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

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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.

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Santa Fe Petroleum, Inc. 10-Q