10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

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

For the quarterly period ended June 30, 2012

or

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

For the transition period from ______________________________ to ______________________________

Commission File Number: 0-27443

BAYOU CITY EXPLORATION, INC.

(Exact name of registrant as specified in its charter)

Nevada	61-1306702
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
632 Adams Street, Suite-700, Bowling Green, Kentucky	42101
(Address of principal executive offices)	(Zip Code)

(800) 798-3389

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes  oNo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) þYes  ¨No

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes  þNo

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. oYes  ¨No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Shares outstanding for each class of stock as of the latest practicable date:

Title or Class	Shares Outstanding on August 6, 2012
Common Stock, $0.005 par value	990,176

EXPLANATORY NOTE

This Amendment No. 1 to the Quarterly Report on Form 10-Q/A is being filed solely to furnish the Interactive Data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T. No other changes have been made to the Form 10-Q, as originally filed on August 14, 2012.

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Item 6. Exhibits

101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

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SIGNATURES

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

	BAYOU CITY EXPLORATION, INC.
Date: August 23, 2012	/s/ Charles T. Bukowski
	Charles T. Bukowski
	Chief Executive Officer and President (Principal Executive Officer and Authorized Signatory)
Date: August 23, 2012	/s/ Stephen C. Larkin
	Stephen C. Larkin
	Chief Financial Officer (Principal Financial and Accounting Officer)

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4. OIL AND GAS PROPERTIES

6 Months Ended

Jun. 30, 2012

Extractive Industries [Abstract]

NOTE 4 - OIL AND GAS PROPERTIES

Oil and Gas properties, stated at cost, consisted of the following:

	June 30, 2012			December 31, 2011
Proved oil and gas properties	$	158,470		$	434,289
Investment in partnerships		440,833			207,280
Investment in undeveloped leases in Illinois Basin		190,000			190,000
Total oil and gas properties		789,303			831,569
Less accumulated depletion and amortization		(403,459	)		(416,420	)
Less impairment		–			–
Net oil and gas properties	$	385,844		$	415,149

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3. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

NOTE 3 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Sale of Common Stock to Related Parties

On March 8, 2012, the Company entered into a Stock Purchase Agreement with eight investors (the “Investors”), pursuant to which the Company sold 700,000 shares (as adjusted to retroactively reflect the Reverse Split more fully described in Note 6. STOCKHOLDERS’ EQUITY) of the Company’s common stock, $0.005 par value (the “Common Stock”) in a private offering (the “Offering”) at a price of $0.005 per share, for total consideration to the Company valued at $350,000.  The Investors included Charles T. Bukowski, Jr., the Company’s President and Chief Executive Officer, as well as a member of the Company’s Board of Directors (the “Board”), Travis N. Creed, a member of the Board, Stephen C. Larkin, the Company’s Chief Financial Officer and a member of the Board, Robert D. and Doris R. Burr, the Company’s former Chief Executive Officer and his spouse, Danny Looney, the Company’s tax accountant, Harry J. Peters, a consultant to the Company, Robert Shallow, a current stockholder and G2 International, Inc., a consultant to the Company. Of the $350,000, $327,500 was collected in cash and $22,500 was exchanged for consulting services.

As of June 30, 2012, there were 990,176 shares of common stock issued and outstanding (as adjusted to retroactively reflect the Reverse Split more fully described in Note 6. STOCKHOLDERS’ EQUITY). Stephen C. Larkin, Director and Chief Financial Officer of the Company, beneficially owns approximately 27.06% of the issued and outstanding Common Stock as a result of his purchase in the Offering.

Payables and Notes Payable to Related Parties

As of June 30, 2012 and December 31, 2011, the Company had the following debts and obligations to related parties:

	June 30, 2012		December 31, 2011
Note Payable to a minority shareholder	$	100,000	$	100,000
Total Note Payable to a minority shareholder	$	100,000	$	100,000

During the fourth quarter 2007, Peter Chen, a minority shareholder, loaned the Company $100,000 to finance the Company’s operations. The Company executed a written promissory note on October 4, 2007 which is due on demand and bears an interest rate of 0%.

