UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30,
2012



OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



For the transition period from                  to



Commission File No. 1-35097



Voyager Oil & Gas, Inc.

(Exact name of registrant as specified in
its charter)



|Montana                                  | 77-0639000         
|---------------------------------------- | -------------------
|(State or other jurisdiction             | (I.R.S. Employer   
|of incorporation or organization)        | Identification No.)
|                                         |                    
|2718 Montana Ave., Suite 220             |                    
|Billings, Montana                        | 59101              
|(Address of principal executive offices) | (Zip Code)         



Registrant’s telephone number, including
area code:(406) 245-4901



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 x  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 during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yesx  No  ̈



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



|Large accelerated filer  ̈                     | Accelerated filer x        
|--------------------------------------------- | ---------------------------
|                                              |                            
|Non-accelerated filer  ̈                       | Smaller reporting company  ̈
|(Do not check if a 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 x



As of August 6, 2012, there were 70,103,645
shares of Common Stock, $0.001 par value per share, outstanding.











VOYAGER OIL & GAS, INC.



INDEX



|           |                       |                                                                                              | Page of  
|---------- | --------------------- | -------------------------------------------------------------------------------------------- | ---------
|           |                       |                                                                                              | Form 10-Q
|           |                       |                                                                                              |          
|PART I.    | FINANCIAL INFORMATION |                                                                                              | 1        
|           |                       |                                                                                              |          
|           | ITEM 1.               | FINANCIAL STATEMENTS (UNAUDITED)                                                             |          
|           |                       |                                                                                              |          
|           |                       | Condensed Balance Sheets as of June 30, 2012 and December 31, 2011                           |          
|           |                       |                                                                                              |          
|           |                       | Condensed Statements of Operations for the three and six months ended June 30, 2012 and 2011 |          
|           |                       |                                                                                              |          
|           |                       | Condensed Statements of Cash Flows for the six months ended June 30, 2012 and 2011           |          
|           |                       |                                                                                              |          
|           |                       | Notes to Condensed Financial Statements                                                      |          
|           |                       |                                                                                              |          
|           | ITEM 2.               | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS        |          
|           |                       |                                                                                              |          
|           | ITEM 3.               | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                   |          
|           |                       |                                                                                              |          
|           | ITEM 4.               | CONTROLS AND PROCEDURES                                                                      |          
|           |                       |                                                                                              |          
|PART II.   | OTHER INFORMATION     |                                                                                              | 32       
|           |                       |                                                                                              |          
|           | ITEM 1.               | LEGAL PROCEEDINGS                                                                            |          
|           |                       |                                                                                              |          
|           | ITEM 1A.              | RISK FACTORS                                                                                 |          
|           |                       |                                                                                              |          
|           | ITEM 6.               | EXHIBITS                                                                                     |          
|           |                       |                                                                                              |          
|SIGNATURES |                       | 37                                                                                          











PART 1 — FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS

VOYAGER OIL & GAS, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                    |  | June 30, 2012 |             |   | December 31, 2011 |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ----------------- | -
|ASSETS                                                                                                                              |  |               |             |   |                   |  
|CURRENT ASSETS                                                                                                                      |  |               |             |   |                   |  
|Cash and Cash Equivalents                                                                                                           |  | $             | 4,113,794   |   |                   | $
|Trade Receivables                                                                                                                   |  |               | 7,529,588   |   |                   |  
|Fair Value of Commodity Derivatives                                                                                                 |  |               | 609,147     |   |                   |  
|Prepaid Expenses                                                                                                                    |  |               | 188,151     |   |                   |  
|Total Current Assets                                                                                                                |  |               | 12,440,680  |   |                   |  
|PROPERTY AND EQUIPMENT                                                                                                              |  |               |             |   |                   |  
|Oil and Natural Gas Properties, Full Cost Method                                                                                    |  |               |             |   |                   |  
|Proved Oil and Natural Gas Properties                                                                                               |  |               | 102,678,532 |   |                   |  
|Unproved Oil and Natural Gas Properties                                                                                             |  |               | 31,211,108  |   |                   |  
|Other Property and Equipment                                                                                                        |  |               | 177,735     |   |                   |  
|Total Property and Equipment                                                                                                        |  |               | 134,067,375 |   |                   |  
|Less – Accumulated Depreciation, Depletion and Amortization                                                                         |  |               | (20,877,163 | ) |                   |  
|Total Property and Equipment, Net                                                                                                   |  |               | 113,190,212 |   |                   |  
|Prepaid Drilling Costs                                                                                                              |  |               | 36,742      |   |                   |  
|Fair Value of Commodity Derivatives                                                                                                 |  |               | 668,936     |   |                   |  
|Debt Issuance Costs, Net of Amortization                                                                                            |  |               | 427,879     |   |                   |  
|Total Assets                                                                                                                        |  | $             | 126,764,449 |   |                   | $
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                |  |               |             |   |                   |  
|CURRENT LIABILITIES                                                                                                                 |  |               |             |   |                   |  
|Accounts Payable                                                                                                                    |  | $             | 35,457,693  |   |                   | $
|Accrued Expenses                                                                                                                    |  |               | 29,425      |   |                   |  
|Total Current Liabilities                                                                                                           |  |               | 35,487,118  |   |                   |  
|LONG-TERM LIABILITIES                                                                                                               |  |               |             |   |                   |  
|Revolving Credit Facility                                                                                                           |  |               | 18,030,730  |   |                   |  
|Senior Secured Promissory Notes                                                                                                     |  |               | —           |   |                   |  
|Asset Retirement Obligations                                                                                                        |  |               | 198,293     |   |                   |  
|Total Liabilities                                                                                                                   |  |               | 53,716,141  |   |                   |  
|                                                                                                                                    |  |               |             |   |                   |  
|COMMITMENTS AND CONTINGENCIES                                                                                                       |  |               |             |   |                   |  
|                                                                                                                                    |  |               |             |   |                   |  
|STOCKHOLDERS’ EQUITY                                                                                                                |  |               |             |   |                   |  
|Preferred Stock – Par Value $.001; 20,000,000 Shares Authorized; None Issued or Outstanding                                         |  |               | —           |   |                   |  
|Common Stock, Par Value $.001; 200,000,000 Shares Authorized, 58,468,428 and 57,848,428 Shares Issued and Outstanding, respectively |  |               | 58,468      |   |                   |  
|Additional Paid-In Capital                                                                                                          |  |               | 88,081,199  |   |                   |  
|Accumulated Deficit                                                                                                                 |  |               | (15,091,359 | ) |                   |  
|Total Stockholders’ Equity                                                                                                          |  |               | 73,048,308  |   |                   |  
|Total Liabilities and Stockholders’ Equity                                                                                          |  | $             | 126,764,449 |   |                   | $

The accompanying notes are an integral part of these unaudited
condensed financial statements



1







VOYAGER OIL & GAS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                        |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                        |  | 2012                        |            |   | 2011                      |  
|REVENUES                                                |  |                             |            |   |                           |  
|Oil and Natural Gas Sales                               |  | $                           | 6,763,429  |   |                           | $
|Gain on Commodity Derivatives                           |  |                             | 2,251,543  |   |                           |  
|                                                        |  |                             | 9,014,972  |   |                           |  
|OPERATING EXPENSES                                      |  |                             |            |   |                           |  
|Production Expenses                                     |  |                             | 484,829    |   |                           |  
|Production Taxes                                        |  |                             | 728,588    |   |                           |  
|General and Administrative Expenses                     |  |                             | 1,215,218  |   |                           |  
|Depletion of Oil and Natural Gas Properties             |  |                             | 3,160,368  |   |                           |  
|Impairment of Oil and Natural Gas Properties            |  |                             | 10,191,234 |   |                           |  
|Depreciation and Amortization                           |  |                             | 11,144     |   |                           |  
|Accretion of Discount on Asset Retirement Obligations   |  |                             | 3,423      |   |                           |  
|Total Expenses                                          |  |                             | 15,794,804 |   |                           |  
|                                                        |  |                             |            |   |                           |  
|INCOME (LOSS) FROM OPERATIONS                           |  |                             | (6,779,832 | ) |                           |  
|                                                        |  |                             |            |   |                           |  
|OTHER INCOME (EXPENSE)                                  |  |                             |            |   |                           |  
|Interest Expense                                        |  |                             | (169,445   | ) |                           |  
|Other Income (Expense), Net                             |  |                             | (11,631    | ) |                           |  
|Total Other Expense, Net                                |  |                             | (181,076   | ) |                           |  
|                                                        |  |                             |            |   |                           |  
|LOSS BEFORE INCOME TAXES                                |  |                             | (6,960,908 | ) |                           |  
|                                                        |  |                             |            |   |                           |  
|INCOME TAX EXPENSE                                      |  |                             | —          |   |                           |  
|                                                        |  |                             |            |   |                           |  
|NET LOSS                                                |  | $                           | (6,960,908 | ) |                           | $
|                                                        |  |                             |            |   |                           |  
|Net Loss Per Common Share — Basic and Diluted           |  | $                           | (0.12      | ) |                           | $
|Weighted Average Shares Outstanding — Basic and Diluted |  |                             | 57,994,582 |   |                           |  



The accompanying notes are an integral part of these unaudited
condensed financial statements.



2







VOYAGER OIL & GAS, INC.



CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                                           |  | Six Months Ended June 30, |            
|------------------------------------------------------------------------------------------ |  | ------------------------- | -----------
|                                                                                           |  | 2012                      |            
|CASH FLOWS FROM OPERATING ACTIVITIES                                                       |  |                           |            
|Net Loss                                                                                   |  | $                         | (7,217,278 
|Adjustments to Reconcile Net Loss to Net Cash Provided By (Used For) Operating Activities: |  |                           |            
|Depletion of Oil and Natural Gas Properties                                                |  |                           | 5,158,427  
|Impairment of Oil and Natural Gas Properties                                               |  |                           | 10,191,234 
|Depreciation and Amortization                                                              |  |                           | 22,214     
|Amortization of Debt Discount                                                              |  |                           | —          
|Amortization of Finance Costs                                                              |  |                           | 278,776    
|Accretion of Discount on Asset Retirement Obligations                                      |  |                           | 5,990      
|Unrealized Gain on Derivative Instruments                                                  |  |                           | (1,278,083 
|Share-Based Compensation Expense                                                           |  |                           | 727,877    
|Changes in Assets and Liabilities:                                                         |  |                           |            
|Increase in Trade Receivables                                                              |  |                           | (4,282,176 
|Increase in Prepaid Expenses                                                               |  |                           | (139,821   
|Increase (Decrease) in Accounts Payable                                                    |  |                           | 46,454     
|Decrease in Accrued Expenses                                                               |  |                           | (176,697   
|Net Cash Provided By (Used For) Operating Activities                                       |  |                           | 3,336,917  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                       |  |                           |            
|Purchases of Other Property and Equipment                                                  |  |                           | (1,497     
|Prepaid Drilling Costs                                                                     |  |                           | (3,579     
|Proceeds from Sales of Available for Sale Securities                                       |  |                           | —          
|Investment in Oil and Natural Gas Properties                                               |  |                           | (15,776,228
|Net Cash Used For Investing Activities                                                     |  |                           | (15,781,304
|CASH FLOWS FROM FINANCING ACTIVITIES                                                       |  |                           |            
|Proceeds from Issuance of Common Stock – Net of Issuance Costs                             |  |                           | —          
|Advances on Revolving Credit Facility and Term Loan                                        |  |                           | 18,030,730 
|Payments on Senior Secured Promissory Notes                                                |  |                           | (15,000,000
|Cash Paid for Finance Costs                                                                |  |                           | (399,816   
|Proceeds from Exercise of Stock Options and Warrants                                       |  |                           | —          
|Net Cash Provided by Financing Activities                                                  |  |                           | 2,630,914  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       |  |                           | (9,813,473 
|CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD                                            |  |                           | 13,927,267 
|CASH AND CASH EQUIVALENTS – END OF PERIOD                                                  |  | $                         | 4,113,794  
|Supplemental Disclosure of Cash Flow Information                                           |  |                           |            
|Cash Paid During the Period for Interest                                                   |  | $                         | 613,814    
|Cash Paid During the Period for Income Taxes                                               |  | $                         | —          
|Non-Cash Financing and Investing Activities:                                               |  |                           |            
|Oil and Natural Gas Properties Property Accrual in Accounts Payable                        |  | $                         | 35,288,407 
|Stock-Based Compensation Capitalized to Oil and Natural Gas Properties                     |  | $                         | 395,768    
|Capitalized Asset Retirement Obligations                                                   |  | $                         | 76,184     

The accompanying notes are an integral part
of these unaudited condensed financial statements.



3







VOYAGER OIL & GAS, INC.

Notes to Condensed Financial Statements

Unaudited



NOTE 1  ORGANIZATION AND NATURE OF BUSINESS



Description of Operations — Voyager
Oil & Gas, Inc., a Montana corporation (the “Company”), is an independent oil and natural gas exploration and production
company engaged in the business of acquiring acreage in prospective natural resource plays within the continental United States,
primarily focused on the Williston Basin located in North Dakota and Montana. The Company also holds acreage in other emerging
oil plays in Colorado, Wyoming and Montana. The Company seeks to accumulate acreage that builds net asset value by growing reserves
and converting undeveloped assets into producing wells in repeatable and scalable shale oil plays.



The Company participates in well development
as a non-operator and is in the process of building operations to plan and design well development as an operator on acreage where
a controlling interest is held. The Company had six employees as of June 30, 2012 and retains independent contractors to assist
in operating and managing its prospects as well as to carry out the principal and necessary functions incidental to the oil and
natural gas business. With the acquisition of Emerald Oil, Inc. during third quarter 2012 (see Note 14 – Subsequent Events),
the Company has added executive management that is experienced in well development and intends to build on these capabilities internally
and through partnering with others to leverage best practices. Production from oil wells has increased significantly, and the Company
intends to add to this production by operating its own wells, while continuing to participate as a non-operator in wells managed
by other operators.



Liquidity - As of June 30,
2012, the Company had cash and cash equivalents and accounts receivable of approximately $11.6 million and accounts payable and
accrued expenses of approximately $35.5 million. In addition, as a part of the acquisition of Emerald Oil, Inc. the Company assumed
$20.2 million of debt that matures in November 2012. Concurrent with the Emerald Oil, Inc. acquisition the Company entered into
an amended and restated credit agreement with Macquarie Bank expanding the Company’s outstanding borrowings by $15.0 million
which is due and payable in November 2012. The additional $15.0 million drawn under the credit facility was used to offset a portion
of the $35.5 million of current liabilities.



