Asset Retirement Obligations

3 Months Ended

Dec. 31, 2011

10. Asset Retirement Obligations

The total future asset retirement obligation is estimated by management based on the Company’s net working interests in all wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be incurred in future periods. At December 31, 2011, the Company estimates the undiscounted cash flows related to asset retirement obligation to total approximately $640,870 (September 30, 2011 - $644,226). The fair value of the liability at December 31, 2011 is estimated to be $398,220 (September 30, 2011 - $387,368) using a risk free rate of 3.74% and an inflation rate of 2%. The actual costs to settle the obligation are expected to occur in approximately 35 years.

Changes to the asset retirement obligation were as follows:

	December 31, 2011		September 30, 2011
Balance, beginning of year	$	387,368	$	386,934
Liabilities incurred		—		—
Effect of foreign exchange		7,176		(5,490	)
Disposal		—		(6,839	)
Accretion expense		3,676		12,763
Balance, end of year	$	398,220	$	387,368

- Definition

The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.

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