Delaware
|
95-2841597
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
180
State Street, Suite 200
|
76092
|
Southlake,
Texas
|
(Zip
Code)
|
(Address
of principal executive offices)
|
Title
of each class:
|
Name
of each exchange on which registered:
|
Common
Stock, Par Value $0.01 Per Share
|
NYSE
ALTERNEXT US
|
Page
|
||
PART
I.
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||
4
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||
8
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15
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15
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16
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||
16
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||
PART
II.
|
||
17
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||
19
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||
20
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||
41
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||
42
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||
77
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||
77
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||
PART
III.
|
||
80
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||
80
|
||
80
|
||
80
|
||
80
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||
PART
IV.
|
||
81
|
|
·
|
Deploying
assets into energy-based opportunities to build annual measurable value
and/or cash flow,
|
|
·
|
Optimizing
the value of our assets and
|
|
·
|
Monetizing
assets that have reached their full potential, that do not have an
expectation of near-term value enhancement or that represent a
disproportionate concentration of value in one
asset.
|
Average
Working
Interest
|
Average
Revenue
Interest
|
||
Lake
Raccourci
|
40%
|
28%
|
|
Lapeyrouse
|
14%
|
9%
|
|
Raymondville
|
27%
|
19%
|
|
Main
Pass Block 35
|
90%
|
72%
|
|
Creole
|
15%
|
11%
|
Year
Ended December 31,
|
||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||
Production:
|
||||||||||||||||||||
Natural
Gas (Mcf)
|
1,739,000 | 1,266,000 | 1,712,000 | 986,000 | 703,000 | |||||||||||||||
Oil
(Bbls)
|
|
181,000 | 135,000 | 167,000 | 172,000 | 149,000 | ||||||||||||||
Revenues:
|
||||||||||||||||||||
Natural
Gas
|
$ | 10,745,000 | $ | 10,768,000 | $ | 12,381,000 | $ | 7,881,000 | $ | 6,913,000 | ||||||||||
Oil
|
7,270,000 | 7,086,000 | 10,769,000 | 12,538,000 | 15,293,000 | |||||||||||||||
Total
|
$ | 18,015,000 | $ | 17,854,000 | $ | 23,150,000 | $ | 20,419,000 | $ | 22,206,000 | ||||||||||
Unit
Prices:
|
||||||||||||||||||||
Natural
Gas (per Mcf)
|
$ | 6.18 | $ | 8.51 | $ | 7.23 | $ | 7.99 | $ | 9.83 | ||||||||||
Oil
(per Bbl)
|
$ | 40.06 | $ | 52.62 | $ | 64.30 | $ | 72.95 | $ | 102.35 | ||||||||||
Production
costs per equivalent
Mcfe
|
$ | 1.90 | $ | 3.05 | $ | 3.58 | $ | 4.29 | $ | 6.75 | ||||||||||
Amortization
per equivalent
Mcfe
|
$ | 2.38 | $ | 2.78 | $ | 3.26 | $ | 2.72 | $ | 2.87 |
Gross
Wells
|
Net
Wells
|
Developed
Acreage
|
Undeveloped
Acreage
|
|||||||||||||||||||||||||||||
State
|
Oil
|
Gas
|
Oil
|
Gas
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||||||||||||||
Texas
|
- | 31 | - | 10.26 | 1,309 | 241 | 3,253 | 342 | ||||||||||||||||||||||||
Louisiana
|
64 | 35 | 54.07 | 7.09 | 7,293 | 2,204 | 7,610 | 2,177 | ||||||||||||||||||||||||
Other
|
- | 13 | - | 8.45 | - | - | 1,862 | 1,210 | ||||||||||||||||||||||||
Total
|
64 | 79 | 54.07 | 25.80 | 8,602 | 2,445 | 12,725 | 3,729 |
Number
of Gross Wells Drilled
|
|||||||||||
Exploratory
|
Developmental
|
Total
|
|||||||||
Productive
|
Drilled
|
Productive
|
Drilled
|
Productive
|
Drilled
|
||||||
2006
|
2
|
5
|
4
|
4
|
6
|
9
|
|||||
2007
|
2
|
3
|
2
|
2
|
4
|
5
|
|||||
2008
|
2
|
2
|
1
|
2
|
3
|
4
|
|||||
Total
|
6
|
10
|
7
|
8
|
13
|
18
|
Number
of Net Wells Drilled
|
|||||||||||
Exploratory
|
Developmental
|
Total
|
|||||||||
Productive
|
Drilled
|
Productive
|
Drilled
|
Productive
|
Drilled
|
||||||
2006
|
0.20
|
0.52
|
0.76
|
0.76
|
0.96
|
1.28
|
|||||
2007
|
0.33
|
0.44
|
0.30
|
0.30
|
0.63
|
0.74
|
|||||
2008
|
0.35
|
0.35
|
0.02
|
0.04
|
0.37
|
0.39
|
|||||
Total
|
0.88
|
1.31
|
1.08
|
1.10
|
1.96
|
2.41
|
•
|
the
quality and quantity of available data;
|
|
•
|
the
interpretation of that data;
|
|
•
|
the
accuracy of various mandated economic
assumptions; and
|
|
•
|
the
judgment of the persons preparing the
estimate.
|
|
·
|
refuse
to initiate exploration or development
projects,
|
|
·
|
initiate
exploration or development projects on a slower schedule than we prefer;
or
|
|
·
|
drill
more wells or build more facilities on a project than we can adequately
fund, which may limit our participation in those projects or limit our
percentage of the revenues from those
projects.
|
|
·
|
the
extent of local production and imports of oil and
gas,
|
|
·
|
the
proximity and capacity of pipelines and other transportation
facilities,
|
|
·
|
fluctuating
demand for oil and gas,
|
|
·
|
the
marketing of competitive fuels, and
|
|
·
|
the
effects of governmental regulation of oil and gas production and
sales.
|
|
·
|
the
quantities of oil and gas that are ultimately
recovered,
|
|
·
|
the
production and operating costs
incurred,
|
|
·
|
the
amount and timing of future development expenditures,
and
|
|
·
|
future
oil and gas sales prices.
|
|
·
|
our
direction and policies, including the election and removal of
directors,
|
|
·
|
mergers
or other business combinations,
|
|
·
|
the
acquisition or disposition of our
assets,
|
|
·
|
future
issuances of our common stock or other
securities,
|
|
·
|
our
incurrence of debt, and
|
|
·
|
the
payment of dividends, if any, on our common stock, and amendments to our
certificate of incorporation and
bylaws.
|
|
·
|
commodity
prices of oil and natural gas,
|
|
·
|
the
volatility of the market in
general,
|
|
·
|
the
results of our drilling,
|
|
·
|
current
expectations of our future financial
performance.
|
Prices
|
|||||||||
High
|
Low
|
||||||||
2007
--
|
First
Quarter
|
$ | 11.87 | $ | 8.96 | ||||
Second
Quarter
|
10.66 | 8.29 | |||||||
Third
Quarter
|
11.70 | 8.80 | |||||||
Fourth
Quarter
|
10.41 | 8.05 | |||||||
2008
--
|
First
Quarter
|
$ | 9.02 | $ | 7.61 | ||||
Second
Quarter
|
13.10 | 8.38 | |||||||
Third
Quarter
|
11.55 | 7.85 | |||||||
Fourth
Quarter
|
8.35 | 2.39 |
(a)
|
(b)
|
(c)
|
(d)
|
|||||||||||||
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as part of Publicly Announced
Program
|
Maximum
Number of Shares that May Yet Be Purchased Under the
Programs
|
||||||||||||
October
1, 2008 through October 31, 2008
|
49,605 | $7.274961 | 452,364 | 294,042 | ||||||||||||
November
1, 2008 through November 30, 2008
|
27,579 | $4.620337 | 477,943 | 266,463 | ||||||||||||
December
1, 2008 through December 31, 2008
|
29,183 | $3.619681 | 507,126 | 237,280 | ||||||||||||
Total
|
106,367 | $5.583799 | 507,126 | 237,280 |
December
31,
|
||||||||||||||||||||
2004
|
2005
|
2006 (3)
|
2007
|
2008
|
||||||||||||||||
(in
thousands, except for share amounts)
|
||||||||||||||||||||
Operating
Data:
|
||||||||||||||||||||
Revenues
and other
|
$ | 29,629 | $ | 40,062 | $ | 30,273 | $ | 24,298 | $ | 19,523 | ||||||||||
Net
income/(loss) before cumulative effect of change in
|
||||||||||||||||||||
accounting
principle
|
$ | (18,184 | ) | $ | 42,655 | $ | 13 | $ | 3,229 | $ | (26,746 | ) | ||||||||
Net
income/(loss)
|
$ | (18,184 | ) | $ | 42,655 | $ | (855 | ) | $ | 3,229 | $ | (26,746 | ) | |||||||
Net
income/(loss) attributed to common stock
|
$ | (18,699 | ) | $ | 42,068 | $ | (2,244 | ) | $ | 2,965 | $ | (27,108 | ) | |||||||
Basic income/(loss) per common
share: (1)
|
||||||||||||||||||||
Net
income/(loss) before cumulative effect of change in
|
||||||||||||||||||||
accounting
principle
|
$ | (2.08 | ) | $ | 4.30 | $ | (0.14 | ) | $ | 0.30 | $ | (2.83 | ) | |||||||
Net
income/(loss)
|
$ | (2.08 | ) | $ | 4.30 | $ | (0.23 | ) | $ | 0.30 | $ | (2.83 | ) | |||||||
Diluted income/(loss) per common
share: (1)
|
||||||||||||||||||||
Net
income/(loss) before cumulative effect of change in
|
||||||||||||||||||||
accounting
principle
|
$ | (2.08 | ) | $ | 3.95 | $ | (0.14 | ) | $ | 0.30 | $ | (2.83 | ) | |||||||
Net
income/(loss)
|
$ | (2.08 | ) | $ | 3.95 | $ | (0.23 | ) | $ | 0.30 | $ | (2.83 | ) | |||||||
Balance
Sheet Data:
|
||||||||||||||||||||
Current
assets
|
$ | 38,460 | $ | 62,662 | $ | 41,589 | $ | 30,015 | $ | 19,479 | ||||||||||
Current
liabilities
|
17,824 | 19,045 | 12,627 | 5,482 | 3,377 | |||||||||||||||
Working
capital
|
$ | 20,636 | $ | 43,617 | $ | 28,962 | $ | 24,533 | $ | 16,102 | ||||||||||
Total
assets
|
$ | 109,575 | $ | 156,163 | $ | 125,035 | $ | 110,465 | $ | 68,773 | ||||||||||
Long-term
obligations:
|
||||||||||||||||||||
Convertible
notes payable
|
$ | 6,911 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Share
based compensation liability
|
6,120 | 10,687 | - | - | - | |||||||||||||||
Global
senior convertible notes
|
- | 12,500 | - | - | - | |||||||||||||||
Accrued
preferred stock dividends
|
- | - | - | 10 | - | |||||||||||||||
Asset
retirement obligation
|
5,954 | 6,301 | 7,407 | 5,187 | 5,472 | |||||||||||||||
Deferred
income taxes
|
- | - | - | 20 | 20 | |||||||||||||||
Global
warrant liability
|
14,858 | - | - | - | - | |||||||||||||||
Total
|
$ | 33,843 | $ | 29,488 | $ | 7,407 | $ | 5,217 | $ | 5,492 | ||||||||||
Stockholders'
equity
|
$ | 49,532 | $ | 90,267 | $ | 105,001 | $ | 99,766 | $ | 59,904 | ||||||||||
Series G1 preferred stock
outstanding (2)
|
14,000 | 1,600 | 1,600 | 1,600 | 1,600 | |||||||||||||||
Series G2 preferred stock
outstanding (2)
|
2,000 | 1,000 | 1,000 | 1,000 | 1,000 | |||||||||||||||
Series
G4 preferred stock outstanding
|
78,000 | - | - | - | - | |||||||||||||||
Series
J preferred stock outstanding
|
50,000 | - | - | - | - | |||||||||||||||
Series
L preferred stock outstanding
|
10,000 | - | - | - | - | |||||||||||||||
Series M preferred stock
outstanding (2)
|
50,000 | 50,000 | 44,000 | 44,000 | 44,000 | |||||||||||||||
Weighted average common shares
outstanding (1)
|
9,004,564 | 9,793,296 | 9,952,742 | 9,799,332 | 9,587,952 |
|
(1)
|
Per
share amounts and weighted average common shares outstanding calculations
reflect the impact of a one-for-22.4 reverse stock split which was
effective June 2007.
