HKN, Inc. (NYSE Amex: HKN) ("HKN") today reported its interim
financial results for the three and nine months ended September 30,
2011.
Financial Condition
During the third quarter of 2011, we closed our mandatory offer
whereby 234,306 shares of Global Energy Development, PLC ("Global")
were tendered to HKN at a cost of approximately $261 thousand. We
also continued to progress our marketing efforts for our Gulf Coast
properties through Burks Oil and Gas Properties, Inc., and a
decision on any potential divestiture of our remaining properties
will be reached during the fourth quarter of 2011. Industry
conditions continue to indicate that divesting of these properties
during 2011 may provide the greatest opportunity to receive value
for these assets while eliminating future pricing, operating, and
regulatory risks to the company. Any proceeds received from the
sales of our oil and gas properties may enable our company to
invest into areas of the oil and gas industry which could generate
greater value for our shareholders while carrying significantly
lower operational and regulatory risks.
Our cash balance at September 30, 2011 was $25.8 million, which
included approximately $18.3 million in restricted cash which was
held in escrow related to the Global offer. These funds were
released from escrow during October after the tendered shares were
settled. Our working capital increased from $8.4 million at
December 31, 2010 to $29.1 million at September 30, 2011, and we
continue to hold no debt. The increase in cash and working capital
was due to proceeds received from the Creole divestiture and rights
offering, discussed in previous quarterly reports.
Investment in BriteWater International,
LLC
During the quarter, BriteWater continued to pursue opportunities
to commercialize our patented OHSOL emulsion-breaking technology
and began the planning and design of two plants which will utilize
this technology. These plants will allow the recovery and sale of
oil volumes from refinery and oilfield emulsion waste materials
which are lost through current waste disposal methodologies in the
industry.
Investment in Global Energy Development,
PLC
At September 30, 2011, HKN owned approximately 34% of Global's
ordinary shares. Our investment in Global is carried at its market
value as follows (in thousands, except for the share amounts):
September 30, December 31,
2011 2010
-------------- --------------
Shares of Global Stock Held by HKN 12,127,768 11,893,462
Closing price of Global Stock GBP 0.855 GBP 1.09
Foreign Currency Exchange Rate 1.5581 1.5524
-------------- --------------
Market Value of Investment in Global $ 16,156 $ 20,136
============== ==============
The foreign currency translation adjustment of approximately
$234 thousand and the unrealized loss of approximately $4.5 million
for the decline in market value between the two dates shown,
provide the primary components of the $4.2 million loss recorded in
other comprehensive income in stockholders' equity for the nine
month period ended September 30, 2011.
During June 2011, we announced our obligation to make an offer
for shares of Global at a price of 72 pence. This offer closed on
September 30, 2011, and 234,306 shares of Global stock were
tendered to HKN at a cost of approximately $261 thousand. As a
result of the shares tendered in the offer, our ownership interest
in Global increased by approximately 0.65%.
Operating Results Update
Our year-to date operating results continue to be significantly
below 2010 results. Although our net income for the third quarter
increased over the third quarter of 2010 by approximately 132%,
commodity pricing increases during 2011 were more than offset by
production decreases as a result of weather-related issues and
divestitures that occurred during our first and second
quarters.
Following record-setting cold weather at our Louisiana
properties during the first quarter and downtime and repairs at our
Main Pass field during the second quarter, production rates at our
Main Pass field returned to normal levels during the third quarter.
In addition to these factors, overall oil and gas production levels
continue to be lower than our 2010 levels as a result of our Creole
field divestiture during the first quarter of 2011 and the Allen
Ranch, Point au Fer, and NW Speaks field divestitures in the second
quarter of 2011.
Although oilfield costs of $5.7 million for the nine months
ended September 2011 were higher than $5.3 million recorded for the
same period during 2010, this is primarily the result of $560
thousand in refunded severance taxes received during the 2010
period. Excluding these refunds, actual oilfield costs decreased
during the 2011 period as a result of the current year property
divestitures, but these were partially offset by increased repair
costs during the current year. These repair costs were primarily
due to projects to restore production at Lake Raccourci and the
cold-weather related repairs at our Main Pass facility.
During the nine months ended September 30, 2011, general and
administrative expenses were approximately $2.9 million as compared
to approximately $2.4 million during the 2010 period. These
increases were primarily the result of increased business
development activities related to our BriteWater subsidiary as they
develop the Arctic Star project on the North Slope of Alaska. Legal
and regulatory costs related to our IRS contingency and Global
mandatory offer also contributed to the increase.
During the nine months ended September 30, 2010, we sold our
remaining investment in Spitfire Energy, Ltd. ("Spitfire") for cash
proceeds of $3.3 million and realized a gain on sale of assets of
$1.9 million.
