12.	Disclosures About Oil and Gas Producing Activities (Unaudited)

The following table summarizes changes in the estimates of the Company’s net interest in total proved reserves of crude oil and condensate and natural gas and liquids, all of which are domestic reserves. There can be no assurance that such estimates will not be materially revised in subsequent periods.

	Oil (Barrels)			Gas (MCF)

Balance, January 1, 2013		1,224,926			2,348,335
Revisions of previous estimates		(202,450	)		(322,413	)
Extensions and discoveries		99,988			143,343
Sale of reserves		-			-
Purchase of minerals in place		-			-
Production		(101,752	)		(179,737	)
Balance, December 31, 2013		1,020,712			1,989,528
Revisions of previous estimates		(25,391	)		(51,075	)
Extensions and discoveries		216,930			118,880
Sale of reserves		-			-
Purchase of minerals in place		-			-
Production		(97,630	)		(148,086	)
Balance, December 31, 2014		1,114,621			1,909,247

Proved developed reserves, December 31, 2014		937,416			1,652,014
Proved developed reserves, December 31, 2013		916,139			1,834,899

Proved oil and natural gas reserves are the estimated quantities of crude oil, condensate, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and natural gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. The above estimated net interests in proved reserves are based upon subjective engineering judgments and may be affected by the limitations inherent in such estimation. The process of estimating reserves is subject to continual revision as additional information becomes available as a result of drilling, testing, reservoir studies and production history, and market prices for oil and natural gas. Significant fluctuations in market prices have a direct impact on recoverability and will result in changes in estimated recoverable reserves without regard to actual increases or decreases in reserves in place.

Year Ended December 31, 2013

The average natural gas price used in our proved reserves estimate at December 31, 2013 was $3.49 per Mcf. The average oil price used in our proved reserves estimate at December 31, 2013 was $90.14 per barrel. We drilled the East Lusk Federal well #3 and re-completed an additional well on the North Block lease during the year ended December 31, 2013, which were the primary reasons for the quantities listed under extensions and discoveries. Our consulting engineers decreased our proved reserves in the East Lusk Field due to a steeper than anticipated decline curve on the East Lusk Federal #2 and #3 wells.

Year Ended December 31, 2014

The average natural gas price used in our proved reserves estimate at December 31, 2014, was $4.30 per Mcf. The average oil price used in our proved reserves estimate at December 31, 2014, was $92.89 per barrel. We drilled four wells in the Serbin Taylor field and added reserves for four proved undeveloped wells in the same field during the year ended December 31, 2014, which were the primary reasons for the quantities listed under extensions and discoveries. Our consulting engineers decreased our proved reserves in the East Lusk Field due to a steeper than anticipated decline curve on the East Lusk Federal #2 and #3 wells.

Standardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows at December 31, 2014 and 2013, relating to proved oil and natural gas reserves is set forth below. The assumptions used to compute the standardized measure are those prescribed by the Financial Accounting Standards Board and, as such, do not necessarily reflect our expectations of actual revenues to be derived from those reserves nor their present worth. The limitations inherent in the reserve quantity estimation process are equally applicable to the standardized measure computations since these estimates are the basis for the valuation process.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves and the changes in standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves were prepared in accordance with prescribed accounting and SEC standards. Future cash inflows were computed by applying the unweighted, arithmetic average of the closing price on the first day of each month for the 12-month period prior to December 31, 2014 and 2013, to estimated future production. Future production and development costs are computed by estimating the expenditures to be incurred in developing and producing the proved oil and natural gas reserves at year end, based on year-end costs and assuming continuation of existing economic conditions.

Future income tax expenses are calculated by applying appropriate year-end tax rates to future pre-tax net cash flows relating to proved oil and natural gas reserves, less the tax basis of properties involved.

Future income tax expenses give effect to permanent differences, tax credits and loss carryforwards relating to the proved oil and natural gas reserves. Future net cash flows are discounted at a rate of 10% annually to derive the standardized measure of discounted future net cash flows. This calculation procedure does not necessarily result in an estimate of the fair market value of our oil and natural gas properties.

	Years Ended December 31,
	(in thousands)
	2014			2013

Future cash inflows	$	111,664		$	101,289
Future production costs		(41,322	)		(38,667	)
Future development cost		(6,733	)		(3,681	)
Future income taxes		(20,712	)		(18,115	)

Future net cash flows		42,897			40,826
10% annual discount		(19,908	)		(20,455	)
,
Standardized measure of discounted future net cash flows	$	22,989		$	20,371

The following are the principal sources of change in the standardized measure of discounted future net cash flows, in thousands:

	Years Ended December 31,
	2014			2013
Balance, beginning of year	$	20,371		$	25,100
Sales of oil and natural gas produced, net of production costs		(5,181	)		(6,416	)
Sale of reserves		-			-
Extensions and discoveries		6,477			3,040
Net changes in prices and production costs		2,139			525
Net changes in future development costs		(2,209	)		(1,227	)
Revisions and other changes		551			(6,556	)
Accretion of discount		3,210			3,736
Net change in income taxes		(2,369	)		2,169
Balance, end of year	$	22,989		$	20,371