Note 13 - Fair Value Measurements and Disclosures

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 13— Fair Value Measurements and Disclosures

The Company records certain of its assets and liabilities on the balance sheet at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A three-level valuation hierarchy has been established to allow readers to understand the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

●	Level 1 —	Fair value measurements which use quoted market prices (unadjusted) in active markets for identical assets or liabilities.
●	Level 2 —	Fair value measurements which use inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.
●	Level 3 —	Fair value measurements which use unobservable inputs.

The following describes the valuation methodologies the Company uses for its fair value measurements.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and any highly liquid investments with an original maturity of 90 days or less. The carrying amount approximates fair value because of the short maturity of these instruments.

Restricted Cash

Restricted cash includes all cash balances which are classified as current or long-term because they are associated with the Company’s debt or long-term assets. The carrying amount approximates fair value because the nature of the restricted cash balance is the same as cash. The fair value of restricted cash is measured using Level 1 inputs within the three-level valuation hierarchy.

Derivative Financial Instruments   

The Company’s derivative financial instruments consist of variable financing arranger fee payments that are dependent on the change in oil prices from the loan origination date of the Company’s $40.0 million secured debt facility, the $75.0 million secured debt facility and the oil price on each repayment date. The Company estimates the fair value of these payments based on published forward commodity price curves at each financial reporting date. The discount rate used to discount the associated cash flows is based on the Company’s credit-adjusted risk-free rate. Accordingly, these derivatives are considered to be a Level 2 measurement on the fair value hierarchy. For further information regarding the Company’s derivatives, see Note-11, “Derivative Financial Instruments.”

Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows:

		Fair Value Measurements Using:
	Balance Sheet Location	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(in thousands)
June 30, 2013
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	358	$	-
	Non-current Liabilities		-		-		-
		$	-	$	358	$	-
December 31, 2012
Financial Liabilities
Derivative Financial Instruments
	Current Liabilities	$	-	$	2,984	$	-
	Non-current Liabilities		-		-		-
		$	-	$	2,984	$	-

Non-Financial Assets and Liabilities

The Company discloses or recognizes its non-financial assets and liabilities, such as impairments of long-lived assets, at fair value on a non-recurring basis. As none of the Company’s non-financial assets or liabilities were impaired as of June 30, 2013 and December 31, 2012, and no other fair value measurements were required to be recognized on a non-recurring basis, additional disclosures were not provided.

Additional Fair Value Disclosures

Short-term Investments

The Company’s investment in held-to-maturity securities, which are stated at net of amortized cost, was as follows at June 30, 2013 and December 31, 2012:

	June 30, 2013				December 31, 2012
	Carrying Amount		Fair Value (1)		Carrying Amount		Fair Value
	(in thousands)				(in thousands)
Short-term investments - U.S. Treasury bills	$	1,000	$	1,000	$	-	$	-

(1) The Company estimated the fair value of the U.S. Treasury bill to be approximately $1.0 million at June 30, 2013, based on observed market prices for the same or similar types of debt issues. The fair value of the U.S. Treasury bill is considered to be a Level 2 measurement on the fair value hierarchy.

Debt with Variable Interest Rates

The fair value of the Company’s $40.0 million secured debt facility at June 30, 2013 approximates the carrying value because the interest rate is based on the floating rate identified by reference to the market rate, and because the interest rate charged is at a rate at which the Company could borrow under similar terms. The floating rate debt is considered to be a Level 2 measurement on the fair value hierarchy.

Debt with Fixed Interest Rates

The fair value information regarding the Company’s fixed rate debt at June 30, 2013 and December 31, 2012 is as follows:

	June 30, 2013				December 31, 2012
	Carrying Amount		Fair Value (1)		Carrying Amount		Fair Value (1)
	(in thousands)				(in thousands)
$170.9 million Convertible Notes, 6.5%, due March 2015, net of discount of ($13.8) million at June 30, 2013 and ($17.4) million at December 31, 2012	$	157,132	$	138,460	$	153,479	$	147,861

(1) The Company estimated the fair value of the $170.9 million 2015 Convertible Notes to be approximately $138.5 million and $147.9 million at June 30, 2013 and December 31, 2012, respectively, based on observed market prices for the same or similar types of debt issues. The fair value of the $170.9 million 2015 Convertible Notes is considered to be a Level 1 measurement on the fair value hierarchy.