Property and Equipment, Net

9 Months Ended

Sep. 30, 2014

At September 30, 2014, Property and Equipment, Net consisted of the following;

			Accumulated
			Depreciation,
			Depletion and
	Gross		Amortization		Net
Oil and gas proved properties:
Lease acquisition costs:
Chrane lease (Taylor County, TX)	$	70,449	$	779	$	69,670
Brown Snyder leases (Jones County, TX) *		39,522		-		39,522
Burnett Tidewater leases (Wichita County, TX) *		13,574		-		13,574

Subtotals		123,545		779		122,766

Capitalized workover costs:
Chrane lease **		63,676		758		62,918
Brown Snyder leases *		-		-		-
Burnett Tidewater leases *		3,100		37		3,063

Subtotals		66,776		795		65,981

Asset retirement obligations:
Chrane lease		835		22		813
Brown Snyder leases *		797		-		797
Burnett Tidewater leases *		2,258		-		2,258

Subtotals		3,890		22		3,868

Totals	$	194,211	$	1,596	$	192,615

*	The wells associated with the Brown Snyder and Burnett Tidewater leases currently have nominal barrels of oil production. In the opinion of Management, the total recoverable barrels from these wells can be increased by the completion of workovers. Accordingly, management believes it is premature to impair part or all of the net capitalized costs associated with these leases (a total of $40,319 for the Brown Snyder leases and a total of $18,895 for the Burnett Tidewater leases). Completion of the workovers is dependent on the Company’s ability to raise sufficient financing to pay for the work. In September 2014, the Company incurred capitalized workover costs of $3,100 relating to the repair of a fiberglass tank located on the Burnett Tidewater leases' site.

**	In August 2014 and September 2014, the Company incurred capitalized workover costs of $63,676 relating to the refurbishment of rigs for two wells located on the Chrane lease site. As a result, future oil production for these two wells is expected to increase.

As discussed in Note 1 above, the above leasehold interests were acquired effective May 31, 2014 from Sterling in exchange for approximately 97% of the issued and outstanding common stock of XRT. Sterling acquired the leases from various entities controlled by the Company’s Chief Executive Officer, Akram Chaudhary (“Chaudhary”) for nominal consideration. Accordingly, the lease acquisition costs and asset retirement obligations relating to the leasehold interests acquired from Sterling were recorded at the estimated original cost to Chaudhary’s affiliates in arms length transactions less estimated applicable depletion commencing from the respective original acquisition dates; December 1, 1996 for the Chrane lease, September 1, 1993 for the Brown Snyder leases and September 1, 1993 for the Burnett Tidewater leases.

- Definition

The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

XR Energy Inc. 10-Q