Petroleum and natural gas rights
|6 Months Ended|
Jun. 30, 2015
|Notes to Financial Statements|
|Note 4. Petroleum and natural gas rights||
On November 3, 2014, the Company entered into a Purchase and Sale, Petroleum and Natural Gas Conveyance Agreement (the Agreement), with Tanager Energy Inc., a Canadian corporation listed on the TSX Venture Exchange as a Tier 2 company and trading under the stock symbol TAN (Tanager Energy). Pursuant to the Agreement, the Company was to receive a 50% working interest in the Joffre oil and gas property located in Alberta, Canada (the Joffre Property), and the Company was obligated to pay Tanager C$400,000 for the interest in the Joffre Property, with C$340,000 payable at closing.
On November 4, 2014, the Company closed the transaction by paying Tanager $302,367, with the balance of $52,801 (C$60,000) paid in January of 2015. Tanager is to own the remaining 50% working interest in the property and operate and manage the property in accordance with an operating agreement pursuant to the Canadian Association of Petroleum Landman Operating Procedure. The proceeds were to be used by Tanager to complete and place on production the first of four suspended Devonian oil wells in the Joffre D-3 B oil pool (the Joffre Project). The Companys (and Tanagers) working interest in the Joffre Property will generally terminate when future production, if any, ceases (or in the case of the water disposal well on the Joffre Property, on the date that production ceases after 5 years has elapsed).
In April 2015, the Company advanced to Tanager Energy Inc., an additional $153,877 (C$190,000) as an investment in the second well in the Joffre D-3 oil pool. As the Company and Tanager each own 50% of each phase of this project, the Company has accounted for this transaction as an investment by the Company of $77,158 (C$95,270), with a loan receivable from Tanager of $76,719 (C$94,730).
The Companys petroleum and natural gas rights are recorded at cost as of June 30, 2015. The Company will assess the impairment by comparing the estimated future undiscounted cash flows derived from these rights to the carrying value. Any impairment loss will be recorded in the income statements for the future reporting period(s). Management has accounted for the joint venture activities in accordance with ASC 932-323.