Download to XLS

Document and Entity Information

v2.4.0.6
Document and Entity Information (USD $)
4 Months Ended
Apr. 30, 2013
Aug. 22, 2013
Oct. 31, 2012
Document And Entity Information      
Entity Registrant Name Petro River Oil Corp.    
Entity Central Index Key 0001172298    
Document Type 10-K    
Document Period End Date Apr. 30, 2013    
Amendment Flag false    
Current Fiscal Year End Date --04-30    
Is Entity a Well-known Seasoned Issuer? No    
Is Entity a Voluntary Filer? No    
Is Entity's Reporting Status Current? Yes    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 584,684
Entity Common Stock, Shares Outstanding   737,317,746  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2013    

Consolidated Balance Sheets

v2.4.0.6
Consolidated Balance Sheets (USD $)
Apr. 30, 2013
Dec. 31, 2012
Current Assets:    
Cash and cash equivalents $ 5,703,082 $ 6,472,094
Accounts receivable 31,394   
Interest receivable, related party    34,658
Prepaid expenses and other current assets 58,390 22,112
Total Current Assets 5,792,866 6,528,864
Oil and gas assets, net 13,423,089 12,254,519
Property, plant and equipment, net of accumulated depreciation of $310,700 4,538   
Related Party Long-term receivable, net    825,000
Reclamation deposits 25,000   
Other assets 5,500   
Total Non-Current Assets 13,458,127 13,079,519
Total Assets 19,250,993 19,608,383
Current Liabilities:    
Accounts payable and accrued expenses 871,094 102,410
Accrued interest payable    1,277,572
Current portion of asset retirement obligations 213,302   
Total Current Liabilities 1,084,396 1,379,982
Long-term liabilities:    
Asset retirement obligations, net of current portion 549,734 143,035
Notes payable    19,999,983
Total Long-Term Liabilities 549,734 20,143,018
Total Liabilities 1,634,130 21,523,000
Commitments and contingencies      
Stockholders' Equity (Deficiency):    
Preferred Shares - 5,000,000 authorized; par value $0.00001 per share, Preferred B shares - 29,500 authorized; 0 issued with a $100 stated value, par value $0.00001 per share      
Common shares - 2,250,000,000 authorized; par value $0.00001 per share; Issued and outstanding; 737,117,746 and 575,541,561 7,371 5,756
Additional paid-in capital 20,317,094 (4,756)
Members' deficiency and accumulated deficit (2,707,602) (1,915,617)
Total Stockholders' Equity (Deficiency) 17,616,863 (1,914,617)
Total Liabilities and Stockholders' Equity (Deficiency) 19,250,993 19,608,383
Preferred B Shares [Member]
   
Stockholders' Equity (Deficiency):    
Preferred Shares - 5,000,000 authorized; par value $0.00001 per share, Preferred B shares - 29,500 authorized; 0 issued with a $100 stated value, par value $0.00001 per share      

Consolidated Balance Sheets (Parenthetical)

v2.4.0.6
Consolidated Balance Sheets (Parenthetical) (USD $)
Apr. 30, 2013
Dec. 31, 2012
Accumulated depreciation of Property, plant and equipment $ 310,700 $ 310,700
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 2,250,000,000 2,250,000,000
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares issued 737,117,746 575,541,561
Common stock, shares outstanding 737,117,746 575,541,561
Preferred B Shares [Member]
   
Preferred stock, shares authorized 29,500 29,500
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares issued 0 0
Preferred shares, stated value per share $ 100 $ 100

Consolidated Statements of Operations

v2.4.0.6
Consolidated Statements of Operations (USD $)
4 Months Ended 11 Months Ended
Apr. 30, 2013
Dec. 31, 2012
Revenue and Other Income    
Oil and natural gas sales $ 184,676 $ 16,901
Total Income 184,676 16,901
Operating Expenses    
Operating 144,439 82,663
General and administrative 623,136 526,460
Depreciation, depletion and accretion 29,304 80,481
Impairment of excess purchase price 1,093,527  
Total Expenses 1,890,406 689,604
Operating loss (1,705,730) (672,703)
Other (income) expenses    
Interest and other Income 5,174 34,658
Interest expense (619,178) (1,277,572)
Total other expenses (614,004) (1,242,914)
Net Loss $ (2,319,734) $ (1,915,617)
Net Loss per Common Share Basic and Diluted $ 0.00 $ 0.00
Weighted Average Number of Common Shares Outstanding - Basic and Diluted 584,966,838 402,985,653

Consolidated Statements of Stockholders' Equity (Deficiency)

v2.4.0.6
Consolidated Statements of Stockholders' Equity (Deficiency) (USD $)
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Balance at Feb. 01, 2012 $ 1 $ 999    $ 1,000
Balance, shares at Feb. 01, 2012 27,556      
Shares issued for conversion of convertible notes and accrued interest 5,755 (5,755)     
Shares issued for conversion of convertible notes and accrued interest, shares 575,514,005      
Net loss       (1,915,617) (1,915,617)
Balance at Dec. 31, 2012 5,756 (4,756) (1,915,617) (1,914,617)
Balance, shares at Dec. 31, 2012 575,541,561      
Shares issued for conversion of convertible notes and accrued interest 155 21,896,578    21,896,733
Shares issued for conversion of convertible notes and accrued interest, shares 15,479,450      
Shares issued in reverse merger 1,460 1,115,944   1,117,404
Shares issued in reverse merger, shares 146,096,735      
Recapitalization of Petro River LLC's accumulated losses through the date of merger   (2,691,279) 2,691,279   
Stock based compensation   607   607
Dividend distribution     (1,163,530) (1,163,530)
Net loss     (2,319,734) (2,319,734)
Balance at Apr. 30, 2013 $ 7,371 $ 20,317,094 $ (2,707,602) $ 17,616,863
Balance, shares at Apr. 30, 2013 737,117,746      

Consolidated Statements of Cash Flows

v2.4.0.6
Consolidated Statements of Cash Flows (USD $)
4 Months Ended 11 Months Ended
Apr. 30, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (2,319,734) $ (1,915,617)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation, depletion and amortization 25,087 80,481
Stock-based compensation 607  
Accretion of asset retirement obligation 4,217   
Impairment of excess purchase price 1,093,527  
Changes in operating assets and liabilities:    
Accounts receivable (31,394)   
Prepaid expenses and other assets 43,278 (22,112)
Interest receivable    (34,658)
Other assets (5,500)   
Accounts payable and accrued liabilities (99,514) 102,410
Accrued interest payable 619,178 1,277,572
Net Cash Used in Operating Activities (670,248) (511,924)
Cash Flows From Investing Activities:    
Capitalized expenditure on oil and gas assets (98,764) (12,191,965)
Issuance of notes receivable to related party    (825,000)
Net Cash Provided Used in Investing Activities (98,764) (13,016,965)
Cash Flows From Financing Activities:    
Proceeds from issuance of notes    19,999,983
Capital contributions    1,000
Net Cash Provided by Financing Activities    20,000,983
Change in cash and cash equivalents (769,012) 6,472,094
Cash and cash equivalents, beginning of period 6,472,094  
Cash and cash equivalents, end of period 5,703,082 6,472,094
Cash Paid During the Period for:    
Income taxes      
Interest paid      
Non-cash investing and financing activities:    
Conversion of notes and accrued interest into shares of common stock 21,896,733   
Recognition of asset retirement obligation    143,035
Dividend distribution 1,163,530   
Assets acquired and liabilities assumed in reverse merger:    
Prepaid expenses and other current assets 104,556   
Property and equipment 4,538   
Oil and gas assets 1,093,991   
Accounts payable and accrued expenses (563,424)  
Asset retirement obligations (615,784)   
Net assets acquired 23,877   
Consideration for net assets acquired 1,117,404   
Excess purchase price $ 1,093,527   

Organization and Liquidity

v2.4.0.6
Organization and Liquidity
4 Months Ended
Apr. 30, 2013
Organization And Liquidity  
Organization and Liquidity

1. Organization and Liquidity:

 

Petro River Oil Corp (the “Company”) is an enterprise engaged in the exploration and exploitation of heavy oil properties. On September 7, 2012 a shareholder meeting was held to amend the Articles of the Corporation to change the name of the Company from Gravis Oil Corporation to Petro River Oil Corp. The Company’s principal administrative office is located in Houston, Texas and its principal operations are in Kansas and Western Missouri.

