(6) Equity Investment in Savoy

12 Months Ended

Dec. 31, 2013

Equity Investment In SELLP [Abstract]

(6) Equity Investment in Savoy

We own a 45% interest in Savoy Energy L.P. (Savoy), a private company engaged in the oil and gas business primarily in the state of Michigan. Savoy uses the successful efforts method of accounting. We account for our interest in Savoy using the equity method of accounting.

Below (in thousands) to the 100% is a condensed balance sheet at December 31, for both years and a condensed statement of operations for both years.

Condensed Balance Sheet

	2013		2012
Current assets	$	29,182	$	16,207
Oil and gas properties, net		25,408		21,065
Other		260		263
	$	54,850	$	37,535

Total liabilities	$	16,447	$	9,116
Partners' capital		38,403		28,419
	$	54,850	$	37,535

Condensed Statement of Operations

	2013			2012
Revenue	$	42,248		$	32,052
Expenses		(29,322	)		(27,527	)
Net income	$	12,926		$	4,525

Late last year Savoy engaged Energy Spectrum Advisors Inc. (ESA) to market its Trenton-Black River (TBR) oil properties located in southeast Michigan. ESA has offices in Dallas and Houston. More information will be posted to the ESA website in early March 2014.

The reserve quantity and value information set forth in the tables below, do not agree to the Brock Engineering Report as such report only includes the TBR properties. The other properties are not significant, but have been included in the tables below. The TBR properties comprise about 95% of the PV10 amounts.

We are looking forward to the opportunity to potentially effect a monetization of our Savoy investment.

Unaudited Oil and Gas Reserve Quantity and Value Information (in thousands)

The data below is shown proportionate to our approximate 45% ownership in Savoy.

Costs incurred are as follows:

	2013
Unproved property acquisition	$	1,287
Development		858
Exploration		7,061
Total	$	9,206

	Oil (Bbls)			NGLs (Bbls)			Natgas (Mcf)

January 1, 2013		700			29			1,108
Extensions and discoveries		898			58			442
Production		(153	)		(11	)		(96	)
Revisions to previous estimates		24			23			(153	)
December 31, 2013		1,469			99			1,301

Proved developed reserves		746			60			450
Proved undeveloped reserves (PUDs)		723			39			851

	Proved Developed			PUDs			Total Proved
Future cash flows:
Oil	$	70,582		$	70,662		$	141,244
NGLs		2,551			1,669			4,220
Natgas		1,365			976			2,341
Total cash flows		74,498			73,307			147,805
Future production costs		(12,213	)		(12,233	)		(24,446	)
Future development costs					(3,073	)		(3,073	)
Future income tax (none since Savoy is a pass-through entity for income tax purposes)
Future net cash flows		62,285			58,001			120,286
10% annual discount for estimated timing of cash flows		(14,355	)		(15,111	)		(29,466	)
Standardized measure of discounted future net cash flows	$	47,930		$	42,890		$	90,820

	2013
Beginning of year	$	35,300
Sales, net of production costs		(12,640	)
Net changes in prices and production costs		1,600
Extensions and discoveries		57,200
Revisions of previous quantity estimates		2,100
Change in production timing and other		3,700
Accretion of discount		3,560
End of year	$	90,820

Average wellhead prices:
Oil (per Bbl)	$	94.66
NGLs (per Bbl)		42.45
Natgas (per Mcf)		3.04

The 2013 reserve estimates shown above have been independently evaluated by Brock Engineering, LLC, which customarily prepares petroleum property analysis for industry and financial organizations and government agencies. Brock Engineering was founded in 1997 and performs consulting petroleum engineering services. Within Brock Engineering, the technical personnel responsible for preparing the estimates set forth in the Brock Engineering reserves report incorporated herein are Timothy J. Brock and Douglas J. Elenbaas. Mr. Brock has been practicing consulting petroleum engineering at Brock Engineering since 1997. Mr. Brock is a Licensed Professional Engineer in the State of Michigan (No. 39603) and has over 33 years of experience in the estimation and evaluation of reserves. He graduated from Michigan Technological University in 1980 with a Bachelor of Science Degree in Geological Engineering. He meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering evaluations as well as applying SEC and other industry reserves definitions and guidelines. Mr. Elenbaas has been practicing consulting petroleum engineering at Brock Engineering since 2012. Mr. Elenbaas is a Licensed Professional Engineer in the State of Michigan (No. 32030) and has over 30 years of experience in the estimation and evaluation of reserves. He graduated from the University of Michigan in 1977 with a Bachelor of Science Degree in Chemical Engineering. He meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves promulgated by the Society of Petroleum Engineers; he is proficient in judiciously applying industry standard practices to engineering evaluations as well as applying SEC and other industry reserves definitions and guidelines.

The estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors.