Unaudited Oil and Gas Reserves Information

12 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Unaudited Oil and Gas Reserves Information

11. Unaudited Oil and Gas Reserves Information

As of March 31, 2012 and 2011, 100% and 91%, respectively, of the estimated oil and gas reserves presented herein were derived from reports prepared by independent petroleum engineering firm Ryder Scott Company.  For the year ended March 31, 2011, the remaining 9% of the reserve estimates, respectively, were prepared internally by the Company’s management.

Proved developed reserves are reserves expected to be recovered through existing wells with existing equipment and operating methods.  Proved undeveloped reserves are reserves expected to be recovered through wells yet to be completed.

Analysis of Changes in Proved Reserves.  Estimated quantities of proved developed reserves (all of which are located within the United States), as well as the changes in proved developed reserves during the periods indicated, are presented in the following tables:

Proved Reserves

	March 31, 2012						March 31, 2011						March 31, 2010
	Oil (Bbls)			Gas (Mcf)			Oil (Bbls)			Gas  (Mcf)			Oil (Bbls)			Gas (Mcf)
Proved reserves:
Balance, beginning of year		1,015,000			735,000			818,000			912,000			638,000			936,000
Revisions of previous           estimates¹		38,000			8,000			167,000			(106,000	)		275,000			195,000
Extensions and discoveries²		295,000			351,000			62,000			39,000			4,000			10,000
Sales of reserves in place		(31,000	)		(221,000	)		—			—			—			—
Improved recovery		2,000			—			6,000			61,000			—			—
Purchase of reserves		17,000			—			55,000			1,000			—			—
Production³		(109,000	)		(227,000	)		(93,000	)		(172,000	)		(99,000	)		(229,000	)
Balance, end of year		1,227,000			646,000			1,015,000			735,000			818,000			912,000
Proved developed reserves:
Balance, beginning of year		1,015,000			735,000			727,000			912,000			587,000			907,000
Balance, end of year		1,077,000			515,000			1,015,000			735,000			727,000			912,000
Proved undeveloped    reserves:
Balance, beginning of year		—			—			91,000			—			51,000			29,000
Balance, end of year		150,000			131,000			—			—			91,000			—

¹ Revisions of Previous Estimates – Estimates reflect steady increases in oil and gas prices since December 2008, when prices reached a 5-year low.  Changes in performance constitute less than 10% of the total amount of revisions of previous estimates.

² Extensions and Discoveries – 19 wells represent extensions and discoveries during the year ended March 31, 2012, all of which are located in North Dakota. Additions during the year ended March 31, 2011, consisted of eleven new wells – North Dakota (7), Montana (2), Colorado (1) and Texas (1).  Additions during the year ended March 31, 2010, pertained to 2 wells drilled in Colorado and 1 well drilled in North Dakota.  

³ Production – Volumes of oil and gas that were produced were removed from reserves during the year.

The table below sets forth a standardized measure of the estimated discounted future net cash flows attributable to the Company’s proved oil and gas reserves. Estimated future cash inflows were computed by applying the 12 month average price of oil and gas on the first day of each month to the estimated future production of proved oil and gas reserves as of March 31, 2012, 2011, and 2010.  The future production and development costs represent the estimated future expenditures to be incurred in producing and developing the proved reserves, assuming continuation of existing economic conditions.  Discounting the annual net cash flows at 10% illustrates the impact of timing on these future cash flows.

Standardized Measure of Estimated Discounted Future Net Cash Flows

	For the Years Ended March 31,
	2012			2011			2010
Future cash inflows	$	116,925,000		$	81,053,000		$	55,991,000
Future cash outflows:
Production cost		(53,568,000	)		(41,185,000	)		(29,065,000	)
Development cost		(2,757,000	)		—			(991,000	)
Future income tax		(14,614,000	)		(6,545,000	)		(3,361,000	)
Future net cash flows		45,986,000			33,323,000			22,574,000
Adjustment to discount future annual net cash flows at 10%		(22,803,000	)		(15,826,000	)		(10,060,000	)
Standardized measure of discounted future net cash flows	$	23,183,000		$	17,497,000		$	12,514,000

The following table summarizes the principal factors comprising the changes in the standardized measure of estimated discounted net cash flows for each of the years ended March 31, 2012, 2011, and 2010:

Changes in Standardized Measure of Estimated Discounted Net Cash Flows

		For the Years Ended March 31,
		2012			2011			2010
Standardized measure, beginning of year	$	17,497,000		$	12,514,000		$	7,199,000
Sales of oil and gas, net of production cost		(8,156,000	)		(5,204,000	)		(4,284,000	)
Net change in sales prices, net of production cost		5,135,000			5,886,000			6,279,000
Discoveries, extensions and improved recoveries, net of           future development cost		10,285,000			1,567,000			154,000
Change in future development costs		—			—			467,000
Development costs incurred during the period that reduced           future development cost		—			—			—
Sales of reserves in place		(1,761,000	)		—			—
Revisions of quantity estimates		916,000			3,806,000			5,280,000
Accretion of discount		2,113,000			1,874,000			720,000
Net change in income tax		(3,312,000	)		3,685,000			(1,582,000	)
Purchase of reserves		352,000			1,408,000			—
Changes in timing of rates of production		114,000			(8,039,000	)		(1,719,000	)
Standardized measure, end of year	$	23,183,000		$	17,497,000		$	12,514,000