ASSET RETIREMENT OBLIGATION

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Asset Retirement Obligations (AROs)

Note 9 – Asset Retirement Obligations (AROs)

The Company's ARO relates to future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment facilities from leased acreage and land restoration in accordance with applicable local, state and federal laws. The discounted fair value of an ARO liability is required to be recognized in the period in which it is incurred, with the associated asset retirement cost capitalized as part of the carrying cost of the oil and natural gas asset. In periods subsequent to the initial measurement of the ARO, the Company must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The increases in the ARO liability due to the passage of time impact net earnings as accretion expense. The related capital cost, including revisions thereto, is charged to expense through depreciation, depletion and amortization of oil and natural gas production over the life of the oil and natural gas field.

The following table summarizes the activity for the Company's abandonment obligations:

	Year Ended December 31,
	2016		2015
Beginning balance at January 1	$	198,279	$	48,923
Liabilities incurred from property acquisition		12,264		146,720
Accretion expense		6,669		2,636
Ending balance at December 31	$	217,212	$	198,279