Oil and Gas Exploration and Production Industries Disclosures

12 Months Ended

Dec. 31, 2012

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

Oil and Gas Exploration and Production Industries Disclosures [Text Block]

FASB ASC Topic 932, Extraction Activities - Oil and Gas, requires disclosure of certain financial data for oil and gas operations and reserve estimates of oil and gas. This information, presented here, is intended to enable the reader to better evaluate the operations of the Company. All of the Company's oil and gas reserves are located in the United States.

The aggregate amounts of capitalized costs relating to oil and gas producing activities and the related accumulated depletion, depreciation, and amortization and valuation allowances as of December 31, 2012, 2011 and 2010 were as follows:

	2012			2011			2010
Proved properties	$	19,828,900		$	18,946,000		$	17,922,900
Unproved properties being amortized		178,600			178,600			178,600
Unproved properties not being amortized		0			0			0
Capitalized asset retirement costs		426,000			401,200			389,500
Accumulated depletion, depreciation, amortization and valuation allowances		(17,912,400	)		(17,132,100	)		(15,755,500	)
	$	2,521,100		$	2,393,700		$	2,735,500

The estimated quantities and the change in proved reserves, both developed and undeveloped, for the Company are as follows:

	2012						2011						2010
	Oil			Gas			Oil			Gas			Oil			Gas
	(Mbbls)			(MMCF)			(Mbbls)			(MMCF)			(Mbbls)			(MMCF)
Proved developed and undeveloped reserves:
Beginning of year		546			42			538			44			506			81
Revisions of previous estimates		(19	)		(36	)		63			7			92			(28	)
Extensions, discoveries and other additions		0			0			0			0			0			0
Production		(45	)		(6	)		(55	)		(9	)		(60	)		(9	)
End of year		482			0			546			42			538			44
Proved developed reserves:
Beginning of year		474			42			433			35			383			43
End of year		482			0			474			42			433			35
Proved undeveloped reserves:
Beginning of year		71			0			105			8			123			38
End of year		0			0			71			0			105			8

The foregoing estimates have been prepared by the Company from data prepared by an independent petroleum engineer in respect to certain producing properties. Revisions in previous estimates as set forth above can result from analysis of new information, as well as from additional production experience or from a change in economic factors. The primary factor that has impacted the revisions of previous estimates of crude oil and natural gas reserves noted above is from a change in crude oil and natural gas prices used to determine the valuation of year-end reserves. Higher crude oil and natural gas prices cause certain oil and gas leases to become more profitable,thus generating additional reserves. Net average crude oil sales prices (average crude oil sales prices net of operating costs, production taxes and development costs) used to value the year-end reserves decreased by approximately $6.50 per barrel at December 31, 2012, and increased by approximately $18.00 per barrel at December 31, 2011 and increased by approximately $12.60 per barrel at December 31, 2010.

The decrease in revisions of previous estimates for natural gas reserves at December 31, 2010, is due primarily to one of the Company's Texas joint venture wells. During 2010, this well started producing exclusively crude oil due to work that was done on this well in 2010.

The reserve estimates are believed to be reasonable and consistent with presently known physical data concerning size and character of the reservoirs and are subject to change as additional knowledge concerning the reservoirs becomes available.

The present value of estimated future net revenues of proved developed and undeveloped reserves, discounted at 10%, were as follows:

	December 31,
	2012		2011		2010
Proved developed and undeveloped reserves
(Present value before income taxes)	$	13,712,000	$	18,439,000	$	13,068,000

FASB ASC Topic 932, Extraction Activities - Oil and Gas, requires certain disclosures of the costs and results of exploration and production activities and established a standardized measure of oil and gas reserves and the year-to-year changes therein.

In addition to the foregoing disclosures, FASB ASC Topic 932, Extraction Activities - Oil and Gas established a "Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves".

Costs incurred, both capitalized and expensed, of oil and gas property acquisition, exploration and development for the years ended December 31, 2012, 2011 and 2010 were as follows:

	2012		2011		2010
Property acquisition costs	$	50,000	$	700	$	60,000
Exploration costs – expensed		0		0		0
Development costs		857,900		1,022,300		2,113,900
Asset retirement costs		24,700		11,800		6,900

The results of operations for oil and gas producing activities for the years ended December 31, 2012, 2011 and 2010 were as follows:

	2012		2011		2010
Sales	$	4,995,000	$	5,688,000	$	4,515,000
Production costs		2,103,000		1,920,000		1,698,000
Exploration costs		0		0		0
Accretion expense		38,000		45,000		35,000
Depletion, depreciation, amortization and valuation allowance		887,000		1,486,000		1,819,000
		1,967,000		2,237,000		963,000
Income tax (benefit) provision		240,000		113,000		(163,000	)
Results of operations from production activities	$	1,727,000	$	2,124,000	$	1,126,000

