Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 20, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | RESERVE PETROLEUM CO | ||
Entity Central Index Key | 83350 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $50,906,138 | ||
Entity Common Stock, Shares Outstanding | 158,650 | ||
Entity Common Stock, Par Value Per Share | $0.50 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ||
Cash and Cash Equivalents (Note 2) | $15,203,558 | $10,764,506 |
Available-for-Sale Securities (Notes 2 & 5) | 6,654,303 | 6,653,823 |
Trading Securities (Notes 2 & 5) | 445,476 | 586,708 |
Refundable Income Taxes | 154,393 | 336,620 |
Receivables (Note 2) | 2,142,356 | 2,449,048 |
Prepaid Seismic | 86,856 | 6,232 |
Total Current Assets | 24,686,942 | 20,796,937 |
Investments: | ||
Equity Investment (Notes 2 & 7) | 352,995 | 613,558 |
Other | 672,416 | 151,839 |
Total Investments | 1,025,411 | 765,397 |
Oil and Gas Properties, at Cost, Based on the Successful Efforts Method of Accounting - | ||
Unproved Properties | 1,728,944 | 1,601,180 |
Proved Properties | 53,110,630 | 47,968,895 |
Total Oil and Gas Properties Gross | 54,839,574 | 49,570,075 |
Less - Accumulated Depreciation, Depletion, Amortization and Valuation Allowance | 36,883,078 | 31,170,203 |
Total Oil and Gas PropertiesNet | 17,956,496 | 18,399,872 |
Other Property and Equipment, at Cost | 440,284 | 427,056 |
Less - Accumulated Depreciation | 329,429 | 305,302 |
Total Other Property and Equipment, at Cost | 110,855 | 121,754 |
Total Property, Plant and Equipment | 18,067,351 | 18,521,626 |
Other Assets | 391,290 | 376,982 |
Total Assets | 44,170,994 | 40,460,942 |
Current Liabilities: | ||
Accounts Payable | 819,010 | 367,622 |
Other Current Liabilities - Deferred Income Taxes and Other | 263,234 | 337,624 |
Total Current Liabilities | 1,082,244 | 705,246 |
Long-Term Liabilities: | ||
Asset Retirement Obligation (Note 2) | 1,645,597 | 1,510,864 |
Dividends Payable (Note 3) | 1,451,635 | 1,369,966 |
Deferred Tax Liability, Net (Note 6) | 3,249,291 | 3,548,035 |
Total Long-Term Liabilities | 6,346,523 | 6,428,865 |
Total Liabilities | 7,428,767 | 7,134,111 |
Commitments and Contingencies (Notes 2 & 7) | ||
Stockholders' Equity (Notes 3 & 4): | ||
Common Stock | 92,368 | 92,368 |
Additional Paid-in Capital | 65,000 | 65,000 |
Retained Earnings | 37,946,212 | 34,363,292 |
Stockholders Equity Before Treasury Stock | 38,103,580 | 34,520,660 |
Less - Treasury Stock, at Cost | 1,361,353 | 1,193,829 |
Total Stockholders' Equity | 36,742,227 | 33,326,831 |
Total Liabilities and Stockholders' Equity | $44,170,994 | $40,460,942 |
STATEMENTS_OF_INCOME
STATEMENTS OF INCOME (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Revenues: | ||
Oil and Gas Sales | $19,074,254 | $18,443,984 |
Lease Bonuses and Other | 2,093,558 | 368,689 |
Operating Revenues | 21,167,812 | 18,812,673 |
Operating Costs and Expenses: | ||
Production | 3,377,812 | 3,009,953 |
Exploration | 1,284,483 | 663,627 |
Depreciation, Depletion, Amortization and Valuation Provisions (Note 10) | 6,134,859 | 5,969,290 |
General, Administrative and Other | 1,664,540 | 1,596,558 |
Total Operating Costs and Expenses | 12,461,694 | 11,239,428 |
Income from Operations | 8,706,118 | 7,573,245 |
Equity Income in Investee (Note 7) | 66,584 | 35,203 |
Other Income, Net (Note 11) | 107,414 | 357,081 |
Income Before Income Taxes | 8,880,116 | 7,965,529 |
Provision for Income Taxes (Notes 2 & 6) | 2,117,241 | 1,897,487 |
Net Income | $6,762,875 | $6,068,042 |
Per Share Data (Note 2): | ||
Net Income, Basic and Diluted | $42.55 | $37.90 |
Cash Dividends | $20 | $10 |
Weighted Average Shares Outstanding, Basic and Diluted | 158,945 | 160,092 |
STATEMENTS_OF_STOCKHOLDERS_EQU
STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Total |
Balance, beginning at Dec. 31, 2012 | $92,368 | $65,000 | $29,898,866 | ($872,502) | $29,183,732 |
Net Income | 6,068,042 | 6,068,042 | |||
Dividends Declared | -1,603,616 | -1,603,616 | |||
Purchase of Treasury Stock | -321,327 | -321,327 | |||
Balance, ending at Dec. 31, 2013 | 92,368 | 65,000 | 34,363,292 | -1,193,829 | 33,326,831 |
Net Income | 6,762,875 | 6,762,875 | |||
Dividends Declared | -3,179,955 | -3,179,955 | |||
Purchase of Treasury Stock | -167,524 | -167,524 | |||
Balance, ending at Dec. 31, 2014 | $92,368 | $65,000 | $37,946,212 | ($1,361,353) | $36,742,227 |
STATEMENTS_OF_CASH_FLOWS
STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash Received - | ||
Oil and Gas Sales | $19,375,879 | $17,728,795 |
Lease Bonuses and Other | 2,093,558 | 372,895 |
Sale of Trading Securities | 1,084,612 | 1,619,062 |
Interest Received | 21,440 | 18,993 |
Agricultural Rentals and Other | 136,778 | 20,686 |
Dividends Received on Trading Securities | 1,340 | 1,648 |
Cash Distributions from Equity Investment | 337,095 | |
Cash Paid - | ||
Production Costs | -3,393,795 | -2,952,670 |
General Suppliers, Employees and Taxes, Other than Income Taxes | -1,672,390 | -1,618,927 |
Interest Paid | -37 | |
Purchase of Trading Securities | -1,085,903 | -1,620,714 |
Income Taxes Paid, Net | -2,306,915 | -1,311,250 |
Farm Expense | -446 | -397 |
Net Cash Provided by Operating Activities | 14,591,253 | 12,258,084 |
Cash Flows Provided by/(Applied to) Investing Activities: | ||
Maturity of Available-for-Sale Securities | 13,308,610 | 13,306,310 |
Purchases of Available-for-Sale Securities | -13,309,089 | -13,307,544 |
Proceeds from Disposal of Property, Plant and Equipment | 131,810 | 131,400 |
Purchase of Property, Plant and Equipment | -6,508,237 | -10,426,615 |
Cash Distributions from Other Investments | 20,100 | 49,500 |
Purchase of Other Investments | -530,625 | |
Net Cash Provided by/(Applied to) Investing Activities | -6,887,431 | -10,246,949 |
Cash Flows Applied to Financing Activities: | ||
Dividends Paid to Stockholders | -3,097,246 | -1,767,613 |
Purchase of Treasury Stock | -167,524 | -321,327 |
Total Cash Applied to Financing Activities | -3,264,770 | -2,088,940 |
Net Change in Cash and Cash Equivalents | 4,439,052 | -77,805 |
Cash and Cash Equivalents at Beginning of Year | 10,764,506 | 10,842,311 |
Cash and Cash Equivalents at End of Year | 15,203,558 | 10,764,506 |
Reconciliation of Net Income to Net Cash Provided by Operating Activities: | ||
Net Income | 6,762,875 | 6,068,042 |
Net Income Increased (Decreased) by Net Change in - | ||
Net Unrealized Holding (Gains)/Losses on Trading Securities | 200,714 | -166,804 |
Accounts Receivable | 302,851 | -709,039 |
Interest and Dividends Receivable | 3,840 | -3,840 |
Refundable Income Taxes | 182,226 | 181,458 |
Accounts Payable | -48,731 | 36,519 |
Trading Securities | -59,482 | -30,568 |
Other Assets | -14,308 | -13,260 |
Deferred Taxes | -371,900 | 404,779 |
Other Liabilities | 43,368 | 21,633 |
Income from Equity and Other Investments | -86,584 | -68,203 |
Cash Distribution from Equity Investment | 337,095 | |
Exploratory Costs | 1,320,999 | 670,416 |
Gain on Disposition of Property, Plant and Equipment | -116,569 | -102,339 |
Depreciation, Depletion, Amortization and Valuation Provisions | 6,134,859 | 5,969,290 |
Net Cash Provided by Operating Activities | $14,591,253 | $12,258,084 |
NATURE_OF_OPERATIONS
NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2014 | |
Nature Of Operations | |
NATURE OF OPERATIONS | Note 1 – NATURE OF OPERATIONS |
The Company is engaged in oil and natural gas exploration and development and minerals management with areas of concentration in Texas, Oklahoma, Kansas, Arkansas and South Dakota, a single business segment. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Summary Of Significant Accounting Policies | |||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||
