Fair Value Measurements

9 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE 11: Fair Value Measurements

     Fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants, i.e., an exit price. To estimate an exit price, a three-level hierarchy is used. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or a liability, into three levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active; (iii) inputs other than quoted prices that are observable for the asset or liability; or (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 inputs are unobservable inputs for the financial asset or liability.

     The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011.

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value
Financial Assets:
Derivative Contracts - Swaps	$	-	$	84,451	$	-	$	84,451
Derivative Contracts - Collars	$	-	$	-	$	186,998	$	186,998

Level 2 - Market Approach - The fair values of the Company’s natural gas swaps are based on a third-party pricing model which utilizes inputs that are either readily available in the public market, such as natural gas curves, or can be corroborated from active markets. These values are based upon, among other things, future prices and time to maturity. These values are then compared to the values given by our counterparties for reasonableness.

Level 3 - The fair values of the Company’s oil collar contracts are based on a pricing model which utilizes inputs that are unobservable or not readily available in the public market. These values are based upon, among other things, future prices, volatility, and time to maturity. These values are then compared to the values given by our counterparties for reasonableness.

     A reconciliation of the Company’s assets classified as Level 3 measurements is presented below.

	Derivatives
Balance of Level 3 as of October 1, 2010	$	-
Total gains or (losses) - realized and unrealized:
Included in earnings		186,998
Included in other comprehensive income (loss)		-
Purchases, issuances and settlements		-
Transfers in and out of Level 3		-
Balance of Level 3 as of June 30, 2011	$	186,998

The following table presents impairments associated with certain assets that have been measured at fair value on a nonrecurring basis within Level 3 of the fair value hierarchy.

	Total Losses for the		Total Losses for the
	Three Months Ended		Nine Months Ended
	June 30, 2011		June 30, 2011
Impairments:
Producing Properties (a)	$	2,927	$	830,946

(a) At the end of each quarter, the Company assesses the carrying value of its producing properties for impairment. This assessment utilizes estimates of future cash flows. Significant judgments and assumptions in these assessments include estimates of future oil and natural gas prices using a forward NYMEX curve adjusted for locational basis differentials, drilling plans, expected capital costs and an applicable discount rate commensurate with risk of the underlying cash flow estimates. These assessments identified certain properties with carrying value in excess of their calculated fair values.