10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2015

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-8157

THE RESERVE PETROLEUM COMPANY

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	73-0237060
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
6801 Broadway ext., Suite 300 Oklahoma City, Oklahoma 73116-9037 (405) 848-7551
(Address and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  R     No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  R     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 8, 2015, 158,553 shares of the registrant’s $.50 par value common stock were outstanding.

PART I – FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
ASSETS
	March 31,		December 31,
	2015		2014
	(Unaudited)		(Derived from
			audited financial
			statements)
Current Assets:
Cash and Cash Equivalents	$	16,756,630	$	15,203,558
Available-for-Sale Securities		6,654,303		6,654,303
Trading Securities		439,674		445,476
Refundable Income Taxes		309,976		154,393
Receivables		1,152,467		2,142,356
Prepaid Seismic		86,856		86,856
		25,399,906		24,686,942
Investments:
Equity Investment		365,078		352,995
Other		676,856		672,416
		1,041,934		1,025,411
Property, Plant and Equipment:
Oil and Gas Properties, at Cost,
Based on the Successful Efforts Method of Accounting –
Unproved Properties		1,800,962		1,728,944
Proved Properties		53,036,810		53,110,630
		54,837,772		54,839,574
Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance		38,342,608		36,883,078
		16,495,164		17,956,496
Other Property and Equipment, at Cost		448,263		440,284
Less – Accumulated Depreciation		307,738		329,429
		140,525		110,855
Total Property, Plant and Equipment		16,635,689		18,067,351
Other Assets		—		391,290
Total Assets	$	43,077,529	$	44,170,994
See Accompanying Notes

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THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
	March 31,		December 31,
	2015		2014
	(Unaudited)		(Derived from
			audited financial
			statements)
Current Liabilities:
Accounts Payable	$	211,391	$	819,010
Other Current Liabilities – Deferred Income Taxes and Other		143,470		263,234
		354,861		1,082,244
Long-Term Liabilities:
Asset Retirement Obligation		1,665,022		1,645,597
Dividends Payable		1,433,682		1,451,635
Deferred Tax Liability, Net		2,869,322		3,249,291
		5,968,026		6,346,523
Total Liabilities		6,322,887		7,428,767
Stockholders’ Equity:
Common Stock		92,368		92,368
Additional Paid-in Capital		65,000		65,000
Retained Earnings		37,963,687		37,946,212
		38,121,055		38,103,580
Less – Treasury Stock, at Cost		1,366,413		1,361,353
Total Stockholders’ Equity		36,754,642		36,742,227
Total Liabilities and Stockholders’ Equity	$	43,077,529	$	44,170,994

See Accompanying Notes

3

THE RESERVE PETROLEUM COMPANY
STATEMENTS OF INCOME
(Unaudited)
	Three Months Ended
	March 31,
	2015			2014
Operating Revenues:
Oil and Gas Sales	$	2,152,948		$	5,275,210
Lease Bonuses and Other		535,214			200,942
		2,688,162			5,476,152
Operating Costs and Expenses:
Production		690,856			844,600
Exploration		150,150			657,471
Depreciation, Depletion, Amortization and Valuation Provisions		1,570,350			867,632
General, Administrative and Other		442,373			438,241
		2,853,729			2,807,944
Income / (Loss) from Operations		(165,567	)		2,668,208
Other Income / (Loss), Net		2,733			(15,558	)
Income / (Loss) Before Provision for Income Taxes		(162,834	)		2,652,650
Income Tax Provision / (Benefit):
Current		344,423			902,762
Deferred		(524,733	)		(224,815	)
Total Income Tax Provision / (Benefit)		(180,310	)		677,947
Net Income	$	17,476		$	1,974,703
Per Share Data:
Net Income, Basic and Diluted	$	0.11		$	12.40
Weighted Average Shares Outstanding, Basic and Diluted		158,659			159,228

See Accompanying Notes

4

THE RESERVE PETROLEUM COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended
	March 31,
	2015			2014
Net Cash Provided by Operating Activities	$	2,492,388		$	3,264,333
Cash Applied to Investing Activities:
Proceeds from Disposal of Property, Plant and Equipment		—			200
Purchase of Property, Plant and Equipment		(911,863	)		(1,318,627	)
Cash Distribution from Equity Investee		—			40,095
Other Investment		(4,440	)		—
Net Cash Applied to Investing Activities		(916,303	)		(1,278,332	)
Cash Applied to Financing Activities:
Dividends Paid to Stockholders		(17,953	)		(12,740	)
Purchase of Treasury Stock		(5,060	)		(59,585	)
Total Cash Applied to Financing Activities		(23,013	)		(72,325	)
Net Change in Cash and Cash Equivalents		1,553,072			1,913,676
Cash and Cash Equivalents, Beginning of Period		15,203,558			10,764,506
Cash and Cash Equivalents, End of Period	$	16,756,630		$	12,678,182

See Accompanying Notes

5

THE RESERVE PETROLEUM COMPANY

NOTES TO FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

Note 1 – BASIS OF PRESENTATION

The accompanying balance sheet as of December 31, 2014, which has been derived from audited financial statements, the unaudited interim financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

In the opinion of Management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year.

