Note 2 - Divestiture

6 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 2 — Divestiture

On April 27, 2012, the Company and Pacific Rubiales (together with its subsidiaries) executed a SPA under which the Company formed an unincorporated joint venture relationship with Pacific Rubiales to explore and develop the offshore Block Z-1 located in Peru. Pursuant to the SPA, Pacific Rubiales agreed to pay $150.0 million for a 49% participating interest in Block Z-1 and agreed to fund $185.0 million of the Company’s share of capital and exploratory expenditures in Block Z-1 from the effective date of the SPA, January 1, 2012. In order to finalize the joint venture, Peruvian governmental approvals were needed to allow Pacific Rubiales to become a party to the Block Z-1 License Contract. Until the required approvals were obtained, Pacific Rubiales provided the Company a $65.0 million down payment on the purchase price and other funds which the Company initially accounted for as loans to continue to fund the Company’s Block Z-1 capital and exploratory activities. These amounts were reflected as long-term debt prior to closing the transaction.

On December 14, 2012, Perupetro approved the terms of the amendment to the Block Z-1 license contract to recognize the sale of a 49% participating interest in offshore Block Z-1 to Pacific Rubiales. The Company and Pacific Rubiales waived and modified certain contract conditions in order to close the transaction. On December 30, 2012, the Peruvian Government signed the Supreme Decree for the execution of the amendment to the Block Z-1 license contract.

At closing, Pacific Rubiales exchanged certain loans along with an additional $85.0 million, plus any other amounts due to the Company or from the Company under the SPA, for the interests and assets obtained from the Company under the SPA and under the Block Z-1 License Contract. Proceeds of $150.0 million (less transaction costs of $5.7 million) less the net book value of the assets resulted in a gain on the sale that was recognized as a component of operating and administrative expenses in connection with the closing of $26.9 million. Due to certain tax benefits resulting from the sale, the after tax gain was $31.1 million.

The transaction provided for an adjustment based upon the collection of revenues ($56.1 million) and the payment of expenses ($32.6 million) and income taxes ($5.2 million) attributable to the properties that took place after an effective date of January 1, 2012 and prior to the closing date which was December 14, 2012. These amounts were considered settled by adjusting down by $18.3 million the unused portion of the agreed carry amount of $185.0 million by Pacific Rubiales for the Company’s share of capital and exploratory expenditures in Block Z-1. The June 30, 2013 and December 31, 2012 carry amounts were $112.0 million and $126.3 million, respectively.

At June 30, 2013 and December 31, 2012, the Company reflected $19.9 million as other current liabilities and $20.8 million as other non-current liabilities for exploratory expenditures related to Block Z-1 under funding by Pacific Rubiales of the exploratory expenditures in Block Z-1 incurred in 2012. This amount will be settled by the Company and Pacific Rubiales under the terms of the SPA.