Capitalization of Costs Incurred in Oil and Gas Activities

3 Months Ended

Dec. 31, 2014

Oil and Gas Properties [Abstract]

CAPITALIZATION OF COSTS INCURRED IN OIL AND GAS ACTIVITIES

4. CAPITALIZATION OF COSTS INCURRED IN OIL AND GAS ACTIVITIES

The Company accounts for the cost of its oil sands projects and continues to capitalize project costs after the completion of drilling, equipping and facility construction as long as sufficient progress is being made in assessing the oil sands reserves to justify the oil sands project as a producing well.

For the period ended December 31, 2014, the Company’s management determined that sufficient progress has been made in assessing its oil sands reserves for continued capitalization of exploratory drilling, equipping and facility costs. In relation to this sufficient progress assessment of its oil sands project the Company considered among other criteria; long lead times in getting regulatory approval for oil sands thermal recovery projects, road bans, winter access only properties and governmental and environmental regulations which can and often delay development of oil sands projects. Because of these and other factors, the Company’s oil sands project can take significantly longer to complete than regular conventional drilling programs for lighter oil. To date the Company’s geological, engineering, economic studies, and AER approved thermal recovery projects; including the Company’s now producing SAGD Project, continue to lead them to believe that there is continuing progress toward bringing the project to commercial production. Therefore, the Company has continued to capitalize its costs associated with its oil sands project.

For the Company’s oil sands projects, exploratory drilling, equipping and facility costs are capitalized on the balance sheet under “Oil and Gas Properties” line item, pending a determination of whether potentially economic oil sands reserves have been discovered by the drilling effort to justify oil sands project as a producing well. The Company periodically assesses the exploration drilling, equipping and facility capitalized costs for impairment and once a determination is made that a well is of no potential economic value, the costs related to that oil sands project are expensed as dry hole and reported in exploration expense. No impairments to the Company’s long-lived assets were identified or recorded in the three months ended December 31, 2014 or in the fiscal year ended September 30, 2014.

The following table illustrates capitalized costs relating to oil producing activities for the three months ended December 31, 2014 and the fiscal year ended September 30, 2014:

	December 31, 2014			September 30, 2014
Unproved Oil and Gas Properties	$	19,668,577		$	19,651,296
Proved Oil and Gas Properties		4,568			4,568
Accumulated Depreciation and Depletion		(54,950	)		(51,814	)
Net Capitalized Cost	$	19,618,195		$	19,604,050