annum with monthly payments equal to $980 (principal and interest) and matures on January 1, 2019. (8) In June 2013, in connection with the conversions of Series A-1 Preferred Stock by Burlingame Equity Investors II, LP and Burlingame Equity Investors Master Fund, LP, the Company issued unsecured promissory notes in the original principal amounts of $48,000 and $552,000, respectively, with interest at 7% per annum payable quarterly and all unpaid interest and principal due on July 23, 2014. We have agreed in writing with the holders of these two existing notes to extend the maturity date of the notes to June 18, 2018. (9) On March 1, 2016, the Company entered into a Commercial Premium Finance Agreement – Promissory Note in the amount of $25,976 to finance one of its insurance policies. This note accrues interest at a rate of 4.957% and matured on October 17, 2016 with monthly payments equal to $3,247 (principal and interest). This note was paid in full on October 17, 2016. (10) On June 29, 2016, the Company entered into a promissory note with an unrelated party and received $100,000 and issued 30,000 shares of the Company's restricted common stock, valued at $3,600, as a loan servicing fee. This note accrues interest at the rate of 7.0% per annum with interest paid quarterly in arrears and all principal and interest due on June 29, 2018. In the event of a default, the loan will become due immediately and a default interest rate of 18.0% per year will be assessed on all amounts outstanding until paid in full. An event of default only occurs if any payment required by this note is not paid. All payments have been made on this note through the filing of this report. The loan servicing fee will be amortized over the life of the loan. On June 30, 2016, the Company entered into a promissory note with an unrelated party for $100,000 and the issuance of 20,000 shares of the Company's restricted common stock, valued at $2,400, as a loan servicing fee. This note accrues interest at the rate of 7.0% per annum with interest paid quarterly in arrears and all principal and interest due on June 30, 2018. In the event of a default, the loan will become due immediately and a default interest rate of 18.0% per year will be assessed on all amounts outstanding until paid in full. An event of default only occurs if any payment required by this note is not paid. The proceeds for this note were received on July 1, 2016, upon formal closing of the transaction. The loan servicing fee will be amortized over the life of the loan On June 30, 2016, the Company entered into a promissory note with an unrelated party for $25,000 and the issuance of 12,500 shares of the Company's restricted common stock, valued at $1,500, as a loan servicing fee. This note accrues interest at the rate of 7.0% per annum with interest paid quarterly in arrears and all principal and interest due on June 29, 2018. In the event of a default, the loan will become due immediately and a default interest rate of 18.0% per year will be assessed on all amounts outstanding until paid in full. An event of default only occurs if any payment required by this note is not paid. The proceeds from this note were received on July 5, 2016, upon formal closing of the transaction. The loan servicing fee will be amortized over the life of the loan.

Asset Retirement Obligations

Asset Retirement Obligations	6 Months Ended
	Jun. 30, 2016
Asset Retirement Obligations
Asset Retirement Obligations	Note 8 - Asset retirement obligations A reconciliation of the Company's asset retirement obligations ("ARO") at June 30, 2016, is as follows: Balance, December 31, 2015 $ 995,197 Accretion expense 47,810 Balance, June 30, 2016 1,043,007 Less current asset retirement obligations (419,094 ) Long-term asset retirement obligations $ 623,913

Subsequent Events

Subsequent Events	6 Months Ended
	Jun. 30, 2016
Subsequent Events
Subsequent Events	Note 9 - Subsequent events On September 29, 2016, a complaint was filed against the Company and two others in the Superior Court of Arizona, Maricopa County, entitled Eric Langan, Paul McNulty, Patricia Quick, Stony Point Fund, L.P., and Jeffrey H. Wallen, D.D.S., P.C. vs. Arête Industries, Inc., Don Prosser, and Charles Davis. The complaint alleges that defendants Prosser and Davis made certain material representations to the plaintiffs in connection with the alleged purchase by the plaintiffs of $555,000 in common stock of the Company. The complaint alleges that the alleged misrepresentations were deliberate and requests damages against all of the defendants to compensate the plaintiffs for their alleged injuries resulting from the alleged misrepresentations, including punitive damages. The Company has moved to dismiss the case and it and the other defendants believe the action is entirely without merit and intend to vigorously defend the proceeding.

