10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☑ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2012

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____.

Commission file number 333-173302

SANTA FE PETROLEUM, INC.

(Exact name of registrant as specified in its charter)

Delaware	99-0362658
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification No.)

4011 West Plano Parkway, Suite 126 Plano, Texas	75093
(Address of Principal Executive Offices)	(Zip Code)

(888) 870-7060

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

☐ Large accelerated filer ☐ Accelerated filer

☐ Non-accelerated filer (Do not check ☑ Smaller reporting company

if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of August 15, 2013, the Company had 47,410,519 shares of common stock issued and outstanding.

__________

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SANTA FE PETROLEUM, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012

	June 30,			December 31,
	2013			2012
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivilants	$	323		$	33,901
Accounts receivable - oil and gas		1,300			—
Total current assets		1,623			33,901
Oil and natural gas property, successful efforts method		1,280,859			736,676
Total assets	$	1,282,482		$	770,577
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	414,190		$	419,506
Accounts payable, related parties		343,696			235,276
Accrued liabilities		192,310			208,560
Accrued compensation		367,350			277,350
Total current liabilities		1,317,546			1,140,692
Convertible promissory notes, net of discount		251,215
Convertible promissory note, related party		244,148
Derivative Liability		61,000
Total liabilities		1,873,909			1,140,692
Commitments and contingencies
Stockholders' deficit
Common stock, $0.0001 par value, 200,000,000 shares authorized
46,800,517 and 40,797,711 shares issued and outstanding, respectively		4,680			4,080
Additional paid in capital		2,048,025			836,606
Deficit accumulated during the development stage		(2,644,132	)		(1,210,801	)
Total stockholders' deficit		(591,427	)		(370,115	)
Total liabilities and stockholders' deficit	$	1,282,482		$	770,577
See accompanying notes to consolidated financial statements

F-1

SANTA FE PETROLEUM, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

AND FOR THE PERIOD FROM  MAY 11, 2011 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 2013

                    (Unaudited)

														Period from
														May 11, 2011
														(inception of
		Three Months			Three Months			Six Months			Six Months			development stage)
		Ended			Ended			Ended			Ended			through
		June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012			June 30, 2013
Revenue	$	3,328		$	—		$	3,328		$	—		$	3,328
Expenses
Lease operating expense	$	—		$	—		$	—		$	—		$	7,975
Compensation		556,000			60,000			661,000			120,000		$	1,223,325
Professional		55,674			78,576			82,174			80,391		$	431,847
Consulting		314,401			30,300			349,401			60,700		$	531,101
Rent		4,845			—			7,268			—		$	53,953
Lease		557			—			557			—		$	557
Production taxes		157			—			157			—		$	157
Derivative expense		61,000			—			61,000			—		$	61,000
Other		11,630			1,227			23,914			22,147		$	86,357
Total		1,004,264			170,103			1,185,471			283,238			2,396,272
Interest		2,465			—			251,188			—			251,188
Total expenses		1,006,729			170,103			1,436,659			283,238			2,647,460
Net loss	$	(1,003,401	)	$	(170,103	)	$	(1,433,331	)	$	(283,238	)	$	(2,644,132	)
Basic and diluted loss per share	$	(0.02	)		(0.00	)	$	(0.03	)	$	(0.01	)
Basic and diluted weighted average
shares outstanding		43,184,493			36,840,898			42,129,032			35,159,580
See accompanying notes to consolidated financial statements

F-2

SANTA FE PETROLEUM, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM MAY 11, 2011 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2011(Audited)

FOR THE YEAR ENDED DECEMBER 31, 2012 (Audited)

FOR THE SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

							Deficit
							Accumulated
				Additional			During the			Total
	Common Stock				Paid - In			Development			Stockholders’
	Shares		Amount		Capital			Stage			Deficit
May 11, 2011 - Common stock and
1,999,150 warrants issued to unit
holders of Santa Fe Land, LLC
(amounts reflect the effect of the
recapitalization on May 10, 2012)	33,478,261	$	3,348	$	490,784		$	—		$	494,132
May 11, 2011 - Stock based compensation
provided by Principal Stockholder	—		—		123,581			—			123,581
May 17, 2011 - Common stock and 1,573,956
warrants issued for capital placement fees
provided by Principal Stockholder	—		—		23,784			—			23,784
Net loss	—		—		—			(541,590	)		(541,590	)
Balances at December 31, 2011	33,478,261	$	3,348	$	638,149		$	(541,590	)	$	99,907
January 31, 2012 - Stock based compensation
provided by Principal Stockholder					40,044						40,044
Shares issued in connection with the
recapitalization transaction	6,000,000		600		(600	)		—			—
Sale of common stock	1,319,450		132		556,544			—			556,676
Payment of financing and offering expenses	—		—		(59,952	)		—			(59,952	)
Conversion of deferred offering expenses
from sale of common stock	—		—		(23,784	)		—			(23,784	)
Merger costs	—		—		(313,795	)		—			(313,795	)
Net loss	—		—		—			(669,211	)		(669,211	)
Balances at December 31, 2012	40,797,711	$	4,080	$	836,606		$	(1,210,801	)	$	(370,115	)
Stock issued to settle accounts payable	50,000		5		17,495						17,500
Sale of common stock	540,800		54		105,146						105,200
Stock offering costs					(60,705	)					(60,705	)
Stock issued for working interest	480,000		48		47,952						48,000
Stock issued for consulting services	1,432,006		143		328,158						328,301
Stock issued in settlement of prior services	3,500,000		350		524,650						525,000
Convertible promissory notes - beneficial conversion feature					248,723						248,723
Net loss								(1,433,331	)		(1,433,331	)
Balances at June 30, 2013	46,800,517	$	4,680	$	2,048,025		$	(2,644,132	)	$	(591,427	)
See accompanying notes to consolidated financial statements

F-3

SANTA FE PETROLEUM, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statement of Cash Flows

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

AND FOR THE PERIOD FROM  MAY 11, 2011 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 2013

                   (Unaudited)

							Period from
							May 11, 2011
							(Inception of
	Six Months Ended			Six Months Ended			Development Stage)
	June 30, 2013			June 30, 2012			to June 30, 2013
Cash Flows From Operating Activities:
Net Loss	$	(1,433,331	)	$	(283,238	)	$	(2,644,132	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		328,301						491,926
Stock issued for settlement of prior services		525,000						525,000
Non-cash interest expense - beneficial conversion feature		248,723						248,723
Non-cash interest expense - original issue discount		1,215						1,215
Derivative expense		61,000						61,000
Increase in cash attributable to changes in operating assets and liabilities:
Accounts receivable		(1,300	)					(1,300	)
Accounts payable		(5,316	)		163,238			414,190
Accounts payable, related parties		108,420						187,223
Accrued Liabilities		1,250						23,750
Accrued compensation		90,000			120,000			367,350
Net Cash Provided By Operating Activities		(76,038	)		—			(325,055	)
Investing Activities:
Investment in unevaluated oil and natural gas property		(52,035	)					(294,579	)
Accounts payable related parties, unpaid property costs		—						156,473
Net Cash Used in Investing Activities		(52,035	)		—			(138,106	)
Financing Activities:
Proceeds from sale of common stock		44,495						601,171
Proceeds from issuance of convertible promissory note		50,000						50,000
Merger costs		—						(373,747	)
Accrued liabilities, unpaid merger costs		—						186,060
Net Cash Provided by Financing Activities		94,495			—			463,484
Net Increase in Cash		(33,578	)					323
Cash at Beginning of Period		33,901			—			—
Cash at End of Period	$	323		$	—		$	323
Supplemental disclosure of cash flow information
Income taxes paid	$	—		$	—		$	—
Cash interest paid	$	—		$	—		$	—
Supplemental disclosure of  non-cash investing and financing activities
Unevaluated oil and natural gas property acquired	$	492,148		$	—		$	986,280
Common shares issued in recapitalization	$	—		$	—		$	600
Common stock issued for acquistion of oil & natural gas property	$	48,000		$	—		$	48,000
Convertible promisssory notes issued for mineral lease acquisition	$	200,000		$	—		$	200,000
Convertible promissory note, related party issued for mineral lease acquisition	$	244,148		$	—		$	244,148
Common stock issued in settlement of accounts payable	$	17,500		$	—		$	17,500
See accompanying notes to consolidated financial statements

F-4

Santa Fe Petroleum, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2013 and 2012

(Unaudited)

Note 1 – Nature of Operations

On May 10, 2012, Santa Fe Petroleum, Inc., f/k/a Baby All Corp., a Delaware corporation (the “we,” “us ,” “our ,” or the “Company”), entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santa Fe Operating, Inc., a Delaware corporation engaged in the exploration and production of oil and gas (“SFO”), Tom Griffin, an individual, on behalf of the holders (the “SFO Shareholders”) of 100% of the issued and outstanding common stock of SFO (the “SFO Stock”), and Efrat Schwartz, an individual and the holder of a majority of the issued and outstanding shares of our common stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Exchange Agreement, each SFO Shareholder was issued one share of Common Stock in exchange for each of such SFO Shareholder’s shares of SFO Stock (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Exchange closed on May 20, 2012, (the “Closing Date”). As a result, (i) we issued an aggregate of 33,478,261 shares of Common Stock to the SFO Shareholders; (ii) we issued warrants to purchase an aggregate of 6,764,856 shares of Common Stock to the SFO Shareholders, at an exercise price of $0.50 per share; and (iii) SFO became our wholly-owned subsidiary.

We were incorporated in Delaware on November 30, 2010. Prior to the Exchange, our business plan was to seek third party entities interested in licensing the rights to manufacture and market the patent design of an infant medicine dispenser. Due to a lack of funds, we were not able to commence operations under the infant medicine dispenser business plan and were in the development stage at the time of the Exchange.

As the result of the Exchange, we are now a development stage company engaged in the acquisition, exploration, and development of oil and gas properties. In addition to the development of our existing property interests, we intend to acquire additional oil and gas interests in the future. Our management believes that our future growth will primarily occur through the acquisition of additional oil and gas properties following extensive due diligence. We also may elect to proceed through collaborative agreements and joint ventures in order to share expertise and reduce operating costs with other experts in the oil and gas industry. The analysis of new property interests will be undertaken by or under the supervision of our management and our board of directors (our “Board”). Although the oil and gas industry is currently very competitive, our management believes that many undervalued prospective properties remain available for acquisition purposes. For accounting purposes, the Exchange Agreement was accounted for as a reverse merger, since the SFO Shareholders collectively beneficially owned approximately 84.8% of the Common Stock immediately after the Exchange.

On May 11, 2011, SFO acquired 100 percent of the issued and outstanding units of membership interest of Santa Fe Land, LLC (such units, the “SFL Units”), a Texas limited liability company and a wholly-owned subsidiary of SFO (“SFL”). SFO issued an aggregate of 33,478,261 shares of its common stock and 1,966,900 warrants to purchase its common stock to holders of SFL units of membership interest (the “SFL Unit Holders”) in exchange for their SFL Units (the “SFL Acquisition”). The SFL Unit Holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”), including Long Branch Petroleum, LP (“LB”). The acquisition of SFL by SFO is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred.

In connection with the SFL Acquisition, we acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Test Well in Comanche County, Texas. Additionally, we acquired a mineral lease over approximately 76 acres of land as part of the SFL Acquisition.

The Company formally changed its name from Baby All Corp. to Santa Fe Petroleum, Inc. on May 17, 2012. 

Note 2 – Going Concern and Liquidity

As reflected in the accompanying consolidated financial statements, the Company had a net loss of, $1,433,331 for the six months ended June 30, 2013, and a net loss of $2,644,132 for period from May 11, 2011 (commencement of operations) through June 30, 2013. Additionally, at June 30, 2013, the Company had cash of only $323, a working capital deficit of $1,315,923 and an accumulated deficit of $2,644,132, which could have a material impact on the Company’s financial condition and operations.

Our net losses and lack of capital pose risks to our business and stockholders by:

• making it more difficult for us to satisfy our obligations;

• impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and

• making us more vulnerable to a downturn in our business and limiting our flexibility to plan for, or react to, changes in our business.

The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our industry. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the amount and classification of liabilities which may result from the inability of the Company to continue as a going concern.

Note 3 - Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying consolidated balance sheets and related consolidated statements of operations, cash flows, and stockholders’ equity (deficit) include all adjustments, consisting of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America for interim period reporting in conjunction with the instructions to Form 10-Q Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information required by GAAP. In the opinion of management, the condensed consolidated financial statements include the adjustments and accruals, all of which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. Estimates are used when accounting for stock-based transactions, accounts payables and accrued expenses and taxes, among other matters.

Principles of Consolidation

The audited consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

Development Stage Company

The Company is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, Development Stage Entities, since no revenues have been generated from inception through the date of these consolidated financial statements. During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated with the Company’s contemplated equity financing plan.  

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas. Under these provisions, costs to acquire mineral interests in oil and natural gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural gas interests are depleted on a unit-of-production basis.

If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

Impairment of Long-Lived Assets

The Company accounts for the impairment of long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment, which requires that long-lived assets be, reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired, the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Deferred Offering Costs

The Company complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement agents that are related to the Company’s contemplated equity financing and will be charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or charged to expense if the contemplated equity financing is not completed. During the year ended December 31, 2012, the Company received subscriptions of 1,319,450 shares of common stock for $556,676 of gross proceeds less $83,736 of financing and offering expenses through a private placement memorandum at prices ranging from $0.25 to $0.50 per share. Previously recorded deferred offering expenses of $23,784 were expensed. In the six months ended June 30, 2013, the Company received subscriptions of 540,800 of shares of its $0.0001 par value common stock at prices ranging from $0.10 to $0.25 per share. The gross proceeds were $105,200 less $60,705 of offering expenses.

