ACCOUNTS PAYABLE DUE TO DRILLING OPERATOR

3 Months Ended

Mar. 31, 2014

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ACCOUNTS PAYABLE DUE TO DRILLING OPERATOR

NOTE 3 —ACCOUNTS PAYABLE DUE TO DRILLING OPERATOR

We have historically been the drilling operator for wells drilled on our behalf and other third parties in which we own a working interest. In 2012, another working interest owner became the drilling operator for wells in which we own a working interest. We owed the drilling operator $6,584,668 and $2,698,302 for charges incurred, but not paid, as of March 31, 2014 and December 31, 2013, respectively. The amount due to the operator reported at March 31, 2014 and December 31, 2013, is net of a $837,443 and $637,667 credit, respectively, related to a refund of prior drilling costs previously invoiced to America Shale for wells we are not participating in as well as intercompany charges related to employee salary reimbursements, travel expenses, and lease costs.