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** **

 

** **

**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 March 31, 2011**

 

**OR**

 
| **o** | ** ** | **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. 0-50848**

 

**Voyager Oil & Gas, Inc.**

 (Exact name of registrant as specified in its charter)

 

| **Delaware**                      | ** ** | **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 o

 

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). Yes o  No o

 

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 o                |   | Accelerated filer x         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer o                  |   | Smaller reporting company o |
| (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 o  No x

 

As of May 9, 2011, there were 57,848,431 shares of Common Stock, $0.001 par value per share outstanding.

 

 

 

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**VOYAGER OIL & GAS, INC.**

 

**INDEX**

 
| ** **    | ** **            | ** **                                                                                                            | **Page of**   |
|---------------|-----------------------|-----------------------------------------------------------------------------------------------------------------------|--------------------|
| ** **    | ** **            | ** **                                                                                                            | **Form 10-Q** |
| PART I.  | FINANCIAL INFORMATION |
|          |                  |                                                                                                                  |               |
|          | ITEM 1.               | FINANCIAL STATEMENTS                                                                                                  |               |
|          |                  |                                                                                                                  |               |
|          |                  | Condensed   Consolidated Balance Sheets as of March 31, 2011 (unaudited) and   December 31, 2010            | 1                  |
|          |                  |                                                                                                                  |               |
|          |                  | Unaudited   Condensed Consolidated Statements of Operations for the three months ended   March 31, 2011 and 2010 | 2                  |
|          |                  |                                                                                                                  |               |
|          |                  | Unaudited   Condensed Consolidated Statements of Cash Flows for the three months ended March 31,   2011 and 2010 | 3                  |
|          |                  |                                                                                                                  |               |
|          |                  | Notes   to Unaudited Condensed Consolidated Financial Statements                                                      | 4                  |
|          |                  |                                                                                                                  |               |
|          | ITEM 2.               | MANAGEMENT’S   DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                          | 15                 |
|          |                  |                                                                                                                  |               |
|          | ITEM 3.               | QUANTITATIVE   AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                          | 23                 |
|          |                  |                                                                                                                  |               |
|          | ITEM 4.               | CONTROLS AND   PROCEDURES                                                                                             | 23                 |
|          |                  |                                                                                                                  |               |
| PART II. | OTHER INFORMATION     | 23                                                                                                                    |
|          |                  |                                                                                                                  |               |
|          | ITEM 1.               | LEGAL PROCEEDINGS                                                                                                     | 23                 |
|          |                  |                                                                                                                  |               |
|          | ITEM 1A.              | RISK FACTORS                                                                                                          | 24                 |
|          |                  |                                                                                                                  |               |
|          | ITEM 6.               | EXHIBITS                                                                                                              | 24                 |
|          |                  |                                                                                                                  |               |
| SIGNATURES    | 24                    |
|               |                       |                                                                                                                       |                    |  |

 

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**PART 1 — FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS**

 

**VOYAGER OIL & GAS, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**AS OF MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010**

 
| ** **                                                          | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                          | ** ** | **2011**           | ** ** | **2010**              | ** ** |
| ** **                                                          | ** ** | **(UNAUDITED)**    | ** ** | ** **            | ** ** |
| **ASSETS**                                                          |       |               |       |                  |       |
| **CURRENT ASSETS**                                                  |       |               |       |                  |       |
| Cash and Cash Equivalents                                           |       | $                  | 46,879,679 |                  | $          | 11,358,520 |   |
| Trade Receivables                                                   |       | 476,863            |       | 295,821               |       |
| Short Term Investments                                              |       | —             |       | 242,070               |       |
| Prepaid Drilling Costs                                              |       | 3,069,567          |       | 493,660               |       |
| Prepaid Expenses                                                    |       | 47,589             |       | 85,988                |       |
| Restricted Cash                                                     |       | 51,000             |       | 51,000                |       |
| Other Current Assets                                                |       | —             |       | 1,465                 |       |
| Total Current Assets                                                |       | 50,524,698         |       | 12,528,524            |       |
|                                                                |       |               |       |                  |       |
| **PROPERTY AND EQUIPMENT**                                          |       |               |       |                  |       |
| Oil and Natural Gas Properties, Full Cost Method                    |       |               |       |                  |       |
| Proved Properties                                                   |       | 10,367,288         |       | 6,700,438             |       |
| Unproved Properties                                                 |       | 37,992,372         |       | 31,176,109            |       |
| Other Property and Equipment                                        |       | 83,428             |       | 18,346                |       |
| Total Property and Equipment                                        |       | 48,443,088         |       | 37,894,893            |       |
| Less - Accumulated Depreciation and Depletion                       |       | (2,336,762         | )          | (1,927,991            | )          |
| Total Property and Equipment, Net                                   |       | 46,106,326         |       | 35,966,902            |       |
|                                                                |       |               |       |                  |       |
| Total Assets                                                        |       | $                  | 96,631,024 |                  | $          | 48,495,426 |   |
|                                                                |       |               |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                       |       |               |       |                  |       |
| **CURRENT LIABILITIES**                                             |       |               |       |                  |       |
| Accounts Payable                                                    |       | $                  | 2,734,945  |                  | $          | 537,757 |   |
| Accrued Expenses                                                    |       | 180,576            |       | 188,923               |       |
| Operating Lease Reserve                                             |       | 100,376            |       | 200,756               |       |
| Senior Secured Promissory Notes, Net                                |       | 14,892,123         |       | 14,836,644            |       |
| Total Current Liabilities                                           |       | 17,908,020         |       | 15,764,080            |       |
|                                                                |       |               |       |                  |       |
| **LONG-TERM LIABILITIES**                                           |       |               |       |                  |       |
| Other Noncurrent Liabilities                                        |       | 16,004             |       | 10,522                |       |
|                                                                |       |               |       |                  |       |
| Total Liabilities                                                   |       | 17,924,024         |       | 15,774,602            |       |
|                                                                |       |               |       |                  |       |
| **STOCKHOLDERS’ EQUITY**                                       |       |               |       |                  |       |
| Preferred Stock - Par Value $.001; 20,000,000   Shares Authorized;  |       |               |       |                  |       |
| None Issued or Outstanding                                          |       | —             |       | —                |       |
| Common Stock, Par Value $.001; 100,000,000   Authorized, 57,848,431 |       |               |       |                  |       |
| Outstanding (12/31/2010 — 45,344,431 Shares   Outstanding)     |       | 57,848             |       | 45,344                |       |
| Additional Paid-In Capital                                          |       | 86,067,953         |       | 39,204,507            |       |
| Accumulated Deficit                                                 |       | (7,418,801         | )          | (6,529,027            | )          |
| Total Stockholders’ Equity                                     |       | 78,707,000         |       | 32,720,824            |       |
|                                                                |       |               |       |                  |       |
| Total Liabilities and Stockholders’ Equity                     |       | $                  | 96,631,024 |                  | $          | 48,495,426 |   |

 

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

 