 

The Company was originally incorporated under the Company Act (British Columbia) on February 8, 2000 under the name Brockton Capital Corp. The Company then changed its name to Mega West Energy Corp. effective February 27, 2010 before changing it to Gravis Oil Corp. on June 20, 2011. On September 11, 2012, the Company re-organized under the laws of the State of Delaware. Prior to September 11, 2012, and at April 30, 2012, the Company was organized under the laws of Alberta, Canada. This re-organization had no impact on the Company’s consolidated financial statements.

 

Petro River Oil LLC (“Petro”) was incorporated under the laws of the State of Delaware on March 3, 2011. Through proceeds received from the issuance of various promissory notes, on February 1, 2012 Petro purchased various interests in oil and gas leases, wells, records, data and related personal property located along the Mississippi Lime play in the state of Kansas from Metro Energy Corporation (“Metro”)., a Louisiana company and other interrelated entities, entities of which were in financial distress. These assets were purchased by Petro from Metro through a court approved order for which Metro was undergoing Chapter 11 Bankruptcy proceedings as a Debtor-In-Possession of these various oil and gas assets. Petro purchased these assets for cash considerations of $2,000,000 as well as a 25% Non-Managing membership interest in the Company. Subsequent to the Metro purchase the Company engaged Energy Source Advisors to renew a number of the leases acquired in the Metro purchase and to lease additional acreage. As a result of the asset purchase from Metro and the completion of the additional lease renewals and additional acreage purchases, the Company obtained a total of 115,000 gross/85,000 net acres of leases, having unproven reserves at the time of acquisition, in the Mississippi Lime play in Southeast Kansas for total cost of $12.2 million.

 

On April 23, 2013, the Company executed and consummated a securities purchase agreement by and among the Company, Petro, the holders of outstanding secured promissory notes of Petro (the “Notes”), and the members (the “Petro Members”) of Petro holding membership interests in Petro (the “Membership Interests”), and together with the Notes and the Membership Interests, the “Acquired Securities”) sold by the Company (the “Securities Purchase Agreement” and the transaction, the “Share Exchange”).

 

In the Share Exchange, the Investors exchanged their Acquired Securities for 591,021,011 newly issued shares of common stock of the Company (“Common Stock”). As a result, upon completion of the Share Exchange, Petro became the Company’s wholly-owned subsidiary.

 

As a result of the Share Exchange, the Company acquired 100% of the member units of Petro and consequently, control of the business and operations of Petro. Under generally accepted accounting principles in the Unites States, (“U.S. GAAP”) because Petro’s former members’ and note holders held 80% of the issued and outstanding shares of the Company as a result of the Share Exchange. Petro is deemed the accounting acquirer while the Company remains the legal acquirer. Petro adopted the fiscal year of the Company and its operations for the period from February 2, 2012 (Commencement of Operations) to April 30, 2012 were not material.Prior to the Share Exchange, all historical financial statements presented are that of Petro. The equity of the Company is the historical equity of Petro, retrospectively restated to reflect the number of shares issued by the Company in the transaction.

 

Liquidity and Management Plans

 

The Company is focused on developing its recently acquired Mississippi Lime acreage in Kansas and also its heavy oil properties in Missouri and Kentucky. Early reservoir projects in Kansas were focused on establishing proved reserve potential into the Bourbon Arch geological region of the Mississippi Lime play. The production response from this region established migration and asset production potential. The Company also engaged an extensive geologic study of its leasehold position using over 26,000 producers and 60 square miles of a proprietary 3D data set.

 

Projects related to the heavy oil reservoirs were in technical review. The Company has an extensive amount of technical and reservoir information on both Missouri and Kansas positions. The data is being utilized in the understanding and test phases to develop an economic heavy oil production reserve base.

 

The ultimate goal of the management of the Company is to maximize shareholder value. Specific targets include: increasing production by developing its acreage, increasing profitability margins by evaluating and optimizing its production, and executing its business plan to increase property values, prove its reserves, and expand its asset base.

 

As of April 30, 2013, the Company has working capital of approximately $4.7 million but has incurred losses since it commenced operations and utilized cash in its operating activities to date. In addition, Petro has a limited operating history. At April 30, 2013, the Company has cash and cash equivalents of approximately $5.7 million. Management believes that the current level of working capital is sufficient to maintain operations for at least the next 12 months. Management intends to continue to raise capital through debt and equity instruments in order to achieve its business plans.

Basis of Preparation

v2.4.0.6
Basis of Preparation
4 Months Ended
Apr. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Preparation

2. Basis of Preparation:

 

The consolidated financial statements and accompanying footnotes are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

 

These consolidated financial statements include the below wholly-owned subsidiaries:

 

Petro River Oil LLC, and MegaWest Energy USA Corp. and its wholly owned subsidiaries:

 

MegaWest Energy Texas Corp.
MegaWest Energy Kentucky Corp.
MegaWest Energy Missouri Corp.
MegaWest Energy Kansas Corp.
MegaWest Energy Montana Corp.

Significant Accounting Policies

v2.4.0.6
Significant Accounting Policies
4 Months Ended
Apr. 30, 2013
Accounting Policies [Abstract]  
Significant Accounting Policies

3. Significant Accounting Policies:
   
(a) Use of Estimates

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions 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. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation, depletion and accretion, income taxes, fair value of derivatives liabilities and other financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of April 30, 2013 and December 31, 2013, Petro had no estimated proven reserves.

 

(b) Cash and Cash Equivalents:

 

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased to be cash equivalents. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

 

(c) Oil and Gas Operations:

 

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the statement of operations. The Company has defined a cost center by country. Currently, all of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include nonproducing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least quarterly to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company performed a comparable study of unproven long-lived assets as of April 30, 2013 and determined that none of its long-term assets at April 30, 2013 were impaired

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All the oil and gas properties with proven reserves were impaired to the salvage value prior to the merger. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period.

 

Ceiling Test: Under the full-cost method of accounting, a ceiling test is performed quarterly. The full-cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test determines a limit on the carrying value of oil and gas properties. The capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion, amortization, and impairment and the related deferred income taxes, may not exceed the estimated future net cash flows from proved oil and gas reserves, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, generally using current prices (with consideration of price changes only to the extent provided by contractual arrangements) as of the date of the latest balance sheet presented and including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, net of related tax effects, plus the cost of un evaluated properties and major development projects excluded from the costs being amortized. If capitalized costs exceed this limit, the excess is charged to expense and reflected as additional accumulated depreciation, depletion, amortization and impairment. In the application of the full-cost method, the term “current price” means the average price during the 12-month period prior to the end of the entity’s fiscal year determined as the un-weighted arithmetical average of the prices on the first day of each month within the 12-month period. 

 

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. For the four months ended April 30, 2013, all oil and gas reserves were classified as unproven. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion of oil and gas properties under the full cost method during the four months ended April 30, 2013 and for the period from February 2, 2012 (Commencement of Operations) through December 31, 2012.

 

(d) Asset Retirement Obligations:

 

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the statement of operations.

