RELEASE: May 8, 2012
HKN Announces First Quarter 2012 Results
Texas – May 8, 2012 – HKN,
Inc. (NYSE Amex: HKN) (“HKN”) today reported its interim financial results for
the three months ended March 31, 2012.
first quarter of 2012, HKN continued to focus on enhancing value for our
shareholders through the development of a well-balanced portfolio of assets in
the energy industry. Our cash balance at
March 31, 2012 was approximately $30 million, and we continue to hold no
the majority of the value of our assets is derived from BriteWater
International, Inc. (“BriteWater”), our investment in publicly-traded common
shares of Global Energy Development PLC (“Global”), and our notes receivable extended
BriteWater International, Inc.
continues to devote substantial resources to the development and
commercialization of our wholly-owned subsidiary BriteWater. BriteWater is
currently designing standardized OHSOL modules which can be configured for use
in both upstream and downstream applications in the oil and gas industry,
including oil field and refinery emulsions and oil spill remediation. BriteWater
also has an existing purpose-built plant which can be used to break emulsions
found in weathered lagoon pits. BriteWater continues to market this plant and
hopes to deploy it to a location in North Africa or the Middle East during the
second half of 2012.
is currently pursuing opportunities to
commercialize our patented OHSOL emulsion-breaking technology. BriteWater and
its wholly-owned subsidiary, Arctic Star Alaska, Inc. (“Arctic Star”) signed
contracts during 2011 and 2012 which grant Arctic Star the right of first
refusal for oilfield emulsions generated in certain fields on the Alaska North
Slope (“ANS”). Arctic Star has also secured an option which grants it the right
of first refusal to lease a location on the ANS on which it plans to locate one
of the standardized plant designs. This plant will allow Arctic Star to recover
saleable crude oil from oil field waste for sale into the market. Arctic Star
anticipates that construction of the plant will begin during the second half of
At March 31,
2012, HKN owned approximately 34% of Global’s ordinary shares. Global is a
publicly-traded oil and gas company listed on the Alternative Investment Market
(“AIM”), a market operated by the London Stock Exchange. Global is a Latin America focused
petroleum exploration and production company with assets in Colombia and Peru.
Our investment in Global is carried at its market value as
follows (in thousands, except for the share amounts):
currency translation adjustment of approximately $664 thousand and the
unrealized gain of approximately $982 thousand for the changes in market value
between the two dates shown, provide the components of the $1.6 million gain
recorded in our statement of comprehensive income for the three months ended March
Global Notes Receivable - In January 2012, we executed a new Loan Agreement (the
“Global Loan”) with Global which provides the principal amount of $12 million. The
Global Loan is currently unsecured, but we can require Global to provide
adequate collateral security in the event of a material adverse effect, as
determined in our sole discretion. The Global Loan is due and payable to us on
or before September 30, 2013 and bears interest at 10.5% per annum. Accrued and
unpaid interest on the outstanding principal amount is due and payable on the
last day of each quarter.
We had previously issued a separate note to Global in
2010 in the amount of $5 million (“Global Note Receivable”). The Global Note Receivable is due and payable
to us on or before September 14, 2012 and bears interest at 10.5% per annum. This
note is fully secured by oil producing assets of Global, and interest is paid
on a monthly basis.
Operating Results Update
from continuing operations improved from a loss of $919 thousand in the first
quarter 2011 to a loss of $871 thousand for the first quarter 2012, primarily
as a result of increased interest income generated by a loan to Global in the
current year which was partially offset by increased selling, general and
administrative expenses (“SG&A”).
During the three
months ended March 31, 2012, SG&A were approximately $1.2 million as
compared to approximately $995 thousand during the 2011 period. The increase was
primarily due to higher consulting and personnel related expenses for
BriteWater which have grown as we continue to increase the resources used for
the commercial development of BriteWater.
and other income from related parties increased from $129 thousand in 2011 to $362
thousand in 2012, primarily due to interest earned on the Global Loan which was
issued in January 2012.
We sold our
oil and gas properties in the prior year and our quarterly operating results
have been restated to reflect our oil and gas operations as discontinued
operations. Our income (loss) from
discontinued operations decreased from income of $239 thousand in the first
quarter 2011 to a loss of $177 thousand for the first quarter 2012. The current
year loss is primarily due to additional legal costs related to the divestitures
and bad debt expense on a potentially uncollectible oil and gas receivable
We recognized an adjustment to the loss of $82 thousand on the 2011
Gulf Coast oil and gas divestitures during the first quarter 2012 as a result
of increases in retained liabilities for plugging and abandonment costs on sold
and abandoned fields.
HKN, Inc. is an
independent energy company engaged in the development of a well-balanced
portfolio of assets in the energy industry and in the active management of our
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 March 2, 2012.
HKN undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.