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**VOYAGER OIL & GAS, INC.**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010**

 
| ** **                                                     | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | **March 31,**               | ** ** |
| ** **                                                     | ** ** | **2011**                         | ** ** | **2010** | ** ** |
| **REVENUES**                                                   |       |                             |       |   |   |
| Oil and Gas Sales                                              |       | $                                | 832,621    |   | $ | 22,497 |   |
|                                                           |       |                             |       |   |   |
| **OPERATING EXPENSES**                                         |       |                             |       |   |   |
| Production Expenses                                            |       | 49,978                           |       | — |   |
| Production Taxes                                               |       | 79,964                           |       | 2,587 |   |
| General and Administrative Expense                             |       | 694,314                          |       | 255,710 |   |
| Depletion of Oil and Gas Properties                            |       | 407,984                          |       | 8,500 |   |
| Depreciation and Amortization                                  |       | 787                              |       | 732 |   |
| Accretion of Discount on Asset Retirement   Obligations        |       | 261                              |       | — |   |
| Total Expenses                                                 |       | 1,233,288                        |       | 267,529 |   |
|                                                           |       |                             |       |   |   |
| **LOSS FROM OPERATIONS**                                       |       | (400,667                         | )          | (245,032 | ) |
|                                                           |       |                             |       |   |   |
| **OTHER INCOME (EXPENSE)**                                     |       |                             |       |   |   |
| Interest Expense                                               |       | (495,479                         | )          | — |   |
| Other Income                                                   |       | 6,372                            |       | 10,991 |   |
| Total Other Income (Expense)                                   |       | (489,107                         | )          | 10,991 |   |
|                                                           |       |                             |       |   |   |
| **LOSS BEFORE INCOME TAXES**                                   |       | (889,774                         | )          | (234,041 | ) |
|                                                           |       |                             |       |   |   |
| **INCOME TAX PROVISION**                                       |       | —                           |       | — |   |
|                                                           |       |                             |       |   |   |
| **NET LOSS**                                                   |       | $                                | (889,774   | ) | $ | (234,041 | ) |
|                                                           |       |                             |       |   |   |
| Net Loss Per Common Share — Basic and Diluted             |       | $                                | (0.02      | ) | $ | (0.01 | ) |
|                                                           |       |                             |       |   |   |
| Weighted Average Shares Outstanding — Basic and   Diluted |       | 52,567,631                       |       | 22,921,804 |   |

 

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

 

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**VOYAGER OIL & GAS, INC.**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010**

 
| ** **                                                                                  | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                  | ** ** | **March 31,**               | ** ** |
| ** **                                                                                  | ** ** | **2011**                         | ** ** | **2010** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES**                                                    |       |                             |       |   |   |
| Net Loss                                                                                    |       | $                                | (889,774   | ) | $ | (234,041 | ) |
| Adjustments to Reconcile Net Loss to Net Cash   Provided by (Used for) Operating Activities |       |                             |       |   |   |
| Depletion of Oil and Gas Properties                                                         |       | 407,984                          |       | 8,500 |   |
| Depreciation and Amortization                                                               |       | 787                              |       | 732 |   |
| Amortization of Loan Discount                                                               |       | 55,479                           |       | — |   |
| Accretion of Discount on Asset Retirement   Obligations                                     |       | 261                              |       | — |   |
| Gain on Sale of Available for Sale Securities                                               |       | —                           |       | (4,928 | ) |
| Share — Based Compensation Expense                                                     |       | 256,739                          |       | 178,146 |   |
| Changes in Working Capital and Other Items:                                                 |       |                             |       |   |   |
| Increase in Trade Receivables                                                               |       | (181,042                         | )          | (19,910 | ) |
| Decrease in Prepaid Expenses                                                                |       | 38,399                           |       | — |   |
| Decrease (Increase) in Other Current Assets                                                 |       | 1,465                            |       | (11,229 | ) |
| Increase in Accounts Payable                                                                |       | 2,112,370                        |       | 20,745 |   |
| Decrease in Accrued Expenses                                                                |       | (8,347                           | )          | (2,581 | ) |
| Decrease in Operating Lease Reserve                                                         |       | (100,380                         | )          | — |   |
| Net Cash Provided by (Used For) Operating   Activities                                      |       | 1,693,941                        |       | (64,566 | ) |
|                                                                                        |       |                             |       |   |   |
| **CASH FLOWS FROM INVESTING   ACTIVITIES**                                                  |       |                             |       |   |   |
| Purchases of Other Property and Equipment                                                   |       | (65,082                          | )          | (4,598 | ) |
| Prepaid Drilling Costs                                                                      |       | (2,575,907                       | )          | — |   |
| Proceeds from Sales of Available for Sale   Securities                                      |       | 242,070                          |       | 183,090 |   |
| Acquisition and Development of Oil and Gas   Properties                                     |       | (10,393,074                      | )          | (732,792 | ) |
| Net Cash Used For Investing Activities                                                      |       | (12,791,993                      | )          | (554,300 | ) |
|                                                                                        |       |                             |       |   |   |
| **CASH FLOWS FROM FINANCING   ACTIVITIES**                                                  |       |                             |       |   |   |
| Proceeds from Issuance of Common Stock - Net of   Issuance Costs                            |       | 46,602,251                       |       | 779,240 |   |
| Proceeds from Exercise of Stock Options and   Warrants                                      |       | 16,960                           |       | 800 |   |
| Net Cash Provided by Financing Activities                                                   |       | 46,619,211                       |       | 780,040 |   |
|                                                                                        |       |                             |       |   |   |
| **NET INCREASE IN CASH AND CASH   EQUIVALENTS**                                             |       | 35,521,159                       |       | 161,174 |   |
|                                                                                        |       |                             |       |   |   |
| **CASH AND CASH EQUIVALENTS —   BEGINNING OF PERIOD**                                  |       | 11,358,520                       |       | 691,263 |   |
|                                                                                        |       |                             |       |   |   |
| **CASH AND CASH EQUIVALENTS — END   OF PERIOD**                                        |       | $                                | 46,879,679 |   | $ | 852,437 |   |
|                                                                                        |       |                             |       |   |   |
| **Supplemental Disclosure of Cash   Flow Information**                                      |       |                             |       |   |   |
| Cash Paid During the Period for Interest                                                    |       | $                                | 450,000    |   | $ | — |   |
| Cash Paid During the Period for Income Taxes                                                |       | $                                | —     |   | $ | — |   |
|                                                                                        |       |                             |       |   |   |
| Non-Cash Financing and Investing Activities:                                                |       |                             |       |   |   |
| Purchase of Oil and Gas Properties Paid Subsequent   to Period End                          |       | $                                | 84,818     |   | $ | — |   |
| Purchase of Oil and Gas Properties through   Issuance of Common Stock                       |       | $                                | —     |   | $ | 2,358,900 |   |
| Purchase of Oil and Gas Properties through Due to   Related Party                           |       | $                                | —     |   | $ | 1,374,675 |   |
| Payment of Capital Raise Costs with Issuance of   Common Stock                              |       | $                                | —     |   | $ | 186,340 |   |
| Fair Value of Warrants and Options Granted as   Compensation                                |       | $                                | —     |   | $ | 120,770 |   |
| Payment of Compensation through Issuance of Common   Stock                                  |       | $                                | 256,739    |   | $ | 57,376 |   |
| Capitalized Asset Retirement Obligations                                                    |       | $                                | 5,221      |   | $ | — |   |

 

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

 

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**VOYAGER OIL & GAS, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**March 31, 2011**

 

**NOTE 1 ORGANIZATION AND NATURE OF BUSINESS**

 

On April 16, 2010, Voyager Oil & Gas, Inc. (formerly ante4, Inc.) (the “Company” or “Voyager”), Plains Energy Acquisition, Inc. (“Acquisition Sub”) and Plains Energy Investments, Inc. (“the Target Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the Merger Agreement, Acquisition Sub merged with and into the Target Company, with the Target Company remaining as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). On the Closing Date, the Company filed a Certificate of Amendment with the State of Delaware to change its name from ante4, Inc. to Voyager Oil & Gas, Inc. The Company is currently a holding company parent of the Target Company, and the Company’s business operations following the Merger are those of the Target Company.

 

On June 14, 2010 ante4. Inc. completed the spin-off of ante5, Inc. (“ante5”). ante5 was previously a wholly-owned subsidiary of Voyager and holds certain assets principally related to Voyager’s prior entertainment and consumer products business. ante5 has become a separate publicly reporting U.S. company. The spin-off was completed through the distribution of one share of ante5 common stock for each share of Voyager common stock held by stockholders as of the record date, June 24, 2010.

