10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2013 Commission File No. 000-22750

ROYALE ENERGY, INC.

(Exact name of registrant as specified in its charter)

California	33-0224120
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7676 Hazard Center Drive, Suite 1500

San Diego, CA 92108

(Address of principal executive offices) (Zip Code)

619-881-2800

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90 days.     Yes  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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes x     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Check one:

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o	Smaller reporting company  x

Indicate by check mark whether the registrant is a blank check company (as defined in Rule 12b-2 of the Exchange Act).       Yes  o    No  x

At September 30, 2013, a total of 14,635,362 shares of registrant’s common stock were outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	12
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	13
Item 1A.	Risk Factors	13
Item 6.	Exhibits	13
	Signatures	14

PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

ROYALE ENERGY, INC.

BALANCE SHEETS

	September 30, 2013		December 31, 2012
	(Unaudited)		(Audited)
ASSETS
Current Assets
Cash and Cash Equivalents	$	2,462,511	$	1,489,930
Accounts Receivable, net		3,700,285		3,969,160
Prepaid Expenses		852,963		469,038
Available for Sale Securities		16,448		0
Inventory		322,456		612,464
Total Current Assets		7,354,663		6,540,592
Other Assets		946		6,946
Oil and Gas Properties, at cost, (successful efforts basis), Equipment and Fixtures		9,954,859		10,955,797
Total Assets	$	17,310,468	$	17,503,335

See notes to unaudited financial statements

1

ROYALE ENERGY, INC.

BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(Unaudited)			(Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses	$	4,286,513		$	4,932,468
Current Portion of Long-Term Debt, Net of Discount		0			2,258,668
Current Portion of Deferred Tax Liability		1,775			1,775
Deferred Revenue from Turnkey Drilling		7,247,071			8,693,743
Total Current Liabilities		11,535,359			15,886,654
Noncurrent Liabilities:
Asset Retirement Obligation		937,990			954,088
Total Noncurrent Liabilities		937,990			954,088
Total Liabilities		12,473,349			16,840,742
Stockholders' Equity:
Common Stock, no par value, 20,000,000 shares authorized,  14,635,362 and 12,545,465 shares issued and outstanding , respectively		37,412,870			33,247,571
Convertible preferred stock, Series AA, no par value, 147,500 shares authorized; 52,784 and 52,784 shares issued and outstanding, respectively		154,014			154,014
Accumulated Deficit		(33,043,565	)		(34,186,930	)
Accumulated Other Comprehensive Income		9,945			0
Paid in Capital		303,855			1,447,938
Total Stockholders' Equity		4,837,119			662,593
Total Liabilities and Stockholders' Equity	$	17,310,468		$	17,503,335

See notes to unaudited financial statements

2

ROYALE ENERGY, INC.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012-restated			2013			2012-restated
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Sale of Oil and Gas	$	498,838		$	387,477		$	1,286,834		$	1,255,321
Turnkey drilling		2,470,322			0			3,363,989			0
Supervisory Fees and Other		160,496			166,170			485,534			535,717
Total Revenues		3,129,656			553,647			5,136,357			1,791,038
Costs and Expenses:
General and Administrative		753,227			821,603			2,309,441			2,833,050
Turnkey Drilling and Development		1,220,536			(343,707	)		1,762,379			(153,549	)
Lease Operating		326,515			272,635			860,465			878,966
Lease Impairment		46,311			20,500			46,311			202,127
Geological and Geophysical Expense		24,997			773			24,997			423,459
Inventory Write Down		39,185			0			39,185			62,744
Legal and Accounting		26,509			80,772			278,973			500,647
Marketing		101,844			182,161			204,565			508,302
Depreciation, Depletion and Amortization		346,093			656,909			807,357			1,394,028
Total Costs and Expenses		2,885,217			1,691,646			6,333,673			6,649,774
Gain on Sale of Assets, Net		350,233			1,547			2,645,153			3,284
Income (Loss) From Operations		594,672			(1,136,452	)		1,447,837			(4,855,452	)
Other Income (Expense):
Interest Expense		(1,105	)		(19,039	)		(304,472	)		(87,401	)
Income (Loss) Before Income Tax Expense (Benefit)		593,567			(1,155,491	)		1,143,365			(4,942,853	)
Income tax provision (benefit)		0			(330,306	)		0			(1,434,089	)
Net Income (Loss)	$	593,567		$	(825,185	)	$	1,143,365		$	(3,508,764	)
Basic Earnings (Loss) Per Share	$	0.04		$	(0.07	)	$	0.08		$	(0.32	)
Diluted Earnings (Loss) Per Share	$	0.04		$	(0.07	)	$	0.08		$	(0.32	)
Other Comprehensive Income
Unrealized Gain on Equity Securities	$	9,945		$	1,501		$	9,945		$	1,843
Other Comprehensive Income, before tax		9,945			1,501			9,945			1,843
Income Tax Expense Related to Items of Other Comprehensive Income		0			436			0			535
Other Comprehensive Income, net of tax		9,945			1,065			9,945			1,308
Comprehensive Income (Loss)	$	603,512		$	(824,120	)	$	1,153,310		$	(3,507,456	)

See notes to unaudited financial statements 

3

ROYALE ENERGY, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	2013			2012-Restated
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	1,143,365		$	(3,508,764	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Used by Operating Activities:
Depreciation, Depletion and Amortization		807,357			1,394,028
Lease Impairment		46,311			202,127
(Gain) Loss on Sale of Assets		(2,645,153	)		(3,284	)
Inventory Write Down		39,185			62,744
Stock-Based Compensation, net of adjustments		0			29,445
Debt Discount Amortization, net of adjustments		280,583			0
Decrease (Increase) in:
Accounts Receivable		268,875			218,830
Prepaid Expenses and Other Assets		(215,286	)		143,013
Increase (Decrease) in:
Accounts Payable and Accrued expenses		(662,053	)		11,040
Deferred Revenues - DWI		(1,446,672	)		2,747,939
Deferred Income Tax expense (benefit)		0			(1,434,089	)
Net Cash Used by Operating Activities		(2,383,488	)		(136,971	)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for Oil and Gas Properties and Other Capital Expenditures		(1,146,651	)		(774,968	)
Proceeds from Sale of Assets		4,020,755			1,737
Net Cash Provided (Used) by Investing Activities		2,874,104			(773,231	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt		(1,183,333	)		(1,800,000	)
Proceeds from Stock Option and Warrant Exercises		643,630			299,500
Proceeds from Sale of Common Stock		1,021,668			1,033,640
Net Cash Provided (Used) by Financing Activities		481,965			(466,860	)
Net Increase/Decrease in Cash and Cash Equivalents		972,581			(1,377,062	)
Cash at Beginning of Year	$	1,489,930		$	2,946,131
Cash at End of Period	$	2,462,511		$	1,569,069
Cash Paid for Interest	$	23,890		$	83,196
Cash Paid for Taxes	$	800		$	800
Non-Cash Investing and Financing Transactions
Unrealized Gain on Equity Securities	$	9,945		$	1,843
Conversion of Debt and accrued interest to Common Stock	$	1,355,918		$	0

See notes to unaudited financial statements

4

ROYALE ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normally recurring adjustments, necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented.  The results of operations for the nine month period are not, in management’s opinion, indicative of the results to be expected for a full year of operations.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report.

