Arête Industries (ARET) Inactive 10-Q14 Aug 142014 Q2 Quarterly reportFinancial data

Company Profile

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
Document and Entity Information	Jun. 30, 2014	Aug. 13, 2014
Document Information [Line Items]	'	'
Document Type	'10-Q	'
Amendment Flag	'false	'
Document Period End Date	30-Jun-14	'
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q2	'
Trading Symbol	'ARET	'
Entity Registrant Name	'ARETE INDUSTRIES INC	'
Entity Central Index Key	'0000820901	'
Current Fiscal Year End Date	'--12-31	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	12,408,459

CONSOLIDATED_BALANCE_SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current Assets:	'	'
Cash and equivalents	$16,109	$476,323
Receivable from DNR Oil & Gas, Inc.:	'	'
Oil and gas sales, net of production costs	484,048	230,029
Other	2,368	2,368
Prepaid expenses and other	42,650	38,177
Total Current Assets	545,175	746,897
Oil and gas properties, at cost, successful efforts method:	'	'
Proved properties	10,176,355	9,555,897
Unevaluated properties	314,336	314,336
Natural gas gathering system	442,195	442,195
Furniture and equipment	22,522	22,522
Total property and equipment	10,955,408	10,334,950
Less accumulated depreciation, depletion and amortization	-2,375,447	-2,094,337
Net Property and Equipment	8,579,961	8,240,613
TOTAL ASSETS	9,125,136	8,987,510
Payable to DNR Oil & Gas, Inc.:	'	'
Operator fees and other	36,000	36,000
Unrelated parties	375,738	17,806
Notes and advances payable - current portion:	'	'
Directors and affiliates	178,273	717,833
Unrelated parties	950,641	325,000
Accrued interest expense	12,998	52,242
Accrued consulting - related party	67,500	'
Director fees payable in common stock	900	450
Current portion of asset retirement obligations	162,672	159,782
Other accrued costs and expenses	88,425	57,210
Total Current Liabilities	1,873,147	1,366,323
Long-Term Liabilities:	'	'
Contingent acquisition costs payable to DNR Oil & Gas, Inc.	250,000	250,000
Notes and advances payable, net of current portion:	'	'
DNR Oil & Gas, Inc.	792,151	792,151
Directors and affiliates	226,750	246,639
Unrelated parties	'	425,000
Asset retirement obligations, net of current portion	552,661	522,421
Total Long-Term Liabilities	1,821,562	2,236,211
Total Liabilities	3,694,709	3,602,534
Commitments and Contingencies	'	'
Stockholders' Equity:	'	'
Common stock, no par value; authorized 499,000,000 shares, issued and outstanding 13,608,459 in 2013 and 12,408,459 in 2014	21,260,387	21,488,387
Accumulated deficit	-15,925,411	-16,198,862
Total Stockholders' Equity	5,430,427	5,384,976
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	9,125,136	8,987,510
Preferred Stock Series A1	'	'
Stockholders' Equity:	'	'
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares:	95,451	95,451
Preferred Stock Series A2	'	'
Stockholders' Equity:	'	'
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares:	'	'

CONSOLIDATED_BALANCE_SHEETS_Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Common stock, par value	'	'
Common stock, shares authorized	499,000,000	499,000,000
Common stock, shares issued	12,408,459	13,608,459
Common stock, shares outstanding	12,408,459	13,608,459
Class A Preferred Stock	'	'
Convertible preferred stock, face value	$10,000	$10,000
Convertible preferred stock, shares authorized	1,000,000	1,000,000
Preferred Stock Series A1	'	'
Convertible preferred stock, shares authorized	30,000	30,000
Convertible preferred stock, shares issued	10	10
Convertible preferred stock, shares outstanding	10	10
Convertible preferred stock, liquidation preference	$118,750	$111,250
Preferred Stock Series A2	'	'
Convertible preferred stock, shares authorized	2,500	2,500