 

Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

 

(e) Oil and Gas Revenue:

 

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

 

(f) Stock-Based Compensation:

 

Generally, all forms of stock-based compensation, including stock option grants, warrants, and restricted stock grants are measured at their fair value utilizing an option pricing model on the award’s grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expenses resulting from stock-based compensation are recorded as general and administrative expenses in the consolidated statement of operations, depending on the nature of the services provided.

 

(g) Income Taxes:

 

Prior to the Share Exchange, Petro was not subject to income taxes in any jurisdiction. The members of Petro were responsible for the tax liability, if any, related to Petro’s taxable income. Accordingly, no provision for income taxes was reflected in the accompanying financial statements. The Petro members have concluded that Petro was a pass-through entity and there were no uncertain tax positions that would require recognition in the financial statements. If Petro were to incur an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes. For the periods ended April 30, 2013 and December 31, 2012, no interest and penalties were required to be recorded. The Members’ conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof as well as other factors. At the time of the share exchange, all undistributed losses were closed to additional paid in capital.

 

Subsequent to the Share Exchange, the Company applies the elements of ASC 740-10 “Income Taxes — Overall” regarding accounting for uncertainty in income taxes. This clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of April 30, 2013 and December 31, 2012, the Company did not have any unrecognized tax benefits. The Company does not expect that the amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

 

Deferred taxes are computed based on the tax liability or benefit in future years of the reversal of temporary differences in the recognition of income or deduction of expenses between financial and tax reporting purposes. The net difference, if any, between the provision for taxes and taxes currently payable is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if any, are classified as current and non-current based on the classification of the related asset or liability for financial reporting purposes, or based on the expected reversal date for deferred taxes that are not related to an asset or liability. Valuation allowances are recorded to reduce deferred tax assets to that amount which is more likely than not to be realized.

 

(h) Per Share Amounts:

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the four months ended April 30, 2013 and the period February 2, 2012 (commencement of operations) to December 31, 2012 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Common share equivalents excluded an aggregate of 520,000 and 0 shares of common stock for the four months ended April, 2013 and the period February 2, 2012 (commencement of operations) to December 31, 2012, respectively.

 

The Company had the following common stock equivalents at April 30, 2013 and December 31, 2012:

 

As at   April 30, 2013     December 31, 2012  
Stock Options     290,000          
Compensation Warrants     230,000          
      520,000          

 

(j) Fair Value of Financial Instruments:

 

All financial instruments, including cash and cash equivalent, accounts receivable, prepaid expenses and accounts payable are to be recognized on the balance sheet initially at its carrying value. The carrying value of these assets approximate their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

(k) Subsequent Events:

 

The Company evaluates subsequent events through the date when consolidated financial statements are issued.

 

(l) Reclassifications 

 

Certain amounts in prior periods have been reclassified to conform to current period presentation. As of December 31, 2012, Petro previously reserved a recorded asset value by $143,035 the related asset retirement obligation. The reclassification of the asset retirement obligation to a liability increased the oil and gas assets by the corresponding amount. The recognition did not have an effect on the Company’s results of operations or cash flows during the period ended December 31, 2012.

 

(m) Recent Accounting Pronouncements:

 

In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, an amendment to FASB ASC Topic 220. The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This ASU is effective prospectively for the Company’s fiscal years, and interim periods within those years, beginning after December 15, 2012. The pronouncement did not have a material effect on the Company’s financial position, results of operations or cash flows.

 

In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by the FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Reverse Acquisition

v2.4.0.6
Reverse Acquisition
4 Months Ended
Apr. 30, 2013
Business Combinations [Abstract]  
Reverse Acquisition

Note 4: Reverse Acquisition

 

Prior to the reverse acquisition, the existing shareholders of the Company (the Legal Acquirer) held 146,096,735 or 20% of the outstanding shares of the common stock. Based on the overall market capitalization of the Company at the time of the share exchange, the aggregate fair value of these shares (20% of the market capitalization) was $1,117,404, which exceeded the fair value of the net assets acquired by $1,093,527.

 

Purchase price allocation        
Prepaid expenses   $ 104,556  
Property and equipment     4,538  
Oil and gas assets     1,093,991  
Accounts payable and accrued expenses     (563,424 )
Asset retirement obligations   $ (615,784 )
         
Net assets acquired   $ 23,877  
         
Consideration for net assets acquired   $ 1,117,404  
Excess purchase price   $ 1,093,527  

 

The Company prior to the merger, impaired its assets to net salvage value and determined upon consummation of the merger the excess purchase price paid for the assets continued to be impaired, thus the Company recognized an immediate charge of $1,093,527 in its accompanying consolidated statement of operations for the four months period ended April 30, 2013.

 

The following table summarizes, on an unaudited pro forma basis, the results of operations of the Company as though the acquisition had occurred as of February 2, 2012 (Commencement of operations). The pro forma amounts give effect to appropriate adjustments of amortization of intangible assets and interest expense associated with the financing of the purchase. The pro forma amounts presented are not necessarily indicative of either the actual operation results had the acquisition transaction occurred as of February 2, 2012 and as of January 1, 2013.

 

    April 30, 2013     December 31, 2012  
Revenues   $ 184,676       16,901  
Net loss     (2,276,797 )     (2,216,470 )
Loss per share of common stock     (0.00 )     (0.00 )
Basic and diluted     737,117,746       737,117,746  

Oil and Gas Assets

v2.4.0.6
Oil and Gas Assets
4 Months Ended
Apr. 30, 2013
Extractive Industries [Abstract]  
Oil and Gas Assets

5. Oil and Gas Assets:

 

The following table summarizes the oil and gas assets by project:

 

Cost   Missouri     Kentucky     Montana     Kansas     Other     Total  
February 2, 2012   $ -     $ -       -     $ -     $ -     $ -  
Additions     -       -       -       12,191,965       -       12,191,965  
Asset retirement obligations     -       -       -       143,035               143,035  
Depreciation, Depletion and amortization     -       -       -       (80,481 )     -       (80,481 )
Balance December 31, 2012     -       -       -       12,254,519       -       12,254,519  
Assets acquired in reverse merger     918,991       -       75,000       -       100,000       1,093,991  
Additions                             98,764               98,764  
Excess purchase price paid     1,093,527       -                               1,093,527  
Impairment of excess purchase price     (1,093,527 )     -                               (1,093,527 )
Depreciation, Depletion and amortization     -       -       -       (24,185 )     -       (24,185 )
                                                 
Balance April 30, 2013   $ 918,991     $ -       75,000     $ 12,329,098     $ 100,000     $ 13,423,089  

 

The Company performed a test of oil and gas assets as of April 30, 2013, and concluded that the excess purchase price paid for its Missouri property exceeded it net realizable value, and as a result it recognized an impairment in the amount of $1,093,527.

 

The following are descriptions of the Company’s oil and gas assets. The assets are disclosed based on the historical ownership of both Petro and the Company.

 

Kansas

 

Through proceeds received from the issuance of various promissory notes, on February 1, 2012 Petro purchased various interests in oil and gas leases, wells, records, data and related personal property located along the Mississippi Lime play in the state of Kansas from Metro Energy Corporation (“Metro”)., a Louisiana company and other interrelated entities, entities of which were in financial distress. These assets were purchased by Petro from Metro through a court approved order for which Metro was undergoing Chapter 11 Bankruptcy proceedings as a Debtor-In-Possession of these various oil and gas assets. Petro purchased these assets for cash considerations of $2,000,000 as well as a 25% Non-Managing membership interest in the Company. Subsequent to the Metro purchase the Company engaged Energy Source Advisors to renew a number of the leases acquired in the Metro purchase and to lease additional acreage. As a result of the asset purchase from Metro and the completion of the additional lease renewals and additional acreage purchases, the Company obtained a total of 115,000 gross/85,000 net acres of leases, having unproven reserves at the time of acquisition, in the Mississippi Lime play in Southeast Kansas for total cost of $12.2 million. The Company also acquired over 60 square miles of proprietary 3D seismic data over prospective Mississippi Lime acreage in the same area.