NOTE 2 – EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share are calculated as follows:

	For the Nine Months ended  September 30, 2013
	Earnings  (Numerator)		Shares (Denominator)		Per-Share Amount
Basic Earnings Per Share:
Net Income available to common stock	$	1,143,365		13,567,216	$	0.08
Diluted Earnings Per Share:
Effect of dilutive securities and stock options		0		685,621		0
Net Earnings available to common stock	$	1,143,365		14,252,837	$	0.08

	For the Nine Months ended  September 30, 2012 - Restated
	Earnings (Loss) (Numerator)			Shares (Denominator)		Per-Share Amount
Basic Earnings (Loss) Per Share:
Net income available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)
Diluted Earning (Loss) Per Share:
Effect of dilutive securities and stock options		0			0		0.00
Net Earnings (loss) available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)

For the nine months ended September 30, 2012, Royale Energy had dilutive securities of 887,681.  These securities were not included in the dilutive earnings (loss) per share due to their antidilutive nature.

5

ROYALE ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES

Oil and gas properties, equipment and fixtures consist of the following:

	September 30, 2013 (Unaudited)			December 31, 2012 (Audited)
Oil and Gas
Producing properties, including drilling costs	$	25,170,304		$	24,327,806
Undeveloped properties		2,877,378			4,034,292
Lease and well equipment		9,838,582			9,724,602
		37,886,264			38,086,700
Accumulated depletion, depreciation & amortization		(28,525,710	)		(27,756,493	)
		9,360,554			10,330,207
Commercial and Other
Real estate, including furniture and fixtures	$	502,344		$	502,344
Vehicles		120,314			151,669
Furniture and equipment		1,300,803			1,299,300
		1,923,461			1,953,313
Accumulated depreciation		(1,329,156	)		(1,327,723	)
		594,305			625,590
	$	9,954,859		$	10,955,797

The guidance set forth in the Continued Capitalization of Exploratory Well Costs paragraph of the Extractive Activities Topic of the FASB Accounting Standards Codification requires that we evaluate all existing capitalized exploratory well costs and disclose the extent to which any such capitalized costs have become impaired and are expensed or reclassified during a fiscal period. We did not make any additions to capitalized exploratory well costs pending a determination of proved reserves during the periods in 2013 or 2012. 

NOTE 4 – STOCK BASED COMPENSATION

During the Board of Directors meeting held in December 2010, directors and officers of Royale Energy were each granted 50,000 stock options, a total of 400,000 options, to purchase common stock at an exercise price of $3.25 per share.  These options are to vest in two parts; the first 200,000 options vested on January 1, 2011; the remaining 200,000 options vested on January 1, 2012.  The options were granted with a legal life of five years, and a service period of two years beginning on January 1, 2011.  During the first nine months of 2012 Royale recognized costs of $19,630 relating to this grant as well as $5,696 in a tax benefit relating to this grant.  No stock-based compensation was recognized during the first nine months of 2013.

6

ROYALE ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 5 – FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS

Royale Energy identifies reportable segments by product. Royale Energy includes revenues from both external customers and revenues from transactions with other operating segments in its measure of segment profit or loss. Royale Energy also includes interest revenue and expense, DD&A, and other operating expenses in its measure of segment profit or loss.

Royale Energy's operations are classified into two principal industry segments. Following is a summary of segmented information for the nine months ended September 30, 2013, and 2012 -Restated:

	Oil and Gas
	Producing		Turnkey
	and		Drilling
	Exploration		Services		Total
Nine Months Ended September 30, 2013:
Revenues from External Customers	$	1,286,834		3,363,989		4,650,823
Supervisory Fees		467,096		0		467,096
Interest Revenue		0		18,438		18,438
Interest Expense		152,236		152,236		304,472
Operating Expenses for Segment Assets		2,451,811		3,028,194		5,480,005
Depreciation, Depletion and Amortization		766,989		40,368		807,357
Lease Impairment		23,156		23,155		46,311
Gain on Sale of Assets		2,645,153		0		2,645,153
Income Tax Benefit		0		0		0
Total Assets	$	16,444,945		865,523		17,310,468
Net Income (Loss)	$	1,004,891		138,474		1,143,365

7

ROYALE ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

	Oil and Gas
	Producing			Turnkey
	and			Drilling
	Exploration			Services			Total
Nine Months Ended September 30, 2012 - Restated:
Revenues from External Customers	$	1,255,321		$	0		$	1,255,321
Supervisory Fees		530,025			0			530,025
Interest Revenue		0			5,692			5,692
Interest Expense		43,701			43,700			87,401
Expenditures for Segment Assets		3,332,051			1,721,568			5,053,619
Depreciation, Depletion and Amortization		1,324,327			69,701			1,394,028
Lease Impairment		101,064			101,063			202,127
Gain on Sale of Assets		3,284			0			3,284
Income Tax Benefit		(874,032	)		(560,057	)		(1,434,089	)
Total Assets	$	18,582,220		$	978,012		$	19,560,232
Net Loss	$	(2,138,481	)	$	(1,370,283	)	$	(3,508,764	)

8

ROYALE ENERGY, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 6 – RESTATEMENT TO REFLECT CHANGE IN REVENUE RECOGNITION POLICY

The Company has restated its previously issued 2012 financial statements for the correction of an error in the method of revenue recognition.   Subsequent to the issuance of the financial statements of the Company as of December 31, 2012 and 2011, and for the years then ended, we reevaluated our policy regarding the recognition of pre-drilling and drilling service revenue.  Beginning with the fiscal year ending December 31, 2010 we have changed our revenue recognition policy to recognize all pre-drilling and drilling service revenue, provided under turnkey drilling agreements, at the time drilling of the well is completed.  Accordingly, the financial statements as of September 30, 2012, and for the periods then ended have been restated to correct an error in our method of revenue recognition to reflect changes in Deferred Revenue, Accumulated Deficit, Deferred Income Tax Asset, and Turnkey Drilling Revenue  relating to the Company’s revenue recognition method.  The effect on the Company’s issued September 30, 2012 financial statements is summarized below:

	As Previously
	Reported			As Restated
Statement of Comprehensive Loss for the Three Month Period Ended September 30, 2012
Turnkey Drilling	$	83,591		$	0
Total  Revenue		637,238			553,647
Loss from Operations		(1,052,861	)		(1,136,452	)
Loss Before Income Tax Benefit		(1,071,900	)		(1,155,491	)
Income Tax Benefit		(306,826	)		(330,306	)
Net Loss		(765,074	)		(825,185	)
Comprehensive Loss		(764,009	)		(824,120	)
Statement of Comprehensive Loss for the Nine Month Period Ended September 30, 2012:
Turnkey Drilling		676,149			0
Total Revenues		2,467,187			1,791,038
Loss From Operations		(4,179,303	)		(4,855,452	)
Loss Before Income Tax Benefit		(4,266,704	)		(4,942,853	)
Income Tax Benefit		(1,237,915	)		(1,434,089	)
Net Loss		(3,028,789	)		(3,508,764	)
Comprehensive Loss		(3,027,481	)		(3,507,456	)

9

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

In addition to historical information contained herein, this discussion contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, subject to various risks and uncertainties that could cause our actual results to differ materially from those in the "forward-looking" statements. While we believe our forward looking statements are based upon reasonable assumptions, there are factors that are difficult to predict and that are influenced by economic and other conditions beyond our control. Investors are directed to consider such risks and other uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.

