ASSET RETIREMENT OBLIGATION	3 Months Ended
Oct. 31, 2011
ASSET RETIREMENT OBLIGATION	6. ASSET RETIREMENT OBLIGATION Effective January 1, 2003, the Company implemented the requirements of SFAS 143. Among other things, SFAS 143 requires entities to record a liability and corresponding increase in long-lived assets for the present value of material obligations associated with the retirement of tangible long-lived assets. Over the passage of time, accretion of the liability is recognized as an operation expense and the capitalized cost is depleted over the estimated useful life of the related asset. Additionally, SFAS No. 143 requires that upon initial application of these standards, the Company must recognize a cumulative effect of a change in accounting principle corresponding to the accumulated accretion and depletion expense that would have been recognized had this standard been applied at the time the long-lived assets were acquired or constructed. The Company’s asset retirement obligations relate primarily to the plugging, dismantling and removal of wells drilled to date. Using a credit-adjusted risk free rate of 8%, and estimated useful life of wells ranging from 30-40 years, and estimated plugging and abandonment cost ranging from $7,000 per well to $25,000 per well, the Company has recorded a non-cash fixed asset addition and associated liability related to its property acquisitions of $457,429. Oil and gas properties were increased by $457,429, which represents the present value of all future obligations to retire the wells at October 31, 2011. At October 31, 2011 the obligation was $472,855 as a result of increases in plugging costs and related services and accretion expenses. For the periods ended July 31, 2011 and 2010, respectively, the Company recorded accretion expenses of $35,126 and $32,525 associated with this liability.

ASSET RETIREMENT OBLIGATION

3 Months Ended

Oct. 31, 2011

6. ASSET RETIREMENT OBLIGATION

Effective January 1, 2003, the Company implemented the requirements of SFAS 143. Among other things, SFAS 143 requires entities to record a liability and corresponding increase in long-lived assets for the present value of material obligations associated with the retirement of tangible long-lived assets. Over the passage of time, accretion of the liability is recognized as an operation expense and the capitalized cost is depleted over the estimated useful life of the related asset. Additionally, SFAS No. 143 requires that upon initial application of these standards, the Company must recognize a cumulative effect of a change in accounting principle corresponding to the accumulated accretion and depletion expense that would have been recognized had this standard been applied at the time the long-lived assets were acquired or constructed. The Company’s asset retirement obligations relate primarily to the plugging, dismantling and removal of wells drilled to date.

Using a credit-adjusted risk free rate of 8%, and estimated useful life of wells ranging from 30-40 years, and estimated plugging and abandonment cost ranging from $7,000 per well to $25,000 per well, the Company has recorded a non-cash fixed asset addition and associated liability related to its property acquisitions of $457,429. Oil and gas properties were increased by $457,429, which represents the present value of all future obligations to retire the wells at October 31, 2011. At October 31, 2011 the obligation was $472,855 as a result of increases in plugging costs and related services and accretion expenses. For the periods ended July 31, 2011 and 2010, respectively, the Company recorded accretion expenses of $35,126 and $32,525 associated with this liability.

- Definition

The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.

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