Note 8 - Revenue Recognition

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

8

– REVENUE RECOGNITION

The Financial Accounting Standards Board (FASB) issued

Revenue from Contracts with Customers

(Topic

606

) superseding virtually all existing revenue recognition guidance. We adopted this new standard in the

first

quarter of

2018

using the modified retrospective approach. Adoption of the new standard did

not

require an adjustment to the opening balance of equity and did

not

have an impact on income from operations, earnings per share or cash flows.

The Company’s revenues are primarily derived from its interests in the sale of oil and natural gas production. Each barrel of oil or thousand cubic feet of natural gas delivered is considered a separate performance obligation. The Company recognizes revenue from its interests in the sales of oil and natural gas in the period that its performance obligations to provide oil and natural gas to customers are satisfied. Performance obligations are satisfied when the Company has

no

further obligations to perform related to the sale and the customer obtains control of product. The sales of oil and natural gas are made under contracts which the

third

-party operators of the wells have negotiated with customers, which typically include variable consideration that is based on pricing tied to local indices and volumes delivered in the current month. The Company receives payment from the sale of oil and natural gas production from

one

to

three

months after delivery. At the end of each month as performance obligations are satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in accounts receivable in the balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received, however, differences have been and are insignificant. Accordingly, the variable consideration is

not

constrained. A portion of oil and gas sales recorded in the statements of income are the result of estimated volumes and pricing for oil and gas product

not

yet received for the period. For the periods ending

March 

31,

2019

and

2018,

that estimate represented approximately

$293,653

and

$264,543,

respectively, of oil and gas sales included in the statements of income.

The Company’s contracts with customers originate at or near the time of delivery and transfer of control of oil and natural gas to the purchasers. As such, the Company does

not

have significant unsatisfied performance obligations.

The Company’s oil is typically sold at delivery points under contract terms that are common in our industry. The Company's natural gas produced is delivered by the well operators to various purchasers at agreed upon delivery points under a limited number of contract types that are also common in our industry. However, under these contracts, the natural gas

may

be sold to a single purchaser or

may

be sold to separate purchasers. Regardless of the contract type, the terms of these contracts compensate the well operators for the value of the oil and natural gas at specified prices, and then the well operators will remit payment to the Company for its share in the value of the oil and natural gas sold.

The Company’s disaggregated revenue has

two

primary revenue sources which are oil sales and natural gas sales. Oil sales for the

three

months ended

March 

31,

2019

and

2018

were

$981,931

and

$980,786,

respectively. Natural gas sales for the

three

months ended

March 

31,

2019

and

2018

were

$565,112

and

$541,273,

respectively. Miscellaneous oil and gas product sales for the

three

months ended

March 

31,

2019

and

2018

were

$45,668

and

$57,222,

respectively.