ARET Arete Industries Inc (CE)

Arete Industries, Inc. (OTCQB:ARET), announces revenue for the fiscal year ended December 31, 2011 of $3.5 million. During the fiscal year, oil sales totaled $783,491, natural gas sales totaled $221,658 gas gathering income totaled $45,638 and the sale of oil & gas properties $2,479,934.

These production figures took place over a five month period, from July 29th, 2011 through December 31, 2011. On July 29, 2011, Arete entered into a purchase and sale agreement which resulted in the acquisition of oil and gas properties in Wyoming, Colorado, Kansas and Montana. Prior to this date, the Company did not have any "oil and gas producing activities". Arete's oil sales are primarily attributable to its properties in Kansas and Wyoming. Production taxes were approximately 9% of oil and gas sales for the five-month period.

Highlights from 2011

• Arete was profitable during 2011. Net income for the fiscal year ended December 31, 2011 was $495,266 which includes $391,606 interest expense, income from extinguishment of debt income and interest income of $112,994.  
• Arete produced 9,990 barrels of oil during the fiscal year ended December 31st, 2011 and 38,477 Mcf of natural gas during the fiscal year ended December 31st, 2011.  
• Arete reported 2011 average monthly production of 3,626 barrels of oil equivalent (BBLe).    
• One of the properties purchased on July 29, 2011 was sold to an unrelated purchaser on August 23, 2011. Pursuant to the Amended Agreement for "Arete's purchase of the properties, Arete received $5,101,047 of the net proceeds from this sale which resulted in a gain of $2,479,934.    
• As of December 31, 2011, Arete reported a pre-tax PV-10 value of $10.865 million.   
• The Company had a stockholder's equity at December 31, 2011 of $6,978,041. This is compared to stockholder's (deficit) at December 31, 2010 of ($1,832,847).

Donald W. Prosser, CEO of Arete Industries stated: "We are proud of all of the significant progress we have made during 2011. We intend to continue to execute on our business model, which is focused on purchasing assets that no one else wants, drilling and getting production out of our leases and generating cash flows that have value, and selling to make profits on things Arete wouldn't be able to drill."

General and administrative expenses increased by $1,016,309 in 2011 compared to 2010. This increase was primarily due to increases in acquisition investigation and due diligence costs of $492,529; investor relations of $170,814; legal, auditing and transfer agent costs of $167,899; and consulting fees of $104,250.

Net income from operations for the fiscal year ended December 31, 2011 was $774,578 as compared to a net loss from operations of $927,304 for the fiscal year ended December 31, 2010. Net income for the fiscal year ended December 31, 2011 was $495,266 which includes $391,606 interest expense, income from extinguishment of debt income and interest income of $112,994 as compared to a net loss of $852,612 for the fiscal year ended December 31, 2010, which includes $47,191 interest expense, income from extinguishment of debt income and interest income of $121,883.

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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 http://www.areteindustries.com/

For additional information on Arete Industries visit the Company's new website at: http://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 Aretes' 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
CONSOLIDATED BALANCE SHEETS
December 31, 2010 and 2011
ASSETS	2010	2011
Current Assets:
Cash and equivalents	$ 15,990	$ 219,566
Receivable from DNR Oil & Gas, Inc.:
Oil and gas sales, net of production costs	--	165,283
Other	12,625	15,597
Prepaid expenses and other	85,139	207,338
Total Current Assets	113,754	607,784
Property and Equipment:
Oil and gas properties, at cost, successful efforts method:
Proved properties	--	9,056,032
Unevaluated properties	--	287,728
Natural gas gathering system	442,195	442,195
Furniture and equipment	19,662	22,522
Total property and equipment	461,857	9,808,477
Less accumulated depreciation, depletion and amortization	(184,121)	(525,154)
Net Property and Equipment	277,736	9,283,323
TOTAL ASSETS	$ 391,490	$ 9,891,107
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable:
Payable to DNR Oil & Gas, Inc.:
Oil and gas property acquisition costs	$ --	$ 826,791
Gas gathering operating costs	402,558	416,835
Operator fees and other	117,518	151,748
Unrelated parties	60,029	92,019
Notes and advances payable:
Directors	704,475	109,319
Unrelated parties	--	250,000
Accrued interest expense	152,943	88,303
Director fees payable	98,000	90,000
Commissions payable for private placement of preferred stock	--	105,000
Accrued payroll taxes	111,690	--
Accrued consulting services payable in common stock	536,528	18,750
Current portion of asset retirement obligations	--	15,398
Other accrued costs and expenses	40,596	111,061
Total Current Liabilities	2,224,337	2,275,224
Asset Retirement Obligations, net of current portion	--	637,842
Total Liabilities	2,224,337	2,913,066
Commitments and Contingencies (Notes 3, 4 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	--	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	13,611,903	16,904,154
Accumulated deficit	(15,444,750)	(14,949,484)
Total Stockholders' Equity (Deficit)	(1,832,847)	6,978,041
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ 391,490	$ 9,891,107
The Accompanying Notes are an Integral Part of These Financial Statements.

