Oil and Gas Properties

12 Months Ended

Dec. 31, 2012

Oil And Gas Properties

Note 3. 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, 2012 and December 31, 2011 were:

	December 31			December 31
	2012			2011			Change ($)
Unproven Properties	$	537,501		$	530,539		$	6,962
Depreciation and impairment		(513,374	)		(511,847	)		(1,527	)
Oil and gas properties, net	$	24,127		$	18,692		$	5,435

Neither 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 December 31, 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 $3,264 for the years ended December 31, 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.

Costs incurred in oil and gas property acquisition, exploration and development activities for the years ended December 31, 2012 and 2011 were:

	December 31,
	2012			2011
Beginning balance, net	$	18,692		$	26,593
Unproven Properties:
Acqusisition costs		-			-
Exploration Costs		-			(5,249	)
Development costs		6,962			612
Impairment of properties		(1,527	)		(3,264	)
Ending balance, net	$	24,127		$	18,692

The table below shows the results of operation for the Company’s oil and gas producing activities for the years ended December 31, 2012 and 2011. All production is within the continental United States.

	For the years ended December 31,
	2012			2011
Revenue
Oil	$	17,035		$	25,605
Gas		2,459			7,182
Total Revenue		19,494			32,787
Expenses
Production		17,715			19,176
Production taxes		1,343			2,061
Impairment		1,527			3,264
Total expenses		20,585			24,501
Results of operations	$	(1,091	)	$	8,286

Asset Retirement Obligation

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

	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