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Nevada
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0-7246
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95-2636730
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(State
or Other Jurisdiction of
Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
Number)
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Item
4.01.
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Change
in Registrants Certifying
Accountant
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·
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The
Company did not have effective policies and procedures to ensure
the
timely reconciliation, review and adjustment of significant balance
sheet
and income statement accounts. As a result, material misstatements
were
identified during the Company's closing process in certain significant
balance sheet and income statement accounts of the Company’s 2006
consolidated financial statements. This deficiency resulted in
a more than
remote likelihood that a material misstatement of the Company’s annual or
interim financial statements would not be prevented or detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise to ensure proper accounting for
derivative
instruments. Specifically, the Company’s internal control processes did
not ensure the completeness of all derivative contracts related
to oil and
gas sales, and also did not ensure the determination of the fair
value of
certain derivatives. As a result, misstatements were identified
in the
fair value of derivatives and related income statement accounts
of the
Company’s 2006 consolidated financial statements. This deficiency resulted
in a more than remote likelihood that a material misstatement of
the
Company’s annual or interim financial statements would not be prevented
or
detected.
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·
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The
Company did not have effective policies and procedures to ensure
proper
accounting for oil and gas properties. Specifically, the Company’s review
procedures were not sufficient to ensure that the calculations
of
depreciation and depletion were performed accurately and that the
capitalization of costs was performed in accordance with the applicable
authoritative accounting guidance. As a result, misstatements were
identified in 2006 in depreciation, depletion and amortization
expense of
the Company’s consolidated financial statements. This deficiency resulted
in a more than remote likelihood that a material misstatement of
the
Company’s annual or interim financial statements would not be prevented
or
detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise, to properly account for derivative
transactions in accordance with generally accepted accounting principles.
Specifically, the Company's policies and procedures relating to
derivatives transactions were not designed effectively to ensure
that each
of the requirements for hedge accounting was evaluated appropriately
with
respect to the Company's commodity based derivatives. Additionally,
the
Company's policies and procedures relating to the derivative transactions
entered into on behalf of affiliated partnerships were not adequate
to
ensure these transactions were recorded properly in the financial
statements. As a result, a misstatement was identified in the fair
value
of derivatives and the oil and gas price risk management loss accounts
that was corrected prior to the issuance of the Company's 2005
consolidated financial statements. This deficiency results in more
than a
remote likelihood that a material misstatement of the Company's
annual or
interim consolidated financial statements would not be prevented
or
detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise, to ensure compliance with appropriate
accounting principles for its oil and gas properties. Specifically,
the
Company's policies and procedures were not designed effectively
to ensure
that the calculation of depreciation and depletion and the determination
of impairments were performed in accordance with the applicable
authoritative accounting guidance. As a result, misstatements were
identified in the accumulated depreciation, depletion and amortization
and
the depreciation, depletion and amortization expense accounts that
was
corrected prior to the issuance of the Company's 2005 consolidated
financial statements. This deficiency results in more than a remote
likelihood that a material misstatement of the Company's annual
or interim
consolidated financial statements would not be prevented or
detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise, to ensure proper accounting and
disclosure
for income taxes. Specifically, the Company's policies and procedures
did
not provide for appropriate control documentation or supervisory
review of
permanent and temporary differences, or assessment of tax reserves
to
ensure that they were properly reflected and disclosed in the Company's
financial statements. As a result, misstatements were identified
in the
deferred income tax liability and income tax expense accounts in
the
Company's preliminary 2005 consolidated financial statements. This
deficiency results in more than a remote likelihood that a material
misstatement of the Company's annual or interim consolidated financial
statements would not be prevented or detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise, to ensure that its accounting for
asset
retirement obligations complied with generally accepted accounting
principles. Specifically, the Company's policies and procedures
regarding
the estimate of the fair value of the asset retirement obligations
were
not designed effectively to ensure that it was estimated in accordance
with FAS No. 143, Asset Retirement Obligations. This deficiency
results in more than a remote likelihood that a material misstatement
of
the Company's annual or interim consolidated financial statements
would
not be prevented or detected.
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·
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The
Company did not have effective policies and procedures, or personnel
with
sufficient technical expertise, to provide for adequate monitoring
and
assessment of the application of accounting principles, standards
or rules
as it relates to proportionate consolidation in a timely manner.
As a
result of this control deficiency, the Company did not appropriately
eliminate its proportionate share of transactions with the Company
sponsored limited partnerships, which resulted in the restatement
of the
Company's financial statements for the first three quarters of
2005, the
years ended December 31, 2004, 2003, 2002, and 2001 and each of
the
quarters in 2004 and 2003.
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Item
9.01.
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Financial
Statements and Exhibits.
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Letter
from KPMG LLP to the Securities and Exchange Commission dated May
31,
2007.
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Date:
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May
31, 2007
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By:
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/s/
Richard W. McCullough
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Richard
W. McCullough
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Chief
Financial Officer
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