|
|
(2)
|
See
"Notes to Consolidated Financial Statements, Note 12 - Stockholders'
Equity and Note 10 - Redeemable Preferred Stocks" contained in Part II,
Item 8, for further discussion of our preferred
stock.
|
|
(3)
|
During
2006, we deconsolidated Global from our financial Statements. See "Notes
to Consolidated Financial Statements, Note 2 - Investments" contained in
Part II, Item 8, for further
discussion.
|
|
·
|
Deploying
assets into energy-based opportunities to build annual measurable value
and/or cash flow,
|
|
·
|
Optimizing
the value of our existing assets,
and
|
|
·
|
Monetizing
assets that have reached their full potential, that do not have an
expectation of near-term value enhancement or that represent a
disproportionate concentration of value in one
asset.
|
|
§
|
We
deployed capital expenditures of approximately $5.9 million for oil and
gas exploratory and development drilling including new interests (the RC
Roberson #1 and Ruebush #1 wells) in the NW Speaks field in South Texas,
two wells and a pipeline in our Creole Field, completion costs on the
successful Boquillas #1 well, also in South Texas, as well as other
projects.
|
|
§
|
We
continued our deployment of capital of approximately $1 million towards
the 2nd
five-well pilot project for our coalbed methane Indiana Posey
Prospect.
|
|
§
|
We
have also repurchased approximately 507 thousand of our common shares in
the market for total proceeds of approximately $4.4
million.
|
December
31,
2008
|
December
31,
2007
|
|||||||
Shares
of Global Stock held by HKN
|
11,893,463 | 11,893,463 | ||||||
Closing
Price of Global Stock
|
£ | 0.68 | £ | 0.84 | ||||
Foreign
Currency Exchange Rate
|
1.4619 | 1.9843 | ||||||
Market
Value of Investments in Global
|
$ | 11,824 | $ | 19,824 |
|
-
|
The
end of day quoted settlement price set by an exchange on which the
financial instrument are principally
traded.
|
|
-
|
The
mean between the last bid and the ask prices from the exchange on which
the financial instrument is principally
traded.
|
Year
Ended December 31,
|
Year
Ended December 31,
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2007
|
2006
|
%
Change
|
|||||||||||||||||||
Domestic
oil and gas operating profit (1)
|
$ | 11,405 | $ | 11,771 | (3 | %) | $ | 11,771 | $ | 13,417 | (12 | %) | ||||||||||||
Domestic
gas revenues
|
$ | 6,913 | $ | 7,881 | (12 | %) | $ | 7,881 | $ | 12,381 | (36 | %) | ||||||||||||
Domestic
gas production (mcf)
|
703,360 | 986,279 | (29 | %) | 986,279 | 1,711,866 | (42 | %) | ||||||||||||||||
Domestic
gas price per mcf
|
$ | 9.83 | $ | 7.99 | 23 | % | $ | 7.99 | $ | 7.23 | 10 | % | ||||||||||||
Domestic
oil revenues
|
$ | 15,293 | $ | 12,538 | 22 | % | $ | 12,538 | $ | 10,769 | 16 | % | ||||||||||||
Domestic
oil production (bbls)
|
149,414 | 171,866 | (13 | %) | 171,866 | 167,469 | 3 | % | ||||||||||||||||
Domestic
oil price per bbl
|
$ | 102.35 | $ | 72.95 | 40 | % | $ | 72.95 | $ | 64.30 | 13 | % | ||||||||||||
International
oil and gas operating profit (1) (2)
|
$ | - | $ | - | 0 | % | $ | - | $ | 2,483 | (100 | %) | ||||||||||||
International
oil revenues (2)
|
$ | - | $ | - | 0 | % | $ | - | $ | 3,743 | (100 | %) | ||||||||||||
International
oil production (bbls) (2)
|
- | - | 0 | % | - | 77,518 | (100 | %) | ||||||||||||||||
International
oil price per bbl (2)
|
$ | - | $ | - | 0 | % | $ | - | $ | 48.29 | (100 | %) | ||||||||||||
Trading
revenues
|
$ | (5,148 | ) | $ | 680 | (857 | %) | $ | 680 | $ | 315 | 116 | % | |||||||||||
Interest
income and other
|
$ | 2,465 | $ | 3,199 | (23 | %) | $ | 3,199 | $ | 3,065 | 4 | % | ||||||||||||
General
and administrative expenses-domestic
|
$ | 5,533 | $ | 5,844 | (5 | %) | $ | 5,844 | $ | 5,649 | 3 | % | ||||||||||||
General
and administrative expenses-international (2)
|
$ | - | $ | - | 0 | % | $ | - | $ | 3,373 | (100 | %) | ||||||||||||
Depreciation,
depletion, amortization and accretion (2)
|
$ | 5,224 | $ | 6,107 | (14 | %) | $ | 6,107 | $ | 10,624 | (43 | %) | ||||||||||||
Interest
expense and other, net
|
$ | 219 | $ | 390 | (44 | %) | $ | 390 | $ | 386 | 1 | % | ||||||||||||
Equity
in losses of subsidiary
|
$ | (196 | ) | $ | 50 | (492 | %) | $ | 50 | $ | - | 100 | % | |||||||||||
Impairment
of investment in Spitfire
|
$ | 4,618 | $ | - | 100 | % | $ | - | $ | - | 0 | % | ||||||||||||
Impairment
of facilties
|
$ | 97 | $ | - | 100 | % | $ | - | $ | - | 0 | % | ||||||||||||
Full
cost pool impairment
|
$ | 19,906 | $ | - | 100 | % | $ | - | $ | - | 0 | % | ||||||||||||
Income
tax expense
|
$ | 275 | $ | 30 | 817 | % | $ | 30 | $ | 187 | (84 | %) | ||||||||||||
Minority
interest
|
$ | (208 | ) | $ | - | 100 | % | $ | - | $ | (2,175 | ) | 100 | % | ||||||||||
Net
income (loss) from continuing operations
|
$ | (26,746 | ) | $ | 3,229 | (928 | %) | $ | 3,229 | $ | 1,236 | 161 | % | |||||||||||
Net
income (loss) attributed to common stock
|
$ | (27,108 | ) | $ | 2,965 | (1014 | %) | $ | 2,965 | $ | (2,244 | ) | 232 | % | ||||||||||
Net
income (loss) per common share:
|
||||||||||||||||||||||||
Basic
|
$ | (2.83 | ) | $ | 0.30 | (1034 | %) | $ | 0.30 | $ | (0.02 | ) |
2068
|
% | ||||||||||
Diluted
|
$ | (2.83 | ) | $ | 0.30 | (1034 | %) | $ | 0.30 | $ | (0.02 | ) |
2068
|
% |
(1)
|
Oil
and gas operating profit is calculated as oil and gas revenues less oil
and gas operating expenses
|
(2)
|
Global
was deconsolidated from our financial statements during the second quarter
of 2006. As a result, Global’s operations for the first quarter 2006 are
still included in our consolidated financial statements for the year ended
December 31, 2006.