Cash and Cash Equivalents | |||||||||
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. | |||||||||
Investments | |||||||||
Marketable Securities: | |||||||||
The Company classifies its debt and marketable equity securities in one of two categories: trading or available-for-sale. Trading securities are bought and held principally for the purposes of selling them in the near term. All other securities are classified as available-for-sale. | |||||||||
Trading and available-for-sale securities are recorded at fair value. Unrealized gains and losses on trading securities, which consist primarily of equity securities, are reported in current earnings. | |||||||||
Unrealized gains and losses on available-for-sale securities, which consist entirely of U.S. Government securities, are reported as a component of other comprehensive income when significant to the financial statements. There are no significant cumulative unrealized gains or losses on available-for-sale securities as of December 31, 2014 or 2013. | |||||||||
Equity Investments: | |||||||||
The Company accounts for its non-marketable investment in a partnership on the equity basis. See Note 7 for additional information. | |||||||||
Receivables and Revenue Recognition | |||||||||
Oil and gas sales and resulting receivables are recognized when the product is delivered to the purchaser and title has transferred. Sales are to credit-worthy major energy purchasers with payments generally received within 60 days of transportation from the well site. Historically, the Company has had little, if any, uncollectible receivables; therefore, an allowance for uncollectible accounts has not been provided. | |||||||||
Property and Equipment | |||||||||
Oil and gas properties are accounted for on the successful efforts method. The acquisition, exploration and development costs of producing properties are capitalized. The Company has not historically had any capitalized exploratory drilling costs that are pending determination of reserves for more than one year. All costs relating to unsuccessful exploratory wells, geological and geophysical costs, delay rentals, and abandoned properties are expensed. Lease costs related to unproved properties are amortized over the life of the lease and are assessed for impairment periodically. Any impairment of value is charged to expense. | |||||||||
Depreciation, depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depreciation, depletion and amortization computations prospectively. | |||||||||
Other property and equipment are depreciated on the straight-line, declining-balance, or other accelerated methods as appropriate. | |||||||||
The following estimated useful lives are used for the different types of property: | |||||||||
Office furniture and fixtures | 5 to 10 years | ||||||||
Automotive equipment | 5 to 8 years | ||||||||
Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present. The Company uses its oil and gas reserve reports to test each producing property for impairment annually. See Note 10 for discussion of impairment losses. | |||||||||
Income Taxes | |||||||||
The Company utilizes an asset/liability approach to calculating deferred income taxes. Deferred income taxes are provided to reflect temporary differences in the basis of net assets and liabilities for income tax and financial reporting purposes. Deferred tax assets are reduced by a valuation allowance if a determination is made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. | |||||||||
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The federal income tax returns for 2011, 2012 and 2013 are subject to examination. | |||||||||
Earnings Per Share | |||||||||
Accounting guidance for Earnings Per Share (EPS) establishes the methodology of calculating basic earnings per share and diluted earnings per share. The calculations of basic earnings per share and diluted earnings per share differ in that instruments convertible to common stock (such as stock options, warrants, and convertible preferred stock) are added to weighted average shares outstanding when computing diluted earnings per share. For 2014 and 2013, the Company had no dilutive shares outstanding; therefore, basic and diluted earnings per share are the same. | |||||||||
Concentrations of Credit Risk and Major Customers | |||||||||
The Company’s receivables relate primarily to sales of oil and natural gas to purchasers with operations in Texas, Oklahoma, Kansas, and South Dakota. The Company had two purchasers in 2014 and 2013 whose combined purchases were 35% and 38%, respectively, of total oil and gas sales. | |||||||||
The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts, and believes that it is not exposed to any significant credit risk with respect to cash and cash equivalents. | |||||||||
Use of Estimates | |||||||||
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include oil and natural gas reserve quantities that form the basis for the calculation of amortization of oil and natural gas properties. Management emphasizes that reserve estimates are inherently imprecise and that estimates of more recent reserve discoveries are more imprecise than those for properties with long production histories. Actual results could differ from the estimates and assumptions used in the preparation of the Company’s financial statements. | |||||||||
Gas Balancing | |||||||||
Gas imbalances are accounted for under the sales method whereby revenues are recognized based on production sold. A liability is recorded when the Company’s excess takes of natural gas volumes exceed our estimated remaining recoverable reserves (over produced). No receivables are recorded for those wells where the Company has taken less than our ownership share of gas production (under produced). | |||||||||
Guarantees | |||||||||
At the inception of a guarantee or subsequent modification, the Company records a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company records a liability for its obligations when it becomes probable that the Company will have to perform under the guarantee. The Company has issued a guarantee associated with the Company’s equity investment in Broadway Sixty-Eight, Ltd. | |||||||||
Asset Retirement Obligation | |||||||||
The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sales). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value, which is currently 3.25%. | |||||||||
The following table summarizes the asset retirement obligation for 2014 and 2013: | |||||||||
2014 | 2013 | ||||||||
Beginning balance at January 1 | $ | 1,510,864 | $ | 1,162,078 | |||||
Liabilities incurred | 93,526 | 281,030 | |||||||
Liabilities settled (wells sold or plugged) | (6,251 | ) | (12,285 | ) | |||||
Accretion expense | 44,602 | 34,384 | |||||||
Revision to estimate | 2,856 | 45,657 | |||||||
Ending balance at December 31 | $ | 1,645,597 | $ | 1,510,864 | |||||
New Accounting Pronouncements | |||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP under which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company for interim and annual periods beginning on or after December 15, 2016. The new standard allows application either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the adoption method and the impact ASU 2014-09 will have on the Company, but it is not expected to have a material effect on the Company’s financial position, results of operations or cash flows. | |||||||||
Reclassifications | |||||||||
Certain amounts in the 2013 financial statements have been reclassified to conform to the 2014 presentation. The amounts were not material to the financial statements and had no effect on previously reported net income. |