Income Taxes

Income taxes are accounted for under the asset and liability method of ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Effective May 11, 2011, with the commencement of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, Accounting for Uncertainties in Income Taxes. These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company had no unrecognized tax benefits. For the period from May 11, 2011, (commencement of operations) through December 31, 2012, no adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011and the tax year for 2012 are subject to audit.

Stock-Based Compensation

The Company adopted ASC 718, Compensation – Share Based Compensation, as of May 11, 2011. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.

Net Income (loss) per Common Share

The Company computes earnings (loss) per share in accordance with ASC 260-10, Earnings Per Share. ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 6,764,856 of potentially dilutive warrants at December 31, 2012 and for the three and six months ended June 30, 2013.

Legal Costs and Contingencies

In the normal course of business, the Company incurs costs to retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonably estimated, the Company recognizes an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

Fair Value Estimates

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”.  The objective of SFAS 157 (ASC 820) is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 (ASC 820) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 (ASC 820) applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.

The Company measures its options and warrants at fair value in accordance with SFAS 157 (ASC 820). SFAS 157 (ASC 820) specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets;

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and 

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The fair value of the stock based compensation at June 30, 2013 and December 31, 2012, were as follows:

		Quoted Prices  In Active  Markets for  Identical  Assets		Significant  Other  Observable  Inputs		Significant  Unobservable  Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Six Months Ended June 30, 2013 Stock Based Compensation	$	—	$	328,301	$	—	$	$328,301
Derivative Liability	$	—	$	61,000	$	—	$	61,000
Year Ended December 31, 2012
Stock Based Compensation	$	—	$	40,044	$	—	$	40,044

Options are valued using the Black Scholes model.

Recent Accounting Pronouncements

No recent accounting pronouncements or other authoritative guidance have been issued that management considers likely to have a material impact on our consolidated financial statements

Note 4 - Acquisition of Oil and Gas Company

On May 11, 2011, SFO acquired 100 percent of the member units of SFL by issuing 33,478,261 shares of common stock and 1,999,150 warrants to SFL member unit holders in exchange for their SFL member units. The SFL member unit holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”). As a result of the Share Exchange on May 10, 2012,

SFO and SFL are subsidiaries of the Company.

The acquisition of SFL is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred. The warrants to purchase common stock of the Company are at an exercise price of $0.50 per share and have a three year exercise period.

The Company acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Barnett Cody #1A in Comanche County, Texas. Additionally, the Company acquired approximately 76 acres of land as part of the purchase.

The following table presents a summary of the historical costs of assets and liabilities acquired at the date of acquisition:

Assets acquired, unevaluated oil and natural gas property	$	494,132
Liabilities assumed		—
Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share	$	494,132

Concurrent with this transaction, the Principal Stockholder assigned 10,446,782 of his personal shares and 1,573,956 warrants in the Company to employees and consultants of the Company for services rendered. Under SAB Topic 5T, Miscellaneous Accounting, payments made by a principal stockholder to settle the Company’s obligations were deemed to be capital contributions.  Accordingly, the assignment of shares was recognized in the accompanying condensed consolidated financial statements as stock based compensation and deferred offering costs of approximately $123,581 and $23,784, respectively.

Note 5 - Oil and Natural Gas Property

The Company’s principal asset consists of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $1,231,000 at June 30, 2013 and $737,000 as of December 31, 2012.

The Company’s original intent was to complete five test wells on its unevaluated oil and natural gas property. The first test well was originally drilled in 2009 by a predecessor affiliate company as the Barnett Cody #1A test. In October 2012, the company did a slick water/ acid frac into the Ellenberger formation and due to the high volume of water production, the Company does not anticipate further developing of this test well but instead intends to use it as a water disposal well for new drilling operations. Additional capital is needed for the Company to commence further drilling activities for the other test wells. As a result of the additional capital requirements, the five test well drilling project is not completed and the reservoir analysis has not yet been finished. As such, the Company has classified the oil and natural gas property as unevaluated as of June 30, 2013. As of June 30, 2013, the primary term of the Company’s oil and natural gas lease is through March 2014.

The Company issued 480,000 common shares at $0.10 a share on June 17, 2013 for a 1.33% working interest in the Hopkins Spindletop #1 well. The Company recorded $3,328 in revenue from the well in the three months ended June 30, 2013.

Note 6 – Convertible Promissory Notes

The Company issued five convertible promissory notes in the first week of February 2013 for a total principal amount of $200,000. The convertible notes accrue no interest and three of the notes, which total $150,000 in principal amount, are due fourteen (14) months from the date of issuance while two of the notes totaling $50,000 in principal amount are due fifteen (15) months from the date of issuance. At any time before the maturity dates, the notes are convertible at $0.25 per share into common stock of the Company.

The convertible promissory notes were issued with a beneficial conversion feature for which the intrinsic value was $112,000 and that amount was expensed as interest expense in the three months ended March 31, 2013.

The Company issued the convertible promissory notes as payment for the acquisition of certain mineral leases in the state of Texas as well as for the settlement of the participation agreement with Long Branch Petroleum LP.

On April 17, 2013 The Company executed a convertible promissory note with JMJ Financial (the “Lender”) and received $50,000 in cash proceeds. The nominal principal amount is $335,000 with a $35,000 original issue discount, however the principal sum to be repaid is only the consideration actually paid by the Lender plus 105 of the original issue discount. The original issue discount is also prorated based upon the consideration received by the Company. The note has zero interest for the first three months, as long as the note is repaid within that time; otherwise, the note bears interest at 12%. The note is convertible at the lesser of: $0.30 or 60% of the lowest trading price 25 days prior to the conversion. Since the conversion feature is at a discount to market, there is a derivative liability associated with it that was valued at $61,000 using the Black-Scholes method. The assumptions for this Black-Scholes calculation were as follows:

Conversion Price	$	.05
Expected life (years)		.5
Risk free interest rate		.15	%
Volatility		130.12	%
Dividend yield		—

Given the terms of the note, the Company recorded a principal amount of $55,833, with a debt discount of $5,833. The amortization of the debt discount was $1,215 for the three months ended June 30, 2013.

Note 7- Convertible Promissory Note – Related Party

The Company issued a $244,148 principal amount, convertible promissory note on February 11, 2013 to Long Branch Petroleum LP. The convertible note accrues no interest and is due fifteen (15) months from the date of issuance. The Long Branch Note also contains customary events of default and, at the election of Long Branch at any time before the date of maturation, shall be convertible into the common stock of the Company at a $0.25 per share. 

The convertible promissory notes were issued with a beneficial conversion feature for which the intrinsic value was $136,723 and that amount was expensed as interest expense in the three months ended March 31, 2013.

The Company issued the convertible promissory note as payment for the acquisition of certain mineral leases in the state of Texas.

Note 8- Stockholders’ Deficit

Capital Structure

The Company is authorized to issue up to 200,000,000 shares of common stock at $0.0001 par value per share. As of June 30, 2013 and December 31, 2012, 46,800,517 and 40,797,711 shares were issued and outstanding, respectively. 

Common Stock

Effective on the commencement date of May 11, 2011, (commencement of operations), the Company issued 33,478,261 shares of common stock for the acquisition of SFL from a related party. The stock was valued based on the historical cost basis of the asset acquired, which approximated $494,000.

In 2011, the Company filed a registration statement on Form S-1 to register and sell in a self-directed offering 6,000,000 shares of newly issued common stock at an offering price of $0.0125 per share for proceeds of up to $75,000. The Registration Statement was declared effective on January 9, 2012. On February 6, 2012, the Company issued 6,000,000 shares of common stock pursuant to the registration statement for proceeds of $75,000 and these shares are freely-tradable as a result of the registration of the offer and sale of these shares on Form S-1.

From July 1, 2012, through December 31, 2012, the Company received subscriptions of 1,319,450 shares of common stock for $556,676 of gross proceeds less $83,736 of financing and offering expenses through a private placement memorandum (“PPM”). Common stock was sold at prices ranging from $0.25 to $0.50 per share through the PPM to “accredited investors” as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of 1933, as amended. 

For the six months ended June 30, 2013, the Company received subscriptions of 540,800 shares of common stock for $105,200 of gross proceeds. The Common stock was sold for prices ranging from $0.10 to $0.25 per share through the PPM to “accredited investors” as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of 1933, as amended. 

Stock Warrants

The exercisable outstanding stock purchase warrants were 6,764,856 at June 30, 2013 and December 31, 2012 with a weighted average exercise price of $0.38.  The following summarizes the warrant activity:

	June 30, 2013				December 31, 2012
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at beginning of the Period		6,764,856	$	0.38		3,540,856	$	0.50
Granted		—				3,224,000	$	0.25
Exercised		—				—
Forfeited or cancelled		—				—
Expired		—				—
Outstanding at end of year		6,764,856		0.38		6,764,856	$	0.38
Exercisable		6,764,856	$	0.38		6,764,856	$	0.38

At June 30, 2013, 3,540,856 warrants expire on May 11, 2014 and 3,224,000 warrants expire January 31, 2015.

We have adopted the guidance of ASC 718-10-S99-1 for purposes of determining the expected term for stock warrants. Due to limited historical data to rely upon, we use the "simplified" method in developing an estimate of expected term for stock warrants per ASC 718-10-S99-1. Additionally, the volatility utilized is based on the composite of several comparable guideline companies.

Effective on January 31, 2012, the Company issued 3,200,000 warrants to purchase common stock to two consultants of the Company and 24,000 warrants to purchase common stock to a director of the Company. The Company evaluated the stock warrants in accordance with ASC 718, Stock Compensation, and utilized the Black Scholes method to determine valuation. As a result of our analysis, the total value for the stock warrant issuance on the grant date of January 31, 2012, was de minimis and no amount was recorded in the consolidated financial statements.

Stock Grants

On January 31, 2012, the Company issued 2,875,000 shares of common stock to two consultants and a director of the Company. The Company recorded $40,044 as stock compensation expense. Under SAB Topic 5T, Miscellaneous Accounting, these were deemed stock based compensation of the Company and were valued in accordance with ASC 718, Stock Compensation.

In the six months ended June 30, 2013, the Company issued 1,432,006 shares of common stock to four consultants and recorded a stock compensation expense of $328,301.

Note 9- Related Party Transactions

On May 11, 2011, SFO acquired 100% of the member units of SFL in exchange for 33,478,261 shares of Common Stock and 1,966,900 warrants to SFL member unit holders in exchange for their SFL member units. All the SFL member unit holders were entities under the control of Tom Griffin, our chairman of the board. This acquisition was accounted for as a combination of entities under common control; therefore, the assets transferred are reflected on our balance sheet at their historical cost basis of $494,132 at December 31, 2011. In the Exchange described above, Mr. Griffin exchanged 26,505,155 shares of SFO for 26,505,155 shares of our Common Stock.

In 2011, we entered into Lease Acquisition Agreements with the Land Banks. Tom Griffin, our chairman of the board, is the President of each Land Bank. Under the Lease Acquisition Agreements, we could purchase leases, or portions of leases, held by the Land Banks from time to time and were obligated to purchase all the leases held by the Land Banks within two years from the dates the Land Banks were formed.

These Lease Acquisitions were terminated in November 2012. On February 11, 2013, we entered into a Lease Acquisition Agreement (the "Lease Acquisition Agreement") with LB. Pursuant to the terms and conditions of the Lease Acquisition Agreement, the Company acquired those leases from LB. In exchange, we issued Unsecured Convertible Promissory Notes totaling an aggregate amount of $444,148 to six parties. We issued the largest of those notes to LB for $244,148.

Our executive offices are located at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093, where we occupy approximately 1,000 square feet of office space. Effective August 2012, we pay $1,211 per month to lease this office space from an unaffiliated third party. Previously, we paid $2,650 per month, which included rent and other prorated offices expenses, under an arrangement with a company controlled by Mr. Griffin, which leased a larger space from an unaffiliated third party. We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans. From May 11, 2011, (commencement of operations) through June 30, 2013, we have recorded approximately $58,797 in rental expense and other prorated office expenses for our executive offices.

From May 11, 2011, (commencement of operations) through March 31, 2013 and December 31, 2012, SFP, LLC., a Texas entity that is an affiliate of the Company (“SFP LLC”) expended $311,496 and $235,276 respectively of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at June 30, 2013 and December 31, 2012. SFPLLC is owned entirely by entities under the control of the Principal Stockholder. The expenditures were primarily related to compensation and legal expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

From May 11, 2011, (commencement of operations) through December 31 2012, SFP, LLC (“SFP LLC”), expended $11,885 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying condensed consolidated balance sheet at December 31, 2012. SFP LLC is owned entirely by entities under the control of the Principal Stockholder. The expenditures were primarily related to legal and consulting expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

We have engaged, and may engage in the future, in transactions with our affiliates or stockholders, officers and directors of our affiliates. TexTron Southwest, Inc. (“TexTron”) provides operating services including drilling of wells and ongoing operating management for oil and gas entities and is owned by entities under the control of the Principal Stockholder.

Note 10- Commitment and Contingencies

From time-to-time, the Company may become subject to proceedings, lawsuits and other claims in the ordinary course of business including proceedings related to environmental and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company is unaware of any claim or lawsuit as of and June 30, 2013 and December 31, 2012.