|
For
the Year Ended
|
||||||||||||
December
31, 2008
|
December
31, 2007
|
December
31, 2006
|
||||||||||
Unrealized
gain (loss) on written call positions
|
$ | - | $ | (50 | ) | $ | 50 | |||||
Unrealized
gain on written put positions
|
$ | - | $ | 68 | $ | 41 | ||||||
Unrealized
gain (loss) on written commodity calls
|
$ | 37 | $ | (37 | ) | $ | - | |||||
Unrealized
gain (loss) on commodity puts
|
$ | 18 | $ | (61 | ) | $ | 42 | |||||
Realized
gain (loss) on written put options
|
$ | (2,795 | ) | $ | 919 | $ | 127 | |||||
Realized
loss on crude futures
|
$ | (1,229 | ) | $ | - | $ | - | |||||
Realized
gain on foreign currency
|
$ | 195 | $ | - | $ | - | ||||||
Realized
loss on purchased commodity puts
|
$ | (16 | ) | $ | (85 | ) | $ | (71 | ) | |||
Realized
gain (loss) on common stock
|
$ | (1,437 | ) | $ | (90 | ) | $ | 102 | ||||
Realized
gain on written call positions
|
$ | 79 | $ | 16 | $ | 24 | ||||||
Total
trading income (loss)
|
$ | (5,148 | ) | $ | 680 | $ | 315 |
2008
|
2007
|
2006
|
||||||||||
Series
G1
|
$ | 13,000 | $ | 13,000 | $ | 13,000 | ||||||
Series
G2
|
8,000 | 8,000 | 8,000 | |||||||||
Series
G4
|
- | - | - | |||||||||
Series
J
|
- | - | - | |||||||||
Series
L
|
- | - | - | |||||||||
Series
M
|
284,000 | 196,000 | 183,000 | |||||||||
Total
|
$ | 305,000 | $ | 217,000 | $ | 204,000 |
Series
G1
|
1,600 | |||
Series
G2
|
1,000 | |||
Series
M
|
44,000 | |||
Total
|
46,600 |
2008
|
2007
|
2006
|
||||||||||
Series
G1
|
$ | 18,000 | $ | 6,000 | $ | 10,000 | ||||||
Series
G2
|
10,000 | 3,000 | 5,000 | |||||||||
Series
M
|
(85,000 | ) | (56,000 | ) | 70,000 | |||||||
Series
L Warrants
|
- | - | (700,000 | ) | ||||||||
Series
M Warrants
|
- | - | (570,000 | ) | ||||||||
Total
|
$ | (57,000 | ) | $ | (47,000 | ) | $ | (1,185,000 | ) |
(Thousands
of dollars)
|
December
31,
2008
|
December
31,
2007
|
||||||
Current
ratio
|
5.77
to 1
|
5.48
to 1
|
||||||
Working
capital
|
$ | 16,102 | $ | 24,533 | ||||
Total
debt
|
$ | - | $ | - | ||||
Total
cash and marketable securities less debt
|
$ | 15,219 | $ | 25,581 | ||||
Stockholders’
equity
|
$ | 59,904 | $ | 99,766 | ||||
Total
liabilities to equity
|
0.15
to 1
|
0.11
to 1
|
||||||
Working
capital is the difference between current assets and current
liabilities.
|
Instrument
|
Conversion
Price
(a)
|
Shares
of Common Stock Issuable at December 31, 2008
|
||||||
Series
M Preferred
|
$ | 13.22 | 332,829 | |||||
Series
G1 Preferred
|
$ | 280.00 | 571 | |||||
Series
G2 Preferred
|
$ | 67.20 | 1,488 | |||||
Common
Stock Potentially Issued Upon Conversion / Exercise
|
334,888 | |||||||
(a)
Certain
conversion prices are subject to adjustment under certain
circumstances
|
Payments
Due by Period
|
||||||||||||||||||||||||
Contractual
Obligations
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
||||||||||||||||||
Office
Leases
|
$ | 182 | $ | 189 | $ | 78 | $ | - | $ | - | $ | 449 | ||||||||||||
Oil,
Gas and Coalbed Methane Commitments (1)
|
- | - | - | - | - | - | ||||||||||||||||||
Asset
Retirement Obligation
|
66 | 180 | 9 | 71 | 5,146 | 5,472 | ||||||||||||||||||
Total
Contractual Cash Obligations
|
$ | 248 | $ | 369 | $ | 87 | $ | 71 | $ | 5,146 | $ | 5,921 |
Page
|
|
Report
of Independent Registered Public Accounting Firms
|
43
|
Consolidated
Balance Sheets -- December 31, 2008 and 2007
|
44
|
Consolidated
Statements of Operations --
|
|
Years
ended December 31, 2008, 2007 and 2006
|
45
|
Consolidated
Statements of Stockholders’ Equity --
|
|
Years
ended December 31, 2008, 2007 and 2006
|
46
|
Consolidated
Statements of Cash Flows --
|
|
Years
ended December 31, 2008, 2007 and 2006
|
47
|
Notes
to Consolidated Financial Statements
|
48
|
HKN,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(in
thousands, except for share
amounts)
|
Assets
|
December
31,
|
December
31,
|
||||||
2008
|
2007
|
|||||||
Current
Assets:
|
||||||||
Cash
and temporary investments
|
$ | 5,722 | $ | 25,581 | ||||
Marketable
securities (Treasury bills)
|
9,497 | - | ||||||
Margin
deposits held by broker
|
- | 123 | ||||||
Accounts
receivable, net
|
3,778 | 3,670 | ||||||
Prepaid
expenses and other current assets
|
482 | 641 | ||||||
Total
Current Assets
|
19,479 | 30,015 | ||||||
Unevaluated
oil and gas properties
|
4,874 | 7,768 | ||||||
Evaluated
oil and gas properties, net
|
29,628 | 44,410 | ||||||
Other
equipment, net
|
856 | 1,080 | ||||||
Property
and Equipment, net
|
35,358 | 53,258 | ||||||
Investment
in Global
|
11,824 | 19,824 | ||||||
Investment
in Spitfire, equity method
|
1,820 | 6,517 | ||||||
Other
Assets, net
|
292 | 851 | ||||||
$ | 68,773 | $ | 110,465 | |||||
Liabilities and Stockholders'
Equity
|
||||||||
Current
Liabilities:
|
||||||||
Trade
payables
|
$ | 639 | $ | 1,013 | ||||
Accrued
liabilities and other
|
1,826 | 2,970 | ||||||
Income
Tax Contingency
|
225 | - | ||||||
Derivative
liabilities
|
- | 61 | ||||||
Revenues
and royalties payable
|
687 | 1,438 | ||||||
Total
Current Liabilities
|
3,377 | 5,482 | ||||||
Asset
Retirement Obligation
|
5,472 | 5,187 | ||||||
Deferred
Income Taxes
|
20 | 20 | ||||||
Preferred
Stock Dividends
|
- | 10 | ||||||
Total
Liabilities
|
8,869 | 10,699 | ||||||
Commitments
and Contingencies (Note 19)
|
||||||||
Stockholders’
Equity:
|
||||||||
Series
G1 Preferred Stock, $1.00 par value; $160 thousand liquidation
value
|
||||||||
700,000
shares authorized; 1,600 shares outstanding
|
2 | 2 | ||||||
Series
G2 Preferred Stock, $1.00 par value; $100 thousand liquidation
value
|
||||||||
100,000
shares authorized; 1,000 shares outstanding
|
1 | 1 | ||||||
Series
M Preferred Stock, $1.00 par value; $4.4 million liquidation
value
|
||||||||
50,000
shares authorized; 44,000 shares outstanding
|
44 | 44 | ||||||
Common
stock, $0.01 par value; 24,000,000 shares authorized;
|
||||||||
9,268,253
and 9,768,261 shares issued, respectively
|
93 | 98 | ||||||
Additional
paid-in capital
|
442,642 | 446,973 | ||||||
Accumulated
deficit
|
(385,171 | ) | (358,063 | ) | ||||
Accumulated
other comprehensive income
|
2,312 | 10,711 | ||||||
Treasury
stock, at cost, 6,869 and 0 shares held, respectively
|
(19 | ) | - | |||||
Total
Stockholders’ Equity
|
59,904 | 99,766 | ||||||
$ | 68,773 | $ | 110,465 |
The
accompanying Notes to Consolidated Financial Statements
are
|
an
integral part of these
Statements.