DIVIDENDS_PAYABLE
DIVIDENDS PAYABLE | 12 Months Ended |
Dec. 31, 2014 | |
Dividends Payable | |
DIVIDENDS PAYABLE | Note 3 – DIVIDENDS PAYABLE |
Dividends payable includes amounts that are due to stockholders whom the Company has been unable to locate, stockholders’ heirs pending ownership transfer documents, or uncashed dividend checks of other stockholders. |
COMMON_STOCK
COMMON STOCK | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
CommonStockAbstract | |||||||||||||
COMMON STOCK | Note 4 – COMMON STOCK | ||||||||||||
The following table summarizes the changes in common stock issued and outstanding: | |||||||||||||
Shares of | |||||||||||||
Shares | Treasury | Shares | |||||||||||
Issued | Stock | Outstanding | |||||||||||
January 1, 2013, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 23,947 | 160,788 | ||||||||||
Purchase of stock | — | 1,416 | (1,416 | ) | |||||||||
December 31, 2013, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 25,363 | 159,372 | ||||||||||
Purchase of stock | — | 700 | (700 | ) | |||||||||
December 31, 2014, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 26,063 | 158,672 |
MARKETABLE_SECURITIES
MARKETABLE SECURITIES | 12 Months Ended |
Dec. 31, 2014 | |
Marketable Securities [Abstract] | |
MARKETABLE SECURITIES | Note 5 – MARKETABLE SECURITIES |
At December 31, 2014, available-for-sale securities, consisting entirely of U.S. government securities, are due within one year or less by contractual maturity. | |
For trading securities, in 2014 the Company recorded realized gains of $58,192 and unrealized losses of $200,714. In 2013 the Company recorded realized gains of $28,917 and unrealized gains of $166,804. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes | |||||||||
INCOME TAXES | Note 6 – INCOME TAXES | ||||||||
Components of deferred taxes are as follows: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Assets: | |||||||||
Net Leasehold Impairment Reserves | $ | 256,389 | $ | 253,939 | |||||
Gas Balance Receivable | 52,379 | 52,379 | |||||||
Long-Lived Asset Impairment | 1,794,264 | 1,524,237 | |||||||
Deferred Geological and Geophysical Expense | 214,305 | 118,443 | |||||||
Other | 303,786 | 192,180 | |||||||
Total Assets | 2,621,123 | 2,141,178 | |||||||
Liabilities: | |||||||||
Receivables | 271,359 | 276,273 | |||||||
Intangible Drilling Costs | 4,600,543 | 4,484,726 | |||||||
Depletion, Depreciation and Other | 1,235,023 | 1,237,881 | |||||||
Total Liabilities | 6,106,925 | 5,998,880 | |||||||
Net Deferred Tax Liability | $ | (3,485,802 | ) | $ | (3,857,702 | ) | |||
The decrease in the deferred tax liability for 2014 reflected in the above table is primarily the result of the Company’s increased current year long-lived asset impairment and geological and geophysical expenses, which are not currently deductible tax expenses. | |||||||||
The following table summarizes the current and deferred portions of income tax expense: | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current Tax Provision: | |||||||||
Federal | $ | 2,415,281 | $ | 1,450,082 | |||||
State | 73,860 | 42,626 | |||||||
2,489,141 | 1,492,708 | ||||||||
Deferred Tax Provision/(Benefit) | (371,900 | ) | 404,779 | ||||||
Total Provision | $ | 2,117,241 | $ | 1,897,487 | |||||
The total provision for income tax expressed as a percentage of income before income tax was 24% for both 2014 and 2013. These amounts differ from the amounts computed by applying the statutory U.S. federal income tax rate of 34% for 2014 and 2013 to income before income tax as summarized in the following reconciliation: | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Computed Federal Tax Provision | $ | 3,019,239 | $ | 2,708,280 | |||||
Increase (Decrease) in Tax From: | |||||||||
Allowable Depletion in Excess of Basis | (890,095 | ) | (811,242 | ) | |||||
Dividend Received Deduction | (319 | ) | (392 | ) | |||||
State Income Tax Provision | 73,860 | 42,626 | |||||||
Other | (85,444 | ) | (41,785 | ) | |||||
Provision for Income Tax | $ | 2,117,241 | $ | 1,897,487 | |||||
Effective Tax Rate | 24 | % | 24 | % |
EQUITY_INVESTMENTS_AND_RELATED
EQUITY INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES | 12 Months Ended |
Dec. 31, 2014 | |
Equity Investments And Related Commitments And Contingent Liabilities Including Guarantees | |
EQUITY INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES | Note 7 – EQUITY INVESTMENT AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES INCLUDING GUARANTEES |
The Company’s Equity Investment consists of 33% ownership in Broadway Sixty-Eight, Ltd. (the “Partnership”), an Oklahoma limited partnership that owns and operates an office building in Oklahoma City, Oklahoma. Although the Company invested as a limited partner, it agreed, jointly and severally, with all other limited partners to indemnify the general partner for any losses suffered from operating the Partnership. The indemnity agreement provides no limitation to the maximum potential future reimbursements. To date, no payments have been made with respect to this agreement. | |
The Company leases its corporate office from the Partnership. The operating lease, under which the space was rented, expired February 28, 1994, and the space is currently rented on a year-to-year basis under the terms of the expired lease. Rent expense for lease of the corporate office from the Partnership was approximately $29,700 for 2014 and 2013. |
COSTS_INCURRED_IN_OIL_AND_GAS_
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Costs Incurred In Oil And Gas Property Acquisition Exploration And Development Activities | |||||||||
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | Note 8 – COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES | ||||||||
All of the Company’s oil and gas operations are within the continental United States. In connection with its oil and gas operations, the following costs were incurred: | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Acquisition of Properties: | |||||||||
Unproved | $ | 367,172 | $ | 818,290 | |||||
Proved | 138,601 | 1,917,376 | |||||||
Exploration Costs | 2,004,935 | 3,587,244 | |||||||
Development Costs | 4,345,160 | 3,898,134 | |||||||
Asset Retirement Obligation | 96,382 | 326,687 |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Fair Value Measurements | |||||||||||||
FAIR VALUE MEASUREMENTS | Note 9 – FAIR VALUE MEASUREMENTS | ||||||||||||
Inputs used to measure fair value are organized into a fair value hierarchy based on how observable the inputs are. Level 1 inputs consist of quoted prices in active markets for identical assets. Level 2 inputs are inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs. During 2014 and 2013 there were no transfers into or out of Level 2 or Level 3. | |||||||||||||
Recurring Fair Value Measurements | |||||||||||||
Certain of the Company’s assets are reported at fair value in the accompanying balance sheets on a recurring basis. The Company determined the fair value of the available-for-sale securities using quoted market prices for securities with similar maturity dates and interest rates. At December 31, 2014 and 2013, the Company’s assets reported at fair value on a recurring basis are summarized as follows: | |||||||||||||
2014 | |||||||||||||
Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | |||||||||||
Financial Assets: | |||||||||||||
Available-for-Sale Securities – | |||||||||||||
U.S. Treasury Bills Maturing in 2015 | $ | — | $ | 6,654,303 | $ | — | |||||||
Trading Securities – | |||||||||||||
Domestic Equities | 183,168 | — | — | ||||||||||
International Equities | 124,998 | — | — | ||||||||||