Results of Operations

For the nine months ended September 30, 2013, we had net income of $1,143,365 compared to a net loss of $3,508,764, during the same period in 2012, a $4,652,129 improvement.  Total revenues for the first nine months of 2013 were $5,136,357, an increase of $3,345,319 or 186.8% from the total revenues of $1,791,038 during the same period in 2012.  For the quarter ended September 30, 2013, we had net income of $593,567 compared to a net loss of $825,185 for the same period in 2012, a $1,418,752 improvement.  The higher net profits and revenues were the result of increased drilling and the sale of a portion of our oil and gas leases in Alaska, during the period in 2013.  See our Current Report Form 8-K filed on May 24, 2013.

In the first nine months of 2013, revenues from oil and gas production increased $31,513 or 2.5% to $1,286,834 from 2012 revenues of $1,255,321.  This increase was due to higher natural gas commodity prices received during the period in 2013.  The net sales volume of natural gas for the nine months ended September 30, 2013, was approximately 330,599 Mcf with an average price of $3.67 per Mcf, versus 444,723 Mcf with an average price of $2.58 per Mcf for the first nine months of 2012.  This represents a decrease in net sales volume of 114,124 Mcf or 25.7%.  For the quarter ended September 30, 2013, revenues from oil and gas increased to $498,838 from $387,477 received during the same period in 2012.  During the third quarter in 2013, we produced 133,138 Mcf with an average price of $3.57 per Mcf versus 129,303 Mcf produced during the same quarter in 2012 with an average price of $2.80 per Mcf, which represents an 3,835 Mcf or 3.0% increase in net sales volume.  For the first nine months of 2013, revenues from oil and condensate (natural gas liquids) decreased $29,271 or 27.8% to $76,022 from 2012 nine month revenues of $105,293.  The net sales volume for the nine month period in 2013 was 810 barrels with an average price of $93.89 per barrel, compared to 1,151 barrels with an average price of $91.46 per barrel for the period in 2012.  This represents a decrease in net sales volume of 341 barrels, or 29.6%.  For the third quarter of 2013, oil and condensate production decreased 53 barrels, or 17.9%, from 296 barrels produced in 2012 to 243 barrels produced in the same period in 2013.  

Oil and natural gas lease operating expenses decreased by $18,501 or 2.1%, to $860,465 for the nine months ended September 30, 2013, from $878,966 for the same period in 2012.  This was mainly due to lower overhead, compression and transportation charges related to the lower production volumes during the period in 2013.  For the third quarter of 2013, lease operating expenses increased $53,880 or 19.8% over the same period in 2012, mainly due to higher plugging costs during the period in 2013.

For the nine months ended September 30, 2013, turnkey drilling revenues were $3,363,989 and turnkey drilling and development costs were $1,762,379.  This was due to the drilling of three California wells during the period in 2013.  During first nine months in 2012, we did not drill any new wells due to lower overall natural gas commodity prices.  Also in the period in 2012, we had an adjustment to previously expensed drilling and development costs due to lower than anticipated completion costs for wells that commenced drilling prior to 2012.  This resulted in an adjustment of ($153,549) in turnkey drilling and development costs.  During the third quarter in 2013, we processed permits on three wells in California, which we expect to drill during the fourth quarter of 2013.

The aggregate of supervisory fees and other income was $485,534 for nine months ended September 30, 2013, a decrease of $50,183 or 9.4% from $535,717 during the period in 2012.  This decrease was the result of lower overhead rates during the period in 2013 due to lower production volumes.  During the third quarter 2013, supervisory fees and other income decreased $5,674 mainly due to lower pipeline and compressor fees as a result of lower natural gas production during the period in 2013.

Depreciation, depletion and amortization expenses decreased to $807,357 from $1,394,028, a decrease of $586,671 or 42.1% for the nine months ended September 30, 2013, as compared to the same period in 2012.  During the third quarter 2013, depreciation, depletion and amortization expenses decreased $310,816.  The depletion rate is calculated using production as a percentage of reserves.  This decrease in depreciation expense was mainly due to a lower depletion rate because of lower production volumes.

10

General and administrative expenses decreased by $523,609 or 18.5% from $2,833,050 for the nine months ended September 30, 2012, to $2,309,441 for the period in 2013. For the third quarter 2013, general and administrative expenses decreased $68,376 or 8.3%, when compared to the same period in 2012.  These decreases were primarily due to lower employee related compensation expenses during the period in 2013, resulting from continued cost control measures.  Marketing expense for the nine months ended September 30, 2013, decreased $303,737, or 59.8%, to $204,565, compared to $508,302 for the same period in 2012.  For the third quarter 2013, marketing expenses decreased $80,317 or 44.1%, when compared to the third quarter in 2012.  Marketing expense varies from period to period according to the number of marketing events attended by personnel and their associated costs.

Legal and accounting expense decreased to $278,973 for the nine months ended September 30, 2013, compared to $500,647 for the same period in 2012, a $221,674 or 44.3% decrease.  For the third quarter 2013, legal and accounting expenses decreased $54,263 or 67.2%, when compared to the same period in 2012.  The decreases in legal and accounting expense were a result of a litigation settlement reached during the period in 2012, resulting in lower legal fees during the period in 2013.

During the period in 2013 we recorded a gain of $2,682,651 from the sale of a portion of our western block oil and gas leases in Alaska.  In the period in 2013, we also recorded a gain of $40,000 on the sale of oil and gas leases in Texas and recorded a loss of $82,184 on the sale of surface casing previously included in inventory.  Additionally in 2013, we recorded a write down of $39,185 on certain oil and gas inventory that no longer appeared viable.  During the same period in 2012, we recorded a gain of $3,284 on the sale of a non-company owned stock and recorded a write down of $62,744 on certain oil and gas inventory to its estimated current market value.

During 2011, we began a seismic survey in Northern California of which a majority of the actual seismic work took place during the first quarter of 2012.  As a result we recorded Geological and Geophysical expenses of $423,459 and $24,997 during the first nine months of 2012 and 2013, respectively.  

We periodically review our proved properties for impairment on a field-by-field basis and charge impairments of value to the expense.  Impairment losses of $46,311 and $202,127 were recorded in the first nine months of 2013 and 2012, respectively.  These impairments were mainly due to various lease and land costs that were no longer viable.