 

Voyager is an independent energy company engaged in the business of acquiring acreage in prospective natural resource plays in the states of Montana and North Dakota within the Williston Basin of the United States and the states of Colorado and Wyoming within the Denver-Julesburg Basin of the United States. The Company seeks to accumulate acreage blocks and build net asset value via the production of hydrocarbons in repeatable and scalable opportunities.

 

The Company is governed by a board of directors and managed by its officers. The affairs of the Company are governed by Delaware law and the Company’s Bylaws.

 

Management has determined that the Company should focus on projects in the oil and gas industry primarily based in the Rocky Mountains and specifically the Williston Basin Bakken Shale formation and Denver Julesburg Basin Niobrara formation. This is based upon a belief that the Company is able to create value via strategic acreage acquisitions and convert the value or portion thereof into production by utilizing experienced industry partners specializing in the specific areas of interest. The Company has targeted specific prospects and has engaged in the drilling for oil and gas.

 

The Company has three employees as of March 31, 2011. The Company will seek to retain independent contractors to assist in operating and managing the prospects as well as to carry out the principal and necessary functions incidental to the oil and gas business. With the continued acquisition of oil and gas properties, the Company intends to continue to establish itself with industry partners best suited to the areas of operation. As the Company continues to establish a revenue base with cash flow, it may seek opportunities more aggressive in nature.

 

As an independent oil and gas producer, the Company’s revenue, profitability and future rate of growth are substantially dependent on prevailing prices of natural gas and crude oil. Historically, the energy markets have been very volatile and it is likely that oil and gas prices will continue to be subject to wide fluctuations in the future. A substantial or extended decline in natural gas and oil prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and access to capital, and on the quantities of natural gas and oil reserves that can be economically produced.

 

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**NOTE 2 SIGNIFICANT ACCOUNTING POLICIES**

 

The condensed financial information included herein is unaudited, except the condensed balance sheet as of December 31, 2010, which has been derived from the Company’s audited financial statements as of December 31, 2010.  However, such information includes all adjustments (consisting of normal recurring adjustments), which are in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods.  The results of operations for interim periods are not necessarily indicative of the results to be expected for an entire year.

 

Certain information, accounting policies, and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America have been condensed or omitted pursuant to certain rules and regulations of the Securities and Exchange Commission.  Interim financial results should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2010, which were included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with insignificant interest rate risk and original maturities to the Company 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. Due to the balances being greater than $250,000, the Company does not have FDIC coverage on the entire amount of bank deposits. The Company believes this risk is minimal. In addition, the Company is subject to Security Investor Protection Corporation (SIPC) protection on a vast majority of its financial assets.

 

Restricted Cash

 

At March 31, 2011, the Company has $51,000 of restricted cash. The restricted cash serves as collateral for an irrevocable standby letter of credit that provides financial assurance that the Company will fulfill its obligations with respect to an office lease. The cash is held in custody by the issuing bank, is restricted as to withdrawal or use, and is currently invested in interest-bearing money market funds. Income from these investments is paid to the Company and recognized in other income.

 

Short-Term Investments

 

All marketable debt, equity securities and certificates of deposit that were included in short-term investments as of December 31, 2010 were considered available-for-sale and were carried at fair value. The short-term investments were considered current assets as of December 31, 2010 due to the Company’s ability and intent to use them to fund current operations. The unrealized gains and losses related to these securities were included in accumulated other comprehensive income (loss). When securities were sold, their cost was determined based on specific identification. The realized gains and losses related to these securities were included in other income in the consolidated statements of operations.

 

For the three months ended March 31, 2010 there were realized gains of $4,928 recognized on the sale of investments.  There were no realized gains or losses recognized on the sale of investments for the three months ended March 31, 2011.

 

Other Property and Equipment

 

Property and equipment that are not oil and 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. Long-lived assets, other than oil and gas properties, are evaluated for impairment to determine if current circumstances and market conditions indicate the carrying amount may not be recoverable. The Company has not recognized any impairment

 

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losses on non oil and gas long-lived assets. Depreciation expense was $787 for the three months ended March 31, 2011.

 

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. Asset retirement obligations are included in other noncurrent liabilities on the consolidated condensed balance sheet.

 

Revenue Recognition and Gas Balancing

 

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

 

Stock-Based Compensation

 

The Company has accounted for stock-based compensation under the provisions of FASB Accounting Standards Codification (ASC) 718-10-55. The Company recognizes stock-based compensation expense in the consolidated 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 in 2010 and 2009 the Company 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 of peer company data fairly represents the expected volatility it would experience if it were in the oil and 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.

 

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.

 

Net Income (Loss) Per Common Share

 

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. As the Company has a loss for the three months ended March 31, 2011 the potentially dilutive shares are anti-dilutive and are thus not added into the earnings per share calculation.

 

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As of March 31, 2011, there are 225,000 stock options that are issued and presently exercisable and represent potentially dilutive shares.

 

As of March 31, 2011, there are also 750,000 stock options that have been granted but are not presently exercisable and represent potentially dilutive shares.

 

As of March 31, 2011, there are also 1,563,051 warrants that are issued but not presently exercisable. These warrants have an exercise price of $0.98 and vest in December 2011.

 

As of March 31, 2011, there are 6,250,000 warrants that are issued and presently exercisable.  These warrants have an exercise price of $7.10.

 

Full Cost Method

 

The Company follows the full cost method of accounting for oil and gas operations whereby all costs related to the exploration and development of oil and gas properties are initially capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities.

 

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. A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool. As of March 31, 2011, the Company has had no property sales.

 

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 months ended March 31, 2011, the Company included $211,176 related to leases expected to expire in June 2011 in Wyoming 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 as determined by independent petroleum engineers. The costs of unproved properties are withheld from the depletion base until such time as they are developed, impaired or abandoned.

 

Capitalized costs of oil and gas properties (net of related deferred income taxes) may not exceed an amount equal to the present value, discounted at 10% per annum, of the estimated future net cash flows from proved oil and gas reserves plus the cost of unproved properties (adjusted for related income tax effects). Should capitalized costs exceed this ceiling, impairment is recognized. The present value of estimated future net cash flows is computed by applying the arithmetic average first day price of oil and natural gas for the preceding 12-months to estimated future production of proved oil and gas reserves as of period-end, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Such present value of proved reserves’ future net cash flows excludes future cash outflows associated with settling asset retirement obligations that have been accrued on the consolidated balance sheet. Should this comparison indicate an excess carrying value, the excess is charged to earnings as an impairment expense. There was no impairment of oil and gas properties recorded for the three months ended March 31, 2011.

 

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Joint Ventures

 

The consolidated condensed financial statements as of March 31, 2011include 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, valuation of share based compensation and the valuation of deferred income taxes. Actual results may differ from those estimates.

 

Reclassifications

 

Certain reclassifications have been made to prior periods’ reported amounts in order to conform with the current period presentation. These reclassifications did not impact the Company’s net income, stockholders’ equity or cash flows.

 

Impairment

 

FASB ASC 360-10-35-21 requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Oil and gas properties accounted for using the full cost method of accounting (which the Company uses) are excluded from this requirement but continue to be subject to the full cost method’s impairment rules. There was no impairment identified at March 31, 2011.

 

Recent 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.

 

Principles of Consolidation

 

The accompanying consolidated condensed financial statements include the accounts of Voyager Oil & Gas, Inc. and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

 

Change in Reporting Period End

 

On July 29, 2010, the Company’s Board of Directors approved a change in the Company’s fiscal year end to a traditional calendar year from that of a last Sunday of quarter end period. The change in reporting period has been reflected in this Quarterly Report on Form 10-Q. The Company’s fiscal year end is December 31, and the quarters end on March 31, June 30 and September 30.

