[Basic Earth Science Systems, Inc. Letterhead]
March 14, 2007
Mark Wojciechowski
Division of Corporate Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-7010
Dear Mr. Wojciechowski:
In response to the comment letter dated February 22, 2007 we have addressed each of the five points
that the SEC raised and provided our response to each point below.
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With respect to Note 13 – Unaudited Oil and Gas Reserve Information on page 41 of our Form
10-KSB for the fiscal year ended March 31, 2006 (fiscal 2006) we stated that the Company
elected not to incur the additional expense of evaluating properties that contributed
marginally to production. The properties in question are, in fact, proved developed producing
and contributed only 7 percent of the Company’s oil production and 4 percent of its gas
production during fiscal 2006. The capital costs associated with these properties are
included in the full cost pool and are being depleted as the production from these properties
is included in the depletion calculation (in the numerator) using the units-of-production
method. The impact of including the reserves for these marginal properties in the denominator
of the units-of-production ratio would be negligible. Also, since the capital costs
associated with these marginal properties are included in the full cost pool but not in the
Company’s reserves, there would be no impact on the ceiling test. |
2. |
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In response to the SEC’s point regarding the certifications pursuant to Section 302 of the
Sarbannes-Oxley Act of 2002, so as to be in compliance with Item 601(b)(31) of Regulation S-B,
in future filings we will strike the identification of the certifying individual at the
beginning of the certification so that Exhibit 31.1 will read: |
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“I, Ray Singleton, hereby certify that: ...” |
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And Exhibit 31.2 will read: |
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“I, David Flake, hereby certify that: ...” |
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In addition, in paragraphs 2, 3 and 4 of the same certifications we will strike the words
“annual” and “quarterly” from the Forms 10-KSB and 10-QSB reports, respectively, when referring
to the report in question. |
3. |
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With respect to the SEC’s point regarding the Company’s EBITDA disclosure in Management’s
Discussion and Analysis and Plan of Operation (MD&A) on page 8 of the Form 10-QSB for the
quarterly period ended December 31, 2006 we would like to point out that, while we report the
Accretion of Asset Retirement Obligation as a separate line item in the Consolidated Statement
of Operations, most companies include this accretion expense in the Depreciation, Depletion
and Amortization amount. As such, in order to make our EBITDA amount comparable with those
companies that choose to include the accretion expense in their DD&A expense we have excluded
the accretion expense from our EBITDA number and made the readers aware of that fact by way of
the reconciliation between net income and EBITDA. |