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CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
CURRENT ASSETS:
Cash	$ 1,895,269	$ 1,259,934
Accounts receivable:
Trade and other	24,255	13,778
Prepaid expenses and other	5,520	5,520
TOTAL CURRENT ASSETS	1,925,044	1,279,232
OIL AND GAS PROPERTIES, NET	385,844	415,149
OTHER FIXED ASSETS, NET	36,469	25,047
INVESTMENTS AT COST	198,523
TOTAL ASSETS	2,545,880	1,719,428
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses	16,285	154,705
Accounts payable - related party	84,906	84,906
Deferred liability - oil and gas partnerships	927,456	743,601
Notes payable - minority shareholders	100,000	100,000
TOTAL CURRENT LIABILITIES	1,128,647	1,083,212
TOTAL LIABILITIES	1,128,647	1,083,212
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2012 and December 31, 2011
Common stock, $0.005 par value; 150,000,000 shares authorized; 990,176 shares issued and outstanding at June 30, 2012 and 290,036 shares issued and outstanding at December 31, 2011	4,950	1,450
Additional paid in capital	13,904,815	13,558,315
Accumulated deficit	(12,492,532)	(12,923,549)
TOTAL STOCKHOLDERS' EQUITY	1,417,233	636,216
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 2,545,880	$ 1,719,428

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1. BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

NOTE 1 - BASIS OF PRESENTATION

The financial statements of Bayou City Exploration, Inc. (the “Company”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States has been omitted, the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Form 10-K of the Company for its fiscal year ended December 31, 2011 and subsequent filings with the SEC.

The financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenues for its working interests in oil and gas properties on the basis of the Company’s net revenue interests as oil and gas is produced and sold by the operators of those properties. The Company’s share of revenues, net of related production and other related costs, are generally remitted to the Company monthly, with a one or two month delay, and are accompanied by joint interest billing statements detailing production amounts and related revenues and expenses.

The Company recognizes net turnkey drilling revenue under a turnkey contract agreement between the Company and the limited partnerships. The revenue is recognized after the completion of the project.

Accounts Receivable

Accounts receivable are from oil and gas sales produced and sold during the reporting period but awaiting cash payment, from expenditures paid on behalf of the limited partnerships, from expenditures on behalf of non-operators, including related parties and on oil and gas properties operated by the Company. Based upon a review of trade receivables as of June 30, 2012, a total of $0 was considered potentially uncollectible.

Managed Limited Partnerships

The Company sponsors limited partnerships for which it serves as the Managing General Partner. The Company normally participates for 10% of the limited partnerships as the Managing General Partner and accounts for the investment under the equity method. Revenues received and changes in the partnership investments are recorded as oil and gas revenues and net assets, respectively.

Consolidation Policy

The financial statements include the accounts of the Company and its wholly owned subsidiary, Rivergreen Financial Group, LLC.

The Company consolidates its interest in joint ventures and partnerships in the oil and gas industry using the ‘proportionate consolidation’ method provided for in Accounting Standards Codification (ASC) Topic 810-10-45-14, Consolidation – Other Presentation Matters.   A proportionate consolidation is permitted when the Company does not control the joint venture or partnership but nonetheless exercises significant influence.  Under this method, the Company recognizes their proportionate share of each partnership’s assets, liabilities, revenues and expenses which are included in the appropriate classifications on the Company’s consolidated financial statements. 

All significant intercompany transactions of its consolidated subsidiary and the limited partnerships are eliminated.

Investments in Debt Securities

Debt securities consist of mortgage notes receivable that management has the intent and ability to hold for the foreseeable future or until maturity are reported at amortized cost. Interest income is accrued based on the unpaid principal balance. The allowance for uncollectible mortgages, provided as necessary, is based upon management’s estimate of probably losses which have occurred as of the balance sheet date based on management’s evaluation of risk in the loan portfolio. Loan losses are charged against the allowance when management believes the uncollectbility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for uncollectible mortgages is evaluated on a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans, historical collection information, and existing economic conditions. Delinquent mortgage note receivables are written off based on an individual credit evaluation and the specific circumstances of the debtor.