CONSOLIDATED_STATEMENTS_OF_OPE

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:	'	'	'	'
Oil and natural gas sales	$669,488	$516,267	$1,165,239	$973,992
Sale of oil and natural gas properties	78,815	'	242,472	949
Royalty revenue	963	'	1,770	'
Total revenues	749,266	516,267	1,409,481	974,941
Oil and gas producing activities:	'	'	'	'
Lease operating expenses	208,566	153,593	369,934	341,400
Production taxes	58,589	41,028	91,646	76,865
Depreciation, depletion, amortization and accretion	162,182	150,733	291,845	323,335
Gas gathering:	'	'	'	'
Operating expenses	3,385	4,142	7,370	7,685
Depreciation	11,055	11,055	22,110	22,110
General and administrative expenses:	'	'	'	'
Director fees	450	900	450	1,350
Investor relations	29,621	44,530	35,186	75,427
Legal, auditing and professional services	34,596	66,300	78,644	96,890
Consulting and executive services:	'	'	'	'
Related parties	97,500	30,750	127,500	61,500
Other administrative expenses	19,307	19,192	41,082	40,562
Depreciation	142	'	285	285
Total operating expenses	625,393	522,223	1,066,052	1,047,409
Operating income (loss)	123,873	-5,956	343,429	-72,468
Other income (expense):	'	'	'	'
Interest income	'	'	'	1
Interest expense	-34,808	-36,304	-69,978	-61,800
Income (loss) before income taxes	89,065	-42,260	273,451	-134,267
Income tax benefit (expense)	'	'	'	'
Net income (loss)	89,065	-42,260	273,451	-134,267
Net Income (Loss) Applicable to Common Stockholders:	'	'	'	'
Net income (loss)	89,065	-42,260	273,451	-134,267
Redemption of preferred stock	'	3,053,365	'	3,053,365
Accrued preferred stock dividends	-3,750	-9,375	-7,500	-205,313
Net income (loss) applicable to common stockholders	$85,315	$3,001,730	$265,951	$2,713,785
Earnings (Loss) Per Share Applicable to Common Stockholders:	'	'	'	'
Basic	$0.01	$0.37	$0.02	$0.34
Diluted	$0.01	$0.23	$0.02	$0.20
Weighted Average Number of Common Shares Outstanding:	'	'	'	'
Basic	12,408,000	8,125,000	12,607,000	8,055,000
Diluted	12,408,000	13,251,466	12,607,000	13,251,466

CONSOLIDATED_STATEMENTS_OF_STO

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock	Accumulated Deficit	Class A Preferred Stock
Balances at Dec. 31, 2013	$5,384,976	$21,488,387	($16,198,862)	$95,451
Balances (in shares) at Dec. 31, 2013	'	13,608,459	'	10
Redeemed common stock (in shares)	'	-1,200,000	'	'
Redeemed common stock	-228,000	-228,000	'	'
Net income	273,451	'	273,451	'
Balances at Jun. 30, 2014	$5,430,427	$21,260,387	($15,925,411)	$95,451
Balances (in shares) at Jun. 30, 2014	'	12,408,459	'	10

CONSOLIDATED_STATEMENTS_OF_CAS

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	Jun. 30, 2014	Jun. 30, 2013
Cash Flows from Operating Activities:	'	'
Net income (loss)	$273,451	($134,267)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	'	'
Depreciation, depletion and amortization	281,110	312,670
Accretion of discount on asset retirement obligations	33,130	33,060
Gain on sale of oil and gas properties	-242,472	-949
Common stock issued in exchange for services	'	18,000
Changes in operating assets and liabilities:	'	'
Accounts receivable	-202,735	-152,499
Prepaid expenses and other	-4,473	36,617
Accounts payable	357,932	-18,758
Directors fees and officers services payable	67,950	'
Accrued costs and expenses	36,487	-161,141
Net cash provided by (used in) operating activities	600,380	-67,267
Cash Flows from Investing Activities:	'	'
Capital expenditures for property and equipment	-620,458	-189,110
Proceeds from sale of oil and gas properties	191,189	949
Net cash provided by (used in) investing activities	-429,269	-188,161
Cash Flows from Financing Activities:	'	'
Proceeds from notes and advance payable	532,641	1,040,935
Principal payments on notes payable	-935,966	-350,135
Payment of dividends on preferred stock	'	-391,875
Redemption of common stock	-228,000	'
Redemption of preferred stock	'	-50,000
Net cash provided by (used in) financing activities	-631,325	248,925
Net decrease in cash and equivalents	-460,214	-6,503
Cash and equivalents, beginning of period	476,323	6,921
Cash and equivalents, end of period	16,109	418
Supplemental Disclosure of Cash Flow Information:	'	'
Cash paid for interest	55,651	51,045
Cash paid for income taxes	'	'
Supplemental Disclosure of Non-cash Investing and Financing Activities:	'	'
Preferred stock dividends declared	'	'

Organization_and_Nature_of_Ope

Organization and Nature of Operations	6 Months Ended
	Jun. 30, 2014
Organization and Nature of Operations	'
	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 owns 100% of Arete Energy, Inc. which is an inactive subsidiary which has no assets, liabilities or operations. Arête has operated a natural gas gathering system in Wyoming since 2006 and on July 29, 2011 the Company purchased oil & natural gas properties in Colorado, Montana, Kansas, and Wyoming.
	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_Account

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2014
Summary of Significant Accounting Policies	'
	2	Summary of Significant Accounting Policies
	Basis of presentation

	The accompanying unaudited consolidated financial statements have been prepared by the Company. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of the financial position as of December 31, 2013 and June 30, 2014, and the results of operations, changes in stockholders’ equity, and cash flows for the quarters ended June 30, 2013 and 2014. 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 2013 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. Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company’s 2013 Annual Report on Form 10-K.

	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, impairments of undeveloped properties, and in valuing stock-based payment awards.

	During the quarter ended June 30, 2014, the Company changed the estimate of revenue receivable from it’s three new wells in Wyoming by reducing net revenue by $54,974.

	The only component of comprehensive income that is applicable to the Company is net income (loss). Accordingly, a separate statement of comprehensive income (loss) is not included in these financial statements.

