ARET Arete Industries Inc (CE)

Arete Industries, Inc. (OTCQB:ARET), announces revenue for the first quarter ended March 31, 2012 of $1.087 million. During the quarter, oil and gas sales totaled $554,035 and oil and gas property net sales totaled $533,048.

Oil sales were primarily attributable to its properties in Kansas and Wyoming. The average oil price for the first quarter of 2012 was $89.34 per barrel but ranged from a low of $88.24 for January to a high of $91.08 for February. Average natural gas price, including proceeds from sales of natural gas liquids, amounted to $4.53 per Mcf for the first quarter of 2012 but ranged from a low of $4.25 per Mcf for February to a high of $4.80 per Mcf for January. Production taxes were approximately 8% of its oil and gas sales for the first quarter of 2012. Lease operating expense averaged $32.06 per Barrel of Oil Equivalent ("BOE").

During the first quarter of 2012, Arete sold one of its properties with a 100% working interest in a producing oil and gas well, which resulted in gross proceeds of approximately $1,109,000. This sale resulted in a gain of approximately $533,000. Arete expects to periodically evaluate its portfolio of properties and sell additional properties if it believes a sale can be completed on terms that provide attractive returns.

Highlights from the First Quarter 2012:

• Arete was profitable during the first quarter 2012. Net income for the quarter ended March 31, 2012 was $274,898 or $0.04 per share, compared to a net loss of $453,678 or ($0.09) for the quarter ended March 31, 2011.  
• Arete reported positive cash flow from operations of $78,455 during the first quarter 2012, compared to a negative cash flow used for operations of $308,800 during the first quarter 2011.  
• Arete had cash and cash equivalents of approximately $632,000 as of March 31, 2012.  
• Arete reported 5,044 barrels of oil and 22,830 Mcf of natural gas was sold during the first quarter ended March 31, 2012.  
• Arete reported 8,850 barrels of oil equivalent (BBLe) was sold during the quarter ended March 31, 2012.

Don Prosser, CEO of Arete Industries stated: "We are very pleased with the results achieved during the first quarter of 2012. We intend to continue to execute on our business model, which is focused on purchasing oil and gas assets at below market prices, drilling and increasing production out of leases to generate cash flows, and selling oil and gas assets for a profits when the Company doesn't intend to drill them."

General and administrative expenses decreased by $72,152 in 2012 compared to 2011. This decrease was primarily due to decreases in investor relations of $94,736, and acquisition investigation and due diligence costs of $27,500. These decreases were offset by increases in consulting expense with related parties of $44,375, and accounting and financial reporting with a related party of $8,208.

Income from operations for the first quarter of 2012 was $292,588 compared to a loss of ($442,073) for the first quarter of 2011. The improvement of approximately $735,000 was primarily due to the gain on sale of oil and gas properties of $533,048, as well as $554,035 in oil and natural gas operations, and a $72,152 reduction general and administrative expenses. As of March 31, 2012, the Company had cash and equivalents of approximately $632,000.

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About Arete Industries

The Company holds oil and gas properties in the Rocky Mountain Region of the United States and operates a small natural gas gathering system. For additional information on the Company visit our website at: www.areteindustries.com

SAFE HARBOR

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this report, such as statements regarding our future expectations to increase our production are forward-looking statements (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Forward-looking statements are based on our current expectations and assumptions about future events and involve inherent risks and uncertainties. These risks include, but are not limited to, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition and government regulation or other actions. Additional information on these and other factors which could affect Arete's operations or financial results are included in Arete's reports on file with the Securities and Exchange Commission. Such factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements. Readers should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof. Arete undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in Arete's expectations.

ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31, 2011 and March 31, 2012
ASSETS	2011	2012
Current Assets:
Cash and equivalents	$ 219,566	$ 631,756
Receivable from DNR Oil & Gas, Inc.:
Oil and gas sales, net of production costs	165,283	163,111
Other	15,597	26,471
Prepaid expenses and other	207,338	169,432
Total Current Assets	607,784	990,770
Property and Equipment:
Oil and gas properties, at cost, successful efforts method:
Proved properties	9,056,032	8,749,536
Unevaluated properties	287,728	291,776
Natural gas gathering system	442,195	442,195
Furniture and equipment	22,522	22,522
Total property and equipment	9,808,477	9,506,029
Less accumulated depreciation, depletion and amortization	(525,154)	(661,659)
Net Property and Equipment	9,283,323	8,844,370
TOTAL ASSETS	$ 9,891,107	$ 9,835,140
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	2011	2012
Current Liabilities:
Accounts payable:
Payable to DNR Oil & Gas, Inc.:
Oil and gas property acquisition costs	$ 826,791	$ 250,000
Gas gathering operating costs	416,835	436,403
Operator fees and other	151,748	151,748
Unrelated parties	92,019	29,297
Preferred stock dividends payable	--	391,875
Notes and advances payable:
Directors and affiliates	109,319	235,069
Unrelated parties	250,000	250,000
Accrued interest expense	88,303	99,109
Director fees payable	90,000	120,000
Finders fee payable for private placement of preferred stock	105,000	105,000
Accrued consulting services payable in common stock	18,750	63,750
Current portion of asset retirement obligations	15,398	15,421
Other accrued costs and expenses	111,061	202,930
Total Current Liabilities	2,275,224	2,350,602
Asset Retirement Obligations, net of current portion	637,842	623,474
Total Liabilities	2,913,066	2,974,076
Commitments and Contingencies (Notes 3, 9 and 10)
Stockholders' Equity (Deficit)
Convertible Class A preferred stock; $10,000 face value per share, authorized 1,000,000 shares:
Series 1; authorized 30,000 shares, issued and outstanding no shares in 2010 and 522.5 shares in 2011, liquidation preference of $5,421,000 in 2011 and $5,616,875 in 2012	5,023,371	5,023,371
Series 2; authorized 2,500 shares, issued and outstanding no shares in 2010 and 2011	--	--
Common stock, no par value; authorized 499,000,000 shares, issued and outstanding 4,972,635 in 2010 and 7,764,476 in 2011	16,904,154	16,904,154
Accumulated deficit	(14,949,484)	(15,066,461)
Total Stockholders' Equity (Deficit)	6,978,041	6,861,064
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 9,891,107	$ 9,835,140
The Accompanying Notes are an Integral Part of These Financial Statements.

ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarters Ended March 31, 2011 and 2012
	2011	2012
Revenues:
Oil and natural gas sales	$ --	$ 554,035
Sale of oil and natural gas properties	--	533,048
Gas gathering income	29,656	--
Total revenues	29,656	1,087,083
Operating Expenses:
Oil and gas producing activities:
Lease operating expenses	--	283,709
Production taxes	--	44,196
Depreciation, depletion, amortization and accretion	--	131,107
Gas gathering:
Cost of operations:
Related Party	20,611	--
Unrelated parties	47,143	3,660
Depreciation	11,055	11,055
General and administrative expenses:
Director fees	30,000	30,000
Investor relations	140,540	45,804
Acquisition investigation and due diligence	27,500	--
Legal, auditing and transfer agent	43,539	49,080
Accounting, financial reporting and rent- related party	27,542	35,750
Consulting fees:
Related parties	30,625	75,000
Unrelated parties	76,450	71,445
Office, travel and other	16,724	13,546
Depreciation	--	143
Total operating expenses	471,729	794,495
Operating income (loss)	(442,073)	292,588
Other income (expense):
Gain on extinguishment of debt	--	--
Interest income	140	155
Interest expense	(11,745)	(17,845)
Income (loss) before income taxes	(453,678)	274,898
Income tax benefit (expense)	--	--
Net income (loss)	$ (453,678)	$ 274,898
Net Income (Loss) Applicable to Common Stockholders:
Net income (loss)	$ (453,678)	$ 274,898
Accrued preferred stock dividends	--	(195,875)
Net income (loss) applicable to common stockholders	$ (453,678)	$ 79,023
Earnings (Loss) Per Share Applicable to Common Stockholders:
Basic	$ (0.09)	$ 0.01
Diluted	$ (0.09)	$ 0.01
Weighted Average Number of Common Shares Outstanding:
Basic	4,970,000	7,764,000
Diluted	4,970,000	7,764,000
The Accompanying Notes are an Integral Part of These Financial Statements.

ARETE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 2011 and 2012
	2011	2012
Cash Flows from Operating Activities:
Net income (loss)	$ (453,678)	$ 274,898
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization	11,055	140,239
Accretion of discount on asset retirement obligations	--	2,066
Gain on sale of oil and gas properties	--	(533,048)
Changes in operating assets and liabilities:
Accounts receivable	3,908	24
Prepaid expenses and other	--	38,656
Accounts payable	(34,800)	(22,054)
Accrued costs and expenses	164,715	177,675
Net cash provided by (used in) operating activities	(308,800)	78,455
Cash Flows from Investing Activities:
Capital expenditures for oil and gas properties	--	(617,270)
Proceeds from sale of oil and gas properties	--	1,108,709
Contingent consideration paid to DNR under sharing arrangement	--	(282,704)
Net cash provided by investing activities	--	208,735
Cash Flows from Financing Activities:
Proceeds from notes and advance payable	620,000	375,000
Principal payments on notes payable	(4,966)	(250,000)
Net cash provided by financing activities	615,034	125,000
Net increase (decrease) in cash and equivalents	306,234	412,190
Cash and equivalents, beginning of period	15,990	219,566
Cash and equivalents, end of period	$ 322,224	$ 631,756
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$ 13,438	$ 20,000
Cash paid for income taxes	$ --	$ --
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Preferred stock dividends declared	$ --	$ 391,875
Asset retirement obligations assumed upon sale of oil and gas properties	$ --	$ 16,411
The Accompanying Notes are an Integral Part of These Financial Statements.

CONTACT: Gerald Kieft
         The WSR Group
         772-219-7525
         IR@theWSRgroup.com
         www.wallstreetresources.net/arete.asp