Investment in Unconsolidated Affiliate Company

The Company owns a non-controlling interest in an affiliated entity that predominately provides mortgage services primarily in Midwest and Southeast areas of the United States. The net carrying amount of the investment in unconsolidated affiliate company was $80,781 at June 30, 2012. The Company accounts for the investment in which it holds a significant interest but does not have controlling influence, under the equity method of accounting pursuant to ASC Topic 323-30-35, Investments – Equity Method and Joint Ventures. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The differences between the carrying amounts and the estimated fair values of equity method investments are recognized as an impairment loss when the loss is deemed to be other than temporary.

Oil and Gas Properties

The Company follows the successful efforts method of accounting for oil and gas producing activities. Under the successful efforts method of accounting, costs which relate directly to the discovery of oil and gas reserves are capitalized. These capitalized costs include:

(1) the costs of acquiring mineral interest in properties,

(2) costs to drill and equip exploratory wells that find proved reserves,

(3) costs to drill and equip development wells, and

(4) costs for support equipment and facilities used in oil and gas producing activities.

These costs are depreciated, depleted or amortized on the unit of production method, based on estimates of recoverable proved developed oil and gas reserves. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed.

The costs of acquiring unproved properties are capitalized as incurred and carried until the property is reclassified as a producing oil and gas property, or considered impaired as discussed below. The Company annually assesses its unproved properties to determine whether they have been impaired. If the results of this assessment indicate impairment, a loss is recognized by providing a valuation allowance. When an unproved property is surrendered, the costs related thereto are first charged to the valuation allowance, with any additional balance expensed to operations.

The costs of drilling exploratory wells are capitalized as wells in progress pending determination of whether the well has proved reserves. Once a determination is made, the capitalized costs are charged to expense if no reserves are found or, otherwise reclassified as part of the costs of the Company’s wells and related equipment. In the absence of a determination as to whether the reserves that have been found can be classified as proved, the costs of drilling such an exploratory well are not carried as an asset for more than one year following completion of drilling. If, after a year has passed, the Company is unable to determine that proved reserves have been found, the well is assumed to be impaired and its costs are charged to expense. At June 30, 2012 and December 31, 2011 the Company had $0 in capitalized costs pending determination.

Other Dispositions

Upon disposition or retirement of property and equipment other than oil and gas properties, the cost and related accumulated depreciation are removed from the accounts and the gain or loss thereon, if any, is credited or charged to expense. The Company recognizes the gain or loss on the sale of either a part of a proved oil and gas property or of an entire proved oil and gas property constituting a part of a field upon the sale or other disposition of such. The unamortized cost of the property or group of properties, a part of which was sold or otherwise disposed of, is apportioned to the interest sold and interest retained on the basis of the fair value of those interests.

Impairment of Long-Lived Assets

The Company follows the provisions of ASC Subtopic 360-35, “Property, Plant and Equipment – Subsequent Measurement.” Consequently, the Company reviews its long-lived assets to be held and used, including oil and gas properties accounted for under the successful efforts method of accounting. Whenever events or circumstances indicate the carrying value of those assets may not be recoverable, an impairment loss for proved properties and capitalized exploration and development costs is recognized. The Company assesses impairment of capitalized costs, or carrying amount, of proved oil and gas properties by comparing net capitalized costs to undiscounted future net cash flows on a field-by-field basis using known expected prices, based on set agreements. If impairment is indicated based on undiscounted expected future cash flows, then impairment is recognizable to the extent that net capitalized costs exceed the estimated fair value of the property. Fair value of the property is estimated by the Company using the present value of future cash flows discounted at 10%, in accordance with ASC 932-235, “Disclosures about Oil and Gas Producing Activities.”