 

**NOTE 3 OIL AND 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 gas leases in the Tiger Ridge Gas Field in Blaine, Hill, and Choteau Counties of Montana. Under the terms of the 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 

 

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87.5% working interest on all future production and reserves, while the third-party joint venture partner controls 12.5%. The joint venture had accumulated oil and gas leases totaling 67,384 net mineral acres as of March 31, 2011. The Company initially committed to a minimum of $1,000,000 toward this joint venture.  An amendment was executed in April 2011 to remove the maximum amount committed 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 $3,659,351 as of March 31, 2011, consisting of $2,150,496 in leasing costs, $1,358,868 in seismic costs and $149,987 in drilling costs. The unutilized cash balance was $48,978 as of March 31, 2011.

 

*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 70.0% working interest, while the third-party investor and well operator control 10% and 20%, respectively. The Agreement requires that all parties contribute in cash their proportional share to cover all costs incurred in developing these blocks of acreage for drilling.

 

*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 gas leases in the Heath 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 two third-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 gas leases totaling 33,562 net mineral acres as of December 31, 2010. 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 March 31, 2011. The unutilized cash balance was $11,799 as of March 31, 2011.

 

*Niobrara Development with Slawson Exploration Company, Inc.*

 

On June 28, 2010, the Company entered into an exploration and development agreement with Slawson Exploration Company, Inc. (“Slawson”) to develop Slawson’s 48,000 net acres in the Denver-Julesberg Basin Niobrara Formation in Weld County, Colorado. Slawson commenced the continuous drilling program in early July 2010 with an initial series of three test wells. Beginning in October 2010, Slawson commenced drilling operations on 15 spacing units and an additional 10 spacing units’ leases which were granted extensions to November 2011 by the state of Colorado due to access restrictions.  Voyager purchased a 50% working interest in the approximately 48,000 acre block for $7.5 million and will participate on a heads-up basis on all wells drilled, as well as participate for its proportionate working interest in all additional acreage acquired in an Area of Mutual Interest consisting of Weld and Laramie Counties. Following the results of the three test wells, Voyager and Slawson allowed approximately 15,000 acres from the initial 34,000 acres of state leases in Weld County, Colorado to expire on November 15, 2010. Three additional wells were begun during the quarter ended March 31, 2011 and are in various stages of drilling and completion.

 

The Company has also completed other miscellaneous acquisitions in Montana and North Dakota during the quarter ended March 31, 2011.

 

The risk that the Company will experience a ceiling test write-down increases when oil and gas prices are depressed or if the Company has substantial downward revisions in its estimated proved reserves. Based on calculated reserves at December 31, 2010 the unamortized costs of the Company’s oil and gas properties exceeded the ceiling limit by 

 

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$1,377,188. As a result, the Company was required to record a write-down of the net capitalized costs of its oil and gas properties in the amount of $1,377,188 at December 31, 2010.  The Company analyzed the need of a further ceiling test write-down in Q1 FY11 and noted one was not required due to the increase of producing wells and related proven developed reserves during the quarter and increased oil prices used in the ceiling test.

 

**NOTE 4 RELATED PARTY TRANSACTIONS**

 

On March 10, 2010, the Company purchased leasehold interests from South Fork Exploration, LLC (SFE) for $1,374,375 and 2,234,600 shares of restricted common stock with a fair value of $2,358,900. SFE’s president was J.R. Reger, Chief Executive Officer and director of the Company.

 

On September 22, 2010, Steven Lipscomb and Michael Reger subscribed for $500,000 and $1,000,000 of senior secured promissory notes, respectively. The senior secured promissory notes which were sold to certain accredited investors in a private placement are described in Note 7 of the footnotes to the consolidated financial statements. Mr. Lipscomb is a current director of the Company. Mr. Reger is a brother of J.R. Reger, the current Chief Executive Officer and a director of the Company. The Company’s Audit Committee approved this transaction.

 

**NOTE 5 PREFERRED AND COMMON STOCK**

 

The Company has authorized 20,000,000 shares of preferred stock. No shares of preferred stock have been issued as of March 31, 2011.

 

In February 2011, the Company completed a private placement of 12,500,000 shares of common stock at a subscription price of $4.00 per share for total gross proceeds of $50 million. In addition to common stock, investors purchasing shares received a warrant to purchase common stock.  For each share of common stock purchased in this transaction, the purchaser received the right to purchase one-half share of the Company’s common stock at a price of $7.10 per share for a period of five years from the date of the closing.  The total number of shares that are issuable upon exercise of warrants is 6,250,000.  The Company incurred costs of $3,397,749 related to this transaction.  These costs were netted against the proceeds of the transaction through Additional Paid-In Capital.

 

Restricted Stock Awards

 

During the year ended December 31, 2009, the Company issued 468,916 restricted shares of common stock as compensation to its officers. The restricted shares vest on December 1, 2011 and December 31, 2011. As of March 31, 2011, there was approximately $169,000 of total unrecognized compensation expense related to unvested restricted stock. This compensation expense will be recognized over the remaining vesting period of the grants. The Company has assumed a zero percent forfeiture rate for restricted stock.

 

There were no changes to the outstanding restricted common stock in the three month period ended March 31, 2011.

 

**NOTE 6 STOCK OPTIONS AND WARRANTS**

 

*Stock Optio*ns

 

The following summarizes activities concerning outstanding options to purchase shares of the Company’s common stock as of and for the period ending March 31, 2011:

 

Currently Outstanding Options

 

· Options covering 4,000 shares were exercised at $4.24 during the three months ended March 31, 2011.

· No options were forfeited during the three months ended March 31, 2011.

· No options expired during the three months ended March 31, 2011.

 

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· The Company recognized $78,592 of compensation expense related to outstanding options for the three month period ended March 31, 2011.

· There is $1,120,728 of compensation expense that will be recognized in future periods through 2014 relating to options that have been granted as of March 31, 2011.

· There were 750,000 unvested options at March 31, 2011.

 

Warrants

 

*Warrants Granted February 2011*

 

In February 2011, in conjunction with the sale of 12,500,000 shares of common stock (see Note 5), the Company issued investors warrants to purchase a total of 6,250,000 shares of common stock exercisable at $7.10 per share.

 

The table below reflects the status of warrants outstanding at March 31, 2011:

 
| **Issue Date**    | ** ** | **Warrants** | ** ** | **Exercise   Price** | ** ** | **Expiration Date** | ** **               |
|------------------------|------------|--------------|------------|----------------------|------------|--------------------------|--------------------------|
| December 1, 2009  |       | 260,509      |       | $                    | 0.98       |                     | December 1,   2019  |   |
| December 31, 2009 |       | 1,302,542    |       | $                    | 0.98       |                     | December 31,   2019 |   |
| February 8, 2011  |       | 6,250,000    |       | $                    | 7.10       |                     | February 8,   2016  |   |
|                   |       | 7,813,051    |       |                 |       |                     |                     |

 

Outstanding Warrants

 

· No warrants were forfeited or expired during the three month period ended March 31, 2011.

· The Company recorded expense related to these warrants of $120,770 for the three month period ended March 31, 2011. There is $355,665 of compensation expense that will be recognized in future periods relating to warrants that have been granted as of March 31, 2011.

· There are 6,250,000 warrants exercisable at December 31, 2010, and 1,563,051 that become exercisable in December 2011.

 

**NOTE 7 SENIOR SECURED PROMISSORY NOTES**

 

In September 2010, the Company completed the closing on the issuance of $15 million principal amount of 12% senior secured promissory notes (“Loans”) for the purpose of financing future drilling and development activities. Proceeds of the notes are being used primarily to fund developmental drilling on the Company’s significant acreage positions targeting the Denver-Julesberg Basin Niobrara through its joint venture with Slawson Exploration and the Williston Basin Bakken/Three Forks.