	Principles of Consolidation

	The consolidated financial statements of the Company include the accounts of Arête and its inactive subsidiary, Arete Energy, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

	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 1 preferred stock that is convertible into common stock at an exchange price of $3.30 per common share. As of June 30, 2014, the convertible preferred stock had an aggregate liquidation preference of $118,750 and was convertible to 35,985 shares of common stock. These shares were excluded from the earnings per share calculation because it was anti-dilutive to assume conversion at the beginning of the quarter, which would have eliminated preferred dividends from the earnings per share calculation.

	New Accounting Pronouncements

	In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The objective of ASU 2013-11 is to provide guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard will not have an impact on the Company’s consolidated financial statements.

	Other accounting standards that have been issued or proposed by the FASB, or other standards-setting bodies, that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

Disposition_of_Oil_and_Gas_Pro

Disposition of Oil and Gas Properties	6 Months Ended
	Jun. 30, 2014
Disposition of Oil and Gas Properties	'
	3	Disposition of Oil and Gas Properties
	In December 2013, we sold one of our producing properties, which resulted in gross proceeds of approximately $1,004,000. This property was sold to an unrelated purchaser and pursuant to our amended purchase agreement entered into in September 2013, we were required to pay the related party sellers approximately $554,000 of the proceeds due to their contingent interest and, as a result our net proceeds were $450,000. After deducting the net book value of the property of $163,000, plus the asset retirement obligation assumed by the unrelated purchaser of $31,000, we recognized a gain of approximately $318,000. The Company retained a 1.57% overriding royalty interest in this property. This sale comprised approximately 1.1% of the Company’s barrels of oil equivalent (“BOE”) of oil and gas reserve quantities, and approximately 2.2% of the Company’s discounted future net revenues prior to the sale. The Company determined that this sale did not qualify for discontinued operations reporting.
	The Company has participated as a working interest owner in four horizontal wells to be drilled in Campbell County, Wyoming in the Turner zone. The following is a description of the wells:

		1)	The Thielen #1-21 is in Section 21 Township 43N. This well is currently being drilled to a total depth of approximately 15,350 including the lateral. The Company will have an approximate 1.06% working interest.

		2)	The Thielen #2-21 is in Section 21 Township 43N. This well is scheduled to be drilled in the summer of 2014 and is planned to be drilled to a total depth of approximately 15,330 feet including the lateral. The Company will have an approximate 1.06% working interest.

		3)	The Starlight Federal 28H is located in Section 7, Township 43N. This well is scheduled to be drilled in the first quarter of 2014 and is planned to be drilled to a total depth of approximately 15,310 including the lateral. The Company will have an approximate 0.7025% working interest.

		4)	The Starlight Federal 30H is located in Section 7, Township 43N. This well is scheduled to be drilled in the first quarter of 2014 and is planned to be drilled to a total depth of approximately 15,310 including the lateral. The Company will have an approximate 1.405% working interest
	The Company has received the results on three of the wells and these results have been included in this filing. We do not have results on the fourth well other then the drilling has been completed and the information is being evaluated.

Income_taxes

Income taxes	6 Months Ended
	Jun. 30, 2014
Income taxes	'
	4	Income taxes
	The book to tax temporary differences resulting in deferred tax assets and liabilities are primarily net operating loss carry forwards of approximately $7.7 million which expire in 2015 through 2032. 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 six months ended June 30, 2014, the Company did not recognize any income tax benefit due to the valuation allowance.

Stock_transactions_and_preferr

Stock transactions and preferred stock dividends	6 Months Ended
	Jun. 30, 2014
Stock transactions and preferred stock dividends	'
	5	Stock transactions and preferred stock dividends
	During the quarter ended June 30, 2014, the Company did not issue any common stock for compensation or services. The Board of Directors has not declared the semi-annual dividend payable to preferred shareholders of record as of June 30, 2014.
	The Company agreed to repurchase 1,200,000 shares of its Common Stock. The following are the details of the transaction:
	On December 10, 2013, Burlingame Equity Investors Master Fund LP (“Burlingame”), a significant stockholder of Arête Industries, Inc. (the “Company”) entered into conditional stock option agreements with Nicholas L. Scheidt, the Company’s Chief Executive Officer and Director, pursuant to which Mr. Scheidt was granted options to purchase up to 1,460,000 shares of Company common stock at $0.19 per share. Mr. Scheidt subsequently assigned the right to purchase 1,200,000 shares to the Company on January 27, 2014. On January 30, 2014, the Company entered into a Direct Stock Purchase Agreement with Burlingame pursuant to which the Company has purchased the 1,200,000 shares of its common stock from Burlingame at a price of $0.19 per share for total consideration of $228,000. In addition, Mr. Scheidt assigned an additional 141,873 shares of Company common stock underlying his option from Burlingame to Donald W. Prosser, the Company’s Chief Financial Officer and Director. Pursuant to this assignment, Mr. Prosser agreed to purchase the entire 141,873 shares of Company common stock from Burlingame at a price of US $0.19 per share for total consideration of $26,956. Furthermore, of these 141,873 shares, Mr. Prosser agreed to transfer 57,895 shares to William W. Stewart, a Director of the Company, for $11,000 or $0.19 per share and 13,158 shares to Apex Financial Services Corp, a company controlled by Mr. Scheidt, for $2,500 or $0.19 per share. Finally, Mr. Scheidt agreed to exercise the remaining 118,127 shares of Company common stock under his option from Burlingame at a price of $0.19 per share for total consideration of $22,444.