Others | 137,310 | — | — | ||||||||||
2013 | |||||||||||||
Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | |||||||||||
Financial Assets: | |||||||||||||
Available-for-Sale Securities – | |||||||||||||
U.S. Treasury Bills Maturing in 2014 | $ | — | $ | 6,653,823 | $ | — | |||||||
Trading Securities – | |||||||||||||
Domestic Equities | 389,766 | — | — | ||||||||||
International Equities | 179,509 | — | — | ||||||||||
Others | 17,433 | — | — | ||||||||||
Non-recurring Fair Value Measurements | |||||||||||||
The Company’s asset retirement obligation incurred annually represents non-recurring fair value liabilities. The fair value of the non-financial liabilities incurred was $93,526 in 2014 and $281,030 in 2013 and was calculated using Level 3 inputs. See Note 2 for more information about this liability and the inputs used for calculating fair value. | |||||||||||||
The impairment losses of $1,928,548 for 2014 and $1,644,142 for 2013 also represent non-recurring fair value expenses calculated using Level 3 inputs. See Note 10 for the procedure used for calculating these expenses. | |||||||||||||
Fair Value of Financial Instruments | |||||||||||||
The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, marketable securities, trade payables, and dividends payable. As of December 31, 2014 and 2013, the historical cost of cash and cash equivalents, trade receivables, trade payables, and dividends payable are considered to be representative of their respective fair values due to the short-term maturities of these items. |
LONG_LIVED_ASSETS_IMPAIRMENT_L
LONG LIVED ASSETS IMPAIRMENT LOSS | 12 Months Ended |
Dec. 31, 2014 | |
Long Lived Assets Impairment Loss | |
LONG LIVED ASSETS IMPAIRMENT LOSS | Note 10 – LONG-LIVED ASSETS IMPAIRMENT LOSS |
Certain oil and gas producing properties have been deemed to be impaired because the assets, evaluated on a property-by-property basis, are not expected to recover their entire carrying value through future cash flows. Impairment losses totaling $1,928,548 for 2014 and $1,644,142 for 2013 are included in the Statements of Income in the line item Depreciation, Depletion, Amortization and Valuation Provisions. The impairments for 2014 and 2013 were calculated by reducing the carrying value of the individual properties to an estimated fair value equal to the discounted present value of the future cash flow from these properties. Forward pricing was used for calculating future revenue and cash flow. |
OTHER_INCOME_NET
OTHER INCOME, NET | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Other Income Net | |||||||||
OTHER INCOME, NET | Note 11 – OTHER INCOME, NET | ||||||||
The following is an analysis of the components of Other Income, Net: | |||||||||
2014 | 2013 | ||||||||
Net Realized and Unrealized Gain (Loss) on | |||||||||
Trading Securities | $ | (142,522 | ) | $ | 195,721 | ||||
Gains on Asset Sales | 119,689 | 118,011 | |||||||
Interest Income | 17,177 | 22,833 | |||||||
Settlements of Class Action Lawsuits | 131,178 | 15,085 | |||||||
Agricultural Rental Income | 5,600 | 5,600 | |||||||
Dividend Income | 1,340 | 1,648 | |||||||
Income from Other Investments | 20,000 | 33,000 | |||||||
Interest and Other Expenses | (45,048 | ) | (34,817 | ) | |||||
Other Income, Net | $ | 107,414 | $ | 357,081 |
CERTAIN_RELATIONSHIPS_AND_RELA
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 12 Months Ended |
Dec. 31, 2014 | |
Certain Relationships And Related Transactions | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | Note 12 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
The Company is affiliated by common management and ownership with Mesquite Minerals, Inc. (Mesquite), Mid-American Oil Company (Mid-American) and Lochbuie Limited Liability Company (LLTD). The Company also owns interests in certain producing and non-producing oil and gas properties as tenants in common with Mesquite, Mid-American and LLTD. | |
Mesquite, Mid-American and LLTD share facilities and employees including executive officers with the Company. The Company has been reimbursed for services, facilities, and miscellaneous business expenses incurred in 2014 in the amount of $191,672 each by Mesquite, Mid-American and LLTD. Reimbursements in 2013 were $177,782 each by Mesquite, Mid-American and LLTD. Included in the 2014 amounts, Mesquite, Mid-American and LLTD each paid $131,855 for their share of salaries. In 2013, the share of salaries paid by Mesquite, Mid-American and LLTD was $126,884 each. |
SUPPEMENTAL_OIL_AND_GAS_INFORM
SUPPEMENTAL OIL AND GAS INFORMATION (Unaudited) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Extractive Industries [Abstract] | |||||||||
SUPPEMENTAL OIL AND GAS INFORMATION (Unaudited) | SUPPLEMENTAL SCHEDULE 1 | ||||||||
THE RESERVE PETROLEUM COMPANY | |||||||||
WORKING INTEREST RESERVE QUANTITY INFORMATION | |||||||||
(Unaudited) | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Oil and Condensate (Bbls) | |||||||||
Proved Developed and Undeveloped Reserves: | |||||||||
Beginning of Year | 527,359 | 454,951 | |||||||
Revisions of Previous Estimates | 7,908 | 6,602 | |||||||
Extensions and Discoveries | 98,035 | 127,505 | |||||||
Purchase of Reserves | — | 48,497 | |||||||
Production | (109,431 | ) | (110,196 | ) | |||||
End of Year | 523,871 | 527,359 | |||||||
Proved Developed Reserves: | |||||||||
Beginning of Year | 484,633 | 454,951 | |||||||
End of Year | 482,717 | 484,633 | |||||||
Gas (MCF) | |||||||||
Proved Developed and Undeveloped Reserves: | |||||||||
Beginning of Year | 4,121,358 | 3,634,480 | |||||||
Revisions of Previous Estimates | 339,675 | 99,133 | |||||||
Extensions and Discoveries | 1,034,589 | 716,497 | |||||||
Purchase of Reserves | — | 589,003 | |||||||
Production | (1,018,595 | ) | (917,755 | ) | |||||
End of Year | 4,477,027 | 4,121,358 | |||||||
Proved Developed Reserves: | |||||||||
Beginning of Year | 3,822,278 | 3,634,480 | |||||||
End of Year | 4,188,946 | 3,822,278 | |||||||
Notes: | |||||||||
1 | Estimates of royalty interests’ reserves, on properties in which the Company does not own a working interest, have not been included because the information required for the estimation of such reserves is not available. The Company’s share of production from its net royalty interests was 28,155 Bbls of oil and 451,969 MCF of gas for 2014 and 32,189 Bbls of oil and 541,866 MCF of gas for 2013 | ||||||||
2 | The preceding table sets forth estimates of the Company’s proved oil and gas reserves, together with the changes in those reserves, as prepared by the Company’s engineer for 2014 and 2013. The Company engineer’s qualifications set forth in the Proxy Statement and as incorporated into Item 10 of this Form 10-K, are incorporated herein by reference. All reserves are located within the United States. | ||||||||
3 | The Company emphasizes that the reserve volumes shown are estimates, which by their nature are subject to revision in the near term. The estimates have been made by utilizing geological and reservoir data, as well as actual production performance data available to the Company. These estimates are reviewed annually and are revised upward or downward as warranted by additional performance data. The Company’s engineer is not independent, but strives to use an objective approach in calculating the Company’s working interest reserve estimates. | ||||||||
4 | The Company’s internal controls relating to the calculation of its working interests’ reserve estimates include review and testing of the accounting data flowing into the calculation of the reserve estimates. In addition, the average oil and natural gas product prices calculated in the engineer’s 2014 summary reserve report was tested by comparison to 2014 average sales price information from the accounting records. | ||||||||