Interest expense increased to $304,472 for the nine months ended September 30, 2013, from $87,401 for the same period in 2012, a $217,071, or 248.4% increase. This increase was due to the interest on a new convertible note payable obtained during the fourth quarter of 2012.  For the nine months in 2013, there was no income tax benefit or expense, as the Company has been in a three year cumulative loss position and recorded a full valuation allowance against all deferred tax assets at December 31, 2012. For the same period in 2012, we had an income tax benefit of $1,434,089 due to net operating loss.

Capital Resources and Liquidity

At September 30, 2013, Royale Energy had current assets totaling $7,354,663 and current liabilities totaling $11,535,359, a $4,180,696 working capital deficit.  We had cash and cash equivalents at September 30, 2013, of $2,462.511 compared to $1,489,930 at December 31, 2012.

In February 2009, we entered into a revolving credit agreement with Texas Capital Bank, N.A. secured by our oil and gas properties, of up to $14,250,000.  We also entered into a separate letter of credit facility with Texas Capital Bank of up to $750,000, for the purposes of refinancing Royale’s existing debt and to fund development, exploration and acquisition activities as well as other general corporate purposes.  The scheduled maturity date for the loan was February 13, 2013.  During January 2013, the balance of $350,000 on this credit facility was paid in full.  In February 2013, the revolving credit agreement matured.

In October 2012, the Company obtained $3 million from sale of a convertible note.  See, The Company’s Prospectus Supplement filed pursuant to Rule 424(b) on October 29, 2012, and the Company’s Form 8-K filed on October 29, 2012.  The Company used these proceeds for general corporate purposes, including the reduction of outstanding bank debt and for capital expenditures on oil and gas development.  The note may, at the Company’s option, be repaid by converting the interest and principal amounts due to common stock, thus reducing the Company’s cash needs to service its debt.  In April 2013, 479,589 common shares were issued in lieu of the scheduled payment of $833,333.  According to the note agreement, the note holders may elect to convert the principal balance into shares of the Company's common stock.  During the period in 2013, the note holders submitted conversion notices to the Company such that 787,055 common shares were issued for a reduction in the note principal of $1,666,666. As of September 30, 2013, this note was paid in full.

11

At September 30, 2013, our accounts receivable totaled $3,700,285, compared to $3,969,160 at December 31, 2012, a $268,875 or 6.8% decrease.  This was due in part to an approximately $2,500,000 receivable, as part of the sale of common stock sold at year end December 2012, which was collected on January 4, 2013.  Additionally, at September 30, 2013, we have an approximately $1,975,000 receivable as part of our lease sale in Alaska, which we expect to collect by the end of 2013.  During the period in 2013, we also made payments of approximately $460,000 for deposits as collateral for various state and county bonds.  At September 30, 2013, our accounts payable and accrued expenses totaled $4,286,513, a decrease of $645,955 or 13.1% from the accounts payable and accrued expenses at December 31, 2012, of $4,932,468, mainly due to a decrease in payables related drilling costs for wells that were drilled during December 2012.

Ordinarily, we fund our operations and cash needs from our available credit and cash flows generated from operations.  We believe that we have sufficient liquidity for the remainder of 2013 and do not foresee any liquidity demands that cannot be met from cash flow or financing activities, including ongoing operations as the Company continues to increase its well inventory, proceeds from our Alaska acreage sale, or additional sales of equity or debt securities pursuant to a Registration Statement on Form S-3 filed with the SEC.  

Operating Activities.  Net cash used by operating activities totaled $2,383,488 and $136,971 for the nine month period ended September 30, 2013 and 2012, respectively.  This $2,246,517 increase in cash used was mainly due to the gain on sale of a portion of its Alaska leases of approximately $2.7 million during the period in 2013.

Investing Activities. Net cash provided by investing activities, primarily in capital acquisitions of oil and gas properties, amounted to $2,874,104 in the nine month period ended September 30, 2013 and net cash used for the nine month period ended September 30, 2012 was $773,231.  This difference was primarily due to the sale of a portion of our leases in Alaska, from which we received proceeds of approximately $4 million, during the period in 2013.  Also during the period in 2013,  we drilled three California wells resulting in expenditures of approximately $1.1 million.  During the nine month period in 2012, we received proceeds of $1,737 relating to a sale of stock and completed wells that were begun in December 2011 resulting in expenditures of approximately $775,000.

Financing Activities.  Net cash provided by financing activities totaled $481,965 in the first nine months of 2013, while $466,860 was used by financing activities for the nine month period ended September 30, 2012.  This difference in cash was mainly due to the proceeds received during the period in 2013 for common stock sales and warrant exercises.  During the nine months ended September 30, 2013, Royale received proceeds of $1,021,668 and issued 500,000 shares of its common stock relating to its market equity offering program.  Also during the period in 2013, several warrants were exercised in exchange for shares of Royale’s common stock, and we received $643,630 and issued 323,253 shares of our common stock relating to these exercises.  These proceeds were added to working capital and used for ordinary operating expense.  During first nine months of 2012, options were exercised by one director for a total of 88,692 shares of the Company’s common stock in exchange for proceeds of $299,500.  Additionally during the period in 2012, Royale received proceeds of $1,033,640 and issued 212,320 shares of its common stock relating to its market equity offering program.  The proceeds were added to working capital and used for ordinary operating expense.  Also during the period in 2012, five directors exchanged 195,000 options in a cashless exercise for 76,346 common shares.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our major market risk exposure relates to pricing of oil and gas production.  The prices we receive for oil and gas are closely related to worldwide market prices for crude oil and local spot prices paid for natural gas production.  Prices have been volatile for the last several years, and we expect that volatility to continue.  Monthly average natural gas prices ranged from a low of $3.64 per Mcf to a high of $4.22 per Mcf for the first nine months of 2013.  We have not entered into any hedging or derivative agreements to limit our exposure to changes in oil and gas prices or interest rates.

Item 4.  Controls and Procedures

As of September 30, 2013, an evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures.  These controls and procedures are based on the definition of disclosure controls and procedures in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934.  Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2013.

No changes occurred in our internal control over financial reporting during the nine months ended September 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

12

PART II.   OTHER INFORMATION

Item 1.  Legal Proceedings

Douglas Jones v. Royale Energy, Inc., et.al.

On July 1, 2010, Douglas Jones filed a lawsuit against the Company in the Circuit Court, 17th Judicial District, Broward County, Florida.  Mr. Jones was an independent contractor handling certain aspects of sales for the Company prior to July 2, 2008.  He asserts that he is entitled to an unspecified amount for commissions and expenses.  The Company denies that any money is owed to Mr. Jones.  On August 16, 2010, the Company, through Florida counsel Adam Hodkin, filed a motion to dismiss the lawsuit for lack of jurisdiction in the Florida courts.  The Court ruled that it wanted to have an evidentiary hearing on the motion.  A hearing to set a date for the evidentiary hearing is scheduled for November 7, 2013.  The actual hearing may not take place for some time, depending on the court’s calendar.  If the motion to dismiss is denied, Royale intends to answer the complaint and oppose the lawsuit vigorously. 