|
HKN,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in
thousands except for share and per share
amounts)
|
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Revenues
and other:
|
||||||||||||
Domestic
oil and gas operations
|
$ | 22,206 | $ | 20,419 | $ | 23,150 | ||||||
International
oil and gas operations
|
- | - | 3,743 | |||||||||
Trading
revenues (losses), net
|
(5,148 | ) | 680 | 315 | ||||||||
Interest
and other income
|
2,465 | 3,199 | 3,065 | |||||||||
19,523 | 24,298 | 30,273 | ||||||||||
Costs
and Expenses:
|
||||||||||||
Domestic
oil and gas operating expenses
|
10,801 | 8,648 | 9,733 | |||||||||
International
oil and gas operating expenses
|
- | - | 1,260 | |||||||||
General
and administrative expenses (including share-based compensation expense of
($0, $0, and $2,184 respectively)
|
5,533 | 5,844 | 9,022 | |||||||||
Depreciation,
depletion, amortization and accretion
|
5,224 | 6,107 | 10,624 | |||||||||
Equity
in losses (gains) of Spitfire
|
(196 | ) | 50 | - | ||||||||
Impairment
of facilities
|
97 | - | - | |||||||||
Impairment
of investment in Spitfire
|
4,618 | - | - | |||||||||
Full
cost impairment
|
19,906 | - | - | |||||||||
Interest
expense and other losses
|
219 | 390 | 386 | |||||||||
46,202 | 21,039 | 31,025 | ||||||||||
Income
(loss) from continuing operations before income taxes
|
$ | (26,679 | ) | $ | 3,259 | $ | (752 | ) | ||||
Income
tax expense
|
275 | 30 | 187 | |||||||||
Income
(loss) from continuing operations before minority interest
|
$ | (26,954 | ) | $ | 3,229 | $ | (939 | ) | ||||
Minority
interest of consolidated company
|
208 | - | 2,175 | |||||||||
Income
(loss) from continuing operations before cumulative effect of change in
accounting principle
|
$ | (26,746 | ) | $ | 3,229 | $ | 1,236 | |||||
Loss
from discontinued operations, net of taxes
|
- | - | (1,223 | ) | ||||||||
Cumulative
effect of a change in accounting principle
|
- | - | (868 | ) | ||||||||
Net
income (loss)
|
$ | (26,746 | ) | $ | 3,229 | $ | (855 | ) | ||||
Accrual
of dividends related to preferred stock
|
(305 | ) | (217 | ) | (204 | ) | ||||||
Payments
of dividends and modification of preferred stock and common stock
warrants
|
(57 | ) | (47 | ) | (1,185 | ) | ||||||
Net
income (loss) attributed to common stock
|
$ | (27,108 | ) | $ | 2,965 | $ | (2,244 | ) | ||||
Basic
and diluted net income (loss) per common share:
|
||||||||||||
Net
income (loss) per common share from continuing operations before
cumulative effect of change in accounting principle
|
$ | (2.83 | ) | $ | 0.30 | $ | (0.02 | ) | ||||
Discontinued
operations
|
- | - | (0.12 | ) | ||||||||
Cumulative
effect of change in accounting principle
|
- | - | (0.09 | ) | ||||||||
Net
income (loss) per common share
|
$ | (2.83 | ) | $ | 0.30 | $ | (0.23 | ) | ||||
Weighted
average common shares outstanding
|
9,587,952 | 9,799,332 | 9,952,742 |
The
accompanying Notes to Consolidated Financial Statements
are
|
an
integral part of these
Statements.
|
HKN,
INC.
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
|
(in
thousands)
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||||||||||
Preferred
Stock
|
Common
|
Paid-In
|
Treasury
|
Accumulated
|
Comprehensive
|
|||||||||||||||||||||||||||||||
G1
|
G2
|
M
|
Stock
|
Capital
|
Stock
|
Deficit
|
Income
|
Total
|
||||||||||||||||||||||||||||
Balance, December
31, 2005
|
$ | 2 | $ | 1 | $ | 50 | $ | 100 | $ | 448,779 | $ | - | $ | (358,784 | ) | $ | 119 | $ | 90,267 | |||||||||||||||||
Adjustment
of preferred stock and common stock warrant terms
|
- | - | - | - | 1,147 | - | (1,147 | ) | - | - | ||||||||||||||||||||||||||
Conversions
of preferred stock to common stock
|
- | - | (6 | ) | - | 13 | - | - | - | 7 | ||||||||||||||||||||||||||
Conversions
of common stock warrants to common stock
|
- | - | - | - | 41 | - | - | - | 41 | |||||||||||||||||||||||||||
Accrual
of preferred stock dividends
|
- | - | - | - | - | - | (204 | ) | - | (204 | ) | |||||||||||||||||||||||||
Issuance
of preferred stock dividends
|
- | - | - | - | 2 | - | (38 | ) | - | (36 | ) | |||||||||||||||||||||||||
Options
exercised for common stock of consolidated company
|
- | - | - | - | 139 | - | - | - | 139 | |||||||||||||||||||||||||||
Treasury
stock repurchase
|
- | - | - | - | - | (2,573 | ) | - | - | (2,573 | ) | |||||||||||||||||||||||||
Treasury
stock retirements
|
- | - | - | - | (903 | ) | 903 | - | - | - | ||||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (855 | ) | - | |||||||||||||||||||||||||||
Unrealized
holding gain on available for sale investments
|
12,333 | |||||||||||||||||||||||||||||||||||
Reclassification
of holding gain on available for sale investment into
earnings
|
(101 | ) | ||||||||||||||||||||||||||||||||||
Unrealized
foreign currency gain
|
5,983 | |||||||||||||||||||||||||||||||||||
Total
comprehensive income
|
17,360 | |||||||||||||||||||||||||||||||||||
Balance, December
31, 2006
|
$ | 2 | $ | 1 | $ | 44 | $ | 100 | $ | 449,218 | $ | (1,670 | ) | $ | (361,028 | ) | $ | 18,334 | $ | 105,001 | ||||||||||||||||
Accrual
of preferred stock dividends
|
- | - | - | - | - | - | (264 | ) | - | (264 | ) | |||||||||||||||||||||||||
Issuance
of preferred stock dividends
|
- | - | - | - | 1 | - | - | - | 1 | |||||||||||||||||||||||||||
Reverse
stock split
|
- | - | - | - | (10 | ) | - | - | - | (10 | ) | |||||||||||||||||||||||||
Treasury
stock repurchase
|
- | - | - | - | - | (679 | ) | - | - | (679 | ) | |||||||||||||||||||||||||
Treasury
stock retirements
|
- | - | - | (2 | ) | (2,347 | ) | 2,349 | - | - | - | |||||||||||||||||||||||||
Equity
in stock issuances by Spitfire
|
- | - | - | - | 111 | - | - | - | 111 | |||||||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | 3,229 | - | ||||||||||||||||||||||||||||
Unrealized
holding loss on available for sale investments
|
(8,469 | ) | ||||||||||||||||||||||||||||||||||
Reclassification
of holding loss on available for sale investment into
earnings
|
207 | |||||||||||||||||||||||||||||||||||
Unrealized
foreign currency gain
|
639 | |||||||||||||||||||||||||||||||||||
Total
comprehensive loss
|
(4,394 | ) | ||||||||||||||||||||||||||||||||||
Balance, December
31, 2007
|
$ | 2 | $ | 1 | $ | 44 | $ | 98 | $ | 446,973 | $ | - | $ | (358,063 | ) | $ | 10,711 | $ | 99,766 | |||||||||||||||||
Accrual
of preferred stock dividends
|
- | - | - | - | - | - | (362 | ) | - | (362 | ) | |||||||||||||||||||||||||
Issuance
of preferred stock dividends
|
- | - | - | - | 2 | - | - | - | 2 | |||||||||||||||||||||||||||
Treasury
stock repurchase
|
- | - | - | - | - | (4,404 | ) | - | - | (4,404 | ) | |||||||||||||||||||||||||
Treasury
stock retirements
|
- | - | - | (5 | ) | (4,380 | ) | 4,385 | - | - | - | |||||||||||||||||||||||||
Equity
in stock issuances by Spitfire
|
- | - | - | - | 47 | - | - | - | 47 | |||||||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (26,746 | ) | - | |||||||||||||||||||||||||||
Unrealized
holding loss on available for sale investments
|
(2,172 | ) | ||||||||||||||||||||||||||||||||||
Unrealized
foreign currency loss
|
(6,227 | ) | ||||||||||||||||||||||||||||||||||
Total
comprehensive loss
|
(35,145 | ) | ||||||||||||||||||||||||||||||||||
Balance, December
31, 2008
|
$ | 2 | $ | 1 | $ | 44 | $ | 93 | $ | 442,642 | $ | (19 | ) | $ | (385,171 | ) | $ | 2,312 | $ | 59,904 |
The
accompanying Notes to Consolidated Financial Statements
|
are
an integral part of these
Statements.
|
HKN,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
For
the Year Ended
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | (26,746 | ) | $ | 3,229 | $ | (855 | ) | ||||
Adjustments
to reconcile net income (loss) to net cash
|
||||||||||||
(used)
provided by operating activities:
|
||||||||||||
Depreciation,
depletion, amortization and accretion
|
5,224 | 6,107 | 10,624 | |||||||||
Loss
(gain) on trading investments
|
1,338 | 91 | (133 | ) | ||||||||
Loss
(gain) on trading derivatives
|
3,810 | (779 | ) | (252 | ) | |||||||
Share-based
compensation
|
- | - | 2,184 | |||||||||
Equity
in (gains) losses of Spitfire
|
(196 | ) | 50 | - | ||||||||
Impairment
of investment in Spitfire
|
4,618 | - | - | |||||||||
Impairment
of facilities
|
97 | - | - | |||||||||
Full
cost impairment
|
19,906 | - | - | |||||||||
Operating
cash flows from discontinued operations
|
- | - | 1,223 | |||||||||
Cumulative
effect of a change in accounting principle
|
- | - | 868 | |||||||||
Minority
interest
|
(208 | ) | - | (2,175 | ) | |||||||
Other
|
(224 | ) | (117 | ) | 448 | |||||||
Change
in operating assets and liabilities:
|
||||||||||||
Decrease
(increase) in marketable securities
|
(9,497 | ) | 5,000 | 10,000 | ||||||||
Decrease
in accounts receivable and other
|
537 | 4,211 | 4,228 | |||||||||
Decrease
(increase) in margin deposits posted with brokers
|
123 | 587 | (710 | ) | ||||||||
(Decrease)
increase in derivative liabilities
|
(3,872 | ) | 388 | 823 | ||||||||
Decrease
in trade payables and other
|
(2,231 | ) | (6,299 | ) | (2,810 | ) | ||||||
Net
cash (used) provided by operating activities
|
(7,321 | ) | 12,468 | 23,463 | ||||||||
Cash
flows from investing activities:
|
||||||||||||
Net
proceeds from sales of assets
|
337 | 1,281 | 2,941 | |||||||||
Capital
expenditures
|
(6,896 | ) | (10,867 | ) | (20,128 | ) | ||||||
Deconsolidation
of Global
|
- | - | (4,282 | ) | ||||||||
Cash
received from redemption of IBA preferred shares
|
- | - | 7,500 | |||||||||
Sales
of investments
|
2,265 | 1,530 | 1,303 | |||||||||
Purchase
of available for sale investments
|
(3,603 | ) | - | (2,823 | ) | |||||||
Purchase
of common shares in Spitfire
|
(77 | ) | (3,900 | ) | (2,015 | ) | ||||||
Net
cash used in investing activities
|
(7,974 | ) | (11,956 | ) | (17,504 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuances of common stock, net of issuance costs
|
- | - | 41 | |||||||||
Proceeds
from capital contributions to Canergy Growth Fund
|
400 | - | - | |||||||||
Proceeds
from capital contributions to Canergy Management Company
|
100 | - | - | |||||||||
Disbursements
of capital contributions from Canergy Growth Fund
|
(241 | ) | - | - | ||||||||
Disbursements
of capital contributions from Canergy Management Company
|
(51 | ) | - | - | ||||||||
Payments
of preferred dividends
|
(368 | ) | (196 | ) | (232 | ) | ||||||
Cash
paid for partial shares in reverse split
|
- | (10 | ) | - | ||||||||
Treasury
shares purchased
|
(4,404 | ) | (679 | ) | (2,296 | ) | ||||||
Net
cash used in financing activities
|
(4,564 | ) | (885 | ) | (2,487 | ) | ||||||
Net
(decrease) increase in cash and temporary investments
|
(19,859 | ) | (373 | ) | 3,472 | |||||||
Cash
and temporary investments at beginning of year
|
25,581 | 25,954 | 22,482 | |||||||||
Cash
and temporary investments at end of year
|
$ | 5,722 | $ | 25,581 | $ | 25,954 |
The
accompanying Notes to Consolidated Financial Statements
|
are
an integral part of these
Statements.