On June 5, 2013, the Company, Long Branch Petroleum L.P. and Bruce Hall signed an assignment and release agreement to settle a dispute over compensation for prior services to Bruce Hall. For the settlement of all compensation claims and the release of all liabilities related to the claims, the Company issued 3,500,000 shares of its common stock. The Company recorded $490,000 of stock compensation expense and the reduction of an accrued compensation liability of $35,000.

The Company is subject to various possible contingencies that arise primarily from interpretation of federal and state laws and regulations affecting the oil and natural gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters. Although management believes that it has complied with the various laws and regulations, administrative rulings and interpretations thereof, adjustments could be required as new interpretations and regulations are issued. In addition, environmental matters are subject to regulation by various federal and state agencies. 

Note 11- Subsequent Events

Acquisition of Working Interests

The Company has continued to acquire individual working interests in the Hopkins Spindletop #1 well. In July 2013, the Company issued common shares for working interests as follows: 24,001 common shares for a 0.07% interest to an individual, 96,001 common shares for a 0.27% interest to an LLC and 360,000 common shares for a 1.0% interest to a trust.

Land Bank Loan Participation Agreement

On July 26, 2013, Santa Fe Land LLC executed a Land Bank Loan Participation Agreement with Proven Fields Energy LLC, for the acquisition of 320 acres in Jack County Texas for the drilling of oil and gas prospects. Proven Fields Energy LLC has paid $35,000 as non-refundable earnest money. The total loan is for $340,000 and is to be funded no later than August 26, 2013. The maturity of the loan is two years from the final funding date and receives a 50% participation return from the oil and gas development.

On June 17, 2013, the Company entered into a letter agreement to purchase leases totaling approximately 320 acres in Jack County, Texas, which letter agreement was subsequently amended on August 2, 2013. Under the agreement, the Company made an initial payment to the seller of $32,000 on August 2, 2013 and is to make an additional payment of $293,925 by September 3, 2013. Failure to make this additional payment will result in the forfeiture of the initial payment.

Note 12- Supplemental Oil and Gas Disclosures

Since the Company is in the development stage and its oil and natural gas property is considered probable, reserve data is not presented.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION

Business Overview

We are a development stage oil and gas company led by an experienced management team and focused on production of oil and natural gas. Our business plan is to acquire oil and gas properties for appraisal and development. We will employ strict selection guidelines for our projects including but not limited to 1) priority to projects with near term cash flow potential, pay-back period, quantity and quality of oil and gas reserves and utilizing premier oilfield services and engineering firms in analyzing and conducting our operations. Until we form a subsidiary that is qualified to be the operator, an affiliated company will act as contract operator.  On July 29, 2013 we formed Santa Fe Operating, LLC that is to be licensed as SFP wholly owned subsidiary operating company.

In 1997 our chairman of the board, Tom Griffin, established Santa Fe Petroleum, LLC, a Texas limited liability company engaged in oil and gas operations (“SFP2”) that subsequently ceased operations and forfeited its status with the Texas Secretary of State in 2006. In 2010, Mr. Griffin formed a new entity, SFP, as a business to engage in oil and gas exploration and production. SFP2 successfully drilled 25 vertical and horizontal wells in East Texas for investors in those projects. As of the date of this Annual Report, SFP is a holding company with no oil and gas operations, and we have no ownership in the prior business or wells drilled in East Texas. In December 2009, that business drilled the Test Well on a 76-acre lease in the Bend Arch-Fort Worth Basin in Texas. Baker Hughes, a top-tier oilfield services company, interpreted the logs and Weatherford Laboratories, who is engaged in all facets of rock and fluid analysis for the purpose of evaluating hydrocarbon resources around the world, analyzed the core samples. The side-wall core samples were taken every two feet beginning a few feet below the Barnett Shale in the Ellenberger formation and above the Barnett Shale a few feet in the Marble Falls formation. The results show oil exists in a porous, 101-feet-thick blanket formation with the top of the formation at the initial test-well location at a depth of approximately 2,600 feet below the surface.

In order to exploit this opportunity, Mr. Griffin and the investors in the Test Well formed SFO, a Delaware corporation, in 2011. SFO’s wholly owned subsidiary, SFL, which was originally incorporated in Texas in 2009, owns the 76-acre oil and gas lease and the Test Well. On the date of the Exchange, May 10, 2012, SFO and SFL became our wholly owned subsidiaries. Aside from acquiring the Test Well and associated leases, SFO and SFL have not conducted any operations and have not begun oil and gas production from the Test Well. In October 2012, SFPI attempted to provide a high-conductivity path from the suspected reservoir to the test well bore using an acid frack treatment. The treatment

was unsuccessful due to fracking into the Ellenberger (which is below the Barnett Shale formation) watering out the well. Due to the high volume of water production it would take to produce the oil in the Barnett Shale, we do not anticipate developing the Test Well but instead intend to use it for a water disposal well for new drilling operations in the future.

The Company believes that for the foreseeable future, the world will be highly dependent on oil and natural gas. Currently, alternative fuels are far more expensive than fossil fuels and because of the politically unstable conditions of many of the energy producing regions of the world, the Company believes that oil and natural gas will remain a key yet volatile component of the world’s future energy requirements. Additionally, with the ever increasing world demand for energy, the domestic production of oil and gas will play an even greater role in America’s future then it already has to date.
 

Results of operations

Going Concern

As reflected in the accompanying consolidated financial statements, the Company had a net loss of, $1,433,331 for the six months ended June 30, 2013 and a net loss of $2,644,132 since inception at May 11, 2011. Additionally, at June 30, 2013 the Company had cash of only $323, a working capital deficit of $1,315,923 and an accumulated deficit of $2,644,132, which could have a material impact on the Company’s financial condition and operations.

The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our business. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.

Commencement of Oil and Gas Operations

Although the Company commenced operating as of May 11, 2011 as Baby All Corp., it did not complete its exchange transaction with Santa Fe Operating, Inc., nor start its oil and gas operations until May 10, 2012.

Revenues:

The Company had $3,328 of revenue in the three and six months ended June 30, 2013 from the acquisition of a 1.33% working interest in the Hopkins Spindletop #1 well in June 2013. Prior to this date, there was no oil and gas revenue.

Operating Expenses:

Operating expenses were $1,004,264 and $1,185,471 respectively for the three and six months ended June 30, 2013 and total operating expenses since inception are $2,396,272. In the comparative periods in 2012, the Company incurred $170,103 and $283,238 respectively, in operating expenses. In the 2013 three and six month periods, the operating expense consisted primarily of $556,000 and $661,000, respectively, in compensation expense, which included the settlement in stock for prior services of a former executive. Also in operating expenses in the 2013 periods, there was $370,075 and $431,575 respectively in combined professional and consulting expenses related to costs from the recapitalization and Share Exchange, to the costs of raising new capital and other costs from becoming a publicly traded company. Finally, the company incurred $61,000 in derivative expense related to the issuance of a convertible promissory note. In the comparative 2012 periods, the operating costs were mainly compensation costs of $60,000 and $120,000 respectively and consulting and professional costs of $108,876 and $141,091 respectively, related to the recapitalization and the Share Exchange and the costs of becoming a publicly traded company.

Interest Expense:

Interest expense was $2,465 and $251,188 respectively, in the three and six months ended June 30, 2013. There was no interest expense in the comparative period of 2012. The interest expense is from the issuance of $444,148 in principal amount of convertible promissory notes in the first quarter which had a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was $248,723 and was expensed as interest expense in the six months ended June 30, 2013. There was $1,250 of accrued interest related to these notes in the three months ended June 30, 2013. The Company also issued $51, 215 principal amount, and net of discount, of convertible promissory notes in the three months ended June 30, 2013 for which $1,215 of the net discount was recognized as interest.

Capital Commitments, Capital Resources and Liquidity

Capital commitments.  The Company’s primary needs for cash are (i) to fund drilling and development costs associated with well development within its leasehold properties, (ii) the further acquisition of additional leasehold assets, and iii) the payment of contractual obligations and working capital obligations. The Company intends to initially fund these cash needs through the sale of equity. Subsequently, it intends to supplement these funds through a combination of internally-generated cash flows from operations and equity and or debt financing sources.

Capital resources and liquidity.  The Company’s primary capital resources from May 11, 2011, (commencement of operations) through June 30, 2013, have been from funds provided by affiliated related parties and cash proceeds from the issuance of common stock. The Company believes that it will raise sufficient cash proceeds from the sale of common stock to meet both our short-term working capital requirements and our twelve month capital expenditure plans.

Cash flow from operating activities.  The Company used $76,038 of cash from operating activities for the six months ended June 30, 2013. The cash used in operations resulted mainly from a net loss of $1,433,331 and a decrease in accounts payable of $5,316 offset by non-cash stock compensation expense of $328,301, stock settlement for prior services of $525,000 and non-cash interest expense of $249,938 and a derivative expense of $61,000. Further, cash was provided by increases in accounts payable related parties of $108,420 and accrued compensation of $90,000. In the comparative period of 2012, there was no cash used or provided from operations as the $283,238 net loss was completely offset by increases in accounts payable of $163,238 and accrued compensation of $120,000.

Cash flow used in investing activities.  The Company had $52,035 of cash used in investing activities for the six months ended June 30, 2013. The cash used in investing activities is entirely due to further expenditures related to the oil and gas properties under lease. There was no cash from investing activities in 2012.

Cash flow from financing activities.  The Company had $94,495 of net cash flow from financing activities for the six months ended June 30, 2013. The net cash provided by financing is from the private placement of common stock by the company and the issuance of a convertible promissory note. The Company issued 540,800 of shares of its $0.0001 par value common stock at prices ranging from $0.10 to $0.25 per share. The gross proceeds were $105,200 less $60,700 of offering expenses. The company received $50,000 or proceeds from the convertible promissory note. There was no cash from financing activities in 2012.

Liquidity.   At June 30, 2013, the Company had $323 of cash and cash equivalents. Additionally, at June 30, 2013, the Company had a working capital deficit of $1,315,923 and a deficit accumulated during the development stage of $2,644,132.

A critical component of our operating plan is the ability to obtain additional capital through additional equity or debt financing. We do not believe that existing capital and anticipated funds from operations will be sufficient to execute our strategic plan during 2013 without either equity or debt financing. We cannot ensure that financing will be available in amounts or on terms acceptable to us, if at all, and failure to secure the necessary financing could have a significant impact on our ability to continue as a going concern. We plan to seek additional capital in the future to fund growth and expansion through additional equity or debt financing. Such financing may not be available.

We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in their early stage of development, particularly companies in the oil and gas exploration industry. To address these risks we must, among other things, implement and successfully execute our business strategy. We may not succeed in addressing such risks, and the failure to do so materially adversely affects our business prospects, financial condition, and results

Plan of Operations

During 2013, if sufficient funds are obtained, we plan to complete the test well that was originally drilled in December 2009 in the Barnett Shale into a water disposal well and drill a Marble falls horizontal well. The Marble Falls formation lies directly on top of the Barnett Shale formation. The Marble Falls Horizontal wells two to three counties north of our test well location have been very successful and cost approximately 60% less to drill than traditional vertical wells with potentially the same daily production as the Barnett five well projects that have been proposed. The Barnett projects include the drilling of four production wells, and one gas-injection well, for a total of five wells. It is projected that the initial projects will be drilled near the test-well location due to the need to utilize the converted test well for production water disposal that both type projects will require. On February 11, 2013, we completed the purchase of multiple leases totaling approximately 1,628 acres in the area of its test well in North Central Texas.  This purchase, plus the existing 76 acres that we already owned, brings the total of the Company’s holdings to 1,704 acres for future drilling.  With this added acreage, we expect to plan for approximately 12-20 drilling locations depending on the number of Marble Falls and Barnett Shale oil wells that are drilled respectively.

Further, the Company acquired a working interest in the Hopkins Spindletop #1 well, which produced a small amount of revenue in the second quarter of 2013. The company has continued to acquire working interest in this well during the third quarter of 2013. The Company anticipates acquiring other promising working interests in the future, capital permitting.

Lastly, the Company has signed a land bank deal in the third quarter of 2013 with the plan to drill oil and gas wells in Jack County Texas, which will further diversify the Company’s oil and gas prospects.

Critical Accounting Policies

Our critical accounting policies are described in Note 3, “Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and acting Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with United States generally accepted accounting principles (“US GAAP”).

As of June 30, 2013, management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, as at June 30, 2013 such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) inadequate entity level controls due to the absence of an audit committee and the presence of only one outside director on our board of directors and (2) lack of a current Principal Financial Officer and a Principal Accounting Officer.

Management believes that none of the material weaknesses set forth above had a material adverse effect on the Company's financial results for the quarter ended June 30, 2013. Management is concerned that the material weaknesses set forth above could result in ineffective oversight in the establishment and monitoring of required internal controls and procedures and result in a material misstatement in our financial statements in future periods.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and are committed to taking further action by implementing additional enhancements or improvements, or deploying additional human resources as may be deemed necessary.

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any legal proceedings, and management is not aware of any legal proceedings pending or that have been threatened against us or our properties.

Item 1A. Risk Factors

Not required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In addition to previously disclosed sales of unregistered securities, since April 1, 2013, we have issued:

● 1,282,006 shares of common stock to consultants in exchange for compensation valued at $217,962;

● 200,000 shares in exchange for $20,000 in cash; and

● 480,000 shares for a 1.33% working interest in the Hopkins Spindletop #1 well.

These issuances were made in reliance of Section 4(2) of the Securities Act. The Company has previously reported all other issuances of unregistered equity from the start of the current fiscal year and through to the date of this report.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

On June 17, 2013, we entered into a letter agreement to purchase leases totaling approximately 320 acres in Jack County, Texas, which letter agreement was subsequently amended on August 2, 2013. Under the agreement, we are to make two payments totaling $325,925. We made the initial payment of $32,000 on August 2, 2013, and we are to make an additional payment of $293,925 by September 3, 2013. Failure to make this additional payment will result in the forfeiture of the initial payment.