Contracts_Payable

Contracts Payable	6 Months Ended
	Jun. 30, 2014
Contracts Payable	'
	6	Contracts Payable
	The Company entered into a consulting contract for financing, structure, and investor services on March 2, 2010 for 800,000 shares of Common Stock valued at $500,000. The contract was for a period of three years and the fair value of the services were amortized ratably over the service period. Accordingly, the Company recognized a charge to investor relations expense of $27,778 and $0 for the six months ended June 30, 2013 and 2014, respectively.

Notes_and_advances_payable

Notes and advances payable	6 Months Ended
Notes and advances payable	Jun. 30, 2014
Notes and advances payable	'
	7	Notes and advances payable
	Notes payable consist of the following as of December 31, 2013 and June 30, 2014:




			2013				2014
	Officers, directors and affiliates:
	Notes and advances payable, interest at 8.0%, due on demand		$	14,984			$	—
	Notes and advances payable, interest at 9.7%, due on demand			85,000				—
	Note payable, interest at 7.0%, due March 2015			150,000				150,000
	Notes payable, interest 7.0%, due January 2017			—				134,295
	Notes payable, interest varies (see explanation below)			—				792,151
	Collateralized note payable (see below)			714,488				120,728

	Total officers, directors and affiliates			964,472				1,197,174
	Less: Current portion of officers, directors, and affiliates			717,833				178,273

	Long-term portion of officers, directors, and affiliates		$	246,639			$	1,018,901

	Unrelated parties:
	Notes payable, interest at 7.5%, due March 2015			200,000				150,000
	Note payable, interest variable (see below)			—				532,641
	Notes payable, interest at 7.0%, due January 2015			44,000				—
	Notes payable, interest at 7.0%, due January 2015			506,000				268,000

	Total unrelated parties			750,000				950,641
	Less: Current portion of unrelated parties			325,000				950,641

	Long-term portion of unrelated parties		$	425,000			$	—

	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 $1,000,000, with interest accruing at an annual rate of 7.5%, with principal and interest due on May 31, 2014. 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 assets 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 borrowed the full amount of principal on the note, and also paid a loan fee 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 outstanding principal balance as of June 30, 2014 was $120,728.

	On January 28, 2014, we entered into a line of credit loan agreement for $1,500,000 due January 15, 2015. 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 (currently 3.25%) plus an add on index with the current and minimum rate of 6.5%., the note has draw provisions, with the first draw of $479,701, 4) the note is secured by seven wells and leases owned by the Company, a certificate of deposit for $500,000 at CityWide Bank pledged by a third party, and 5) the personal guarantee of the Nicholas Scheidt, Chief Executive Officer. The amount eligible for borrowing on the Credit Facility is limited to the lesser of (i) 65% of the Company’s PV10 value of its carbon reserves based upon the most current engineering reserve report or (ii) 48 month cumulative cash flow based upon the most current engineering reserve report. In addition to the borrowing base limitation, the Company is required to maintain and meet certain affirmative and negative covenants and conditions in order to draw advances on the Credit Facility. The Credit Facility contains certain representations, warranties, and affirmative and negative covenants applicable to the Company, which are customarily applicable to senior secured loan facilities. Key covenants include limitations on indebtedness, restricted payments, creation of liens on oil and gas properties, hedging transactions, mergers and consolidations, sales of assets, use of loan proceeds, change in business, and change in control. The above-referenced promissory notes contain customary default and acceleration provisions and provide for a default interest rate of 21% per annum. In addition, the Credit Facility contains customary events of default, including: (a) failure to pay any obligations when due; (b) failure to comply with certain restrictive covenants; (c) false or misleading representations or warranties; (d) defaults of other indebtedness; (e) specified events of bankruptcy, insolvency or similar proceedings; (f) one or more final, non-appealable judgments in excess of $50,000 that is not covered by insurance; (g) change in control (25% threshold); (h) negative events affecting the Guarantor; and (i) lender in good faith believes itself insecure. In an event of default arising from the specified events, the Credit Facility provides that the commitments thereunder will terminate and the Lender may take such other actions as permitted including, declaring any principal and accrued interest owed on the line of credit to become immediately due and payable. The Credit Facility is secured by a security interest in substantially all of the assets of the Company, pursuant to a Security Agreement, Deed of Trust and Assignment of As-Extracted Collateral entered into between the Company and Citywide Banks. The outstanding principal balance as of June 30, 2014 was $532,641.

	On January 1, 2014, we memorialized our short-term liabilities into formal promissory notes. These certain outstanding advances and other notes payable are now included in single promissory notes, all have been reported previously in our financial statements. Information concerning these promissory notes is set forth in the table below.