Note 2 – OTHER INCOME / (LOSS), NET

The following is an analysis of the components of Other Income / (Loss), Net:

	Three Months Ended
	March 31,
	2015			2014
Net Realized and Unrealized Gain / (Loss) on Trading Securities	$	(5,995	)	$	(45,925	)
Gain on Asset Sales		—			1,123
Interest Income		3,751			5,332
Equity Earnings in Investee		12,083			27,245
Other Income		4,898			7,930
Interest and Other Expenses		(12,004	)		(11,263	)
Other Income / (Loss), Net	$	2,733		$	(15,558	)

Note 3 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES

Equity Investment consists of a 33% ownership interest in Broadway Sixty-Eight, Ltd. (the “Partnership”), an Oklahoma limited partnership, which owns and operates an office building in Oklahoma City, Oklahoma. Although the Company invested as a limited partner, it agreed, jointly and severally, with all other limited partners to reimburse the general partner for any losses suffered from operating the Partnership. The indemnity agreement provides no limitation to the maximum potential future payments. To date, no monies have been paid with respect to this agreement.

Note 4 – PROVISION FOR INCOME TAXES

In 2015 and 2014, the effective tax rate was less than the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and gas properties and the corporate graduated tax rate structure.

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates will be updated throughout the year until finalized with the detail well-by-well calculations at year-end. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small, the proportional effect of these items on the effective tax rate may be significant.

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Note 5 – ASSET RETIREMENT OBLIGATION

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased for the change in its present value which is currently 3.25%.

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2014	$	1,645,597
Liabilities incurred for new wells (net of revisions)		7,542
Liabilities settled (wells sold or plugged)		—
Accretion expense		11,883
Balance at March 31, 2015	$	1,665,022

Note 6 – FAIR VALUE MEASUREMENTS

Inputs used to measure fair value are organized into a fair value hierarchy based on the observability of the inputs. Level 1 inputs consist of quoted prices in active markets for identical assets. Level 2 inputs are inputs, other than quoted prices, for similar assets that are observable. Level 3 inputs are unobservable inputs.

Recurring Fair Value Measurements

Certain of the Company’s assets are reported at fair value in the accompanying balance sheets on a recurring basis. The Company determined the fair value of the available-for-sale securities using quoted market prices for securities with similar maturity dates and interest rates. At March 31, 2015 and December 31, 2014, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	March 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		280,533		—		—
International Equities		131,674		—		—
Others		27,467		—		—

	December 31, 2014
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		183,168		—		—
International Equities		124,998		—		—
Others		137,310		—		—

Non-Recurring Fair Value Measurements

The Company’s asset retirement obligation represents a non-recurring fair value liability. The fair value of the non-financial liability incurred in the quarter ended March 31, was $7,542 in 2015 and $26,651 in 2014 and was calculated using Level 3 inputs. See Note 5 above for more information about this liability and the inputs used for calculating fair value.

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The impairment losses in the quarter ended March 31 of $556,734 for 2015, with none for 2014, also represents non-recurring fair value expenses calculated using Level 3 inputs. See Note 10 – LONG-LIVED ASSETS IMPAIRMENT LOSS on page 29 of the 2014 Form 10-K for a description of the impairment loss calculation.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, marketable securities, trade payables and dividends payable. At March 31, 2015 and December 31, 2014, the historical cost of cash and cash equivalents, trade receivables, trade payables and dividends payable are considered to be representative of their respective fair values due to the short-term maturities of these items.

Note 7 – NEW ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP under which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company beginning January 1, 2018. The new standard allows application either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the adoption method and the impact ASU 2014-09 will have on the Company, but it is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (“ASU 2015-03”). The standard requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The Company currently has no debt nor any plans to issue any debt. Accordingly, adoption of ASU 2015-03 will have no effect on the Company’s financial position, results of operations or cash flows.

