Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

FASB ASC 820, "Fair Value Measurements and Disclosures," establishes a framework for measuring fair value. That framework provides a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability. The lowest level of any input that is significant to the fair value measurement determines the applicable level in the fair value hierarchy. The three levels of the fair value hierarchy are described as follows:

- Level 1 – Observable inputs, such as unadjusted quoted prices in active markets, for substantially identical assets and liabilities.

- Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

- Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring a significant amount of judgment by management.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company does not have any liabilities that are measured at fair value on a recurring or nonrecurring basis as of December 31, 2016 or 2015.  The Company does not have any assets that are measured at fair value on a recurring basis.  The following table represents the Company's assets that are measured at fair value on a nonrecurring basis in the accompanying balance sheets, and where they are classified within the fair value hierarchy as of December 31, 2016:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other  Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Proved oil and gas properties at cost, net of impairment		-		-	$	1,377,260

The following table represents the Company's assets that are measured at fair value on a nonrecurring basis in the accompanying balance sheets, and where they are classified within the fair value hierarchy as of December 31, 2015:

	Level 1		Level 2		Level 3
Proved oil and gas properties at cost, net of impairment		-		-	$	5,460,273
Unevaluated oil and gas properties at cost, net of impairment		-		-	$	-

The fair values of the properties were determined using discounted cash flow models.  The discounted cash flows were based on management's expectations for the future.  The inputs included estimates of future crude oil and natural gas production, commodity prices based on sales contracted terms or commodity price curves as of the date of the estimate, estimated operating and development costs, at a risk-adjusted discount rate of 10%.

The carrying amounts of other financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short-term nature of these instruments as of December 31, 2016 and December 31, 2015.