Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE

 v2.3.0.11
FAIR VALUE
6 Months Ended
Jun. 30, 2011
FAIR VALUE [Abstract]  
FAIR VALUE
NOTE 11     FAIR VALUE
 
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
 
Level 1 - Quoted prices in active markets for identical assets or liabilities.
 
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
The following schedule summarizes the valuation of financial instruments measured at fair value on a recurring basis in the balance sheet as of June 30, 2011 and December 31, 2010.
 
     Far Value Measurements at June 30, 2011 Using  
   
Quoted Prices In Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
Commodity Derivatives - Current Liability
  $ -     $ (14,279,978 )   $ -  
Commodity Derivatives - Non-Current Liability
  $ -     $ (1,764,445 )   $ -  
Total
  $ -     $ (16,044,423 )   $ -  


   
Fair Value Measurements at December 31, 2010 Using
 
   
Quoted Prices In Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
Commodity Derivatives - Current Liability
  $ -     $ (11,145,318 )   $ -  
Commodity Derivatives - Non-Current Liability
  $ -     $ (5,022,657 )   $ -  
Short-Term Investments (See Note 3)
  $ 39,726,700     $ -     $ -  
Total
  $ 39,726,700     $ (16,167,975 )   $ -  

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the six month period ended June 30, 2011.

Level 1 assets consist of US Treasury Notes, the fair value of these treasuries is based on quoted market prices.

Level 2 liabilities consist of derivative liabilities (see Note 13).  Under FASB ASC 820-10-55, the fair value of the Company's derivative financial instruments is determined based on spot prices and the notional quantities.  The fair value of all derivative contracts is reflected on the condensed balance sheet.  The current derivative liability amounts represent the fair values expected to be settled in the subsequent year.