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FAIR VALUE MEASUREMENT

6 Months Ended

Jun. 30, 2014

15. FAIR VALUE MEASUREMENT

15.1. Fair Value Measurements

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial assets carried at fair value are classified in one of the three categories as follows.

Financial assets and liabilities carried at fair value as of June 30, 2014:

Financial assets 2014 (in USD)	Level 1	Level 2	Level 3
Investment in associate (Petromanas)	2,549,020	-	-
Total	2,549,020	-	-

Financial assets and liabilities carried at fair value as of December 31, 2013:

Financial assets 2013 (in USD)	Level 1	Level 2	Level 3
Investment in associate (Petromanas)	7,478,799	-	-
Total	7,478,799	-	-

15.2. Fair Value of Financial Instruments

In addition to the methods and assumptions the Company uses to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, the Company used the following methods and assumptions to estimate the fair value of its financial instruments.

Cash and cash equivalents – carrying amount approximated fair value.
Restricted cash – carrying amount approximated fair value.
Accounts receivable – carrying amount approximated fair value.
Transaction prepayment – carrying amount approximated fair value.
Investment in Petromanas –the fair value was calculated based on quoted market prices.
Accounts Payable – carrying amount approximated fair value.

The fair value of the Company’s financial instruments is presented in the table below (in USD):

	June 30, 2014		Dec 31, 2013		Fair Value
	Carrying	Fair Value	Carrying	Fair Value	Levels	Reference
	Amount		Amount
Cash and cash equivalents	7,047,161	7,047,161	3,063,947	3,063,947	1	Note 4
Restricted cash	215,033	215,033	46,738	46,738	1
Transaction prepayment	10,000,000	10,000,000	10,111,656	10,111,656	1	Note 5
Accounts receivable	22,968	22,968	32,508	32,508	1
Investment in Petromanas	2,549,020	2,549,020	7,478,799	7,478,799	1	Note 11
Accounts Payable	691,084	691,084	447,736	447,736	1

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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