Note 14 - Supplemental Oil and Gas Reserve Information (Unaudited)

Results of operations from oil and gas producing activities

The following table shows the results of operations from the Company’s oil and gas producing activities.  For the year ended December 31, 2016, the Company had no revenue from oil and gas producing activities.

Capitalized costs

The following table summarizes the Company’s capitalized costs of oil and gas properties:

Costs incurred in property acquisition, exploration and development activities

The following table summarizes the Company’s costs incurred in property acquisition, exploration and development activities for the year ended December 31, 2016:

Estimated quantities of proved reserves

Our ownership interests in estimated quantities of proved oil and gas reserves all of which are located in the United States are summarized below.  Proved reserves are estimated quantities of oil and gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those that are expected to be recovered through existing wells with existing equipment and operating methods.

Oil reserves are stated in thousands of standard barrels [“MSTB”], natural gas reserves are stated in thousands of cubic feet [“MCF”] and combined oil and gas reserves are stated in thousands of barrels of oil equivalent [“MBOE”]. Geological and engineering estimates of proved oil and gas reserves developed at one point in time by an independent third party petroleum reserves engineering firm are highly interpretive, inherently imprecise and subject to ongoing revisions that may be substantial in amount. Although every reasonable effort is made to ensure that the reserve estimates are accurate, by their nature reserve estimates are generally less precise than other estimates presented in connection with financial statement disclosures.

Proved non-producing and proved undeveloped reserves at December 31, 2016 totaled 212.4 MBOE’s and 1,571.8 MBOE’s, respectively. Total proved reserves at December 31, 2016 totaled 1,784.2 MBOE’s and consisted of approximately 91% oil and 9% gas.

The Company intends to review annually its proved undeveloped reserves to ensure an appropriate plan for development exists. The Company considers proved undeveloped reserves only if it plans to convert these reserves to proved developed producing reserves within five years from the date they were first acquired. The Company plans to develop all the remaining locations that comprise the 1,784.2 MBOE of proved reserves within five years. However, the decision to deploy capital and the timing of those expenditures is contingent on many different factors. The Company estimates capital expenditures of approximately $19.75 million will be sufficient to develop these reserves. The development plan assumes a continued gradual improvement in commodity pricing and general market conditions within the oil and gas industry.

The calculation of proved undeveloped reserves requires the Company to make predictions regarding future acquisitions and discoveries and the impact they may have on the Company’s overall development plan of properties it currently owns. Management anticipates that the development plan will be revised to reflect changes in the oil and gas industry, including changing markets and prices, new investment opportunities, and other key factors and such revisions will result in changes to its proved undeveloped reserves. Consequently, the timing of capital expenditures will be heavily dependent upon the Company’s interpretation of market opportunities, which are influenced by projections of future commodity prices and other key industry factors. Each year management expects to review our five-year development plan to maximize the value of our investment in oil and gas assets and in turn also to enhance shareholder value.

At December 31, 2016, the Company expects its development plan to generally perform as follows:

For the year ended December 31, 2016, the Company had no wells in production and earned no revenue from the sale of oil or natural gas. All properties were either proved non-producing or proved undeveloped.

In 2016, the Company invested approximately $11,198,411 in its oil and gas properties. The Company has approximately $353,363 of net fixed assets on hand and existing infrastructure on the ground in Utah, which will be utilized to facilitate the exploitation and development of proved non-producing and proved undeveloped reserves over the next five years. At year end the Company’s review of proved undeveloped reserves revealed challenges but the Company maintains its belief that reserves will be developed within five years of their acquisition. In addition, the Company anticipates raising additional funds through the sale of common stock, debt and cash generated from the Company’s financing activities, including public, private and institutional offerings in capital market transactions and future reserve based lending activities to develop all of its proved non-producing and proved undeveloped reserves within the next five-years. Additionally, the Company also believes that it has the ability to joint venture to develop any of its assets.

Standardized measure of discounted future net cash flows

The standardized measure of discounted future net cash flows from our proved non-producing and proved undeveloped reserves for the periods presented in the financial statements is summarized below.

Changes in standardized measure of discounted future net cash flows

For the year ended December 31, 2016, the Company had no wells in production and earned no revenue from the sale of oil or natural gas. All assets were recently acquired and the Company has had a limited operating history with its current asset base and as such is unable to form reasonable estimates at the present time. The Company expects to update this section in subsequent reports providing more substantive explanations for changes in its standardized measure of discounted future net cash flows.