As a result of the payments due
on the Company’s current liabilities and the outstanding borrowings that are due and payable in 2012, the Company
expects to have significant cash requirements in the next twelve months. The Company will need to secure financing or access
the capital markets to sell equity or debt, or otherwise, in order to fund future operations and satisfy our obligations.
There is no guarantee that any such required financing or equity will be available on terms satisfactory to us or available
at all.



NOTE 2  SIGNIFICANT ACCOUNTING POLICIES



The accompanying condensed financial statements
have been prepared on the accrual basis of accounting whereby revenues are recognized when earned, and expenses are recognized
when incurred. These condensed financial statements as of June 30, 2012 and for the three and six months ended June 30, 2012 and
2011 are unaudited. In the opinion of management, such 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. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or
omitted in these financial statements for and as of the three and six months ended June 30, 2012 and 2011.



Interim financial results should be read
in conjunction with the audited financial statements and footnotes for the year ended December 31, 2011, which were included in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.



4







Cash and Cash Equivalents



The Company considers highly liquid investments
with insignificant interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents
consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent assets
held in checking and money market accounts. These assets are generally available to the Company on a daily or weekly basis and
are highly liquid in nature. All of the Company’s non-interest bearing cash accounts were fully insured at June 30, 2012
due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit
to the amount of insurance for eligible accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each
financial institution, and the Company’s non-interest bearing cash balances may then exceed federally insured limits. In
addition, the Company is subject to Security Investor Protection Corporation (SIPC) protection on a vast majority of its financial
assets in the event one of the brokerage firms that the Company utilizes for its investments fails.



Other Property and Equipment



Property and equipment that are not oil
and natural gas properties are recorded at cost and depreciated using the straight-line method over their estimated useful lives
of three to seven years. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are
charged to operations as incurred. Depreciation expense was $11,144 and $8,125 for the three month periods ended June 30, 2012
and 2011, respectively. Depreciation expense was $22,214 and $8,912 for the six-month periods ended June 30, 2012 and 2011, respectively.



FASB Accounting Standards
Codification (ASC) 360-10-35-21 requires that long-lived assets, other than oil and natural gas properties, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The determination
of impairment is based upon expectations of undiscounted future cash flows, before interest, of the related asset. If the carrying
value of the asset exceeds the undiscounted future cash flows, the impairment would be computed as the difference between the carrying
value of the asset and the fair value. There was no impairment identified at June 30, 2012 and December 31, 2011 for long-lived
assets not classified as oil and natural gas properties.



Asset Retirement Obligations



The Company records the fair value of a
liability for an asset retirement obligation in the period in which the well is spud or the asset is acquired and a corresponding
increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and
the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other
than the recorded amount, a gain or loss is recognized.



Revenue Recognition and Natural Gas Balancing



The Company recognizes oil and natural
gas revenues from its interests in producing wells when production is delivered and title has transferred to the purchaser, to
the extent the selling price is reasonably determinable. The Company uses the sales method of accounting for balancing of natural
gas production and would recognize a liability if the existing proven reserves were not adequate to cover the current imbalance
situation. As of June 30, 2012 and December 31, 2011, the Company’s natural gas production was in balance, i.e., its cumulative
portion of natural gas production taken and sold from wells in which it has an interest equaled the Company’s entitled interest
in natural gas production from those wells.



Stock-Based Compensation



The Company has accounted for stock-based
compensation under the provisions of ASC 718-10-55. The Company recognizes stock-based compensation expense in the financial statements
over the vesting period of equity-classified employee stock-based compensation awards based on the grant date fair value of the
awards, net of estimated forfeitures. For options and warrants, the Company uses the Black-Scholes option valuation model to calculate
the fair value of stock based compensation awards at the date of grant. Option pricing models require the input of highly subjective
assumptions, including the expected price volatility. For the stock options and warrants granted the Company has used a variety
of comparable and peer companies to determine the expected volatility input based on the expected term of the options. The Company
believes the use or peer company data fairly represents the expected volatility it would experience if it were in the oil and natural
gas industry over the expected term of the options. The Company used the simplified method to determine the expected term of the
options due to the lack of historical data. Changes in these assumptions can materially affect the fair value estimate.



5







On May 27, 2011, the shareholders of the
Company approved the Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), under which 5,000,000
shares of common stock have been reserved. The purpose of the 2011 Plan is to promote the success of the Company by facilitating
the employment and retention of competent personnel and by furnishing incentives to those employees, directors and consultants
upon whose efforts the success of the Company will depend to a large degree. It is the intention of the Company to carry out the
2011 Plan through the granting of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock
unit awards, performance awards and stock appreciation rights. As of June 30, 2012, 1,520,000 of the common stock reserved were
issued to directors, officers and employees under the 2011 Plan.



Income Taxes



The Company accounts for income taxes under
FASB ASC 740-10-30.Deferred income tax assets and liabilities are determined based upon differences between the financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred
tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not
be realized.



The tax effects from an uncertain tax position
can be recognized in the financial statements only if the position is more likely than not of being sustained if the position were
to be challenged by a taxing authority. The Company has examined the tax positions taken in its tax returns and determined that
there are no uncertain tax positions. As a result, the Company has recorded no uncertain tax liabilities in its condensed balance
sheet.



Net Income (Loss) Per Common Share



Basic net income (loss) per common share
is based on the net income (loss) divided by the weighted average number of common shares outstanding during the period. Diluted
earnings per share are computed using the weighted average number of common shares plus dilutive common share equivalents outstanding
during the period using the treasury stock method. In the computation of diluted earnings per share, excess tax benefits that would
be created upon the assumed vesting of unvested restricted shares or the assumed exercise of stock options (i.e., hypothetical
excess tax benefits) are included in the assumed proceeds component of the treasury share method to the extent that such excess
tax benefits are more likely than not to be realized. When a loss from continuing operations exists, all potentially dilutive securities
are anti-dilutive and are therefore excluded from the computation of diluted earnings per share. As the Company had a loss for
the three- and six- month periods ended June 30, 2012 and 2011, the potentially dilutive shares are anti-dilutive and are thus
not added into the earnings per share calculation.



The following stock options, warrants and
restricted stock, which would be potentially dilutive in future periods, were not included in the computation of diluted net loss
per share for the three and six months ended June 30, 2012 because the effect would have been anti-dilutive:



|Restricted Stock                       |  |  | 420,005    | 
|-------------------------------------- |  |  | ---------- | 
|Stock Options                          |  |  | 1,800,000  | 
|Stock Warrants                         |  |  | 7,813,051  | 
|Total Potentially Anti-Dilutive Shares |  |  | 10,033,056 | 



6







Full Cost Method



The Company follows the full cost method
of accounting for oil and natural gas operations whereby all costs related to the exploration and development of oil and natural
gas properties are initially capitalized into a single cost center (“full cost pool”). Such costs include land acquisition
costs, a portion of employee salaries related to property development, geological and geophysical expenses, carrying charges on
non-producing properties, costs of drilling directly related to acquisition, and exploration activities. For the three- and six-month
periods ended June 30, 2012, the Company capitalized $234,484 and $473,099 of internal salaries, which included $194,497 and $395,768
of stock-based compensation. For the three- and six-month periods ended June 30, 2011, the Company capitalized $153,208 of internal
salaries, which included $134,216 of stock-based compensation. Internal salaries are capitalized based on employee time allocated
to the acquisition of leaseholds and development of oil and natural gas properties. The Company capitalized interest of $57,098
for the three- and six-month periods ended June 30 2012. The Company did not capitalize interest for the three- and six-month periods
ended June 30, 2011.



Proceeds from property sales will generally
be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship
between capitalized costs and the proved reserves attributable to these costs. As of June 30, 2012, the Company has had no property
sales since inception.



The Company assesses all items classified
as unevaluated property on a quarterly basis for possible impairment or reduction in value. The assessment includes consideration
of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling
results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned.
During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property
and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization.
For the three- and six-month periods ended June 30, 2012 the Company had no costs that were transferred to the full cost pool related
to impairment. For the year ended December 31, 2011, the Company included $6,983,125 related to expiring leases within costs subject
to the depletion calculation.



Capitalized costs associated with impaired
properties and properties having proved reserves, estimated future development costs, and asset retirement costs under FASB ASC
410-20-25 are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves. The costs of
unproved properties are withheld from the depletion base until such time as they are either developed, impaired, or abandoned.



Capitalized costs (net of related deferred
income taxes) are limited to a ceiling based on the present value of future net revenues using the 12-month unweighted average
of first-day-of-the-month price (the “12-month average price”), discounted at 10%, plus the lower of cost or fair market
value of unproved properties. If the ceiling is not greater than or equal to the total capitalized costs, the Company is required
to write down capitalized costs to the ceiling. The Company performs this ceiling test calculation each quarter. Any required write
downs are included in the condensed statements of operations as an impairment charge. The Company recognized an impairment expense
in the three- and six-month periods ended June 30, 2012 in the amount of $10,191,234. There was no impairment expense recognized
in the three- and six-month periods ended June 30, 2011.



Commodity Derivative Instruments



The Company has entered into commodity
derivative instruments, utilizing "no premium" collars to reduce the effect of price changes on a portion of future oil
production. The Company's commodity derivative instruments are measured at fair value and are included in the condensed balance
sheet as derivative assets and liabilities. Unrealized gains and losses are recorded based on the changes in the fair values of
the derivative instruments. Both the unrealized and realized gains and losses resulting from the contract settlement of derivatives
are recorded in the gain on derivatives line on the condensed statement of operations. The Company's valuation estimate takes into
consideration the counterparties' credit worthiness, the Company's credit worthiness, and the time value of money. The consideration
of the factors results in an estimated exit-price for each derivative asset or liability under a market place participant's view.
Management believes that this approach provides a reasonable, non-biased, verifiable, and consistent methodology for valuing commodity
derivative instruments. For additional discussion on commodity derivative instruments see Note 13.



7







New Accounting Pronouncements



From time to time, new accounting pronouncements
are issued by FASB that are adopted by the Company as of the specified effective date.  If not discussed, management
believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s
financial statements upon adoption.



Joint Ventures



The condensed financial statements as of
June 30, 2012 and 2011 include the accounts of the Company and its proportionate share of the assets, liabilities, and results
of operations of the joint ventures it is involved in.



Use of Estimates



The preparation of financial statements
under GAAP in the United States requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. The most significant estimates relate to proved oil and natural gas reserve
volumes, future development costs, estimates relating to certain oil and natural gas revenues and expenses, fair value of derivative
instruments, valuation of share based compensation and the valuation of deferred income taxes. Actual results may differ from those
estimates.



NOTE 3  OIL AND NATURAL GAS PROPERTIES



Major Joint Venture



In May 2008, the Company entered into the
Major Joint Venture Agreement with a third-party partner to acquire certain oil and natural gas leases in the Tiger Ridge Gas Field
in Blaine, Hill, and Choteau Counties of Montana. Under the terms of the joint venture agreement, the Company is responsible for
all lease acquisition costs. The third-party joint venture partner is responsible for coordinating the geology, acquiring the leases
in its name, preparing and disseminating assignments, accounting for the project costs and administration of the well operator.
The Company controls an 87.5% working interest on all future production and reserves, while the third-party joint venture partner
controls a 12.5% working interest. The joint venture had accumulated oil and natural gas leases totaling 74,706 net mineral acres
as of June 30, 2012. The Company initially committed to a minimum of $1,000,000 toward this joint venture. An amendment to the
joint venture agreement was executed in April 2011 to remove the maximum amount committed under the joint venture. The Company
is not committed to any further capital obligations under the joint venture. The third-party joint venture partner issues cash
calls during the year to replenish the joint venture cash account. The Company’s contributions to the joint venture totaled
$4,214,441 as of June 30, 2012, consisting of $1,940,054 in leasing costs, $1,346,925 in seismic costs and $804,155 in drilling
costs. The unutilized cash balance was $123,307 as of June 30, 2012.



Tiger Ridge Joint Venture



In November 2009, the Company entered into
the Tiger Ridge Joint Venture Agreement with a third-party and a well operator to develop and exploit a drilling program in two
certain blocks of acreage in the Major Joint Venture, which is an area of mutual interest. The Company controls a 70% working interest,
while a third-party investor and the well operator control a 10% working interest and 20% working interest, respectively. The joint
venture agreement requires that all parties contribute in cash their proportional share to cover all costs incurred in developing
these blocks of acreage for drilling. The Company participated in the drilling of two wells with Devon Energy Corporation, both
of which were drilled and shut-in in 2010. The Company conducted 3-D seismic testing throughout 2010 and drilled and completed
six exploratory wells in the fourth quarter of 2011 with our joint venture partners, Hancock Enterprises and MCR, LLC, as operators.
These wells are currently awaiting pipeline hook-up.



8







Big Snowy Joint Venture



In October 2008, the Company entered into
the Big Snowy Joint Venture Agreement with an administrator third-party to acquire certain oil and natural gas leases in the Heath
shale oil play in Musselshell, Petroleum, Garfield, Rosebud and Fergus Counties of Montana, and another third party to perform
as the operator. Under the terms of the agreement, the Company is responsible for 72.5% of lease acquisition costs, and the other
parties are individually responsible for 2.5% and 25% of the lease acquisition costs. Each party controls the same respective working
interest on all future production and reserves. The administrator third-party joint venture partner is responsible for coordinating
the geology, acquiring the leases in its name, preparing and disseminating assignments, accounting for the project costs and administration
of the well operator. The joint venture had accumulated oil and natural gas leases totaling 33,562 net mineral acres as of June
30, 2012. The Company is committed to a minimum of $1,000,000 and up to $1,993,750 toward this joint venture, with all partners,
including the Company, committing a minimum of $2,750,000. The administrator third-party joint venture partner issues cash calls
during the year to replenish the joint venture cash account. The Company’s contributions to the joint venture totaled $724,744
as of June 30, 2012. The unutilized cash balance was $11,790 as of June 30, 2012.



Niobrara Development with Slawson Exploration Company, Inc.