On July 26, 2013, our subsidiary, Santa Fe Land, LLC, entered into a Land Bank Loan/Participation Agreement, which was subsequently amended on August 2, 2013. Pursuant to the amended agreement, the counterparty is to lend $340,000 to Santa Fe Land, LLC. The first portion of that loan of $35,000 was provided to Santa Fe Land, LLC on July 29, 2013 and the remaining $305,000 is to be made by August 26, 2013 (the “Final Funding”). Failure to make the Final Funding by August 26, 2013 (or any other date agreed upon by the parties), shall result in the initial loan of $35,000 being forfeited with no further obligation due by Santa Fe Land, LLC. Once there has been a Final Funding, a 50% participation return shall be due on the second anniversary of the Final Funding or on the sale of the leases. The funds loan under the agreement are to be used to provide the investment funds for the leasing of mineral interest acreage for the drilling of oil and gas well prospects.

On July 26, 2013, we entered into a Working Interest Purchase Agreement by which we offered a fractional undivided working interest (“WI”) equal to 76% (57% of the Net Revenue Interest after accounting for an overriding royalty interest of 25%) in each well on leased property to be acquired in Jack County, Texas (“Santa Fe Letz #1”). The WI is to be sold in exchange for $1,590,950 of which $50,000 was to be paid by August 2, 2013 and the remainder by August 30, 2013. Failure to pay the remainder by August 30, 2013 (which date may be extended to September 16, 2013 with the payment of an additional $250,000 by August 30 or to another date agreed upon by the parties) results in the forfeiture of any payment made prior to that date without any further obligation on our part. We intend to use the funds to fund a turnkey contract agreed to drill, test, complete and equip the Santa Fe Letz #1.

Item 6. Exhibits

The following exhibits are included with this Quarterly Report on Form 10-Q:

Exhibit Number	Description of Exhibit
10.1	Letter Agreement for Lease Purchases in Jack County, Texas
10.2	Working Interest Purchase Agreement, dated July 26, 2013
10.3	Amended Land Bank Loan/Participation Agreement, dated August 2, 2013
31.1	Certification of Principal Executive Officer and Acting Principal Accounting Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1	Certification of Principal Executive Officer and Acting Principal Accounting Officer pursuant to 18 U.S.C. Section 1350.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Exhibit 101

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

__________

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SANTA FE PETROLEUM, INC.

/s/ Tom Griffin

Tom Griffin

Chairman, Principal Executive Officer, Acting Principal Financial Officer and Acting Principal Accounting Officer

Date: August 15, 2013.

__________

EX-10

 

June 17, 2013

Mr. Tom Griffin

Santa Fe Petroleum, Inc.

4011 W. Plano Pkwy

Suite 126

Plano, TX 75093

RE:     Letz Lease Acquisition

320 Net acres, more or less

Jack County, Texas

Dear Tom:

Per our recent discussions, NYTEX Petroleum, Inc. ("NYTEX") owns the Oil & Gas leases totaling 320 gross/net mineral acres located in Jack County, Texas as shown on the attached Exhibit “A” (the “Letz Lease”) which Santa Fe Petroleum, Inc. (“Santa Fe”) desires to acquire from NYTEX and NYTEX desires to sell under the following terms and conditions:

1. Sale price of $1,000 per acre totaling $320,000.

2. NYTEX will deliver to Santa Fe a 77% Net Revenue Interest.

3. Included in the sale are two existing shut-in wells, the George P. Fogg #3 and #4.

4. Title work will be included in the sale price.

5. In addition to the sale price, an original drillsite title opinion by Turner & Allen law firm will be made available by NYTEX to Santa Fe for reimbursement of $5,925 invoice amount previously paid by NYTEX to Turner & Allen.

6. Closing will occur on or before 45 days from execution of this letter agreement, at which time Santa Fe will pay to NYTEX the purchase amount of $320,000 for an assignment of oil & gas lease.

7. During the 45 day period between execution of this letter agreement and closing, NYTEX will not market or sell the Letz Lease, unless during the 45 days Santa Fe notifies NYTEX in writing that Santa Fe does not intend, or is unable to buy the Letz Lease.

Letz Lease Acquisition

Page 2

If the foregoing terms and conditions are acceptable, please so indicate by executing this Letter Agreement in the space provided and returning an executed copy. I look forward to working with you.

Sincerely,

Michael Galvis

President

AGREED TO AND ACCEPTED THIS ______ DAY OF JUNE 2013, BY:

Santa Fe Petroleum, Inc.

_________________________________

Tom Griffin

President

EXHIBIT “A”

Attached hereto and made a part of that certain Letz Lease Acquisition Letter Agreement dated

June 17, by and between NYTEX Petroleum, Inc. and Santa Fe Petroleum, Inc.

LETZ LEASE DESCRIPTION

320 acres of land, more or less, being all of T. E. & L. Survey 2579, Abstract No. 683, Jack County, Texas, being more particularly described in that certain Special Warranty Deed dated February 7, 2012, from David C. Fogg to Ken Clayton, et al, said deed recorded in Volume 881, Page 881, Official Public Records, Jack County, Texas.

LETZ LEASE PLAT

EX-10

THE SANTA FE LETZ #1

A TURNKEY DRILLING PROGRAM

WORKING INTEREST PURCHASE AGREEMENT

Santa Fe Petroleum, Inc.

4011 W. Plano Pkwy, Suite 126

Plano, Texas 75093

Gentlemen:

I (the “Participant”) understand that Santa Fe Petroleum, Inc. (“SFP” or “Issuer”), a Delaware corporation (hereinafter referred to as "Issuer"), is offering for sale a fractional undivided working interest (“WI”) equal to 76% (57% of the Net Revenue Interest “NRI”)in the Santa Fe Letz #1 well (the "Well") after Completion (“NRI” and together with the WI, the “Interests”) (the development and operation of which shall be referred to as the "Program").The Issuer and/or its Affiliates will retain a 24% Working Interest (18% of the Net Revenue Interest) in the Well after Completion. Also, the Issuer is retaining an Overriding Royalty Interest of approximately 2% in the Well, and the Overriding Royalty Interests of SFP and the landowners shall total approximately 25% of the Net Revenue Interest in the Well. I further understand that the Interests are being offered to the prospective purchaser at a Turnkey price of $1,590,950 including the completion of a water disposal well, payable $50,000 on or before August 22, 2013 as forfeitable earnest money (as may be increased hereunder, the “Earnest Money”), with the final funding of $1,540,950 being due in full on or before September 30, 2013 (the “Final Funding”), both being directly wired to the Issuer’s account at Compass Bank. Should the Final Funding not occur the Earnest Money would be forfeited with no further obligation from one party to the other.

Extension of Final Funding: SFP and the Participant hereby agree that should the Participant need additional time to complete the raising of the balance of the Final Funding amount, the Final Funding date may be extended to October 16, 2013 by wiring to SFP $250,000 of additional earnest money on or before August 30, 2013, the original Final Funding date.

The WI acquired by the Participant will entitle the holder thereof to share in net operating revenues created by production from the Well, if the Well is a commercial well. The Participant’s interest will be limited to production from the Well and well-bore. Ownership of an Interest will not entitle the Participant to share in net operating revenues from any other well located on any other spacing unit located on the leases surrounding the Well to be drilled or on any other Prospect.

1. Subscription. I hereby subscribe for and agree to purchase the Interests and tender this executed Working Interest Purchase Agreement (“WIPA”), together my commitment to fund the purchase per the above described funding amounts and time frames (which may be subject to the Extension) referenced above.

2. Acceptance of Subscription. I understand and agree that the Issuer reserves the right, in its sole discretion and for any reason, to accept or reject the subscription, in whole or part, and that the subscription shall be deemed accepted when and only when it is signed by a duly authorized officer of the Issuer and the Final Funding has been received by the Issuer.

3. Use of Funds. I understand and agree that if this WIPA is accepted, the funds tendered per the above shall be considered corporate assets of the Issuer in payment for the Interests. SFP intends to use the funds to fund a turnkey contract, a form of which has been attached hereto.

4. Representations and Warranties of the Subscriber. I understand that the Interests are being offered and sold in reliance upon certain exemptions from the securities registration provisions of the Securities Act of 1933, (the “Act”) and non-public offering exemptions of the securities acts of the states in which the Interests are being offered. As a condition to purchasing interests, and for the purposes of the above-mentioned exemptions and/or qualifications to the extent applicable, and knowing that you will rely upon the statements made herein for such exemptions and in determining my suitability as an investor, I represent and warrant to you that:

a) The offering of Interests was made only through direct personal contact between the Participant and a representative of the Issuer;

b) I have completed a Purchaser Suitability Questionnaire and understand that the Issuer will rely on the accuracy and completeness of the information set forth therein in determining whether to accept this offer and in complying with its obligations under applicable state and federal securities statutes and regulations;

c) I am an “accredited investor” as that term is defined in Rule 501 of Regulation “D” promulgated under the Act.

d) I have been advised that the Interests have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or with any state securities regulatory agency and understand that the Interests are being offered in reliance upon certain exemptions from registration under applicable state and federal securities statutes;

e) I have had an opportunity to ask questions of, and receive answers to those questions, from officers and employees of the Issuer concerning the terms and conditions of the Program and the proposed business of the Issuer, and that all such questions have been answered to my full satisfaction;

f) I have been advised that an investment in Interests will involve a high degree of risk and that there are no assurances that I, if accepted as a purchaser of Interests, will recover my investment or receive any return on my investment at any time;

g) I have been advised that a purchaser of Interests must be prepared to bear the economic risks of such an investment for an indefinite period because:

(1) of the nature of oil and/or gas exploration and development;

(2) the Interests are not registered under applicable securities statutes, and the Issuer does not intend that they be registered; and

(3) the Interests will be subject to substantial restrictions on transfer as set forth below in this WIPA;

h) The funds to be tendered for the purchase of Interests subscribed will not represent funds borrowed by me from any person or lending institution except to the extent that I have a source of repaying such funds other than from the sale of the Interests, and further, that such Interests will not have been pledged or otherwise hypothecated for any such borrowing;

i) I am aware that the Issuer and its Affiliates may in the future be engaged in businesses which are competitive with that of the Program and agree and consent to such activities, even though there are or may be conflicts of interest inherent therein;

j)

k) I have all requisite authority to enter into this WIPA and to perform all of the obligations required to be performed by the Participant as a purchaser of Interests;

l) The Participant is the sole party in interest and is not acquiring the Interests as an agent or otherwise for any other person, is a legal resident of the state which is set forth on the signature page to this WIPA, and, if the Participant is a corporation, partnership, trust or other form of business organization, it has its principal office within such state, and was not formed for the specific purpose of purchasing Interests;

m) I hereby warrant that no representations or warranties have been made to me by the Issuer as to the tax consequences of this investment, or as to any profits, losses or cash flow which may be received or sustained as a result of this investment,;

n) I have knowledge and experience in financial and business matters and am capable of evaluating the merits and risks of an investment in the Program, and am able to bear the economic risks of my purchase, and, furthermore, I have had the opportunity to consult with my own attorney, accountant and/or purchaser representative regarding an investment in the Program;

o) I understand that the projections of potential production results and the reserve estimates included and/or in the exhibits thereto are merely estimates of possible results and not predictions of actual results, I understand that such projections have been based on a very favorable level of production for a specified period of time, which sustained level of production I understand cannot be assured by the Issuer, and accordingly, I have not relied on such projections as a representation, warranty or promise of future results of an investment in this Program.

5. Survival and Indemnification. All representations, warranties and covenants contained in this WIPA and the indemnification contained in this paragraph shall survive: (a) the acceptance of the WIPA by the Issuer; (b) changes in the transactions, documents and instruments which are not material or which are to the benefit of the Subscriber; and (c) the death or disability of a Subscriber. The Participant acknowledges the meaning and legal consequences of the representations, warranties and covenants in paragraph 4. hereof and that the Issuer has relied upon such representations, warranties and covenants in determining the Participant's qualification and suitability to purchase Interests in the Program. The Participant hereby agrees to indemnify, defend and hold harmless the Issuer, its officers, directors, employees, agents and controlling persons, from any and all losses, claims, damages, liabilities, expenses (including attorneys' fees and disbursements), judgments or amounts paid in settlement of actions arising out of or resulting from the untruth of any representation herein or the breach of any warranty or covenant herein. Notwithstanding the foregoing, however, no representation, warranty, covenant or acknowledgment made herein by the Participant shall in any manner be deemed to constitute a waiver of any rights granted to it under the federal securities acts or state securities acts. The obligation of the Issuer to sell the Interests specified herein to the Participant is subject to the condition that the representations and warranties of the Participant contained in paragraph 4. hereof shall be true and correct on and as of the acceptance of the WIPA in all respects with the same effect as though such representations and warranties have been made on and as of that date.

6. Limitation on Transfer of Interests. The Participant hereby further acknowledges that the Interests so subscribed for are being acquired for his own account for investment and not with a view toward resale or redistribution in a manner which would require registration under the Securities Act of 1933, as amended, or any state securities laws, and that he does not presently have any reason to anticipate any change in his circumstances or other particular events which would cause him to sell his interest, and that he is the sole party in interest acquiring this investment and that no parties other than the Participant, as record holder of the Interests, will have any beneficial interest in such Interests. Furthermore, if this subscription is accepted in whole or in part, the Participant agrees that he will not sell nor attempt to sell all or part of the Interests allocated to the Participant unless such Interests have first been registered under the Securities Act of 1933, as amended, and all applicable state securities statutes, or the Participant first furnishes an opinion of counsel satisfactory to the Issuer, stating that exemptions from such registration requirements are available and that the proposed sale is not, and will not, place the Issuer or any of its officers, directors or employees, in violation of any applicable federal or state securities law, or any rule or regulation promulgated thereunder. The Issuer has the right to refuse to recognize any attempted transfer of all or a portion of the Interests that do not meet the requirements of this paragraph.