There were no other accounting pronouncements issued and none that became effective since December 31, 2014 that were directly applicable to the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read with reference to a similar discussion in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission (hereinafter, the “2014 Form 10-K”), as well as the financial statements included in this Form 10-Q. 

Forward Looking Statements

This discussion and analysis includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward looking statements give the Company’s current expectations of future events. They include statements regarding the drilling of oil and gas wells, the production that may be obtained from oil and gas wells, cash flow and anticipated liquidity and expected future expenses.

Although management believes the expectations in these and other forward looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that would cause actual results to differ materially from expected results are described under “Forward Looking Statements” on page 8 of the 2014 Form 10-K.

We caution you not to place undue reliance on these forward looking statements, which speak only as of the date of this Form 10-Q, and we undertake no obligation to update this information. You are urged to carefully review and consider the disclosures made in this and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.

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Financial Conditions and Results of Operations

Liquidity and Capital Resources

Please refer to the Balance Sheets and the Condensed Statements of Cash Flows in this Form 10-Q to supplement the following discussion. In the first quarter of 2015, the Company continued to fund its business activity through the use of internal sources of cash. The Company had net cash provided by operations of $2,492,388. The Company utilized cash for property additions of $911,863, other investment of $4,440 and financing activities of $23,013 for total cash applied of $939,316. Cash and cash equivalents increased $1,553,072 to $16,756,630.

Discussion of Significant Changes in Working Capital. In addition to the changes in cash and cash equivalents discussed above, there were other changes in working capital line items from December 31, 2014. A discussion of these items follows.

Refundable income taxes increased $155,583 (101%) to $309,976 from $154,393 due to the first quarter 2015 current income tax provision of $344,423 offset by estimated tax payments of $500,006 for the same period.

Receivables declined $989,889 (46%) to $1,152,467 from $2,142,356. This decrease was due entirely to lower oil and gas sales receivables. Sales variances are discussed in the “Results of Operations” section below.

Accounts payable decreased $607,619 (74%) to $211,391 from $819,010 due to a decline in the drilling activity in the quarter ended March 31, 2015 compared to the quarter ended December 31, 2014.

Discussion of Significant Changes in the Condensed Statements of Cash Flows. As noted in the first paragraph above, net cash provided by operating activities was $2,492,388 in 2015, a decrease of $771,945 (24%) from the comparable period in 2014. The decrease was primarily the result of decreased oil and gas sales. For more information see “Operating Revenues” and “Operating Costs and Expenses” below.

Cash applied to the purchase of property additions in 2015 was $911,863 a decrease of $406,764 (31%) from cash applied in 2014 of $1,318,627. For both 2015 and 2014, cash applied to property additions was mostly related to oil and gas exploration and development activity. The decrease in property additions for 2015 is mostly due to a decline in the exploration and development drilling activity in the first quarter of 2015 versus 2014. See the subheading “Exploration Costs” in the “Results of Operations” section below for additional information.

Conclusion. Management is unaware of any additional material trends, demands, commitments, events or uncertainties, which would impact liquidity and capital resources to the extent that the discussion presented in the 2014 Form 10-K would not be representative of the Company’s current position.

Material Changes in Results of Operations Three Months Ended March 31, 2015, Compared with Three Months Ended March 31, 2014

Net income decreased $1,957,227 (99%) to $17,476 in 2015 from $1,974,703 in 2014. Net income per share, basic and diluted, decreased $12.29 to $0.11 in 2015 from $12.40 in 2014.

A discussion of revenue from oil and gas sales and other significant line items in the statements of income follows.

Operating Revenues. Revenues from oil and gas sales decreased $3,122,262 (59%) to $2,152,948 in 2015 from $5,275,210 in 2014. Of the $3,122,262 decrease, crude oil sales decreased $1,976,933; natural gas sales decreased $934,196; and miscellaneous oil and gas product sales decreased $211,133.

The $1,976,933 (61%) decrease in oil sales to $1,279,886 in 2015 from $3,256,819 in 2014 was the result of a decrease in the average price per barrel (Bbl) and the volume sold. The volume of oil sold decreased 7,227 Bbls to 28,306 Bbls in 2015, resulting in a negative volume variance of $662,355. The average price per Bbl decreased $46.43 to $45.22 per Bbl in 2015, resulting in a negative price variance of $1,314,578. The decrease in oil volumes sold was mostly due to production declines from older wells partially offset by production of 7,266 Bbls from new wells.