 

Kentucky

 

As a result of the share exchange, the Company acquired Kentucky lease holdings which include a 37.5 % working interest in 27,150 unproved gross acres (10,181 net acres). The Kentucky property is mainly undeveloped land and therefore was not assigned any reserve value under the Company’s independent reserve reports.

 

Currently, the Company is carrying these oil and gas assets at $-, the carrying value of the assets acquired through the share exchange.

 

Missouri

 

At April 30, 2013, the Company’s Missouri lease holdings totaled 22,832 gross acres with 98.4% working interest.

 

On separate pilot projects at Deerfield, the Company built two 500 barrel of oil per day steam drive production facilities (Marmaton River and Grassy Creek) comprised of 116 production wells, 39 steam injection wells and 14 service and observation wells. Throughout the Deerfield area, the Company have drilled 73 exploration/delineation wells with a 67% success rate.

 

As of April 30, 2013, all Missouri assets were carried at salvage value, since the Company’s current business plans do not contemplate raising the necessary capital to develop these properties.

 

Montana

 

The Montana leasehold is in the Devils Basin prospect and totals 1,175 gross acres (881 net). The Company currently owns a 75% working interest in this prospect, but has no immediate plans to develop this property. On April 17, 2012 the Teton Prospect leases totaling 2,807 gross acres (1137 net) expired.

 

As of April 30, 2013, all Montana assets were carried at salvage value.

 

Other

 

Other property consists primarily of four used steam generators and related equipment that will be assigned to future projects. As of April 30, 2013, management concluded that impairment was not necessary as all other assets were carried at salvage value.

Asset Retirement Obligations

v2.4.0.6
Asset Retirement Obligations
4 Months Ended
Apr. 30, 2013
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations

6. Asset Retirement Obligations:

 

The total future asset retirement obligation was estimated based on the Company’s ownership interest in all wells and facilities, the estimated legal obligations required to retire, dismantle, abandon and reclaim the wells and facilities and the estimated timing of such payments. The Company estimated the present value of its asset retirement obligations at April 30, 2013 and December 31, 2012, based on a future undiscounted liability of $1,087,292 and $192,000, respectively. These costs are expected to be incurred within one to 24 years. A credit-adjusted risk-free discount rate of 10% and an inflation rate of 2% were used to calculate the present value.

 

Changes to the asset retirement obligation were as follows:

 

    April 30, 2013     December 31, 2012  
Balance, beginning of period   $ 143,035     $ -  
Additions     615,784       143,035  
Disposition     -       -  
Revisions     -       -  
Accretion     4,217       -  
      763,036       143,035  
Less: Current portion for cash flows expected to be incurred within one year     (213,302 )     -  
Long-term portion, end of period   $ 549,734     $ 143,035  

 

As of April 30, 2013 and December 31, 2012, the Company has $25,000 and $0 of reclamation deposits with authorities to secure certain abandonment liabilities in Missouri.

 

Expected timing of asset retirement obligations:

 

Year Ended April 30        
2014     213,302  
2015     122,222  
2016     135,556  
2017     273,181  
Thereafter     343,031  
      1,087,292  
Effect of discount     (324,256 )
Total     763,036  

Notes Payable

v2.4.0.6
Notes Payable
4 Months Ended
Apr. 30, 2013
Debt Disclosure [Abstract]  
Notes Payable

7. Notes payable:

 

For the period from February 2, 2012 (commencement of operations) through December 31, 2012, the Company received proceeds from the issuance of promissory notes of $19,999,983. Advances under each bear interest, accruing with respect to each advance from the date of such advance, at the rate of 10% per annum, compounding annually, with a maturity of February 10, 2015. The Notes were entered into contemporaneously with and were secured by certain Mortgage, Assignment of Production, Security Agreement and Financing Statement dated of even date herewith (for up to an aggregate Principal Amount of up to $20,000,000).

 

The Company recorded interest expense of $619,178 and $1,277,572 for the four months ended April 30, 2013 and for the period February 2, 2012 (commencement of operations) through December 31, 2012, respectively. On April 23, 2013, as part of the share exchange transaction, the notes and accrued interest aggregating $21,896,733 were converted into 590,993,455 shares of the Company’s common stock.

Members' and Stockholders' Equity

v2.4.0.6
Members' and Stockholders' Equity
4 Months Ended
Apr. 30, 2013
Stockholders' Equity Note [Abstract]  
Members' and Stockholders' Equity

8. Members’ and Stockholders’ Equity:

 

As of April 30, 2013, the Company had 5,000,000 shares of blank check preferred stock authorized with a par value of $0.00001 per share. None of the blank check preferred shares were issued or outstanding.

 

As of April 30, 2013, the Company had 29,500 shares of preferred B shares authorized with a par value of $0.00001 per share. No preferred B shares were issued or outstanding as of April 30, 2013.

Stock Based Compensation

v2.4.0.6
Stock Based Compensation
4 Months Ended
Apr. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Based Compensation

9. Stock Based Compensation:

 

As of April 30, 2013, the Company has one equity incentive plan. The number of shares reserved for issuance in aggregate under the plan is limited to 90 million shares. The exercise price, term and vesting schedule of stock options granted are set by the board of directors at the time of grant. Stock options granted under the plan may be exercised on a cashless basis, if such exercise is approved by the Board. In a cashless exercise, the employee receives a lesser amount of shares in lieu of paying the exercise price based on the quoted market price of the shares on the trading day immediately preceding the exercise date.

  

The following table summarizes the changes in stock options:

 

    Number of Options     Weighted 
Avg
Exercise 
Price
 
Outstanding, February 2, 2012     -     $ -  
Granted     -       -  
Expired     -       -  
Forfeited     -       -  
Cancelled     -       -  
Outstanding, December 31, 2012     -     $ -  
Granted/Acquired in reverse merger     290,000       0.50  
Expired     -       -  
Forfeited     -       -  
Cancelled     -       -  
Outstanding, April 30, 2013     290,000     $ 0.50  
Exercisable on April 30, 2013     290,000     $ 0.50  

 

On April 23, 2013, as a result of the share exchange and reverse merger, the Company inherited the outstanding options of the legal acquirer. These options were previously issued and are fully vested at the time of the share exchange agreement.

 

During the four months ended April 30, 2013 and for the period February 2, 2012 (commencement of operations) to December 31, 2012, the Company recorded stock-based compensation expenses of $607 and $-, respectively.

 

As of April 30, 2013, total compensation cost related to non-vested stock options not yet recognized is $-.

 

The following table summarizes information about the options outstanding and exercisable at April 30, 2013:

  

      Options Outstanding   Options Exercisable
  Exercise Price         Options        Weighted Avg.
Life Remaining
      Weighted Avg. Exercise Price       Options          Weighted Avg.
Exercise Price
 
$ 0.50       290,000        1.01 years   $ 0.50       290,000     $ 0.50  
 

Aggregate

Intrinsic Value

                $ -             $ -  

  

Intrinsic value is the Company’s current per share fair value as quoted on the Over the Counter Bulletin Board on the balance sheet date $0.40 less the current exercise price.