7. Power of Attorney. The Participant hereby makes, constitutes and appoints Santa Fe Petroleum, Inc., 4011 W. Plano Pkwy., Suite 126, Plano, Texas 75093, and its successors, with full powers of substitution and resubstitution, as his true and lawful agent and attorney-in-fact, authorized on his behalf and in his name, place and stead, to execute, acknowledge, swear to and/or file with any person or jurisdiction any required legal or other documents, counterparts of the Operating Agreement, Division Orders, oil and gas sales contracts, re-appointment of Driller-Operator, assumed name certificates and similar instruments, drilling and completion contracts, purchaser orders and all other instruments necessary to conduct the activities of the Program. This Power of Attorney may be exercised by the above-named agent and attorney-in-fact for the Participant by executing such instrument with a single signature, or in such other manner, including by facsimile signature, as it may deem appropriate. This Power of Attorney will be binding on any assignee of the Participant's interest. Notwithstanding the powers granted to his agent and attorney-in-fact by the foregoing power of attorney, the Participant agrees to execute on his own behalf any appropriate instrument which his agent and attorney-in-fact is authorized to execute for him if requested or required to do so. Unless otherwise restricted by law, this Power of Attorney is irrevocable. The parties agree that this Power of Attorney has been coupled with an Interest.

8. Binding Effect. Except as otherwise provided herein, this WIPA shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns, and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by and be binding upon such heirs, executors, administrators, successors, legal representatives and assigns.

9. Choice of Law. The Participant agrees that Texas law shall govern this WIPA and all issues relating to participation in the Program.

10. Arbitration of disputes. With respect to the arbitration of any dispute, the Participant hereby acknowledges that:

(i) arbitration is final and binding on the parties;

(ii) the parties are waiving their right to seek remedies in court, including their right to jury trial;

(iii) pre-arbitration discovery is generally more limited and different from court proceedings;

(iv) the arbitrator's award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by the arbitrators is strictly limited; and

(v) the panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.

The Participant and SFP both agree by their execution of this WIPA that any dispute arising between them (or any person deriving rights or claims through them) or any of their respective partners, agents, employees, or independent contractors, regardless of kind or character, arising out of the subject matter of this WIPA or any other services performed or not performed by a party or the relationship of a party, including questions regarding the formation, construction or arbitrability of this WIPA, shall be resolved through binding arbitration and Texas law will govern. The Participant and Issuer agree to submit the dispute to a court of competent jurisdiction in Dallas County, Texas for arbitration under title 7, chapter 171 of the Texas Civil Practice and Remedies Code. The Participant and Issuer agree that the number of arbitrators to be appointed by the court shall consist of three neutral arbitrators selected by agreement of the Participant, otherwise appointed by the court. The Texas Rules of Evidence and the Texas Rules of Procedure shall apply at all times, with only one arbitrator being appointed to administer procedural rules relating to discovery. Arbitration shall be conducted in Dallas County, Texas.

The foregoing representations and warranties are true and accurate as of the date hereof and will be true and correct as of the date that the Participant acquires Interests, if this subscription is accepted. In witness hereof, the Participant subscriber has executed this WIPA on

July_______, 2013.

ACCEPTED:
SANTA FE PETROLEUM, INC.	PURCHASER - PARTICIPANT:
By:
Name:	By:
Title:	Name:
_____________________, 2013
Acceptance Date	Title:
	Mailing Address:
	Home Phone
	Cell Phone
	Email Address

EX-10

LAND BANK LOAN/

PARTICIPATION AGREEMENT

(Revised)

 July 26, 2013

This Land Bank Loan/Participation Agreement revises and replaces the previous Agreement signed and Dated July 26, 2013.

Land Bank Loan Ref.: Tract #1, 320 Acres, Jack County, Texas

This Land Bank Loan/Participation Agreement (the “LPA”) is by and between Proven Fields Energy, LLC – The Jack County Prospect, Jack Ward, President, hereinafter referred to as the “Participant”, and Santa Fe Land, LLC., a Texas Limited Liability corporation (the “Land Bank”), a wholly owned subsidiary of Santa Fe Petroleum, Inc., hereinafter referred to as “SFL”, together referred to as the “Parties”.

Article I: The Financing

1.1 The Loan. Participant agrees, based on the terms and conditions and relying upon the representations and warranties set forth in this Agreement, to lend to the Land Bank, and Land Bank agrees to borrow from Participant, a loan (the “Loan) to be more fully described in a note (the “Note”) and payable according to the terms of the Note (the form of which is attached hereto). As a condition to the making of any Loan, the Land Bank shall execute and deliver to Participant a Note evidencing the terms of repayment of such Loan. The Participant shall fund the Loan in a total amount of $340,000, with $35,000 non-refundable earnest money (“Earnest Money”) to be funded on or before July 29, 2013 and an additional $305,000 to be funded on or before the earlier of August 26, 2013 or the final funding of that certain related Santa Fe Letz #1 Working Interest Purchase Agreement by Santa Fe Petroleum, Inc. dated the date hereof (the “Final Funding”).

(the objective in para. no. 1.1 above is that the funding of the Land Bank loan proceeds total of $340,000 must be complete at the same time the Working Interest Purchase (WIP) amount of $1,590,950 is complete, but no later than August 26, 2013. Otherwise, should the WIP get funded first we would have all of the drilling funds but the land would not have been paid for. Thus, the Land Bank funding is priority 1 to get funded vs. the WIP; otherwise we loose the land to drill on. Bottom line, the land must be funded on or before August 26, 2013 even if the WI Purchase takes a while longer.)

1.2 Loan Due Date: The Loan will be due in two years from the date of the Final Funding, (the “Maturity Date”), unless extended by the Parties provided that if by August 26, 2013 there has not been a Final Funding, the parties agree that the LPA Loan of the Earnest Money shall be voided and the Land Bank shall be entitled to keep all Loans to date (including the Earnest Money) without any repayment, interest, participation return, additional return or other payment due thereon.

1.3 Use of Proceeds. The purpose of the Loan is to provide the investment funds for the leasing of mineral interest acreage (MIA) for the drilling of oil and gas well prospects. Expenses involved in the leasing and/or lease purchasing process may include but not be limited to mineral interest lease bonus per acre, land man services, attorney fees for title review, curative, division orders, title certification, surveys, administrative expenses, etc. (costs). The Loan will be used to lease and/or purchase existing leases on approximately 320+- acres of land (the “Property”). The Property will be divided into well drilling unit tracts of typically 40 acres each per the driller’s instruction.

1.4 Participation Return. Once there has been a Final Funding, a 50% participation return will be due on or before the “Maturity Date”. For example, if there is no sale of all or a portion of the Property prior to the Maturity Date, then $510,000 ($340,000 of principal plus a participation return of $170,000) shall be due on the Maturity Date, unless extended by the Parties. If there is no Final Funding there shall be no participation return on amounts provided by the Participant to the Land Bank and all monies funded to date shall be forfeited.

1.5 Sale of Property Prior to Maturity Date.

(a) Participation Return. If prior to the Maturity Date, the Land Bank sells all or a portion of the Property, within ten Business Days (a “Business Day” being any day on which the banks in the State of Texas are generally open) of such sale funding, the Land Bank shall repay the portion of the Loan plus a 50% participation return thereon based on the ratio between the acreage sold and the total acreage of the Property. Upon a sale of a portion of the Property and the payment described above, the terms “Property” and “Loan shall be adjusted accordingly.

By way of example, if Prior to the Maturity Date, the Land Bank sells 40 acres of Property, prior to the expiration of ten Business Days from such sale funding, (i) the Land Bank shall pay the Participant $63,750 (representing $42,500 of the principal on the Loan plus $21,250 of participation return, the 50%), (ii) the amount of the “Loan” shall be reduced by $42,500 and (iii) the amount of the “Property” shall be reduced by 40 acres.

(b) Additional Sale Proceeds: If prior to the Maturity Date, the Land Bank sells all or a portion of the Property and the Proceeds Per Acre sold exceeds the 50% Participation return, then the Land Bank shall retain the excess proceeds as income to the Land Bank.

“Proceeds Per Acre” is defined as the income pertaining to each acre of the Property (as may be prorated) from the sale of mineral interest acreage/leases and/or its reserves.

“Purchase Lease Price Per Acre” is defined as pertaining to each acre of the Property (as may be prorated) all direct and indirect associated costs of purchase (which initially shall be at least $1,062.50 per acre) and resale including but not limited to mineral interest lease bonus per acre, land man services, attorney fees, curative, title certification, administrative expenses, sale fees, closing costs and administrative fees.

If there is no Final Funding there shall be no return on amounts provided by the Participant to the Land Bank.

1.6 Area of Interest: This Participation Agreement is primarily for the purchase of mineral interest leases in, but not limited to, Jack County, Texas, being the primary focus area of Santa Fe Petroleum, Inc.’s Marble Falls (and/or other formations) oil and gas drilling projects.

This Agreement shall be governed by and construed under the laws of the State of Texas. Any dispute, claim or controversy arising out of or relating to this agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration in the City and County of Dallas, before one arbitrator. The arbitration shall be administered by JAMS and in English. Judgment on the award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction. Each party will bear its own costs for arbitration. The prevailing party in arbitration shall be entitled to reasonable attorneys’ fees. 

This Agreement shall be binding upon and inure to the benefit of the Parties hereto, their successors and/or assigns.

IN WITNESS HERETO, the duly authorized representatives of the Parties have caused this Land Bank Loan/Participation Agreement to be executed as of this date first above written.

Santa Fe Land, LLC (“Land Bank”)

________________________________

Tom Griffin

President

Date: July 26, 2013

Proven Fields Energy, LLC – The Jack County Prospect (“Participant”)

___________________________

Jack Ward, President

20 Trailview Ct. Novato, CA 94945

Date: July 26, 2013

Form of Note

(Revised )

Santa Fe Land, LLC agrees and promises to pay to Proven Fields Energy, LLC – The Jack County Prospect the sum of $340,000 Dollars for value received. This Note affirms the terms set out in the Land Bank Loan/Participation Agreement (the “Agreement”), including (but not limited) those relating to the Maturity Date and the participation return. (each as described in the Agreement).

If there is no Final Funding (as defined in the Agreement) by August 26, 2013, this Note shall be deemed satisfied in full and Santa Fe Land, LLC shall owe no amounts that may otherwise be due under this Note including any principal, participation return or additional return (each as described in the Agreement).

The terms of the Agreement, including those related to governing law and arbitration apply to this Note as if they were set out below.

Santa Fe Land, LLC.

________________________

Tom Griffin, President

Date: July 26, 2013

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Tom Griffin, certify that:

(1) I have reviewed this Report on Form 10-Q for the quarterly period ended June 30, 2013 of Santa Fe Petroleum, Inc.;

(2) Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

(3) Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting in the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2013

/s/ Tom Griffin

Tom Griffin

Chairman, Principal Executive Officer and Acting Principal Accounting Officer

__________

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Tom Griffin, the Principal Executive Officer and Acting Principal Accounting Officer of Santa Fe Petroleum, Inc. (the “Company”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge, the Report on Form 10-Q of the Company, for the quarterly period ended June 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in the Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.

Date: August 15, 2013

/s/ Tom Griffin

Tom Griffin

Chairman, Principal Executive Officer and Acting Principal Accounting Officer

XML

Subsequent Events

3 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

Note 11- Subsequent Events

Acquisition of Working Interests

The Company has continued to acquire individual working interests in the Hopkins Spindletop #1 well. In July 2013, the Company issued common shares for working interests as follows: 24,001 common shares for a 0.07% interest to an individual, 96,001 common shares for a 0.27% interest to an LLC and 360,000 common shares for a 1.0% interest to a trust.

Land Bank Loan Participation Agreement

On July 26, 2013, Santa Fe Land LLC executed a Land Bank Loan Participation Agreement with Proven Fields Energy LLC, for the acquisition of 320 acres in Jack County Texas for the drilling of oil and gas prospects. Proven Fields Energy LLC has paid $35,000 as non-refundable earnest money. The total loan is for $340,000 and is to be funded no later than August 26, 2013. The maturity of the loan is two years from the final funding date and receives a 50% participation return from the oil and gas development.

