Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value [Abstract]

Fair Value Disclosures [Text Block]

2. Fair Value Measurements

Effective January 1, 2008, the Company adopted the authoritative guidance on fair value measurements. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the guidance establishes a three tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity. Included in this category is the Company’s valuation of its asset retirement obligation liability. The obligation increased $48,972 during the year ended December 31, 2012, as a result of normal accretion, the drilling of a new well, the purchase of two wells and the retirement of one well.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In accordance with this guidance, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short term investments are classified within Level 1. Cash equivalents and short term investments are valued primarily using quoted market prices utilizing market observable inputs. At December 31, 2012, cash equivalents and short term investments consisted of certificates of deposit measured at fair value on a recurring basis. Fair values of our certificates of deposit were $3,642,944, of which $405,709 was included in cash equivalents, $2,135,709 was included in short-term investments and $1,101,526 was included in long-term investments at December 31, 2012. Fair values of our certificates of deposit were $3,605,658, of which $405,294 was included in cash equivalents, $2,128,380 was included in short-term investments and $1,071,984 was included in long-term investments at December 31, 2011. The carrying value of accounts receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP (for example, when there is evidence of impairment). The amounts below represent only balances measured at fair value during the period presented and still held as of the reporting date.  These balances appear as a component of the “Oil and Gas Properties and Equipment” and “Accumulated Depletion, Depreciation, Amortization and Valuation Allowances” captions on the balance sheet.

	At and for the period ended December 31, 2012:
	Total		Level 1		Level 2		Level 3		Total Valuation
Oil and gas properties and equipment	$	1,019,100	$	—	$	—	$	781,400	$	(237,700	)

In the year ended December 31, 2012 certain oil and gas properties and equipment held and used with a carrying amount of $1,019,100 were written down to their fair value of $781,400, resulting in a valuation charge of $237,700, which was included in earnings for this period.  The fair value of these long-lived assets held and used was calculated based upon discounted cash flow projections.  These projections incorporate management's assumptions about future cash flows based upon past experience and future expectations.  The expected cash flows are then discounted using a discount rate that the Company believes is commensurate with the risks involved.

	At and for the period ended December 31, 2011:
	Total		Level 1		Level 2		Level 3		Total Valuation
Oil and gas properties and equipment	$	975,000	$	—	$	—	$	224,000	$	(751,000	)

In the year ended December 31, 2011 certain oil and gas properties and equipment held and used with a carrying amount of $975,000 were written down to their fair value of $224,000, resulting in a valuation charge of $751,000, which was included in earnings for this period.  The fair value of these long-lived assets held and used was calculated based upon discounted cash flow projections.  These projections incorporate management's assumptions about future cash flows based upon past experience and future expectations.  The expected cash flows are then discounted using a discount rate that the Company believes is commensurate with the risks involved.