The $934,196 (53%) decrease in gas sales to $819,752 in 2015 from $1,753,948 in 2014 was the result of a decrease in the average price per thousand cubic feet (MCF) and the volume sold. The volume of gas sold decreased 76,331 MCF to 291,374 MCF in 2015 from 367,705 MCF in 2014, for a negative volume variance of $364,099. The decrease in gas volumes sold was mostly due to production declines from older wells partially offset by production of 77,220 MCF from new wells. The average price per MCF decreased $1.96 to $2.81 per MCF in 2015 from $4.77 per MCF in 2014, resulting in a negative price variance of $570,097.

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Sales from the Robertson County, Texas royalty interest properties provided approximately 21% of the Company’s first quarter gas sales volumes for 2015 and 2014. See discussion on page 11 of the 2014 Form 10-K under the subheading “Operating Revenues” for more information about these properties. Sales from Arkansas working interest properties provided approximately 16% of the Company’s first quarter 2015 gas sales volumes and about 18% of the first quarter 2014 gas sales volumes.

For both oil and gas sales, the price change was mostly the result of a change in the spot market prices upon which most of the Company’s oil and gas sales are based. These spot market prices have had significant fluctuations in the past and these fluctuations are expected to continue.

Sales of miscellaneous oil and gas products were $53,310 in 2015 compared to $264,443 in 2014.

The Company received lease bonuses of $535,214 in the first quarter of 2015 for leases on its owned minerals. Lease bonuses for the first quarter of 2014 were $200,942.

Operating Costs and Expenses. Operating costs and expenses increased $45,785 (2%) to $2,853,729 in 2015 from $2,807,944 in 2014.

Production Costs. Production costs decreased $153,744 (18%) in 2015 to $690,856 from $844,600 in 2014. This decrease was due primarily to lower production taxes as a result of decreased oil and gas sales revenue. Production taxes declined $133,815 (63%) to $78,319 in 2015 from $212,134 in 2014. The remaining $19,929 decrease was due to lower lease operating expense.

Exploration Costs. Total exploration expense decreased $507,321 (77%) to $150,150 in 2015 from $657,471 in 2014. The net decrease was due to a decrease in geological and geophysical expense of $656,891 to $1,054 in 2015 from $657,945 in 2014, offset by an increase of $149,570 in dry hole costs.

The following is a summary as of April 30, 2015, updating both exploration and development activity from December 31, 2014, for the period ended March 31, 2015.

The Company will participate with its 18% working interest in the drilling of three development wells on a Barber County, Kansas prospect in the second half of 2015.

The Company participated with its 16% working interest in the drilling of a development well on a Woods County, Oklahoma prospect. A completion is in progress. Capitalized costs for the period were $68,800.

The Company is participating with an 8% working interest in the completion of a development well that was drilled in 2014 on a Woods County, Oklahoma prospect.

The Company participated with its 10.5% working interest in the drilling of an exploratory well on a Cimarron County, Oklahoma prospect. The well was completed as a dry hole. The Company will participate in the drilling of another exploratory well starting in May 2015. Costs expensed to dry hole costs were $66,531.

The Company is participating with its 10.5% working interest in the completion of an exploratory well that was drilled in 2014 on a Logan County, Oklahoma prospect. Capitalized costs for the period were $57,578.

The Company participated with its 10.5% working interest in the drilling of a development well on a Seminole County, Oklahoma prospect. The well is awaiting completion. The Company will participate in operations to plug back and stimulate a salt water disposal well, repair casing in one producing well and install a submersible pump in another producing well on the prospect.

The Company will participate with its 10.5% working interest in the drilling of a development well on a Seminole County, Oklahoma prospect starting in May 2015.

The Company participated in the drilling of two exploratory wells on a Creek County, Oklahoma prospect. The first well was completed as a dry hole and the second is awaiting completion. Dry hole costs for the period were $26,981 and capitalized costs were $27,013.

The Company participated with its 8.4% interest in a 3-D seismic survey on a Thomas County, Kansas prospect. Several structures have been identified and an exploratory well will be drilled starting in May or June 2015.

In April 2015, the Company purchased a 16% interest in 1861 net acres of leasehold on a Chase County, Nebraska prospect for $40,191. The Company is participating in an exploratory well that is currently drilling.