|
(1)
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Net
income (loss)
|
$ | (26,746 | ) | $ | 3,229 | $ | (855 | ) | ||||
Foreign
currency translation adjustment
|
||||||||||||
on
investment
|
(6,227 | ) | 639 | 5,983 | ||||||||
Reclassification
of holding loss (gain) on
|
||||||||||||
available
for sale investments into earnings
|
- | 207 | (101 | ) | ||||||||
Unrealized
(loss) gain on investments
|
(2,172 | ) | (8,469 | ) | 12,333 | |||||||
Total
comprehensive income (loss)
|
$ | (35,145 | ) | $ | (4,394 | ) | $ | 17,360 |
(2)
|
INVESTMENTS
|
December
31, 2008
|
December
31, 2007
|
|||||||
Shares
of Global Stock held by HKN
|
11,893,463 | 11,893,463 | ||||||
Closing
price of Global Stock
|
£ | 0.68 | £ | 0.84 | ||||
Foreign
Currency Exchange Rate
|
1.4619 | 1.9843 | ||||||
Market
Value of Investment in Global
|
$ | 11,824 | $ | 19,824 |
(3)
|
EQUITY
INVESTMENT IN SPITFIRE ENERGY
|
(4)
|
ADOPTION
OF NEW ACCOUNTING PRINCIPLE
|
|
·
|
Level
1 – Valuation inputs are unadjusted quoted market prices for identical
assets or liabilities in active
markets.
|
|
·
|
Level
2 – Valuation inputs are quoted prices for identical assets or liabilities
in markets that are not active, quoted market prices for similar assets
and liabilities in active markets and other observable inputs directly or
indirectly related to the asset or liability being
measured.
|
|
·
|
Level
3 – Valuation inputs are unobservable and significant to the fair value
measurement.
|
Level
1
|
Level
2
|
Level
3
|
||||||||||
Marketable
securities (Treasury bills)
|
$ | 9,497 | $ | - | $ | - | ||||||
Investment
in Global (cost method)
|
11,824 | - | - | |||||||||
Investment
in Spitfire (equity method)
|
1,820 | - | - | |||||||||
Spitfire
warrants
|
- | - | 16 | |||||||||
Total
assets at fair value
|
$ | 23,141 | $ | - | $ | 16 |
For
the Year Ended
|
||||
December
31, 2008
|
||||
Beginning
balance
|
$ | 111 | ||
Total
realized and unrealized losses included in earnings
|
(95 | ) | ||
Net
purchases and sales
|
- | |||
Ending
balance
|
$ | 16 |
(5)
|
OIL
AND GAS PROPERTIES
|
(6)
|
COALBED
METHANE PROJECT
|
(7)
|
DERIVATIVE
INSTRUMENTS
|
As
of December 31,
|
|||||||||||||||||||
Commodity
|
Type
|
Volume/Day
|
Duration
|
Price
|
2008
|
2007
|
2006
|
||||||||||||
Natural
Gas
|
Floor
|
70,000
mmbtu
|
Feb
07 - Sep 07
|
$ | 5.00 | $ | - | $ | - | $ | 87 | ||||||||
Crude
Oil
|
Floor
|
6,000
bbls
|
Jan
07 - Jun 07
|
$ | 50.00 | - | - | 9 | |||||||||||
Crude
Oil
|
Floor
|
9,000
bbls
|
Feb
08 - Mar 08
|
$ | 80.00 | - | 3 | - | |||||||||||
$ | - | $ | 3 | $ | 96 |
Commodity
|
Type
|
Volume/Day
|
Duration
|
Price
|
2008
|
2007
|
2006
|
||||||||||||
Crude
Oil
|
Ceiling
|
9,000
bbls
|
Apr
08 - May 08
|
$ | 100.00 | $ | - | $ | 61 | $ | - |
For
the Year Ended
|
||||||||||||
December
31, 2008
|
December
31, 2007
|
December
31, 2006
|
||||||||||
Unrealized
gain (loss) on written call positions
|
$ | - | $ | (50 | ) | $ | 50 | |||||
Unrealized
gain on written put positions
|
$ | - | $ | 68 | $ | 41 | ||||||
Unrealized
gain (loss) on written commodity calls
|
$ | 37 | $ | (37 | ) | $ | - | |||||
Unrealized
gain (loss) on commodity puts
|
$ | 18 | $ | (61 | ) | $ | 42 | |||||
Realized
gain (loss) on written put options
|
$ | (2,795 | ) | $ | 919 | $ | 127 | |||||
Realized
loss on crude futures
|
$ | (1,229 | ) | $ | - | $ | - | |||||
Realized
gain on foreign currency
|
$ | 195 | $ | - | $ | - | ||||||
Realized
loss on purchased commodity puts
|
$ | (16 | ) | $ | (85 | ) | $ | (71 | ) | |||
Realized
gain (loss) on common stock
|
$ | (1,437 | ) | $ | (90 | ) | $ | 102 | ||||
Realized
gain on written call positions
|
$ | 79 | $ | 16 | $ | 24 | ||||||
Total
trading income (loss)
|
$ | (5,148 | ) | $ | 680 | $ | 315 |
(8)
|
ASSET
RETIREMENT OBLIGATIONS
|
Asset
Retirement
|
|||||
Asset
Category
|
Obligation
Liability
|
Estimated
Life
|
|||
Oil
and gas producing properties
|
$ | 3,936 |
0-20
years
|
||
Facilities
and other property
|
1,536 |
3-27
years
|
|||
$ | 5,472 |
2008
|
2007
|
|||||||
Asset
retirement obligation at beginning of year
|
$ | 5,187 | $ | 7,407 | ||||
Additions
during the year
|
45 | 39 | ||||||
Disposals
during the year
|
(123 | ) | (63 | ) | ||||
Revisions
of estimates
|
- | (2,575 | ) | |||||
Accretion
expense
|
363 | 379 | ||||||
Asset
retirement obligation at end of year
|
$ | 5,472 | $ | 5,187 |
(9)
|
INCOME
TAXES
|
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
(in
thousands)
|
||||||||||||
Current
Taxes:
|
||||||||||||
Federal
|
$ | 260 | $ | - | $ | - | ||||||
State
|
15 | 10 | - | |||||||||
Foreign
|
- | - | 187 | |||||||||
Deferred:
|
||||||||||||
Federal
|
- | - | - | |||||||||
State
|
- | 20 | - | |||||||||
Total
|
$ | 275 | $ | 30 | $ | 187 |
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
(in
thousands)
|
||||||||||||
Statutory
tax expense (benefit)
|
$ | (9,000 | ) | $ | 1,108 | $ | (227 | ) | ||||
Increase
(decrease) in valuation allowance related to:
|
||||||||||||
Capital
losses
|
1,763 | - | - | |||||||||
Net
operating losses
|
7,229 | (1,111 | ) | 656 | ||||||||
Effect
of foreign operations
|
- | - | 496 | |||||||||
Alternative
minimum tax
|
35 | - | - | |||||||||
FIN
48 accrual
|
225 | - | - | |||||||||
Minority
interest and other
|
8 | 3 | (738 | ) | ||||||||
State
tax
|
15 | 30 | - | |||||||||
Total
Tax Expense
|
$ | 275 | $ | 30 | $ | 187 |
2008
|
2007
|
|||||||
(in
thousands)
|
||||||||
Deferred
tax assets:
|
||||||||
Net
operating loss (NOL) carryover
|
$ | 32,318 | $ | 30,379 | ||||
Depletion
carryover
|
3,094 | 2,550 | ||||||
Deferred
book liabilities
|
1,860 | 1,763 | ||||||
Book
vs. tax basis in investments
|
24,235 | 19,936 | ||||||
Capital
loss carryover
|
35,835 | 34,351 | ||||||
Property
and equipment
|
1,272 | - | ||||||
Deferred
tax liability:
|
||||||||
Property
and equipment
|
- | (2,460 | ) | |||||
Net
deferred tax assets
|
98,614 | 86,519 | ||||||
Less
valuation allowance
|
(98,594 | ) | (86,499 | ) | ||||
Net
deferred tax
|
$ | 20 | $ | 20 |
2008
|
2007
|
|||||||
Unrecognized
tax benefits at January 1,
|
$ | - | $ | - | ||||
Increases
for positions taken in current year
|
225 | - | ||||||
Decreases
for positions taken in a prior year
|
- | - | ||||||
Decreases
for settlements with taxing authorities
|
- | - | ||||||
Decreases
for lapses in the applicable statute of limitations
|
- | - | ||||||
Unrecognized
tax benefits at December 31,
|
$ | 225 | $ | - |
(10)
|
REDEEMABLE
PREFERRED STOCK
|
|
·
|
Extend
the expiration of the term required to occur before we may redeem the
Series M Preferred for cash, at our sole option, by one
year
|
|
·
|
Modify
the escalating dividend rates for the Series M Preferred to reflect a
lower rate of 6% from 8%, for October 8, 2007 through October 7, 2008 and
8% from 9%, for October 8, 2008 to October 7,
2009
|
Shares
of Common
|
||||||||
Stock
Issuable at
|
||||||||
Instrument
|
Conversion
Price (a)
|
December
31, 2008
|
||||||
Series
M Preferred
|
$ | 13.22 | 332,829 | |||||
Series
G1 Preferred
|
$ | 280.00 | 571 | |||||
Series
G2 Preferred
|
$ | 67.20 | 1,488 | |||||
Common
Stock Potentially Issued Upon Conversion
|
334,888 | |||||||
(a)
Certain conversion prices are subject to adjustment under certain
circumstances.