Summary of Significant Accoun16

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies Policies
Basis of presentation	Basis of presentation These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and accounting principles generally accepted in the United States ("GAAP") for interim financial information. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to financial statements included in Arête's Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of normal recurring accruals necessary for a fair presentation of the financial position as of June 30, 2016, and December 31, 2015, and the results of operations, changes in stockholders' equity, and cash flows for the quarters ended June, 30, 2016, and 2015. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for a full year. The Company's 2015 Annual Report on Form 10-K includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. In connection with the preparation of its unaudited condensed financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2016, through the filing date of this report.
Liquidity and Management's Plans	Liquidity and Management's Plans The Company has incurred net operating losses during the six months ended June 30, 2016, and for the fiscal year ended December 31, 2015. The Company also has negative working capital at June 30, 2016, and is currently in default with one of its creditors for which it has a note payable. This history of operating losses, negative working capital and defaults, along with low commodity prices, may adversely affect the Company's ability to access the capital it needs to continue operations on terms acceptable to the Company when such capital is needed. However, due to the Company's limited capital raise (see Note 6 - Stock transactions and preferred stock dividends), its entry into extensions of some of its notes payable to long-term debt (see Note 7 - Notes and advances payable) and the acquisition of additional producing wells and properties at the end of 2015, the Company believes that it can raise additional capital to fund its current operations over, at least 12 months from the date of this filing. The Company's ability to continue as a going concern is dependent upon its ability to secure other sources of financing and attain profitable operations. The Company continues to pursue additional sources of financing but there can be no assurance that such financing will be completed on terms favorable to the Company, if at all.
Use of Estimates	Use of estimates Preparation of the Company's financial statements in accordance with GAAP requires management to make various assumptions, judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts initially established. The most significant areas requiring the use of assumptions, judgments and estimates relate to the volumes of natural gas and oil reserves used in calculating depreciation, depletion and amortization ("DD&A"), the amount of expected future cash flows used in determining possible impairments of oil and gas properties and the amount of future capital costs used in these calculations. Assumptions, judgments and estimates also are required in determining future asset retirement obligations and impairments of undeveloped properties.
Oil and Gas Producing Activities	Oil and Gas producing activities The Company's oil and gas exploration and production activities are accounted for using the successful efforts method. Under this method, all property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has proved reserves. If an exploratory well does not result in proved reserves, the costs of drilling the well are charged to expense and included within cash flows from investing activities in the Statements of Cash Flows. The costs of development wells are capitalized whether productive or nonproductive. Oil and gas lease acquisition costs are also capitalized. Other exploration costs, including certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production DD&A rate. A gain or loss is recognized for all other sales of proved properties and is classified in other operating revenues. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts. The Company estimates the expected undiscounted future cash flows of its oil and gas properties and compares such undiscounted future cash flows to the carrying amount of the oil and gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value include, but are not limited to, recent sales prices of comparable properties, the present value of estimated future cash flows, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the expected cash flows projected. Once incurred, a write-down may not be reversed in a later period. For the six month periods ended June 30, 2016 and 2015, the Company recorded impairment expense of $252,000 and $0, respectively, against its oil and gas properties. The provision for DD&A of oil and gas properties is calculated based on proved reserves on a field-by-field basis using the unit-of-production method. Natural gas is converted to barrel equivalents, BOE, at the rate of six Mcf of natural gas to one barrel of oil. Estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values, are taken into consideration. Unproved oil and gas properties are periodically assessed for impairment on a project-by-project basis. These impairment assessments are affected by the results of exploration activities, commodity price outlooks, planned future sales or expirations of all or a portion of such projects. If the estimated future net cash flows attributable to such projects are not expected to be sufficient to fully recover the costs invested in each project, the Company will recognize an impairment loss at that time. There was no provision for impairment recorded against its unproved property for the six month periods ended June 30, 2016 and 2015.
Revenue Recognition	Revenue recognition The Company records revenues from the sale of crude oil, natural gas and natural gas liquids ("NGL") when delivery to the purchaser has occurred and title has transferred. The Company uses the sales method to account for gas imbalances. Under this method, revenue is recorded on the basis of gas actually sold by the Company. In addition, the Company will record revenue for its share of gas sold by other owners that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company also reduces revenue for other owners' gas sold by the Company that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company's remaining over and under produced gas balancing positions are considered in the Company's proved oil and gas reserves. Gas imbalances at June 30, 2016 and December 31, 2015 were not material.
Earnings Per Share	Earnings per share Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted net income (loss) attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding and other dilutive securities. The only potentially dilutive securities for the diluted earnings per share calculations consist of Series A2 preferred stock that is convertible into common stock at an exchange price of $2.00 per common share. As of June 30, 2016, the convertible preferred stock had an aggregate liquidation preference of $2,720,000 and was convertible to 1,360,000 shares of common stock. These shares were excluded from the earnings per share calculation because they would be anti-dilutive. The following table sets forth the calculation of basic and diluted earnings per share: Three month periods ended Six month periods ended 2016 2015 2016 2015 Net loss available to common shareholders – Basic $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Plus: Preferred stock dividends — — — — Net loss available to common shareholders – Diluted $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Weighted average common shares outstanding – Basic 14,469,700 12,753,000 14,382,550 12,732,000 Add: Dilutive effect of stock options — — — — Add: Dilutive effect of preferred stock — — — — Weighted average common shares outstanding – Diluted 14,469,700 12,753,000 14,382,550 12,732,000 Net loss per common share: Basic $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) Diluted $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 )
New Accounting Pronouncements	New accounting pronouncements In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 changes certain guidance related to the recognition, measurement, presentation and disclosure of financial instruments. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted for the majority of the update, but is permitted for two of its provisions. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements. In February 2016, FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the way lease expenses are accounted for. This update is effective for fiscal years beginning after December 15, 2018 and for interim periods beginning the following year. This update should be applied using a modified retrospective approach, and early adoption is permitted. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements. In January 2017, FASB issued ASU 2017-01, "Business Combinations." These amendments clarify the definition of a business. The amendments affect all reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company is evaluating the new guidance and has not determined the impact this standard may have on its financial statements.

