NOTE 3. CHANGE IN ACCOUNTING POLICY

The Company has elected to adopt the “Successful Efforts Method of Accounting” for accounting of its oil and gas activities, effective June 1, 2011. The change from the Full Cost Method to Successful Efforts Method is a change in accounting principle. This change in accounting principle is deemed to be material in reporting our Financial Statements and therefore the change must be retrospectively adjusted for the cumulative effective for the prior year. The Company believes the Successful Efforts Method of Accounting provides more transparency in presenting the Company’s successes or failures and will more fairly reflect the true cost of its properties and the reserves directly associated with those properties. Further, the Successful Efforts Method of Accounting is the preferred method of accounting for oil and gas properties. Under this method, property acquisition costs, whether the property is proved or unproved, are capitalized as incurred. For other costs incurred under this method, a direct relationship between costs incurred and specific reserves discovered is required before costs are permitted to be capitalized. Costs that cannot be directly related to the discovery of specific oil and gas reserves are expensed immediately as incurred.

The change resulted in a decrease in depletion expense and accumulated depletion of $260,619 and $109,254 for the quarters ending August 31, 2011 and 2010, respectively. There was no change in gross oil and gas properties between the two methods, because Black Rock had incurred no geological costs, dry holes or impairment. The change increased income from operations by $216,285 as reported on the Statement of Operations and increased retained earnings by $216,285 as reported on the Balance Sheet and Statement of Changes in Stockholders’ Equity. The change did not impact cash flows from operations, investing or financing activities.

A comparison of the Company’s net income, earnings per share, oil and gas properties and accumulated deficit under the S uccessful Efforts Method of Accounting and the full cost method as disclosed herein, as follows:

Income Statement	As computed			As computed			Effect
Three Months Ended August 31, 2011	Under			Under			of
	Full Cost			Successful Efforts			Change

Revenue:
Oil and Gas Sales	$	1,124,871		$	1,124,871		$	-

Operating Expenses:
Exploration Expense		3,750			3,750			-
Production Taxes		53,409			53,409			-
Lease Operating Expenses		79,540			79,540			-
Gas Transportation and Marketing expenses		52,935			52,935			-
Depreciation, Depletion and Amortization		500,271			283,985			(216,286	)
Acretion Expense		4,342			4,342			-
General and administrative expense		639,960			639,960			-
Total Operating Expense		1,334,207			1,117,921			(216,286	)

Income (loss) from operations		(209,336	)		6,950			216,286

Total Other Expense		(3,184,827	)		(3,184,827	)		-

Loss from Operations before income tax expense		(3,394,163	)		(3,177,877	)		216,286

Income Tax Provision		-			-			-

Net Loss		(3,394,163	)		(3,177,877	)		216,286

Basis and Diluted earnings per share	$	(0.06	)	$	(0.06	)		-
Basic and Diluted Weighted Average Common Shares Outstanding		56,882,671			56,882,671			-

Income Statement	As computed			As computed			Effect
Three Months Ended August 31, 2010	Under			Under			of
	Full Cost			Successful Efforts			Change

Revenue:
Oil and Gas Sales	$	921,675		$	921,675		$	-

Operating Expenses:
Exploration Expense								-
Production Taxes		60,373			60,373			-
Lease Operating Expenses		32,513			32,513			-
Gas Transportation and Marketing expenses		54,075			54,075			-
Depreciation, Depletion and Amortization		269,404			160,150			(109,254	)
General and administrative expense								-
Total Operating Expense		416,365			307,111			(109,254	)

Income from operations		505,310			614,564			109,254

Total Other Expense		(45,395	)		(45,395	)		-

Income from operations before income tax expense		459,915			569,169			109,254

Income Tax Provision		-			-			-

Net Income		459,915			569,169			109,254

Basis and Diluted earnings per share	$	0.02		$	0.02			0.00
Basic and Diluted Weighted Average Common Shares Outstanding		27,000,000			27,000,000			-

Balance Sheet	As computed			As computed			Effect
August 31, 2011	Under			Under			of
	Full Cost			Successful Efforts			Change

Total Current Assets		1,578,678			1,578,678			-
Total Long Term Investments		4,763,915			4,763,915			-
Oil and Gas Properties		14,654,493			14,654,493			-
Other Property, Plant & Equipment		211,008			211,008			-
Less Accumulated Depreciation and Depletion		1,473,596			(997,062	)		476,534
Other Assets		50,479			50,479			-
Total Assets		19,784,977			20,261,511			476,534

Total Current Liabilities		9,066,873			9,066,873			-
Total Non Current Liabilities		261,648			261,648			-

Common Stock		707			707			-
Additional Paid In Capital		11,369,702			11,369,702			-
Retained Earnings (Accumulated Deficit)		(2,200,438	)		(1,723,904	)		476,534
Accumulated Comprehensive Income		1,286,485			1,286,485			-
Total Stockholder's Equity		10,456,456			10,932,990			476,534
Total Liabilities and Stockholder's Equity		19,784,977			20,261,511			476,534

Balance Sheet	As computed			As computed			Effect
May 31, 2011	Under			Under			of
	Full Cost			Successful Efforts			Change

Total Current Assets		662,051			662,051			-
Total Long Term Investments		6,067,959			6,067,959			-

Oil and Gas Properties								-
Proved oil and gas properties		9,532,190			9,292,797			(239,393	)
Unproved Property		-			239,393			239,393
Less Accumulated Depreciation and Depletion		(977,274	)		(716,655	)		260,619
Oil and Gas Properties, net		8,554,916			8,815,535			260,619
Other Assets		10,805			10,805			-
Total Assets		15,295,731			15,556,350			260,619

Total Current Liabilities		9,020,368			9,020,368			-
Total Non Current Liabilities		2,243,130			2,243,130			-
Stockholder's Equity		4,032,233			4,292,852			260,619
Total Liabilities and Stockholder's Equity		15,295,731			15,556,350			260,619