UNAUDITED OIL AND GAS RESERVE QUANTITIES

12 Months Ended

Dec. 31, 2013

Unaudited Oil And Gas Reserve Quantities

14. UNAUDITED OIL AND GAS RESERVE QUANTITIES

Costs Incurred

The following table sets forth certain information with respect to costs incurred in connection with our oil and gas producing activities during the year ended December 31, 2013, 2012, 2011, and 2010:

2010
	USA			Canada
Property acquisition costs
Proved		17,900		-
Unproved		(17,900	)	-
Development costs
Exploratory costs		1,741,655			(180,681	)
Oil and gas expenditures		1,741,655			(180,681	)

2011
	USA		Canada
Property acquisition costs
Proved		-		-
Unproved		-		-
Development costs
Exploratory costs		919,131		-
Oil and gas expenditures		919,131		-

2012
	USA		Canada
Property acquisition costs
Proved		-		-
Unproved		-		-
Development costs		-		-
Exploratory costs		360,974		-
Oil and gas expenditures		360,974		-

2013
	USA		Canada
Property acquisition costs
Proved		-		-
Unproved		-		-
Development costs		31,573		-
Exploratory costs		-		-
Oil and gas expenditures		-		-

The following unaudited reserve estimates presented as of December 31, 2013 and 2012 were prepared by independent petroleum engineers.  There are many uncertainties inherent in estimating proved reserve quantities and in projecting future production rates and the timing of development expenditures.  In addition, reserve estimates of new discoveries that have little production history are more imprecise than those of properties with more production history.  Accordingly, these estimates are expected to change as future information becomes available.

Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions; i.e., process and costs as of the date the estimate is made. Proved developed oil and gas reserves are those reserves expected to be recovered through existing wells with existing equipment and operating methods.

Unaudited net quantities of proved developed reserves of crude oil and natural gas (all located within United States) are as follows:

	Crude Oil			Natural Gas
Changes in proved reserves	(Bbls)			(MCF)
Estimated quantity, December 31, 2011		48,950			156,630
Revisions of previous estimate		29,376			24,209
Discoveries		-			-
Reserves sold to third party		-			-
Production		(4,424	)		(25,399	)
Estimated quantity, December 31, 2012		73,902			155,440
Revisions of previous estimate		(48,417)			(62,811)
Discoveries		-			-
Reserves sold to third party		(18,110)			(31,690)
Production		(3,445	)		(34,939	)
Estimated quantity, December 31, 2013		3,930			26,000

Proved Reserves at year end	Developed		Undeveloped		Total
Crude Oil (Bbls)
December 31, 2013		3,930		-		3,930
December 31, 2012		24,536		49,366		73,902
Gas (MCF)
December 31, 2013		26,000		-		26,000
December 31, 2012		151,820		3.620		155,440

UNAUDITED STANDARIZED MEASURE

The following information has been developed utilizing procedures prescribed by ASC 932-235 Extractive Activities - Oil and Gas Notes to the Financial Statements and based on crude oil and natural gas reserves and production volumes estimated by the Company. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the following table should not be considered as representative or realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company.

Future cash inflows were computed by applying year-end prices of oil and gas to the estimated future production of proved oil and gas reserves. The future production and development costs represent the estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. Future income tax expenses were computed by applying statutory income tax rates to the difference between pre-tax net cash flows relating to our proved oil and gas reserves and the tax basis of proved oil and gas properties and available net operating loss carry forwards. Discounting the future net cash inflows at 10% is a method to measure the impact of the time value of money

	December 31, 2013			December 31, 2012
Future Cash inflows	$	463,521		$	7,872,934
Future production costs		(96,529	)		(1,529,471	)
Future development costs		-			(858,700	)
Future income tax expense		-				-
Future cash flows		366,992			5,484,763
10% annual discount for estimated timing of cash flows		(30,485)			(1,651,029	)
Standardized measure of discounted future net cash	$	336,507		$	3,833,734

The following presents the principal sources of the changes in the standardized measure of discounted future net cash flows.

Standardized measure of discounted cash flows:	December 31, 2013		December 31, 2012
Beginning of year	$	3,833,734	$	2,390,024
Sales and transfers of oil and gas produced, net production costs		(7,409,413)		2,729,448
Net changes in prices and production costs and other		1,432,942		71,391
Net changes due to discoveries		-		-
Changes in future development costs		858,700		(575,023)
Revisions of previous estimates		-		-
Other		-		-
Net change in income taxes		-		-
Accretion discount		1,620,544		(782,106)
Total change in standardized measure during the year		(3,497,227)		1,443,710
End of year	$	336,507	$	3,833,734