SUPPLEMENTAL SCHEDULE 2 | |||||||||
THE RESERVE PETROLEUM COMPANY | |||||||||
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS | |||||||||
RELATING TO PROVED WORKING INTEREST | |||||||||
OIL AND GAS RESERVES | |||||||||
(Unaudited) | |||||||||
At December 31, | |||||||||
2014 | 2013 | ||||||||
Future Cash Inflows | $ | 63,737,733 | $ | 61,732,164 | |||||
Future Production and Development Costs | (22,271,008 | ) | (20,525,589 | ) | |||||
Future Asset Retirement Obligation | (2,100,960 | ) | (1,937,212 | ) | |||||
Future Income Tax Expense | (8,055,783 | ) | (8,041,742 | ) | |||||
Future Net Cash Flows | 31,309,982 | 31,227,621 | |||||||
10% Annual Discount for Estimated Timing of Cash Flows | (9,616,959 | ) | (9,505,407 | ) | |||||
Standardized Measure of Discounted Future Net Cash Flows | $ | 21,693,023 | $ | 21,722,214 | |||||
Estimates of future net cash flows from the Company’s proved working interests in oil and gas reserves are shown in the table above. These estimates, which by their nature are subject to revision in the near term, were based on an average monthly product price received by the Company for 2013 and 2014, with no escalation. The development and production costs are based on year-end cost levels, assuming the continuation of existing economic conditions. Cash flows are further reduced by estimated future asset retirement obligations and estimated future income tax expense calculated by applying the current statutory income tax rates to the pretax net cash flows, less depreciation of the tax basis of the properties and depletion applicable to oil and gas production. | |||||||||
SUPPLEMENTAL SCHEDULE 3 | |||||||||
THE RESERVE PETROLEUM COMPANY | |||||||||
CHANGES IN STANDARDIZED MEASURE OF | |||||||||
DISCOUNTED FUTURE NET CASH FLOWS FROM | |||||||||
PROVED WORKING INTEREST RESERVE QUANTITIES | |||||||||
(Unaudited) | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Standardized Measure, Beginning of Year | $ | 21,722,214 | $ | 17,018,429 | |||||
Sales and Transfers, Net of Production Costs | (11,225,797 | ) | (10,549,949 | ) | |||||
Net Change in Sales and Transfer Prices, Net of Production Costs | (1,082,219 | ) | 1,841,016 | ||||||
Extensions, Discoveries and Improved Recoveries, | |||||||||
Net of Future Production and Development Costs | 8,713,240 | 9,793,021 | |||||||
Revisions of Quantity Estimates | 1,468,704 | 601,915 | |||||||
Accretion of Discount | 2,914,007 | 2,308,396 | |||||||
Purchases of Reserves in Place | — | 1,969,430 | |||||||
Net Change in Income Taxes | 16,002 | (935,750 | ) | ||||||
Net Change in Asset Retirement Obligation | (90,131 | ) | (314,402 | ) | |||||
Changes in Production Rates (Timing) and Other | (742,997 | ) | (9,892 | ) | |||||
Standardized Measure, End of Year | $ | 21,693,023 | $ | 21,722,214 | |||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents | ||||||||
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. | |||||||||
Investments | Investments | ||||||||
Marketable Securities: | |||||||||
The Company classifies its debt and marketable equity securities in one of two categories: trading or available-for-sale. Trading securities are bought and held principally for the purposes of selling them in the near term. All other securities are classified as available-for-sale. | |||||||||
Trading and available-for-sale securities are recorded at fair value. Unrealized gains and losses on trading securities, which consist primarily of equity securities, are reported in current earnings. | |||||||||
Unrealized gains and losses on available-for-sale securities, which consist entirely of U.S. Government securities, are reported as a component of other comprehensive income when significant to the financial statements. There are no significant cumulative unrealized gains or losses on available-for-sale securities as of December 31, 2014 or 2013. | |||||||||
Equity Investments: | |||||||||
The Company accounts for its non-marketable investment in a partnership on the equity basis. See Note 7 for additional information. | |||||||||
Receivables and Revenue Recognition | Receivables and Revenue Recognition | ||||||||
Oil and gas sales and resulting receivables are recognized when the product is delivered to the purchaser and title has transferred. Sales are to credit-worthy major energy purchasers with payments generally received within 60 days of transportation from the well site. Historically, the Company has had little, if any, uncollectible receivables; therefore, an allowance for uncollectible accounts has not been provided. | |||||||||
Property and Equipment | Property and Equipment | ||||||||
Oil and gas properties are accounted for on the successful efforts method. The acquisition, exploration and development costs of producing properties are capitalized. The Company has not historically had any capitalized exploratory drilling costs that are pending determination of reserves for more than one year. All costs relating to unsuccessful exploratory wells, geological and geophysical costs, delay rentals, and abandoned properties are expensed. Lease costs related to unproved properties are amortized over the life of the lease and are assessed for impairment periodically. Any impairment of value is charged to expense. | |||||||||
Depreciation, depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depreciation, depletion and amortization computations prospectively. | |||||||||
Other property and equipment are depreciated on the straight-line, declining-balance, or other accelerated methods as appropriate. | |||||||||
The following estimated useful lives are used for the different types of property: | |||||||||
Office furniture and fixtures | 5 to 10 years | ||||||||
Automotive equipment | 5 to 8 years | ||||||||
Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present. The Company uses its oil and gas reserve reports to test each producing property for impairment annually. See Note 10 for discussion of impairment losses. | |||||||||
Income Taxes | Income Taxes | ||||||||
The Company utilizes an asset/liability approach to calculating deferred income taxes. Deferred income taxes are provided to reflect temporary differences in the basis of net assets and liabilities for income tax and financial reporting purposes. Deferred tax assets are reduced by a valuation allowance if a determination is made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. | |||||||||
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The federal income tax returns for 2011, 2012 and 2013 are subject to examination. | |||||||||
Earnings Per Share | Earnings Per Share | ||||||||
Accounting guidance for Earnings Per Share (EPS) establishes the methodology of calculating basic earnings per share and diluted earnings per share. The calculations of basic earnings per share and diluted earnings per share differ in that instruments convertible to common stock (such as stock options, warrants, and convertible preferred stock) are added to weighted average shares outstanding when computing diluted earnings per share. For 2014 and 2013, the Company had no dilutive shares outstanding; therefore, basic and diluted earnings per share are the same. | |||||||||
Concentrations of Credit Risk and Major Customers | Concentrations of Credit Risk and Major Customers | ||||||||
The Company’s receivables relate primarily to sales of oil and natural gas to purchasers with operations in Texas, Oklahoma, Kansas, and South Dakota. The Company had two purchasers in 2014 and 2013 whose combined purchases were 35% and 38%, respectively, of total oil and gas sales. | |||||||||