 

In addition, the Company inherited 230,000 outstanding warrants of the legal acquirer. These warrants were previously issued to consultants of the Company and are deemed to be fully vested at the time of the reverse merger. The warrants are exercisable at $0.50 per share until April 5, 2014

 

    Number of     Weighted Avg.     Weighted Avg.  
    Warrants     Exercise Price     Life Remaining  
Outstanding and exercisable, February 2, 2012     -     $ -       -  
Granted     -       -       -  
Outstanding and exercisable, December 31, 2012     -       -       -  
Acquired in reverse merger     230,000       0.50       0.65  
Outstanding and exercisable, April 30, 2013     230,000     $ 0.50       0.65 years  
Aggregate Intrinsic Value           $ -          

Related Party Transactions

v2.4.0.6
Related Party Transactions
4 Months Ended
Apr. 30, 2013
Related Party Transactions [Abstract]  
Related Party Transactions

10. Related Party Transactions:

 

During the period February 2, 2012 (Commencement of Operations) to December 31, 2012, the Company entered into a series of demand promissory notes totaling $825,000 with Petro. The demand promissory notes bear interest at 8% per annum and are due two business days after receipt of demand for payment. In an event of default, the notes bear a default rate of 15% per annum. The notes are unsecured.

 

During the period January 1, 2013 to April 30, 2013, the Company entered into a series of demand promissory notes totaling $256,950 with Petro. The demand promissory notes bear interest at 8% per annum and are due two business days after receipt of demand for payment. In an event of default, the notes bear a default rate of 15% per annum. The notes are unsecured.

 

As a result of the share exchange agreement, on April 23, 2013, the balance of the aforementioned demand promissory notes and accrued interest totaling $1,163,530 which was converted to equity and was reclassified from equity to a liability and was deemed as a dividend distribution.

Segment Information

v2.4.0.6
Segment Information
4 Months Ended
Apr. 30, 2013
Segment Reporting [Abstract]  
Segment Information

11. Segment Information:

 

Petro presently has one reportable business segment, that being oil and gas exploration and exploitation. Petro’s corporate and administrative operations are conducted in the United States, while predominantly all of the oil and gas properties and operations are located in the United States at April 30, 2013.

 

    Four Months ended April 30, 2013  
    Canada     USA     Consolidated  
Revenue   $ -     $ 184,676     $ 184,676  
Expenses     -       (2,504,410 )     (2,504,410  
Net loss     (- )     (2,319,734 )     (2,319,734  
Oil and gas assets     100,000       13,323,089       13,423,089  
Property and equipment     -       4,538       4,538  
Oil and gas asset additions (reverse merger)     100,000       993,991       1,093,991  
Oil and gas additions             98,764       98,764  
Oil and gas asset impairment     -       -       -  
Property and equipment additions (reverse merger)     -       4,538       4,538  

  

    Period February 2, 2012 (Commencement of Operations) to December 31, 2012  
    Canada     USA     Consolidated  
Revenue   $ -     $ 16,901     $ 16,901  
Expenses     -       (1,932,518 )     (1,932,518 )
Net loss     -       (1,915,617 )     (1,915,617 )
Oil and gas assets     -       12,254,519       12,254,519  
Property and equipment     -       -       -  
Oil and gas asset additions     -       12,254,519       12,254,519  
Oil and gas asset impairment     -       -       -  
Property and equipment additions     -       -       -  

Income Taxes

v2.4.0.6
Income Taxes
4 Months Ended
Apr. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

12. Income Taxes:

 

As of April 30, 2013, the Company had approximately $3,500,000 of net operating loss carryovers (“NOLs”). The NOLs expires beginning in 2027. As of December 31, 2012, Petro LLC had no NOL carryovers since it was considered to be a non-taxable flow-through entity. The U.S. net operating loss carryovers are subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. Management has determined that a change in ownership occurred as a result of the share exchange on April 23, 2013. Therefore, the net operating loss carryovers are subject to an annual limitation of approximately $156,000. 

 

The income tax expense (benefit) consists of the following:

 

    For the period
January 1, 2013 to
April 30, 2013
    For the period
February 2, 2012 (Commencement
of operations) to
December 31, 2012
 
Foreign                
Current   $ -     $ -  
Deferred     (562,868 )     -  
U.S. Federal                
Current     -       -  
Deferred     22,735,263          
                 
U.S. State & Local                
Current     -       -  
Deferred     2,758,372       -  
                 
Change in valuation allowance     (24,930,767 )        
Income tax provision (benefit)   $ -     $ -  

  

The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

 

    April 30, 2013     December 31, 2012  
             
U.S. Net operating loss carryovers   $ 1,203,780     $ -  
Depreciation and depletion     15,017,106       -  
Accretion of asset retirement obligation     214,638       -  
Total deferred tax assets   $ 16,435,524       -  
Valuation allowance     (16,435,524 )     -  
Deferred tax asset, net of valuation allowance   $ -     $ -  

  

The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense benefit as follows:

 

    For the period from
January 1, 2013 to
April 30, 2013
    For the period from
February 2, 2012
(Commencement of operations) to
December 31, 2012
 
             
U.S. federal statutory rate     (34.00 )%     (34 )%
State income tax, net of federal benefit     (4.13 )%        
Impairment of excess purchase price     17.97 %        
Non-taxable flow through loss from Petro     12.75 %     34 %
Section 382 NOL impairment     1098.96 %        
Foreign deferred tax write down     (24.26 )%        
Other permanent differences     7.44          
Change in valuation allowance     (1074.73 )%     0 %
Income tax provision (benefit)     0.00 %     0 %

  

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.

Contingency and Contractual Obligations

v2.4.0.6
Contingency and Contractual Obligations
4 Months Ended
Apr. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Contingency and Contractual Obligations

13. Contingency and Contractual Obligations:

 

As a result of the Share Exchange, the Company inherited the following contingencies:

 

(a) In January 2010, the Company experienced a flood in its Calgary office premises as a result of a broken water pipe. There was significant damage to the premises rendering them unusable until remediation had been completed by the landlord. Pursuant to the lease contract, the Company has asserted that rent should be abated during the remediation process and accordingly, the Company has not paid rent since December 2009. During the remediation process, the Company engaged an independent environmental testing company to test for air quality and for the existence of other potentially hazardous conditions. The testing revealed the existence of potentially hazardous mold and the consultant provided specific written instructions for the effective remediation of the premises. During the remediation process, the landlord did not follow the consultant’s instructions and correct the potentially hazardous mold situation and subsequently in June 2010 gave notice and declared the premises to be ready for occupancy. The Company re-engaged the consultant to re-test the premises and the testing results again revealed the presence of potentially hazardous mold. The Company has determined that the premises are not fit for re-occupancy and considers the landlord to be in default of the lease and the lease terminated.

 

The landlord disputes the Company’s position and has given notice that it considers the Company to be in default of the lease for failure to re-occupy the premises.

 

In addition, the landlord has claimed that the Company owes monthly rent for the premises from January 2010 to June 30, 2010 in the amount of $247,348 and has claimed that, as a result of the alleged default, pursuant to the terms of the lease, the Company owes three months accelerated rent in the amount of $114,837. The landlord has also asserted that the Company would be liable for an amount up to the full lease obligation of $1,596,329 which otherwise would have been due as follows:

 

Year Ended April 30          
2011     $ 473,055  
2012       473,055  
2013       473,055  
2014       177,164  
Thereafter       -  
Total     $ 1,596,329  

 

To date, no legal action has been commenced by the landlord and the cost, if any, to the Company is not determinable. Accordingly, no amounts related to rent or the disputed lease obligation have been recorded in these financial statements.

 

(b) On March 15, 2013, a former employee of the Company (VP-Operations) commenced an action in the Court of Queen’s Bench of Alberta claiming wrongful termination and seeking severance in an amount approximating US$185,000. On May 3, 2013, the Company reached a settlement with the former employee and entered into a formal settlement and release of claims agreement. As consideration for full settlement and mutual release, the Company agreed to issue the former employee 200,000 shares of common stock of the Company, valued at $0.40/share or $80,000, and a cash payment of $50,000. The Company has accrued $130,000 as of April 30, 2013.