The Company announced the Niobrara development
program with Slawson Exploration Company, Inc. on June 28, 2010. The Company participated on a heads-up, or pro rata, basis for
a 50% working interest in six exploratory wells in Weld County, Colorado targeting the Niobrara formation in the Denver Julesburg
Basin (“DJ Basin”). Following the results of the initial three test wells, the Company allowed approximately 7,500
acres of its initial 17,000 acres of state leases in Weld County, Colorado to expire on November 15, 2010. Three additional wells
were drilled during the quarter ended March 31, 2011 and were in production as of June 30, 2012. The Company allowed approximately
7,100 additional acres to expire on November 15, 2011. As of June 30, 2012, the Company held approximately 2,400 net acres in Weld
County, Colorado and Laramie County, Wyoming. The Company currently has no plans for drilling any additional development wells
under this development program during 2012.



Other Property Acquisitions



On May 24, 2011, the Company purchased
certain leases consisting of approximately 1,680 net acres in Williams County, North Dakota and Richland County, Montana for a
total purchase price of $2,514,863. On May 27, 2011 the Company purchased certain leases consisting of approximately 1,195 net
acres in Richland County, Montana for a total purchase price of $1,792,950. The Company has also completed other miscellaneous
acquisitions in the Williston Basin of Montana and North Dakota during the year ended December 31, 2011 totaling $13,541,730, and
totaling $2,398,143 during the six months ended June 30, 2012.



NOTE 4  RELATED PARTY TRANSACTIONS



On September 22, 2010, Steven Lipscomb
and Michael Reger subscribed for $500,000 and $1,000,000 of senior secured promissory notes, respectively. The issuance of the
senior secured promissory notes is described in Note 7 to the financial statements. Mr. Lipscomb is formerly a director of the
Company. Mr. Reger is a brother of J.R. Reger, who is the Chief Executive Officer and a director of the Company. The Company’s
Audit Committee, which consists solely of independent directors, reviewed and approved this transaction. The senior secured promissory
notes were paid in full on February 10, 2012.



On November 2, 2011, the Company purchased
certain leases consisting of approximately 256 net acres in Dunn County, North Dakota for a total purchase price of $768,000. The
leases were purchased from Ante5, Inc. (“Seller”), a related party. The Seller and its assets were spun off from the
Company and became a separate public reporting U.S. company on June 24, 2010. The Chairman of the Board of the Seller is Bradley
Berman, who is the son of the Company’s Chairman of the Board and was the beneficial owner of approximately 5.4% of the Company’s
outstanding common stock as of June 30, 2012. The Company’s Audit Committee reviewed and approved this transaction prior
to its completion. In approving this transaction, the Audit Committee, which consisted solely of independent directors, took into
account, among other factors, that due diligence performed by the Company evidenced that the leases were purchased by the Company
at the Seller’s original cost per acre and on terms no less favorable than terms generally available to an unaffiliated third
party under the same or similar circumstances.



9







NOTE 5  PREFERRED AND COMMON STOCK



Stock Awards



In March 2012, the Company issued an aggregate
of 99,999 shares of common stock to executives of the Company as compensation for their services. The shares were fully vested
on the date of the grant. The fair value of the stock issued was approximately $294,000 or $2.94 per share, the market value of
a share of common stock on the date the stock was issued. The Company expensed $160,718 in share-based compensation related to
these grants in the six-month period ended June 30, 2012. The remainder of the fair value of these grants was capitalized into
the full cost pool.



During the six-month period ended June
30, 2012, the Company issued an aggregate 520,001 shares of restricted common stock as compensation to its officers and an employee.
Unvested restricted shares vest over various terms with all restricted shares vesting no later than December 2014, and 99,996 of
the restricted shares were vested as of June 30, 2012. As of June 30, 2012, there was approximately $1.2 million of total unrecognized
compensation expense related to unvested restricted stock. The Company will recognize compensation expense over the remaining vesting
period of the restricted stock grants. The Company has assumed a 0% forfeiture rate for the restricted stock.



The Company incurred compensation expense
associated with restricted stock granted in 2012 of $164,744 and $191,531 for the three and six months ended June 30, 2012, respectively.
The Company incurred compensation expense associated with restricted stock granted prior to 2012 of $57,376 and $114,754 for the
three and six months ended June 30, 2011, respectively. For the three and six months ended June 30, 2012, the Company capitalized
compensation expense associated with the restricted stock of $131,869 and $154,082 to oil and natural gas properties, respectively.



NOTE 6  STOCK OPTIONS AND WARRANTS



Stock Options



On January 6, 2012, the Company granted
stock options to an employee to purchase a total of 25,000 shares of common stock exercisable at $2.65 per share. The total fair
value of the options was calculated using the Black-Scholes valuation model based on factors present at the time the options were
granted. The Company has assumed a 10% forfeiture rate on these options. The options vest over one year with all of the options
vesting on the anniversary date of the grant.



On March 30, 2012, the Company granted
stock options to an employee to purchase a total of 350,000 shares of common stock exercisable at $2.43 per share. The total fair
value of the options was calculated using the Black-Scholes valuation model based on factors present at the time the options were
granted. The Company has assumed a 10% forfeiture rate on these options. The options vest over one year with all of the options
vesting on the anniversary date of the grant.



On May 23, 2012, the Company granted stock
options to an employee to purchase a total of 250,000 shares of common stock exercisable at $1.77 per share. The total fair value
of the options was calculated using the Black-Scholes valuation model based on factors present at the time the options were granted.
The Company has assumed a 10% forfeiture rate on these options. The options vest over 36 months with 100,000 options vesting on
May 23, 2013 and 2014 and 50,000 options vesting in November 23, 2014.



On May 24, 2012, the Company granted stock
options to non-employee directors to purchase a total of 125,000 shares of common stock exercisable at $1.90 per share. The total
fair value of the options was calculated using the Black-Scholes valuation model based on factors present at the time the options
were granted. The Company has assumed a 10% forfeiture rate on these options. The options vest over four years with 25% of the
options vesting on each anniversary date of the grant.



10







The impact on our condensed statement of
operations of stock-based compensation expense related to options granted for the three month periods ended June 30, 2012 and 2011
was $235,408 and $109,100, respectively, net of $0 tax. The impact on our condensed statement of operations of stock-based compensation
expense related to options granted for the six-month periods ended June 30, 2012 and 2011 was $375,629 and $187,692, respectively,
net of $0 tax. The Company capitalized $62,628 and $108,406 in compensation related to outstanding options for the three and six
months ended June 30, 2012, respectively.



The following assumptions were used for
the Black-Scholes model to value the options granted during the six months ended June 30, 2012.



|Risk free rates                |  |  | 0.86% to 1.20%   | 
|------------------------------ |  |  | ---------------- | 
|Dividend yield                 |  |  | 0%               | 
|Expected volatility            |  |  | 72.48% to 78.18% | 
|Weighted average expected life |  |  | 5.5 to 7 years   | 



The following summarizes activities concerning
outstanding options to purchase shares of the Company’s common stock as of and for the three and six months ended June 30,
2012:



| | · | No options were exercised.
| | - | --------------------------

| | · | No options were forfeited.
| | - | --------------------------

| | · | No options expired.
| | - | -------------------

| | · | The Company will recognize approximately $1.4 million of compensation expense in future periods relating to options that have
been granted but have not vested as of June 30, 2012.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | There were 1,187,500 unvested options at June 30, 2012.
| | - | -------------------------------------------------------



Warrants



The table below reflects the status of
warrants outstanding at June 30, 2012:



|                  |  | Warrants |           |  | Exercise Price |   |      | Expiration Date
|----------------- |  | -------- | --------- |  | -------------- | - | ---- | ---------------
|December 1, 2009  |  |          | 260,509   |  |                | $ | 0.98 |                
|December 31, 2009 |  |          | 1,302,542 |  |                | $ | 0.98 |                
|February 8, 2011  |  |          | 6,250,000 |  |                | $ | 7.10 |                
|                  |  |          | 7,813,051 |  |                |   |      |                



No warrants expired or were forfeited during
the six months ended June 30, 2012. The Company recorded no expense related to these warrants for the six months ended June 30,
2012. As of June 30, 2012, all of the compensation expense related to these vested warrants has been expensed by the Company. All
warrants outstanding were exercisable at June 30, 2012.



NOTE 7  SENIOR SECURED PROMISSORY NOTES



In September 2010, the Company issued senior
secured promissory notes in the principal amount of $15 million (the “Notes”) in order to finance future drilling and
development activities. Proceeds of the Notes were used primarily to fund developmental drilling on the Company’s significant
acreage positions targeting the Williston Basin — Bakken/Three Forks area and the Niobrara formation located in
the Denver-Julesburg (D-J) Basin through the joint venture with Slawson.



11







The Notes were paid in full on February
10, 2012 in conjunction with the Company entering into a credit facility with Macquarie Bank Limited (“MBL”) (see Note
8). The remaining unamortized finance costs of $217,809 were written off to interest expense in the six months ended June 30, 2012.



NOTE 8 REVOLVING CREDIT FACILITY



On February 10, 2012, the Company entered
into a credit facility (“Facility”) with MBL. The Facility provides up to a maximum of $150 million in principal amount
of borrowings to be used as working capital for exploration and production operations. Initially, $15 million of financing was
available under the Facility based on reserves (Tranche A), with an additional $50 million available under a development tranche
(Tranche B). As of June 30, 2012, the Company had borrowed $15 million under Tranche A and approximately $3 million under Tranche
B. As of June 30, 2012, $7.7 million was undrawn and available pursuant to an approved development plan.



The borrowing base of funds
available to the Company under Tranche A is redetermined semi-annually based upon the net present value, discounted at 10%
per annum, of the future net revenues expected to accrue from the Company’s interests in proved reserves estimated to
be produced from its crude oil and natural gas properties. The Facility terminates on February 10, 2015. Tranche B is
uncommitted; however, MLB may, in its sole discretion and subject to an approved revised development plan and the
satisfaction of certain conditions, commit additional funds under Tranche B.  Outstanding borrowings under Tranche B are due in six equal monthly installments
beginning on August 10, 2015.



The Company has the option to designate
the reference rate of interest for each specific borrowing under the Facility as amounts are advanced. Under Tranche A, borrowings
designated to be based upon the London Interbank Offered Rate (LIBOR) bear interest at a rate equal to LIBOR plus a spread ranging
from 2.75% to 3.25%, depending on the percentage of borrowing base that is currently advanced. Any borrowings not designated LIBOR-based
will bear interest at a rate equal to the current prime rate published by the Wall Street Journal plus a spread ranging from 1.75%
to 2.25%, depending on the percentage of borrowing base that is currently advanced. The Company has the option to designate either
pricing mechanism. The Company’s interest rate on Tranche A is 3.489% as of June 30, 2012. Tranche B borrowing bears interest
at a rate equal to LIBOR plus 7.5%. The Company’s interest rate on Tranche B is 7.739% as of June 30, 2012. Interest payments
are due under the Facility in arrears; in the case of a LIBOR-based loan, on the last day of the specified interest period and
in the case of all other loans on the last day of each March, June, September and December. All outstanding principal is due and
payable upon termination of the Facility.



Upon an event of default, the applicable
interest rate under the Facility will increase, and the lenders may accelerate payments under the Facility or call all obligations
due under certain circumstances. The Facility references various events constituting a default, including, but not limited to,
failure to pay interest on any loan under the Facility, any material violation of any representation or warranty under the Facility,
failure to observe or perform certain covenants, conditions or agreements under the Facility, a change in control of the Company,
default under any other material indebtedness of the Company, bankruptcy and similar proceedings and failure to pay disbursements
from lines of credit issued under the Facility.



The
Facility requires that the Company enter into hedging agreements with MBL for each month of the 36-month period following
the date on which each such hedge agreement is executed, the notional volumes for which, when aggregated with other
commodity derivative agreements and additional fixed-price physical off-take contracts then in effect are not less than 50%,
nor greater than 90%, of the reasonably anticipated projected production from our proved developed producing reserves.
The Facility also requires the Company to maintain certain financial ratios, including current ratio (at least 1.00 to
1.00), debt coverage ratio (no more than 3.50 to 1.00), interest coverage ratio (at least 2.50 to 1.00) and a ceiling on
general and administrative expenses (no more than $500,000 per fiscal quarter, excluding certain non-cash, audit and
engineering-related expenses), commencing on March 31, 2012. The Company was not in compliance with the current ratio and
general and administrative expenses ceiling covenants as of June 30, 2012, and a waiver was obtained from MBL.The
current ratio shortfall and resulting working capital deficit of $23,046,438 as of June 30, 2012 was in part due
to $10,454,305 of accrued capitalized costs associated with development of oil and natural gas properties in the Williston
Basin not yet invoiced to the Company. The Company intends to partially finance these capitalized costs through the Facility
upon receipt of associating invoices from the respective well operators. The Company intends to fund the remaining current
working capital deficit through interim redetermination of reserves under the Facility and cash provided from operating
activities, although we may have to access the capital markets or seek other financing arrangements. Exceeding the general
and administrative expense ceiling was primarily attributable to professional fees related to the preparation and filing of
the annual proxy statement,  the Emerald acquisition and expenses related to the Company’s annual meeting of
shareholders.



12







All of our obligations under the Facility
and the derivative agreements with MBL are secured by a first priority security interest in any and all of the Company’s
assets.



Subsequent to June 30, 2012, the Company
amended the Facility to expand availability on a short-term basis (See Note 15 – Subsequent Events).



NOTE 9  ASSET RETIREMENT OBLIGATION



The Company has asset retirement obligations
associated with the future plugging and abandonment of proved properties and related facilities. Under the provisions of FASB ASC
410-20-25, the fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred and
a corresponding increase in the carrying amount of the related long lived asset. The liability is accreted to its present value
each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for
an amount other than the recorded amount, a gain or loss is recognized. The Company has no assets that are legally restricted for
purposes of settling asset retirement obligations.