The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts, and believes that it is not exposed to any significant credit risk with respect to cash and cash equivalents. | |||||||||
Use of Estimates | Use of Estimates | ||||||||
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include oil and natural gas reserve quantities that form the basis for the calculation of amortization of oil and natural gas properties. Management emphasizes that reserve estimates are inherently imprecise and that estimates of more recent reserve discoveries are more imprecise than those for properties with long production histories. Actual results could differ from the estimates and assumptions used in the preparation of the Company’s financial statements. | |||||||||
Gas Balancing | Gas Balancing | ||||||||
Gas imbalances are accounted for under the sales method whereby revenues are recognized based on production sold. A liability is recorded when the Company’s excess takes of natural gas volumes exceed our estimated remaining recoverable reserves (over produced). No receivables are recorded for those wells where the Company has taken less than our ownership share of gas production (under produced). | |||||||||
Guarantees | Guarantees | ||||||||
At the inception of a guarantee or subsequent modification, the Company records a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company records a liability for its obligations when it becomes probable that the Company will have to perform under the guarantee. The Company has issued a guarantee associated with the Company’s equity investment in Broadway Sixty-Eight, Ltd. | |||||||||
Asset Retirement Obligation | Asset Retirement Obligation | ||||||||
The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sales). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value, which is currently 3.25%. | |||||||||
The following table summarizes the asset retirement obligation for 2014 and 2013: | |||||||||
2014 | 2013 | ||||||||
Beginning balance at January 1 | $ | 1,510,864 | $ | 1,162,078 | |||||
Liabilities incurred | 93,526 | 281,030 | |||||||
Liabilities settled (wells sold or plugged) | (6,251 | ) | (12,285 | ) | |||||
Accretion expense | 44,602 | 34,384 | |||||||
Revision to estimate | 2,856 | 45,657 | |||||||
Ending balance at December 31 | $ | 1,645,597 | $ | 1,510,864 | |||||
New Accounting Pronouncements | New Accounting Pronouncements | ||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP under which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company for interim and annual periods beginning on or after December 15, 2016. The new standard allows application either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the adoption method and the impact ASU 2014-09 will have on the Company, but it is not expected to have a material effect on the Company’s financial position, results of operations or cash flows. | |||||||||
Reclassifications | Reclassifications | ||||||||
Certain amounts in the 2013 financial statements have been reclassified to conform to the 2014 presentation. The amounts were not material to the financial statements and had no effect on previously reported net income. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Schedule of useful lives of property and equipment | The following estimated useful lives are used for the different types of property: | ||||||||
Office furniture and fixtures | 5 to 10 years | ||||||||
Automotive equipment | 5 to 8 years | ||||||||
Schedule of asset retirement obligation | The following table summarizes the asset retirement obligation for 2014 and 2013: | ||||||||
2014 | 2013 | ||||||||
Beginning balance at January 1 | $ | 1,510,864 | $ | 1,162,078 | |||||
Liabilities incurred | 93,526 | 281,030 | |||||||
Liabilities settled (wells sold or plugged) | -6,251 | -12,285 | |||||||
Accretion expense | 44,602 | 34,384 | |||||||
Revision to estimate | 2,856 | 45,657 | |||||||
Ending balance at December 31 | $ | 1,645,597 | $ | 1,510,864 |
COMMON_STOCK_Tables
COMMON STOCK (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Notes to Financial Statements | |||||||||||||
Schedule of common stock issued and outstanding | The following table summarizes the changes in common stock issued and outstanding: | ||||||||||||
Shares of | |||||||||||||
Shares | Treasury | Shares | |||||||||||
Issued | Stock | Outstanding | |||||||||||
January 1, 2013, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 23,947 | 160,788 | ||||||||||
Purchase of stock | — | 1,416 | (1,416 | ) | |||||||||
December 31, 2013, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 25,363 | 159,372 | ||||||||||
Purchase of stock | — | 700 | (700 | ) | |||||||||
December 31, 2014, $.50 par value stock, | |||||||||||||
200,000 shares authorized | 184,735 | 26,063 | 158,672 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Schedule of components of deferred taxes | Components of deferred taxes are as follows: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Assets: | |||||||||
Net Leasehold Impairment Reserves | $ | 256,389 | $ | 253,939 | |||||
Gas Balance Receivable | 52,379 | 52,379 | |||||||
Long-Lived Asset Impairment | 1,794,264 | 1,524,237 | |||||||
Deferred Geological and Geophysical Expense | 214,305 | 118,443 | |||||||
Other | 303,786 | 192,180 | |||||||
Total Assets | 2,621,123 | 2,141,178 | |||||||
Liabilities: | |||||||||
Receivables | 271,359 | 276,273 | |||||||
Intangible Drilling Costs | 4,600,543 | 4,484,726 | |||||||
Depletion, Depreciation and Other | 1,235,023 | 1,237,881 | |||||||
Total Liabilities | 6,106,925 | 5,998,880 | |||||||
Net Deferred Tax Liability | $ | (3,485,8020 | $ | (3,857,7020 | |||||
Schedule of components of income tax expense | The following table summarizes the current and deferred portions of income tax expense: | ||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current Tax Provision: | |||||||||
Federal | $ | 2,415,281 | $ | 1,450,082 | |||||
State | 73,860 | 42,626 | |||||||
2,489,141 | 1,492,708 | ||||||||
Deferred Tax Provision/(Benefit) | -371,900 | 404,779 | |||||||
Total Provision | $ | 2,117,241 | $ | 1,897,487 | |||||
Schedule of income tax reconciliation | The total provision for income tax expressed as a percentage of income before income tax was 24% for both 2014 and 2013. These amounts differ from the amounts computed by applying the statutory U.S. federal income tax rate of 34% for 2014 and 2013 to income before income tax as summarized in the following reconciliation: | ||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Computed Federal Tax Provision | $ | 3,019,239 | $ | 2,708,280 | |||||
Increase (Decrease) in Tax From: | |||||||||
Allowable Depletion in Excess of Basis | -890,095 | -811,242 | |||||||
Dividend Received Deduction | -319 | -392 | |||||||
State Income Tax Provision | 73,860 | 42,626 | |||||||
Other | -85,444 | -41,785 | |||||||
Provision for Income Tax | $ | 2,117,241 | $ | 1,897,487 | |||||
Effective Tax Rate | 24% | 24% |
COSTS_INCURRED_IN_OIL_AND_GAS_1
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Schedule of Oil and Gas Operations | All of the Company’s oil and gas operations are within the continental United States. In connection with its oil and gas operations, the following costs were incurred: | ||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Acquisition of Properties: | |||||||||
Unproved | $ | 367,172 | $ | 818,290 | |||||
Proved | 138,601 | 1,917,376 | |||||||
Exploration Costs | 2,004,935 | 3,587,244 | |||||||
Development Costs | 4,345,160 | 3,898,134 | |||||||