On June 17, 2013, the Company entered into a letter agreement to purchase leases totaling approximately 320 acres in Jack County, Texas, which letter agreement was subsequently amended on August 2, 2013. Under the agreement, the Company made an initial payment to the seller of $32,000 on August 2, 2013 and is to make an additional payment of $293,925 by September 3, 2013. Failure to make this additional payment will result in the forfeiture of the initial payment.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended		26 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Income Statement [Abstract]
Revenue	$ 3,328		$ 3,328		$ 3,328
Expenses
Lease operating expense					7,975
Compensation	556,000	60,000	661,000	120,000	1,223,325
Professional	55,674	78,576	82,174	80,391	431,847
Consulting	314,401	30,300	349,401	60,700	531,101
Rent	4,845		7,268		53,953
Lease	557		557		557
Production taxes	157		157		157
Derivative expense	61,000		61,000		61,000
Other	11,630	1,227	23,914	22,147	86,357
Total	1,004,264	170,103	1,185,471	283,238	2,396,272
Interest	2,465		251,188		251,188
Total expenses	1,006,729	170,103	1,436,659	283,238	2,647,460
Net loss	$ (1,003,401)	$ (170,103)	$ (1,433,331)	$ (283,238)	$ (2,644,132)
Basic and diluted loss per share	$ (0.02)	$ 0.00	$ (0.03)	$ (0.01)
Basic and diluted weighted average shares outstanding	43,184,493	36,840,898	42,129,032	35,159,580

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Acquisition of Oil and Gas Company

3 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Acquisition of Oil and Gas Company

Note 4 - Acquisition of Oil and Gas Company

On May 11, 2011, SFO acquired 100 percent of the member units of SFL by issuing 33,478,261 shares of common stock and 1,999,150 warrants to SFL member unit holders in exchange for their SFL member units. The SFL member unit holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”). As a result of the Share Exchange on May 10, 2012,

SFO and SFL are subsidiaries of the Company.

The acquisition of SFL is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred. The warrants to purchase common stock of the Company are at an exercise price of $0.50 per share and have a three year exercise period.

The Company acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Barnett Cody #1A in Comanche County, Texas. Additionally, the Company acquired approximately 76 acres of land as part of the purchase.

The following table presents a summary of the historical costs of assets and liabilities acquired at the date of acquisition:

Assets acquired, unevaluated oil and natural gas property	$	494,132
Liabilities assumed		—
Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share	$	494,132

Concurrent with this transaction, the Principal Stockholder assigned 10,446,782 of his personal shares and 1,573,956 warrants in the Company to employees and consultants of the Company for services rendered. Under SAB Topic 5T, Miscellaneous Accounting, payments made by a principal stockholder to settle the Company’s obligations were deemed to be capital contributions.  Accordingly, the assignment of shares was recognized in the accompanying condensed consolidated financial statements as stock based compensation and deferred offering costs of approximately $123,581 and $23,784, respectively.

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Nature of Operations (Details Narrative) (USD $)	May 20, 2012	May 10, 2012	May 12, 2011
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Percent of issued and outstanding common stock of SFO		100.00%
SFO Stock issued and outstanding, par value		$ 0.0001
Aggregate shares of SFO issued to Shareholders	33,478,261		33,478,261
Warrants to purchase shares of Common Stock by SFO Shareholders	6,764,856
Exercise price of common stock, per share	$ 0.50		$ 0.50
Percent of common stock ouned by SFO Shareholders	84.80%
Percent of issued and outstanding membership interest of SFL Units			100.00%
Aggregate shares issued to holders of SFL units of membership interest			33,478,261
Warrants to purchase common stock to SFL unit holders			1,966,900
SFL oil and natural gas working interests			100.00%
Net revenue interest of Test Well			75.00%

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Supplemental Oil and Gas Disclosures

3 Months Ended

Jun. 30, 2013

Extractive Industries [Abstract]

Supplemental Oil and Gas Disclosures

Note 12- Supplemental Oil and Gas Disclosures

Since the Company is in the development stage and its oil and natural gas property is considered probable, reserve data is not presented.

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Subsequent Events (Details Narrative) (USD $)	1 Months Ended
	Jul. 31, 2013	Jul. 26, 2013 acre	Jul. 17, 2013 acre
Subsequent Events [Abstract]
Issuance of common stock for working interests to an individual	24,001
Issuance of common stock for working interests to an individual, interest rate	0.07%
Issuance of common stock for working interests to an LLC	96,001
Issuance of common stock for working interests to an LLC, interest rate	0.27%
Issuance of common stock for working interests to a trust	360,000
Issuance of common stock for working interests to a trust, interest rate	1.00%
Land acquired for drilling of oil and gas		320	320
Payment as non-refundable earnest money		$ 35,000
Total loan		340,000
Initial payment to seller			32,000
Additional payment to seller			$ 293,925

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Summary of Significant Accounting Policies (Details Narrative) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Accounting Policies [Abstract]
Received subscriptions for common stock	$ 540,800	$ 1,319,450
Gross proceeds from subscriptions	85,200	556,676
Finance and offering expenses	30,000	83,736
Private placement price, minimum	$ 0.10	$ 0.25
Private placement price, maximum	$ 0.25	$ 0.50
Expensed deferred offering costs		$ 23,784
Potentially dilutive warrants		6,764,856

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Summary of Significant Accounting Policies - Fair value of stock based compensation (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Quoted Prices In Active Markets for Identical Assets (Level 1)
Stock Based Compensation
Derivative Liability
Significant Other Observable Inputs (Level 2)
Stock Based Compensation	328,301	40,044
Derivative Liability	61,000
Significant Unobservable Inputs (Level 3)
Stock Based Compensation
Derivative Liability
Total
Stock Based Compensation	328,301	40,044
Derivative Liability	$ 61,000

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Stockholders' Deficit - Summary of warrant activity (Details) (USD $)	3 Months Ended	6 Months Ended
	Dec. 31, 2012	Jun. 30, 2013
Warrants
Outstanding at beginning of the year	3,540,856	6,764,856
Granted, shares	3,224,000
Exercised
Forfeited or cancelled, shares
Outstanding at end of year	6,764,856	6,764,856
Exercisable	6,764,856	6,764,856
Weighted-average exercise price
Outstanding and exercisable at December 31, 2011, exercise price	$ 0.50	$ 0.38
Granted, exercise price	$ 0.25
Outstanding and exercisable, exercise price	$ 0.38	$ 0.38
Exercisable	$ 0.38	$ 0.38

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Convertible Promissory Notes - Assumptions for Black-Scholes calculated (Details) (USD $)	Apr. 17, 2013 Years
Investments, Debt and Equity Securities [Abstract]
Conversion Price	$ 0.05
Expected life (years)	0.5
Risk free interest rate	0.15%
Volatility	130.12%
Dividend yield

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Going Concern and Liquidity (Details Narrative) (USD $)	6 Months Ended	26 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011	May 10, 2011
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ 1,433,331	$ 2,644,132
Cash	323	323	33,901
Working capital deficit	1,315,923	1,315,923
Accumulated deficit	$ 2,644,132	$ 2,644,132

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Consolidated Statement of Cash Flows (Unaudited) (USD $)	6 Months Ended	26 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Cash Flow From Operating Activities:
Net loss	$ (1,433,331)	$ (2,644,132)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation	328,301	491,926
Stock issued for settlement of prior services	525,000	525,000
Non-cash interest expense - benficial conversion feature	248,723	248,723
Non-cash interest expense - original issue discount	1,215	1,215
Derivative expense	61,000	61,000
Increase in cash attributable to changes in operating assets and liabilities:
Accounts receivable	(1,300)	(1,300)
Accounts payable	(5,316)	414,190
Accounts payable, related parties	108,420	187,223
Accrued liabilities	1,250	23,750
Accrued compensation	90,000	367,350
Net Cash Provided By Operating Activities	(76,038)	(325,055)
Investing Activities:
Investment in unevaluated oil and natural gas property	(52,035)	(294,579)
Accounts payable related parties, unpaid property costs		156,473
Net Cash Used in Investing Activities	(52,035)	(138,106)
Financing Activities:
Proceeds from sale of common stock	44,495	601,171
Proceeds from issuance of convertible promissory note	50,000	50,000
Merger costs		(373,747)
Accrued liabilities, unpaid merger costs		186,060
Net Cash Provided by Financing Activities	94,495	463,484
Net Increase in Cash	(33,578)
Cash at Beginning of Period	33,901
Cash at End of Period	323	323
Supplemental disclosure of cash flow information
Income taxes paid
Cash interest paid
Supplemental disclosure of non-cash investing and financing activities
Unevaluated oil and natural gas property acquired	492,148	986,280
Common shares issued in recapitalization		600
Common stock issued for acquistion of oil & natural gas property	48,000	48,000
Convertible promisssory notes issued for mineral lease acquisition	200,000	200,000
Convertible promissory note, related party issued for mineral lease acquisition	244,148	244,148
Common stock issued in settlement of accounts payable	$ 17,500	$ 17,500

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Going Concern and Liquidity

3 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern and Liquidity

Note 2 – Going Concern and Liquidity

As reflected in the accompanying consolidated financial statements, the Company had a net loss of, $1,433,331 for the six months ended June 30, 2013, and a net loss of $2,644,132 for period from May 11, 2011 (commencement of operations) through June 30, 2013. Additionally, at June 30, 2013, the Company had cash of only $323, a working capital deficit of $1,315,923 and an accumulated deficit of $2,644,132, which could have a material impact on the Company’s financial condition and operations.

Our net losses and lack of capital pose risks to our business and stockholders by:

• making it more difficult for us to satisfy our obligations;

• impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and

• making us more vulnerable to a downturn in our business and limiting our flexibility to plan for, or react to, changes in our business.

The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our industry. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the amount and classification of liabilities which may result from the inability of the Company to continue as a going concern.

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Oil and Natural Gas Property

3 Months Ended

Jun. 30, 2013

Extractive Industries [Abstract]

Oil and Natural Gas Property

Note 5 - Oil and Natural Gas Property

The Company’s principal asset consists of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $1,231,000 at June 30, 2013 and $737,000 as of December 31, 2012.

The Company’s original intent was to complete five test wells on its unevaluated oil and natural gas property. The first test well was originally drilled in 2009 by a predecessor affiliate company as the Barnett Cody #1A test. In October 2012, the company did a slick water/ acid frac into the Ellenberger formation and due to the high volume of water production, the Company does not anticipate further developing of this test well but instead intends to use it as a water disposal well for new drilling operations. Additional capital is needed for the Company to commence further drilling activities for the other test wells. As a result of the additional capital requirements, the five test well drilling project is not completed and the reservoir analysis has not yet been finished. As such, the Company has classified the oil and natural gas property as unevaluated as of June 30, 2013. As of June 30, 2013, the primary term of the Company’s oil and natural gas lease is through March 2014.

The Company issued 480,000 common shares at $0.10 a share on June 17, 2013 for a 1.33% working interest in the Hopkins Spindletop #1 well. The Company recorded $3,328 in revenue from the well in the three months ended June 30, 2013.

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Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 3 - Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying consolidated balance sheets and related consolidated statements of operations, cash flows, and stockholders’ equity (deficit) include all adjustments, consisting of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America for interim period reporting in conjunction with the instructions to Form 10-Q Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information required by GAAP. In the opinion of management, the condensed consolidated financial statements include the adjustments and accruals, all of which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. Estimates are used when accounting for stock-based transactions, accounts payables and accrued expenses and taxes, among other matters.

Principles of Consolidation

The audited consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

Development Stage Company

The Company is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, Development Stage Entities, since no revenues have been generated from inception through the date of these consolidated financial statements. During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated with the Company’s contemplated equity financing plan.  

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas. Under these provisions, costs to acquire mineral interests in oil and natural gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural gas interests are depleted on a unit-of-production basis.

If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

Impairment of Long-Lived Assets

The Company accounts for the impairment of long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment, which requires that long-lived assets be, reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired, the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Deferred Offering Costs

The Company complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement agents that are related to the Company’s contemplated equity financing and will be charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or charged to expense if the contemplated equity financing is not completed. During the year ended December 31, 2012, the Company received subscriptions of 1,319,450 shares of common stock for $556,676 of gross proceeds less $83,736 of financing and offering expenses through a private placement memorandum at prices ranging from $0.25 to $0.50 per share. Previously recorded deferred offering expenses of $23,784 were expensed. In the six months ended June 30, 2013, the Company received subscriptions of 540,800 of shares of its $0.0001 par value common stock at prices ranging from $0.10 to $0.25 per share. The gross proceeds were $105,200 less $60,705 of offering expenses.

Income Taxes

Income taxes are accounted for under the asset and liability method of ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Effective May 11, 2011, with the commencement of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, Accounting for Uncertainties in Income Taxes. These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company had no unrecognized tax benefits. For the period from May 11, 2011, (commencement of operations) through December 31, 2012, no adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011and the tax year for 2012 are subject to audit.

Stock-Based Compensation

The Company adopted ASC 718, Compensation – Share Based Compensation, as of May 11, 2011. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.

Net Income (loss) per Common Share

The Company computes earnings (loss) per share in accordance with ASC 260-10, Earnings Per Share. ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 6,764,856 of potentially dilutive warrants at December 31, 2012 and for the three and six months ended June 30, 2013.

Legal Costs and Contingencies

In the normal course of business, the Company incurs costs to retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonably estimated, the Company recognizes an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

Fair Value Estimates

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”.  The objective of SFAS 157 (ASC 820) is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 (ASC 820) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 (ASC 820) applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.

The Company measures its options and warrants at fair value in accordance with SFAS 157 (ASC 820). SFAS 157 (ASC 820) specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets;

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and 

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The fair value of the stock based compensation at June 30, 2013 and December 31, 2012, were as follows:

		Quoted Prices  In Active  Markets for  Identical  Assets		Significant  Other  Observable  Inputs		Significant  Unobservable  Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Six Months Ended June 30, 2013 Stock Based Compensation	$	—	$	328,301	$	—	$	$328,301
Derivative Liability	$	—	$	61,000	$	—	$	61,000
Year Ended December 31, 2012
Stock Based Compensation	$	—	$	40,044	$	—	$	40,044

Options are valued using the Black Scholes model.