Stock Options

Effective January 1, 2006, the Company accounts for stock options in accordance with revised Statement of Financial Accounting Standards (SFAS) No. 123, Share-Based Payment (SFAS 123(R) (ASC 718 and 505). Accordingly, stock compensation expense has been recognized in the statements of operations based on the grant date fair value of the options for the period ended December 31, 2006 and thereafter.

Under SFAS 123(R) (ASC 718 and 505), the fair value of options is estimated at the date of grant using a Black-Scholes-Merton (“Black-Scholes”) option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. Volatility is determined using historical stock prices over a period consistent with the expected term of the option. The Company utilizes the guidelines of Staff Accounting Bulletin No. 107 (SAB 107) of the Securities and Exchange Commission relative to “plain vanilla” options in determining the expected term of option grants. SAB 107 permits the expected term of “plain vanilla” options to be calculated as the average of the option’s vesting term and contractual period.

The Company has used this method in determining the expected term of all options. The Company has several awards that provide for graded vesting. The Company recognizes compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The amount of compensation expense recognized at any date is at least equal to the portion of the grant date value of the award that is vested at that date.

Concentrations of Credit Risk Arising From Cash Deposits in Excess of Insured Limits

The Company maintains its cash balances in one financial institution located in Bowling Green, Kentucky. The account the cash balance reflects is insured by the Federal Deposit Insurance Corporation (“FDIC”) for an unlimited amount since it meets the FDIC’s requirements as a noninterest-bearing account. At June 30, 2012 the cash balances were at $1,895,269.

Offering Related Expenses

The Company expenses marketing-related offering expenses as these are incurred. Marketing expenses totaled $254,074 and $81,461 in the six months ended June 30, 2012 and 2011, respectively.

Fair Value of Financial Instruments

The carrying cash value and cash equivalents, receivables, prepaids, accounts payable, notes payable and advances payable approximate their fair value. Management is of the opinion that the Company is not exposed to significant interest or credit risk arising from these financial instruments.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Preferred stock par value	$ 0.001	$ 0.001
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.005	$ 0.005
Common stock shares authorized	150,000,000	150,000,000
Common stock shares issued	990,176	290,036
Common stock shares outstanding	990,176	290,036

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3. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Certain Relationships And Related Party Transactions Details
Note Payable to a minority shareholder	$ 100,000	$ 100,000
Total Note Payable to a minority shareholder	$ 100,000	$ 100,000

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2012	Aug. 06, 2012	Jun. 30, 2011
Document And Entity Information
Entity Registrant Name	BAYOU CITY EXPLORATION, INC.
Entity Central Index Key	0001050957
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 1,459,369
Entity Common Stock, Shares Outstanding		990,176
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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3. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Certain Relationships And Related Party Transactions Details Narrative
Common stock, shares issued	990,176	290,036
Common stock, shares outstanding	990,176	290,036
Cash received from private placement	$ 350,000
Consulting services paid	$ 25,000

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
OPERATING REVENUES:
Oil and gas sales	$ 22,626	$ 35,887	$ 92,194	$ 74,042
Net turnkey drilling contract revenue	(7,562)		926,951
Equity in earnings	80,781		80,781
TOTAL OPERATING REVENUES	95,846	35,887	1,089,926	74,042
OPERATING COSTS AND EXPENSES:
Lease operating expenses and production taxes	25,016	8,876	44,132	21,177
Abandonment and dry hole costs		22,609		22,699
Depreciation, depletion and amortization	5,884	25,149	33,873	55,584
Marketing Costs	179,656	71,193	254,074	81,461
General and administrative costs	188,610	161,458	326,830	344,951
TOTAL OPERATING COSTS	399,167	289,285	658,909	525,872
OPERATING INCOME (LOSS)	(303,321)	(253,398)	431,017	(451,830)
OTHER INCOME (EXPENSE):
Miscellaneous income				200
NET INCOME (LOSS) BEFORE INCOME TAX	(303,321)	(253,398)	431,017	(451,630)
Income Tax Provision
NET INCOME (LOSS)	$ (303,321)	$ (253,398)	$ 431,017	$ (451,630)
NET INCOME (LOSS) PER COMMON SHARE - BASIC (in Dollars per share)	$ (0.31)	$ (0.87)	$ 0.61	$ (1.56)
NET INCOME (LOSS) PER COMMON SHARE - DILUTED	$ (0.31)	$ (0.87)	$ 0.61	$ (1.56)
Weighted average common shares outstanding -
Basic	990,036	290,036	704,710	290,036
Diluted	990,036	290,036	704,710	290,036

