INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Our provision for income taxes comprised the following (expense) benefit during the years ended December 31:

	2013			2012
Current:
Federal	$	(109,000	)	$	(248,000	)
State		(20,070	)		(64,000	)
Total current		(129,070	)		(312,000	)

Deferred:
Federal		(590,000	)		(842,000	)
State		(48,000	)		(20,000	)
Total deferred		(638,000	)		(862,000	)

Total income tax provision	$	(767,070	)	$	(1,174,000	)

Reconciliation of Tax Rate

Total income tax (expense) benefit differed from the amounts computed by applying the U.S. Federal statutory tax rates and estimated state rates to pre-tax income for the years ended December 31, 2013 and 2012 as follows:

	2013			2012
Statutory rate		34	%		34	%
State taxes, net of federal benefit		3	%		2	%
Effective rate		37	%		36	%

Components of Deferred Tax Assets and Liability

Significant components of net deferred tax assets and liabilities are:

	December 31,
	2013			2012
Deferred tax assets:
Asset retirement obligation	$	393,000		$	357,000
Allowance for doubtful accounts		63,000			63,000
Accrued compensation and other		-			109,000
Unrealized loss on commodity derivatives		1,000			-
Alternative minimum tax credit carryforward		80,000			-
Total deferred tax assets		537,000			529,000

Deferred tax liability:
Difference in depreciation, depletion and capitalization methods – oil and gas properties		(3,446,000	)		(2,800,000	)
Total deferred tax liabilities		(3,446,000	)		(2,800,000	)

Net deferred tax liability	$	(2,909,000	)	$	(2,271,000	)

Net Deferred Tax Assets and Liabilities, Balance Sheet Location

Our net deferred tax assets and liabilities are recorded as follows:

	2013			2012
Current asset	$	64,000		$	171,000
Non-current liability		(2,973,000	)		(2,442,000	)
Total	$	(2,909,000	)	$	(2,271,000	)