ARETE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2010 and 2011
	2010	2011
Revenues:
Oil and natural gas sales	$ --	$ 1,005,149
Gain of sale of oil and natural gas properties	--	2,479,934
Gas gathering income	167,625	45,638
Total revenues	167,625	3,530,721
Operating Expenses:
Oil and gas producing activities:
Lease operating expenses	--	449,854
Production taxes	--	89,109
Depreciation, depletion, amortization and accretion	--	310,308
Gas gathering:
Cost of operations:
Related Party	104,606	30,815
Unrelated parties	222,985	92,420
Depreciation	44,229	44,219
General and administrative expenses:
Director fees	100,450	120,000
Investor relations	138,889	309,703
Acquisition investigation and due diligence	22,050	514,579
Legal, auditing and transfer agent	30,974	198,873
Accounting, financial reporting and rent- related party	53,000	83,802
Consulting fees:
Related parties	122,500	167,500
Unrelated parties	238,700	297,950
Office, travel and other	16,546	46,441
Depreciation	--	570
Total operating expenses	1,094,929	2,756,143
Operating income (loss)	(927,304)	774,578
Other income (expense):
Gain on extinguishment of debt	121,870	111,690
Interest income	13	604
Interest expense	(47,191)	(391,606)
Total other income (expense)	74,692	(279,312)
Income (loss) before income taxes	(852,612)	495,266
Income tax benefit (expense)	--	--
Net income (loss)	$ (852,612)	$ 495,266
Net Income (Loss) Applicable to Common Stockholders:
Net income (loss)	$ (852,612)	$ 495,266
Accrued Preferred stock dividends	--	(196,000)
Net income (loss) applicable to common stockholders	$ (852,612)	$ 299,266
Earnings (Loss) Per Share Applicable to Common Stockholders:
Basic	$ (0.17)	$ 0.04
Diluted	$ (0.17)	$ 0.04
Weighted Average Number of Common Shares Outstanding:
Basic	4,950,000	6,875,000
Diluted	4,950,000	6,875,000
The Accompanying Notes are an Integral Part of These Financial Statements.

ARETE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2010 and 2011
	2010	2011
Cash Flows from Operating Activities:
Net income (loss)	$ (852,612)	$ 495,266
Adjustments to reconcile net inome (loss) to net cash used in operating activities:
Depreciation, depletion and amortization	44,229	341,033
Accretion of discount on asset retirement obligations		14,064
Common stock issued in exchange for services	573,889	1,235,973
Gain on extinguishment of debt	(121,869)	(111,690)
Gain on sale of oil and gas properties	--	(2,479,934)
Changes in operating assets and liabilities:
Accounts receivable	9,068	(183,979)
Prepaid expenses and other	--	(122,199)
Accounts payable	110,552	59,397
Accrued costs and expenses	23,619	(2,175)
Net cash used in operating activities	(213,124)	(754,244)
Cash Flows from Investing Activities:
Capital expenditures for oil and gas properties	--	(1,128,810)
Purchase of furniture and equipment	--	(2,860)
Net cash used in investing activities	--	(1,131,670)
Cash Flows from Financing Activities:
Proceeds from notes and advance payable	215,000	2,064,100
Principal payments on notes payable	(2,650)	(5,306,481)
Proceeds from sale of common stock	--	203,500
Proceeds from sale of preferred stock	--	5,225,000
Offering costs related to private placement of preferred stock	--	(96,629)
Net cash provided by financing activities	212,350	2,089,490
Net increase (decrease) in cash and equivalents	(774)	203,576
Cash and equivalents, beginning of year	16,764	15,990
Cash and equivalents, end of year	$ 15,990	$ 219,566
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$ 10,848	$ 319,246
Cash paid for income taxes	$ --	$ --
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Conversion of notes payable to 897,500 shares of common stock	$ --	$ 1,335,000
Note payable for acquisition of oil and gas properties	$ --	$ 10,100,000
Proceeds from sale of oil and gas property applied to note payable	$ --	$ 5,101,047
Pre-acquisition oil and gas sales applied to note payable	$ --	$ 766,728
Non-interest bearing payable for acquisition of oil and gas properties	$ --	$ 826,791
Asset retirement obligations incurred on acquisition of oil and gas properties	$ --	$ 639,176
The Accompanying Notes are an Integral Part of These Financial Statements.

CONTACT: Gerald Kieft
         Wall Street Resources, Inc.
         772-219-7525
         gkieft@wallstreetresources.net