Oil and Gas Properties

9 Months Ended

Sep. 30, 2012

Oil and Gas Properties [Abstract]

Oil and Gas Properties

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 September 30, 2012 and December 31, 2011 were:

	September 30			December 31
	2012			2011			Change ($)
Unproven Properties	$	533,293		$	530,539		$	2,754
Depreciation and impairment		(513,374	)		(511,847	)		(1,527	)
Oil and gas properties, net	$	19,919		$	18,692		$	1,227

The Company, nor its partners, Leexus Oil LLC and Millennium Petro-Physics (collectively, the “Partners”), have conducted any reserve studies and after further assessment of the matter, neither the Company nor the Partners believe it to be commercially reasonable, based on production to date, to undertake the expense of conducting a reserve study. Additionally, the Company maintains only a minority working interest in each of the properties, which are actively maintained by the Partners; accordingly, the Company is not in a position to unilaterally conduct reserve studies on these properties and no reserve studies have been provided to us by the Partners. Therefore, at September 30, 2012 and December 31, 2011, 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 $1,527 and $2,934 for the nine month periods ended September 30, 2012 and 2011, 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.

Asset Retirement Obligation

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

	September 30		December 31
	2012		2011
Asset retirement obligations, beginning of period	$	55,316	$	52,558
Accretion expense		2,216		2,758
Asset retirement obligations, end of period		57,532		55,316
Less: current portion		-		-
Long-term asset retirement obligations, end of period	$	57,532	$	55,316