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7. SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

NOTE 7 - SUBSEQUENT EVENTS

Subsequent to the six months ended June 30, 2012, the Company effected the Reverse Split more fully described in Note 6. STOCKHOLDERS’ EQUITY. The Reverse Split resulted in the number of issued and outstanding shares of common stock of the Company decreasing from 99,003,633 to 990,176.

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6. STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2012

Equity [Abstract]

NOTE 6 - STOCKHOLDERS' EQUITY

Authorization to Issue Shares — Preferred and Common

The Company is authorized to issue two classes of stock that are designated as common and preferred stock. As of June 30, 2012, the Company was authorized to issue 155,000,000 shares of stock, 150,000,000 being designated as Common Stock of which 990,036 were outstanding (as adjusted to retroactively reflect the Reverse Split more fully described in Note 6. STOCKHOLDERS’ EQUITY), and 5,000,000 shares designated as preferred stock, of which 0 shares were outstanding.

Issuance of Equity Securities

As described in Note 3 above, on March 8, 2012, the Company conducted a private Offering pursuant to which the Company sold 700,000 shares (as adjusted to retroactively reflect the Reverse Split more fully described in Note 6. STOCKHOLDERS’ EQUITY) of the Company’s Common Stock for total consideration to the Company valued at $350,000.   The consideration for the Common Stock was paid primarily in cash, however, the shares issued to one Investor were issued in exchange for settlement of outstanding invoices for consulting services rendered.

Stock Options

During the three months ended June 30, 2012, the Company did not issue any options to purchase shares of the Company’s Common Stock, and no outstanding options were exercised during this period.

Reverse Split of Common Stock

On June 26, 2012, the Company’s Board unanimously adopted resolutions declaring the advisability of, and recommending that stockholders approve, an amendment to the Company’s Articles of Incorporation (the “Amendment”) to effect a 1-for-100 reverse split of the issued and outstanding shares of the Company’s Common Stock (the “Reverse Split”). In connection with the adoption of this resolution, the Board elected to seek the written consent of the holders of a majority of the Company’s issued and outstanding shares of Common Stock in order to reduce the costs and implement the proposals in a timely manner.

On June 26, 2012, shareholders holding 55,560,905 shares of the Company’s issued and outstanding Common Stock (approximately 56.1%), consented in writing to the proposed Amendment:

The Reverse Split was effective on July 26, 2012, all issues and outstanding stock and per share amounts included in the financial statements have been retroactively adjusted to reflect the reverse stock split.

SUBSEQUENT EVENTS.

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4. OIL AND GAS PROPERTIES (Details) (Oil And Gas Properties [Member], USD $)	Jun. 30, 2012	Dec. 31, 2011
Oil And Gas Properties [Member]
Property, Plant and Equipment [Line Items]
Proved oil and gas properties	$ 158,470	$ 434,289
Investment in partnerships	440,833	207,280
Investment in undeveloped leases in Illinois Basin	190,000	190,000
Total oil and gas properties	789,303	831,569
Less accumulated depletion and amortization	(403,459)	(416,420)
Less impairment
Net oil and gas properties	$ 385,844	$ 415,149

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4. OIL AND GAS PROPERTIES (Tables)