 

(c) Upon completion of the Share Exchange, the Company entered into an Employment Agreement with Scot Cohen, the Company’s Executive Chairman (the “Employment Agreement”). Under the terms of the Employment Agreement, Mr. Cohen will be entitled to all earned but unpaid salary, expense reimbursements, bonuses (if applicable), and any vested benefits, upon termination of the Employment Agreement by the Company for cause, by Mr. Cohen without good reason, or upon the Employment Agreement’s expiration date in the event Mr. Cohen does not choose to renew his contract. In the event Mr. Cohen’s employment is terminated by the Company without cause, upon a change in control of the company, or by Mr. Cohen for good reason, he shall be entitled to any accrued obligations (detailed in the preceding sentence), severance in a single lump sum installment in an amount equal to twice the sum of the base salary in effect on the termination date plus two times the maximum annual bonus for which Mr. Cohen was eligible in the fiscal year in which the termination date occurred, a pro-rata portion of Mr. Cohen’s annual bonus for the fiscal year in which the termination occurred, and a full vesting in the initial grant and in any and all previously granted outstanding equity-based incentive awards subject to time-based vesting criteria.

Subsequent Events

v2.4.0.6
Subsequent Events
4 Months Ended
Apr. 30, 2013
Subsequent Events [Abstract]  
Subsequent Events

14. Subsequent Events:

 

In June and July of 2013, the Company signed a series of agreements with Jeffrey Freedman, former Chief Executive Officer, in relation to his departure from the Company. Pursuant to these agreements, the Company has provided to Mr. Freedman the sum of $12,000 and options to purchase common stock with a $100,000 aggregate fair market value (as “fair market value” is defined in the 2012 Equity Compensation Plan) as of the July 24, 2013 option grant date. These options will expire on july 23, 2016.

Significant Accounting Policies (Policies)

v2.4.0.6
Significant Accounting Policies (Policies)
4 Months Ended
Apr. 30, 2013
Accounting Policies [Abstract]  
Use of Estimates

(a) Use of Estimates

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions 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. Actual results could differ from those estimates. Significant estimates include volumes of oil and natural gas reserves, abandonment obligations, impairment of oil and natural gas properties, depreciation, depletion and accretion, income taxes, fair value of derivatives liabilities and other financial instruments, and contingencies.

 

Oil and gas proven reserve estimates, which are the basis for unit-of-production depletion and the full cost ceiling test, have a number of inherent uncertainties. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, reserve estimates are vulnerable to changes in prices of crude oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future. As of April 30, 2013 and December 31, 2013, Petro had no estimated proven reserves.

Cash and Cash Equivalents

(b) Cash and Cash Equivalents:

 

Cash and cash equivalents include all highly liquid monetary instruments with original maturities of three months or less when purchased to be cash equivalents. These investments are carried at cost, which approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.

Oil and Gas Operations

(c) Oil and Gas Operations:

 

Oil and Gas Properties: The Company uses the full-cost method of accounting for its exploration and development activities. Under this method of accounting, the costs of both successful and unsuccessful exploration and development activities are capitalized as oil and gas property and equipment. Proceeds from the sale or disposition of oil and gas properties are accounted for as a reduction to capitalized costs unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country, in which case a gain or loss would be recognized in the statement of operations. The Company has defined a cost center by country. Currently, all of the Company’s oil and gas properties are located within the continental United States, its sole cost center.

 

Oil and gas properties may include costs that are excluded from costs being depleted. Oil and gas costs excluded represent investments in unproved properties and major development projects in which the Company owns a direct interest. These unproved property costs include nonproducing leasehold, geological and geophysical costs associated with leasehold or drilling interests and in process exploration drilling costs. All costs excluded are reviewed at least quarterly to determine if impairment has occurred.

 

The Company accounts for its unproven long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate.  The Company performed a comparable study of unproven long-lived assets as of April 30, 2013 and determined that none of its long-term assets at April 30, 2013 were impaired

 

Proved Oil and Gas Reserves: In accordance with Rule 4-10 of SEC Regulation S-X, proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All the oil and gas properties with proven reserves were impaired to the salvage value prior to the merger. The price used to establish economic producibility is the average price during the 12-month period preceding the end of the entity’s fiscal year and calculated as the un-weighted arithmetic average of the first-day-of-the-month price for each month within such 12-month period.

 

Ceiling Test: Under the full-cost method of accounting, a ceiling test is performed quarterly. The full-cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test determines a limit on the carrying value of oil and gas properties. The capitalized costs of proved oil and gas properties, net of accumulated depreciation, depletion, amortization, and impairment and the related deferred income taxes, may not exceed the estimated future net cash flows from proved oil and gas reserves, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, generally using current prices (with consideration of price changes only to the extent provided by contractual arrangements) as of the date of the latest balance sheet presented and including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, net of related tax effects, plus the cost of unevaluated properties and major development projects excluded from the costs being amortized. If capitalized costs exceed this limit, the excess is charged to expense and reflected as additional accumulated depreciation, depletion, amortization and impairment. In the application of the full-cost method, the term “current price” means the average price during the 12-month period prior to the end of the entity’s fiscal year determined as the un-weighted arithmetical average of the prices on the first day of each month within the 12-month period.

  

Depletion, Depreciation and Amortization: Depletion, depreciation and amortization is provided using the unit-of-production method based upon estimates of proved oil and gas reserves with oil and gas production being converted to a common unit of measure based upon their relative energy content. For the four months ended April 30, 2013, all oil and gas reserves were classified as unproven. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and, where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

 

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expenses. There have been no material changes in the methodology used by the Company in calculating depletion of oil and gas properties under the full cost method during the four months ended April 30, 2013 and for the period from February 2, 2012 (Commencement of Operations) through December 31, 2012.

Asset Retirement Obligations

(d) Asset Retirement Obligations:

 

The Company recognizes a liability for the estimated fair value of site restoration and abandonment costs when the obligations are legally incurred and the fair value can be reasonably estimated. The fair value of the obligations is based on the estimated cash flow required to settle the obligations discounted using the Company’s credit adjusted risk-free interest rate. The obligation is recorded as a liability with a corresponding increase in the carrying amount of the oil and gas assets. The capitalized amount will be depleted on a unit-of-production method. The liability is increased each period, or accretes, due to the passage of time and a corresponding amount is recorded in the statement of operations.

 

Revisions to the estimated fair value would result in an adjustment to the liability and the capitalized amount in oil and gas assets.

Oil and Gas Revenue

(e) Oil and Gas Revenue:

 

Sales of oil and gas, net of any royalties, are recognized when oil has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable. The Company sells oil and gas on a monthly basis. Virtually all of its contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuates to remain competitive with other available oil supplies.

Stock-Based Compensation

(f) Stock-Based Compensation:

 

Generally, all forms of stock-based compensation, including stock option grants, warrants, and restricted stock grants are measured at their fair value utilizing an option pricing model on the award’s grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expenses resulting from stock-based compensation are recorded as general and administrative expenses in the consolidated statement of operations, depending on the nature of the services provided.

Income Taxes

(g) Income Taxes:

 

Prior to the Share Exchange, Petro was not subject to income taxes in any jurisdiction. The members of Petro were responsible for the tax liability, if any, related to Petro’s taxable income. Accordingly, no provision for income taxes was reflected in the accompanying financial statements. The Petro members have concluded that Petro was a pass-through entity and there were no uncertain tax positions that would require recognition in the financial statements. If Petro were to incur an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes. For the periods ended April 30, 2013 and December 31, 2012, no interest and penalties were required to be recorded. The Members’ conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof as well as other factors. At the time of the share exchange, all undistributed losses were closed to additional paid in capital.