 

The Loans bear interest at the rate of 12% per annum, with interest payable monthly beginning October 1, 2010. The Loans are secured by a first priority security interest on all of the Company’s assets, on a pari passu basis with each other. The Loans mature one year from the date of issuance. The Company has the option to extend the term one year. In order to enter the extension term, the Company is required to pay an extension payment equal to two percent (2%) of the principal amount. The Company may pre-pay the Loans at a price of one hundred two percent (102%) of face value during the initial twelve months, and may pre-pay the Loans at anytime without penalty during the extended term.

 

The Loans were sold at a discount and yielded cash proceeds of $14,775,000. The discount amount of $225,000 is being amortized to interest expense over twelve months, the initial term of the Loans, using the effective interest method. The amortization of the discount for the three months ended March 31, 2011 was $55,479.

 

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**NOTE 8 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 during the three month period ended March 31, 2011:

 
| ** **                                                | ** ** | **Three Months   Ended   March 31,   2011** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------------|------------|
| Beginning Asset Retirement Obligation                     |       | $                                                     | 10,522     |   |
| Liabilities Incurred for New Wells Placed in   Production |       | 5,221                                                 |       |
| Accretion of Discount on Asset Retirement   Obligations   |       | 261                                                   |       |
| Ending Asset Retirement Obligation                        |       | $                                                     | 16,004     |   |

 

**NOTE 9 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 2011 as a result of the losses recorded during the three months ended March 31, 2011 as well as additional losses expected for the remainder of 2011.  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 March 31, 2011, 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 10 FAIR VALUE**

 

FASB ASC 820-10-55 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles 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 under FASB ASC 820-10-55 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:

 

Level 1—Quoted prices in active markets 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 or 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.

 

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The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the nonfinancial assets and liabilities and their placement in the fair value hierarchy levels. The fair value of the Company’s asset retirement obligations at their inception are determined using discounted cash flow methodologies based on inputs that are not readily available in public markets. The fair value of the asset retirement obligations incurred during the period is reflected on the balance sheet as follows.

 
| ** **                    | ** ** | **Fair Value Measurements at   March 31, 2011 Using**           | ** ** |
|-------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
| **Description**               | ** ** | **Quoted   Prices In   Active   Markets for   Identical   Assets   (Level 1)** | ** ** | **Significant   Other   Observable   Inputs   (Level 2)** | ** ** | **Significant   Unobservable   Inputs   (Level 3)** | ** ** |
| Other Non-current Liabilities |       | $                                                                                             | —     |   | $ | — |   | $ | (16,004 | ) |
| Total                         |       | $                                                                                             | —     |   | $ | — |   | $ | (16,004 | ) |

 

See Note 8 for a rollforward of the Asset Retirement Obligation.

 

**NOTE 11 FINANCIAL INSTRUMENTS**

 

The Company’s financial instruments include cash and cash equivalents, short-term investments, restricted cash, accounts receivable, accounts payable and senior secured promissory notes. The carrying amount of cash and cash equivalents, short-term investments, restricted cash, accounts receivable, accounts payable, and senior secured promissory notes approximate fair value because of their immediate or short-term maturities.

 

The Company’s accounts receivable relate to oil and natural gas sold to various industry companies. Credit terms, typical of industry standards, are of a short-term nature and the Company does not require collateral. Management believes the Company’s accounts receivable at March 31, 2011 do not represent significant credit risks as they are dispersed across many counterparties.

 

**NOTE 12 COMPREHENSIVE INCOME**

 

The Company follows the provisions of FASB ASC 220-10-55 which establishes standards for reporting comprehensive income. In addition to net income, comprehensive income includes all changes in equity during a period, except those resulting from investments and distributions to stockholders of the Company.

 

For the periods indicated, comprehensive income (loss) consisted of the following:

 
| ** **                                 | ** ** | **Three Months Ended********March 31,** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                 | ** ** | **2011**                                               | ** ** | **2010** | ** ** |
| Net Income (Loss)                          |       | $                                                      | (889,774   | ) | $ | (234,041 | ) |
| Unrealized gains on Short-term Investments |       | —                                                 |       | 11,497 |   |
| Other Comprehensive income (loss) net      |       | $                                                      | (889,774   | ) | $ | (229,030 | ) |

 

**NOTE 13 SUBSEQUENT EVENTS**

 

On April 3, 2011 the Company’s Chairman approved a purchase agreement to pay $1,000,000 as consideration for the assignment of certain leases in Richland County, Montana. The agreement specifies leases totaling 

 

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approximately 1,320 net mineral acres and is expected to close in second quarter of 2011 upon completing examination of title.

 

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**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 consolidated 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 our Annual Report on Form 10-K under the heading “Risk Factors”.*

 

**Overview**

 

Voyager Oil & Gas, Inc. (“Voyager,” “we,” “us,” or “our”) is a Delaware corporation formed for the purpose of providing capital investments for acreage acquisitions and working interests in existing or planned hydrocarbon production with a special focus on scalable, repeatable natural gas plays with established operators. Our business focuses on properties in Montana, North Dakota, 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 commitment may grow if the opportunity presents itself and depending upon the results of initial testing and development activities.

 

On April 16, 2010 ante4, Inc. (“ante4”) completed the acquisition of Plains Energy Investments, Inc., a Nevada corporation (the “Company”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Subsequent to the Merger, ante4 changed its name to Voyager Oil & Gas, Inc. Under the Merger Agreement, Plains Energy Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Voyager, merged with and into the Company, with the Company remaining as the surviving corporation and a wholly-owned subsidiary of Voyager (the “Merger”). Currently, Voyager is a holding company parent of the Company, and Voyager’s business operations following the Merger are the same as ours.

 

**Business**

 

Voyager’s primary focus is to acquire high value leasehold interests specifically targeting oil shale resource prospects in the continental United States. 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. We believe our competitive advantage is our ability to continue to acquire leases directly from the mineral owners through “organic leasing.” Because of our size and maneuverability, we are able to deploy our land acquisition teams into specific areas based on the latest industry information. We generate revenue by and through the conversion of our leasehold into non-operated working interests in multiple Bakken, Three Forks, Niobrara and other oil shale wells. We believe our drilling participation, primarily on a heads-up basis proportionate to our working interest, will allow us to deliver high value with low cost.

 

Voyager is also currently engaged in a top-leasing program in targeted areas of the Williston Basin. A top-lease is a lease acquired prior to and commencing immediately upon the expiration of the current lease. We believe this approach allows us to access the most prolific areas of the Bakken oilfields. Existing lease terms vary significantly when an area initially becomes productive. We continue to see this approach met with success as the Williston Basin delineates given the rapidly expanding nature of the productive area of the play.

 

Voyager explores and produces oil and gas through a non-operated business model. We engage in the drilling process within operators’ drilling units that include our acreage. As a non-operator, we rely on our operating partners to propose, permit and engage in the drilling process. Before a well is spud, the operator is required to provide all oil and gas interest owners in the designated well unit the opportunity to participate in the drilling costs and revenues of the well on a pro-rata basis. After the well is completed, our operating partners also transport, market and account for all production. It is our policy and goal to engage and participate on a heads-up basis in substantially all, if not all, wells proposed. This model provides us with diversification across operators and geologic areas. It also allows us to continue to add production at a low marginal cost and maintain general and administrative costs at minimal levels.