The following table summarizes the Company’s
asset retirement obligation transactions recorded in accordance with the provisions of FASB ASC 410-20-25 for the six months ended
June 30, 2012 and the year ended December 31:



|                                                        |  | June 30, 2012 |         |  | December 31, 2011 |  
|------------------------------------------------------- |  | ------------- | ------- |  | ----------------- | -
|Beginning Asset Retirement Obligation                   |  | $             | 116,119 |  |                   | $
|Liabilities Incurred for New Wells Placed in Production |  |               | 76,184  |  |                   |  
|Accretion of Discount on Asset Retirement Obligations   |  |               | 5,990   |  |                   |  
|Ending Asset Retirement Obligation                      |  | $             | 198,293 |  |                   | $



NOTE 10  INCOME TAXES



Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  The Company does
not expect to pay any federal or state income tax for 2012 as a result of net operating loss carry forwards from prior years. 
Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than
not” that some component or all of the benefits of deferred tax assets will not be realized.  As of June 30, 2012, the
Company maintains a full valuation allowance for all deferred tax assets.  Based on these requirements no provision or benefit
for income taxes has been recorded for deferred taxes. There were no recorded unrecognized tax benefits at the end of the reporting
period.



NOTE 11 FAIR VALUE



FASB ASC 820-10-55 defines fair value,
establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value
is defined under FASB ASC 820-10-55 as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy based on three levels of
inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which
are the following:



13







Level 1 – Unadjusted quoted prices in active
markets that are accessible at measurement date for identical assets or liabilities.



Level 2 - Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.



Level 3 - Unobservable inputs that are supported by
little or no market activity and that are significant to the fair value of the assets or liabilities and less observable from objective
sources.



The following schedule summarizes the valuation
of financial instruments measured at fair value on a recurring basis in the condensed balance sheet as of June 30, 2012:





|                                                            |  | Fair Value Measurements at June 30,
2012 Using                 |  
|----------------------------------------------------------- |  | -------------------------------------------------------------- | -
|                                                            |  | Quoted Prices In Active Markets for Identical Assets (Level 1) |  
|Commodity Derivatives – Current Asset (crude oil collars)   |  | $                                                              | —
|Commodity Derivatives – Long Term Asset (crude oil collars) |  |                                                                | —
|Total                                                       |  | $                                                              |  



There were no financial instruments measured
at fair value on a recurring basis as of December 31, 2011.



Level 2 assets consist of commodity derivative
assets (see Note 13).  The fair value of the commodity derivative assets is estimated by the Company by utilizing an
option pricing model which takes into account notional quantities, market volatility, market prices, contract parameters and discount
rates based on published LIBOR rates. Significant changes in the quoted forward prices for commodities and changes in market volatility
generally leads to corresponding changes in the fair value measurement of our oil  derivative contracts. The fair value of
all derivative contracts is reflected on the condensed balance sheet.



NOTE 12 FINANCIAL INSTRUMENTS



The Company’s non-derivative financial
instruments include cash and cash equivalents, accounts receivable, accounts payable and the revolving credit facility. The carrying
amount of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their immediate
or short-term maturities. The book value of the revolving credit facility approximates fair value because of its floating rate
structure. The Company has classified the revolving credit facility as a Level 2 item within the fair value hierarchy.



NOTE 13 DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT



The Company utilizes commodity costless
collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the oil commodities
it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute
at least a portion of its capital spending.



14







All derivative positions are carried at
their fair value on the condensed balance sheet and are marked-to-market at the end of each period. Both the unrealized and realized
gains and losses resulting from the contract settlement of derivatives are recorded in the gain on derivatives line on the condensed
statement of operations.



The Company has a master netting agreement
on each of the individual oil contracts and therefore the current asset and liability are netted on the condensed balance sheet
and the non-current asset and liability are netted on the condensed balance sheet.



The Company realized a gain on settled
derivatives of $88,568 and $61,025 and a gain on mark-to-market of derivatives instruments of $2,162,975 and $1,278,083 for the
three and six months ended June 30, 2012, respectively. The Company did not enter into derivative instruments prior to 2012.



Costless collars are used to establish
floor and ceiling prices on anticipated oil and natural gas production. There were no premiums paid or received by the Company
related to the costless collar agreements.  The following table reflects open costless collar agreements as of June 30,
2012.



|Term                             |  | Oil (Barrels) |  | Price          |  | Basis
|-------------------------------- |  | ------------- |  | -------------- |  | -----
|Costless Collars                 |  |               |  |                |  |      
|July 1, 2012 – February 28, 2015 |  | 189,095       |  | $90.00–$103.50 |  | NYMEX



At June 30, 2012, the Company had derivative
financial instruments recorded on the condensed balance sheet as set forth below:



|Type of Contract             |  | Balance Sheet Location  |  |   |          
|---------------------------- |  | ----------------------- |  | - | ---------
|Derivative Assets:           |  |                         |  |   |          
|Costless Collars             |  | Current assets          |  | $ | 786,411  
|Costless Collars             |  | Non-current assets      |  |   | 1,247,240
|Total Derivative Assets      |  |                         |  | $ | 2,033,651
|                             |  |                         |  |   |          
|Derivative Liabilities:      |  |                         |  |   |          
|Costless Collars             |  | Current liabilities     |  |   | (177,264 
|Costless Collars             |  | Non-current liabilities |  |   | (578,304 
|Total Derivative Liabilities |  |                         |  | $ | (755,568 
|Net Derivative Position      |  |                         |  | $ | 1,278,083



The use of derivative transactions involves
the risk that the counterparties will be unable to meet the financial terms of such transactions. The Company has netting arrangements
with MBL that provide for offsetting payables against receivables from separate derivative instruments.



NOTE 14 COMMITMENTS AND CONTINGENCIES



We are subject to litigation claims and
governmental and regulatory proceedings arising in the ordinary course of business.  We believe that all such litigation matters
are not likely to have a material adverse effect on the Company’s financial position, cash flows or results of operations.



15







NOTE 15 SUBSEQUENT EVENTS



Emerald Oil, Inc. Acquisition



On July 9, 2012,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Emerald Oil & Gas NL (the
“Parent”) and Emerald Oil, Inc. (“Emerald Oil”), a wholly owned subsidiary of the Parent pursuant to which
the Company purchased all of the outstanding capital stock of Emerald Oil for approximately 19.9% of the total shares of Voyager
common stock outstanding as of the closing date.The Company completed the acquisition of Emerald Oil on July 26, 2012.
The Company issued a number of shares equal to19.9% of its common stock outstanding on the closing date, or approximately 11.6
million unregistered shares to the Parent, of which 0.5 million shares are being held in escrow pending resolution of certain title
defects. The Company will maintain Emerald Oil’s liabilities, including approximately $20.2 million in debt owed by Emerald
Oil. Included in the acquisition are approximately 10,600 net acres located in Dunn County, North Dakota and approximately 45,000
net acres in the Sandwash Basin Niobrara shale oil play in northwestern Colorado and southwestern Wyoming.



In connection with the closing of the
acquisition, five existing members of the Company’s board of directors resigned, and their vacancies were filled with
directors selected by the remaining members of Voyager’s board of directors. Also in connection with the closing of the
Emerald acquisition, the Company entered into employment agreements with six officers, J.R. Reger
(Executive Chairman—formerly Chief Executive Officer), Mike Krzus (Chief Executive Officer), McAndrew Rudisill
(President), Paul Wiesner (Chief Financial Officer), Karl Osterbuhr (Vice President of Exploration and Business Development)
and Mitchell R. Thompson (Chief Accounting Officer—formerly Chief Financial Officer).



The Company is currently determining the
appropriate purchase price allocation for this transaction.



MBL Credit Facility Amendment



On July 26, 2012, the Company entered into
an amended and restated credit agreement with MBL to expand the existing availability and outstanding balance under its existing
credit facility. In addition to the $20.2 million of debt obligations related to the acquisition of Emerald Oil that remain outstanding
through existing agreements, the Company obtained additional availability from its credit facility and drew $15 million of additional
debt on a new third tranche at an initial rate of 9% above the applicable London Interbank Borrowing Rate (LIBOR) and has the potential
to draw a maximum of $20 million. The $15 million drawn was used for existing development activities. The new tranche matures on
November 15, 2012, while Tranche A and Tranche B continue to mature on February 10, 2015. Tranche B is uncommitted, however, MBL
may, in its sole discretion and subject to an approved revised development plan and the satisfaction of certain conditions commit
additional funds under Tranche B.



On July 26, 2012, in conjunction with
the closing of the amended and restated credit agreement with MBL, the Company executed a NYMEX West Texas Intermediate crude
oil derivative swap contract. The following table reflects the opened commodity swap contract with the associated volumes and
fixed price.



|                       |  |                |        |  | Fixed |  
|---------------------- |  | -------------- | ------ |  | ----- | -
|Calendar Year          |  | Volumes (Bbls) |        |  | Price |  
|August - December 2012 |  |                | 51,136 |  |       | $
|2013                   |  |                | 73,370 |  |       | $
|2014                   |  |                | 48,742 |  |       | $
|2015                   |  |                | 6,404  |  |       | $



16







ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.



The following discussion and
analysis of our financial condition and results of operations should be read together with our financial statements appearing
in this Form 10-Q.  This discussion contains forward-looking statements that involve risks and uncertainties because
they are based on current expectations and relate to future events and future financial performance.  Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of many important factors,
including those set forth in Part II, Item 1A of this Form 10-Q and in our Annual Report on Form 10-K under the heading
“Risk Factors”.



Overview



Voyager Oil & Gas, Inc., a Montana
corporation (“Voyager,” the “Company,” “we,” “us,” or “our”), was formed
for the purpose of acquiring acreage and participating in the production of crude oil, primarily focusing on acquiring working
interests in scalable, repeatable shale oil and natural gas plays where established oil and natural gas companies have operations.



Our business focuses on shale oil and natural
gas properties primarily located in North Dakota and Montana and, to a lesser extent, Colorado and Wyoming. We do not intend to
limit our focus to any single geographic area because we want to remain flexible and intend to pursue the best opportunities available
to us. Our required capital commitments may grow as our opportunities grow and depend upon the results of wells and development
activities in our focus areas.



Our primary focus is to acquire high value
leasehold interests specifically targeting shale resource prospects in the continental United States. Because of our size and maneuverability,
we are able to deploy our land acquisition personnel into specific areas based on the latest industry information. We generate
revenue by and through the conversion of our leaseholds into working interests in multiple wells primarily located in the Bakken
and Three Forks oil shale.



To
date our focus has been to participate in wells as a non-operating partner, primarily on a heads-up, or pro rata,
basis proportionate to our working interest, allowing us to participate with established operators in well economics that
have high return potential with relatively low overhead cost. On July 9, 2012, we entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with Emerald Oil & Gas NL (the “Parent”) and Emerald Oil,
Inc. (“Emerald Oil”), a wholly owned subsidiary of the Parent, pursuant to which we purchased all of the
outstanding capital stock of Emerald Oil for approximately 19.9% of the total shares of our common stock outstanding as of
the closing date.We completed the acquisition of Emerald Oil on July 26, 2012 and issued approximately 11.6 million
of our shares of common stock to the Parent of which 0.5 million shares are being held in escrow by the Company pending
resolution of certain title defects. As part of the acquisition, we agreed to maintain Emerald Oil’s liabilities,
including approximately $20.2 million in debt owed by Emerald Oil. Included in the acquisition are approximately 10,600 net
acres located in Dunn County, North Dakota and approximately 45,000 net acres in the Sandwash Basin Niobrara shale oil play
in northwestern Colorado and southwestern Wyoming. In connection with the closing of
the acquisition, five existing members of our board of directors resigned, and their vacancies were filled with
directors selected by the remaining members of our board of directors. Also in connection with the closing of the Emerald
acquisition, we entered into employment agreements with six officers, J.R. Reger (Executive Chairman—formerly our Chief
Executive Officer), Mike Krzus (Chief Executive Officer), McAndrew Rudisill (President), Paul Wiesner (Chief Financial
Officer), Karl Osterbuhr (Vice President of Exploration and Business Development) and Mitchell R. Thompson (Chief
Accounting Officer—formerly our Chief Financial Officer).



We intend to enhance our return on capital
and growth potential by adding operating capabilities with our recent acquisition of Emerald Oil. We believe adding operating capabilities
provides increased control over the planning and designing of well development and increases our long-term growth prospects and
attractiveness to partner with others. The delineation of the Williston Basin continues to expand and evolve as development activity
increases and well designs improve to enhance production and well economics.



17







We intend to trade or swap our acreage
with other operators to increase our operating acreage or potential working interests in areas where we have existing acreage.
Most trades are for comparable acreage and mutually beneficial for both parties as we consolidate and increase our working interests.
We are also engaged in top-leasing in targeted areas of the Williston Basin where we believe there is a great likelihood that the
current lease with a third party will expire before the acreage is developed and held by production. When we top-lease, we enter
into a lease with a third party prior to the expiration of an existing lease, which only becomes effective when the current lease
with the third party expires. We believe top-leasing may provide us access to quality acreage in the Williston Basin in areas that
have the potential to be developed into economical Bakken and Three Forks oil wells.



Assets and Acreage Holdings



As of June 30, 2012, we controlled approximately
144,000 net acres in the following five primary prospect areas:



| | · | 33,000 net acres in the Williston Basin targeting the Bakken and Three Forks shale oil formations in North Dakota and Montana;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | 33,500 net acres in a joint venture targeting the Heath shale oil formation in Musselshell, Petroleum, Garfield and Fergus
Counties of Montana;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | · | 2,400 net acres in the Denver-Julesburg Basin targeting the Niobrara shale oil formation in Colorado and Wyoming; and
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | 74,700 net acres in a joint venture in and around the Tiger Ridge natural gas field in Blaine, Hill and Chouteau Counties of
Montana.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



Williston Basin — Bakken and Three Forks



As of June 30, 2012, we own an interest
in approximately 33,000 net acres in the Williston Basin. During 2011, we acquired approximately 8,354 net acres primarily in Williams
and McKenzie Counties, North Dakota and Richland County, Montana. On May 24, 2011, we purchased certain leases consisting of approximately
1,680 net acres in Williams County, North Dakota and Richland County, Montana for a total purchase price of $2,514,863. On May
27, 2011, we purchased certain leases consisting of approximately 1,195 net acres in Richland County, Montana for a total purchase
price of $1,792,950. We also completed other acquisitions in the Williston Basin of Montana and North Dakota totaling $13,541,730
during the year ended December 31, 2011, and totaling $2,398,143 during the six months ended June 30, 2012.