 

Subsequent to the Share Exchange, the Company applies the elements of ASC 740-10 “Income Taxes — Overall” regarding accounting for uncertainty in income taxes. This clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of April 30, 2013 and December 31, 2012, the Company did not have any unrecognized tax benefits. The Company does not expect that the amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

 

Deferred taxes are computed based on the tax liability or benefit in future years of the reversal of temporary differences in the recognition of income or deduction of expenses between financial and tax reporting purposes. The net difference, if any, between the provision for taxes and taxes currently payable is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if any, are classified as current and non-current based on the classification of the related asset or liability for financial reporting purposes, or based on the expected reversal date for deferred taxes that are not related to an asset or liability. Valuation allowances are recorded to reduce deferred tax assets to that amount which is more likely than not to be realized.

Per Share Amounts

(h) Per Share Amounts:

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the four months ended April 30, 2013 and the period February 2, 2012 (commencement of operations) to December 31, 2012 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Common share equivalents excluded an aggregate of 520,000 and 0 shares of common stock for the four months ended April, 2013 and the period February 2, 2012 (commencement of operations) to December 31, 2012, respectively.

 

The Company had the following common stock equivalents at April 30, 2013 and December 31, 2012:

 

As at   April 30, 2013   December 31, 2012  
Stock Options     290,000     -  
Compensation Warrants     230,000     -  
      520,000     -  

Fair Value of Financial Instruments

(j) Fair Value of Financial Instruments:

 

All financial instruments, including cash and cash equivalent, accounts receivable, prepaid expenses and accounts payable are to be recognized on the balance sheet initially at its carrying value. The carrying value of these assets approximate their fair value due to their short-term maturities.

 

At each balance sheet date, the Company assesses financial assets for impairment with any impairment recorded in the consolidated statement of operations. To assess loans and receivables for impairment, the Company evaluates the probability of collection of accounts receivable and records an allowance for doubtful accounts, which reduces loans and receivables to the amount management reasonably believes will be collected. In determining the amount of the allowance, the following factors are considered: the length of the time the receivable has been outstanding, specific knowledge of each customer’s financial condition and historical experience.

 

Market risk is the risk that changes in commodity prices will affect the Company’s oil sales, cash flows or the value of its financial instruments. The objective of commodity price risk management is to manage and control market risk exposures within acceptable limits while maximizing returns.

 

The Company is exposed to changes in oil prices which impact its revenues and to changes in natural gas process which impact its operating expenses.

 

The Company does not utilize financial derivatives or other contracts to manage commodity price risks.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Fair value measurements are categorized using a valuation hierarchy for disclosure of the inputs used to measure fair value, which prioritize the inputs into three broad levels:

 

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date, and include those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Subsequent Events

(k) Subsequent Events:

 

The Company evaluates subsequent events through the date when consolidated financial statements are issued.

Reclassifications

(l) Reclassifications

 

Certain amounts in prior periods have been reclassified to conform to current period presentation. As of December 31, 2012, Petro previously reserved a recorded asset value by $143,035 the related asset retirement obligation. The reclassification of the asset retirement obligation to a liability increased the oil and gas assets by the corresponding amount. The recognition did not have an effect on the Company’s results of operations or cash flows during the period ended December 31, 2012.

Recent Accounting Pronouncements

(m) Recent Accounting Pronouncements:

 

In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, an amendment to FASB ASC Topic 220. The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This ASU is effective prospectively for the Company’s fiscal years, and interim periods within those years, beginning after December 15, 2012. The pronouncement did not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by the FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. Management does not expect the pronouncement to have a material effect on the Company’s financial position, results of operations or cash flows.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Significant Accounting Policies (Tables)

v2.4.0.6
Significant Accounting Policies (Tables)
4 Months Ended
Apr. 30, 2013
Accounting Policies [Abstract]  
Schedule of Common Stock Equivalents

The Company had the following common stock equivalents at April 30, 2013 and December 31, 2012:

 

As at   April 30, 2013   December 31, 2012  
Stock Options     290,000     -  
Compensation Warrants     230,000     -  
      520,000     -  

Reverse Acquisition (Tables)

v2.4.0.6
Reverse Acquisition (Tables)
4 Months Ended
Apr. 30, 2013
Business Combinations [Abstract]  
Schedule of Purchase Price Allocation

The common stock maintained by the existing shareholders of the Company, 146,096,735 or 20% of the outstanding common shares prior to the reverse acquisition. Based on the overall market capitalization of the Company at the time of the share exchange, the aggregate fair value of these shares (20% of the market capitalization) was $1,117,404, which exceeded the fair value of the net assets acquired by $1,093,527.

 

Purchase price allocation      
Prepaid expenses   $ 104,556  
Property and equipment     4,538  
Oil and gas assets     1,093,991  
Accounts payable and accrued expenses     (563,424 )
Asset retirement obligations   $ (615,784 )
         
Net assets acquired   $ 23,877  
         
Consideration for net assets acquired   $ 1,117,404  
Excess purchase price   $ 1,093,527  

Schedule of Pro Forma Operation Results

The pro forma amounts presented are not necessarily indicative of either the actual operation results had the acquisition transaction occurred as of February 2, 2012 and as of January 1, 2013.

 

    April 30, 2013     December 31, 2012  
Revenues   $ 184,676       16,901  
Net loss     (2,276,797 )     (2,216,470 )
Loss per share of common stock     (0.00 )     (0.00 )
Basic and diluted     737,117,746       737,117,746  

Oil and Gas Assets (Tables)

v2.4.0.6
Oil and Gas Assets (Tables)
4 Months Ended
Apr. 30, 2013
Extractive Industries [Abstract]  
Schedule of Oil and Gas Assets

The following table summarizes the oil and gas assets by project:

 

Cost   Missouri     Kentucky     Montana     Kansas     Other     Total  
February 2, 2012   $ -     $ -       -     $ -     $ -     $ -  
Additions     -       -       -       12,191,965       -       12,191,965  
Asset retirement obligations     -       -       -       143,035               143,035  
Depreciation, Depletion and amortization     -       -       -       (80,481 )     -       (80,481 )
Balance December 31, 2012     -       -       -       12,254,519       -       12,254,519  
Assets acquired in reverse merger     918,991       -       75,000       -       100,000       1,093,991  
Additions                             98,764               98,764  
Excess purchase price paid     1,093,527       -                               1,093,527  
Impairment of excess purchase price     (1,093,527 )     -                               (1,093,527 )
Depreciation, Depletion and amortization     -       -       -       (24,185 )     -       (24,185 )
                                                 
Balance April 30, 2013   $ 918,991     $ -       75,000     $ 12,329,098     $ 100,000     $ 13,423,089  

Asset Retirement Obligations (Tables)

v2.4.0.6
Asset Retirement Obligations (Tables)
4 Months Ended
Apr. 30, 2013
Asset Retirement Obligation Disclosure [Abstract]  
Schedule of Changes to Asset Retirement Obligation

Changes to the asset retirement obligation were as follows:

 

    April 30, 2013     December 31, 2012  
Balance, beginning of period   $ 143,035     $ -  
Additions     615,784       143,035  
Disposition     -       -  
Revisions     -       -  
Accretion     4,217       -  
      763,036       143,035  
Less: Current portion for cash flows expected to be incurred within one year     (213,302 )     -  
Long-term portion, end of period   $ 549,734     $ 143,035  

Schedule of Expected Timing of Asset Retirement Obligations

Expected timing of asset retirement obligations:

 

Year Ended April 30        
2014     213,302  
2015     122,222  
2016     135,556  
2017     273,181  
Thereafter     343,031  
      1,087,292  
Effect of discount     (324,256 )
Total     763,036  

