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NEWS

 

FOR RELEASE: November 4, 2010

HKN Announces Continued Positive Cash Flow from Operations And Net Income Attributable to the Company of $1.9 Million

Dallas, Texas – November 4, 2010 – HKN, Inc. (NYSE Amex: HKN) (“HKN”) today reported its interim financial results for the three and nine months ended September 30, 2010. HKN reported net income attributable to the Company of $1.9 million during the nine months ended September 30, 2010 as compared to a net loss of $1.7 million for the respective prior period in 2009.  

·         During 2010, our oil and gas revenue has been comprised of approximately 87% oil sales and 13% natural gas sales. During this quarterly period, our results of operations reflected increased oil and natural gas revenues as a result of both increased commodity prices and increased natural gas production. 

 

·         Natural gas production increased 35% in the third quarter 2010 compared to the prior year period due primarily due to the successful recompletion of one of our wells (the SL 14589 #3)  in our Lake Raccourci field.  We hold an average 55% operated working interest in the wells in this field. 

 

·         Our oil revenues increased slightly by $50 thousand to approximately $2.4 million during the third quarter 2010. We realized a 14% increase in oil prices received, while overall oil production decreased by 10% in the third quarter 2010 primarily as a result of downtime at our Main Pass 35 field. We experienced lower than normal production at this property during the third quarter as a result of the flowline repairs as well as compressor maintenance and repairs. Also, during 2010, work continued on pipeline modifications mandated by the Corps of Engineers to a third-party gas sales line that serves our Main Pass 35 offshore facility. The work had previously been postponed due to the Mississippi River conditions, but we anticipate that work will be completed during November 2010.  We also began work to upgrade the flowlines and to increase capacity at our Main Pass 35 facility which will allow us to bring additional third party or operated production volumes through the facility in the future.  We experienced lower than normal production at this property during the third quarter as a result of the flowline repairs as well as compressor maintenance and repairs.

 

·         Our investments in both Global Energy Development PLC (“Global”) and BriteWater International LLC (“BWI”) represent a significant concentration of value of our assets.   Global is a petroleum exploration and production company focused on Latin America, and their shares are traded on the AIM, a market operated by the London Stock Exchange.   BWI is a privately-held company which owns a patented oilfield emulsion breaking “OHSOL” technology which can be used to purify oilfield emulsions by breaking and separating the emulsions into oil, water and solids to recover hydrocarbons and reduce wastes.  During 2010, we extended financing notes to both Global and BWI in order to promote the development activities of these companies while also earning a 10% and 8% annualized rate of return, respectively, on our funds during the term of these notes. At September 30, 2010, the outstanding principal balance of the notes receivable from Global and BWI were $5 million and $1.7 million, respectively. Both loans are secured and provide for cash interest payments either on a monthly or quarterly basis, respectively. 


HKN’s operating results for the three and nine months ended September 30, 2010 and 2009 are as follows: (in thousands, except for share and per share amounts)



Balance Sheet Summary (in thousands)


(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)

Management believes the presentation of this non-GAAP financial measure, in connection with the results for the three and nine months ended September 30, 2010 and 2009, 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, natural gas and coalbed methane 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 18, 2010. HKN undertakes no duty to update or revise any forward-looking statements.  Actual results may vary materially.

 

 

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