 

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** **

**Assets and Acreage Holdings**

 

As of May 9, 2011, Voyager controls approximately 143,000 net acres in the following five primary prospect areas:

 

·                  27,000 core net acres targeting the Bakken/Three Forks in North Dakota and Montana;

·                  14,200 net acres targeting the Niobrara formation in Colorado and Wyoming;

·                  800 net acres targeting a Red River prospect in Montana;

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

·                  67,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill and Chouteau Counties of Montana.

 

With the exception of the leases targeting the Niobrara formation, the leases we control have a minimum term of three years and many have extensions effectively giving us control of lands for up to ten years.

 

We control a 50% interest of approximately 34,000 net acres in Colorado targeting the Niobrara formation, the majority of which is extended to November 2011 through the commencement of drilling operations on approximately 13,500 net acres and extensions granted by the state of Colorado on approximately 5,000 net acres.  Following the results of the three test wells, Voyager and Slawson allowed approximately 15,000 acres from the initial 34,000 acres of state leases in Weld County, Colorado to expire on November 15, 2010.  We control a 50% interest of approximately 5,000 net acres in Wyoming targeting the Niobrara formation, the majority of which expire in or subsequent to June 2011.  As of March 31, 2011, we included $211,176 of lease acquisition costs associated with leases expected to expire in June 2011 in Wyoming within costs subject to the depletion calculation.

 

As described in Note 2 in the footnotes to the financial statements, capitalized costs of oil and gas properties (net of related deferred income taxes) may not exceed an amount equal to the present value, discounted at 10% per annum, of the estimated future net cash flows from proved oil and gas reserves plus the cost of unevaluated properties (adjusted for related income tax effects).  Should capitalized costs exceed this ceiling, impairment is recognized.  The results of the ceiling test based on the reserve report at December 31, 2010 resulted in an impairment of $1,377,188 for the year ended December 31, 2010.  The Company analyzed the need of a further ceiling test write-down in Q1 FY11 and noted one was not required due to the increase of producing wells and related proven developed reserves during the quarter and increased oil prices used in the ceiling test.

 

**2011 Drilling Projects**

 

We are engaged in several drilling activities on properties presently owned and intend to drill or develop additional properties acquired in the future.  As of March 31, 2011, we had interests in a total of 46 gross Bakken-Three Forks wells (1.72 net) that were drilling, completing or producing, including 11 gross (0.48 net) producing Bakken-Three Forks wells.  Permits continue to be issued for drilling units in which we have acreage interests within North Dakota and Montana.  We expect to participate in 70 gross, six net Bakken-Three Forks wells in 2011.

 

We have completed the preliminary development of the acreage position we acquired in the Denver-Julesberg Basin of Weld County, Colorado in 2010 with our operating partner, Slawson Exploration Company, Inc.  The development program consists of three gross test wells, which began drilling activity in July 2010.  The results of the initial three test wells have provided data points on our acreage position and ultimately how many wells will be drilled in 2011.  One of the test wells is producing as of March 31, 2011.  Beginning in October 2010, Slawson commenced drilling operations on 15 spacing units and an additional 12 spacing units’ leases which were granted extensions to November 2011 by the state of Colorado due to access restrictions.  Slawson drilled three wells during the quarter ended March 31, 2011.  Those wells are in various stages of completion.

 

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* *

*Production History*

 

The following table presents information about our produced oil and gas volumes during the three months ended March 31, 2011, compared to the three months ended March 31, 2010.  As of March 31, 2011, we were selling oil and natural gas from a total of twelve gross wells (approximately 0.48 net wells), compared to one gross wells (0.01 net wells) at March 31, 2010.  All data presented below is derived from accrued revenue and production volumes for the relevant period indicated.

 
| ** **                                                     | ** ** | **Three Months Ended   March 31,** | ** ** |
|----------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                     | ** ** | **2011**                                          | ** ** | **2010** | ** ** |
| **Net Production:**                                            |       |                                              |       |   |   |
| Oil (Bbl)                                                      |       | 10,165                                            |       | 307 |   |
| Natural Gas (Mcf)                                              |       | 577                                               |       | 81 |   |
| Barrel of Oil Equivalent (Boe)                                 |       | 10,262                                            |       | 320 |   |
|                                                           |       |                                              |       |   |   |
| **Average Sales Prices:**                                      |       |                                              |       |   |   |
| Oil (per Bbl)                                                  |       | 81.66                                             |       | 72.64 |   |
| Effect of settled oil hedges on average price   (per Bbl) |       | 0.00                                              |       | 0.00 |   |
| Oil net of settled hedging (per Bbl)                           |       | 81.66                                             |       | 72.64 |   |
| Natural Gas and Other Liquids (per Mcf)                        |       | 4.33                                              |       | 6.73 |   |
| Effect of natural gas hedges on average price (per   Mcf)      |       | 0.00                                              |       | 0.00 |   |
| Natural gas net of hedging (per Mcf)                           |       | 4.33                                              |       | 6.73 |   |
|                                                           |       |                                              |       |   |   |
| **Average Production Costs:**                                  |       |                                              |       |   |   |
| Oil (per Bbl)                                                  |       | 14.35                                             |       | 10.16 |   |
| Natural Gas (per Mcf)                                          |       | 0.40                                              |       | 0.20 |   |
| Barrel of Oil Equivalent (Boe)                                 |       | 14.24                                             |       | 8.06 |   |

 

*Depletion of oil and natural gas properties*

 

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.  The following table presents our depletion expenses for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010.

 
| ** **                                  | ** ** | **Three Months Ended   March 31,** | ** ** |
|---------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                  | ** ** | **2011**                                          | ** ** | **2010** | ** ** |
| Depletion of oil and natural gas properties |       | $                                                 | 407,984    |   | $ | 8,500 |   |
|                                             |            |                                                   |            |  |  |  |  |

 

**Productive Oil Wells**

 

The following table summarizes gross and net productive oil wells by state at March 31, 2011 and March 31, 2010. A net well represents our fractional working ownership interest of a gross well. No wells have been permitted or drilled on any of our Big Snowy Joint Venture acreage in Montana. The following table also does not include wells that were awaiting completion, in the process of completion or awaiting flow back subsequent to fracture stimulation.

 
| ** **                           | ** ** | **March 31,** | ** ** |
|--------------------------------------|------------|--------------------|------------|
| ** **                           | ** ** | **2011**           | ** ** | **2010** | ** ** |
| ** **                           | ** ** | **Gross**          | ** ** | **Net** | ** ** | **Gross** | ** ** | **Net** | ** ** |
| North Dakota Bakken—Three Forks |       | 10                 |       | 0.29 |   | 1 |   | 0.01 |   |
| Montana Bakken—Three Forks      |       | 1                  |       | 0.19 |   | 0 |   | 0 |   |
| Montana Heath Shale                  |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Montana Natural Gas                  |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Colorado Niobrara                    |       | 1                  |       | 0.50 |   | 0 |   | 0 |   |
| Wyoming Niobrara                     |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Total:                               |       | 12                 |       | 0.98 |   | 1 |   | 0.01 |   |

 

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**Exploratory Oil Wells**

 

Voyager is participating with a 50% working interest in exploratory oil wells in the Denver-Julesberg Basin of Colorado with drilling partner Slawson Exploration, Inc. As of March 31, 2011, six wells had been drilled. One of the wells was producing and included in the productive oil well table. The other five wells were in various stages of completion and the costs incurred are included in unevaluated oil and gas properties on our balance sheet. The Moonshine #1-36H and Outlaw #16-11-66H were completed as producers, the Joker #36-9-62H is currently flowing back after fracture stimulation, and the Smuggler #16-10-62H and Birds of Prey #36-10-61 are waiting on completion. Slawson’s delineation of the more prospective acreage and additional 2011 well locations will be determined by the results of the three most recent wells.

