Note 5 - Asset Retirement Obligation

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Asset Retirement Obligation Disclosure [Text Block]

Note

5

– ASSET RETIREMENT OBLIGATION

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of

first

sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is

4.08%.

When the liability is

first

recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value which is currently

3.25%.

A reconciliation of the Company

’s asset retirement obligation liability is as follows:

Balance at December 31, 2016	$	1,710,677
Liabilities incurred for new wells (net of revisions)		21,208
Liabilities settled (wells sold or plugged)		(20,583	)
Accretion expense		34,931
Balance at September 30, 2017	$	1,746,233