During the six months ended June 30, 2012,
we acquired 1,118 net acres in the Williston Basin at an average lease bonus cost of $2,000 per acre. 100% of the acreage acquired
during the six months ended June 30, 2012 either had an authorization for expenditure (“AFE”) from a well operator
attached to the lease, or we subsequently received an AFE. We have participated in 180 gross (7.66 net)
Bakken and Three Forks oil wells, including 150 gross (6.56 net) wells that are producing as of June 30, 2012. The remaining 30
gross (1.10 net) wells are in the process of being drilled, awaiting completion, in the process of completion or awaiting flow
back subsequent to fracture stimulation as of June 30, 2012. We continue to lease prospective acreage targeting delineated areas
of high quality production.



DJ Basin — Niobrara



We announced the Niobrara development program
with Slawson Exploration Company, Inc. on June 28, 2010. We participated on a heads-up, or pro rata, basis for a 50% working interest
in six exploratory wells in Weld County, Colorado targeting the Niobrara formation in the DJ Basin. Following the results of the
initial three test wells, we allowed approximately 7,500 acres of our initial 17,000 acres of state leases in Weld County, Colorado
to expire on November 15, 2010. Three additional wells were drilled during the first quarter of 2011 and in production as of December
31, 2011. We allowed approximately 7,100 additional acres to expire on November 15, 2011. We currently hold approximately 2,400
net acres in Weld County, Colorado and Laramie County, Wyoming. We currently have no plans for drilling any additional development
wells in the DJ Basin under this development program during 2012.



18







Major Joint Venture — Tiger Ridge Natural
Gas



As of June 30, 2012, we own an interest
in approximately 74,700 net acres in and around the Tiger Ridge natural gas field in Montana. We participated in the drilling of
two wells with Devon Energy Corporation, both of which were drilled and shut-in in 2010. We conducted 3-D seismic testing throughout
2010 and drilled and completed six exploratory wells in the fourth quarter of 2011 with our joint venture partners, Hancock Enterprises
and MCR, LLC, as operators. We have an average working interest of 70% in these initial wells. These wells are currently awaiting
pipeline hook-up.



Big Snowy Joint Venture — Heath Shale Oil



As of June 30, 2012, we own an interest
in approximately 33,500 net acres located in central Montana as part of a joint venture targeting the Heath shale oil. We have
begun to see substantial permitting activity and drilling in the area. We believe the Heath shale has similar characteristics to
the Bakken and Three Forks formations, and several of the same development partners are operating in the area.



Productive Wells



The following table summarizes gross and
net productive oil wells by state at June 30, 2012 and 2011. A net well represents our fractional working ownership interest of
a gross well. The following table also does not include 30 gross (1.10 net) Bakken and Three Forks wells that were in the process
of being drilled, awaiting completion, in the process of completion or awaiting flow back subsequent to fracture stimulation as
of June 30, 2012 and 39 gross (2.00 net) Bakken and Three Forks wells as of June 30, 2011.



|                                    |  | June 30, |    
|----------------------------------- |  | -------- | ---
|                                    |  | 2012     |    
|                                    |  | Gross    |    
|North Dakota Bakken and Three Forks |  |          | 132
|Montana Bakken and Three Forks      |  |          | 18 
|Colorado Niobrara in DJ Basin       |  |          | 5  
|Total:                              |  |          | 155



Exploratory Wells



In 2012, we participated in the drilling
of the Johnson 31-17 SWH well in an undeveloped area of Mountrail County, North Dakota with a 3.13% working interest. The well
was abandoned after experiencing poor oil shows during the drilling process. The dry hole costs associated this well were $149,714.
The costs associated with this well were included in the full cost pool and subject to the depletion base. Of the 155 gross productive
wells that we have participated in we have only participated in two dry holes.



19







Results of Operations



Comparison of the Three and Six Months Ended June 30,
2012 with the Three and Six Months Ended June 30, 2011.





|                                                      |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|----------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                      |  | 2012                        |            |   | 2011                      |  
|REVENUES                                              |  |                             |            |   |                           |  
|Oil and Natural Gas Sales                             |  | $                           | 6,763,429  |   |                           | $
|Gain on Commodity Derivatives                         |  |                             | 2,251,543  |   |                           |  
|                                                      |  |                             | 9,014,972  |   |                           |  
|OPERATING EXPENSES                                    |  |                             |            |   |                           |  
|Production Expenses                                   |  |                             | 484,829    |   |                           |  
|Production Taxes                                      |  |                             | 728,588    |   |                           |  
|General and Administrative Expenses                   |  |                             | 1,215,218  |   |                           |  
|Depletion of Oil and Natural Gas Properties           |  |                             | 3,160,368  |   |                           |  
|Impairment of Oil and Natural Gas Properties          |  |                             | 10,191,234 |   |                           |  
|Depreciation and Amortization                         |  |                             | 11,144     |   |                           |  
|Accretion of Discount on Asset Retirement Obligations |  |                             | 3,423      |   |                           |  
|Total Expenses                                        |  |                             | 15,794,804 |   |                           |  
|                                                      |  |                             |            |   |                           |  
|INCOME (LOSS) FROM OPERATIONS                         |  |                             | (6,779,832 | ) |                           |  
|                                                      |  |                             |            |   |                           |  
|OTHER INCOME (EXPENSE)                                |  |                             |            |   |                           |  
|Interest Expense                                      |  |                             | (169,445   | ) |                           |  
|Other Income (Expense), Net                           |  |                             | (11,631    | ) |                           |  
|Total Other Expense, Net                              |  |                             | (181,076   | ) |                           |  
|                                                      |  |                             |            |   |                           |  
|LOSS BEFORE INCOME TAXES                              |  |                             | (6,960,908 | ) |                           |  
|                                                      |  |                             |            |   |                           |  
|INCOME TAX EXPENSE                                    |  |                             | —          |   |                           |  
|                                                      |  |                             |            |   |                           |  
|NET LOSS                                              |  | $                           | (6,960,908 | ) |                           | $



Revenues



The following table presents information
about our revenues and produced oil and natural gas volumes during the three and six months ended June 30, 2012, compared to the
three and six months ended June 30, 2011.  As of June 30, 2012, we were selling oil and natural gas from a total of 155 gross
wells (approximately 9.06 net wells), compared to 28 gross wells (3.13 net wells) at June 30, 2011.  Revenues
from sales of oil and natural gas were $6,763,429 and $11,861,762 during the three and six months ended June 30, 2012, respectively,
compared to $1,666,535 and $2,499,156 during the three and six months ended June 30, 2011, respectively. Our production volumes
increased 378% and 406% in the three and six months ended June 30, 2012, respectively, as compared to the three and six months
ended June 30, 2011, respectively. The production primarily increased due to the addition of 5.43 net productive Bakken and Three
Forks wells from July 1, 2011 to June 30, 2012. During the three and six months ended June 30, 2012, we realized $82.34 and $86.14
average price per barrel of oil, respectively, before theeffect of settled oil derivativescompared to $93.88 and $89.42 average price per barrel of oil during the three and six months ended June 30, 2011, respectively.For the three and six months ended June 30, 2012, crude oil represented 99% of revenues and 95% of production volume.



20







All data presented below is derived from
accrued revenue and production volumes for the relevant period indicated.



|                                                             |  | Three Months Ended June 30, |           |  | Six Months Ended June 30, |  
|------------------------------------------------------------ |  | --------------------------- | --------- |  | ------------------------- | -
|                                                             |  | 2012                        |           |  | 2011                      |  
|Net Oil and Natural Gas Revenues:                            |  |                             |           |  |                           |  
|Oil                                                          |  | $                           | 6,696,034 |  |                           | $
|Natural Gas and Other Liquids                                |  |                             | 67,395    |  |                           |  
|Total Oil and Natural Gas Sales                              |  |                             | 6,763,429 |  |                           |  
|                                                             |  |                             |           |  |                           |  
|Net Production:                                              |  |                             |           |  |                           |  
|Oil (Bbl)                                                    |  |                             | 81,323    |  |                           |  
|Natural Gas and Other Liquids (Mcf)                          |  |                             | 24,237    |  |                           |  
|Barrel of Oil Equivalent (Boe)                               |  |                             | 85,363    |  |                           |  
|                                                             |  |                             |           |  |                           |  
|Average Sales Prices:                                        |  |                             |           |  |                           |  
|Oil (per Bbl)                                                |  | $                           | 82.34     |  |                           | $
|Effect of settled oil derivatives on average price (per Bbl) |  | $                           | 1.09      |  |                           | $
|Oil net of settled derivatives (per Bbl)                     |  | $                           | 83.43     |  |                           | $
|                                                             |  |                             |           |  |                           |  
|Natural Gas and Other Liquids (per Mcf)                      |  | $                           | 2.78      |  |                           | $
|                                                             |  |                             |           |  |                           |  
|Barrel of Oil Equivalent with realized derivatives (per Boe) |  | $                           | 80.27     |  |                           | $



|                                         |  | Three Months Ended June 30, |           |  | Six Months Ended June 30, |  
|---------------------------------------- |  | --------------------------- | --------- |  | ------------------------- | -
|                                         |  | 2012                        |           |  | 2011                      |  
|Net Revenues:                            |  |                             |           |  |                           |  
|Total Oil and Natural Gas Sales          |  | $                           | 6,763,429 |  |                           | $
|Realized Gain on Commodity Derivatives   |  |                             | 88,568    |  |                           |  
|Unrealized Gain on Commodity Derivatives |  |                             | 2,162,975 |  |                           |  
|Revenues                                 |  | $                           | 9,014,972 |  |                           | $



Gain on Commodity Derivatives



Realized commodity derivative gains were
$88,568 and $61,025, for the three and six months ended June 30, 2012, respectively. Unrealized commodity derivative gains were
$2,162,975 and $1,278,083, for the three and six months ended June 30, 2012, respectively. There were no commodity derivates losses
during the three and six months ended June 30, 2011. Our derivatives are not designated for hedge accounting and are accounted
for using the mark-to-market accounting method whereby gains and losses from changes in the fair value of derivative instruments
are recognized immediately into earnings.  Mark-to-market accounting treatment creates volatility in our revenues as
unrealized gains and losses from derivatives are included in total revenues and are not included in accumulated other comprehensive
income in the accompanying balance sheets.  As commodity prices increase or decrease, such changes will have an opposite
effect on the mark-to-market value of our derivatives.  Future derivatives gains will be offset by lower future wellhead
revenues. Conversely, future derivatives losses will be offset by higher future wellhead revenues based on the value at the settlement
date.  At June 30, 2012, all of our derivative contracts are recorded at their fair value, which was a net asset of $1,278,083.
We did not incur any net asset or liability with respect to derivative contracts prior to January 1, 2012.



21







Expenses



All data presented below is derived from
costs and production volumes for the relevant period indicated.



|                                                     |  | Three Months Ended June 30, |        |  | Six Months Ended June 30, |  
|---------------------------------------------------- |  | --------------------------- | ------ |  | ------------------------- | -
|                                                     |  | 2012                        |        |  | 2011                      |  
|Costs and Expenses Per Boe of Production :           |  |                             |        |  |                           |  
|Production Expenses                                  |  | $                           | 5.68   |  |                           | $
|Production Taxes                                     |  |                             | 8.54   |  |                           |  
|G&A Expenses (Excluding Share-Based Compensation)    |  |                             | 9.55   |  |                           |  
|Shared-Based Compensation                            |  |                             | 4.69   |  |                           |  
|Depletion of Oil & Natural Gas Properties            |  |                             | 37.02  |  |                           |  
|Impairment of Oil and Natural Gas Properties         |  |                             | 119.39 |  |                           |  
|Depreciation and Amortization                        |  |                             | 0.13   |  |                           |  
|Accretion of Discount on Asset Retirement Obligation |  |                             | 0.04   |  |                           |  



Production Expenses



Production expenses
were $484,829 and $951,459during the three and six months ended June 30, 2012, respectively,
compared to $148,335 and $198,313 during the three and six months ended June 30, 2011. We experience increases in operating expenses
as we add new wells and maintain production from existing properties. On a per unit basis, production expenses per Boe decreased
from $8.30 and $7.05 per barrel of oil equivalent, or Boe, sold during the three and six months ended June 30, 2011, respectively,
to $5.68 and $6.69 during the three and six months ended June 30, 2012, respectively. These decreases were related to lower operating
costs primarily in our Williston Basin wells. The severe weather conditions that increased production expenses relative to production
volumes during the three and six months ended June 30, 2011 were not experienced during the three and six months ended June 30,
2012. The largest cost component in our Williston Basin wells is the disposal of water.



Production Taxes



We pay production taxes based on realized
crude oil and natural gas sales. Production taxes were $728,588 and $1,234,609 during the three and six months ended June 30, 2012,
respectively, compared to $167,417 and $247,381 in the three and six months ended June 30, 2011, respectively. Our production taxes
during the three and six months ended June 30, 2012 were 10.8% and 10.4%, respectively, compared to 10.0% and 9.9% for the the
three and six months ended June 30, 2011. The slightly higher production taxes in 2012 relates to the mix of wells added to production
and the growing mix of producing wells that no longer qualify for reduced rates/or tax exemptions. Certain portions of our production
occurs in North Dakota and Montana jurisdictions that have lower initial tax rates for an established period of time or until an
established threshold of production is exceeded, after which the tax rates are increased to the standard tax rate.



General and Administrative Expense



General and administrative expenses were
$1,215,218 and $2,157,349 during the three and six months ended June 30, 2012, respectively, compared to $706,617 and $1,400,931
during the three and six months ended June 30, 2011, respectively. General and administrative expenses excluding share-based compensation
were $815,066 and $1,429,472 during the three and six months ended June 30, 2012, respectively, compared to $553,587 and $991,162
during the three and six months ended June 30, 2011, respectively. The increase is primarily due to increased legal, engineering,
audit and other professional expenses (increased $270,565 and $389,367 for the three and six months ended June 30, 2012, compared
to the three and six months ended June 30, 2011, respectively) and the addition of employees and related employment expenses (increased
$122,937 and $192,087 for the three and six months ended June 30, 2012, compared to the three and six months ended June 30, 2011,
respectively). Increases in legal, engineering, audit, other professional expenses and employment-related expenses for the three
and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011 were primarily the result of growth
in infrastructure. On a per unit basis, general and administrative expenses per Boe decreased significantly as we were able to
leverage our costs over a higher level of production. Share-based compensation expenses totaled $400,152 and $727,877 for the three
and six months ended June 30, 2012, respectively, compared to $153,030 and $409,769 for the three and six months ended June 30,
2011, respectively.