 
| ** **                           | ** ** | **March 31,** | ** ** |
|--------------------------------------|------------|--------------------|------------|
| ** **                           | ** ** | **2011**           | ** ** | **2010** | ** ** |
| ** **                           | ** ** | **Gross**          | ** ** | **Net** | ** ** | **Gross** | ** ** | **Net** | ** ** |
| North Dakota Bakken—Three Forks |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Montana Bakken—Three Forks      |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Montana Heath Shale                  |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Montana Natural Gas                  |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Colorado Niobrara                    |       | 5                  |       | 2.50 |   | 0 |   | 0 |   |
| Wyoming Niobrara                     |       | 0                  |       | 0 |   | 0 |   | 0 |   |
| Total:                               |       | 5                  |       | 2.50 |   | 0 |   | 0 |   |

 

**Results of Operations**

 

***Comparison of the Three Months Ended March 31, 2011 with the Three Months Ended March 31, 2010***

 
| ** **                                             | ** ** | **Three Months   Ended   March 30,   2011** | ** ** | **Three Months   Ended   March 31,   2010** | ** ** |
|--------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
|                                                   |       |                                                  |       |                                                  |       |
| Revenues                                               |       | $                                                     | 832,621    |                                                  | $          | 22,497 |   |
|                                                   |       |                                                  |       |                                                  |       |
| Operating Expenses:                                    |       |                                                  |       |                                                  |       |
| Production Expenses                                    |       | $                                                     | 49,978     |                                                  | $          |   |   |
| Production Taxes                                       |       | 79,964                                                |       | 2,587                                                 |       |
| General and Administrative Expense                     |       | 694,314                                               |       | 255,710                                               |       |
| Depletion of Oil and Gas Properties                    |       | 407,984                                               |       | 8,500                                                 |       |
| Depreciation and Amortization                          |       | 787                                                   |       | 732                                                   |       |
| Accretion of Discount on Asset Retirement   Obligation |       | 261                                                   |       | —                                                |       |
| Total Operating Expenses                               |       | 1,233,288                                             |       | 267,529                                               |       |
|                                                   |       |                                                  |       |                                                  |       |
| Loss From Operations                                   |       | (400,667                                              | )          | (245,032                                              | )          |
|                                                   |       |                                                  |       |                                                  |       |
| Other Income (Expense):                                |       | (489,107                                              | )          | 10,991                                                |       |
|                                                   |       |                                                  |       |                                                  |       |
| Loss Before Income Taxes                               |       | (889,774                                              | )          | (234,041                                              | )          |
|                                                   |       |                                                  |       |                                                  |       |
| Provision for Income Taxes                             |       | —                                                |       | —                                                |       |
|                                                   |       |                                                  |       |                                                  |       |
| Net Loss                                               |       | $                                                     | (889,774   | )                                                     | $          | (234,041 | ) |

 

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*Revenues*

 

We recognized $832,621 in revenues from sales of oil and natural gas for the three months ended March 31, 2011, compared to $22,497 for the three months ended March 31, 2010.  This increase in revenue is due primarily to production from twelve gross (0.98 net) wells across all plays as of March 31, 2011, compared to production from one gross (0.01 net) wells as of March 31, 2010.  We report our revenues on wells in which we have a working interest based on information received from operators.  The recognition of revenues in this manner is in accordance with generally accepted accounting principles.

 

*General and Administrative Expense*

 

We recognized $694,314 in general and administrative expense for the three months ended March 31, 2011 compared to $255,710 for the three months ended March 31, 2010.  This increase resulted from $256,739 of share-based compensation for the three months ended March 31, 2011, compared to $178,146 for the three months ended March 31, 2010, and $240,912 of professional fees for the three months ended March 31, 2011, compared to $29,400 for the three months ended March 31, 2010.

 

*Depreciation, Depletion and Amortization Expense*

 

We recognized $408,771 in depreciation, depletion and amortization expense for the three months ended March 31, 2011, compared to $9,232 for the three months ended March 31, 2010.  This increase in expenses resulted from $407,984 of depletion of oil and gas properties for the three months ended March 31, 2011, compared to $8,500 for the three months ended March 31, 2010.

 

*Net loss*

 

We had a net loss of $889,774 (representing ($0.02) per share) for the three months ended March 31, 2011, compared to a net loss of $234,041 (representing ($0.01) per share) for the three months ended March 31, 2010.  Total operating expenses were $1,233,288 for the three months ended March 31, 2011, compared to operating expenses of $267,529 for the three months ended March 31, 2010.  Interest expense was $495,479 for the three months ended March 31, 2011, compared to $-0- for the three months ended March 31, 2010.  The increase is due to the issuance of senior secured promissory notes in September 2010 described in Note 7 in the footnotes to the financial statements.

 

**Non-GAAP Financial Measures**

 

*Adjusted EBITDA*

 

In addition to reporting net earnings (loss) as defined under GAAP, Voyager also presents net earnings before interest, income taxes, depreciation, depletion, and amortization (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 earnings (loss) (its most comparable GAAP financial measure), and Voyager’s calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items described below, Voyager believes the measure is useful in evaluating its fundamental core operating performance. Voyager also believes 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. Voyager’s management uses adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial projections. Voyager’s management does not view adjusted EBITDA in isolation and also uses other measurements, such as net earnings (loss) and revenues to measure operating performance. The following table provides a reconciliation of net earnings (loss), the most directly comparable GAAP measure, to adjusted EBITDA for the periods presented:

 
| ** **                                | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|
| ** **                                | ** ** | **March 31,**               | ** ** |
| ** **                                | ** ** | **2011**                         | ** ** | **2010** | ** ** |
|                                      |       |                             |       |   |   |
| Net loss                                  |       | $                                | (889,774   | ) | $ | (234,041 | ) |
| Interest expense                          |       | 495,479                          |       | — |   |
| Accretion of asset retirement obligations |       | 261                              |       | — |   |
| Depreciation, depletion, and amortization |       | 408,771                          |       | 8,500 |   |
| Stock-based compensation                  |       | 256,739                          |       | 178,146 |   |
| Adjusted EBITDA                           |       | $                                | 271,476    |   | $ | (47,395 | ) |

 

**Liquidity and Capital Resources**

 

*Senior Secured Note Offering*

 

On September 22, 2010, we received aggregate commitments for a $15,000,000 loan in the form of 12.00% Senior Secured Promissory Notes provided by certain accredited investors for the purpose of financing future drilling and development activities.  Proceeds from the Notes were used and will be used primarily to fund developmental drilling on our significant acreage positions targeting the Denver-Julesberg Basin Niobrara formation through our joint venture with Slawson Exploration and the Williston Basin Bakken/Three Forks.

 

The Loan bears interest at the rate of 12.00% per annum.  All principal will be due and payable on the ultimate maturity date of the Loan.

 

Pursuant to the Loan, the Investors also have a first priority security interest on all of our assets, on a pari passu basis with each other.

 

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The Notes mature one year from their date of issuance, with an optional one-year extended term and will be subject to the usual and customary financial covenants.  In order to enter the extension term, the Company is required to pay an extension payment equal to two percent (2%) of the principal amount.

 

We may pre-pay the Notes at a price of one hundred two percent (102%) of face value during the initial twelve months, and may pre-pay the Notes at any time without penalty during the extended term.

 

The Notes yielded cash proceeds of $14,775,000 net of fees.  We paid a success fee equal to one percent (1.0%) of the proceeds raised from the Loan to unrelated finders.

 

*February 2011 Private Placement*

 

In February 2011, the Company completed a private placement of 12,500,000 shares of common stock at a subscription price of $4.00 per share for total gross proceeds of $50 million. In addition to common stock, investors purchasing shares received a warrant to purchase common stock.  For each share of common stock purchased in this transaction, the purchaser received the right to purchase one-half share of the Company’s common stock at a price of $7.10 per share for a period of five years from the date of the closing.  The total number of shares that are issuable upon exercise of warrants is 6,250,000.  The Company incurred costs of $3,397,749 related to this transaction.  These costs were netted against the proceeds of the transaction through Additional Paid-In Capital.

