Asset Retirement Obligations

12 Months Ended

Dec. 31, 2014

DisclosureAssetRetirementObligationsAbstract

Asset Retirement Obligations

NOTE 9 – ASSET RETIREMENT OBLIGATIONS

The total future asset retirement obligation is estimated by management based on the Company’s net working interests in all wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be incurred in future periods. At December 31, 2014 and 2013, the Company estimated the undiscounted cash flows related to asset retirement obligation to total approximately $323,400 and $323,400, respectively. The fair value of the liability at December 31, 2014 and 2013 is estimated to be $157,752 and $151,353, respectively, using risk free rates between 2.48 and 4.24 percent and inflation rates between 2.75 and 4.20 percent. The actual costs to settle the obligation are expected to occur in approximately 25 years.

On February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas leases located in Pratt County, Kansas for $100,000. This amount was deducted from funds payable from the Company to the purchasing entity on July 18, 2013. Pursuant to this transaction the Company transferred a 30 percent interest in all related support equipment and asset retirement obligations.

Through December 31, 2013, the Company established an asset retirement obligation of $112,652 for the wells acquired by the Company, which was capitalized to the value of the oil and gas properties. The wells have an estimated useful life of 25 years. Total accretion expense on the asset retirement obligation was $38,701, leaving an ending net balance of $151,353 at December 31, 2013. During 2014, the asset retirement obligation was reduced by $10,041 pursuant to the sale of certain oil and gas leases, and accretion expense totaled $16,440 for the year, resulting in an ending net balance of $157,752 at December 31, 2014.

Changes to the asset retirement obligation for the years ended December 31, 2014 and 2013 were as follows:

	December 31, 2014			December 31, 2013
Balance, beginning of year	$	151,353		$	158,976
Liabilities incurred		—			—
Disposal		(10,041	)		(24,063	)
Accretion expense		16,440			16,440
Balance, end of year	$	157,752		$	151,353