Quarterly report pursuant to Section 13 or 15(d)

ASSET RETIREMENT OBLIGATION

v2.4.0.6
ASSET RETIREMENT OBLIGATION
9 Months Ended
Sep. 30, 2012
ASSET RETIREMENT OBLIGATION  
ASSET RETIREMENT OBLIGATION

NOTE 5 – ASSET RETIREMENT OBLIGATION

 

The Company provides for the obligation to plug and abandon oil and gas wells at the dates properties are either acquired or the wells are drilled.  The asset retirement obligation is adjusted each quarter for any liabilities incurred or settled during the period, accretion expense and any revisions made to the estimated cash flows. The asset retirement obligation relating to the predecessor carve-out financial statements was computed using an annual credit-adjusted risk-free discount rate of 4.28%. The asset retirement obligation incurred by Stanford upon each of the three acquisitions was computed using the annual credit-adjusted risk-free discount rate at the applicable date, which rates were from 6.55% to 7.62% per annum.  Changes in the asset retirement obligation were as follows:

 

Balance, January 1, 2012

$

274,788

Liabilities incurred

 

14,214

Accretion expense

 

14,287

Balance, September 30, 2012

$

303,289