6 Months Ended

Jun. 30, 2012

Oil And Gas Properties Tables

OIL AND GAS PROPERTIES

Oil and Gas properties, stated at cost, consisted of the following:

	June 30, 2012			December 31, 2011
Proved oil and gas properties	$	158,470		$	434,289
Investment in partnerships		440,833			207,280
Investment in undeveloped leases in Illinois Basin		190,000			190,000
Total oil and gas properties		789,303			831,569
Less accumulated depletion and amortization		(403,459	)		(416,420	)
Less impairment		–			–
Net oil and gas properties	$	385,844		$	415,149

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2012

Summary Of Significant Accounting Policies Policies

BASIS OF PRESENTATION

The financial statements of Bayou City Exploration, Inc. (the “Company”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States has been omitted, the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Form 10-K of the Company for its fiscal year ended December 31, 2011 and subsequent filings with the SEC.

The financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.

Revenue Recognition

The Company recognizes revenues for its working interests in oil and gas properties on the basis of the Company’s net revenue interests as oil and gas is produced and sold by the operators of those properties. The Company’s share of revenues, net of related production and other related costs, are generally remitted to the Company monthly, with a one or two month delay, and are accompanied by joint interest billing statements detailing production amounts and related revenues and expenses.

The Company recognizes net turnkey drilling revenue under a turnkey contract agreement between the Company and the limited partnerships. The revenue is recognized after the completion of the project.

Accounts Receivable

Accounts receivable are from oil and gas sales produced and sold during the reporting period but awaiting cash payment, from expenditures paid on behalf of the limited partnerships, from expenditures on behalf of non-operators, including related parties and on oil and gas properties operated by the Company. Based upon a review of trade receivables as of June 30, 2012, a total of $0 was considered potentially uncollectible.

Managed Limited Partnerships

The Company sponsors limited partnerships for which it serves as the Managing General Partner. The Company normally participates for 10% of the limited partnerships as the Managing General Partner and accounts for the investment under the equity method. Revenues received and changes in the partnership investments are recorded as oil and gas revenues and net assets, respectively.

Consolidation Policy

The financial statements include the accounts of the Company and its wholly owned subsidiary, Rivergreen Financial Group, LLC.

The Company consolidates its interest in joint ventures and partnerships in the oil and gas industry using the ‘proportionate consolidation’ method provided for in Accounting Standards Codification (ASC) Topic 810-10-45-14, Consolidation – Other Presentation Matters.   A proportionate consolidation is permitted when the Company does not control the joint venture or partnership but nonetheless exercises significant influence.  Under this method, the Company recognizes their proportionate share of each partnership’s assets, liabilities, revenues and expenses which are included in the appropriate classifications on the Company’s consolidated financial statements. 

All significant intercompany transactions of its consolidated subsidiary and the limited partnerships are eliminated.

Investments in Debt Securities

Debt securities consist of mortgage notes receivable that management has the intent and ability to hold for the foreseeable future or until maturity are reported at amortized cost. Interest income is accrued based on the unpaid principal balance. The allowance for uncollectible mortgages, provided as necessary, is based upon management’s estimate of probably losses which have occurred as of the balance sheet date based on management’s evaluation of risk in the loan portfolio. Loan losses are charged against the allowance when management believes the uncollectbility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for uncollectible mortgages is evaluated on a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans, historical collection information, and existing economic conditions. Delinquent mortgage note receivables are written off based on an individual credit evaluation and the specific circumstances of the debtor.

Investment in Unconsolidated Affiliate Company

The Company owns a non-controlling interest in an affiliated entity that predominately provides mortgage services primarily in Midwest and Southeast areas of the United States. The net carrying amount of the investment in unconsolidated affiliate company was $80,781 at June 30, 2012. The Company accounts for the investment in which it holds a significant interest but does not have controlling influence, under the equity method of accounting pursuant to ASC Topic 323-30-35, Investments – Equity Method and Joint Ventures. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The differences between the carrying amounts and the estimated fair values of equity method investments are recognized as an impairment loss when the loss is deemed to be other than temporary.

