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Related Party Transactions
12 Months Ended
Dec. 31, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

3. Related Party Transactions



On September 17, 2007, Hoactzin, simultaneously with subscribing to participate in the Program, and pursuant to a separate agreement with the Company, was conveyed a 75% net profits interest in the Company’s Methane Project. Because the Payout Point had been reached in February 2014 as described above in the Program, Hoactzin’s net profits interest in the Methane Project was simultaneously decreased from 75% to 7.5%.  The agreed method of calculation of net profits takes into account specific costs and expenses as well as gross gas revenues for the project.  As a result of the startup costs, ongoing operating expenses, and gas production levels experienced, no net profits as defined were realized during the period from the project startup in April, 2009 through December 31, 2016 for payment to Hoactzin under the net profits interest.  Since the start of 2014, there have been no methane gas sales or revenues, and consequently no net profits attributable to Hoactzin’s net profits interest. 



In addition to the Program and Net Profits Interest above, one transaction of the type described above was entered into in 2007 but has expired by its own terms.  On December 18, 2007, the Company entered into a Management Agreement with Hoactzin to manage on behalf of Hoactzin all of its working interest in certain oil and gas properties owned by Hoactzin and located in the onshore Texas Gulf Coast, and offshore Texas and offshore Louisiana. As part of the consideration for the Company’s agreement to enter into the Management Agreement, Hoactzin granted to the Company an option to participate in up to a 15% working interest on a dollar for dollar cost basis in any new drilling or workover activities undertaken on Hoactzin’s managed properties during the term of the Management Agreement.  The Management Agreement expired on December 18, 2012. 



The Company has entered into a transition agreement with Hoactzin whereby the Company will no longer perform operations, but will administratively assist Hoactzin in becoming operator of record of these wells and administratively assist Hoactzin in the transfer of the corresponding bonds from the Company to Hoactzin.  This assistance is primarily related to signing the necessary documents to effectuate this transition.  Hoactzin and its controlling member are indemnifying the Company for any costs or liabilities incurred by the Company resulting from such assistance, or the fact that the Company is the operator of record on certain of these wells.  As of the date of this Report, the Company continues to administratively assist Hoactzin with this transition process. 



During the term of the Management Agreement, the Company became the operator of certain properties owned by Hoactzin.  The Company obtained over time, bonds for the purpose of covering substantial plugging and abandonment obligations on Hoactzin’s properties located in federal offshore waters in favor of the BSEE, as well as certain private parties.  As of May 15, 2014, all such operator bonds as to the Company have been released by the BSEE and have been cancelled by the issuer of the bonds.  As of December 31, 2016, the transfer of all RUE’s and associated bonds and the transfer of operations to Hoactzin was completed. Accordingly, the exposure to the Company under any bonds or any indemnity agreements relating to all bonds has decreased to zero.



As operator during the term of the Management Agreement that expired in 2012, the Company routinely contracted in its name for goods and services with vendors in connection with its operation of the Hoactzin properties.  In practice, Hoactzin directly paid these invoices for goods and services that were contracted in the Company’s name.  As a result of the operations performed in late 2009 and early 2010, Hoactzin had significant past due balances to several vendors, a portion of which were included on the Company’s balance sheet.  Payables related to these past due and ongoing operations remained outstanding at December 31, 2016 and 2015 in the amount of $159,000.  The Company has recorded the Hoactzin-related payables and the corresponding receivable from Hoactzin as of December 31, 2016 and 2015 in its Consolidated Balance Sheets under “Accounts payable – other” and “Accounts receivable – related party”.  The outstanding balance of $159,000 should not increase in the future.  However, Hoactzin has not made payments to reduce the $159,000 of past due balances from 2009 and 2010 since the second quarter of 2012.  Based on these circumstances, the Company has elected to establish an allowance in the amount of $159,000 for the balances outstanding at December 31, 2016 and 2015.  This allowance was recorded in the Company’s Consolidated Balance Sheets under “Accounts receivable – related party”.  The resulting balances recorded in the Company’s Consolidated Balance Sheets under “Accounts receivable – related party, less allowance for doubtful accounts of $159” are $0 at December 31, 2016 and 2015.