We are unaware of any unasserted or threatened litigation or claims.

Item 1A.  Risk Factors

Please review the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 6.  Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification
31.2	Rule 13a-14(a)/15d-14(a) Certification
32.1	18 U.S.C. § 1350 Certification
32.2	18 U.S.C. § 1350 Certification
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

13

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

	ROYALE ENERGY, INC.
Date:    October 21, 2013	/s/ Donald H. Hosmer
	Donald H. Hosmer, Co-President and Co-Chief Executive Officer
Date:    October 21, 2013	/s/ Stephen M. Hosmer
	Stephen M. Hosmer, Co-President, Co-Chief Executive Officer, and Chief Financial Officer

14

EX-31.1

Exhibit 31.1

I, Donald H. Hosmer, certify that:

1. I have reviewed this report on Form 10-Q of Royale Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  October 21, 2013	/s/ Donald H. Hosmer
	Donald H. Hosmer, Co-President and Co-Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Stephen M. Hosmer, certify that:

1. I have reviewed this report on Form 10-Q of Royale Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions)

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  October 21, 2013	/s/ Stephen M. Hosmer
	Stephen M. Hosmer, Co-President, Co-Chief Executive Officer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. § 1350

The undersigned, Donald H. Hosmer, Co-President and Co-Chief Executive Officer of Royale Energy, Inc., a California corporation (the "Company"), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, hereby certifies that:

(1) the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  October 21, 2013	By:	/s/ Donald H. Hosmer
		Donald H. Hosmer, Co-President and Co Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. § 1350

The undersigned, Stephen M. Hosmer, Co-President, Co-Chief Executive Officer and Chief Financial Officer of Royale Energy, Inc., a California corporation (the "Company"), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, hereby certifies that:

(1) the Company's Annual Report on Form 10-Q for the period ended September 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  October 21, 2013	By:	/s/ Stephen M. Hosmer
		Stephen M. Hosmer, Co-President, Co-Chief Executive Officer and Chief Financial Officer

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NOTE 2 - EARNINGS (LOSS) PER SHARE (Details) - Schedule of Earnings Per Share, Basic and Diluted (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Basic Earnings Per Share:
Net Income available to common stock (in Dollars per share)	$ 0.04	$ (0.07)	$ 0.08	$ (0.32)
Diluted Earnings Per Share:
Net Earnings available to common stock (in Dollars per share)	$ 0.04	$ (0.07)	$ 0.08	$ (0.32)
Income (Numerator) [Member]
Basic Earnings Per Share:
Net Income available to common stock			$ 1,143,365	$ (3,508,764)
Diluted Earnings Per Share:
Effect of dilutive securities and stock options			0	0
Net Earnings available to common stock			1,143,365	(3,508,764)
Shares (Denominator) [Member]
Basic Earnings Per Share:
Net Income available to common stock (in Shares)			13,567,216	11,027,124
Diluted Earnings Per Share:
Effect of dilutive securities and stock options (in Shares)			685,621	0
Net Earnings available to common stock (in Shares)			14,252,837	11,027,124
Per-share Amount [Member]
Basic Earnings Per Share:
Net Income available to common stock (in Dollars per share)			$ 0.08	$ (0.32)
Diluted Earnings Per Share:
Effect of dilutive securities and stock options			$ 0	$ 0.00
Net Earnings available to common stock (in Dollars per share)			$ 0.08	$ (0.32)

XML

STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Sale of Oil and Gas	$ 498,838	$ 387,477	$ 1,286,834	$ 1,255,321
Turnkey drilling	2,470,322	0	3,363,989	0
Supervisory Fees and Other	160,496	166,170	485,534	535,717
Total Revenues	3,129,656	553,647	5,136,357	1,791,038
Costs and Expenses:
General and Administrative	753,227	821,603	2,309,441	2,833,050
Turnkey Drilling and Development	1,220,536	(343,707)	1,762,379	(153,549)
Lease Operating	326,515	272,635	860,465	878,966
Lease Impairment	46,311	20,500	46,311	202,127
Geological and Geophysical Expense	24,997	773	24,997	423,459
Inventory Write Down	39,185	0	39,185	62,744
Legal and Accounting	26,509	80,772	278,973	500,647
Marketing	101,844	182,161	204,565	508,302
Depreciation, Depletion and Amortization	346,093	656,909	807,357	1,394,028
Total Costs and Expenses	2,885,217	1,691,646	6,333,673	6,649,774
Gain on Sale of Assets, Net	350,233	1,547	2,645,153	3,284
Income (Loss) From Operations	594,672	(1,136,452)	1,447,837	(4,855,452)
Other Income (Expense):
Interest Expense	(1,105)	(19,039)	(304,472)	(87,401)
Income (Loss) Before Income Tax Expense (Benefit)	593,567	(1,155,491)	1,143,365	(4,942,853)
Income tax provision (benefit)	0	(330,306)	0	(1,434,089)
Net Income (Loss)	593,567	(825,185)	1,143,365	(3,508,764)
Basic Earnings (Loss) Per Share (in Dollars per share)	$ 0.04	$ (0.07)	$ 0.08	$ (0.32)
Diluted Earnings (Loss) Per Share (in Dollars per share)	$ 0.04	$ (0.07)	$ 0.08	$ (0.32)
Other Comprehensive Income
Unrealized Gain on Equity Securities	9,945	1,501	9,945	1,843
Other Comprehensive Income, before tax	9,945	1,501	9,945	1,843
Income Tax Expense Related to Items of Other Comprehensive Income	0	436	0	535
Other Comprehensive Income, net of tax	9,945	1,065	9,945	1,308
Comprehensive Income (Loss)	$ 603,512	$ (824,120)	$ 1,153,310	$ (3,507,456)

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NOTE 5 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 5 – FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS

Royale Energy identifies reportable segments by product. Royale Energy includes revenues from both external customers and revenues from transactions with other operating segments in its measure of segment profit or loss. Royale Energy also includes interest revenue and expense, DD&A, and other operating expenses in its measure of segment profit or loss.