	Name of Holder		Position		Principal				Interest			Monthly P&I		Number
					Amount				Rate			Payment		of
												Amount		Monthly
														Payments
	Donald W. Prosser		CFO & Director		$	28,500				7	%	$	564.33		60
	Charles B. Davis		COO & Director		$	66,500				7	%	$	1,316.78		60
	William Stewart		Director		$	49,500				7	%	$	980.16		36
	The above-referenced promissory notes contain customary default and acceleration provisions and provide for a default interest rate of 18% per annum. The outstanding principal balances as of June 30, 2014 was $134,295.

	In addition, we also issued an unsecured promissory note in the amount of $792,151 on January 1, 2014 to DNR Oil & Gas, Inc. (“DNR”). DNR is a company controlled by one of our directors, Charles B. Davis. The DNR note accrues interest at the rate of 2.50% for the calendar years 2014 and 2015, 4.00% for the calendar year 2016, 6.00% for the calendar year 2017 and 8.00% for the remainder of the term of the DNR note. The DNR note matures on January 1, 2019. The DNR note requires payments as follows:



		•		One payment of $250,000 in 2016;


		•		One payment of $250,000 in 2017;


		•		One payment of $250,000 in 2018; and


		•		The balance of principal and accrued interest on or before January 1, 2019.
	The DNR note contains customary default and acceleration provisions and provides for a default interest rate of 18% per annum. The outstanding principal balance as of June 30, 2014 was $792,151.

In June 2013, in connection with the conversions of Series A1 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. In connection with our new line of credit, we have agreed with the holders of these two existing notes to make a partial prepayment on the principal balance of the Notes in exchange for an extension of the maturity date to January 27, 2015. Information concerning the principal pay down and new maturity date is set forth in the following table.




Name of Holder		Principal Balance				Principal				Remaining
Name of Holder		Before Pay down				Pay down				Principal Balance
Burlingame Equity Investors II, LP		$	44,000			$	44,000			$	—
Burlingame Equity Investors Master Fund, LP		$	506,000			$	238,000			$	268,000
All of the notes payable shown above are unsecured, except the Apex note. Accrued interest on notes and advances payable amounted to $52,242 as of December 31, 2013 and $12,998 as of June 30, 2014.

Asset_retirement_obligations_A

Asset retirement obligations (ARO)	6 Months Ended
Asset retirement obligations (ARO)	Jun. 30, 2014
Asset retirement obligations (ARO)	'
	8	Asset retirement obligations (ARO)
	A reconciliation of the Company’s asset retirement obligations for the quarter ended June 30, 2014, is as follows:




	Balance, December 31, 2013		$	682,203
	Liabilities incurred			—
	Accretion expense			33,130
	Revisions to estimate			—

	Balance, June 30, 2014			715,333
	Less current asset retirement obligations			(162,672	)

	Long-term asset retirement obligations		$	552,661

Summary_of_Significant_Account1

Summary of Significant Accounting Policies (Policies)	6 Months Ended
Summary of Significant Accounting Policies (Policies)	Jun. 30, 2014
Basis of presentation	'
	Basis of presentation
	The accompanying unaudited consolidated financial statements have been prepared by the Company. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of the financial position as of December 31, 2013 and June 30, 2014, and the results of operations, changes in stockholders’ equity, and cash flows for the quarters ended June 30, 2013 and 2014. 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 2013 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. Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company’s 2013 Annual Report on Form 10-K.
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, impairments of undeveloped properties, and in valuing stock-based payment awards.

	During the quarter ended June 30, 2014, the Company changed the estimate of revenue receivable from it’s three new wells in Wyoming by reducing net revenue by $54,974.

	The only component of comprehensive income that is applicable to the Company is net income (loss). Accordingly, a separate statement of comprehensive income (loss) is not included in these financial statements.

Principles of Consolidation	'
	Principles of Consolidation
	The consolidated financial statements of the Company include the accounts of Arête and its inactive subsidiary, Arete Energy, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
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 1 preferred stock that is convertible into common stock at an exchange price of $3.30 per common share. As of June 30, 2014, the convertible preferred stock had an aggregate liquidation preference of $118,750 and was convertible to 35,985 shares of common stock. These shares were excluded from the earnings per share calculation because it was anti-dilutive to assume conversion at the beginning of the quarter, which would have eliminated preferred dividends from the earnings per share calculation.
New Accounting Pronouncements	'
	New Accounting Pronouncements
	In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The objective of ASU 2013-11 is to provide guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard will not have an impact on the Company’s consolidated financial statements.
	Other accounting standards that have been issued or proposed by the FASB, or other standards-setting bodies, that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

Notes_and_advances_payable_Tab

Notes and advances payable (Tables)	6 Months Ended
Notes and advances payable (Tables)	Jun. 30, 2014
Notes and Advances Payable	'
	Notes payable consist of the following as of December 31, 2013 and June 30, 2014:




		2013				2014
	Officers, directors and affiliates:
	Notes and advances payable, interest at 8.0%, due on demand	$	14,984			$	—
	Notes and advances payable, interest at 9.7%, due on demand		85,000				—
	Note payable, interest at 7.0%, due March 2015		150,000				150,000
	Notes payable, interest 7.0%, due January 2017		—				134,295
	Notes payable, interest varies (see explanation below)		—				792,151
	Collateralized note payable (see below)		714,488				120,728

	Total officers, directors and affiliates		964,472				1,197,174
	Less: Current portion of officers, directors, and affiliates		717,833				178,273

	Long-term portion of officers, directors, and affiliates	$	246,639			$	1,018,901

	Unrelated parties:
	Notes payable, interest at 7.5%, due March 2015		200,000				150,000
	Note payable, interest variable (see below)		—				532,641
	Notes payable, interest at 7.0%, due January 2015		44,000				—
	Notes payable, interest at 7.0%, due January 2015		506,000				268,000

	Total unrelated parties		750,000				950,641
	Less: Current portion of unrelated parties		325,000				950,641

	Long-term portion of unrelated parties	$	425,000			$	—

Related Party Notes Payable	'
	Information concerning these promissory notes is set forth in the table below.