|
(11)
|
COMMON
STOCK WARRANTS
|
(12)
|
STOCKHOLDERS’
EQUITY
|
Number
of Shares
|
||||||||||||||||||||
Description
|
Preferred
G1
|
Preferred
G2
|
Preferred
M
|
Common
|
Treasury
|
|||||||||||||||
Balance
as of December 31, 2006
|
1,600 | 1,000 | 44,000 | 9,972,361 | 134,308 | |||||||||||||||
Issuances
of preferred stock dividends
|
- | - | - | 83 | - | |||||||||||||||
Reverse
stock split-cash in lieu payments
|
- | - | - | (911 | ) | - | ||||||||||||||
Treasury
Stock repurchase
|
- | - | - | - | 68,964 | |||||||||||||||
Treasury
Stock cancellation
|
- | - | - | (203,272 | ) | (203,272 | ) | |||||||||||||
Balance
as of December 31, 2007
|
1,600 | 1,000 | 44,000 | 9,768,261 | - | |||||||||||||||
Issuances
of preferred stock dividends
|
- | - | - | 249 | - | |||||||||||||||
Treasury
Stock repurchase
|
- | - | - | - | 507,126 | |||||||||||||||
Treasury
Stock cancellation
|
- | - | - | (500,257 | ) | (500,257 | ) | |||||||||||||
Balance
as of December 31, 2008
|
1,600 | 1,000 | 44,000 | 9,268,253 | 6,869 |
(13)
|
STOCK
OPTION PLAN
|
For
the Three Months Ended March 31, 2006
|
||||||||||||||||
Date
of grant (A)
|
Historical
volatility
|
Expected
option term
|
Risk-free
interest rate
|
Fair
value
|
||||||||||||
Jan.
31, 2002
|
50.22% | 3.44 | 4.83 | £ | 2.41 | |||||||||||
Aug.
30, 2002
|
50.22% | 1.75 | 4.83 | £ | 2.33 | |||||||||||
Dec.
3, 2004
|
50.22% | 2.86 | 4.86 | £ | 1.67 | |||||||||||
Dec.
3, 2005
|
50.22% | 3.01 | 4.86 | £ | 1.15 |
(14)
|
RELATED
PARTY TRANSACTIONS
|
(15)
|
DISCONTINUED
OPERATIONS
|
Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
(in
thousands)
|
||||||||||||
Sales
and other revenues from discontinued operations
|
$ | - | $ | - | $ | 19 | ||||||
Loss
from discontinued operations before income tax expense
|
- | - | (1,207 | ) | ||||||||
Income
tax expense
|
- | - | (16 | ) | ||||||||
Loss
from discontinued operations, net
|
$ | - | $ | - | $ | (1,223 | ) |
(16)
|
OTHER
INFORMATION
|
Quarter
Ended
|
Total
|
|||||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
Year
|
||||||||||||||||
2008
|
||||||||||||||||||||
Revenues
and other
|
$ | 6,280 | $ | 7,072 | $ | 5,606 | $ | 565 | $ | 19,523 | ||||||||||
Net
income (loss)
|
1,114 | 2,358 | (3,204 | ) | (27,014 | ) | (26,746 | ) | ||||||||||||
Net
income (loss) attributed to common stock
|
1,053 | 2,256 | (3,276 | ) | (27,141 | ) | (27,108 | ) | ||||||||||||
Basic
and diluted income (loss) per common share
|
$ | 0.11 | $ | 0.23 | $ | (0.34 | ) | $ | (2.83 | ) | $ | (2.83 | ) | |||||||
2007
|
||||||||||||||||||||
Revenues
and other
|
$ | 5,810 | $ | 6,181 | $ | 6,024 | $ | 6,283 | $ | 24,298 | ||||||||||
Net
income
|
433 | 1,365 | 972 | 459 | 3,229 | |||||||||||||||
Net
income attributed to common stock
|
384 | 1,301 | 923 | 357 | 2,965 | |||||||||||||||
Basic
and diluted income per common share
|
$ | 0.04 | $ | 0.13 | $ | 0.09 | $ | 0.04 | $ | 0.30 |
For
the Twelve Months Ended December 31, 2008
|
||||||||||||||||||||
Canergy
|
Canergy
|
|||||||||||||||||||
HKN
|
Fund
|
Management
|
Global
|
Consolidated
|
||||||||||||||||
Oil
and gas revenues
|
$ | 22,206 | $ | - | $ | - | $ | - | $ | 22,206 | ||||||||||
Trading
revenues
|
(4,344 | ) | (804 | ) | - | - | (5,148 | ) | ||||||||||||
Interest
and other income
|
2,457 | 8 | - | - | 2,465 | |||||||||||||||
Oil
and gas operating expenses
|
(10,801 | ) | - | - | - | (10,801 | ) | |||||||||||||
General
and administrative expenses
|
(5,378 | ) | (1 | ) | (154 | ) | - | (5,533 | ) | |||||||||||
Depreciation,
depletion, amortization and accretion
|
(5,224 | ) | - | - | - | (5,224 | ) | |||||||||||||
Other
losses, net
|
(121 | ) | (98 | ) | - | - | (219 | ) | ||||||||||||
Equity
in earnings of Spitfire
|
196 | - | - | - | 196 | |||||||||||||||
Impairment
of investment in Spitfire
|
(4,618 | ) | - | - | - | (4,618 | ) | |||||||||||||
Impairment
of facilities
|
(97 | ) | - | - | - | (97 | ) | |||||||||||||
Full
cost impairment
|
(19,906 | ) | - | - | - | (19,906 | ) | |||||||||||||
Income
tax expense
|
(275 | ) | - | - | - | (275 | ) | |||||||||||||
Minority
Interest
|
- | 159 | 49 | - | 208 | |||||||||||||||
Segment
loss from continuing operations
|
$ | (25,905 | ) | $ | (736 | ) | $ | (105 | ) | $ | - | $ | (26,746 | ) | ||||||
Capital
Expenditures
|
6,896 | - | - | - | 6,896 | |||||||||||||||
Total
Assets
|
68,773 | 2 | (2 | ) | - | 68,773 | ||||||||||||||
Equity
investment in Spitfire
|
1,820 | - | - | - | 1,820 |
For the Twelve Months Ended December 31,
2007
|
||||||||||||||||||||
Canergy
|
Canergy
|
|||||||||||||||||||
HKN
|
Fund
|
Management
|
Global
|
Consolidated
|
||||||||||||||||
Oil
and gas revenues
|
$ | 20,419 | $ | - | $ | - | $ | - | $ | 20,419 | ||||||||||
Trading
revenues
|
680 | - | - | - | 680 | |||||||||||||||
Interest
and other income
|
3,199 | - | - | - | 3,199 | |||||||||||||||
Oil
and gas operating expenses
|
(8,648 | ) | - | - | - | (8,648 | ) | |||||||||||||
General
and administrative expenses
|
(5,844 | ) | - | - | - | (5,844 | ) | |||||||||||||
Depreciation,
depletion, accretion and amortization
|
(6,107 | ) | - | - | - | (6,107 | ) | |||||||||||||
Interest
expense and other, net
|
(390 | ) | - | - | - | (390 | ) | |||||||||||||
Income
tax expense
|
(30 | ) | - | - | - | (30 | ) | |||||||||||||
Equity
in losses of Spitfire
|
(50 | ) | - | - | - | (50 | ) | |||||||||||||
Segment
income from continuing operations
|
$ | 3,229 | $ | - | $ | - | $ | - | $ | 3,229 | ||||||||||
Capital
expenditures
|
10,867 | - | - | - | 10,867 | |||||||||||||||
Total
Assets
|
110,465 | - | - | - | 110,465 | |||||||||||||||
Equity
investment in Spitfire
|
6,517 | - | - | - | 6,517 |
For the Twelve Months Ended December 31,
2006
|
||||||||||||||||||||
Canergy
|
Canergy
|
|||||||||||||||||||
HKN
|
Fund
|
Management
|
Global
|
Consolidated
|
||||||||||||||||
Oil
and gas revenues
|
$ | 23,150 | $ | - | $ | - | $ | 3,743 | $ | 26,893 | ||||||||||
Trading
revenues
|
315 | - | - | - | 315 | |||||||||||||||
Interest
and other income
|
3,011 | - | - | 54 | 3,065 | |||||||||||||||
Oil
and gas operating expenses
|
(9,733 | ) | - | - | (1,260 | ) | (10,993 | ) | ||||||||||||
General
and administrative expenses
|
(5,649 | ) | - | - | (1,189 | ) | (6,838 | ) | ||||||||||||
Depreciation,
depletion, accretion and amortization
|
(9,562 | ) | - | - | (1,062 | ) | (10,624 | ) | ||||||||||||
Interest
expense and other, net
|
(60 | ) | - | - | (326 | ) | (386 | ) | ||||||||||||
Share
Based Compensation
|
- | - | - | (2,184 | ) | (2,184 | ) | |||||||||||||
Income
tax expense
|
- | - | - | (187 | ) | (187 | ) | |||||||||||||
Minority
interest
|
2,175 | - | - | - | 2,175 | |||||||||||||||
Cumulative
effect of change in accounting principle
|
- | - | - | (868 | ) | (868 | ) | |||||||||||||
Segment
income (loss) from continuing operations
|
$ | 3,647 | $ | - | $ | - | $ | (3,279 | ) | $ | 368 | |||||||||
Capital
expenditures
|
12,970 | - | - | 7,158 | 20,128 | |||||||||||||||
Total
Assets
|
125,035 | - | - | - | 125,035 | |||||||||||||||
Equity
investment in Spitfire
|
2,023 | - | - | - | 2,023 |
(17)
|
EARNINGS
(LOSS) PER SHARE
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
Net
Loss Attributed to Common Stock
|
Weighted-Average
Shares
|
Per
Share Loss
|
Net
Income Attributed to Common Stock
|
Weighted-Average
Shares
|
Per
Share Income
|
Net
Loss Attributed to Common Stock
|
Weighted-Average
Shares
|
Per
Share Loss
|
||||||||||||||||||||||||||||
Basic
EPS:
|
||||||||||||||||||||||||||||||||||||
Income
(loss) from continuing
|
||||||||||||||||||||||||||||||||||||
ops
before cumulative effect
|
$ | (27,108 | ) | 9,588 | $ | (2.83 | ) | $ | 2,965 | 9,799 | $ | 0.30 | $ | (2,244 | ) | 9,953 | $ | (0.23 | ) | |||||||||||||||||
Effect
of dilutive securities
|
||||||||||||||||||||||||||||||||||||
Preferred
stock and warrants (A)
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Diluted
earnings per share
|
$ | (27,108 | ) | 9,588 | $ | (2.83 | ) | $ | 2,965 | 9,799 | $ | 0.30 | $ | (2,244 | ) | 9,953 | $ | (0.23 | ) |
(A)
|
Our
Series G1, Series G2 and Series M Preferred and common stock warrants
which were outstanding in the periods presented were excluded from the
calculation of diluted earnings per share as their effect would have been
antidilutive.