Royale Energy's operations are classified into two principal industry segments. Following is a summary of segmented information for the nine months ended September 30, 2013, and 2012 -Restated:

	Oil and Gas
	Producing		Turnkey
	and		Drilling
	Exploration		Services		Total
Nine Months Ended September 30, 2013:
Revenues from External Customers	$	1,286,834		3,363,989		4,650,823
Supervisory Fees		467,096		0		467,096
Interest Revenue		0		18,438		18,438
Interest Expense		152,236		152,236		304,472
Operating Expenses for Segment Assets		2,451,811		3,028,194		5,480,005
Depreciation, Depletion and Amortization		766,989		40,368		807,357
Lease Impairment		23,156		23,155		46,311
Gain on Sale of Assets		2,645,153		0		2,645,153
Income Tax Benefit		0		0		0
Total Assets	$	16,444,945		865,523		17,310,468
Net Income (Loss)	$	1,004,891		138,474		1,143,365

	Oil and Gas
	Producing			Turnkey
	and			Drilling
	Exploration			Services			Total
Nine Months Ended September 30, 2012 - Restated:
Revenues from External Customers	$	1,255,321		$	0		$	1,255,321
Supervisory Fees		530,025			0			530,025
Interest Revenue		0			5,692			5,692
Interest Expense		43,701			43,700			87,401
Expenditures for Segment Assets		3,332,051			1,721,568			5,053,619
Depreciation, Depletion and Amortization		1,324,327			69,701			1,394,028
Lease Impairment		101,064			101,063			202,127
Gain on Sale of Assets		3,284			0			3,284
Income Tax Benefit		(874,032	)		(560,057	)		(1,434,089	)
Total Assets	$	18,582,220		$	978,012		$	19,560,232
Net Loss	$	(2,138,481	)	$	(1,370,283	)	$	(3,508,764	)

XML

NOTE 3 - OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES (Details) - Schedule of Oil and Gas Properties, Equipment and Fixtures (USD $)	Sep. 30, 2013	Dec. 31, 2012
Oil and Gas
Producing properties, including drilling costs	$ 25,170,304	$ 24,327,806
Undeveloped properties	2,877,378	4,034,292
Lease and well equipment	9,838,582	9,724,602
	37,886,264	38,086,700
Accumulated depletion, depreciation & amortization	(28,525,710)	(27,756,493)
	9,360,554	10,330,207
Commercial and Other
Real estate, including furniture and fixtures	502,344	502,344
Vehicles	120,314	151,669
Furniture and equipment	1,300,803	1,299,300
	1,923,461	1,953,313
Accumulated depreciation	(1,329,156)	(1,327,723)
	594,305	625,590
	$ 9,954,859	$ 10,955,797

XML

NOTE 1

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 – In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normally recurring adjustments, necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented.  The results of operations for the nine month period are not, in management’s opinion, indicative of the results to be expected for a full year of operations.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report.

XML

NOTE 3 - OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES

9 Months Ended

Sep. 30, 2013

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

Oil and Gas Exploration and Production Industries Disclosures [Text Block]

NOTE 3 – OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES

Oil and gas properties, equipment and fixtures consist of the following:

	September 30, 2013 (Unaudited)			December 31, 2012 (Audited)
Oil and Gas
Producing properties, including drilling costs	$	25,170,304		$	24,327,806
Undeveloped properties		2,877,378			4,034,292
Lease and well equipment		9,838,582			9,724,602
		37,886,264			38,086,700
Accumulated depletion, depreciation & amortization		(28,525,710	)		(27,756,493	)
		9,360,554			10,330,207
Commercial and Other
Real estate, including furniture and fixtures	$	502,344		$	502,344
Vehicles		120,314			151,669
Furniture and equipment		1,300,803			1,299,300
		1,923,461			1,953,313
Accumulated depreciation		(1,329,156	)		(1,327,723	)
		594,305			625,590
	$	9,954,859		$	10,955,797

The guidance set forth in the Continued Capitalization of Exploratory Well Costs paragraph of the Extractive Activities Topic of the FASB Accounting Standards Codification requires that we evaluate all existing capitalized exploratory well costs and disclose the extent to which any such capitalized costs have become impaired and are expensed or reclassified during a fiscal period. We did not make any additions to capitalized exploratory well costs pending a determination of proved reserves during the periods in 2013 or 2012. 

XML

NOTE 6 - RESTATEMENT TO REFLECT CHANGE IN REVENUE RECOGNITION POLICY

9 Months Ended

Sep. 30, 2013

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

NOTE 6 – RESTATEMENT TO REFLECT CHANGE IN REVENUE RECOGNITION POLICY

The Company has restated its previously issued 2012 financial statements for the correction of an error in the method of revenue recognition.   Subsequent to the issuance of the financial statements of the Company as of December 31, 2012 and 2011, and for the years then ended, we reevaluated our policy regarding the recognition of pre-drilling and drilling service revenue.  Beginning with the fiscal year ending December 31, 2010 we have changed our revenue recognition policy to recognize all pre-drilling and drilling service revenue, provided under turnkey drilling agreements, at the time drilling of the well is completed.  Accordingly, the financial statements as of September 30, 2012, and for the periods then ended have been restated to correct an error in our method of revenue recognition to reflect changes in Deferred Revenue, Accumulated Deficit, Deferred Income Tax Asset, and Turnkey Drilling Revenue  relating to the Company’s revenue recognition method.  The effect on the Company’s issued September 30, 2012 financial statements is summarized below:

	As Previously
	Reported			As Restated
Statement of Comprehensive Loss for the Three Month Period Ended September 30, 2012
Turnkey Drilling	$	83,591		$	0
Total  Revenue		637,238			553,647
Loss from Operations		(1,052,861	)		(1,136,452	)
Loss Before Income Tax Benefit		(1,071,900	)		(1,155,491	)
Income Tax Benefit		(306,826	)		(330,306	)
Net Loss		(765,074	)		(825,185	)
Comprehensive Loss		(764,009	)		(824,120	)
Statement of Comprehensive Loss for the Nine Month Period Ended September 30, 2012:
Turnkey Drilling		676,149			0
Total Revenues		2,467,187			1,791,038
Loss From Operations		(4,179,303	)		(4,855,452	)
Loss Before Income Tax Benefit		(4,266,704	)		(4,942,853	)
Income Tax Benefit		(1,237,915	)		(1,434,089	)
Net Loss		(3,028,789	)		(3,508,764	)
Comprehensive Loss		(3,027,481	)		(3,507,456	)

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NOTE 4 - STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 4 – STOCK BASED COMPENSATION

During the Board of Directors meeting held in December 2010, directors and officers of Royale Energy were each granted 50,000 stock options, a total of 400,000 options, to purchase common stock at an exercise price of $3.25 per share.  These options are to vest in two parts; the first 200,000 options vested on January 1, 2011; the remaining 200,000 options vested on January 1, 2012.  The options were granted with a legal life of five years, and a service period of two years beginning on January 1, 2011.  During the first nine months of 2012 Royale recognized costs of $19,630 relating to this grant as well as $5,696 in a tax benefit relating to this grant.  No stock-based compensation was recognized during the first nine months of 2013.

