ASSET RETIREMENT OBLIGATIONS

12 Months Ended

Mar. 31, 2012

NOTE 6 – ASSET RETIREMENT OBLIGATIONS

Lucas records the fair value of a liability for asset retirement obligations (“ARO”) in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset and is depreciated over the useful life of the asset. Lucas accrues an abandonment liability associated with its oil and gas wells when those assets are placed in service. The ARO is recorded at its estimated fair value and accretion is recognized over time as the discounted liability is accreted to its expected settlement value. Fair value is determined by using the expected future cash outflows discounted at Lucas’ credit-adjusted risk-free interest rate. No market risk premium has been included in Lucas’ calculation of the ARO balance.

The following table presents the reconciliation of the beginning and ending aggregate carrying amounts of long-term legal obligations associated with the future retirement of oil and gas properties for the years ended March 31, 2012 and 2011:

	2012			2011
Carrying amount at beginning of year	$	409,112		$	327,412
Liabilities incurred		207,131			42,955
Liabilities settled		(53,263	)		-
Accretion		44,521			35,801
Revisions		518,357			2,944
Reduction for sale of oil and gas property		(50,706	)		-
Carrying amount at end of year	$	1,075,152		$	409,112

- Definition

The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.

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