Stock Based Compensation (Tables)

v2.4.0.6
Stock Based Compensation (Tables)
4 Months Ended
Apr. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Changes in Stock Options

The following table summarizes the changes in stock options:

 

    Number of Options     Weighted 
Avg
Exercise 
Price
 
Outstanding, February 2, 2012     -     $ -  
Granted     -       -  
Expired     -       -  
Forfeited     -       -  
Cancelled     -       -  
Outstanding, December 31, 2012     -     $ -  
Granted/Acquired in reverse merger     290,000       0.50  
Expired     -       -  
Forfeited     -       -  
Cancelled     -       -  
Outstanding, April 30, 2013     290,000     $ 0.50  
Exercisable on April 30, 2013     290,000     $ 0.50  

Summary of Options Outstanding and Exercisable

The following table summarizes information about the options outstanding and exercisable at April 30, 2013:

 

 

      Options Outstanding   Options Exercisable
  Exercise Price         Options        Weighted Avg.
Life Remaining
      Weighted Avg. Exercise Price       Options          Weighted Avg.
Exercise Price
 
$ 0.50       290,000        1.01 years   $ 0.50       290,000     $ 0.50  
 

Aggregate

Intrinsic Value

                $ -             $ -  

Summary of Warrants Outstanding and Exercisable

 

    Number of     Weighted Avg.     Weighted Avg.  
    Warrants     Exercise Price     Life Remaining  
Outstanding and exercisable, February 2, 2012     -     $ -       -  
Granted     -       -       -  
Outstanding and exercisable, December 31, 2012     -       -       -  
Acquired in reverse merger     230,000       0.50       0.65  
Outstanding and exercisable, April 30, 2013     230,000     $ 0.50       0.65 years  
Aggregate Intrinsic Value           $ -          

Income Taxes (Tables)

v2.4.0.6
Income Taxes (Tables)
4 Months Ended
Apr. 30, 2013
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Taxes Expense (Benefits)

The income tax expense (benefit) consists of the following:

 

    For the period
January 1, 2013 to
April 30, 2013
    For the period
February 2, 2012 (Commencement
of operations) to
December 31, 2012
 
Foreign                
Current   $ -     $ -  
Deferred     (562,868 )     -  
U.S. Federal                
Current     -       -  
Deferred     22,735,263          
                 
U.S. State & Local                
Current     -       -  
Deferred     2,758,372       -  
                 
Change in valuation allowance     (24,930,767 )        
Income tax provision (benefit)   $ -     $ -  

Schedule of Deferred Tax Assets and Liabilities

The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

 

    April 30, 2013     December 31, 2012  
             
U.S. Net operating loss carryovers   $ 1,203,780     $ -  
Depreciation and depletion     15,017,106       -  
Accretion of asset retirement obligation     214,638       -  
Total deferred tax assets   $ 16,435,524       -  
Valuation allowance     (16,435,524 )     -  
Deferred tax asset, net of valuation allowance   $ -     $ -  

Schedule of Expected Tax Expense (Benefits) Reconciliation

The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense benefit as follows:

 

    For the period from
January 1, 2013 to
April 30, 2013
    For the period from
February 2, 2012
(Commencement of operations) to
December 31, 2012
 
             
U.S. federal statutory rate     (34.00 )%     (34 )%
State income tax, net of federal benefit     (4.13 )%        
Impairment of excess purchase price     17.97 %        
Non-taxable flow through loss from Petro     12.75 %     34 %
Section 382 NOL impairment     1098.96 %        
Foreign deferred tax write down     (24.26 )%        
Other permanent differences     7.44          
Change in valuation allowance     (1074.73 )%     0 %
Income tax provision (benefit)     0.00 %     0 %

Contingency and Contractual Obligations (Tables)

v2.4.0.6
Contingency and Contractual Obligations (Tables)
4 Months Ended
Apr. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Contractual Lease Obligations for Fiscal Years

The landlord has also asserted that the Company would be liable for an amount up to the full lease obligation of $1,596,329 which otherwise would have been due as follows:

 

Year Ended April 30        
2011     $ 473,055  
2012       473,055  
2013       473,055  
2014       177,164  
Thereafter       -  
Total     $ 1,596,329  

Segment Information (Tables)

v2.4.0.6
Segment Information (Tables)
4 Months Ended
Apr. 30, 2013
Segment Reporting [Abstract]  
Schedule of Segment Information

Petro presently has one reportable business segment, that being oil and gas exploration and exploitation. Petro’s corporate and administrative operations are conducted in the United States, while predominantly all of the oil and gas properties and operations are located in the United States at April 30, 2013.

 

    Four Months ended April 30, 2013  
    Canada     USA     Consolidated  
Revenue   $ -     $ 184,676     $ 184,676  
Expenses     -       (2,504,410 )     (2,504,410  
Net loss     (- )     (2,319,734 )     (2,319,734  
Oil and gas assets     100,000       13,323,089       13,423,089  
Property and equipment     -       4,538       4,538  
Oil and gas asset additions (reverse merger)     100,000       993,991       1,093,991  
Oil and gas additions             98,764       98,764  
Oil and gas asset impairment     -       -       -  
Property and equipment additions (reverse merger)     -       4,538       4,538  

  

    Period February 2, 2012 (Commencement of Operations) to December 31, 2012  
    Canada     USA     Consolidated  
Revenue   $ -     $ 16,901     $ 16,901  
Expenses     -       (1,932,518 )     (1,932,518 )
Net loss     -       (1,915,617 )     (1,915,617 )
Oil and gas assets     -       12,254,519       12,254,519  
Property and equipment     -       -       -  
Oil and gas asset additions     -       12,254,519       12,254,519  
Oil and gas asset impairment     -       -       -  
Property and equipment additions     -       -       -  

Organization and Liquidity (Details Narrative)

v2.4.0.6
Organization and Liquidity (Details Narrative) (USD $)
4 Months Ended
Apr. 30, 2013
acre
Dec. 31, 2012
Cash paid for purchase assets $ 2,000,000  
Non-Managing membership interest 25.00%  
Land subject to leases, gross 115,000  
Land subject to leases, net 85,000  
Value of land at during lease 12,200,000  
Number of stock newly issued during the period 591,021,011  
Working capital deficiency 4,700,000  
Cash and cash equivalents $ 5,703,082 $ 6,472,094
Petro [Member]
   
Percentage of ownership interest 100.00%  
Petro's Former's Holder [Member]
   
Percentage of ownership interest 80.00%  

Significant Accounting Policies (Details Narrative)

v2.4.0.6
Significant Accounting Policies (Details Narrative) (USD $)
4 Months Ended 11 Months Ended
Apr. 30, 2013
Dec. 31, 2012
Accounting Policies [Abstract]    
Derivative instruments qualifying as cash flow hedges, discounted rate 10.00%  
Excluded common share equivalents 520,000 0
Asset retirement obligations , net of current portion $ 549,734 $ 143,035

Significant Accounting Policies - Schedule of Common Stock Equivalents (Details)

v2.4.0.6
Significant Accounting Policies - Schedule of Common Stock Equivalents (Details)
Apr. 30, 2013
Dec. 31, 2012
Common stock equivalent shares 520,000   
Stock Options [Member]
   
Common stock equivalent shares 290,000   
Compensation Warrants [Member]
   
Common stock equivalent shares 230,000   

Reverse Acquisition (Details Narrative)

v2.4.0.6
Reverse Acquisition (Details Narrative) (USD $)
4 Months Ended
Apr. 30, 2013
Business Combinations [Abstract]  
Common stock maintained by the existing shareholders 146,096,735
Percentage of outstanding common shares held by existing shareholders 20.00%
Aggregate fair value of market shares 1,117,404
Percentage of market capitalization consider for aggregate value of market shares 20.00%
Excess purchase price $ 1,093,527