22







Depletion Expense



Our depletion expense is driven by many
factors, including certain exploration costs involved in the development of producing reserves, production levels and estimates
of proved reserve quantities and future developmental costs. Depletion expense was $3,160,368
and $5,158,427for the three and six months ended June 30, 2012, respectively, compared to $560,344
and $968,328 for the three and six months ended June 30, 2011, respectively. On a per-unit basis, depletion expense was $37.02
and $36.27 per Boe for the three and six months ended June 30, 2012, respectively, compared to $31.36 and $34.43 per Boe for the
three and six months ended June 30, 2011, respectively. Our depletion expense is based on the capitalized costs related to properties
having proved reserves, plus the estimated future development costs and asset retirement costs which are depleted and amortized
on the unit-of-production method based on the estimated gross proved reserves determined by independent petroleum engineers. This
increase in depletion expense for the three and six months ended June 30, 2012 compared to the three and six months ended June
30, 2011 was due primarily to the addition of 5.93 net productive wells from July 1, 2011 to June 30, 2012.



Impairment of Oil and Natural Gas Properties



We follow the full cost method of accounting
for oil and natural gas operations whereby all costs related to the exploration and development of oil and natural gas properties
are initially capitalized into a single cost center (“full cost pool”). Capitalized costs (net of related deferred
income taxes) are limited to a ceiling based on the present value of future net revenues using the 12-month unweighted average
of first-day-of-the-month price (the “12-month average price”), discounted at 10%, plus the lower of cost or fair market
value of unproved properties. If the ceiling is not greater than or equal to the total capitalized costs, then we are required
to write down capitalized costs to the ceiling. We perform this ceiling test calculation each quarter. Any required write downs
are included in the condensed statements of operations as an impairment charge. We recognized an impairment expense in the three-
and six-month periods ended June 30, 2012 in the amount of $10,191,234. Included in the full cost pool at June 30, 2012 were costs
incurred in 2010 and 2011 associated with our interest in the Niobrara development program in the DJ Basin. We incurred approximately
$23.6 million in development costs to acquire acreage and develop the program, with insufficient oil and natural gas reserves established
as a result of the development program in the third-party reserve engineer’s reserve report to offset the costs of the development
program. While the costs were incurred in 2010 and 2011, we did not fail the ceiling test until June 30, 2012. The failure was
primarily due to a decrease in the 12-month average commodity price and an increase in the local differential to NYMEX on Williston
Basin properties on the June 30, 2012 reserve report compared to March 31, 2012 and December 31, 2011 reserve reports. We did not
recognize any impairment expense in the three- and six-month periods ended June 30, 2011.



Other Expense



Other expense
was $181,076 and $696,866 for the three and six months ended June 30, 2012, respectively, compared to $539,426 and $1,028,533 for
the three and six months ended June 30, 2011, respectively. Interest expense, the largest component of other expense, was $169,445
and $685,235 for the three and six months ended June 30, 2012, respectively, compared to $506,096 and $1,001,575 for
the three and six months ended June 30, 2011, respectively. The decrease in interest expense resulted from utilization of the credit
facility’s lower cost of capital compared to the senior secured notes outstanding during 2011. Interest expense for the six
months ended June 30, 2012 included a $217,809 expense of unamortized financing costs related to the outstanding senior secured
notes that were paid in full on February 10, 2012.



23







Net Loss



We had a net loss of $6,960,908 and $7,217,278
for the three and six months ended June 30, 2012, respectively (representing $(0.12) and $(0.12) per share-basic and diluted, respectively)
compared to a net loss of $465,057 and $1,354,831 for the three and six months ended June 30, 2011, respectively (representing
$(0.01) and $(0.02) per share-basic and diluted, respectively). The improvement in our period-over-period results due to revenue
and production from oil and natural gas properties growing at a faster rate than general and administrative and other expenses,
lower interest expense, and unrealized gains on commodity derivatives were more than offset by the $10,191,234 of impairment of
oil and natural gas properties charge taken during the three and six months ended June 30, 2012.



Non-GAAP Financial Measures



Adjusted EBITDA



In addition to reporting net income (loss)
as defined under GAAP, we also present net earnings before interest, income taxes, depreciation, depletion, and amortization, accretion
of discount on asset retirement obligations, impairment of oil and natural gas properties, unrealized gain (loss) from mark-to-market
on commodity derivatives and non-cash expenses relating to share based payments recognized under ASC Topic 718 (“adjusted
EBITDA”), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings after adjustment for those items
described in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements,
such as net income (loss) (its most directly comparable GAAP measure), and our calculations thereof may not be comparable to similarly
titled measures reported by other companies. By eliminating the items described below, we believe the measure is useful in evaluating
its fundamental core operating performance. We also believe that adjusted EBITDA is useful to investors because similar measures
are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar
industries. Our management uses adjusted EBITDA to manage our business, including in preparing our annual operating budget and
financial projections. Our management does not view adjusted EBITDA in isolation and also uses other measurements, such as net
income (loss) and revenues to measure operating performance. The following table provides a reconciliation of net income (loss)
to adjusted EBITDA for the periods presented:



|                                                      |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|----------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                                      |  | 2012                        |            |   | 2011                      |  
|Net loss                                              |  | $                           | (6,960,908 | ) |                           | $
|Impairment of oil and natural gas properties          |  |                             | 10,191,234 |   |                           |  
|Interest expense                                      |  |                             | 169,445    |   |                           |  
|Accretion of discount on asset retirement obligations |  |                             | 3,423      |   |                           |  
|Depreciation, depletion and amortization              |  |                             | 3,171,512  |   |                           |  
|Stock-based compensation                              |  |                             | 400,152    |   |                           |  
|Unrealized gain on commodity derivatives              |  |                             | (2,162,975 | ) |                           |  
|Adjusted EBITDA                                       |  | $                           | 4,811,883  |   |                           | $



Adjusted Income (Loss)



In addition to reporting net income (loss)
as defined under GAAP, we also present net earnings before the impairment of oil and natural gas properties and the effect of unrealized
gain (loss) from mark-to-market on commodity derivatives (“adjusted income (loss)”), which is a non-GAAP performance
measure. Adjusted income (loss) consists of net earnings after adjustment for those items described in the table below. Adjusted
income (loss) does not represent, and should not be considered an alternative to GAAP measurements, such as net income (loss),
and our calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the
items described below, we believe the measure is useful in evaluating our fundamental core operating performance. We also believe
that adjusted income (loss) is useful to investors because similar measures are frequently used by securities analysts, investors,
and other interested parties in their evaluation of companies in similar industries. Our management uses adjusted income to manage
our business, including in preparing our annual operating budget and financial projections. Our management does not view adjusted
income (loss) in isolation and also uses other measurements, such as net income (loss) and revenues to measure operating performance.
The following table provides a reconciliation of net income (loss), to adjusted income (loss) for the periods presented:



24







|                                              |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|--------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                              |  | 2012                        |            |   | 2011                      |  
|Net loss                                      |  | $                           | (6,960,908 | ) |                           | $
|Impairment of oil and natural gas properties  |  |                             | 10,191,234 |   |                           |  
|Unrealized gain on commodity derivatives      |  |                             | (2,162,975 | ) |                           |  
|Adjusted income (loss)                        |  | $                           | 1,067,351  |   |                           | $
|Adjusted income (loss) per share – basic      |  | $                           | 0.02       |   |                           | $
|Adjusted income (loss) per share – diluted    |  | $                           | 0.02       |   |                           | $
|Weighted average shares outstanding – basic   |  |                             | 57,994,582 |   |                           |  
|Weighted average shares outstanding – diluted |  |                             | 58,814,046 |   |                           |  



Liquidity and Capital Resources



Liquidity is a measure of a company’s
ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of common stock
and by long-term and short-term borrowings. In the future, we anticipate we will be able to provide the necessary liquidity from
the revenues generated from the sales of our oil and natural gas reserves in our existing properties and availability under our
credit facility; however, if we do not generate sufficient cash flow from operations or do not have availability under our credit
facility we may attempt to continue to finance our operations through equity and/or debt financings.



As of June 30, 2012, we had cash and
cash equivalents and accounts receivable of approximately $11.6 million and accounts payable and accrued expenses of
approximately $35.5 million. In addition, as a part of the acquisition of Emerald Oil, Inc. we assumed $20.2 million of debt
that matures in November 2012. Concurrent with the Emerald Oil, Inc. acquisition we entered into an amended and restated
credit agreement with Macquarie Bank expanding our outstanding borrowings by $15.0 million with a third tranche, which is due
and payable in November 2012. The additional $15.0 million drawn under the credit facility was used to pay a portion of the
$35.5 million of current liabilities. As a result of the payments due on our current liabilities and the outstanding
borrowings that are due and payable in November 2012, we expect to have significant cash requirements in the next twelve
months. We will need to secure financing or access the capital markets to sell equity or debt, or otherwise, in order to fund
future operations and satisfy our obligations. There is no guarantee that any such required financing or equity will be
available on terms satisfactory to us or available at all.



The following table summarizes total current
assets, total current liabilities and working capital at June 30, 2012.



|Current assets            |  | $ | 12,440,680  |  
|------------------------- |  | - | ----------- | -
|Current liabilities       |  |   | 35,487,118  |  
|Working capital (deficit) |  | $ | (23,046,438 | )



25







Equity Offerings



On February 8, 2011, we completed a private
placement to accredited investors of 12,500,000 shares of common stock. The net proceeds from this sale of common stock were approximately
$46.6 million after deducting placement agent fees and estimated offering expenses. We also issued 6,250,000 warrants to subscribers
of the private placement concurrently with the sale of shares. The warrants have an exercise price of $7.10, and a five-year term
from the date of the closing. We used the proceeds from this private placement to pursue acquisition opportunities, develop our
accelerated drilling program in the Williston Basin and other working capital purposes.



Macquarie Credit Facility



On February 10, 2012, we entered into a
credit facility with Macquarie Bank Limited (“MBL”). Concurrent with the closing, we paid in full the $15 million in
outstanding senior secured promissory notes.



The facility provides up to a maximum of
$150 million in principal amount of borrowings to be used as working capital for exploration and production operations. Initially,
$15 million of financing was available under the facility based on reserves (Tranche A), with an additional $50 million maximum
under a development tranche (Tranche B). As of June 30, 2012, we had $15 million borrowed under Tranche A and $3,030,730 borrowed
under Tranche B. As of June 30, 2012, $7.7 million was undrawn and available pursuant to an approved development plan.



The borrowing base of funds available to
us under Tranche A is redetermined semi-annually based upon the net present value, discounted at 10% per annum, of the future net
revenues expected to accrue from our interests in proved reserves estimated to be produced from our oil and natural gas properties.
The facility terminates on February 10, 2015. Tranche B may be committed and drawn upon developing properties approved by MBL.



We have the option to designate the reference
rate of interest for each specific borrowing under the facility as amounts are advanced. Under Tranche A, borrowings based upon
the London Interbank Offered Rate (LIBOR) will bear interest at a rate equal to LIBOR plus a spread ranging from 2.75% to 3.25%,
depending on the percentage of borrowing base that is currently advanced. Any borrowings not designated as being based upon LIBOR
will bear interest at a rate equal to the current prime rate published by the Wall Street Journal plus a spread ranging from 1.75%
to 2.25%, depending on the percentage of borrowing base that is currently advanced. We have the option to designate either pricing
mechanism. Tranche B borrowings bear interest at a rate equal to LIBOR plus 7.5%. Interest payments are due under the facility
in arrears, in the case of a LIBOR-based loan on the last day of the specified interest period and in the case of all other loans
on the last day of each March, June, September and December. All outstanding principal is due and payable upon termination of the
facility, or February 10, 2015.



Upon the event of default, the applicable
interest rate increases under the facility and the lenders may accelerate payments under the facility, or call all obligations
due under certain circumstances. The facility references various events constituting a default, including, but not limited to,
failure to pay interest on any loan under the facility, any material violation of any representation or warranty under the credit
facility, failure to observe or perform certain covenants, conditions or agreements under the credit facility, a change in control,
default under any other material indebtedness, bankruptcy and similar proceedings and failure to pay disbursements from lines of
credit issued under the facility.



The facility
requires that we enter into hedging agreements with MBL for each month of the 36-month period following the date on which each
such hedge agreement is executed, the notional volumes for which (when aggregated with other commodity derivative agreements and
additional fixed-price physical off-take contracts then in effect, as of the date such hedging agreement is executed, is not less
than 50%, nor greater than 90%, of the reasonably anticipated projected production from our proved developed producing reserves.The facility also requires us to maintain certain financial ratios, including current ratio (at
least 1.00 to 1.00), debt coverage ratio (no more than 3.50 to 1.00) and interest coverage ratio (at least 2.50 to 1.00), commencing
on March 31, 2012. We were not in compliance with the current ratio covenant as of June 30, 2012, and a waiver was obtained from
MBL.The current ratio shortfall and resulting working capital
deficit of $23,046,438 as of June 30, 2012 is in part due to $10,454,305 of accrued capitalized costs associated with development
of oil and natural gas properties in the Williston Basin not yet invoiced us. These capitalized costs will be financed through
the facility upon receipt of associating invoices from the respective well operators. We intend to fund the remaining current working
capital deficit through interim redetermination of reserves under the facility and cash provided from operating activities.



All of our obligations under the facility
and the derivative agreements with MBL are secured by a first priority security interest in any and all of our assets.



26







On July 26, 2012, we entered into an amended
and restated credit agreement with MBL to expand the existing availability and outstanding balance under our existing credit facility.
In addition to the $20.2 million of debt obligations related to the acquisition of Emerald Oil that remain outstanding through
existing agreements, we obtained additional availability from our credit facility and drew $15 million of additional debt on a
new third tranche at an initial rate of 9% above the applicable London Interbank Borrowing Rate (LIBOR) and have the potential
to draw a maximum of $20 million. The $15 million drawn was used for existing development activities. The new tranche matures on
November 15, 2012, while Tranche A and Tranche B continue to mature on February 10, 2015. Tranche B is uncommitted; however, MBL
may, in its sole discretion and subject to an approved revised development plan and the satisfaction of certain conditions commit
additional funds under Tranche B.