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BALANCE SHEETS (Parentheticals) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Common stock, shares authorized (in Shares)	20,000,000	20,000,000
Common stock, shares issued (in Shares)	14,635,362	12,545,465
Common stock, shares outstanding (in Shares)	14,635,362	12,545,465
Common Stock, no par value (in Dollars per share)
Convertible Preferred Stock, shares authorized (in Shares)	147,500	147,500
Convertible Preferred Stock, shares issued (in Shares)	52,784	52,784
Convertible Preferred Stock, shares outstanding (in Shares)	52,784	52,784
Convertible preferred stock, Series AA, no par value (in Dollars per share)

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NOTE 5 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Royale Energy's operations are classified into two principal industry segments. Following is a summary of segmented information for the nine months ended September 30, 2013, and 2012 -Restated:

	Oil and Gas
	Producing		Turnkey
	and		Drilling
	Exploration		Services		Total
Nine Months Ended September 30, 2013:
Revenues from External Customers	$	1,286,834		3,363,989		4,650,823
Supervisory Fees		467,096		0		467,096
Interest Revenue		0		18,438		18,438
Interest Expense		152,236		152,236		304,472
Operating Expenses for Segment Assets		2,451,811		3,028,194		5,480,005
Depreciation, Depletion and Amortization		766,989		40,368		807,357
Lease Impairment		23,156		23,155		46,311
Gain on Sale of Assets		2,645,153		0		2,645,153
Income Tax Benefit		0		0		0
Total Assets	$	16,444,945		865,523		17,310,468
Net Income (Loss)	$	1,004,891		138,474		1,143,365

	Oil and Gas
	Producing			Turnkey
	and			Drilling
	Exploration			Services			Total
Nine Months Ended September 30, 2012 - Restated:
Revenues from External Customers	$	1,255,321		$	0		$	1,255,321
Supervisory Fees		530,025			0			530,025
Interest Revenue		0			5,692			5,692
Interest Expense		43,701			43,700			87,401
Expenditures for Segment Assets		3,332,051			1,721,568			5,053,619
Depreciation, Depletion and Amortization		1,324,327			69,701			1,394,028
Lease Impairment		101,064			101,063			202,127
Gain on Sale of Assets		3,284			0			3,284
Income Tax Benefit		(874,032	)		(560,057	)		(1,434,089	)
Total Assets	$	18,582,220		$	978,012		$	19,560,232
Net Loss	$	(2,138,481	)	$	(1,370,283	)	$	(3,508,764	)

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STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$ 1,143,365	$ (3,508,764)
Adjustments to Reconcile Net Income (Loss) to Net Cash Used by Operating Activities:
Depreciation, Depletion and Amortization	807,357	1,394,028
Lease Impairment	46,311	202,127
(Gain) Loss on Sale of Assets	(2,645,153)	(3,284)
Inventory Write Down	39,185	62,744
Stock-Based Compensation, net of adjustments	0	29,445
Debt Discount Amortization, net of adjustments	280,583	0
Decrease (Increase) in:
Accounts Receivable	268,875	218,830
Prepaid Expenses and Other Assets	(215,286)	143,013
Increase (Decrease) in:
Accounts Payable and Accrued expenses	(662,053)	11,040
Deferred Revenues - DWI	(1,446,672)	2,747,939
Deferred Income Tax expense (benefit)	0	(1,434,089)
Net Cash Used by Operating Activities	(2,383,488)	(136,971)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for Oil and Gas Properties and Other Capital Expenditures	(1,146,651)	(774,968)
Proceeds from Sale of Assets	4,020,755	1,737
Net Cash Provided (Used) by Investing Activities	2,874,104	(773,231)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Long-Term Debt	(1,183,333)	(1,800,000)
Proceeds from Stock Option and Warrant Exercises	643,630	299,500
Proceeds from Sale of Common Stock	1,021,668	1,033,640
Net Cash Provided (Used) by Financing Activities	481,965	(466,860)
Net Increase/Decrease in Cash and Cash Equivalents	972,581	(1,377,062)
Cash at Beginning of Year	1,489,930	2,946,131
Cash at End of Period	2,462,511	1,569,069
Cash Paid for Interest	23,890	83,196
Cash Paid for Taxes	800	800
Non-Cash Investing and Financing Transactions
Unrealized Gain on Equity Securities	9,945	1,843
Conversion of Debt and accrued interest to Common Stock	$ 1,355,918	$ 0

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BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current Assets
Cash and Cash Equivalents	$ 2,462,511	$ 1,489,930
Accounts Receivable, net	3,700,285	3,969,160
Prepaid Expenses	852,963	469,038
Available for Sale Securities	16,448	0
Inventory	322,456	612,464
Total Current Assets	7,354,663	6,540,592
Other Assets	946	6,946
Oil and Gas Properties, at cost, (successful efforts basis), Equipment and Fixtures	9,954,859	10,955,797
Total Assets	17,310,468	17,503,335
Current Liabilities:
Accounts Payable and Accrued Expenses	4,286,513	4,932,468
Current Portion of Long-Term Debt, Net of Discount	0	2,258,668
Current Portion of Deferred Tax Liability	1,775	1,775
Deferred Revenue from Turnkey Drilling	7,247,071	8,693,743
Total Current Liabilities	11,535,359	15,886,654
Noncurrent Liabilities:
Asset Retirement Obligation	937,990	954,088
Total Noncurrent Liabilities	937,990	954,088
Total Liabilities	12,473,349	16,840,742
Stockholders' Equity:
Common Stock, no par value, 20,000,000 shares authorized, 14,635,362 and 12,545,465 shares issued and outstanding , respectively	37,412,870	33,247,571
Convertible preferred stock, Series AA, no par value, 147,500 shares authorized; 52,784 and 52,784 shares issued and outstanding, respectively	154,014	154,014
Accumulated Deficit	(33,043,565)	(34,186,930)
Accumulated Other Comprehensive Income	9,945	0
Paid in Capital	303,855	1,447,938
Total Stockholders' Equity	4,837,119	662,593
Total Liabilities and Stockholders' Equity	$ 17,310,468	$ 17,503,335

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NOTE 3 - OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES (Tables)

9 Months Ended

Sep. 30, 2013

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

Schedule of Oil and Gas Properties, Equipment and Fixtures [Table Text Block]

Oil and gas properties, equipment and fixtures consist of the following:

	September 30, 2013 (Unaudited)			December 31, 2012 (Audited)
Oil and Gas
Producing properties, including drilling costs	$	25,170,304		$	24,327,806
Undeveloped properties		2,877,378			4,034,292
Lease and well equipment		9,838,582			9,724,602
		37,886,264			38,086,700
Accumulated depletion, depreciation & amortization		(28,525,710	)		(27,756,493	)
		9,360,554			10,330,207
Commercial and Other
Real estate, including furniture and fixtures	$	502,344		$	502,344
Vehicles		120,314			151,669
Furniture and equipment		1,300,803			1,299,300
		1,923,461			1,953,313
Accumulated depreciation		(1,329,156	)		(1,327,723	)
		594,305			625,590
	$	9,954,859		$	10,955,797

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NOTE 2 - EARNINGS (LOSS) PER SHARE (Details)	9 Months Ended
	Sep. 30, 2013
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	887,681

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NOTE 2 - EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Basic and diluted earnings (loss) per share are calculated as follows:

	For the Nine Months ended  September 30, 2013
	Earnings  (Numerator)		Shares (Denominator)		Per-Share Amount
Basic Earnings Per Share:
Net Income available to common stock	$	1,143,365		13,567,216	$	0.08
Diluted Earnings Per Share:
Effect of dilutive securities and stock options		0		685,621		0
Net Earnings available to common stock	$	1,143,365		14,252,837	$	0.08