The standardized measure of discounted estimated future net cash flows relating to proved oil and gas reserves for the years ended December 31, 2012, 2011 and 2010 were as follows:

	2012		2011		2010
Future cash inflows	$	51,004,000	$	58,216,000	$	41,973,000
Future development and production costs		25,941,000		24,445,000		19,454,000
Future abandonment costs		1,328,000		1,279,000		1,235,000
Future income tax expense		5,238,000		7,987,000		4,759,000
Future net cash flow		18,497,000		24,505,000		16,525,000
10% annual discount		7,771,000		9,392,000		6,368,000
Standardized measure of discounted future net cash flow	$	10,726,000	$	15,113,000	$	10,157,000

The principal changes in the standardized measure of discounted future net cash flows during the years ended December 31, 2012, 2011 and 2010 were as follows:

	2012			2011			2010
Extensions	$	0		$	0		$	0
Revisions of previous estimates
Price changes		(2,155,000	)		7,026,000			4,962,000
Quantity estimates		(894,000	)		1,901,000			2,016,000
Change in production rates, timing and other		(1,642,000	)		(1,157,000	)		(2,136,000	)
Development costs incurred		858,000			1,023,000			941,000
Changes in estimated future development costs		(1,281,000	)		315,000			(46,000	)
Estimated future abandonment costs		(6,000	)		8,000			(4,000	)
Sales of oil and gas, net of production costs		(2,892,000	)		(3,768,000	)		(2,817,000	)
Accretion of discount		1,922,000			1,386,000			994,000
		(6,090,000	)		6,734,000			3,910,000
Net change in income taxes		(1,703,000	)		1,778,000			1,106,000
Net (decrease) increase	$	(4,387,000	)	$	4,956,000		$	2,804,000

Estimated future cash inflows are computed by applying year-end prices of oil and gas to year-end quantities of proved reserves. Estimated future development and production costs are determined by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year-end costs and assuming continuation of existing economic conditions. Estimated future income tax expense is calculated by applying the year-end effective tax rate to estimated future pretax net cash flows related to proved oil and gas reserves, less the tax basis of the properties involved.

These estimates are furnished and calculated in accordance with requirements of the Financial Accounting Standards Board and the Securities and Exchange Commission. Because of the unpredictable variances in expenses and capital forecasts, crude oil and natural gas price changes being largely influenced and controlled by United States and foreign governmental actions, and the fact that the basis for such estimates vary significantly, management believes the usefulness of these projections is limited. Estimates of future net cash flows do not represent management's assessment of future profitability or future actual cash flows of the Company. It should be recognized that applying current costs and prices and a ten percent standard discount rate allows for comparability but does not convey absolute value. The discounted amounts arrived at are only one measure of financial quantification of proved reserves.

The standardized measure of discounted future cash flows before income taxes decreased by $6,090,000 at December 31, 2012. The decrease in income taxes offset discounted future cash flows by $1,703,000 for a net decrease in future cash flows of $4,387,000 after income taxes as of December 31, 2012. The factors contributing to the decrease in cash flows are lower net average crude oil prices (average crude oil sales prices net of operating costs, production taxes and development costs). During 2012, net average crude oil prices decreased by approximately $6.50 per barrel. At December 31, 2012 the Company did not have any proved undeveloped reserves which also contributed to the decrease in future cash flows for 2012. The proved undeveloped reserves at December 31, 2011 included two wells that were projected to be drilled during 2012. One of these wells was the Santa Fe #20 development well that was drilled in 2012. This well is not currently producing and a valuation allowance of $204,000 was recorded at December 31, 2012 for the Santa Fe energy lease. The other well project to be drilled in 2012, the CLI 4-H, was not drilled during 2012 and is not expected to be drilled in the future.

The standardized measure of discounted future cash flows before income taxes increased by $6,734,000 at December 31, 2011. The increase in income taxes offset discounted future cash flows by $1,778,000 for a net increase in future cash flows of $4,956,000 after income taxes as of December 31, 2011. The major factor contributing to the increase in cash flows is higher net average crude oil prices (average crude oil sales prices net of operating costs, production taxes and development costs). During 2011, net average crude oil prices increased by approximately $18.00 per barrel. This price increase contributed to an increase in discounted cash flows due to price changes of $7,026,000.

The standardized measure of discounted future cash flows before income taxes increased by $3,910,000 at December 31, 2010. The increase in income taxes offset discounted future cash flows by $1,106,000 for a net increase in future cash flows of $2,804,000 after income taxes as of December 31, 2010. The major factor contributing to the increase in cash flows is higher net average crude oil prices (average crude oil sales prices net of operating costs, production taxes and development costs). During 2010 Net average crude oil prices increased by approximately $12.60 per barrel. This price increase contributed to an increase in discounted cash flows due to price changes of $4,962,000 and a change in quantity estimates of $2,016,000.