Satisfaction of Our Cash Obligations for the Next Twelve
Months



With increasing production from
wells that are increasing cash flow from operations and increasing reserves, we believe we have sufficient capital to meet
our drilling commitments and expected general and administrative expenses for the next twelve months. However, we may
continue to pursue strategic acquisitions and employ an aggressive well development program. In addition, we have
approximately $35.2 million in debt outstanding that will be due and payable in November 2012, $20.2 of which is owed by
Emerald Oil. Unless we are able to increase the availability under the MBL credit facility, refinance our debt obligations or
increase our cash flow from operations, we may be required to access the capital markets at some point in 2012. We may also
choose to access the equity capital markets rather than a debt instrument to fund accelerated or continued drilling at the
discretion of management and depending on prevailing market conditions. We will evaluate any potential opportunities for
acquisitions as they arise. Given our asset base and anticipated growing cash flows, we believe we are in a position to take
advantage of any appropriately priced sales that may occur. However, there can be no assurance that any additional capital
will be available to us on favorable terms or at all.



Our prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in their early stage of operations, particularly companies
in the oil and natural gas exploration industry. Such risks include, but are not limited to, an evolving and unpredictable business
model and the management of growth. To address these risks we must, among other things, implement and successfully execute our
business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There
can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect
on our business prospects, financial condition and results of operations.



Effects of Inflation and Pricing



The oil and natural gas industry is very
cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry put extreme
pressure on the economic stability and pricing structure within the industry. Typically, as prices for oil and natural gas increase,
so do all associated costs. Conversely, in a period of declining prices, associated cost declines are likely to lag and may not
adjust downward in proportion. Material changes in prices also impact our current revenue stream, estimates of future reserves,
borrowing base calculations of bank loans, impairment assessments of oil and natural gas properties, and values of properties in
purchase and sale transactions. Material changes in prices can impact the value of oil and natural gas companies and their ability
to raise capital, borrow money and retain personnel. While we do not currently expect business costs to materially increase, higher
prices for oil and natural gas could result in increases in the costs of materials, services and personnel.



Cash and Cash Equivalents



Our total cash resources as of June 30,
2012 were $4,113,794, compared to $13,927,267 as of December 31, 2011. The decrease in our cash balance was primarily attributable
to the acquisition and development of oil and natural gas properties.



27







Net Cash Provided By (Used For) Operating Activities



Net cash provided by (used for) operating
activities was $3,336,917 for the six months ended June 30, 2012 compared to $(1,784,960) for the six months ended June 30, 2011.
The change in the net cash used in operating activities is primarily attributable to higher production revenue in 2012.



Net Cash Used In Investment Activities



Net cash used in investment activities
was $15,781,304 for the six months ended June 30, 2012 compared to $24,596,447 for the six months ended June 30, 2011. The cash
used in investment activities is primarily attributable to the purchase and development of oil and natural gas properties in the
Williston Basin during the periods.



Net Cash Provided By Financing Activities



Net cash provided by financing activities
was $2,630,914 for the six months ended June 30, 2012 compared to $46,619,211 for the six months ended June 30, 2011. The change
in net cash provided by financing activities for the six months ended June 30, 2012 is primarily attributable to proceeds from
the new credit facility and payment of the senior secured promissory notes. The change in net cash provided by financing activities
for the six months ended June 30, 2011 is primarily attributable to proceeds from the private placement described in Item 2. Management’s
Discuss and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Equity
Offeringsabove.



Off-Balance Sheet Arrangements



We currently do not have any off-balance
sheet arrangements.



2012 Drilling Projects



Subsequent to the second quarter ended
June 30, 2012, we acquired Emerald and made a strategic decision to add operating capabilities and focus on growing operating acreage
in the Williston Basin. Considering that we recently closed on the acquisition of Emerald, we are still evaluating our capital
expenditure plans and evaluating how much of an effect our strategy, which includes swapping non-operating acreage for operating
acreage that we intend to develop in future years, will have on our 2012 development plans. With the increased return on capital
opportunities of participating in our own developed wells, we may encounter situations where we swap out of non-operated acreage
for operated acreage and forgo the opportunity to participate in non-operated wells developed on the acreage. Additionally, as
we evaluate return on capital potentially of wells developed by other operators, we may decide to not participate in the development
of the first well developed on our non-operated acreage, and go non-consent, but could have the opportunity to participate in future
well development on future in-fill wells in the leased area that are held by production with an existing producing well. We believe
adding operating capabilities will provide us more control over our capital budget and ultimately will result in a higher return
on capital over the long-term. We expect to fund all of our 2012 capital expenditures using cash-on-hand, cash flow from operations, borrowings under our revolving credit facility and equity and/or debt financings.



Our future financial results will depend
primarily on: (i) the ability to continue to source and screen potential projects; (ii) the ability to discover commercial quantities
of crude oil and natural gas; (iii) the market price for crude oil and natural gas; and (iv) the ability to fully implement our
exploration and development program, which is dependent on the availability of capital resources. There can be no assurance that
we will be successful in any of these respects, that the prices of crude oil and natural gas prevailing at the time of production
will be at a level allowing for profitable production, or that we will be able to obtain additional funding, if necessary.



28







Critical Accounting Policies



Revenue Recognition and Natural Gas Balancing



We recognize oil and natural gas revenues
from our interests in producing wells when production is delivered, and title has transferred to the purchaser and to the extent
the selling price is reasonably determinable. We use the sales method of accounting for natural gas balancing of natural gas production
and would recognize a liability if the existing proven reserves were not adequate to cover the current imbalance situation. As
of June 30, 2012 and December 31, 2011, our natural gas production was in balance, i.e., our cumulative portion of natural gas
production taken and sold from wells in which we have an interest equaled our entitled interest in natural gas production from
those wells.



Full Cost Method



We follow the full cost method of accounting
for oil and natural gas operations whereby all costs related to the exploration and development of oil and natural gas properties
are initially capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs,
a portion of employee salaries related to property development, geological and geophysical expenses, carrying charges on non-producing
properties, costs of drilling directly related to acquisition, and exploration activities. For the three and six months ended June
30, 2012, we capitalized $234,484 and $473,099 of internal salaries, respectively, which included $194,497 and $395,768 of stock-based
compensation, respectively. Internal salaries are capitalized based on employee time allocated to the acquisition of leaseholds
and development of oil and natural gas properties. We capitalized interest of $57,098 for the three and six months ended June 30,
2012. We did not capitalize interest for the three and six months ended June 30, 2011.



Proceeds from property sales will generally
be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship
between capitalized costs and the proved reserves attributable to these costs. As of June 30, 2012, we had no property sales since
inception.



We assess all items classified as unevaluated
property on a quarterly basis for possible impairment or reduction in value. The assessment includes consideration of the following
factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity;
the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period
in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion
of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization. For the six months
ended June 30, 2012 we had no costs that were transferred to the full cost pool related to impairment. For the year ended December
31, 2011, we included $6,983,125 related to expiring leases within costs subject to the depletion calculation.



Capitalized costs associated with impaired
properties and properties having proved reserves, estimated future development costs, and asset retirement costs under FASB ASC
410-20-25 are depleted and amortized on the unit-of-production method based on the estimated gross proved reserves. The costs of
unproved properties are withheld from the depletion base until such time as they are either developed, impaired or abandoned.



Capitalized costs (net of related deferred
income taxes) are limited to a ceiling based on the present value of future net revenues using the 12-month unweighted average
of first-day-of-the-month price (the “12-month average price”), discounted at 10%, plus the lower of cost or fair market
value of unproved properties. If the ceiling is not greater than or equal to the total capitalized costs, we are required to write
down capitalized costs to the ceiling. We perform this ceiling test calculation each quarter. Any required write downs are included
in the condensed statements of operations as an impairment charge. There was no impairment for the six months ended June 30, 2012
and 2011.



Joint Ventures



The condensed financial statements as of
June 30, 2012 and 2011 include our accounts and our proportionate share of the assets, liabilities, and results of operations of
the joint ventures in which we are involved.



29







Stock-Based Compensation



We have accounted for stock-based compensation
under the provisions of ASC 718-10-55. We recognize stock-based compensation expense in the financial statements over the vesting
period of equity-classified employee stock-based compensation awards based on the grant date fair value of the awards, net of estimated
forfeitures. For options and warrants we use the Black-Scholes option valuation model to calculate the fair value of stock based
compensation awards at the date of grant. Option pricing models require the input of highly subjective assumptions, including the
expected price volatility. For the stock options and warrants granted we have used a variety of comparable and peer companies to
determine the expected volatility input based on the expected term of the options. We believe the use or peer company data fairly
represents the expected volatility it would experience if it were in the oil and natural gas industry over the expected term of
the options. We used the simplified method to determine the expected term of the options due to the lack of historical data. Changes
in these assumptions can materially affect the fair value estimate.



On May 27, 2011, our shareholders approved
the Voyager Oil & Gas, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), under which 5,000,000 shares of common
stock have been reserved. The purpose of the 2011 Plan is to promote the success of the Company by facilitating the employment
and retention of competent personnel and by furnishing incentives to those employees, directors and consultants upon whose efforts
the success of the Company will depend to a large degree. It is our intention to carry out the 2011 Plan through the granting of
incentive stock options, nonqualified stock options, restricted stock awards, restricted stock unit awards, performance awards
and stock appreciation rights. As of June 30, 2012, we had issued 1,520,000 shares of common stock reserved under the 2011 Plan.



Cautionary Factors That May Affect Future Results



This Quarterly Report on Form 10-Q contains,
and we may from time to time otherwise make in other public filings, press releases and presentations, forward-looking statements
within the meaning of the federal securities laws. All statements other than statements of historical facts are forward-looking
statements.  Such statements can be identified by the use of forward-looking terminology such as “believe,” “expect,”
“may,” “should,” “seek,” “on-track,” “plan,” “project,”
“forecast,” “intend” or “anticipate,” or the negative thereof or comparable terminology, or
by discussions of vision, strategy or outlook, including statements related to our beliefs and intentions with respect to our growth
strategy, including the amount we may invest, the location, and the scale of the drilling projects in which we intend to participate;
our beliefs with respect to the potential value of drilling projects; our beliefs with regard to the impact of environmental and
other regulations on our business; our beliefs with respect to the strengths of our business model; our assumptions, beliefs, and
expectations with respect to future market conditions; our plans for future capital expenditures; and our capital needs, the adequacy
of our capital resources, and potential sources of capital. You are cautioned that our business and operations are subject to a
variety of risks and uncertainties, many of which are beyond our control and, consequently, our actual results may differ materially
from those projected by any forward-looking statements. You should consider carefully the statements under the “Risk Factors”
section of this report and in our Annual Report on Form 10-K for the year ended December 31, 2011 and the other disclosures contained
herein and therein, which describe factors that could cause our actual results to differ from those anticipated in the forward-looking
statements, including, but not limited to, the following factors:



| | · | our ability to diversify our operations in terms of both the nature and geographic scope of our business;
| | - | ---------------------------------------------------------------------------------------------------------



| | · | our ability to generate sufficient cash flow from operations, borrowings or other sources to enable us to fully develop our
undeveloped acreage positions;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our ability to successfully acquire additional properties, to discover reserves, to participate in exploration opportunities
and to identify and enter into commercial arrangements with customers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | competition, including competition for acreage in resource play areas;
| | - | ----------------------------------------------------------------------



30







| | · | our ability to retain key members of management;
| | - | ------------------------------------------------



| | · | volatility in commodity prices for oil and natural gas;
| | - | -------------------------------------------------------



| | · | the possibility that our industry may be subject to future regulatory or legislative actions (including any additional taxes
and changes in environmental regulation);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the presence or recoverability of estimated oil and natural gas reserves and the actual future production rates and associated
costs;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | the timing of and our ability to obtain financing on acceptable terms;
| | - | ----------------------------------------------------------------------



| | · | interest payment requirements of our debt obligations;
| | - | ------------------------------------------------------



| | · | restrictions imposed by our debt instruments and compliance with our debt covenants;
| | - | ------------------------------------------------------------------------------------



| | · | substantial impairment write-downs;
| | - | -----------------------------------



| | · | our ability to replace oil and natural gas reserves;
| | - | ----------------------------------------------------



| | · | environmental risks;
| | - | --------------------



| | · | drilling and operating risks;
| | - | -----------------------------



| | · | exploration and development risks;
| | - | ----------------------------------



| | · | general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business,
may be less favorable than expected, including the possibility that the economic conditions in the United States will worsen and
that capital markets are disrupted, which could adversely affect demand for oil and natural gas and make it difficult to access
financial markets; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively
impact our business, operations or pricing.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All forward-looking statements speak only
as of the date of this report and are expressly qualified in their entirety by the cautionary statements in this paragraph and
elsewhere in this report. Other than as required under the securities laws, we do not assume a duty to update these forward-looking
statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



Commodity Price Risk



The price we receive for our oil and natural
gas production heavily influences our revenue, profitability, access to capital and future rate of growth. Crude oil and natural
gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply
and demand. Historically, the markets for oil and natural gas have been volatile, and these markets will likely continue to be
volatile in the future. The prices we receive for our production depend on numerous factors beyond our control. Our revenues during
the three and six months ended June 30, 2012 and June 30, 2011 generally have increased or decreased along with any increases or
decreases in crude oil or natural gas prices, but the exact impact on our income is indeterminable given the variety of expenses
associated with producing and selling crude oil and natural gas that also increase and decrease along with crude oil and natural
gas prices.



31







We entered into a facility with MBL on
February 10, 2012 that requires us to enter into commodity derivative instruments for each month of the 36-month period following
the date on which each such hedge agreement is executed, the notional volumes for which when aggregated with other commodity swap
agreements and additional fixed-price physical off-take contracts then in effect, as of the date such instrument is executed, is
not less than 50%, nor greater than 90%, of the reasonably anticipated projected production from our proved developed producing
reserves. We intend to use of these commodity derivative instruments as a means of managing our exposure to price changes in the
future. For additional discussion, see Item 2. Management’s Discuss and Analysis of Financial Condition and Results of Operations — Liquidity
and Capital Resources — Macquarie Credit Facilityabove.



Interest Rate Risk



As of June 30, 2012, we had borrowed $15
million under Tranche A and $3,030,730 under Tranche B under our credit facility.