Summary of Significant Accoun17

Summary of Significant Accounting Policies (Tables)	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies Tables
Schedule of Earning per Share	Three month periods ended Six month periods ended 2016 2015 2016 2015 Net loss available to common shareholders – Basic $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Plus: Preferred stock dividends — — — — Net loss available to common shareholders – Diluted $ (243,029 ) $ (298,631 ) $ (931,112 ) $ (603,141 ) Weighted average common shares outstanding – Basic 14,469,700 12,753,000 14,382,550 12,732,000 Add: Dilutive effect of stock options — — — — Add: Dilutive effect of preferred stock — — — — Weighted average common shares outstanding – Diluted 14,469,700 12,753,000 14,382,550 12,732,000 Net loss per common share: Basic $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 ) Diluted $ (0.02 ) $ (0.02 ) $ (0.06 ) $ (0.05 )

Oil and Gas Properties (Tables)

Oil and Gas Properties (Tables)	6 Months Ended
	Jun. 30, 2016
Extractive Industries [Abstract]
Schedule of Oil and Gas Properties	June 30, December 31, Proved oil and gas properties at cost, net of impairment $ 8,431,505 $ 8,683,273 Unproved oil and gas properties at cost, net of impairment 154,977 154,836 Accumulated depreciation, depletion and amortization (3,474,000 ) (3,223,000 ) Oil and gas properties, net $ 5,112,482 $ 5,615,109