Asset Retirement Obligation | 96,382 | 326,687 |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Fair Value Measurements Tables | |||||||||||||
Schedule of fair value reported on a recurring basis | Certain of the Company’s assets are reported at fair value in the accompanying balance sheets on a recurring basis. The Company determined the fair value of the available-for-sale securities using quoted market prices for securities with similar maturity dates and interest rates. At December 31, 2014 and 2013, the Company’s assets reported at fair value on a recurring basis are summarized as follows: | ||||||||||||
2014 | |||||||||||||
Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | |||||||||||
Financial Assets: | |||||||||||||
Available-for-Sale Securities – | |||||||||||||
U.S. Treasury Bills Maturing in 2015 | $ | — | $ | 6,654,303 | $ | — | |||||||
Trading Securities – | |||||||||||||
Domestic Equities | 183,168 | — | — | ||||||||||
International Equities | 124,998 | — | — | ||||||||||
Others | 137,310 | — | — | ||||||||||
2013 | |||||||||||||
Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | |||||||||||
Financial Assets: | |||||||||||||
Available-for-Sale Securities – | |||||||||||||
U.S. Treasury Bills Maturing in 2014 | $ | — | $ | 6,653,823 | $ | — | |||||||
Trading Securities – | |||||||||||||
Domestic Equities | 389,766 | — | — | ||||||||||
International Equities | 179,509 | — | — | ||||||||||
Others | 17,433 | — | — |
OTHER_INCOME_NET_Tables
OTHER INCOME, NET (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Other Income Net Tables | |||||||||
Schedule of components of other income, net | The following is an analysis of the components of Other Income, Net: | ||||||||
2014 | 2013 | ||||||||
Net Realized and Unrealized Gain (Loss) on | |||||||||
Trading Securities | $ | -142,522 | $ | 195,721 | |||||
Gains on Asset Sales | 119,689 | 118,011 | |||||||
Interest Income | 17,177 | 22,833 | |||||||
Settlements of Class Action Lawsuits | 131,178 | 15,085 | |||||||
Agricultural Rental Income | 5,600 | 5,600 | |||||||
Dividend Income | 1,340 | 1,648 | |||||||
Income from Other Investments | 20,000 | 33,000 | |||||||
Interest and Other Expenses | -45,048 | -34,817 | |||||||
Other Income, Net | $ | 107,414 | $ | 357,081 |
SUPPLEMENTAL_OIL_AND_GAS_INFOR
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Extractive Industries [Abstract] | |||||||||
Schedule of proved developed and undeveloped reserves | WORKING INTEREST RESERVE QUANTITY INFORMATION | ||||||||
(Unaudited) | |||||||||
Year Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Oil and Condensate (Bbls) | |||||||||
Proved Developed and Undeveloped Reserves: | |||||||||
Beginning of Year | 527,359 | 454,951 | |||||||
Revisions of Previous Estimates | 7,908 | 6,602 | |||||||
Extensions and Discoveries | 98,035 | 127,505 | |||||||
Purchase of Reserves | — | 48,497 | |||||||
Production | (109,431 | ) | (110,196 | ) | |||||
End of Year | 523,871 | 527,359 | |||||||
Proved Developed Reserves: | |||||||||
Beginning of Year | 484,633 | 454,951 | |||||||
End of Year | 482,717 | 484,633 | |||||||
Gas (MCF) | |||||||||
Proved Developed and Undeveloped Reserves: | |||||||||
Beginning of Year | 4,121,358 | 3,634,480 | |||||||
Revisions of Previous Estimates | 339,675 | 99,133 | |||||||
Extensions and Discoveries | 1,034,589 | 716,497 | |||||||
Purchase of Reserves | — | 589,003 | |||||||
Production | (1,018,595 | ) | (917,755 | ) | |||||
End of Year | 4,477,027 | 4,121,358 | |||||||
Proved Developed Reserves: | |||||||||
Beginning of Year | 3,822,278 | 3,634,480 | |||||||
End of Year | 4,188,946 | 3,822,278 | |||||||
Schedule of standardized measure of discounted future net cash flow | At December 31, | ||||||||
2014 | 2013 | ||||||||
Future Cash Inflows | $ | 63,737,733 | $ | 61,732,164 | |||||
Future Production and Development Costs | (22,271,008 | ) | (20,525,589 | ) | |||||
Future Asset Retirement Obligation | (2,100,960 | ) | (1,937,212 | ) | |||||
Future Income Tax Expense | (8,055,783 | ) | (8,041,742 | ) | |||||
Future Net Cash Flows | 31,309,982 | 31,227,621 | |||||||
10% Annual Discount for Estimated Timing of Cash Flows | (9,616,959 | ) | (9,505,407 | ) | |||||
Standardized Measure of Discounted Future Net Cash Flows | $ | 21,693,023 | $ | 21,722,214 | |||||
Schedule of changes in the standardized measure of discounted future net cash flow | Year Ended December 31, | ||||||||
2014 | 2013 | ||||||||
Standardized Measure, Beginning of Year | $ | 21,722,214 | $ | 17,018,429 | |||||
Sales and Transfers, Net of Production Costs | (11,225,797 | ) | (10,549,949 | ) | |||||
Net Change in Sales and Transfer Prices, Net of Production Costs | (1,082,219 | ) | 1,841,016 | ||||||
Extensions, Discoveries and Improved Recoveries, | |||||||||
Net of Future Production and Development Costs | 8,713,240 | 9,793,021 | |||||||
Revisions of Quantity Estimates | 1,468,704 | 601,915 | |||||||
Accretion of Discount | 2,914,007 | 2,308,396 | |||||||
Purchases of Reserves in Place | — | 1,969,430 | |||||||
Net Change in Income Taxes | 16,002 | (935,750 | ) | ||||||
Net Change in Asset Retirement Obligation | (90,131 | ) | (314,402 | ) | |||||
Changes in Production Rates (Timing) and Other | (742,997 | ) | (9,892 | ) | |||||
Standardized Measure, End of Year | $ | 21,693,023 | $ | 21,722,214 | |||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Current year inflation rate | 4.08% | |
Change in present value, percent | 3.25% | |
Customer Concentration Risk [Member] | Sales [Member] | ||
Concentration risk, number of purchasers | Two | Two |
Concentration Risk Percentage | 35.00% | 38.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Office furniture and fixtures [Member] | Upper Range [Member] | |
Useful lives of property | 10 years |
Office furniture and fixtures [Member] | Lower Range [Member] | |
Useful lives of property | 5 years |
Automobile equipment [Member] | Upper Range [Member] | |
Useful lives of property | 8 years |
Automobile equipment [Member] | Lower Range [Member] | |
Useful lives of property | 5 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary Of Significant Accounting Policies Details 1 | ||
Asset retirement obligation liability, beginning Balance | $1,510,864 | $1,162,078 |
Liabilities incurred | 93,526 | 281,030 |
Liabilities settled (wells sold or plugged) | -6,251 | -12,285 |
Accretion expense | 44,602 | 34,384 |
Revision to estimate | 2,856 | 45,657 |
Asset retirement obligation at end of year | $1,645,597 | $1,510,864 |
COMMON_STOCK_Details_Narrative
COMMON STOCK (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Common Stock Details Narrative | |||
Common stock authorized | 200,000 | 200,000 | 200,000 |
Common stock, par value | $0.50 | $0.50 | $0.50 |
COMMON_STOCK_Details
COMMON STOCK (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Common Stock Details | ||
Shares issued, beginning | 184,735 | 184,735 |
Shares of treasury stock, beginning | 25,363 | 23,947 |
Shares outstanding, beginning | 159,372 | 160,788 |
Treasury shares purchased | 700 | 1,416 |
Shares issued, ending | 184,735 | 184,735 |
Shares of treasury stock, ending | 26,063 | 25,363 |
Shares outstanding, ending | 158,672 | 159,372 |
MARKETABLE_SECURITIES_Details_
MARKETABLE SECURITIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Marketable Securities Details Narrative | ||
Realized gains on trading securities | $58,192 | $28,917 |
Unrealized gains (losses) on trading securities | $200,714 | $166,804 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details Narrative | ||
Effective tax rate | 24.00% | 24.00% |
U.S. Federal income tax rate | 34.00% | 34.00% |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets: | ||