Our credit facility with MBL subjects us
to interest rate risk on borrowings. The credit facility allows us to fix the interest rate of borrowings under it for all or a
portion of the principal balance for a period up to six months. To the extent the interest rate is fixed, interest rate changes
affect the instrument’s fair market value but do not impact results of operations or cash flows. Conversely, for the portion
of our borrowings that has a floating interest rate, interest rate changes will not affect the fair market value but will impact
future results of operations and cash flows.



ITEM 4. CONTROLS AND PROCEDURES



Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of the
end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.



There have been no changes (including corrective
actions with regard to significant deficiencies of material weaknesses) in our internal control over financial reporting that occurred
during our most recently completed fiscal quarter 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 subject to litigation claims and
governmental and regulatory proceedings arising in the ordinary course of business.  We believe that all such litigation matters
are not likely to have a material adverse effect on the Company’s financial position, cash flows or results of operations.



ITEM 1A. RISK FACTORS



In addition to the other information set
forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks discussed in our Annual Report on Form 10-K
for the year ended December 31, 2011, including those listed under the heading “Item 1A. Risk Factors,” which risks
could materially affect our business, financial condition or future results. There have been no material changes to the risk factors
described in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2012,except as stated below.



32







Acquisitions, such as the Emerald Oil purchase, may prove
to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities.



Our recent growth is due in large part to acquisitions of producing
properties and undeveloped leasehold, especially the Emerald Oil acquisition. We expect acquisitions, such as the Emerald Oil purchase,
will also contribute to our future growth. Successful acquisitions require an assessment of a number of factors, including estimates
of recoverable reserves, exploration potential, future oil and natural gas prices, operating costs and potential environmental
and other liabilities. Such assessments are inexact and their accuracy is inherently uncertain. In connection with our assessments,
we perform a review of the acquired properties which we believe is generally consistent with industry practices. However, such
a review will not reveal all existing or potential problems, and does not involve a review of seismic data or independent environmental
testing, including for the Emerald Oil purchase. In addition, our review may not permit us to become sufficiently familiar with
the properties to fully assess their deficiencies and capabilities, including any structural, subsurface and environmental problems
that may exist or arise. As a result of these factors, we may not be able to acquire oil and natural gas properties that contain
economically recoverable reserves or be able to complete future acquisitions on terms that we believe are acceptable or, even if
completed, that do not contain problems that reduce the value of acquired property.



We may have difficulty integrating and managing the growth
associated with the Emerald Oil acquisition.



The Emerald Oil acquisition has resulted in a significant growth
in our assets, reserves and revenues and may place a significant strain on our financial, technical, operational and administrative
resources. We may not be able to integrate the operations of the acquired assets without increases in costs, losses in revenues
or other difficulties. In addition, we may not be able to realize the operating efficiencies, synergies, costs savings or other
benefits expected from the Emerald Oil acquisition. Any unexpected costs or delays incurred in connection with the integration
could have an adverse effect on our business, results of operations or financial condition. Our ability to continue to grow after
the Emerald Oil acquisition will depend upon a number of factors, including our ability to identify and acquire new exploratory
prospects, other acquisition targets, our ability to develop then existing prospects, our ability to continue to retain and attract
skilled personnel, the results of our drilling program and acquisition efforts, hydrocarbon prices and access to capital. We may
not be successful in achieving or managing growth and any such failure could have a material adverse effect on us.



Properties that we acquire may not produce as projected,
and we may not have identified all liabilities associated with the properties.



Our assessment of the properties in acquisitions may not reveal
all existing or potential problems. In the course of our due diligence, we may not inspect every well. Inspections may not reveal
structural or environmental problems. We may be required to assume the risk of the physical condition of the properties in addition
to the risk that the properties may not perform in accordance with our expectations.



If we are not able to generate sufficient funds from our
operations and other financing sources, we may not be able to finance our planned development activity, acquisitions or service
our debt.



We have been dependent on debt and equity financing to fund
our cash needs that are not funded from operations or the sale of assets. In addition, low commodity prices, production problems,
disappointing drilling results and other factors beyond our control could reduce our funds from operations and may restrict our
ability to obtain additional financing or to pay interest and principal on our debt obligations. Furthermore, we have incurred
losses in the past that may affect our ability to obtain financing. Quantifying or predicting the likelihood of any or all of these
occurring is difficult in the current domestic and world economy. For these reasons, financing may not be available to us in the
future on acceptable terms or at all. In the event additional capital is required but not available on acceptable terms, we would
curtail our acquisition, drilling, development and other activities or could be forced to sell some of our assets on an untimely
or unfavorable basis.



We have significant debt, trade payables, other long-term
obligations.



Our trade payables, other long-term obligations and related
interest payment requirements and scheduled debt maturities may have important negative consequences. For instance, they could:



| | · | make it more difficult or render us unable to satisfy these or our other financial obligations;
| | - | -----------------------------------------------------------------------------------------------



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| | · | require us to dedicate a substantial portion of any cash flow from operations to the payment of overriding royalties or interest
and principal due under our debt, which will reduce funds available for other business purposes;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | increase our vulnerability to general adverse economic and industry conditions;
| | - | -------------------------------------------------------------------------------



| | · | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | place us at a competitive disadvantage compared to some of our competitors that have less financial leverage; and
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general
corporate purposes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



Our ability to overcome our negative working capital and to
satisfy our financial obligations and commitments depends on our future operating performance and on economic, financial, competitive
and other factors, many of which are beyond our control. We cannot provide assurance that our business will generate sufficient
cash flow or that future financings will be available to provide sufficient proceeds to meet these obligations. The inability to
meet our financial obligations and commitments will impede the successful execution of our business strategy and the maintenance
of our economic viability. Oil and natural gas prices are volatile, and low prices have had in the past and could have in the future
a material adverse impact on our business. Our revenues, profitability and future growth and the carrying value of our properties
depend substantially on the prices we realize for our oil and natural gas production. Our realized prices also affect the amount
of cash flow available for capital expenditures and our ability to borrow and raise additional capital.



Restrictive debt covenants could limit our growth and
our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities
that may be in our best interests.



Our bank credit facility contains a number of significant covenants
that, among other things, restrict or limit our ability to:



| | · | pay dividends or distributions on our capital stock;
| | - | ----------------------------------------------------

| | · | make certain loans and investments;
| | - | -----------------------------------

| | · | enter into certain transactions with affiliates;
| | - | ------------------------------------------------

| | · | create or assume certain liens on our assets;
| | - | ---------------------------------------------

| | · | merge or to enter into other business combination transactions;
| | - | ---------------------------------------------------------------

| | · | enter into transactions that would result in a change of control of us; or
| | - | --------------------------------------------------------------------------

| | · | engage in certain other corporate activities.
| | - | ---------------------------------------------



Also, our bank credit facility requires us to maintain compliance
with specified financial ratios and satisfy certain financial condition tests. Our ability to comply with these ratios and financial
condition tests may be affected by events beyond our control, and we cannot assure you that we will meet these ratios and financial
condition tests. These financial ratio restrictions and financial condition tests could limit our ability to obtain future financings,
make needed capital expenditures, withstand a future downturn in our business or the economy in general or otherwise conduct necessary
corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the limitations
that the restrictive covenants under our bank credit facility impose on us.



A breach of any of these covenants or our inability to comply
with the required financial ratios or financial condition tests could result in a default under our bank credit facility. A default,
if not cured or waived, could result in all indebtedness outstanding under our bank credit facility to become immediately due and
payable. If that should occur, we may not be able to pay all such debt or borrow sufficient funds to refinance it. Even if new
financing were then available, it may not be on terms that are acceptable to us. If we were unable to repay those amounts, the
lenders could accelerate the maturity of the debt or proceed against any collateral granted to them to secure such defaulted debt.



34







We have limited control over activities on properties
that we do not operate.



We are not the operator on a significant portion of our properties.
Because we are not the operator for these properties, our ability to exercise influence over the operations of these properties
or their associated costs is limited. Our dependence on the operators and other working interest owners of these projects and our
limited ability to influence operations and associated costs or control the risks could materially and adversely affect the realization
of our targeted returns on capital in drilling or acquisition activities. The success and timing of our drilling and development
activities on properties operated by others therefore depends upon a number of factors, including:



| | · | timing and amount of capital expenditures;
| | - | ------------------------------------------

| | · | the operator’s expertise and financial resources;
| | - | -------------------------------------------------

| | · | the rate of production of reserves, if any;
| | - | -------------------------------------------

| | · | approval of other participants in drilling wells; and
| | - | -----------------------------------------------------

| | · | selection of technology.
| | - | ------------------------



In areas where we do not have the right to propose the drilling
of wells, we may have limited influence on when, how and at what pace our properties in those areas are developed. Further, the
operators of those properties may experience financial problems in the future or may sell their rights to another operator not
of our choosing, both of which could limit our ability to develop and monetize the underlying natural gas reserves. In addition,
the operators of these properties may elect to curtail the oil or natural gas production or to shut in the wells on these properties
during periods of low oil or natural gas prices, and we may receive less than anticipated or no production and associated revenues
from these properties until the operator elects to return them to production.



Delays in the development of or production curtailment
at our material properties may adversely affect our financial position and results of operations.



The size of our operations and our capital expenditures budget
limit the number of properties that we can develop in any given year. Complications in the development of any single major well
or infrastructure installation may result in a material adverse effect on our financial condition and results of operations. In
addition, relatively few wells contribute a substantial portion of our production. If we were to experience operational problems
or adverse commodity prices resulting in the curtailment of production in any of these wells, our total production levels would
be adversely affected, which would have a material adverse effect on our financial condition and results of operations.



Federal legislation regarding derivatives could have an
adverse effect on our ability and cost of entering into derivative transactions.



On July 21, 2010, President Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Reform Act”), which, among other provisions, establishes
federal oversight and regulation of the over-the-counter derivatives market and entities that participate in that market. The new
legislation requires the Commodities Futures Trading Commission (the “CFTC”) and the SEC to promulgate rules and regulations
implementing the new legislation within 360 days from the date of enactment. On October 1, 2010, the CFTC introduced its first
series of proposed rules coming out of the Dodd-Frank Reform Act. In July 2011, the CFTC granted temporary exemptive relief from
certain swap regulation provisions of the legislation until December 31, 2011, or until the agency finalized the corresponding
rules. In December 2011, the CFTC extended the potential latest expiration date of the exemptive relief to July 16, 2012.
In May 2012, the CFTC proposed an amendment to further extend the potential latest expiration date until December 31, 2012.



35







In its rulemaking under the new legislation, the CFTC has issued
a final rule on position limits for certain futures and option contracts in the major energy markets and for swaps that are their
economic equivalents. Certain bona fide hedging transactions or positions are exempt from these position limits. The CFTC has also
issued final rules further defining “swap dealer” and “major swap participant.” It is not possible at this
time to predict when the CFTC will finalize other regulations, including critical rulemaking on the definition of “swap.”
Depending on our classification under the regulations, the financial reform legislation may require us to comply with margin requirements
and with certain clearing and trade-execution requirements in connection with our derivative activities. The financial reform legislation
may also require our counterparties to the derivative contracts to spin off some of their derivatives activities to separate entities,
which may not be as creditworthy as the current counterparties. The new legislation and any new regulations could significantly
increase the cost of derivative contracts (including through requirements to post collateral which could adversely affect our available
liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks
we encounter, reduce our ability to monetize or restructure existing derivative contracts, and increase our potential exposure
to less creditworthy counterparties. If we reduce our use of derivatives or commodity prices decline as a result of the legislation
and regulations, our results of operations may become more volatile and cash flows may be less predictable, which could adversely
affect our ability to plan for and fund capital expenditures, our results of operations, or our cash flows.



ITEM 6. EXHIBITS



The following documents are included as
exhibits to this Quarterly Report on Form 10-Q. Those exhibits incorporated by reference are so indicated by the information supplied
with respect thereto. Those exhibits which are not incorporated by reference are attached hereto.



| | 2.1 | Securities Purchase Agreement, dated July 9, 2012, among Voyager Oil & Gas, Inc., Emerald Oil & Gas NL and Emerald
Oil, Inc. (incorporated by reference to Exhibit 2.1 to our current report on Form 8-K filed on July 10, 2012)
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.1 | Amended and Restated Credit Agreement, dated July 26, 2012, among Voyager Oil & Gas, Inc., as Borrower, Macquarie Bank
Limited, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to our current report
on Form 8-K filed on July 31, 2012)
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and J.R. Reger (incorporated by reference to
Exhibit 10.2 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.3 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and McAndrew Rudisill (incorporated by reference
to Exhibit 10.3 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and Mike Krzus (incorporated by reference to
Exhibit 10.4 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and Mitchell R. Thompson (incorporated by reference
to Exhibit 10.5 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and Paul Wiesner (incorporated by reference
to Exhibit 10.6 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7 | Employment Agreement, dated July 26, 2012, between Voyager Oil & Gas, Inc. and Karl Osterbuhr (incorporated by reference
to Exhibit 10.7 to our current report on Form 8-K filed on July 31, 2012)
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.8 | Employment Agreement dated March 30, 2012 by and between Martin J. Beskow and Voyager Oil & Gas, Inc. (incorporated by
reference to Exhibit 10.1 to our current report on Form 8-K filed on April 5, 2012)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.1* | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2* | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36







| | 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 101.INS1 | XBRL Instance Document
| | -------- | ----------------------



| | 101.SCH1 | XBRL Schema Document
| | -------- | --------------------



| | 101.CAL1 | XBRL Calculation Linkbase Document
| | -------- | ----------------------------------



| | 101.LAB1 | XBRL Label Linkbase Document
| | -------- | ----------------------------



| | 101.PRE1 | XBRL Presentation Linkbase Document
| | -------- | -----------------------------------










| | * | Attached hereto.
| | - | ----------------

| | 1 | To be filed by amendment.
| | - | -------------------------



SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto
duly authorized.



|Dated: August 6, 2012 | VOYAGER OIL & GAS, INC.                              
|--------------------- | -----------------------------------------------------
|                      |                                                      
|                      | /s/ Michael Krzus                                    
|                      | Michael Krzus                                        
|                      | Chief Executive Officer (principal executive officer)
|                      |                                                      
|                      | /s/ Paul Wiesner                                     
|                      | Paul Wiesner                                         
|                      | Chief Financial Officer (principal financial officer)



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