SHARE CAPITAL

12 Months Ended

Dec. 31, 2013

Share Capital

10. SHARE CAPITAL

i.      Common Stock

On February 22, 2012, the Company granted 300,000 common shares to the Officers of the Company as part of their compensation package for 2012.  The price per share was $0.14.

On August 20, 2012, the Company issued 236,134 common shares valued at $35,420 to Progas Energy Services, Inc. as payment of the drilling costs of the first well located in Jim Wells County, Texas.  The price per share was $0.15.

On February 6, 2013, the Company granted 300,000 common shares to the Officers of the Company as part of their compensation package for 2013.  The price per share was $0.085.

On March 7, 2013, the Company issued 100,000 common shares pursuant to the exercise of 100,000 options at $0.08 per share for total proceeds of $8,000.

On May 2, 2013, the Company issued 100,000 common shares pursuant to the exercise of 100,000 options at $0.08 per share for total proceeds of $8,000.

Preferred Stock

The Company did not issue any preferred stock during the year ended December 31, 2013 (December 31, 2012 - Nil).

ii.    Stock Options

On February 6, 2013, the Company granted 400,000 stock options with an exercise price of $0.085 per share to the Officers of the Company as part of their compensation package.

On May 8, 2013, the Company granted 400,000 stock options with an exercise price of $0.05 per share to the Officers of the Company as part of their compensation package.

Compensation expense related to incentive stock options granted is recorded at their fair value as calculated by the Black-Scholes option pricing model.  Compensation expense was $ 51,837 for the year ended December 31, 2013 and $113,161 for the year ended December 31, 2012.  The changes in stock options are as follows:

	Number			Weighted average exercise price
Balance outstanding, December 31, 2012		1,600,000		$	0.119
Granted		400,000			0.085
Granted		400,000			0.050
Exercised		(200,000	)		0.080
Expired		(200,000	)		0.080
Balance outstanding, December 31, 2013		2,000,000		$	0.107

The weighted average assumptions used in calculating the fair value of stock options granted and vested using the Black-Scholes option pricing model are as follows:

	December 31, 2013			December 31, 2012
Risk-fee interest rate		0.075 - 0.84	%		1.15	%
Expected life of the option	5 years			5 years
Expected volatility		260 - 278	%		228	%
Expected dividend yield		-			-

The following table summarized information about the stock options outstanding as at December 31, 2013:

Options outstanding			Options exercisable
Exercise price	Number of shares	Remaining contractual life (years)	Number of shares
$0.135	600,000	2.05	600,000
$0.130	600,000	3.22	600,000
$0.085	400,000	4.10	400,000
$0.050	400,000	4.16	400,000