	Name of Holder	Position		Principal				Interest				Monthly P&I		Number
				Amount				Rate				Payment		of
												Amount		Monthly
														Payments
	Donald W. Prosser	CFO & Director		$	28,500				7	%		$	564.33		60
	Charles B. Davis	COO & Director		$	66,500				7	%		$	1,316.78		60
	William Stewart	Director		$	49,500				7	%		$	980.16		36
Information concerning principal pay down and new maturity date	'
	Information concerning the principal pay down and new maturity date is set forth in the following table.


	Name of Holder	Principal Balance				Principal				Remaining
	Name of Holder	Before Pay down				Pay down				Principal Balance
	Burlingame Equity Investors II, LP	$	44,000			$	44,000			$	—
	Burlingame Equity Investors Master Fund, LP	$	506,000			$	238,000			$	268,000

Asset_retirement_obligations_A1

Asset retirement obligations (ARO) (Tables)	6 Months Ended
Asset retirement obligations (ARO) (Tables)	Jun. 30, 2014
Asset Retirement Obligations (ARO)	'
	A reconciliation of the Company’s asset retirement obligations for the quarter ended June 30, 2014, is as follows:




	Balance, December 31, 2013	$	682,203
	Liabilities incurred		—
	Accretion expense		33,130
	Revisions to estimate		—

	Balance, June 30, 2014		715,333
	Less current asset retirement obligations		(162,672	)

	Long-term asset retirement obligations	$	552,661

Organization_and_Nature_of_Ope1

Organization and Nature of Operations - Additional Information (Detail)	Jun. 30, 2014
Organization and Nature of Operations [Line Items]	'
Ownership percentage of Arete Energy, Inc.	100.00%

Summary_of_Significant_Account2

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended
	Jun. 30, 2014
Summary Of Significant Accounting Policies [Line Items]	'
Common stock exchange price	$3.30
Common stock shares issued upon conversion of Convertible preferred stock	35,985
WYOMING	'
Summary Of Significant Accounting Policies [Line Items]	'
Change in estimated revenue	($54,974)
Number of new wells	3
Preferred Stock Series A1	'
Summary Of Significant Accounting Policies [Line Items]	'
Convertible preferred stock, liquidation preference	$118,750

Disposition_of_Oil_and_Gas_Pro1

Disposition of Oil and Gas Properties - Additional Information (Detail) (USD $)	1 Months Ended		6 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
	Dec. 31, 2013	Sep. 30, 2013	Well	Jun. 30, 2013
Acquisitions And Dispositions Of Oil And Gas Properties [Line Items]	'	'	'	'
Proceeds from sale of oil and gas properties	$1,004,000	'	$191,189	$949
Contingent interest obligation to related party	'	554,000	'	'
Net proceeds from selling of productive properties	'	450,000	'	'
Net book value of sold property	'	163,000	'	'
Asset retirement obligations, net of current portion	522,421	31,000	552,661	'
Gain after reduction of net book value of property	'	$318,000	'	'
Overriding royalty interest	'	1.57%	'	'
Sale comprises, percentage of barrels of oil	'	1.10%	'	'
Company's discontinued future net revenues prior to the sale	'	2.20%	'	'
Number of wells to be drilled	'	'	4	'
Thielen #1-21 in section 21 Township 43 N	'	'	'	'
Acquisitions And Dispositions Of Oil And Gas Properties [Line Items]	'	'	'	'
Depth of well	'	'	15,350	'
Working interest	'	'	1.06%	'
Thielen #2-21 in Section 21 Township 43N	'	'	'	'
Acquisitions And Dispositions Of Oil And Gas Properties [Line Items]	'	'	'	'
Depth of well	'	'	15,330	'
Working interest	'	'	1.06%	'
Starlight federal 28H in Section 7, Township 43N	'	'	'	'
Acquisitions And Dispositions Of Oil And Gas Properties [Line Items]	'	'	'	'
Depth of well	'	'	15,310	'
Working interest	'	'	0.70%	'
Starlight Federal 30H in Section 7, Township 43N	'	'	'	'
Acquisitions And Dispositions Of Oil And Gas Properties [Line Items]	'	'	'	'
Depth of well	'	'	15,310	'
Working interest	'	'	1.41%	'