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Depreciation, Depletion, Amortization and Valuation Provision (DD&A). DD&A increased $702,718 (81%) to $1,570,350 in 2015 from $867,632 in 2014. The increase was due primarily to $556,734 of long–lived asset impairment losses for 2015 with none for 2014. The impairment losses for 2015 are due to lower oil and natural gas futures prices at March 31, 2015 compared to December 31, 2014. Oil prices have declined approximately 50% and natural gas prices have declined approximately 33% during the first quarter of 2015. See Note 10 – LONG-LIVED ASSETS IMPAIRMENT LOSS on page 29 of the 2014 Form 10-K for a description of the impairment loss calculation. The remaining $145,984 increase was due primarily to increased depreciation and lease impairment expense.

Other Income / (Loss), Net. This line item increased $18,291 to a gain of $2,733 in 2015 from a loss of $(15,558) in 2014. See Note 2 to the accompanying financial statements for the analysis of the various components of this line item.

Trading securities losses in 2015 were $(5,995) compared to losses of $(45,925) in 2014, a decrease of $39,930. In 2015, the Company had realized losses of $(1,092) and unrealized losses of $(4,903) from adjusting the securities to estimated fair market value. In 2014, the Company had realized gains of $16,732 and unrealized losses of $(62,657).

Income Tax Provision / (Benefit). Income taxes decreased $858,257 to a $(180,310) tax benefit in 2015 from a $677,947 tax provision in 2014. The decrease was due to the decrease in income / (loss) before income taxes of $2,815,484 (106%) to $(162,834) in 2015 from $2,652,650 in 2014. Of the 2015 income tax provision, the estimated current tax expense was $344,423, which was offset by an estimated deferred tax benefit of $(524,733). Of the 2014 income tax provision, the current tax expense and deferred tax benefit were $902,762 and $(224,815), respectively. See Note 4 to the accompanying financial statements for additional information on income taxes.

Off-Balance Sheet Arrangement

The Company’s off-balance sheet arrangement relates to Broadway Sixty-Eight, Ltd., an Oklahoma limited partnership. The Company does not have actual or effective control of this entity. Management of this entity could at any time make decisions in its own best interest, which could materially affect the Company’s net income or the value of the Company’s investment. For more information about this entity, see Note 3 to the accompanying financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

As defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, they concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2015.

Internal Control over Financial Reporting

As defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act, the term “internal control over financial reporting” means a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles and includes those policies and procedures that:

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(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the financial statements.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the quarter ended March 31, 2015, the Company did not have any material legal proceedings brought against it or its properties.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1
January 1 to January 31, 2015		11	$	230		—		—
February 1 to February 28, 2015		—	$	230		—		—
March 1 to March 31, 2015		11	$	230		—		—
Total		22	$	230		—		—

¹The Company has no formal equity security purchase program or plan. The Company acts as its own transfer agent, and most purchases result from requests made by shareholders receiving small odd lot share quantities as the result of probate transfers.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

12

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following documents are exhibits to this Form 10-Q. Each document marked by an asterisk is filed electronically herewith.

Exhibit Number	Description
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32*	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Presentation Linkbase Document
	* Filed electronically herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

	THE RESERVE PETROLEUM COMPANY
	(Registrant)
Date: May 13, 2015	/s/ Cameron R. McLain
	Cameron R. McLain,
	Principal Executive Officer
Date: May 13, 2015	/s/ James L. Tyler
	James L. Tyler
	Principal Financial Officer

13

EX-31.1

THE RESERVE PETROLEUM COMPANY 10-Q

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Cameron R. McLain, certify that:

1. I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2015	/s/ Cameron R. McLain
	Cameron R. McLain
	Principal Executive Officer

EX-31.2

THE RESERVE PETROLEUM COMPANY 10-Q

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, James L. Tyler, certify that:

1. I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2015	/s/ James L. Tyler
	James L. Tyler
	Principal Financial Officer

EX-32

THE RESERVE PETROLEUM COMPANY 10-Q

 Exhibit 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL

FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of The Reserve Petroleum Company (the “Company”) on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Cameron R. McLain and James L. Tyler, Principal Executive Officer and Principal Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, that to our knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company for the quarter ended March 31, 2015.

May 13, 2015	/s/ Cameron R. McLain
	Cameron R. McLain, President
	(Principal Executive Officer)
	/s/ James L. Tyler
	James L. Tyler, 2nd Vice President
	(Principal Financial Officer)

XML

ASSET RETIREMENT OBLIGATION

3 Months Ended

Mar. 31, 2015

Asset Retirement Obligation [Abstract]

ASSET RETIREMENT OBLIGATION

Note 5 – ASSET RETIREMENT OBLIGATION

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased for the change in its present value which is currently 3.25%.

