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.
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.
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.
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,
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.
of Operating Margin to Net Income (Loss) (in thousands)
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