HKN's operating results for the three and nine months ended
September 30, 2011 and 2010 are as follows (in thousands except for
share and per share amounts)
Three Months Ended
September 30,
------------------------
2011 2010
------------ -----------
Oil Revenues $ 2,958 $ 2,419
Gas Revenues $ 281 $ 442
Oil and Gas Processing and Handling Income $ 405 $ 316
Oil and Gas Operating Expenses $ 1,860 $ 2,029
General and Administrative Expenses $ 862 $ 899
Operating Margin (Non-GAAP; see reconciliation
below) $ 922 $ 249
Interest and Other Expenses $ - $ 22
Interest and Other Income $ 175 $ 129
Depreciation, Depletion, Amortization and
Accretion $ 952 $ 806
Net Income (Loss) $ 145 $ (450)
Net Loss Attributable to Noncontrolling Interests $ 7 $ 221
Net Income (Loss) Attributable to HKN, Inc. $ 152 $ (229)
Net Income (Loss) Attributed to Common Stock $ 148 $ (233)
Basic and Diluted Net Income (Loss) per Common
Share $ 0.01 $ (0.02)
Basic and Diluted Weighted Average Common Shares
Outstanding 18,726,901 9,629,855
Nine Months Ended
September 30,
-------------------------
2011 2010
----------- ------------
Oil Revenues $ 7,849 $ 7,319
Gas Revenues $ 407 $ 1,095
Oil and Gas Processing and Handling Income $ 1,097 $ 923
Oil and Gas Operating Expenses $ 5,739 $ 5,313
General and Administrative Expenses $ 2,926 $ 2,371
Operating Margin (Non-GAAP; see reconciliation
below) $ 688 $ 1,653
Interest and Other Expenses $ 24 $ 64
Interest and Other Income $ 483 $ 290
Depreciation, Depletion, Amortization and
Accretion $ 2,191 $ 2,300
Gain on Sale of Investment $ - $ 1,887
Net Income (Loss) $ (1,044) $ 1,446
Net Loss Attributable to Noncontrolling Interests $ 326 $ 476
Net Income (Loss) Attributable to HKN, Inc. $ (718) $ 1,922
Net Income (Loss) Attributed to Common Stock $ (722) $ 1,918
Basic and Diluted Net Income (Loss) per Common
Share $ (0.05) $ 0.20
Basic Weighted Average Common Shares Outstanding 15,187,973 9,579,462
Diluted Weighted Average Common Shares Outstanding 15,187,973 9,582,872
Balance Sheet Summary (in thousands of dollars)
September 30, December 31,
-------------- --------------
2011 2010
-------------- --------------
Current Ratio (1) 7.98 to 1 3.27 to 1
Working Capital (2) $ 29,129 $ 8,375
Cash and Cash Equivalents (including
restricted cash) $ 25,751 $ 4,815
Total Debt $ - $ -
Stockholders' Equity $ 73,734 $ 65,112
Total Liabilities to Equity 0.19 to 1 0.22 to 1
(1) Current ratio is calculated as current assets divided by current
liabilities.
(2) Working capital is the difference between current assets and current
liabilities.
NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Income (Loss) (in thousands)
Three Months Ended
September 30,
--------------------
2011 2010
--------- ---------
Net Income (Loss) - GAAP $ 145 $ (450)
Depreciation, Depletion, Amortization and Accretion 952 806
Interest and Other Expenses - 22
Interest and Other Income (175) (129)
-------- --------
Operating Margin $ 922 $ 249
======== ========
Nine Months Ended
September 30,
--------------------
2011 2010
--------- ---------
Net Income (Loss) - GAAP $ (1,044) $ 1,466
Depreciation, Depletion, Amortization and Accretion 2,191 2,300
Interest and Other Expenses 24 64
Interest and Other Income (483) (290)
Gain on Sale of Investment - (1,887)
-------- --------
Operating Margin $ 688 $ 1,653
======== ========
Management believes the presentation of this non-GAAP financial measure, in
connection with the results for the three and nine months ended September
30, 2011 and 2010, provides useful information to investors regarding our
results of operations. Management also believes that this non-GAAP
financial measure provides a picture of our results that is comparable
among reporting periods and provides factors that influenced performance
during the period under the report. This non-GAAP financial measure should
be considered in addition to, and not as a substitute for, financial
measures prepared in accordance with GAAP.
HKN, Inc. is an independent energy company engaged in the
development and production of crude oil and natural gas assets and
in the active management of energy-based investments. Additional
information may be found at the HKN Web site, www.hkninc.com.
Please e-mail all investor inquiries to
Investorrelations@hkninc.com.
Certain statements in this announcement and
inferences derived therefrom may be regarded as "forward-looking
statements" within the meaning of the Securities Exchange Act of
1934, as amended. These forward-looking statements are based on the
opinions and estimates of management at the time the statements are
made. Management's current view and plans, however, are subject to
numerous known and unknown risks, uncertainties and other factors
that may cause the actual results, performance, timing or
achievements of HKN to be materially different from any results,
performance, timing or achievements expressed or implied by such
forward-looking statements. The various uncertainties, variables,
and other risks include those discussed in detail in the Company's
SEC filings, including the Annual Report on Form 10-K filed on
February 17, 2011. HKN undertakes no duty to update or revise any
forward-looking statements. Actual results may vary
materially.
Hkn, Inc. (AMEX:HKN)
Historical Stock Chart
From Apr 2024 to May 2024
Hkn, Inc. (AMEX:HKN)
Historical Stock Chart
From May 2023 to May 2024