	For the Nine Months ended  September 30, 2012 - Restated
	Earnings (Loss) (Numerator)			Shares (Denominator)		Per-Share Amount
Basic Earnings (Loss) Per Share:
Net income available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)
Diluted Earning (Loss) Per Share:
Effect of dilutive securities and stock options		0			0		0.00
Net Earnings (loss) available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)

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NOTE 2 - EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 2 – EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share are calculated as follows:

	For the Nine Months ended  September 30, 2013
	Earnings  (Numerator)		Shares (Denominator)		Per-Share Amount
Basic Earnings Per Share:
Net Income available to common stock	$	1,143,365		13,567,216	$	0.08
Diluted Earnings Per Share:
Effect of dilutive securities and stock options		0		685,621		0
Net Earnings available to common stock	$	1,143,365		14,252,837	$	0.08

	For the Nine Months ended  September 30, 2012 - Restated
	Earnings (Loss) (Numerator)			Shares (Denominator)		Per-Share Amount
Basic Earnings (Loss) Per Share:
Net income available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)
Diluted Earning (Loss) Per Share:
Effect of dilutive securities and stock options		0			0		0.00
Net Earnings (loss) available to common stock	$	(3,508,764	)		11,027,124	$	(0.32	)

For the nine months ended September 30, 2012, Royale Energy had dilutive securities of 887,681.  These securities were not included in the dilutive earnings (loss) per share due to their antidilutive nature.

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NOTE 4 - STOCK BASED COMPENSATION (Details) (Employee Stock Option [Member], USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2010
NOTE 4 - STOCK BASED COMPENSATION (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)			400,000
Share-based Compensation by Share-based Payment Award, Options, Exercise Price of Options (in Dollars per share)			$ 3.25
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights			vest in two parts; the first 200,000 options vested on January 1, 2011; the remaining 200,000 options vested on January 1, 2012
Share-based Compensation by Share-based Payment Award, Options, Term of Options			5 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period			2 years
Allocated Share-based Compensation Expense	$ 0	$ 19,630
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense		$ 5,696
Options Granted to Each Director and Executive Officer [Member]
NOTE 4 - STOCK BASED COMPENSATION (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)			50,000

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NOTE 6 - RESTATEMENT TO REFLECT CHANGE IN REVENUE RECOGNITION POLICY (Tables)

9 Months Ended

Sep. 30, 2013

Accounting Changes and Error Corrections [Abstract]

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

The effect on the Company’s issued September 30, 2012 financial statements is summarized below:

	As Previously
	Reported			As Restated
Statement of Comprehensive Loss for the Three Month Period Ended September 30, 2012
Turnkey Drilling	$	83,591		$	0
Total  Revenue		637,238			553,647
Loss from Operations		(1,052,861	)		(1,136,452	)
Loss Before Income Tax Benefit		(1,071,900	)		(1,155,491	)
Income Tax Benefit		(306,826	)		(330,306	)
Net Loss		(765,074	)		(825,185	)
Comprehensive Loss		(764,009	)		(824,120	)
Statement of Comprehensive Loss for the Nine Month Period Ended September 30, 2012:
Turnkey Drilling		676,149			0
Total Revenues		2,467,187			1,791,038
Loss From Operations		(4,179,303	)		(4,855,452	)
Loss Before Income Tax Benefit		(4,266,704	)		(4,942,853	)
Income Tax Benefit		(1,237,915	)		(1,434,089	)
Net Loss		(3,028,789	)		(3,508,764	)
Comprehensive Loss		(3,027,481	)		(3,507,456	)

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NOTE 6 - RESTATEMENT TO REFLECT CHANGE IN REVENUE RECOGNITION POLICY (Details) - Schedule of Error Corrections and Prior Period Adjustments (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Turnkey Drilling	$ 2,470,322	$ 0	$ 3,363,989	$ 0
Total Revenues	3,129,656	553,647	5,136,357	1,791,038
Loss From Operations	594,672	(1,136,452)	1,447,837	(4,855,452)
Loss Before Income Tax Benefit	593,567	(1,155,491)	1,143,365	(4,942,853)
Income Tax Benefit	0	(330,306)	0	(1,434,089)
Net Loss	593,567	(825,185)	1,143,365	(3,508,764)
Comprehensive Loss	603,512	(824,120)	1,153,310	(3,507,456)
Scenario, Previously Reported [Member]
Turnkey Drilling		83,591		676,149
Total Revenues		637,238		2,467,187
Loss From Operations		(1,052,861)		(4,179,303)
Loss Before Income Tax Benefit		(1,071,900)		(4,266,704)
Income Tax Benefit		(306,826)		(1,237,915)
Net Loss		(765,074)		(3,028,789)
Comprehensive Loss		$ (764,009)		$ (3,027,481)

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NOTE 5 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS (Details)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting [Abstract]
Number of Operating Segments	2	2

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ROYALE ENERGY INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	14,635,362
Amendment Flag	false
Entity Central Index Key	0000864839
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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NOTE 5 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS (Details) - Schedule of Segment Reporting Information, by Segment (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Segment Reporting Information [Line Items]
Revenues from External Customers			$ 4,650,823	$ 1,255,321
Supervisory Fees			467,096	530,025
Interest Revenue			18,438	5,692
Interest Expense	1,105	19,039	304,472	87,401
Operating Expenses for Segment Assets			5,480,005	5,053,619
Depreciation, Depletion, and Amortization			807,357	1,394,028
Lease Impairment	46,311	20,500	46,311	202,127
Gain on Sale of Assets	350,233	1,547	2,645,153	3,284
Income Tax (Benefit)	0	(330,306)	0	(1,434,089)
Total Assets	17,310,468	19,560,232	17,310,468	19,560,232	17,503,335
Net Income (Loss)	593,567	(825,185)	1,143,365	(3,508,764)
Oil and Gas Producing and Exploration [Member]
Segment Reporting Information [Line Items]
Revenues from External Customers			1,286,834	1,255,321
Supervisory Fees			467,096	530,025
Interest Revenue			0	0
Interest Expense			152,236	43,701
Operating Expenses for Segment Assets			2,451,811	3,332,051
Depreciation, Depletion, and Amortization			766,989	1,324,327
Lease Impairment			23,156	101,064
Gain on Sale of Assets			2,645,153	3,284
Income Tax (Benefit)			0	(874,032)
Total Assets	16,444,945	18,582,220	16,444,945	18,582,220
Net Income (Loss)			1,004,891	(2,138,481)
Turnkey Drilling Services [Member]
Segment Reporting Information [Line Items]
Revenues from External Customers			3,363,989	0
Supervisory Fees			0	0
Interest Revenue			18,438	5,692
Interest Expense			152,236	43,700
Operating Expenses for Segment Assets			3,028,194	1,721,568
Depreciation, Depletion, and Amortization			40,368	69,701
Lease Impairment			23,155	101,063
Gain on Sale of Assets			0	0
Income Tax (Benefit)			0	(560,057)
Total Assets	865,523	978,012	865,523	978,012
Net Income (Loss)			$ 138,474	$ (1,370,283)