Net Leasehold Impairment Reserves | $256,389 | $253,939 |
Gas Balance Receivable | 52,379 | 52,379 |
Long-Lived Asset Impairment | 1,794,264 | 1,524,237 |
Deferred Geological and Geophysical Expense | 214,305 | 118,443 |
Other | 303,786 | 192,180 |
Total Assets | 2,621,123 | 2,141,178 |
Liabilities | ||
Receivables | 271,359 | 276,273 |
Intangible Drilling Costs | 4,600,543 | 4,484,726 |
Depletion, Depreciation and Other | 1,235,023 | 1,237,881 |
Total Liabilities | 6,106,925 | 5,998,880 |
Net Deferred Tax Liability | ($3,485,802) | ($3,857,702) |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Current Tax Provision: | ||
Federal | $2,415,281 | $1,450,082 |
State | 73,860 | 42,626 |
Current Income Tax Expense Benefit | 2,489,141 | 1,492,708 |
Deferred Tax Provision/(Benefit) | -371,900 | 404,779 |
Provision for Income Taxes (Notes 2 & 6) | $2,117,241 | $1,897,487 |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Effective income tax reconciliation: | ||
Computed Federal Tax Provision | $3,019,239 | $2,708,280 |
Increase (Decrease) in Tax From: | ||
Allowable Depletion in Excess of Basis | -890,095 | -811,242 |
Dividend Received Deduction | -319 | -392 |
State Income Tax Provision | 73,860 | 42,626 |
Other | -85,444 | -41,785 |
Provision for Income Taxes (Notes 2 & 6) | $2,117,241 | $1,897,487 |
Effective Tax Rate | 24.00% | 24.00% |
EQUITY_INVESTMENTS_AND_RELATED1
EQUITY INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Equity Investments And Related Commitments And Contingent Liabilities Including Guarantees Details Narrative | |
Ownership in Broadway Sixty-Eight, Ltd., classified as an equity investment | 33.00% |
Rent expense for lease of the corporate office | $29,700 |
COSTS_INCURRED_IN_OIL_AND_GAS_2
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION, AND DEVELOPMENT ACTIVITIES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Acquisition of Properties: | ||
Unproved | $367,172 | $818,290 |
Proved | 138,601 | 1,917,376 |
Exploration Costs | 2,004,935 | 3,587,244 |
Development Costs | 4,345,160 | 3,898,134 |
Asset Retirement Obligation | $96,382 | $326,687 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Liabilities incurred | $93,526 | $281,030 |
Impairment losses on oil and gas properties | 1,928,548 | 1,644,142 |
Measured on a Non-Recurring Basis [Member] | Level 3 Inputs [Member] | ||
Liabilities incurred | 93,526 | 281,030 |
Impairment losses on oil and gas properties | $1,928,548 | $1,644,142 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Fair value on a recurring basis: | ||
Available-for-Sale Securities | $6,654,303 | $6,653,823 |
Trading Securities | 445,476 | 586,708 |
Measured on a Recurring Basis [Member] | Other [Member] | Level 1 Inputs [Member] | ||
Fair value on a recurring basis: | ||
Trading Securities | 137,310 | 17,433 |
Measured on a Recurring Basis [Member] | US Treasury Bills Maturing in the next Twelve Months [Member] | Level 2 Inputs [Member] | ||
Fair value on a recurring basis: | ||
Available-for-Sale Securities | 6,654,303 | 6,653,823 |
Measured on a Recurring Basis [Member] | Domestic Equities [Member] | Level 1 Inputs [Member] | ||
Fair value on a recurring basis: | ||
Trading Securities | 183,168 | 389,766 |
Measured on a Recurring Basis [Member] | International Equities [Member] | Level 1 Inputs [Member] | ||
Fair value on a recurring basis: | ||
Trading Securities | $124,998 | $179,509 |
LONG_LIVED_ASSETS_IMPAIRMENT_L1
LONG LIVED ASSETS IMPAIRMENT LOSS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Long Lived Assets Impairment Loss Details Narrative | ||
Impairment losses on oil and gas properties | $1,928,548 | $1,644,142 |
OTHER_INCOME_NET_Details
OTHER INCOME, NET (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Components of Other Income: | ||
Net Realized and unrealized gain (loss) on trading securities | ($142,522) | $195,721 |
Gains on asset sales | 119,689 | 118,011 |
Interest income | 17,177 | 22,833 |
Settlements of class action lawsuits | 131,178 | 15,085 |
Agricultural rental income | 5,600 | 5,600 |
Dividend income | 1,340 | 1,648 |
Income from other investments | 20,000 | 33,000 |
Interest and Other Expenses | -45,048 | -34,817 |
Other Income, Net | $107,414 | $357,081 |
CERTAIN_RELATIONSHIPS_AND_RELA1
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
LTTD Affiliate [Member] | ||
Administrative Expenses | $191,672 | $177,782 |
Payments for share of salaries | 131,855 | 126,884 |
Mid-American Affiliate [Member] | ||
Administrative Expenses | 191,672 | 177,782 |
Payments for share of salaries | 131,855 | 126,884 |
Mesquite Affiliate [Member] | ||
Administrative Expenses | 191,672 | 177,782 |
Payments for share of salaries | $131,855 | $126,884 |
SUPPLEMENTAL_OIL_AND_GAS_INFOR1
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Discounting factor for future net cash flows | 10.00% | 10.00% |
Oil and Condensate (Bbls) [Member] | ||
Share of production from net royalty interests | 28,155 | 32,189 |
Gas (Mcf) [Member] | ||
Share of production from net royalty interests | 451,969 | 541,866 |
SUPPLEMENTAL_OIL_AND_GAS_INFOR2
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
bbl | bbl | |
Oil and Condensate (Bbls) [Member] | ||
Proved Developed and Undeveloped Reserves: | ||
Beginning of Year | 527,359 | 454,951 |
Revisions of Previous Estimates | 7,908 | 6,602 |
Extensions and Discoveries | 98,035 | 127,505 |
Purchase of Reserves | 48,497 | |
Production | -109,431 | -110,196 |
End of Year | 523,871 | 527,359 |
Proved Developed Reserves: | ||
Beginning of Year | 484,633 | 454,951 |
End of Year | 482,717 | 484,633 |
Gas (Mcf) [Member] | ||
Proved Developed and Undeveloped Reserves: | ||
Beginning of Year | 4,121,358 | 3,634,480 |
Revisions of Previous Estimates | 339,675 | 99,133 |
Extensions and Discoveries | 1,034,589 | 716,497 |
Purchase of Reserves | 589,003 | |
Production | -1,018,595 | -917,755 |
End of Year | 4,477,027 | 4,121,358 |
Proved Developed Reserves: | ||
Beginning of Year | 3,822,278 | 3,634,480 |
End of Year | 4,188,946 | 3,822,278 |
SUPPLEMENTAL_OIL_AND_GAS_INFOR3
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (Details 1) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Standardized measure of discounted future net cash flows | |||
Future cash inflows | $63,737,733 | $61,732,164 | |
Future Production and Development Costs | -22,271,008 | -20,525,589 | |
Future Asset Retirement Obligation | -2,100,960 | -1,937,212 | |
Future Income Tax Expense | -8,055,783 | -8,041,742 | |
Future Net Cash Flows | 31,309,982 | 31,227,621 | |
10% Annual Discount for Estimated Timing of Cash Flows | -9,616,959 | -9,505,407 | |
Standardized Measure of Discounted Future Net Cash Flows | $21,693,023 | $21,722,214 | $17,018,429 |
SUPPLEMENTAL_OIL_AND_GAS_INFOR4
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Changes in the standardized measure of discounted future cash flows | ||
Standardized Measure, Beginning of Year | $21,722,214 | $17,018,429 |
Sales and Transfers, Net of Production Costs | -11,225,797 | -10,549,949 |
Net Change in Sales and Transfer Prices, Net of Production Costs | -1,082,219 | 1,841,016 |
Extensions, Discoveries and Improved Recoveries, Net of Future Production and Development Costs | 8,713,240 | 9,793,021 |
Revisions of Quantity Estimates | 1,468,704 | 601,915 |
Accretion of Discount | 2,914,007 | 2,308,396 |
Purchases of Reserves in Place | 1,969,430 | |
Net Change in Income Taxes | 16,002 | -935,750 |
Net Change in Asset Retirement Obligation | -90,131 | -314,402 |
Changes in Production Rates (Timing) and Other | -742,997 | -9,892 |
Standardized Measure, End of Year | $21,693,023 | $21,722,214 |