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2014	$	1,645,597
Liabilities incurred for new wells (net of revisions)		7,542
Liabilities settled (wells sold or plugged)		—
Accretion expense		11,883
Balance at March 31, 2015	$	1,665,022

XML

PROVISION FOR INCOME TAXES

3 Months Ended

Mar. 31, 2015

Provision For Income Taxes

PROVISION FOR INCOME TAXES

Note 4 – PROVISION FOR INCOME TAXES

In 2015 and 2014, the effective tax rate was less than the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and gas properties and the corporate graduated tax rate structure.

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates will be updated throughout the year until finalized with the detail well-by-well calculations at year-end. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small, the proportional effect of these items on the effective tax rate may be significant.

XML

BALANCE SHEETS (Unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current Assets:
Cash and Cash Equivalents	$ 16,756,630	$ 15,203,558
Available-for-Sale Securities	6,654,303	6,654,303
Trading Securities	439,674	445,476
Refundable Income Taxes	309,976	154,393
Receivables	1,152,467	2,142,356
Prepaid Seismic	86,856	86,856
Total Current Assets	25,399,906	24,686,942
Investments:
Equity Investment	365,078	352,995
Other	676,856	672,416
Total Investments	1,041,934	1,025,411
Oil and Gas Properties, at Cost, Based on the Successful Efforts Method of Accounting -
Unproved Properties	1,800,962	1,728,944
Proved Properties	53,036,810	53,110,630
Oil and Gas Properties Gross	54,837,772	54,839,574
Less - Accumulated Depreciation, Depletion, Amortization and Valuation Allowance	38,342,608	36,883,078
Oil and Gas Properties Net	16,495,164	17,956,496
Other Property and Equipment, at Cost	448,263	440,284
Less - Accumulated Depreciation	307,738	329,429
Other Property and Equipment, Net	140,525	110,855
Total Property, Plant and Equipment	16,635,689	18,067,351
Other Assets		391,290
Total Assets	43,077,529	44,170,994
Current Liabilities:
Accounts Payable	211,391	819,010
Other Current Liabilities - Deferred Income Taxes and Other	143,470	263,234
Total Current Liabilities	354,861	1,082,244
Long-Term Liabilities:
Asset Retirement Obligation	1,665,022	1,645,597
Dividends Payable	1,433,682	1,451,635
Deferred Tax Liability, Net	2,869,322	3,249,291
Total Long-Term Liabilities	5,968,026	6,346,523
Total Liabilities	6,322,887	7,428,767
Stockholders' Equity:
Common Stock	92,368	92,368
Additional Paid-in Capital	65,000	65,000
Retained Earnings	37,963,687	37,946,212
Stockholders Equity Before Treasury Stock	38,121,055	38,103,580
Less - Treasury Stock, at Cost	1,366,413	1,361,353
Total Stockholders' Equity	36,754,642	36,742,227
Total Liabilities and Stockholders' Equity	$ 43,077,529	$ 44,170,994

XML

OTHER INCOME / (LOSS), NET

3 Months Ended

Mar. 31, 2015

Other Income Loss Net

OTHER INCOME / (LOSS), NET

Note 2 – OTHER INCOME / (LOSS), NET

The following is an analysis of the components of Other Income / (Loss), Net:

	Three Months Ended
	March 31,
	2015			2014
Net Realized and Unrealized Gain / (Loss) on Trading Securities	$	(5,995	)	$	(45,925	)
Gain on Asset Sales		—			1,123
Interest Income		3,751			5,332
Equity Earnings in Investee		12,083			27,245
Other Income		4,898			7,930
Interest and Other Expenses		(12,004	)		(11,263	)
Other Income / (Loss), Net	$	2,733		$	(15,558	)

XML

INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES

3 Months Ended

Mar. 31, 2015

Investments And Related Commitments And Contingent Liabilities Including Guarantees

INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES

Note 3 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES

Equity Investment consists of a 33% ownership interest in Broadway Sixty-Eight, Ltd. (the “Partnership”), an Oklahoma limited partnership, which owns and operates an office building in Oklahoma City, Oklahoma. Although the Company invested as a limited partner, it agreed, jointly and severally, with all other limited partners to reimburse the general partner for any losses suffered from operating the Partnership. The indemnity agreement provides no limitation to the maximum potential future payments. To date, no monies have been paid with respect to this agreement.