Notes and advances payable (Tab

Notes and advances payable (Tables)	6 Months Ended
	Jun. 30, 2016
Notes And Advances Payable Tables
Schedule of Notes and Advances Payable	June 30, 2016 December 31, 2015 Officers, directors and affiliates: Note payable, interest 7.0%, due January 2019 (1) 37,243 43,803 Collateralized note payable (2) 120,728 120,728 Total officers, directors and affiliates 157,971 164,531 Less: Current portion of officers, directors, and affiliates 134,354 13,152 Long-term portion of officers, directors, and affiliates $ 23,617 $ 151,379 Unrelated parties: Notes payable, interest at 7.5%, due April 2016 (3) $ 100,000 $ 100,000 Note payable, due March 2017 (4) 165,953 169,660 Note payable, interest variable (see below) due June 28, 2018 (5) 523,000 616,105 Note payable, interest at 7.0%, due August 2016 (6) 62,000 62,000 Notes payable, interest at 7.0%, due January 2017 (7) 27,718 32,606 Notes payable, interest at 7.0%, due January 2016, Extended to May 2016 (8) 183,000 183,000 Notes payable, interest at 4.957%, due October 2017 (9) 15,759 — Notes payable, net of discount, interest at 7.0%, due June 29, 2018 (10) 96,400 — Total unrelated parties 1,173,830 1,163,371 Less: Current portion of unrelated parties 253,854 989,853 Long-term portion of unrelated parties $ 919,976 $ 173,519 (1) In January 2014, we memorialized certain short-term liabilities with owed to one of our directors, Charlie Davis, into a formal promissory note. This note accrues interest at an annual rate of 7.0% with monthly payments equal to $1,316 (principal and interest) and will mature on January 1, 2019. (2) On April 29, 2013, the Company executed a promissory note under which the Company agreed to pay Apex Financial Services Corp, a Colorado corporation, ("Apex") the principal sum of $120,728, with interest accruing at an annual rate of 7.5%, with principal and interest due on March 31, 2017. The Company also agreed to assign 75% of its operating income from its oil and gas operations and any lease or well sale or any other asset sales to Apex to secure the debt. Apex is 100% owned by the CEO, director, and shareholder of the Company, Nicholas L. Scheidt. The Company paid a loan fee to Apex of $10,000. In the event of default on the note and failure to cure the default in ten days, Apex may accelerate payment and the annual interest rate on the note will accrue at 18%. Default includes failure to pay the note when due or if the Company borrows any other monies or offers security in the Company or in the collateral securing the note prior to the note being paid in full. The Company obtained a default waiver from Apex related to the new notes entered into through the six month period ended June 30, 2016. The Company has not had operating income or had any lease or well sales in the current fiscal year; therefore, no payments have been made to Apex through June 30, 2016. (3) On March 28, 2012, the Company executed a promissory note with Pikerni, LLC ("Pikerni"). This note was extended and amended on April 1, 2015,extending the maturity date of the note to April 1, 2016, with principal payments of $5,000 due on June 30, 2015, September 30, 2015, December 31, 2015, and March 31, 2016, and the remaining principal balance of $80,000 due on April 1, 2016. The note accrues interest at an annual rate of 7.5% and is payable quarterly. The Company did not make any of the principal payments and was in default on this note, however, in January 2016 the Company entered into an extension agreement with Pikerni, with an effective date of June 15, 2016. The principal amount of $100,000 was extended to March 30, 2018, with interest continuing to accrue at an annual rate of 7.5% and interest payments continuing to be paid in 90-day intervals. (4) On March 28, 2012, the Company executed a Promissory Note with Fairfield Management Group, LLC, subsequently assigned to Donald Prosser (former CFO and Director) ("Prosser") during the fiscal year ended December 31, 2015. The note has a principal balance of $150,000, accrues interest at 7.5% payable monthly and has a maturity date of March 31, 2016, which was subsequently extended to March 31, 2017. On December 31, 2013, the Company executed a promissory note with Mr. Prosser for $28,500. This note accrues interest at a rate of 7.0% with monthly payments equal to $564 (principal and interest) and matures on January 1, 2019. (5) On January 28, 2014, we entered into a line of credit loan agreement for $1,500,000 due January 15, 2015, subsequently extended to June 28, 2018. The terms of the note are as follows: 1) the accrued interest is payable monthly starting February 28, 2014, 2) the interest rate is variable based on an index calculated based on a prime rate as published by the Wall Street Journal index plus an add on index with the current and minimum rate of 6.5%, (6) On August 15, 2014, the Company redeemed the remaining 10 shares of Series A-1 Convertible Preferred Stock outstanding for consideration of $77,500, of which $15,500 was paid in cash and the remaining amount as a promissory note for $62,000. The note accrues interest at 7% per annum, payable in two installments as follows; a. A payment of $31,000, plus accrued and unpaid interest was payable on August 15, 2015 b. A payment of $31,000, plus accrued and unpaid interest was payable on August 15, 2016 The Company did not make the August 15, 2015, or August 15, 2016, principal payment and is currently in default on this note. The Company is negotiating new terms with the note holder. (7) On December 31, 2013, the Company executed a promissory note with Pikerni for $49,500. This note accrues interest at a rate of 7.0% per annum with monthly payments equal to $980 (principal and interest) and matures on January 1, 2019. (8) In June 2013, in connection with the conversions of Series A-1 Preferred Stock by Burlingame Equity Investors II, LP and Burlingame Equity Investors Master Fund, LP, the Company issued unsecured promissory notes in the original principal amounts of $48,000 and $552,000, respectively, with interest at 7% per annum payable quarterly and all unpaid interest and principal due on July 23, 2014. We have agreed in writing with the holders of these two existing notes to extend the maturity date of the notes to June 18, 2018. (9) On March 1, 2016, the Company entered into a Commercial Premium Finance Agreement – Promissory Note in the amount of $25,976 to finance one of its insurance policies. This note accrues interest at a rate of 4.957% and matured on October 17, 2016 with monthly payments equal to $3,247 (principal and interest). This note was paid in full on October 17, 2016. (10) On June 29, 2016, the Company entered into a promissory note with an unrelated party and received $100,000 and issued 30,000 shares of the Company's restricted common stock, valued at $3,600, as a loan servicing fee. This note accrues interest at the rate of 7.0% per annum with interest paid quarterly in arrears and all principal and interest due on June 29, 2018. In the event of a default, the loan will become due immediately and a default interest rate of 18.0% per year will be assessed on all amounts outstanding until paid in full. An event of default only occurs if any payment required by this note is not paid. All payments have been made on this note through the filing of this report. The loan servicing fee will be amortized over the life of the loan.