Income_Taxes_Additional_Inform

Income Taxes - Additional Information (Detail) (USD $)	6 Months Ended
In Millions, unless otherwise specified	Jun. 30, 2014
Income Tax [Line Items]	'
Operating loss carry forwards, amount	$7.70
Valuation allowance against deferred tax assets	100.00%
Minimum	'
Income Tax [Line Items]	'
Operating loss carry forwards, expiration	'2015
Maximum	'
Income Tax [Line Items]	'
Operating loss carry forwards, expiration	'2032

Recovered_Sheet1

Stock Transactions and Preferred Stock Dividends - Additional Information (Detail) (USD $)	6 Months Ended	0 Months Ended		0 Months Ended			0 Months Ended		0 Months Ended
	Jun. 30, 2014	Jan. 30, 2014	Dec. 10, 2013	Dec. 10, 2013	Jan. 30, 2014	Jan. 30, 2014	Jan. 30, 2014	Jan. 30, 2014	Jan. 30, 2014	Jan. 30, 2014
		Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP	Burlingame Equity Investors Master Fund, LP
				Chief Executive Officer and Director	CFO and Director	CFO and Director	Director	Director	Apex Financial Services Corp	Apex Financial Services Corp
Stockholders Equity Note [Line Items]	'	'	'	'	'	'	'	'	'	'
Shares of common stock agreed to repurchase	1,200,000	'	'	'	'	'	'	'	'	'
Stock options granted	'	'	'	1,460,000	'	'	'	'	'	'
Stock options granted, per share	'	'	$0.19	'	'	$0.19	'	$0.19	'	$0.19
Shares of common stock repurchased, shares	'	1,200,000	'	'	'	'	'	'	'	'
Shares of common stock repurchased, per share	'	$0.19	'	'	'	'	'	'	'	'
Shares of common stock repurchased, value	$228,000	$228,000	'	'	'	'	'	'	'	'
Common stock, shares authorized	'	'	'	'	141,873	'	57,895	'	13,158	'
Common stock, value outstanding	'	'	'	'	'	26,956	'	11,000	'	2,500
Stock options exercised, shares	'	118,127	'	'	'	'	'	'	'	'
Stock options exercised, per share	'	$0.19	'	'	'	'	'	'	'	'
Stock options exercised, value	'	$22,444	'	'	'	'	'	'	'	'

Contracts_Payable_Additional_I

Contracts Payable - Additional Information (Detail) (USD $)	6 Months Ended
Contracts Payable - Additional Information (Detail) (USD $)	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Mar. 02, 2010
Other Liabilities [Line Items]	'	'	'	'
Common Stock Shares	12,408,459	'	13,608,459	800,000
Common Stock, value issued	$21,260,387	'	$21,488,387	$500,000
Consulting contract tenure	'	'3 years	'	'
Consulting contract related investor relations expense	$0	$27,778	'	'

Notes_and_Advances_Payable_Det

Notes and Advances Payable (Detail) (USD $)

Jun. 30, 2014

Dec. 31, 2013

Jun. 23, 2013

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Dec. 31, 2013

Jun. 30, 2014

Dec. 31, 2013

Burlingame Equity Investors II, LP

Burlingame Equity Investors Master Fund, LP

Officers directors and affiliates

Unrelated Parties

Notes and advances payable, interest at 8.0%, due on demand

Notes and advances payable, interest at 9.7%, due on demand

Note payable, interest at 7.0%, due March 2015

Notes payable, interest 7.0%, due December 2017

Note Payable Interest at Varies Rate

Collateralized note payable

Note Payable Interest at Varies Rate

Notes payable, interest at 7.5 %, due March 2015

Notes payable, interest at 7.0%, due January 2015

Burlingame Equity Investors II, LP

Burlingame Equity Investors Master Fund, LP

Notes Payable [Line Items]

Notes and advances payable, related parties

$1,197,174

$964,472

$14,984

$85,000

$150,000

$134,295

$792,151

$120,728

$714,488

Less: Current portion of officers, directors, and affiliates

178,273

717,833

178,273

717,833

Long-term portion of officers, directors, and affiliates

226,750

246,639

1,018,901

246,639

Notes and advances payable, related parties

1,197,174

964,472

14,984

85,000

150,000

134,295

792,151

120,728

714,488

Notes and advances payable, unrelated parties

950,641

750,000

532,641

150,000

200,000

44,000

268,000

506,000

Less: Current portion of unrelated parties

950,641

325,000

48,000

552,000

950,641

325,000

Long-term portion of unrelated parties

425,000

Notes and advances payable, unrelated parties

$950,641

$750,000

$532,641

$150,000

$200,000

$44,000

$268,000

$506,000

Notes_and_Advances_Payable_Par

Notes and Advances Payable (Parenthetical) (Detail)	Jun. 23, 2013	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014
		Notes and advances payable, interest at 8.0%, due on demand	Notes and advances payable, interest at 9.7%, due on demand	Note payable, interest at 7.0%, due March 2015	Notes payable, interest 7.0%, due December 2017	Notes payable, interest at 7.5 %, due March 2015	Notes payable, interest at 7.0%, due January 2015	Notes payable, interest at 7.0%, due January 2015
		Officers directors and affiliates	Officers directors and affiliates	Officers directors and affiliates	Officers directors and affiliates	Unrelated Parties	Unrelated Parties	Unrelated Parties
							Burlingame Equity Investors II, LP	Burlingame Equity Investors Master Fund, LP
Notes Payable [Line Items]	'	'	'	'	'	'	'	'
Notes and advances payable, interest rate	7.00%	8.00%	9.70%	7.00%	7.00%	7.50%	7.00%	7.00%
Notes and advances payable, maturity period	'	'	'	'2015-03	'2017-01	'2015-03	'2015-01	'2015-01