Oil and Gas Properties

The Company follows the successful efforts method of accounting for oil and gas producing activities. Under the successful efforts method of accounting, costs which relate directly to the discovery of oil and gas reserves are capitalized. These capitalized costs include:

(1) the costs of acquiring mineral interest in properties,

(2) costs to drill and equip exploratory wells that find proved reserves,

(3) costs to drill and equip development wells, and

(4) costs for support equipment and facilities used in oil and gas producing activities.

These costs are depreciated, depleted or amortized on the unit of production method, based on estimates of recoverable proved developed oil and gas reserves. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed.

The costs of acquiring unproved properties are capitalized as incurred and carried until the property is reclassified as a producing oil and gas property, or considered impaired as discussed below. The Company annually assesses its unproved properties to determine whether they have been impaired. If the results of this assessment indicate impairment, a loss is recognized by providing a valuation allowance. When an unproved property is surrendered, the costs related thereto are first charged to the valuation allowance, with any additional balance expensed to operations.

The costs of drilling exploratory wells are capitalized as wells in progress pending determination of whether the well has proved reserves. Once a determination is made, the capitalized costs are charged to expense if no reserves are found or, otherwise reclassified as part of the costs of the Company’s wells and related equipment. In the absence of a determination as to whether the reserves that have been found can be classified as proved, the costs of drilling such an exploratory well are not carried as an asset for more than one year following completion of drilling. If, after a year has passed, the Company is unable to determine that proved reserves have been found, the well is assumed to be impaired and its costs are charged to expense. At June 30, 2012 and December 31, 2011 the Company had $0 in capitalized costs pending determination.

Other Dispositions

Upon disposition or retirement of property and equipment other than oil and gas properties, the cost and related accumulated depreciation are removed from the accounts and the gain or loss thereon, if any, is credited or charged to expense. The Company recognizes the gain or loss on the sale of either a part of a proved oil and gas property or of an entire proved oil and gas property constituting a part of a field upon the sale or other disposition of such. The unamortized cost of the property or group of properties, a part of which was sold or otherwise disposed of, is apportioned to the interest sold and interest retained on the basis of the fair value of those interests.

Impairment of Long-Lived Assets

The Company follows the provisions of ASC Subtopic 360-35, “Property, Plant and Equipment – Subsequent Measurement.” Consequently, the Company reviews its long-lived assets to be held and used, including oil and gas properties accounted for under the successful efforts method of accounting. Whenever events or circumstances indicate the carrying value of those assets may not be recoverable, an impairment loss for proved properties and capitalized exploration and development costs is recognized. The Company assesses impairment of capitalized costs, or carrying amount, of proved oil and gas properties by comparing net capitalized costs to undiscounted future net cash flows on a field-by-field basis using known expected prices, based on set agreements. If impairment is indicated based on undiscounted expected future cash flows, then impairment is recognizable to the extent that net capitalized costs exceed the estimated fair value of the property. Fair value of the property is estimated by the Company using the present value of future cash flows discounted at 10%, in accordance with ASC 932-235, “Disclosures about Oil and Gas Producing Activities.”

Stock Options

Effective January 1, 2006, the Company accounts for stock options in accordance with revised Statement of Financial Accounting Standards (SFAS) No. 123, Share-Based Payment (SFAS 123(R) (ASC 718 and 505). Accordingly, stock compensation expense has been recognized in the statements of operations based on the grant date fair value of the options for the period ended December 31, 2006 and thereafter.

Under SFAS 123(R) (ASC 718 and 505), the fair value of options is estimated at the date of grant using a Black-Scholes-Merton (“Black-Scholes”) option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. Volatility is determined using historical stock prices over a period consistent with the expected term of the option. The Company utilizes the guidelines of Staff Accounting Bulletin No. 107 (SAB 107) of the Securities and Exchange Commission relative to “plain vanilla” options in determining the expected term of option grants. SAB 107 permits the expected term of “plain vanilla” options to be calculated as the average of the option’s vesting term and contractual period.