|
(18)
|
OIL
AND GAS DISCLOSURES (unaudited)
|
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Domestic
costs incurred:
|
||||||||||||
Acquisition
of properties
|
||||||||||||
Evaluated
|
$ | - | $ | - | $ | 2,181 | ||||||
Unevaluated
|
- | - | 569 | |||||||||
Exploration
|
837 | 5,000 | 4,637 | |||||||||
Development
|
4,442 | 5,734 | 4,510 | |||||||||
Total
domestic costs incurred
|
$ | 5,279 | $ | 10,734 | $ | 11,897 |
As
of December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Capitalized
costs:
|
||||||||||||
Unevaluated
domestic properties
|
$ | 4,874 | $ | 7,768 | $ | 5,845 | ||||||
Evaluated
domestic properties
|
197,534 | 187,817 | 182,358 | |||||||||
Domestic
production facilities
|
1,023 | 1,152 | 1,273 | |||||||||
Total
capitalized costs
|
203,431 | 196,737 | 189,476 | |||||||||
Less
accumulated depreciation, amortization and full
cost impairment
|
(168,227 | ) | (143,760 | ) | (138,291 | ) | ||||||
Net
capitalized costs
|
$ | 35,204 | $ | 52,977 | $ | 51,185 |
Year
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Oil
and natural gas revenues
|
$ | 22,206 | $ | 20,419 | $ | 26,893 | ||||||
Less:
|
||||||||||||
Oil
and natural gas operating costs
|
10,801 | 8,648 | 10,993 | |||||||||
Depreciation
and amortization
|
4,593 | 5,481 | 10,193 | |||||||||
Accretion
expense
|
363 | 379 | 431 | |||||||||
Income
tax expense
|
50 | 30 | 187 | |||||||||
15,807 | 14,538 | 21,804 | ||||||||||
Results
of operations from oil and natural gas producing
activities
|
$ | 6,399 | $ | 5,881 | $ | 5,089 |
(Unaudited)
|
||||||||||||||||||||||||
United
States
|
Colombia
(2)
|
Total
Worldwide
|
||||||||||||||||||||||
Oil
|
Gas
|
Oil
|
Gas
|
Oil
|
Gas
|
|||||||||||||||||||
(Barrels)
|
(Mcf)
|
(Barrels)
|
(Mcf)
|
(Barrels)
|
(Mcf)
|
|||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Proved
reserves:
|
||||||||||||||||||||||||
As
of December 31, 2005
|
1,247 | 8,453 | 5,035 | (1) | - | 6,282 | (1) | 8,453 | ||||||||||||||||
Extensions
and discoveries
|
173 | 1,118 | - | - | 173 | 1,118 | ||||||||||||||||||
Revisions
|
422 | (595 | ) | - | - | 422 | (595 | ) | ||||||||||||||||
Production
|
(167 | ) | (1,712 | ) | - | - | (167 | ) | (1,712 | ) | ||||||||||||||
Purchases
of reserves in place
|
250 | 442 | - | - | 250 | 442 | ||||||||||||||||||
Sales
of reserves in place
|
(69 | ) | (701 | ) | - | - | (69 | ) | (701 | ) | ||||||||||||||
Deconsolidation
of Global
|
- | - | (5,035 | ) | - | (5,035 | ) | - | ||||||||||||||||
As
of December 31, 2006
|
1,856 | 7,005 | - | - | 1,856 | 7,005 | ||||||||||||||||||
Extensions
and discoveries
|
220 | 311 | - | - | 220 | 311 | ||||||||||||||||||
Revisions
|
486 | (1,135 | ) | - | 486 | (1,135 | ) | |||||||||||||||||
Production
|
(172 | ) | (986 | ) | - | - | (172 | ) | (986 | ) | ||||||||||||||
Purchases
of reserves in place
|
- | - | - | - | - | - | ||||||||||||||||||
Sales
of reserves in place
|
(21 | ) | (175 | ) | - | - | (21 | ) | (175 | ) | ||||||||||||||
As of December 31, 2007
(3)
|
2,369 | 5,020 | - | - | 2,369 | 5,020 | ||||||||||||||||||
Extensions
and discoveries
|
371 | 601 | - | - | 371 | 601 | ||||||||||||||||||
Revisions
|
(1,132 | ) | (703 | ) | - | (1,132 | ) | (703 | ) | |||||||||||||||
Production
|
(149 | ) | (703 | ) | - | - | (149 | ) | (703 | ) | ||||||||||||||
Purchases
of reserves in place
|
- | - | - | - | - | - | ||||||||||||||||||
Sales
of reserves in place
|
- | - | - | - | - | - | ||||||||||||||||||
As of December 31, 2008
(3)
|
1,459 | 4,215 | - | - | 1,459 | 4,215 | ||||||||||||||||||
Proved
developed reserves at:
|
||||||||||||||||||||||||
December
31, 2006
|
1,412 | 5,495 | - | - | 1,412 | 5,495 | ||||||||||||||||||
December
31, 2007 (4)
|
1,880 | 4,619 | - | - | 1,880 | 4,619 | ||||||||||||||||||
December
31, 2008 (4)
|
925 | 1,013 | - | - | 925 | 1,013 |
(1)
|
Included
approximately 3,336,000 barrels of total proved reserves attributable to a
66.25% minority interest of Global at December 31,
2005.
|
(2)
|
Please
note that during 2006, we deconsolidated Global’s operations from our
consolidated financial statements. Please see Note 2 – Investments for
further discussion.
|
(3)
|
Not
included are our proportional interests of 236,750 barrels and 272,000 Mcf
and 237,330 barrels and 240,300 Mcf of proved reserves from our equity
investment in Spitfire at December 31, 2007 and 2008,
respectively. Spitfire’s reserve report information is as of
March 31, 2007 and 2008 (their fiscal
year-end).
|
(4)
|
Not
included are our proportional interests of 201,000 barrels and 228,750 Mcf
and 190,350 barrels and 156,060 Mcf of proved developed reserves from our
equity investment in Spitfire at December 31, 2007 and 2008,
respectively. Spitfire’s reserve report information is as of
March 31, 2007 and 2008 (their fiscal
year-end).
|
Unaudited,
in
thousands
|
||||
December
31, 2007:
|
||||
Future
cash inflows
|
$ | 270,333 | ||
Production
costs
|
(103,439 | ) | ||
Development
costs
|
(18,972 | ) | ||
Future
income taxes
|
- | |||
Future
net cash flows
|
147,922 | |||
10%
discount factor
|
(53,983 | ) | ||
Standardized
measure of discounted future net
cash flows (1)
|
$ | 93,939 | ||
December
31, 2008:
|
||||
Future
cash inflows
|
$ | 93,494 | ||
Production
costs
|
(48,254 | ) | ||
Development
costs
|
(17,103 | ) | ||
Future
income taxes
|
- | |||
Future
net cash flows
|
28,137 | |||
10%
discount factor
|
(4,877 | ) | ||
Standardized
measure of discounted future net
cash flows (1)
|
$ | 23,260 |
(1)
|
Cash
flows associated with asset retirement obligations are included in the
Standardized Measure of Discounted Future Net Cash
Flows.
