The increase in total revenue for this reporting period is attributed to higher production. This was offset somewhat by lower oil and natural gas prices, which averaged approximately $89.23 per barrel in the second quarter of 2012 as compared to $98.37 per barrel in the same period last year. Natural gas prices averaged $4.58 per MCF in this quarter as compared to $5.04 per MCF in the same quarter of 2011. Sales volumes increased by 28% on a BOE basis, primarily due to production from the new well in New Mexico.Lease operating expenses increased 31% or $204,421 to $853,560 for the three month period ended June 30, 2012 from the comparable 2011 period. This was primarily due to increases in costs associated with new field production and in workover expense and remedial repairs in 2012 as compared to 2011. The increased volumes account for approximately $184,000 of increase in lease operating expenses. Lifting costs per BOE increased 3% or $0.72 to $29.45 for the period. We anticipate lease operating expenses to increase over the following quarters due to additional remedial repairs and workover expenses. Depletion and depreciation increased 59% or $145,500 to $393,500 for the three month period ended June 30, 2012 versus $248,000 in the 2011 comparable period. This was primarily due to the addition of the new East Lusk well and higher production during the quarter ended June, 30, 2012 as compared to the same period in 2011. General and administrative overhead cost increased 3% or $6,592 to $219,871 for the three-month period ended June 30, 2012 from the three-month period ended June 30, 2011. This was primarily attributable to an increase in legal, consulting and administration services during the 2012 period. At this time, the Company anticipates general and administrative expenses to increase in the coming quarters. Other income, net for the quarter ended June 30, 2012, were $458,750 compared to other expense, net of $145,402 for quarter ended June 30, 2011. The net increase was primarily due to a $444,000 unrealized gain and a $77,331 realized gain on commodity derivatives during the 2012 period. We expect the unrealized gain to decrease in the coming quarters. Financial Highlights for the Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011:
- Total revenues increased 49% to $5,429,705 from $3,644,360;
- Net Income increased to $1,513,958 from $788,196; and
- Earnings per share, basic $0.19 and fully diluted at $0.18.