Recent Accounting Pronouncements

No recent accounting pronouncements or other authoritative guidance have been issued that management considers likely to have a material impact on our consolidated financial statements

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Acquisition of Oil and Gas Company - Costs of assets and liabilities acquired (Details) (USD $)	May 12, 2011
Extractive Industries [Abstract]
Assets acquired, unevaluated oil and natural gas property	$ 494,132
Liabilities assumed
Net assets acquired for 33,478,261 shares of Company common stock and 1,966,900 warrants to purchase Company common stock at $0.50 per share	$ 494,132

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Convertible Promissory Notes (Details Narrative) (USD $)	3 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Apr. 17, 2013	Feb. 28, 2013	Feb. 11, 2013
Debt Disclosure [Abstract]
Five convertible notes issued, principal amount				$ 200,000
Three of the convertible notes, principal amount				150,000
Two of the convertible notes, principal amount				50,000
Convertible rate, per share			$ 0.30	$ 0.25	$ 0.25
Beneficial conversion feature expensed as interest		112,000
Cash proceeds received			50,000
Principal amount of note	55,833		335,000
Debt discount	5,833		35,000
Convertible promissory note, interest rate			12.00%
Derivative liability			61,000
Amortization of debt discount	$ 1,215

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Commitment and Contingencies (Details Narrative) (USD $)	Jun. 05, 2013
Commitments and Contingencies Disclosure [Abstract]
Issuance of common stock for settlement of all compensation claims	3,500,000
Stock compensation expense	$ 490,000
Accrued compensation liability	$ 35,000

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	46,800,517	40,797,711
Common stock, shares outstanding	46,800,517	40,797,711

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Stockholders' Deficit

3 Months Ended

Jun. 30, 2013

Equity [Abstract]

Stockholders' Deficit

Note 8- Stockholders’ Deficit

Capital Structure

The Company is authorized to issue up to 200,000,000 shares of common stock at $0.0001 par value per share. As of June 30, 2013 and December 31, 2012, 46,800,517 and 40,797,711 shares were issued and outstanding, respectively. 

Common Stock

Effective on the commencement date of May 11, 2011, (commencement of operations), the Company issued 33,478,261 shares of common stock for the acquisition of SFL from a related party. The stock was valued based on the historical cost basis of the asset acquired, which approximated $494,000.

In 2011, the Company filed a registration statement on Form S-1 to register and sell in a self-directed offering 6,000,000 shares of newly issued common stock at an offering price of $0.0125 per share for proceeds of up to $75,000. The Registration Statement was declared effective on January 9, 2012. On February 6, 2012, the Company issued 6,000,000 shares of common stock pursuant to the registration statement for proceeds of $75,000 and these shares are freely-tradable as a result of the registration of the offer and sale of these shares on Form S-1.

From July 1, 2012, through December 31, 2012, the Company received subscriptions of 1,319,450 shares of common stock for $556,676 of gross proceeds less $83,736 of financing and offering expenses through a private placement memorandum (“PPM”). Common stock was sold at prices ranging from $0.25 to $0.50 per share through the PPM to “accredited investors” as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of 1933, as amended. 

For the six months ended June 30, 2013, the Company received subscriptions of 540,800 shares of common stock for $105,200 of gross proceeds. The Common stock was sold for prices ranging from $0.10 to $0.25 per share through the PPM to “accredited investors” as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of 1933, as amended. 

Stock Warrants

The exercisable outstanding stock purchase warrants were 6,764,856 at June 30, 2013 and December 31, 2012 with a weighted average exercise price of $0.38.  The following summarizes the warrant activity:

	June 30, 2013				December 31, 2012
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at beginning of the Period		6,764,856	$	0.38		3,540,856	$	0.50
Granted		—				3,224,000	$	0.25
Exercised		—				—
Forfeited or cancelled		—				—
Expired		—				—
Outstanding at end of year		6,764,856		0.38		6,764,856	$	0.38
Exercisable		6,764,856	$	0.38		6,764,856	$	0.38

At June 30, 2013, 3,540,856 warrants expire on May 11, 2014 and 3,224,000 warrants expire January 31, 2015.

We have adopted the guidance of ASC 718-10-S99-1 for purposes of determining the expected term for stock warrants. Due to limited historical data to rely upon, we use the "simplified" method in developing an estimate of expected term for stock warrants per ASC 718-10-S99-1. Additionally, the volatility utilized is based on the composite of several comparable guideline companies.

Effective on January 31, 2012, the Company issued 3,200,000 warrants to purchase common stock to two consultants of the Company and 24,000 warrants to purchase common stock to a director of the Company. The Company evaluated the stock warrants in accordance with ASC 718, Stock Compensation, and utilized the Black Scholes method to determine valuation. As a result of our analysis, the total value for the stock warrant issuance on the grant date of January 31, 2012, was de minimis and no amount was recorded in the consolidated financial statements.

Stock Grants

On January 31, 2012, the Company issued 2,875,000 shares of common stock to two consultants and a director of the Company. The Company recorded $40,044 as stock compensation expense. Under SAB Topic 5T, Miscellaneous Accounting, these were deemed stock based compensation of the Company and were valued in accordance with ASC 718, Stock Compensation.

In the six months ended June 30, 2013, the Company issued 1,432,006 shares of common stock to four consultants and recorded a stock compensation expense of $328,301.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $)	Common Stock	Additional Paid-In Capital	Deficit Accumulated During the Development Stage	Total
Beginning balance, Amount at May. 10, 2011
Common stock issued to unit holders of Santa Fe Land, LLC, Shares	33,478,261
Common stock issued to unit holders of Santa Fe Land, LLC, Amount	$ 3,348	$ 490,784		$ 494,132
Warrants issued to unit holders of Santa Fe Land, LLC, Shares	1,999,150
Stock based compensation provided by Principal Stockholder		123,581		123,581
Common stock issued for capital placement fees provided by Principal Stockholder		23,784		23,784
Warrants issued for capital placement fees provided by Principal Stockholder	1,573,956
Net Loss			(541,590)	(541,590)
Ending balance, Amount at Dec. 31, 2011	3,348	638,149	(541,590)	99,907
Ending balance, Shares at Dec. 31, 2011	33,478,261
Stock based compensation provided by Principal Stockholder		40,044		40,044
Shares issued in connection with the recapitalization transaction, Shares	6,000,000
Shares issued in connection with the recapitalization transaction, Amount	600	(600)
Sale of common stock, Shares	1,319,450
Sale of common stock, Amount	132	556,544		556,676
Payment of financing and offering expenses		(59,952)		(59,952)
Conversion of deferred offering expenses from sale of common stock		(23,784)		(23,784)
Merger costs		(313,795)		(313,795)
Net Loss			(669,211)	(669,211)
Ending balance, Amount at Dec. 31, 2012	4,080	836,606	(1,210,801)	(370,115)
Ending balance, Shares at Dec. 31, 2012	40,797,711
Stock issued to settle accounts payable, Shares	50,000
Stock issued to settle accounts payable, Amount	5	17,495		17,500
Sale of common stock, Shares	540,800
Sale of common stock, Amount	54	108,146		105,200
Stock issued for working interest, Shares	480,000
Stock issued for working interest, Amount	48	47,952		48,000
Stock issued for consulting services, Shares	1,432,006
Stock issued for consulting services, Amount	143	328,158		328,301
Stock offering costs		(60,705)		(60,705)
Convertible promissory notes - beneficial conversion		248,723		248,723
Net Loss			(1,433,331)	(1,433,331)
Ending balance, Amount at Jun. 30, 2013	$ 4,680	$ 2,048,025	$ (2,644,132)	$ (591,427)
Ending balance, Shares at Jun. 30, 2013	46,800,517

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 323	$ 33,901
Accounts receivable - oil and gas	1,300
Total current assets	1,623	33,901
Oil and natural gas property, successful efforts method	1,280,859	736,676
Total assets	1,282,482	770,577
Current liabilties
Accounts payable	414,190	419,506
Accounts payable, related parties	343,696	235,276
Accrued Liabilities	192,310	208,560
Accrued compensation	367,350	277,350
Total current liabilities	1,317,546	1,140,692
Convertible promissory notes, net of discount	251,215
Convertible promisssory note, related party	244,148
Derivative Liability	61,000
Total liabilities	1,873,909	1,140,692
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $0.0001 par value, 200,000,000 shares authorized 46,800,517 and 40,797,711 shares issued and outstanding, respectively	4,680	4,080
Additional paid in capital	2,048,025	836,606
Deficit accumulated during the development stage	(2,644,132)	(1,210,801)
Total stockholders' deficit	(591,427)	(370,115)
Total liabilities and stockholders' deficit	$ 1,282,482	$ 770,577

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Acquisition of Oil and Gas Company (Details Narrative) (USD $)	May 20, 2012	May 12, 2011
Extractive Industries [Abstract]
Percent of issued and outstanding membership interest of SFL Units		100.00%
Aggregate shares issued to holders of SFL units of membership interest		33,478,261
Warrants to purchase common stock to SFL unit holders		1,999,150
Exercise price of common stock, per share	$ 0.50	$ 0.50
Acquired net revenue interest		75.00%
Principal Stockholder, personal shares assigned to employees		10,446,782
Principal Stockholder, personal warrants assigned to employees		$ 1,573,956
Stock based compensation		123,581
Deferred offering costs		$ 23,784

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Stockholders' Deficit (Tables)

3 Months Ended

Jun. 30, 2013

Equity [Abstract]

Warrant activity

	June 30, 2013				December 31, 2012
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at beginning of the Period		6,764,856	$	0.38		3,540,856	$	0.50
Granted		—				3,224,000	$	0.25
Exercised		—				—
Forfeited or cancelled		—				—
Expired		—				—
Outstanding at end of year		6,764,856		0.38		6,764,856	$	0.38
Exercisable		6,764,856	$	0.38		6,764,856	$	0.38

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Stockholders' Deficit (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	May 20, 2012	Feb. 06, 2012	Jan. 31, 2012	Dec. 31, 2011	May 12, 2011
Equity [Abstract]
Shares of common stock authorized	200,000,000
Authorized common stock, par value per share	$ 0.0001
Issued and outstanding common stock	41,288,511	40,797,711
Aggregate shares of SFL issued to Shareholders			33,478,261				33,478,261
Historical cost basis of the asset acquired							$ 494,000
Shares in newly issued common stock in self-directed offering, pursuant to registration statement				6,000,000		6,000,000
Offering price of common stock in self-directed offering, per share						$ 0.0125
Maximum proceeds in self-directed offering				75,000		75,000
Received subscriptions, shares of common stock	540,800	1,319,450
Received subscriptions, gross proceeds	105,200	556,676
Financing and offering expenses		83,736
Private placement memorandum, per share	$ 0.25	$ 0.25
Private placement memorandum, per share maximum		$ 0.50
Total outstanding warrants	6,764,856	6,764,856
Average exercise price of warrants per share	$ 0.38	$ 0.38
Warrants to expire	3,540,856	3,224,000
Issued warrants to two consultants					3,200,000
Issued warrants to purchase common stock to a director					24,000
Total value for stock warrant issuance, included in compensation expense					40,044
Total shares issued to two consultants and director					2,875,000
Shares of common stock issued to four consultants	1,432,006
Stock compensation expense recorded from issuance to three consultants	$ 328,301

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Related Party Transactions (Details Narrative) (USD $)	12 Months Ended	26 Months Ended
	Dec. 31, 2012	Jun. 30, 2013	Feb. 11, 2013	Aug. 31, 2012 sqft	May 12, 2011
Related Party Transactions [Abstract]
Percent of issued and outstanding membership interest of SFL Units					100.00%
Aggregate shares issued to holders of SFL units of membership interest					33,478,261
Warrants to purchase common stock to SFL unit holders					1,966,900
Assets acquired, unevaluated oil and natural gas property					$ 494,132
Exchanged shares of SFO for our Common Stock, Chairman of the board					26,505,155
Exchanged shares of SFO for our Common Stock, CEO and CFO					26,505,155
Issuance of unsecured convertible promissory notes			444,148
Largest portion of issued unsecured convertible promissory notes			244,148
Lease of office space, square feet				1,000
Lease of office space, per month				1,211
Lease of larger space, per month				2,650
Rental expense for executive offices		58,797
Expended funds on SFPLLC, component of accounts payable	235,276	311,496
Expended funds on SFP LLC, component of accounts payable	$ 11,885

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Convertible Promissory Note - Related Party

3 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Convertible Promissory Note - Related Party

Note 7- Convertible Promissory Note – Related Party

The Company issued a $244,148 principal amount, convertible promissory note on February 11, 2013 to Long Branch Petroleum LP. The convertible note accrues no interest and is due fifteen (15) months from the date of issuance. The Long Branch Note also contains customary events of default and, at the election of Long Branch at any time before the date of maturation, shall be convertible into the common stock of the Company at a $0.25 per share. 

The convertible promissory notes were issued with a beneficial conversion feature for which the intrinsic value was $136,723 and that amount was expensed as interest expense in the three months ended March 31, 2013.

The Company issued the convertible promissory note as payment for the acquisition of certain mineral leases in the state of Texas.

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Oil and Natural Gas Property (Details Narrative) (USD $)	3 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2009	Jun. 17, 2013	Dec. 31, 2012
Extractive Industries [Abstract]
Unevaluated oil and natural gas property	$ 1,231,000			$ 737,000
Test wells on unevaluated oil and natural gas property		5
Issuance of common stock			480,000
Issuance of common stock, per share			$ 0.10
Working interest			1.33%
Revenue	$ 3,328

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Commitment and Contingencies

3 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitment and Contingencies

Note 10- Commitment and Contingencies

From time-to-time, the Company may become subject to proceedings, lawsuits and other claims in the ordinary course of business including proceedings related to environmental and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company is unaware of any claim or lawsuit as of and June 30, 2013 and December 31, 2012.