XML

STATEMENTS OF INCOME (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating Revenues:
Oil and Gas Sales	$ 2,152,948	$ 5,275,210
Lease Bonuses and Other	535,214	200,942
Total Operating Revenues	2,688,162	5,476,152
Operating Costs and Expenses:
Production	690,856	844,600
Exploration	150,150	657,471
Depreciation, Depletion, Amortization and Valuation Provisions	1,570,350	867,632
General, Administrative and Other	442,373	438,241
Operating Costs and Expenses	2,853,729	2,807,944
Income / (Loss) from Operations	(165,567)	2,668,208
Other Income / (Loss), Net	2,733	(15,558)
Income / (Loss) Before Provision for Income Taxes	(162,834)	2,652,650
Income Tax Provision/(Benefit):
Current	344,423	902,762
Deferred	(524,733)	(224,815)
Total Income Tax Provision / (Benefit)	(180,310)	677,947
Net Income	$ 17,476	$ 1,974,703
Per Share Data:
Net Income, Basic and Diluted	$ 0.11	$ 12.4
Weighted Average Shares Outstanding, Basic and Diluted	158,659	159,228

XML

ASSET RETIREMENT OBLIGATION (Details Narrative)	3 Months Ended
	Mar. 31, 2015
Asset Retirement Obligation Details Narrative
Current year inflation rate	4.08%
Change in present value, percent	3.25%

XML

Document and Entity Information (USD $)	3 Months Ended
	Mar. 31, 2015	May 08, 2015
Document And Entity Information
Entity Registrant Name	RESERVE PETROLEUM CO
Entity Central Index Key	0000083350
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		158,553
Entity Common Stock, Par Value Per Share	$ 0.50
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

XML

ASSET RETIREMENT OBLIGATION (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Asset Retirement Obligation Details
Asset retirement obligation liability, beginning Balance	$ 1,645,597
Liabilities incurred for new wells	7,542
Liabilities settled (wells sold or plugged)
Accretion expense	11,883
Asset retirement obligation at end of year	$ 1,665,022

XML

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Condensed Statements Of Cash Flows
Net Cash Provided by Operating Activities	$ 2,492,388	$ 3,264,333
Cash Flows Applied to Investing Activities:
Proceeds from Disposal of Property, Plant and Equipment		200
Purchase of Property, Plant and Equipment	(911,863)	(1,318,627)
Cash Distribution from Equity Investee		40,095
Other Investments	(4,440)
Net Cash Applied to Investing Activities	(916,303)	(1,278,332)
Cash Flows Applied to Financing Activities:
Dividends Paid to Stockholders	(17,953)	(12,740)
Purchase of Treasury Stock	(5,060)	(59,585)
Total Cash Applied to Financing Activities	(23,013)	(72,325)
Net Change in Cash and Cash Equivalents	1,553,072	1,913,676
Cash and Cash Equivalents at Beginning of Period	15,203,558	10,764,506
Cash and Cash Equivalents at End of Period	$ 16,756,630	$ 12,678,182

XML

OTHER INCOME / (LOSS), NET (Tables)

3 Months Ended

Mar. 31, 2015

Other Income Loss Net Tables

Schedule of components of other income, net

The following is an analysis of the components of Other Income / (Loss), Net:

	Three Months Ended
	March 31,
	2015			2014
Net Realized and Unrealized Gain / (Loss) on Trading Securities	$	(5,995	)	$	(45,925	)
Gain on Asset Sales		—			1,123
Interest Income		3,751			5,332
Equity Earnings in Investee		12,083			27,245
Other Income		4,898			7,930
Interest and Other Expenses		(12,004	)		(11,263	)
Other Income / (Loss), Net	$	2,733		$	(15,558	)

XML

NEW ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2015

New Accounting Pronouncements

NEW ACCOUNTING PRONOUNCEMENTS

Note 7 – NEW ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP under which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company beginning January 1, 2018. The new standard allows application either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the adoption method and the impact ASU 2014-09 will have on the Company, but it is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (“ASU 2015-03”). The standard requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The Company currently has no debt nor any plans to issue any debt. Accordingly, adoption of ASU 2015-03 will have no effect on the Company’s financial position, results of operations or cash flows.

There were no other accounting pronouncements issued and none that became effective since December 31, 2014 that were directly applicable to the Company.