Asset Retirement Obligations (T

Asset Retirement Obligations (Tables)	6 Months Ended
	Jun. 30, 2016
Asset Retirement Obligations Tables
Asset Retirement Obligations (ARO)	Balance, December 31, 2015 $ 995,197 Accretion expense 47,810 Balance, June 30, 2016 1,043,007 Less current asset retirement obligations (419,094 ) Long-term asset retirement obligations $ 623,913

Summary of Significant Accoun21

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	Jun. 30, 2016	Jun. 30, 2015
Summary Of Significant Accounting Policies Details Narrative
Impairment Expense	$ 252,000	$ 0

Summary of Significant Accoun22

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Summary Of Significant Accounting Policies Details Narrative
Net loss available to common shareholder's - Basic	$ (243,029)	$ (298,631)	$ (931,112)	$ (603,141)
Plus: Preferred stock dividends
Net loss available to common shareholder's - Diluted	$ (243,029)	$ (298,631)	$ (931,112)	$ (603,141)
Weighted average common shares outstanding - Basic	14,469,700	12,753,000	14,382,550	12,732,000
Add: Dilutive effect of stock options
Add: Dilutive effect of preferred stock
Weighted average common shares outstanding - Diluted	14,469,700	12,753,000	14,382,550	12,732,000
Net loss per common share:
Basic	$ (0.02)	$ (0.02)	$ (0.06)	$ (0.05)
Diluted	$ (0.02)	$ (0.02)	$ (0.06)	$ (0.05)

Oil and Gas Properties (Details

Oil and Gas Properties (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Extractive Industries [Abstract]
Depletion Expenses			$ 251,000	$ 307,322
Impairment Expenses			$ 252,000

Oil and Gas Properties (Detail

Oil and Gas Properties (Detail Narrative 1) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Dec. 30, 2015
Common Stock	$ 21,531,569	$ 21,502,635
Wellstar Purchase and Sale Agreement
Cash			$ 1,100,000
Common Stock			$ 100,000

Oil and Gas Properties (Detai25

Oil and Gas Properties (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Extractive Industries [Abstract]
Proved oil and gas properties at cost, net of impairment	$ 8,431,505	$ 8,683,273
Unevaluated oil and gas properties at cost, net of impairment	154,977	154,836
Accumulated depreciation, depletion and amortization	(3,474,000)	(3,223,000)
Oil and gas properties, net	$ 5,112,482	$ 5,615,109

Asset Retirement Obligations (D

Asset Retirement Obligations (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Asset Retirement Obligations Details
Balance, beginning of year	$ 995,197
Accretion expense	47,810	$ 34,635
Balance, end of year	1,043,007
Less current asset retirement obligations	(419,094)		$ (409,621)
Long-term asset retirement obligations	$ 623,913		$ 585,576