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Note 7 - Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2011
Fair Value Disclosures [Text Block]
Note 7 – Fair Value of Financial Instruments

The Company adopted FASB ASC 820-10 upon inception at April 9, 2010. Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company doesn’t have any financial instruments that must be measured under the new fair value standard.  The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.  The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balances sheet as of December 31, 2011 and 2010:

 
Fair Value Measurements at December 31, 2011
 
 
Level 1
 
Level 2
 
Level 3
 
Assets
                 
Oil & Gas Proved Properties
  $ -     $ -     $ 10,867,443  
    $ -     $ -     $ 10,867,443  

 
Fair Value Measurements at December 31, 2010
 
 
Level 1
 
Level 2
 
Level 3
 
Assets
                 
Contingent Royalty Receivable
  $ -     $ -     $ 6,472,000  
    $ -     $ -     $ 6,472,000  

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the year ended December 31, 2011 and the period from April 9, 2010 (inception) to December 31, 2010.

Level 3 assets consist of proved oil and gas properties as adjusted for a non-recurring $2,392,742 adjustment for the impairment of oil and gas properties during the year ended December 31, 2011, and a contingent royalty receivable as adjusted on December 31, 2010 for a non-recurring $878,650 impairment adjustment.