XML

FAIR VALUE MEASUREMENTS (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Liabilities incurred	$ 7,542
Impairment losses on oil and gas properties	556,734
Measured on a Non-Recurring Basis [Member] | Level 3 Inputs [Member]
Liabilities incurred	$ 7,542	$ 26,651

XML

OTHER INCOME / (LOSS), NET (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Components of Other Income:
Net realized and unrealized gain / (loss) on trading securities	$ (5,995)	$ (45,925)
Gains on asset sales		1,123
Interest income	3,751	5,332
Equity Earnings in Investee	12,083	27,245
Other Income	4,898	7,930
Interest and Other Expenses	(12,004)	(11,263)
Other Income/(Loss), Net	$ 2,733	$ (15,558)

XML

ASSET RETIREMENT OBLIGATION (Tables)

3 Months Ended

Mar. 31, 2015

Asset Retirement Obligation Tables

Schedule of asset retirement obligation

A reconciliation of the Company’s asset retirement obligation liability is as follows:

Balance at December 31, 2014	$	1,645,597
Liabilities incurred for new wells (net of revisions)		7,542
Liabilities settled (wells sold or plugged)		—
Accretion expense		11,883
Balance at March 31, 2015	$	1,665,022

XML

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of fair value reported on a recurring basis

At March 31, 2015 and December 31, 2014, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	March 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		280,533		—		—
International Equities		131,674		—		—
Others		27,467		—		—

	December 31, 2014
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		183,168		—		—
International Equities		124,998		—		—
Others		137,310		—		—

XML

INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES (Details Narrative)	Mar. 31, 2015
Investments And Related Commitments And Contingent Liabilities Including Guarantees Details Narrative
Ownership in Broadway Sixty-Eight, Ltd., classified as an equity investment	33.00%

XML

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2015

Basis Of Presentation

BASIS OF PRESENTATION

Note 1 – BASIS OF PRESENTATION

The accompanying balance sheet as of December 31, 2014, which has been derived from audited financial statements, the unaudited interim financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

In the opinion of Management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year.

XML

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

Note 6 – FAIR VALUE MEASUREMENTS

Inputs used to measure fair value are organized into a fair value hierarchy based on the observability of the inputs. Level 1 inputs consist of quoted prices in active markets for identical assets. Level 2 inputs are inputs, other than quoted prices, for similar assets that are observable. Level 3 inputs are unobservable inputs.

Recurring Fair Value Measurements

Certain of the Company’s assets are reported at fair value in the accompanying balance sheets on a recurring basis. The Company determined the fair value of the available-for-sale securities using quoted market prices for securities with similar maturity dates and interest rates. At March 31, 2015 and December 31, 2014, the Company’s assets reported at fair value on a recurring basis are summarized as follows:

	March 31, 2015
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		280,533		—		—
International Equities		131,674		—		—
Others		27,467		—		—

	December 31, 2014
	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Financial Assets:
Available-for Sale Securities –
U.S. Treasury Bills Maturing in 2015	$	—	$	6,654,303	$	—
Trading Securities:
Domestic Equities		183,168		—		—
International Equities		124,998		—		—
Others		137,310		—		—

Non-Recurring Fair Value Measurements

The Company’s asset retirement obligation represents a non-recurring fair value liability. The fair value of the non-financial liability incurred in the quarter ended March 31, was $7,542 in 2015 and $26,651 in 2014 and was calculated using Level 3 inputs. See Note 5 above for more information about this liability and the inputs used for calculating fair value.

The impairment losses in the quarter ended March 31 of $556,734 for 2015, with none for 2014, also represents non-recurring fair value expenses calculated using Level 3 inputs. See Note 10 – LONG-LIVED ASSETS IMPAIRMENT LOSS on page 29 of the 2014 Form 10-K for a description of the impairment loss calculation.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, marketable securities, trade payables and dividends payable. At March 31, 2015 and December 31, 2014, the historical cost of cash and cash equivalents, trade receivables, trade payables and dividends payable are considered to be representative of their respective fair values due to the short-term maturities of these items.

XML

FAIR VALUE MEASUREMENTS (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Fair value on a recurring basis:
Available-for-Sale Securities	$ 6,654,303	$ 6,654,303
Trading Securities	439,674	445,476
Measured on a Recurring Basis [Member] | Level 1 Inputs [Member] | Domestic Equities [Member]
Fair value on a recurring basis:
Trading Securities	280,533	183,168
Measured on a Recurring Basis [Member] | Level 1 Inputs [Member] | International Equities [Member]
Fair value on a recurring basis:
Trading Securities	131,674	124,998
Measured on a Recurring Basis [Member] | Level 1 Inputs [Member] | Other [Member]
Fair value on a recurring basis:
Trading Securities	27,467	137,310
Measured on a Recurring Basis [Member] | Level 2 Inputs [Member] | US Treasury Bills Maturing in the next Twelve Months [Member]
Fair value on a recurring basis:
Available-for-Sale Securities	$ 6,654,303	$ 6,654,303