The Company has used this method in determining the expected term of all options. The Company has several awards that provide for graded vesting. The Company recognizes compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The amount of compensation expense recognized at any date is at least equal to the portion of the grant date value of the award that is vested at that date.

Concentrations of Credit Risk Arising From Cash Deposits in Excess of Insured Limits

The Company maintains its cash balances in one financial institution located in Bowling Green, Kentucky. The account the cash balance reflects is insured by the Federal Deposit Insurance Corporation (“FDIC”) for an unlimited amount since it meets the FDIC’s requirements as a noninterest-bearing account. At June 30, 2012 the cash balances were at $1,895,269.

Offering Related Expenses

The Company expenses marketing-related offering expenses as these are incurred. Marketing expenses totaled $254,074 and $81,461 in the six months ended June 30, 2012 and 2011, respectively.

Fair Value of Financial Instruments

The carrying cash value and cash equivalents, receivables, prepaids, accounts payable, notes payable and advances payable approximate their fair value. Management is of the opinion that the Company is not exposed to significant interest or credit risk arising from these financial instruments.

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3. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2012

Certain Relationships And Related Party Transactions Tables

Payables and Notes Payable to Related Parties

As of June 30, 2012 and December 31, 2011, the Company had the following debts and obligations to related parties:

	June 30, 2012		December 31, 2011
Note Payable to a minority shareholder	$	100,000	$	100,000
Total Note Payable to a minority shareholder	$	100,000	$	100,000

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Summary Of Significant Accounting Policies Details Narrative
Trade receivables potentially uncollectible	$ 0
Carrying amount of the investment in unconsolidated affiliate company	80,781
Capitalized costs pending determination	0		0
Marketing expenses	$ 254,074	$ 81,461

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss)	$ 431,017	$ (451,630)
Adjustments to reconcile net income (loss) to net cash flows Provided by operating activities:
Depreciation, depletion, and amortization	33,873	55,584
Common stock issued for services	22,500
Change in operating assets and liabilities:
Accounts receivable - trade	(10,477)	(2,530)
Accounts payable and accrued liabilities	(138,420)	(85,802)
Net turnkey partnership obligation	183,855	1,082,460
NET CASH PROVIDED BY OPERATING ACTIVITIES	522,348	598,082
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of oil and gas properties	(4,568)	(186,218)
Purchase of investments	(209,945)
NET CASH (USED IN) INVESTING ACTIVITIES	(214,513)	(186,218)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing stock	327,500
NET CASH PROVIDED BY FINANCING ACTIVITIES	327,500
NET INCREASE IN CASH	635,335	411,864
CASH AT BEGINNING OF PERIOD	1,259,934	491,708
CASH AT END OF PERIOD	1,895,269	903,572
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for federal income taxes

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5. COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Commitments

As of June 30, 2012, neither the Company nor any of its properties is subject to any material pending legal proceedings.

Contingencies

As the managing general partner of the Company’s investment partnerships, the Company’s operations are subject to environmental protection regulations established by federal, state, and local agencies that may necessitate significant capital outlays that, in turn, would materially affect the financial position and business operations of the Company. These regulations, enacted to protect against waste, conserve natural resources and prevent pollution, could necessitate spending funds on environmental protection measures, rather than on drilling operations. Because these laws and regulations change frequently and are becoming increasingly more stringent, the costs to the Company of compliance with existing and future environmental regulations and the overall impact on the Company’s operations or financial condition cannot be predicted, but are likely to increase. Furthermore, if any penalties or prohibitions were imposed on the Company for violating such regulations, the Company’s operations could be adversely affected.

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6. STOCKHOLDERS' EQUITY (Details Narrative)	3 Months Ended
	Jun. 30, 2012
Stockholders Equity Details Narrative
Options issued to purchase shares of the Company's Common Stock	0
Outstanding options exercised	0