 

***Cash and Cash Equivalents***

 

Our total cash resources, excluding short-term investments, as of March 31, 2011 were $46,879,679, compared to $11,358,520 as of December 31, 2010. The increase in cash balance was primarily attributable to the private placement in February 2011 described in Note 5 in the footnotes to the financial statements.

 

***Net Cash Provided by (Used In) Operating Activities***

 

Net cash provided by (used in) operating activities was $1,693,941for the three months ended March 31, 2011 compared to $(64,566) for the three months ended March 31, 2010.  The increase in the net cash provided by operating activities is primarily attributable to the increase in accounts payable and makes up a portion of our net loss during the three months ended March 31, 2011.

 

***Net Cash Used In Investment Activities***

 

Net cash used in investment activities was $12,791,993 and for the three months ended March 31, 2011 compared to $554,300 for the three months ended March 31, 2010.  The increase in cash used in investment activities is primarily attributable to the purchase and development of oil and gas properties in the Williston Basin, as well as the increase of prepaid drilling costs paid during the quarter.

 

***Net Cash Provided by Financing Activities***

 

Net cash provided by financing activities was $46,619,211 for the three months ended March 31, 2011 compared to $780,040 for the three months ended March 31, 2010.  The increase in net cash provided by financing activities is primarily attributable to proceeds from the private placement described in Note 5 in the footnotes to the financial statements.

 

***Adequacy of Capital Resources***

 

With the addition of capital achieved through the private placement in February 2011, we believe we have sufficient capital to meet our drilling commitments and expected general and administrative expenses through 2011. Any strategic acquisition of assets may require us to access the capital markets.  We may also choose to access the equity capital markets 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 non-leveraged asset base and anticipated growing cash flows, we believe we are in a position to take advantage of

 

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any appropriately priced sales that may occur.  However, additional capital may not be available to us on favorable terms or at all.

** **

**Off-Balance Sheet Arrangements**

 

We currently do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

**Critical Accounting Policies and Estimates**

 

Our management’s discussion and analysis of financial conditions and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.  The preparation of these financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.  On an ongoing basis, we evaluate these estimates and judgments, including those described below.  We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results and experiences may differ materially from these estimates.

 

While our significant accounting policies are more fully described in notes to our financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.

 

*Revenue Recognition and Gas Balancing*

 

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

 

*Full Cost Method*

 

The Company follows the full cost method of accounting for oil and gas operations whereby all costs related to the exploration and development of oil and gas properties are initially capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities.

 

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. A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool. As of March 31, 2011, the Company has had no property sales.

 

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. No impairment was recognized in the three months ended March 31, 2011.

 

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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 as determined by independent petroleum engineers. The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned.

 

Capitalized costs of oil and gas properties (net of related deferred income taxes) may not exceed an amount equal to the present value, discounted at 10% per annum, of the estimated future net cash flows from proved oil and gas reserves plus the cost of unproved properties (adjusted for related income tax effects). Should capitalized costs exceed this ceiling, impairment is recognized. The present value of estimated future net cash flows is computed by applying the arithmetic average first day price of oil and natural gas for the preceding 12-months to estimated future production of proved oil and gas reserves as of period-end, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Such present value of proved reserves’ future net cash flows excludes future cash outflows associated with settling asset retirement obligations that have been accrued on the consolidated balance sheet. Should this comparison indicate an excess carrying value, the excess is charged to earnings as an impairment expense. There was no impairment of oil and gas properties recorded for the three months ended March 31, 2011.

 

*Joint Ventures*

 

The consolidated financial statements as of March 31, 2011include 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.

 

*Stock-Based Compensation*

 

The Company has accounted for stock-based compensation under the provisions of FASB Accounting Standards Codification (ASC) 718-10-55. The Company recognizes stock-based compensation expense in the consolidated 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 in 2010 and 2009 the Company 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 of peer company data fairly represents the expected volatility we would experience if we were in the oil and 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.

 

**Cautionary Factors That May Affect Future Results**

 

This Form 10-Q and other written reports and oral statements made from time to time by us may contain so-called “forward-looking statements,” regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934.  All statements other than statements of historical facts included in this report, such as statements regarding our future expectations to participate in or drill additional wells, that wells will continue to flow at current or forecasted rates, that oil cut on producing wells will continue at current or anticipated rates, that we will achieve or drilling goals and that we will continue our aggressive acreage acquisition and expansion are forward-looking statements. Forward-looking statements are based on our current expectations and assumptions about future events and involve inherent risks and uncertainties. Important factors (many of which are beyond our control) could cause actual results to differ materially from those set forth in the forward-looking statements, including those described in our public filings with the Securities and Exchange Commission. Investors should not place undue reliance on any such forward-looking statements, which are made only as of the date hereof.

 

We do not assume the obligation to update any forward-looking statement, other than as required by law.  One should carefully evaluate such statements in light of factors described in Voyager’s filings with the SEC,

 

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including the section titled “Risk Factors” in its most recent Annual Report on Form 10-K for the year ended December 31, 2010.

 

**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 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 revenue during 2010 and through March 31, 2011 generally would 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 oil that also increase and decrease along with oil prices.

 

**Interest Rate Risk**

We currently have no exposure to risks associated with fluctuating interest rates. Accordingly, we do not believe that changes in interest rates will have a material effect on our liquidity, financial condition or results of operations.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and President, and Interim 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 management has 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**

 

On August 23, 2010, plaintiff Donald Rensch filed a three count shareholder derivative action in the United States District Court for the District of Minnesota against nominal defendant Northern Oil & Gas, Inc. (“Northern”), certain officers and directors of Northern, James Randall Reger, Weldon Gilbertson and J.R. Reger (all current or former officers of Voyager), and Voyager. Count I of the complaint alleges breach of fiduciary duty of loyalty and usurpation of corporate opportunities by certain of Northern’s officers and directors. Count II asserts allegations against James Randall Reger, Weldon Gilbertson, and J.R Reger of aiding and abetting officers of Northern in breaching their fiduciary duties and usurpation of Northern’s corporate opportunities in connection with the formation, capitalization, and operation of Plains Energy/Voyager. Count III asserts a claim against Voyager for tortious interference with a prospective business relationship. The plaintiff seeks injunctive relief and damages, including imposing on Voyager and all of its assets a constructive trust for the benefit of Northern. We believe that each of the above claims lacks merit and we intend to strongly defend ourselves and each of our current or former officers in connection with this lawsuit. We filed a Motion to Dismiss the lawsuit in the United States District Court for the District of Minnesota on September 23, 2010. A hearing on our Motion was heard on February 23, 2011. The Judge has taken our Motion under advisement.

 

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

 

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**ITEM 1A. RISK FACTORS**

 

Please refer to the risk factors contained in Item 1A under the caption “Risk Factors” and elsewhere in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2010.

 

**ITEM 6. EXHIBITS**

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

 

**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:   May 9, 2011 | VOYAGER   OIL & GAS, INC.                 |
|---------------------------|---------------------------------------------------------|
|                      | Registrant                                              |
|                      |                                                    |
|                      |                                                    |
|                      | /s/   *James Russell (J.R.) Reger*                      |
|                      | James Russell (J.R.) Reger                              |
|                      | Chief   Executive Officer (principal executive officer) |
|                      |                                                    |
|                      |                                                    |
|                      | /s/   *Mitchell R. Thompson*                            |
|                      | Mitchell   R. Thompson                                  |
|                      | Chief   Financial Officer (principal financial officer) |

 

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