Oil and Gas Properties

12 Months Ended

Dec. 31, 2011

Note 4. Oil and Gas Properties

The aggregate amount of capitalized costs relating to crude oil and natural gas producing activities and the aggregate amount of related accumulated depreciation, depletion and amortization at December 31, 2011 and 2010 were:

	December 31,
	2011			2010			Change ($)
Unproven Properties	$	530,539		$	535,176		$	(4,637	)
Impairment of properties		(511,847	)		(508,583	)		(3,264	)
Oil and gas properties, net	$	18,692		$	26,593		$	(7,901	)

The Company has not obtained reserve studies with estimated proved reserves. Management is assessing production data to determine the feasibility of obtaining reserves studies. Therefore, at December 31, 2011 and 2010, there were no proved properties subject to amortization.

Properties which are not being amortized are assessed quarterly, on a property-by-property basis, to determine whether they are recorded at the lower of cost or fair market value. As a result of this analysis and lack of reserve studies, the Company recorded an impairment loss of $3,264 and $79,245 for the years ended December 31, 2011 and 2010, respectively. The impairment recognized was to bring the carrying costs of the wells to their anticipated salvage value since most of the wells are approaching end of life unless additional capital investments are made. The impairment is similar to amortization and therefore is not added to the cost of properties being amortized.

Costs incurred in oil and gas property acquisition, exploration and development activities for the years ended December 31, 2011 and 2010 were:

	Costs Incurred for Oil & Gas Properties
	For the year ended December 31,
	2011			2010
Beginning balance, net	$	26,593		$	96,535
Unproven properties:
Acqusisition costs		-			1,405
Exploration Costs		(5,249	)		6,588
Development costs		612			1310
Impairment and depreciation		(3,264	)		(79,245	)
Ending balance, net	$	18,692		$	26,593

The table below shows the results of operation for the Company’s oil and gas producing activities for the years ended December 31, 2011 and 2010. All production is within the continental United States.

	For the year ended December 31,
	2011		2010
Revenue
Oil	$	25,605	$	29,960
Gas		7,182		9,886
		32,787		39,846
Expenses
Production		19,176		24,988
Production taxes		2,061		721
Impairment		3,264		79,245
		24,501		104,954
Results of operations	$	8,286	$	(65,108	)

Asset Retirement Obligation

The following table summarizes the activity for the Company’s asset retirement obligations:

	For the year ended December 31,
	2011		2010
Asset retirement obligations, beginning of period	$	52,558	$	50,000
Accretion expense		2,758		2,558
Change in estimated obligations		-		-
Asset retirement obligations, end of period		55,316		52,558
Less: current portion		-		-
Long-term asset retirement obligations, end of period	$	55,316	$	52,558

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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