On June 5, 2013, the Company, Long Branch Petroleum L.P. and Bruce Hall signed an assignment and release agreement to settle a dispute over compensation for prior services to Bruce Hall. For the settlement of all compensation claims and the release of all liabilities related to the claims, the Company issued 3,500,000 shares of its common stock. The Company recorded $490,000 of stock compensation expense and the reduction of an accrued compensation liability of $35,000.

The Company is subject to various possible contingencies that arise primarily from interpretation of federal and state laws and regulations affecting the oil and natural gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters. Although management believes that it has complied with the various laws and regulations, administrative rulings and interpretations thereof, adjustments could be required as new interpretations and regulations are issued. In addition, environmental matters are subject to regulation by various federal and state agencies. 

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Convertible Promissory Notes

3 Months Ended

Jun. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Convertible Promissory Notes

Note 6 – Convertible Promissory Notes

The Company issued five convertible promissory notes in the first week of February 2013 for a total principal amount of $200,000. The convertible notes accrue no interest and three of the notes, which total $150,000 in principal amount, are due fourteen (14) months from the date of issuance while two of the notes totaling $50,000 in principal amount are due fifteen (15) months from the date of issuance. At any time before the maturity dates, the notes are convertible at $0.25 per share into common stock of the Company.

The convertible promissory notes were issued with a beneficial conversion feature for which the intrinsic value was $112,000 and that amount was expensed as interest expense in the three months ended March 31, 2013.

The Company issued the convertible promissory notes as payment for the acquisition of certain mineral leases in the state of Texas as well as for the settlement of the participation agreement with Long Branch Petroleum LP.

On April 17, 2013 The Company executed a convertible promissory note with JMJ Financial (the “Lender”) and received $50,000 in cash proceeds. The nominal principal amount is $335,000 with a $35,000 original issue discount, however the principal sum to be repaid is only the consideration actually paid by the Lender plus 105 of the original issue discount. The original issue discount is also prorated based upon the consideration received by the Company. The note has zero interest for the first three months, as long as the note is repaid within that time; otherwise, the note bears interest at 12%. The note is convertible at the lesser of: $0.30 or 60% of the lowest trading price 25 days prior to the conversion. Since the conversion feature is at a discount to market, there is a derivative liability associated with it that was valued at $61,000 using the Black-Scholes method. The assumptions for this Black-Scholes calculation were as follows:

Conversion Price	$	.05
Expected life (years)		.5
Risk free interest rate		.15	%
Volatility		130.12	%
Dividend yield		—

Given the terms of the note, the Company recorded a principal amount of $55,833, with a debt discount of $5,833. The amortization of the debt discount was $1,215 for the three months ended June 30, 2013.

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Nature of Operations

3 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

Note 1 – Nature of Operations

On May 10, 2012, Santa Fe Petroleum, Inc., f/k/a Baby All Corp., a Delaware corporation (the “we,” “us ,” “our ,” or the “Company”), entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santa Fe Operating, Inc., a Delaware corporation engaged in the exploration and production of oil and gas (“SFO”), Tom Griffin, an individual, on behalf of the holders (the “SFO Shareholders”) of 100% of the issued and outstanding common stock of SFO (the “SFO Stock”), and Efrat Schwartz, an individual and the holder of a majority of the issued and outstanding shares of our common stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Exchange Agreement, each SFO Shareholder was issued one share of Common Stock in exchange for each of such SFO Shareholder’s shares of SFO Stock (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Exchange closed on May 20, 2012, (the “Closing Date”). As a result, (i) we issued an aggregate of 33,478,261 shares of Common Stock to the SFO Shareholders; (ii) we issued warrants to purchase an aggregate of 6,764,856 shares of Common Stock to the SFO Shareholders, at an exercise price of $0.50 per share; and (iii) SFO became our wholly-owned subsidiary.

We were incorporated in Delaware on November 30, 2010. Prior to the Exchange, our business plan was to seek third party entities interested in licensing the rights to manufacture and market the patent design of an infant medicine dispenser. Due to a lack of funds, we were not able to commence operations under the infant medicine dispenser business plan and were in the development stage at the time of the Exchange.

As the result of the Exchange, we are now a development stage company engaged in the acquisition, exploration, and development of oil and gas properties. In addition to the development of our existing property interests, we intend to acquire additional oil and gas interests in the future. Our management believes that our future growth will primarily occur through the acquisition of additional oil and gas properties following extensive due diligence. We also may elect to proceed through collaborative agreements and joint ventures in order to share expertise and reduce operating costs with other experts in the oil and gas industry. The analysis of new property interests will be undertaken by or under the supervision of our management and our board of directors (our “Board”). Although the oil and gas industry is currently very competitive, our management believes that many undervalued prospective properties remain available for acquisition purposes. For accounting purposes, the Exchange Agreement was accounted for as a reverse merger, since the SFO Shareholders collectively beneficially owned approximately 84.8% of the Common Stock immediately after the Exchange.

On May 11, 2011, SFO acquired 100 percent of the issued and outstanding units of membership interest of Santa Fe Land, LLC (such units, the “SFL Units”), a Texas limited liability company and a wholly-owned subsidiary of SFO (“SFL”). SFO issued an aggregate of 33,478,261 shares of its common stock and 1,966,900 warrants to purchase its common stock to holders of SFL units of membership interest (the “SFL Unit Holders”) in exchange for their SFL Units (the “SFL Acquisition”). The SFL Unit Holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”), including Long Branch Petroleum, LP (“LB”). The acquisition of SFL by SFO is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred.

In connection with the SFL Acquisition, we acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Test Well in Comanche County, Texas. Additionally, we acquired a mineral lease over approximately 76 acres of land as part of the SFL Acquisition.

The Company formally changed its name from Baby All Corp. to Santa Fe Petroleum, Inc. on May 17, 2012.

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Convertible Promissory Note - Related Party (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 17, 2013	Feb. 28, 2013	Feb. 11, 2013
Summary of Investments, Other than Investments in Related Parties [Abstract]
Convertible prommisory note issued to related party				$ 244,148
Related party note, price per share		$ 0.30	$ 0.25	$ 0.25
Beneficial conversion feature expensed as interest	$ 136,723

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

In the opinion of management, the accompanying consolidated balance sheets and related consolidated statements of operations, cash flows, and stockholders’ equity (deficit) include all adjustments, consisting of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America for interim period reporting in conjunction with the instructions to Form 10-Q Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information required by GAAP. In the opinion of management, the condensed consolidated financial statements include the adjustments and accruals, all of which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. Estimates are used when accounting for stock-based transactions, accounts payables and accrued expenses and taxes, among other matters.

Principles of Consolidation

Principles of Consolidation

The audited consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

Development Stage Company

Development Stage Company

The Company is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, Development Stage Entities, since no revenues have been generated from inception through the date of these consolidated financial statements. During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated with the Company’s contemplated equity financing plan.  

Oil and Gas Properties

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas. Under these provisions, costs to acquire mineral interests in oil and natural gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural gas interests are depleted on a unit-of-production basis.

If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company accounts for the impairment of long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment, which requires that long-lived assets be, reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired, the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Deferred Offering Costs

Deferred Offering Costs

The Company complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement agents that are related to the Company’s contemplated equity financing and will be charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or charged to expense if the contemplated equity financing is not completed. During the year ended December 31, 2012, the Company received subscriptions of 1,319,450 shares of common stock for $556,676 of gross proceeds less $83,736 of financing and offering expenses through a private placement memorandum at prices ranging from $0.25 to $0.50 per share. Previously recorded deferred offering expenses of $23,784 were expensed. In the six months ended June 30, 2013, the Company received subscriptions of 540,800 of shares of its $0.0001 par value common stock at prices ranging from $0.10 to $0.25 per share. The gross proceeds were $105,200 less $60,705 of offering expenses.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method of ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Effective May 11, 2011, with the commencement of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, Accounting for Uncertainties in Income Taxes. These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company had no unrecognized tax benefits. For the period from May 11, 2011, (commencement of operations) through December 31, 2012, no adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011and the tax year for 2012 are subject to audit.

Stock-Based Compensation

Stock-Based Compensation

The Company adopted ASC 718, Compensation – Share Based Compensation, as of May 11, 2011. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.

Net Income (loss) per Common Share

Net Income (loss) per Common Share

The Company computes earnings (loss) per share in accordance with ASC 260-10, Earnings Per Share. ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 6,764,856 of potentially dilutive warrants at December 31, 2012 and for the three and six months ended June 30, 2013.

Legal Costs and Contingencies

Legal Costs and Contingencies

In the normal course of business, the Company incurs costs to retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonably estimated, the Company recognizes an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

Fair Value Estimates

Fair Value Estimates

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”.  The objective of SFAS 157 (ASC 820) is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 (ASC 820) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 (ASC 820) applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.

The Company measures its options and warrants at fair value in accordance with SFAS 157 (ASC 820). SFAS 157 (ASC 820) specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets;

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and 

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The fair value of the stock based compensation at June 30, 2013 and December 31, 2012, were as follows:

		Quoted Prices  In Active  Markets for  Identical  Assets		Significant  Other  Observable  Inputs		Significant  Unobservable  Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Six Months Ended June 30, 2013 Stock Based Compensation	$	—	$	328,301	$	—	$	$328,301
Derivative Liability	$	—	$	61,000	$	—	$	61,000
Year Ended December 31, 2012
Stock Based Compensation	$	—	$	40,044	$	—	$	40,044

Options are valued using the Black Scholes model.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

No recent accounting pronouncements or other authoritative guidance have been issued that management considers likely to have a material impact on our consolidated financial statements

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Related Party Transactions

3 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 9- Related Party Transactions

On May 11, 2011, SFO acquired 100% of the member units of SFL in exchange for 33,478,261 shares of Common Stock and 1,966,900 warrants to SFL member unit holders in exchange for their SFL member units. All the SFL member unit holders were entities under the control of Tom Griffin, our chairman of the board. This acquisition was accounted for as a combination of entities under common control; therefore, the assets transferred are reflected on our balance sheet at their historical cost basis of $494,132 at December 31, 2011. In the Exchange described above, Mr. Griffin exchanged 26,505,155 shares of SFO for 26,505,155 shares of our Common Stock.

In 2011, we entered into Lease Acquisition Agreements with the Land Banks. Tom Griffin, our chairman of the board, is the President of each Land Bank. Under the Lease Acquisition Agreements, we could purchase leases, or portions of leases, held by the Land Banks from time to time and were obligated to purchase all the leases held by the Land Banks within two years from the dates the Land Banks were formed.

These Lease Acquisitions were terminated in November 2012. On February 11, 2013, we entered into a Lease Acquisition Agreement (the "Lease Acquisition Agreement") with LB. Pursuant to the terms and conditions of the Lease Acquisition Agreement, the Company acquired those leases from LB. In exchange, we issued Unsecured Convertible Promissory Notes totaling an aggregate amount of $444,148 to six parties. We issued the largest of those notes to LB for $244,148.

Our executive offices are located at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093, where we occupy approximately 1,000 square feet of office space. Effective August 2012, we pay $1,211 per month to lease this office space from an unaffiliated third party. Previously, we paid $2,650 per month, which included rent and other prorated offices expenses, under an arrangement with a company controlled by Mr. Griffin, which leased a larger space from an unaffiliated third party. We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans. From May 11, 2011, (commencement of operations) through June 30, 2013, we have recorded approximately $58,797 in rental expense and other prorated office expenses for our executive offices.

From May 11, 2011, (commencement of operations) through March 31, 2013 and December 31, 2012, SFP, LLC., a Texas entity that is an affiliate of the Company (“SFP LLC”) expended $311,496 and $235,276 respectively of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at June 30, 2013 and December 31, 2012. SFPLLC is owned entirely by entities under the control of the Principal Stockholder. The expenditures were primarily related to compensation and legal expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

From May 11, 2011, (commencement of operations) through December 31 2012, SFP, LLC (“SFP LLC”), expended $11,885 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying condensed consolidated balance sheet at December 31, 2012. SFP LLC is owned entirely by entities under the control of the Principal Stockholder. The expenditures were primarily related to legal and consulting expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

We have engaged, and may engage in the future, in transactions with our affiliates or stockholders, officers and directors of our affiliates. TexTron Southwest, Inc. (“TexTron”) provides operating services including drilling of wells and ongoing operating management for oil and gas entities and is owned by entities under the control of the Principal Stockholder.

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Convertible Promissory Notes (Tables)

3 Months Ended

Jun. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Assumptions for Black-Scholes calculated

Conversion Price	$	.05
Expected life (years)		.5
Risk free interest rate		.15	%
Volatility		130.12	%
Dividend yield		—

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Fair value of the stock based compensation

		Quoted Prices  In Active  Markets for  Identical  Assets		Significant  Other  Observable  Inputs		Significant  Unobservable  Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Six Months Ended June 30, 2013 Stock Based Compensation	$	—	$	328,301	$	—	$	$328,301
Derivative Liability	$	—	$	61,000	$	—	$	61,000
Year Ended December 31, 2012
Stock Based Compensation	$	—	$	40,044	$	—	$	40,044

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Document and Entity Information	3 Months Ended
	Jun. 30, 2013	Aug. 15, 2013
Document And Entity Information
Entity Registrant Name	Santa Fe Petroleum, Inc.
Entity Central Index Key	0001508262
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		47,410,519
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

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Acquisition of Oil and Gas Company (Tables)

3 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Historical costs of assets and liabilities acquired

Assets acquired, unevaluated oil and natural gas property	$	494,132
Liabilities assumed		—
Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share	$	494,132