Notes_and_Advances_Payable_Add

Notes and Advances Payable - Additional Information (Detail) (USD $)

0 Months Ended

1 Months Ended

0 Months Ended

6 Months Ended

0 Months Ended

6 Months Ended

0 Months Ended

Jan. 28, 2014

Jun. 23, 2013

Jun. 30, 2014

Jan. 01, 2014

Dec. 31, 2013

Jun. 30, 2013

Jun. 23, 2013

Jun. 30, 2013

Jun. 23, 2013

Jan. 28, 2014

Jun. 30, 2014

Jan. 01, 2014

Jun. 30, 2014

Jan. 01, 2014

Jun. 30, 2014

Apr. 29, 2013

Well

Burlingame Equity Investors II, LP

Burlingame Equity Investors Master Fund, LP

Prime Rate

Minimum

Related Parties

DNR Oil & Gas, INC

Note payable interest at 7.5 % due May 2014

Fiscal 2014 and 2015

Fiscal 2016

Fiscal 2017

Remainder of Term

Apex

Chief Executive Officer and Director

Notes Payable [Line Items]

Promissory note, principal sum

$44,000

$506,000

$1,000,000

Debt instrument, due date

28-Jan-15

23-Jul-14

1-Jan-19

31-May-14

Promissory note payable, interest rate

7.00%

2.50%

4.00%

6.00%

8.00%

7.50%

Operating income, assign for secure debt

75.00%

Maximum number of days to cure notes on default

'10 days

Ownership interest on APEX by CEO, director, and shareholder

100.00%

Paid loan fee

10,000

Annual interest rate, Increase percentage

18.00%

Outstanding principal balance

134,295

120,728

Line of credit loan agreement

1,500,000

Accrued interest payable, start date

28-Feb-14

Variable interest rate

3.25%

Add on, variable interest rate

6.50%

Line of credit loan draw provision

479,701

532,641

Number of wells and leases owned

Certificate of deposit

500,000

Percentage of present value of carbon reserves to determine amount eligible for borrowing

65.00%

Cumulative cash flow period to determine amount eligible for borrowing

'48 months

Default interest per annum

21.00%

18.00%

Non-appealable judgments

50,000

Change in control threshold percent

25.00%

Promissory note payable

226,750

246,639

792,151

Principal payment in 2016

250,000

Principal payment in 2017

250,000

Principal payment in 2018

250,000

Outstanding principal balance of promissory notes

792,151

Promissory Note - Principal

950,641

325,000

48,000

552,000

Promissory notes, extended due date

27-Jan-15

Accrued interest on notes and advances payable

$12,998

$52,242

Related_Party_Notes_Payable_De

Related Party Notes Payable (Detail) (USD $)	Jun. 23, 2013	Jan. 01, 2014	Jan. 01, 2014	Jan. 01, 2014	Jan. 01, 2014	Jan. 01, 2014	Jan. 01, 2014
		Promissory Note	Promissory Note	Promissory Note	Promissory Note	Promissory Note	Promissory Note
		CFO & Director	CFO & Director	COO & Director	COO & Director	Director	Director
		Installment		Installment		Installment
Notes Payable [Line Items]	'	'	'	'	'	'	'
Principal Amount	'	$28,500	'	$66,500	'	$49,500	'
Interest Rate	7.00%	'	7.00%	'	7.00%	'	7.00%
Monthly P&I Payment Amount	'	$564.33	'	$1,316.78	'	$980.16	'
Number of Monthly Payments	'	60	'	60	'	36	'

Principal_pay_down_and_New_Mat

Principal pay down and New Maturity Date (Detail) (USD $)	1 Months Ended
Principal pay down and New Maturity Date (Detail) (USD $)	Jun. 30, 2013
Burlingame Equity Investors II, LP	'
Notes Payable [Line Items]	'
Principal Balance Before Pay down	$44,000
Principal Pay down	44,000
Burlingame Equity Investors Master Fund, LP	'
Notes Payable [Line Items]	'
Principal Balance Before Pay down	506,000
Principal Pay down	238,000
Remaining Principal Balance	$268,000

Reconciliation_of_Asset_Retire

Reconciliation of Asset Retirement Obligations (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Sep. 30, 2013
Asset Retirement Obligations [Line Items]	'	'	'	'
Beginning balance	$682,203	'	'	'
Liabilities incurred	'	'	'	'
Accretion expense	33,130	33,060	'	'
Revisions to estimate	'	'	'	'
Ending balance	715,333	'	'	'
Less current asset retirement obligations	-162,672	'	-159,782	'
Long-term asset retirement obligations	552,661	'	522,421	31,000
Asset retirement obligations	$715,333	'	'	'