|
(Unaudited)
|
||||||||||||
2008
|
2007
|
2006
(2)
|
||||||||||
(in
thousands)
|
||||||||||||
Worldwide
|
||||||||||||
Standardized
measure -- beginning of year
|
$ | 93,939 | $ | 50,879 | $ | 178,009 | (1) | |||||
Increase
(decrease)
|
||||||||||||
Deconsolidation
of Global
|
- | - | (104,441 | ) | ||||||||
Sales,
net of production costs
|
(11,405 | ) | (11,889 | ) | (14,818 | ) | ||||||
Net
change in prices, net of production costs
|
(55,617 | ) | 36,902 | (21,686 | ) | |||||||
Development
costs incurred
|
(1,251 | ) | (1,361 | ) | (522 | ) | ||||||
Change
in future development costs
|
2,579 | 2,420 | (6,855 | ) | ||||||||
Change
in future income taxes
|
- | - | 641 | |||||||||
Revisions
of quantity estimates
|
(21,614 | ) | 9,832 | 7,089 | ||||||||
Accretion
of discount
|
9,394 | 5,088 | 7,587 | |||||||||
Changes
in production rates, timing and other
|
(921 | ) | (5,254 | ) | (5,026 | ) | ||||||
Extensions
and discoveries, net of future costs
|
8,156 | 8,976 | 7,878 | |||||||||
Sales
of reserves-in-place
|
- | (1,654 | ) | (4,080 | ) | |||||||
Purchases
of reserves-in-place
|
- | - | 7,103 | |||||||||
Standardized
measure -- end of year
|
$ | 23,260 | (3) | $ | 93,939 | (3) | $ | 50,879 |
(1)
|
Included
approximately $69.2 million of discounted future net cash flows
attributable to a 66.25% minority interest of
Global.
|
(2)
|
Please
note that during 2006, we deconsolidated Global’s operations from our
consolidated financial statements. Please see Note 2 – Investments for
further discussion.
|
(3)
|
Not
included are our proportional interests of $4.1 million and $4.0 million
of the standardized measure of discounted future net cash flows related to
the proved reserves from our equity investment in Spitfire at December 31,
2007 and 2008, respectively. Spitfire’s reserve report
information is as of March 31, 2007 and 2008 (their fiscal
year-end).
|
(19)
|
COMMITMENTS
AND CONTINGENCIES
|
Year
|
Amount
|
|||
2009
|
$ | 182,000 | ||
2010
|
189,000 | |||
2011
|
78,000 | |||
2012
|
-- | |||
Thereafter
|
-- | |||
Total
minimum payments required
|
$ | 449,000 |
(a)
|
The
following documents are filed as a part of this Annual
Report:
|
(1)
|
Financial
Statements included in Part II of this Annual
Report:
|
Page
|
|
HKN,
Inc. and Subsidiaries
|
|
--
Report of Independent Registered Public Accounting Firms
|
43
|
--
Consolidated Balance Sheets -- December 31, 2008 and
2007
|
44
|
--
Consolidated Statements of Operations for the three years ended
December 31, 2008
|
45
|
--
Consolidated Statements of Stockholders’ Equity for the three years ended
December 31, 2008
|
46
|
--
Consolidated Statements of Cash Flows for the three years ended
December 31, 2008
|
47
|
--
Notes to Consolidated Financial Statements
|
48
|
(2)
|
The
information required by Schedule I is either provided in the related
financial statements or in a note thereto, or is not applicable to HKN,
Inc. The information required by all other Schedules is not applicable to
HKN, Inc.
|
(4)
|
Exhibits
|
3.1
|
Restated
Certificate of Incorporation of HKN, Inc. (filed as Exhibit 3.1
to HKN’s Form 10-K dated February 28, 2006, File No. 1-10262, and
incorporated herein by reference).
|
3.2
|
Certificate
of Amendment to Restated Certificate of Incorporation of Harken Energy
Corporation dated June 4, 2007 (filed as Exhibit 3.2 to HKN’s Form 10-Q
dated August 7, 2007, File No. 1-10262, and incorporated by reference
herein).
|
3.3
|
Certificate
of Amendment to Restated Certificate of Incorporation of HKN, Inc. dated
June 24, 2008 and effective June 26, 2008
|
3.4
|
Amended
and Restated Bylaws of HKN, Inc. (filed as Exhibit 3.7 to HKN’s Annual
Report on Form 10-K for fiscal year ended December 31, 2002, File No.
1-10262, and incorporated by reference herein).
|
4.1
|
Form
of certificate representing shares of HKN, Inc. common stock, par value
$.01 per share (filed as Exhibit 4.1 to HKN’s Form 10-Q dated August 7,
2007, File No. 1-10262, and incorporated by reference
herein).
|
4.2
|
Rights
Agreement, dated as of April 6, 1998, by and between Harken Energy
Corporation and ChaseMellon Shareholder Services L.L.C., as Rights Agent
(filed as Exhibit 4 to Harken’s Current Report on Form 8-K dated April 7,
1998, file No. 1-10262, and incorporated by reference
herein).
|
4.3
|
Amendment
to Rights Agreement by and between Harken Energy Corporation and American
Stock Transfer and Trust Company (successor to Mellon Investor Services
LLC, (formerly known as ChaseMellon Shareholder Services L.L.C.), as
Rights Agent, dated June 18, 2002 (filed as Exhibit 4.11 to Harken’s
Quarterly Report on Form 10-Q for the period ended September 30, 2002,
File No. 1-10262, and incorporated by reference
herein).
|
4.4
|
Amendment
to Rights Agreement by and between Harken Energy Corporation and American
Stock Transfer and Trust Company (successor to Mellon Investor Services
LLC, (formerly known as ChaseMellon Shareholder Services L.L.C.), as
Rights Agent, dated August 27, 2002 (filed as Exhibit 4.12 to Harken’s
Quarterly Report on Form 10-Q for the period ended September 30, 2002,
File No. 1-10262, and incorporated by reference
herein).
|
4.5
|
Certificate
of Designations of Series E Junior Participating Preferred Stock (filed as
Exhibit A to Exhibit 4 to Harken’s Current Report on Form 8-K dated April
7, 1998, file No. 1-10262, and incorporated by reference
herein).
|
4.6
|
Certificate
of Increase of Series E Junior Participating Preferred Stock of Harken
Energy Corporation (filed as Exhibit 4.6 to Harken’s Annual Report on Form
10-K for the fiscal year ended December 31, 2002, File No. 1-10262, and
incorporated by reference herein).
|
4.7
|
Certificate
of Designations of Series G1 Convertible Preferred Stock (filed as Exhibit
3.7 to Harken’s Current Report on Form 8-K dated February 13, 2003, File
No. 1-10262, and incorporated by reference herein).
|
4.8
|
Certificate
of Increase of Series G1 Convertible Preferred Stock
of Harken Energy Corporation (filed as Exhibit 3.8
to Harken’s Current Report on Form 8-K dated February 13, 2003, File No.
1-10262, and incorporated by reference herein).
|
4.9
|
Certificate
of Designations of Series G2 Convertible Preferred Stock (filed as Exhibit
4.10 to Harken’s Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 2001, File No. 1-10262, and incorporated by
reference herein).
|
4.15
|
Certificate
of Designations of Series M Cumulative Convertible Preferred Stock (filed
as Exhibit 4.1 to Harken’s Current Report on Form 8-K dated October 8,
2004, File No. 1-10262, and incorporated by reference
herein).
|
4.16
|
Amendment
to Rights Agreement by and between HKN, Inc. and American Stock
Transfer and Trust Company, as Rights Agent, dated April 4, 2008
(filed as Exhibit 4.1 to HKN’s current report on Form 8-K dated
April 4, 2008, file No. 1-10262, and incorporated by reference
herein).
|
10.1
|
Exploration
and Development Agreement – Indiana Posey (filed as Exhibit 10.1 to
Harken’s Current Report on Form 8-K, dated March 22, 2005, File No.
001-10262, and incorporated herein by reference).
|
10.2
|
Exploration
and Development Agreement – Ohio Cumberland (filed as Exhibit 10.1 to
Harken’s Current Report on Form 8-K, dated March 29, 2005, File No.
001-10262, and incorporated herein by reference).
|
10.3
|
Form
of Executive Retention Agreement (filed as Exhibit 10.1 to HKN’s Current
Report on Form 8-K dated July 2, 2008, File No. 001-10262, and
incorporated by reference herein)
|
*21
|
Subsidiaries
of HKN, Inc.
|
*23.1
|
Consent
of Independent Registered Public Accounting Firm – Hein & Associates,
LLP
|
*23.2
|
Consent
of Collarini & Associates (Independent Reserve
Engineers)
|
*23.3
|
Consent
of Crest Engineering Services (Independent Reserve
Engineers)
|
*24
|
Power
of Attorney
|
*31.1
|
Certificate
of the Chief Executive Officer of HKN, Inc. pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 (“S.O. Act”)
|
*31.2
|
Certificate
of the Chief Financial Officer of HKN, Inc. pursuant to section 302 of the
S.O. Act
|
*32.1
|
Certificate
of the Chief Executive Officer of HKN, Inc. pursuant to section 906 of the
S.O. Act
|
*32.2
|
Certificate
of the Chief Financial Officer of HKN, Inc. pursuant to section 906 of the
S.O. Act
|
HKN,
INC.
|
|||
|
By:
|
/s/ Anna M. Williams | |
By:
Anna M. Williams, Senior Vice President – and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
|
|||
Signature
|
Title
|
|
/s/ Anna M. Williams
|
Senior
Vice President and Chief Financial Officer
|
|
Anna
M. Williams
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
/s/ Mikel D. Faulkner
|
Director,
Chief Executive Officer and President
|
|
Mikel
D. Faulkner
|
(Principal
Executive Officer)
|
|
/s/ Michael M. Ameen *
|
Director
|
|
Michael
M. Ameen
|
||
/s/ J. William Petty *
|
Director
|
|
J.
William Petty
|
||
/s/ Alan G. Quasha *
|
Director
|
|
Alan
G. Quasha
|
||
/s/ H.A. Smith *
|
Director
|
|
H.
A. Smith
|
||
/s/ Anna M. Williams
|
||
*
By: Anna M. Williams, Attorney
in-fact
|